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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
MARK ONE
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR 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 COMMISSION FILE
NUMBER: 0-20720
FROM ______________ TO _____________ .
LIGAND PHARMACEUTICALS INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 77-0160744
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10275 SCIENCE CENTER DRIVE 92121-1117
SAN DIEGO, CA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (619) 550-7500
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.001 PAR VALUE
(TITLE OF CLASS)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
WARRANTS TO PURCHASE ONE SHARE OF COMMON STOCK, $.001 PAR VALUE
(TITLE OF CLASS)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the Registrant's voting stock held by
non-affiliates as of February 28, 1998 was $488,205,375. For purposes of this
calculation, shares of Common Stock held by directors, officers and 5%
stockholders known to Registrant have been deemed to be owned by affiliates
which should not be construed to indicate that any such person possesses the
power, direct or indirect, to direct or cause the direction of the management or
policies of the Registrant or that such person is controlled by or under common
control with the Registrant.
As of February 28, 1998 the registrant had 38,594,979 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement to be filed not later than 120
days after December 31, 1997, in connection with the Registrant's 1998 Annual
Meeting of Stockholders, referred to herein as the "Proxy Statement", are
incorporated by reference into Part III of this Form 10-K.
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PART I
ITEM 1. BUSINESS
The discussion of the Company's business contained in this Annual Report on
Form 10-K may contain certain projections, estimates and other forward-looking
statements that involve a number of risks and uncertainties, including those
discussed below at "Risks and Uncertainties." While this outlook represents
management's current judgment on the future direction of the business, such
risks and uncertainties could cause actual results to differ materially from any
future performance suggested below. The Company undertakes no obligation to
release publicly the results of any revisions to these forward-looking
statements to reflect events or circumstances arising after the date hereof.
OVERVIEW
Ligand Pharmaceuticals Incorporated ("Ligand" or the "Company"), a Delaware
corporation, is a biopharmaceutical company engaged in the discovery and
development of small-molecule drugs which mimic or block the activities of
various hormones and cytokines to regulate gene activity and the genetic
processes affecting many diseases. The Company's drug discovery and development
programs are based on its proprietary technologies involving two natural
mechanisms that regulate gene activity: (i) hormone-activated Intracellular
Receptors ("IRs") and (ii) cytokine-activated Signal Transducers and Activators
of Transcription ("STATs"). IRs play key roles in many disease processes,
including certain cancers, disorders of women's health, cardiovascular diseases,
metabolic diseases, inflammatory disorders and skin diseases. Similarly, STATs
influence many biological processes, including cancer, metabolic diseases,
inflammation and blood cell formation. In programs acquired in connection with
the merger with Glycomed Incorporated ("Glycomed") in May 1995 ("the Merger"),
Ligand is also seeking, through licensees, to develop orally active drugs to
modulate biological processes involving complex carbohydrates and other cell
surface components for the treatment of inflammation and cancer.
Ligand currently is developing new drugs through a combination of internal
and collaborative programs, including substantial collaborations with Eli Lilly
and Company ("Lilly"), SmithKline Beecham Corporation ("SmithKline Beecham"),
Wyeth-Ayerst, the pharmaceutical division of American Home Products ("AHP"),
Abbott Laboratories ("Abbott"), Glaxo-Wellcome plc ("Glaxo"), Sankyo Company,
Ltd. ("Sankyo"), Pfizer Inc ("Pfizer") and Allergan, Inc., ("Allergan"). Ligand
has initiated human clinical trials for five potential products: the retinoids
Panretin Capsules (LGD1057), Panretin Gel (LGD1057), LGD1550 Capsules, Targretin
Gel (LGD1069) and Targretin Capsules (LGD1069). Ligand also has 25 non-retinoid
compounds in various stages of development, including a three compound series
being developed by AHP, as well as two compounds which are now under development
by Pfizer for osteoporosis.
IRs are members of a family of hormone-activated proteins that act inside
the cell to directly regulate gene expression and cellular function. Although
the effectiveness of IRs as drug targets has been demonstrated by drugs acting
through IRs already on the market, such as retinoids (e.g., Retin-A(R) for acne
and psoriasis) and sex steroid modulators (e.g., estrogens and progesterones for
hormone replacement therapy and contraception, tamoxifen for breast cancer,
flutamide for prostate cancer), the utility of these first-generation drugs has
been limited by their often significant side effects. STATs are a recently
discovered family of proteins that act inside cells to regulate gene expression
in response to various cytokines such as interferons, interleukins and
hematopoietic growth factors. Imbalances in the activity of these cytokines can
lead to various pathological conditions, such as inflammation. While certain
recombinant cytokines and other proteins which bind to cell surface receptors
have proven to have clinical utility in the treatment of disease, they must be
administered by injection and can be difficult to manufacture.
Ligand and its exclusive academic collaborators have advanced the
understanding of the activities of hormones and hormone-related drugs and have
made scientific discoveries relating to IR and STATs technologies. Ligand
believes that its expertise in these technologies will enable the Company to
develop novel, small-molecule pharmaceutical products acting through IRs or
STATs with more target-specific
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properties than currently available products, resulting in either improved
therapeutic and side effect profiles and new indications for IRs or novel
mechanisms of action and oral bioavailability for STATs.
Through a combination of internal and partnered programs, supplemented by
selective in-licensing of approved cancer products, Ligand has built a pipeline
of numerous potential products and products in advanced preclinical testing,
clinical development or commercialization stages. The most advanced of these
potential products and products are as follows:
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PROGRAM PRODUCT DISEASE INDICATION DEVELOPMENT PHASE(1)
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Retinoids Panretin(TM) Gel (LGD1057) Kaposi's Sarcoma ("KS") III
Panretin(TM) Capsules Cancers including KS, other cancers II
Psoriasis II
LGD1550 Capsules Cancers I/IIA
Targretin(TM) Gel (LGD1069) Cutaneous T cell lymphoma ("CTCL") III
Actinic Keratoses II
Targretin(TM) Capsules CTCL II/III
Lung cancer, breast cancer II/III
Cancers, including, kidney, KS, II
prostate, ovarian
Metabolic diseases (diabetes) II(2)
Psoriasis II
Sex steroids Droloxifene(3) Osteoporosis II
CP336,156(4) Osteoporosis II
Oncology Proleukin(R)(5) Kidney cancer Marketed in Canada
PHOTOFRIN(R)(5) Bladder cancer, esophageal cancer Marketed in Canada
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(1) "Development Phase" refers to the current stage of development of the most
advanced indication. See "Business -- Product Development Program" for a
more detailed description of the stages of development for these compounds.
(2) Targretin Capsules has entered Phase II human clinical trials in diabetes in
March 1997 in Europe.
(3) Droloxifene is a compound owned by Pfizer. Ligand performed work on
droloxifene at Pfizer's request. Ligand and Pfizer entered into a settlement
agreement with respect to a lawsuit in April 1996. Under the terms of the
settlement agreement, the Company is entitled to receive milestone payments
if Pfizer continues development and royalties if Pfizer commercializes the
product. See "Business -- Strategic Alliances -- Pfizer Inc."
(4) A compound discovered through the Company's collaborative relationship with
Pfizer to which Pfizer has retained marketing rights. See
"Business -- Strategic Alliances -- Pfizer Inc".
(5) In-licensed product.
Ligand is conducting human clinical trials with five products. Panretin
Capsules, Panretin Gel, Targretin Capsules, Targretin Gel and LGD1550 Capsules
are retinoids that may be useful for the treatment of various cancers, such as
KS, CTCL, lung and prostate cancer or breast cancer and diseases of the skin and
are being developed by Ligand. The Company has completed two pivotal Phase III
trials for Panretin Gel in KS to support an NDA which Ligand intends to file in
early 1998. The Company has completed two Phase II clinical trials for Panretin
Capsules in KS with plans to complete development work and file an NDA in 1999.
Ligand is also performing clinical trials for the retinoids Targretin Capsules
and Targretin Gel. Interim data from a Phase I/II study of Targretin Gel in CTCL
have demonstrated significant activity, and based on discussions with the FDA on
trial design, the Company has launched Phase III clinical trials in this
indication with Targretin Gel and Phase II/III trials in this indication with
Targretin Capsules, each intended to support NDA filings in 1998 or 1999. The
Company has received reports on interim findings from the University of Texas
M.D. Anderson Cancer Center with respect to certain Phase II/III trials of
Targretin Capsules intended to support an NDA in CTCL. See "Business -- Product
Development Program -- Retinoids -- Targretin Gel and Targretin Capsules." The
Company has launched Phase II/III clinical trials with Targretin
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Capsules in lung cancer. There can be no assurance that the clinical trials will
proceed as planned or that any drugs will be successfully developed or
commercialized.
To date, Ligand has entered into collaborations with eight corporate
partners which include, Lilly (for metabolic diseases, including diabetes,
obesity, dislipedemia, insulin resistance and cardiovascular diseases associated
with insulin resistance and obesity), SmithKline Beecham (for hematopoietic
growth factor mimetics for use in oncology and treatment of anemia), AHP (for
women's health, e.g., hormone replacement therapy, osteoporosis, fertility
control), Abbott (for inflammatory diseases, utilizing selected IR-based
approaches), Sankyo (for inflammatory diseases, utilizing selected Glycomed
technologies), Glaxo (for atherosclerosis and other diseases affecting the
cardiovascular system), Allergan (for oncology and dermatology) and Pfizer (for
osteoporosis). These partners provide discovery resources complementary to those
of Ligand and are expected to facilitate the development and commercialization
of potential products for primary care markets. The collaborative partners have
also been an important funding source for Ligand, contributing approximately
two-thirds of its invested capital to date. In addition to Allergan Ligand
Retinoid Therapeutics, Inc. ("ALRT"), the research and development company
formed by Ligand and Allergan, which was funded with net proceeds of $94.3
million to accelerate research and development of certain retinoids ( see
"Strategic Alliances -- Allergan, Inc."), Ligand's research activities have been
supported by commitments from its partners of up to $141.1 million for research
funding. Ligand's collaborative partners have also committed up to $127.8
million of additional equity and convertible notes to Ligand, of which $122.8
million has been received through December 31, 1997, and the remaining $5.0
million is subject to Ligand attaining certain milestones.
In September 1997, Ligand exercised its option to purchase all of the
3,250,000 outstanding shares of Callable Common Stock of ALRT at $21.97 per
share, the original price applicable for purchase from June 3, 1997 to June 3,
1998. Simultaneously, Allergan exercised its option to acquire an undivided
one-half interest in the assets and technologies of ALRT. Certain existing
agreements between Allergan and Ligand had provided for joint development and
joint commercialization of ALRT compounds following exercise of the buyout
option. Allergan and Ligand agreed to amend and restate those agreements so that
ALRT compounds and development programs were divided between Allergan and
Ligand, and each party received exclusive rights under the ALRT technology for
use with their respective compounds and programs. Products and compounds for
which Ligand received worldwide rights include Panretin(TM)Gel and
Panretin(TM)Capsules, LGD1268, LGD1324 and LGD1550. Allergan received ALRT4310,
ALRT326 and ALRT4204 and $4.5 million in cash and rights to future royalties on
certain Ligand products. Allergan and Ligand also completed a lottery to divide
the approximately 2,000 retinoid compounds remaining in the ALRT compound
library as of the ALRT closing date in November 1997. Each party will pay
royalties to the other on net sales, if any, of the successfully developed
compounds it received directly or in the lottery. See "Business -- Strategic
Alliances -- Allergan, Inc."
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BUSINESS STRATEGY
Ligand's business strategy is to develop new drugs using its IR and STATs
technologies through both internal and collaborative programs. Ligand's internal
programs focus on the discovery, development and marketing of small-molecule
drugs that address cancer, gynecological diseases and male hormonal imbalances,
which are generally treated by medical specialists. An outgrowth of these
programs has led to a development program in metabolic disease. Ligand also
seeks to in-license or acquire products in these medical specialty markets which
are in late-stage clinical development or which have been previously approved by
regulatory authorities. Ligand's collaborative programs focus on building a
royalty-based business through partnerships with large pharmaceutical companies
that apply Ligand's technologies to discover drugs for primary care markets,
such as markets for certain cardiovascular, inflammatory, metabolic and other
diseases, as well as broad applications for women's and men's health.
Ligand's internal efforts have been focused primarily on the discovery and
development of improved retinoids, sex steroid receptor agonists and antagonists
and cytokine agonists for use in specialty market applications, principally
cancer, gynecological disorders and male hormonal imbalances. Products for these
specialty markets typically require less resource-intensive clinical trials and
can be marketed by a targeted sales force. Ligand has initiated human clinical
trials for five products: the retinoids Panretin Capsules, Panretin Gel, LGD1550
Capsules, Targretin Capsules and Targretin Gel.
Externally, Ligand is collaborating with large pharmaceutical companies,
with the goal of building a royalty-based business through the application of
its technologies to primary care markets, broad aspects of women's and men's
health, such as cardiovascular, inflammatory, metabolic and other diseases.
Ligand has established eight major collaborative arrangements to discover and
develop drugs that address disorders principally treated by primary care
physicians, specifically hematopoiesis with SmithKline Beecham, women's health
disorders with AHP, inflammatory diseases with Abbott, cardiovascular diseases
with Glaxo, osteoporosis with Pfizer, oncology and dermatology with Allergan,
metabolic disease with Lilly, and inherited a collaboration through the Glycomed
merger, with Sankyo in inflammation based on cell adhesion research. Ligand
believes its collaborators have the significant resources, including clinical
and regulatory experience, manufacturing capabilities and marketing
infrastructure, needed to develop and commercialize drugs for these markets.
Each of these arrangements provides for collaborative discovery programs funded
largely by the corporate partners aimed at discovering new therapies for
diseases treated by primary care physicians. In general, drugs resulting from
these collaborations will be developed, manufactured and marketed by the
corporate partners, with Ligand receiving research revenue during the drug
discovery stage, additional milestone revenue for successful compounds moving
through clinical development and milestone revenue as well as royalty revenue on
sales of drugs marketed by its collaborators.
SCIENTIFIC BACKGROUND AND DRUG DISCOVERY OPPORTUNITIES
INTRACELLULAR RECEPTORS ("IRS")
Hormones are natural chemicals within the body that control important
physiological processes, including reproduction and cell growth and
differentiation. The known non-peptide hormones are the retinoids, the sex
steroids (estrogens, progesterones and androgens), the adrenal steroids
(glucocorticoids and mineralocorticoids), vitamin D and thyroid hormone. The
understanding of hormones and their actions has increased substantially in the
last 10 years. Driving this rapid expansion of knowledge has been the discovery
of the family of IRs through which all the known small-molecule (i.e.,
non-peptide) hormones act. Dr. Ronald Evans at The Salk Institute of Biological
Studies ("the Salk Institute"), Ligand's scientific co-founder and exclusive
consultant, was the first to clone and characterize an IR in 1985. Since that
time, approximately 75 IRs have been defined and characterized, many by Ligand's
scientists or its exclusive collaborators. IRs play key roles in a variety of
diseases, including certain cancers, gynecological disorders, and
cardiovascular, metabolic, inflammatory and skin diseases.
Hormones act by binding to their corresponding IRs to regulate the
expression of genes in order to maintain and restore balanced cellular function
within the body. Hormonal imbalances can lead to a variety of diseases. The
hormones themselves and drugs which mimic or block hormone action may be useful
in the
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treatment of these diseases. Furthermore, hormone mimics (agonists) or blockers
(antagonists) can be used in the treatment of diseases in which the underlying
cause is not hormonal imbalance.
The effectiveness of the IRs as drug targets has been demonstrated by
currently available drugs acting through IRs for many of these diseases.
However, the use of most of these drugs has been limited by their often
significant side effects. Examples of currently marketed hormone-related drugs
acting on IRs are glucocorticoids (steroids used to treat inflammation),
estrogens and progesterones (used for hormone replacement therapy and
contraception), tamoxifen (an estrogen antagonist used in the treatment of
breast cancer), and various retinoids such as Accutane(R) and Retin-A(R) (used
to treat acne and psoriasis).
Ligand's early recognition of the drug discovery opportunities inherent in
emerging IR research has enabled it to build a strong proprietary position and
accumulate substantial expertise in IRs applicable to drug discovery and
development. Building on its recent scientific findings about the molecular
basis of hormone action, Ligand has created proprietary new tools to explore and
manipulate non-peptide hormone action for potential therapeutic benefit. The
Company has exclusive relationships in the field of IRs with Dr. Ronald Evans, a
professor in the Gene Epresion Laboratory of The Salk Institute, and Dr. Bert
O'Malley, Professor and Chairman of the Center for Reproductive Biology at
Baylor College of Medicine ("Baylor"), where many of the core discoveries in IR
research have been made. The Company has exclusively licensed most of these
discoveries. Ligand has also developed proprietary IR assays that it believes
can rapidly and accurately predict the probable therapeutic and side effect
profiles of compounds with potential as drugs. The Company believes that its IR
expertise will enable it to discover and develop drugs that have equal or
greater therapeutic efficacy and reduced incidence and severity of side effects
compared to existing drugs acting through IRs. The Company also believes these
drugs will be orally bioavailable.
In many diseases, there is an imbalance of cytokine action. For example,
some inflammatory conditions may represent excessive actions of certain
interleukins or interferons. In these conditions, it may prove beneficial to
block the actions of specific cytokines. In other pathological states, there is
insufficient activity of specific cytokines. For example, in patients with
chronic renal failure, diminished erythropoietin ("EPO") release by the damaged
kidneys results in the inadequate production of red blood cells, resulting in
anemia. Recombinant human EPO protein (Epogen(R)) can be administered to
effectively correct this anemia, but must be injected. Many other cytokines are
useful as injected protein medicines, including interferons (Intron-A(R),
Roferon(R), Betaseron(R)) interleukins (Proleukin(R), which Ligand markets in
Canada), hematopoietic growth factors (Epogen(R), Neupogen(R)) and others. Each
of these and many other cytokines appears to exert their actions through
JAK/STAT signal transduction pathways. Ligand is utilizing JAK/STAT technology
to seek low molecular weight compounds which can mimic or block the actions of
medically relevant cytokines for uses in various pathological conditions,
including cancer, inflammation and disorders of blood cell formation. Because
these are small molecules, whereas the cytokines themselves are proteins, they
offer potential significant advantages over current cytokine-based compounds,
including oral activity and greater ease of manufacture and improved stability.
LIGAND'S IR DRUG DISCOVERY OPPORTUNITIES
Ligand and its collaborators have made major discoveries pertaining to IRs
and small molecule hormones and compounds which interact with these IRs. These
discoveries include: (i) the identification of the IR superfamily, (ii) the
recognition of IR subtypes, (iii) the discovery of orphan IRs and (iv) the
heterodimer biology of RXR selective compounds. Ligand believes that each of
these broad areas of knowledge provides important opportunities for drug
discovery.
IR Superfamily. The receptors for all the non-peptide hormones are closely
related members of a superfamily of proteins known as IRs. The IRs are similar
in both structure and mechanisms of action. Human IRs for all of the known
non-peptide hormones have now been cloned, primarily by Ligand's scientists or
its collaborators, building an understanding of the similar underlying
mechanisms of action shared by the non-peptide hormones.
Ligand believes that the relatedness of the IRs for the non-peptide
hormones has major implications for drug discovery. IRs share a common mechanism
of action, which often enables drug discovery insights about
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one IR to be directly applied to other members of the IR superfamily, bringing
synergy to Ligand's IR-focused drug discovery efforts. First generation drugs
were developed and commercialized for their therapeutic benefits prior to the
discovery of IRs and often cross-react with the IRs for hormones other than the
intended target, resulting in often significant side effects. The understanding
that the IRs are structurally similar has enabled Ligand to determine the basis
for the side effects of some first generation drugs and to discover improved
drug candidates.
IR Subtypes. For some of the non-peptide hormones, several closely related
but non-identical IRs, known as IR subtypes, have been discovered. These include
six subtypes of the IRs for retinoids and four subtypes of the IRs for thyroid
hormone. Patent applications covering most of these IR subtypes have been
exclusively licensed by Ligand. Ligand believes that drugs that activate a
subset of IR subtypes will allow more specific pharmacological intervention
better matched to therapeutic need. Ligand's clinical candidate Targretin was
discovered as a result of Ligand's understanding of retinoid receptor subtypes.
Orphan IRs. Over 50 additional members of the IR superfamily which do not
interact with the known non-peptide hormones or vitamin derivatives have been
discovered. Ligand has an exclusive license to patent applications covering many
of these orphan IRs. Ligand believes that among the orphan IRs may be receptors
for uncharacterized small molecule hormones and that the physiological roles of
the various orphan IRs are likely to be diverse. Ligand has devised strategies
to isolate small molecules that interact with orphan IRs and is working to
identify new orphan IRs as drug targets and to identify their natural and
synthetic modulators as possible drug candidates. For example, the RXRs, one
subfamily of IRs activated by certain retinoids, were orphan IRs when initially
discovered. Panretin was discovered by virtue of its activation of the RXR
retinoid receptors.
RXR Heterodimer Biology. Retinoids that bind to the RXR family deliver
their therapeutic effects through partnered IRs. Recently scientists have
discovered that RXRs are obligate partners in these IR pairs through all
tissues. These IR pairs consist of one RXR and one of a variety of other IRs,
such as RARs, PPARs or thyroid hormone receptors. While RXRs are widely
expressed, their IR partners are more discreet, being expressed in selective
tissues, such as liver, fat or muscle. As a result, compounds that bind RXRs
offer the unique potential to be broadly active compounds that can treat a
variety of diseases, including metabolic diseases.
In animal models of type II diabetes, RXR agonists appear to stimulate the
physiological pathways responsive to RXR-PPAR receptor partners expressed in key
target tissues that are involved in glucose metabolism. As a result, a discrete
set of genes is activated in these tissues resulting in a decrease in serum
glucose levels and insulin.
Ligand has established collaborations with major pharmaceutical companies
to discover and characterize small molecules to modulate specific IR pathways.
LIGAND'S STAT DRUG DISCOVERY OPPORTUNITIES
SIGNAL TRANSDUCERS AND ACTIVATORS OF TRANSCRIPTION ("STATS")
STATs are a recently discovered family of proteins that are a key part of
the signal transduction pathway for a variety of biologically important peptide
hormones (e.g., interferons, interleukins, leptin and hematopoietic growth
factors) collectively termed Extracellular Signaling Proteins ("ESPs"). STATs
play a role in the biology of ESPs functionally analogous to that played by IRs
in the biology of the non-peptide hormones: both STATs and IRs are families of
transcription factors which change cell function by selectively turning on
particular genes in response to circulating signals which impinge on cells. When
various cytokines bind to their receptors on the cell surface, this triggers the
activation of specific members of the Janus Kinase family of tyrosine protein
kinases ("JAKs"), which in turn activate specific STATs. The activated STATs
enter the cell nucleus and bind to the control regions of specific target genes
and increase their expression, thereby modulating physiologic or
pathophysiologic processes.
In many diseases, there is an imbalance of cytokine action. For example,
some inflammatory conditions may represent excessive actions of certain
interleukins or interferons. In these conditions it may prove
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beneficial to block the actions of specific cytokines. In other pathological
states there is insufficient activity of specific cytokines. For example, in
patients with chronic renal failure, EPO release by the damaged kidneys results
in the inadequate production of red blood cells, causing anemia. Recombinant
human EPO protein (Epogen) can be administered to correct this anemia
effectively, but must be injected. Many other cytokines are useful as injected
protein medicines, including interferons (Intron-A, Roferon, Betaseron),
interleukins (e.g., Proleukin, which Ligand markets in Canada), hematopoietic
growth factors (Epogen, Neupogen) and others. Each of these and many other
cytokines appear to exert their actions through JAK/STAT signal transduction
pathways.
Ligand believes that its JAK/STAT technologies may lead to the discovery of
low molecular weight compounds able to mimic or block the actions of medically
relevant cytokines for uses in various pathological conditions, including
cancer, inflammation and disorders of blood cell formation. Because these
compounds are small molecules, whereas the cytokines themselves are proteins,
they offer potentially significant advantages over current cytokine-based
compounds, including oral bioavailability, greater ease of manufacture and
improved stability.
The discovery of STATs, the elucidation of their roles in interferon signal
transduction, and the first cloning of genes encoding STATs were all
accomplished by Ligand's exclusive collaborators, Dr. James Darnell at
Rockefeller University and Dr. David Levy at New York University ("NYU"), and
were described initially in August 1992. Since then, over half a dozen members
of the STAT family have been identified and a large number of ESPs in addition
to interferons have also been shown to utilize STAT signal transduction. Among
the ESPs which have been shown to use STAT signaling pathways are the
interferons (alpha, beta and gamma), the hematopoietic colony stimulating
factors (interleukin-3, EPO, G-CSF, GM-CSF and thrombopoietin), many of the
interleukins (including IL-2, IL-4, IL-6, IL-12 and IL-13, the related ESPs
Oncostatin M and Leukemia Inhibitory Factor), the cytokine leptin and several
protein hormones (growth hormone and prolactin).
Based on insights into JAK/STAT signal transduction and the generation of
the necessary reagents, Ligand has developed STAT technologies for drug
discovery which include cell culture-based high throughput screens to identify
small molecule drugs and biochemical assays that define where in the JAK/STAT
signal transduction pathways the small molecules act. Ligand believes that its
JAK/STAT drug discovery technology can produce drug candidates to control gene
expression to address a broad range of uses, including treating cancer,
providing hematopoietic support for cancer patients undergoing chemotherapy or
bone marrow transplantation, combating inflammation and viral or other
infections, treating anemia in chronically ill patients (e.g., those with renal
failure), treating dwarfism and related disorders of stature and enhancing
immune function.
Ligand is using its high throughput screening assays to discover small
molecule drugs to act as interferon agonists for potential application in
various cancers and viral diseases. Ligand has also established a collaboration
with SmithKline Beecham to discover and characterize small molecule drugs to
modulate specific JAK/STAT pathways to control the formation of red and white
blood cells for treating patients with cancer or anemia. Ligand has additional
assays under development to allow high throughput screening for and subsequent
optimization of small molecule drugs to act through JAK/STAT signaling pathways
to block or mimic other medically significant ESPs.
GLYCOMED'S COMPLEX CARBOHYDRATES
Ligand, through its wholly owned subsidiary Glycomed, is seeking drugs that
modulate processes involving complex carbohydrates and other components of the
extracellular matrix. The cells in the body are in many cases embedded in
various gelatinous or fibrous background substances such as proteins (e.g.,
collagen) or glycoproteins and mucopolysaccharides (various complex biological
polymers containing amino acid and sugar building blocks). This background
substance, termed extracellular matrix, can exert important effects on cells,
modifying their function and controlling their migration. Additionally, related
complex carbohydrates, glycoproteins and mucopolysaccharides are located on the
surfaces of cells, where they can
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play important roles in controlling interactions among various cells, including,
for example, the attachment of white blood cells to the inner linings of blood
vessels, a necessary part of some inflammatory responses.
Glycomed has expertise and core technology relating to the biology and
chemistry of complex carbohydrates and related components of the extracellular
matrix. Ligand is focusing Glycomed's expertise and core technologies to seek
small molecule, potentially orally active drugs to modulate the biological
processes involving complex carbohydrates and other cell surface and
extracellular matrix components for the treatment of inflammation and cancer.
One Glycomed compound is Galardin(TM), a matrix metaloproteinase inhibitor
in-licensed by Glycomed prior to the Merger. In Phase II/III trials,
Galardin(TM) treated patients had significantly lower incidence of corneal
perforation. Since the Merger, the Company has sought a partner to further
develop the product. Sankyo has Galardin(TM) under development in Phase II
trials in Japan for ophthalmic indications.
LIGAND'S DRUG DISCOVERY AND DEVELOPMENT PROCESS
Ligand's advanced molecular-based IR research focuses on analyzing the
biological systems regulated by IRs to choose the most promising molecular
targets for drug discovery. After selecting a target, the next critical step in
drug discovery is the identification of suitable lead compounds (chemical
structures suitable as starting points for optimization as drugs by the
application of medicinal chemistry). Traditional drug discovery generally uses
animal models or biochemical screening systems for lead compound identification.
Animal models are relatively slow, complicated and expensive; and results in
animals do not always correlate to those obtained in humans. Biochemical assays
are fast and inexpensive, but give limited information and frequently identify
poor lead compounds. Ligand has developed a hybrid approach to lead compound
identification that retains the best features and avoids the pitfalls of
traditional methods to discover leads.
Ligand has developed a proprietary cell-culture based assay system for
IR-modulating small molecules, referred to as the co-transfection assay, that
simulates the actual cellular processes controlled by IRs. The system is (i)
fast, compared to animal models; (ii) capable of cost-effective, high throughput
screening of thousands of compounds per week; (iii) highly predictive of in vivo
pharmacology of both agonists and antagonists; (iv) able to separate complex
targets, such as receptor subtypes; and (v) conducted using the actual human
receptors which are the ultimate drug targets. Ligand's co-transfection assay is
a key component of Ligand's IR drug discovery and development programs, and
facilitates both the identification of lead compounds and their optimization as
clinical candidates.
The co-transfection assay is able to preclinically detect both agonists and
antagonists of specific IRs. It determines not only whether a compound interacts
with a particular human IR, but also whether this interaction mimics or blocks
the effects of the natural regulatory molecules on target gene expression. The
Company's assays also enable the Company to detect useful lead compounds which
could be missed by alternative biochemical screens or animal models. Ligand has
successfully automated its co-transfection assays for high throughput screening
of thousands of compounds per week. Ligand's screening in co-transfection assays
has resulted in the identification of lead compounds for novel estrogen
agonists, non-steroidal progestins and antiprogestins, non-steroidal
antiandrogens, non-steroidal glucocorticoid agonists, new retinoid analogues and
PPAR agonists that are now undergoing further investigation.
Ligand has developed similar automated high throughput assays to identify
lead compounds acting as agonists or antagonists of selected JAK/STAT signaling
pathways for particular ESPs such as interferons, certain interleukins and
selected hematopoietic growth factors. Additional STAT-based screening assays
are under development.
Once Ligand verifies a lead compound for a particular target, the next
critical process is optimization of the compound to achieve specificity and
appropriate properties as a drug. Specificity is achieved when the compound
interacts only with the intended target molecule and not with related but
unintended molecules. Ligand's unique and comprehensive ability to assess
compounds preclinically for interactions with all the known human IRs or in
various STAT pathways is a significant advantage in obtaining specificity in a
lead compound. Optimization of a lead compound is an iterative process in which
analogues of the lead compound, designed and synthesized by medicinal chemists,
are assayed for activity. The results obtained with each set of
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<PAGE> 10
analogues guide the medicinal chemists in the design of compounds with greater
specificity. The co-transfection assay produces results which enhance the
accuracy and efficiency of this iterative optimization process. Ligand believes
the STAT-based assays may have similar advantages.
Ligand believes that its combination of modern molecular and traditional
approaches to drug discovery will accelerate its progress to develop new drug
candidates. To that end, Ligand has built a strong multidisciplinary team,
consisting of molecular biologists, medicinal chemists, pharmacologists and
specialists in drug metabolism and distribution, and other pharmaceutical
scientists. Ligand believes the similarities between hormone and cytokine
mechanisms of action allow it to leverage its drug discovery resources
efficiently in the IR and STATs areas.
PRODUCT DEVELOPMENT PROGRAM
Ligand, as part of its overall business strategy, is developing new drugs
through a combination of internal and collaborative programs: (i) internally, by
focusing on the discovery, development and marketing of small-molecule drugs
that address diseases, such as cancer, gynecological disorders and male hormonal
imbalances, treated by medical specialists, and by seeking to in-license or
acquire later-stage products in these medical specialties; and (ii) by
collaborating with large pharmaceutical companies, with the goal of building a
royalty-based business through the application of its technologies to primary
care markets, such as markets for certain cardiovascular, inflammatory,
metabolic and other diseases, as well as broad applications for women's and
men's health.
Ligand is currently pursuing five major internally-funded and collaborative
drug discovery programs: four are based on specific IRs (the retinoid, sex
steroid and glucocorticod receptor programs for cancer, skin and eye disease,
metabolic disease, men's and women's health, and inflammatory disease); one is
based on STATs; and one is based on Glycomed's inhibitors of cell adhesion
technology. Additionally, Ligand has in-licensed and is distributing two
anticancer products in Canada for which further indications are being sought.
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<PAGE> 11
The following table summarizes the current status of Ligand's product
research, development and marketing programs:
<TABLE>
<CAPTION>
DEVELOPMENT MARKETING
PROGRAM DISEASE INDICATION PHASE(1) RIGHTS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RETINOIDS
Panretin Gel (LGD1057)(2) KS Phase III Ligand worldwide
Panretin Capsules(2) Cancers, including., KS, MDS, Phase II Ligand worldwide
Psoriasis Phase II Ligand worldwide
LGD1550 Capsules(2) Cancer Phase I/IIA Ligand worldwide
Targretin Gel (LGD1069)(3) CTCL Phase III Ligand worldwide
Actinic keratoses Phase II Ligand worldwide
Targretin Capsules(4) CTCL Phase II/III Ligand worldwide
Lung cancer, breast cancer Phase II/III Ligand worldwide
Cancers, including, kidney, Phase II Ligand worldwide
prostate, ovarian, KS
Psoriasis Phase II Ligand worldwide
AGN4310(2) Skin Disorders Development Allergan
candidate
DIABETES AND METABOLIC DISEASE
Targretin Capsules(3) Type II diabetes Phase II Lilly
LGD1268 and LGD1324(3) Type II diabetes Development Lilly
candidate
AGN 4204 and AGN4326 Type II diabetes Preclinical Allergan
PPAR Modulators(3) Metabolic and cardiovascular Research Lilly
diseases
HNF4(3) Metabolic and cardiovascular Research Lilly
diseases
Ob gene Pathway(3) Metabolic and cardiovascular Research Lilly
diseases
SEX STEROIDS
Droloxifene(5) Breast cancer prevention Phase II Pfizer
Osteoporosis Phase II Pfizer
Estrogen agonist Osteoporosis Phase II Pfizer
(CP336,156)(6)
Estrogen antagonist Breast cancer Lead compounds AHP/Ligand(7)
selected
Progesterone antagonists Cancer, endometriosis, uterine Lead compounds AHP/Ligand(7)
(LG1447 series) fibroids selected
Progesterone agonists Breast cancer, hormone Lead compounds Ligand
(LG2527/2716 series) replacement therapy selected
Estrogen agonists Osteoporosis Phase I AHP
(TSE424)
Tissue selective estrogen or Gynecological disease, Lead compounds AHP/Ligand(7)
progesterone agonists and antagonists cardiovascular disease, hormone selected
replacement therapy
Androgen antagonists Prostate cancer, BPH and Development Ligand worldwide
(LGD1331 series) hirsutism candidate
Androgen agonists Male hormone replacement Lead compounds Ligand worldwide
therapy, osteoporosis selected
CARDIOVASCULAR DISEASE
Lipid regulators - LDL lowering Atherosclerosis Lead compounds Glaxo
selected
PPAR modulators Atherosclerosis and other Lead compounds Glaxo
disorders affecting the selected
cardiovascular system
</TABLE>
10
<PAGE> 12
<TABLE>
<CAPTION>
DEVELOPMENT MARKETING
PROGRAM DISEASE INDICATION PHASE(1) RIGHTS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INFLAMMATORY DISEASE
Glucocorticoid agonists Rheumatoid arthritis, Preclinical Abbott/Ligand(7)
inflammatory bowel disease,
asthma, dermatitis
GLYCOMED INFLAMMATORY
DISEASE
Galardin (TM) MMPI (GM6001) Ophthalmic inflammation Phase II/III Ligand; Sankyo
Matrix metalloproteinase completed in Far East
inhibitor ("MMPI")(8) Phase II(9) (opthalmic
indications)
GM1998 Acute and chronic inflammation Lead compounds Ligand; Sankyo
Cell adhesion inhibitors selected in Far East
GM1925, GM2296, GM1380 & analogues Acute and chronic inflammation Lead compounds Ligand; Sankyo
selected in Far East
GM1892 Reperfusion injury Lead compounds Ligand worldwide
Endothelial protective agent selected
GLYCOMED CANCER
GM1474, GM1306 Cancer Lead compounds Ligand worldwide
Growth factor modulators selected
GM6001 & analogues Cancer Lead compounds Ligand worldwide
Matrix metalloproteinase inhibitors selected
GM1603 & analogues Cancer Lead compounds Ligand worldwide
Heparinase inhibitors selected
STATS
Interferon agonists Cancer, infectious disease Lead compounds Ligand worldwide
identified
Interferon antagonists Rheumatoid arthritis, Lead compounds Ligand worldwide
inflammatory bowel disease, selected
asthma, dermatitis
Hematopoietic growth factors Oncological uses, anemia Lead compounds SmithKline
selected Beecham/Ligand(7)
Other cytokine agonists and Cancer, immunology, growth Lead Compounds Ligand worldwide
antagonists control identified
IN-LICENSED
PHOTOFRIN(R) Esophageal cancer, superficial Market Ligand
bladder cancer (Canada only)
Proleukin(R) Kidney cancer Market Ligand
(Canada only)
</TABLE>
- ---------------
(1) "Development Phase" refers to the current stage of development of the most
advanced indication.
"Research" activities include research related to specific IR and STATs
targets and the identification of lead compounds.
"Lead compounds" are chemicals that have been identified that meet
preselected criteria in cell culture models for activity and potency against
IR or STATs targets. More extensive evaluation is then undertaken to
determine if the compound should be selected to enter into preclinical
development. Once lead compound is selected, chemical modification of the
compound is then undertaken to create the best drug candidate.
"Preclinical" includes pharmacology and toxicology testing in preclinical
models (in vitro and in vivo), formulation work and manufacturing scale-up
to gather necessary data to comply with applicable regulations prior to
commencement of human clinical trials.
"Development candidates" are lead compounds that have successfully undergone
in vitro and in vivo evaluation to demonstrate that they have an acceptable
profile which justifies taking them through preclinical development with the
intention of filing an IND and initiating human clinical testing.
Clinical trials are typically conducted in three sequential phases that may
overlap. In "Phase I," the initial introduction of the pharmaceutical into
healthy human volunteers, the emphasis is on testing for
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<PAGE> 13
safety (adverse effects), dosage tolerance, metabolism, distribution,
excretion and clinical pharmacology. "Phase II" involves studies in a
limited patient population to determine the efficacy of the pharmaceutical
for specific targeted indications, to determine dosage tolerance and optimal
dosage and to identify possible adverse side effects and safety risks. Once
a compound is found to be effective and to have an acceptable safety profile
in Phase II evaluations, "Phase III" trials are undertaken to evaluate
clinical efficacy further and to further test for safety within an expanded
patient population at multiple clinical study sites. Sometimes Phase I and
II trials or Phase II and III trials are combined. The FDA reviews both the
clinical plans and the results of the trials and may discontinue the trials
at any time if there are significant safety issues.
(2) In connection with the exercise of the buyback of ALRT and the exclusive
licensing arrangement with Allergan (See "Strategic Alliances -- Allergan,
Inc."), Ligand acquired the exclusive right to develop and commercialize
Panretin Capsules and Panretin Gel, LGD1550, LGD1268 and LGD1324. In
addition, Ligand and Allergan participated in a lottery for each of the
approximately 2,000 retinoid compounds existing in the ALRT compound
library, with each party acquiring exclusive, worldwide development,
commercialization and sublicense rights to the compounds which they
selected. Allergan acquired rights to ALRT4310, ALRT4204, ALRT4326 and
acquired rights to selected RARa agonists.
(3) In connection with the strategic alliance with Lilly described in "Strategic
Alliance -- Eli Lilly and Company," Lilly will receive worldwide, exclusive
rights to Targretin (LGD1069), other Ligand compounds and technology
associated with the RXR receptor, HNF4, PPAR modulators and the ob gene
pathway in all fields other than cancer and dermatology.
(4) Targretin Capsules entered Phase II human clinical trials in diabetes in
March 1997 in Europe.
(5) Droloxifene is a Pfizer compound. Ligand performed work on droloxifene at
Pfizer's request. Ligand and Pfizer entered into a settlement agreement with
respect to a lawsuit in April 1996. Under the terms of the settlement
agreement, the Company is entitled to receive milestones if Pfizer continues
development and royalties if Pfizer commercializes the product. See
"Strategic Alliances -- Pfizer Inc"
(6) A compound discovered through the Company's collaborative relationship with
Pfizer to which Pfizer has retained marketing rights. Ligand is awaiting
confirmation from Pfizer. There can be no assurance that clinical trials
will proceed as planned or that any new drugs will be successfully
developed. See "Strategic Alliance -- Pfizer Inc" and "Government
Regulation."
(7) Ligand has retained certain compound rights. See "Strategic
Alliances -- American Home Products Corporation."
(8) Ligand is seeking a partner to further the development and commercialization
of Galardin for ophthalmic use. See "Inflammatory Disease."
(9) Phase II trials ongoing in Japan.
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<PAGE> 14
RETINOIDS
Retinoic acid, a derivative of Vitamin A, is one of the body's natural
regulatory hormones and has a broad range of biological actions, influencing
cell growth, differentiation, apoptosis and embryonic development. Many chemical
analogues of retinoic acid, also called retinoids, also have biological
activity. Specific retinoids have been approved by the FDA for the treatment of
psoriasis and certain severe forms of acne. Evidence also suggests that
retinoids can be used to arrest and, to an extent, reverse the effects of skin
damage arising from prolonged exposure to the sun. Other evidence suggests that
retinoids are useful in the treatment of a variety of cancers, including kidney
cancer and certain forms of leukemia. For example, all-trans-Retinoic-acid
("ATRA") has been approved by the FDA for the treatment of acute promyelocytic
leukemia ("APL"). Retinoids have also shown an ability to reverse precancerous
(premalignant) changes in tissues, reducing the risk of development of cancer,
and may have potential as preventive agents for a variety of epithelial
malignancies, including skin, head and neck, bladder and prostate cancer. Recent
scientific articles by Ligand researchers have described the potential of RXR
selective retinods in metabolic disease.
Despite the therapeutic benefits of currently marketed retinoids, their use
to date has been limited by their propensity to cause significant side effects,
such as severe birth defects if fetal exposure occurs, severe irritation of the
skin and mucosal surfaces, elevation of plasma lipids, headache and skeletal
abnormalities. Currently marketed retinoids were developed and commercialized
for their therapeutic benefits prior to the discovery of retinoid-responsive IRs
("RRs"), and were developed with suboptimal tools.
The six RRs that have been identified to date can be grouped in two
subfamilies: Retinoic Acid Receptors ("RARs") and RXRs. Patent applications
covering members of both families of RRs have been licensed exclusively to
Ligand primarily from The Salk Institute. The RR subtypes appear to have
different functions, based on their distribution in the various tissues within
the body and data arising from in vitro studies and from studies of transgenic
mice.
Several of the retinoids currently in commercial use are either
non-selective in their pattern of RR subtype activation or are not ideal drugs
for other reasons. Ligand, is developing chemically synthesized retinoids which,
by selectively activating RR subtypes, may preserve desired therapeutic effects
while reducing side effects. Because of their subtype selectivity or other
desirable activities, Ligand's retinoid agonists are expected to have more
specific pharmacological effects and fewer side effects, thus providing a better
therapeutic index than currently used retinoids, many of which are not RR
subtype specific or are suboptimal for other reasons.
Ligand, has five retinoid products in clinical trials, Panretin Gel,
Panretin Capsules and LGD1550 Capsules, Targretin Gel and Targretin Capsules,
and five retinoid compounds in advanced preclinical evaluation through its
corporate partners. Ligand and Allergan also participated in a lottery for each
of the approximately 2,000 retinoid compounds existing in the ALRT compound
library with each party acquiring exclusive, worldwide development,
commercialization and sublicense rights to the compounds selected. In September
1997, Ligand and Allergan agreed to restructure the terms and conditions
relating to research, development, commercialization and sublicense rights for
the ALRT compounds in the period following the closing of the exercise of
Ligand's Stock Purchase Option and Allergan's Asset Purchase Option. See
"Strategic Alliances -- Allergan, Inc."
In November 1997, Ligand and Lilly entered into a strategic alliance for
the discovery and development of products based on Ligand's IR technology. See
"Strategic Alliances -- Eli Lilly and Company, Inc."
Panretin Gel. 9-cis-Retinoic acid (Panretin) is a non-peptide hormone
isolated and characterized by Ligand in 1991 in collaboration with scientists at
The Salk Institute and Baylor. This is the first non-peptide hormone discovered
in over 25 years and appears to be a natural Ligand for the RAR and RXR
subfamilies of retinoid receptors. 9-cis-Retinoic acid has pharmacological
properties which Ligand believes give it therapeutic utility.
In June 1994, Ligand initiated a Phase I/II human clinical trial for
Panretin Gel in AIDS-related, cutaneous KS. Interim results of this Phase I/II
clinical trial reported in January 1996 showed that, when evaluated at 12 weeks
after the start of each patient's therapy, Panretin Gel induced a partial or
complete
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<PAGE> 15
clinical response in 30% of 43 patients with AIDS-related, cutaneous KS
evaluated by AIDS Clinical Trial Group ("ACTG") criteria as applied to topical
therapy, compared with 9% of patients with untreated control lesions. This
interim assessment supported results of an earlier assessment reported in
September 1995. Final results of this Phase I/II clinical trial involving 115
patients were reported in December 1996 and were consistent with the interim
data.
Following positive Phase I/II interim results and a meeting with the FDA in
November 1995, Ligand launched of 1996, a pivotal Phase III study in North
America to evaluate Panretin Gel in over 200 patients with AIDS-related,
cutaneous KS in the second quarter. In addition, Panretin Gel began
international Phase III trials for KS in the third quarter of 1996. In January
1997, the Company reported an interim assessment of the control (placebo)
response. Based on the first 100 patients, the control response was equal to or
below 10% which would permit the statistical power of the study to be maintained
without expanding the patient sample size. However, the Company decided to
enroll an additional 35 patients which will add time to the accrual process but
should not impact the targeted NDA filing date.
In August 1997, the Company reported that the international Phase III trial
of Panretin Gel was stopped early in August 1997 at 82 KS patients because an
interim analysis specified in the protocol revealed a 42% (15 of 36 patients)
response in patients treated with Panretin Gel compared with a 7% (3 of 46
patients) response of patients treated with a placebo. The trial conducted at
approximately 30 centers internationally and, permitted its early conclusion if
a significant number of patients were receiving clear benefit from Panretin Gel
treatment.
In December 1997, the company reported that the North American Phase III
pivotal trial for Panretin Gel in KS patients showed a 35.1% (47 of 134
patients) response in patients treated topically with Panretin Gel compared to
17.9% (24 of 134 patients) using a placebo gel with no active drug. The North
American study, which began in April 1996, included more than 30 sites with 269
patients -- 135 in the Panretin Gel group and 134 in the placebo group. Patients
in the Panretin Gel group had the option of continuing treatment after the
blinded portion of the study was complete. For patients initially assigned to
Panretin Gel and then continuing on the drug therapy, the response rate
increased to 49.3% (66 of 134 patients). Of the 85 patients who initially
received placebo and then elected to use Panretin Gel after the blinded phase,
29.4% (25 of 85) showed a complete or partial response. The Company believes
that these two Phase III trials should be sufficient to support a favorable
clinical review of the NDA targeted for submission early in 1998.
Panretin Capsules. In completed Phase I/IIA human clinical trials, Panretin
Capsules were well tolerated at doses as high as 140 mg/m(2)/day (milligram per
square meter of body surface, per day), the maximum tolerated dose ("MTD"). At
the MTD level, side effects, including headaches, elevated triglyceride levels,
hypercalcemia and mucocutaneous irritation, were dose limiting toxicities.
Memorial Sloan-Kettering Cancer Center ("Sloan-Kettering") interim data indicate
that nine of 39 patients with advanced or otherwise untreatable cancer treated
with Panretin Capsules experienced no disease progression for periods ranging
from 14 to 28 weeks. The Phase I/IIA clinical data also indicate that Panretin
Capsules have good bioavailability. Patient exposure to Panretin Capsules is
proportional to the administered dose of the compound over a broad range of
doses.
United States and international Phase II trials have been launched with
Panretin Capsules in a number of cancer indications, including kidney cancer (in
combination with interferon alpha), ovarian cancer (with cis-platin), KS,
prostate cancer, non-Hodgkin's lymphoma and multiple myeloma. In June 1997,
kidney cancer, non-Hodgkin's lymphoma and multiple myeloma trials were
discontinued due to insufficient activity. A Phase III trial with Panretin
Capsules at a dose of 140 mg/m(2)/day in APL was initiated in the fourth quarter
of 1996. In September 1997, the final analysis of a Phase I/IIA trial of
Panretin Capsules in APL showed that 4 of 5 newly diagnosed patients achieved
complete remission and 4 of 12 relapsed patients also experienced complete
remission. The FDA approved an application by Ligand, to have Panretin Capsules
designated an "Orphan Drug" for the treatment of APL. In February 1998, the
Company announced the restructure of the slowly accruing APL program by
terminating the ongoing Phase III studies. Panretin Capsules entered a Phase II
trial for psoriasis in the United States in September 1995, a Phase II trial for
myelodysplastic syndrome in Europe in the second quarter of 1996 and a Phase II
trial for proliferative vitreo-retinopathy,
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which was discontinued in July 1997 due to inability to accrue patients in this
small patient population. In July 1997, the Company reported interim results of
a Phase II study for Panretin Capsules in KS showing that Panretin Capsules has
an acceptable safety profile and a sufficient number of positive responders to
continue full accrual of the trial by the Aids Malignancy Consortium.
In February 1998, Ligand announced favorable results in two Phase II trials
with Panretin Capsules in patients with KS. The two studies were similar in
design, with one conducted by the AIDS Malignancy Consortium ("AMC") sponsored
by the National Cancer Institute ("NCI") and the other conducted directly by
Ligand. In the studies, Panretin Capsules were administered once daily at doses
increasing from 60 mg/m(2) to 100 mg/m(2)/day. Study participants had to have
biopsy proven KS associated with AIDS and at least five to six skin lesions that
were assessed every two weeks for response. Response was determined by applying
standard ACTG criteria for complete and partial response based on the indicator
lesions. The protocol-defined evaluation period was 16 weeks.
The study conducted by the AMC has enrolled 66 patients at eight sites. The
overall response rate at final analysis through the 16-week evaluation period
for patients meeting the criteria for evaluation was 38% (19 of 50) including
one complete responder. Drug side effects were generally manageable, with some
patients requiring dose reductions with headache, dry skin, rash, alopecia,
peeling/flaking and hyperlipidemia as the most common events.
The study conducted by Ligand enrolled 57 patients at five study centers.
The overall response rate for all patients (21 of 57) was 37%, and for patients
who met the protocol defined criteria for evaluation, the overall response rate
was 57% (21 of 37). One patient demonstrated a complete response. Almost all
patients were on highly active antiretroviral therapy (HAART), including at
least one protease inhibitor, prior to the start of Panretin Capsules therapy.
The side effect profile was similar to that in the AMC study.
A 50-patient Phase II trial of Panretin Capsules in psoriasis has been
completed and Panretin Capsules appear to be well-tolerated in patients with
moderate to severe plaque psoriasis. In this study, 50% (5 of 10 patients) who
received the optimal dose level of 0.9 mg/kg administered daily, achieved a 50%
or greater improvement based on the Physician's Global Evaluation.
There is currently substantial interest among oncologists in the potential
of retinoids, as evidenced by the existence of over 60 open protocols at the NCI
to examine the effects of retinoids on a variety of cancers. A Phase I/II study
is currently being conducted by the NCI to evaluate the safety and efficacy of
Panretin Capsules in children with malignancies, and the Phase II trials are
underway sponsored by the NCI to evaluate the safety and efficacy of Panretin
Capsules in patients with lung cancer, cervical cancer and those with breast
cancer.
LGD1550 Capsules. A very potent RAR agonist, LGD1550 Capsules strongly
inhibits growth of several human cancer cell lines. In the fourth quarter of
1996, Ligand submitted an IND. Phase I/IIA Clinical Trials in advanced cancer
began at Sloan-Kettering and Lombardi Comprehensive Cancer Center at Georgetown
University ("Lombardi Cancer Center") in the first quarter of 1997.
Other former ALRT Compounds. ALRT's drug development pipeline included
seven additional retinoid compounds in preclinical evaluation. These included:
(i) ALRT4310 and analogues, RAR antagonists for topical use to ameliorate
mucocutaneous irritation accompanying therapy for cancer or skin disease with
systemic retinoids such as Accutane, Vesanoid and Oral Panretin, (ii) ALRT1455
and analogues, RAR-alpha-selective retinoids for possible use in treating
leukemias, lymphoma, and breast cancer; (iii) RXR-selective retinoids, including
ALRT268 and ALRT324 with possible utilities in various metabolic disorders such
as diabetes mellitus; and (iv) four additional retinoid receptor selective
compounds with possible utilities in various cancers and skin disease. Ligand
and Allergan participated in a lottery for each of the approximately 2,000
retinoid compounds in the ALRT compound library with each party acquiring
exclusive, worldwide development, commercialization and sublicense rights to
compounds selected.
Targretin Topical Gel and Targretin Capsules. Ligand has created synthetic
retinoids that show distinctive patterns of RR subtype selectivity. Ligand's
research indicates that one of these retinoids, Targretin, has a beneficial
effect in squamous epithelial growth, showing activity with human skin cells in
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culture and in a preclinical model of psoriasis. Targretin , which is the first
RXR-selective retinoid in clinical development, has shown anti-cancer activity
in vitro and in vivo preclinically. Because Targretin has attractive preclinical
effects to induce programmed cell death (apoptosis) in cancer cell lines, Ligand
believes it may have utility in solid tumors, such as breast, colon or lung
cancer, which grow relatively slowly and therefore respond poorly to
conventional cytotoxic chemotherapeutic agents. In vivo preclinical data
indicate that Targretin is orally and topically active and well tolerated.
Ligand's research indicates that Targretin has a pattern of RR subtype
activation distinct from that of Panretin.
In June 1994, Ligand initiated Phase I/II clinical trials in patients with
a form of skin lymphoma or with cutaneous KS with Targretin Gel. In interim data
presented by investigations from the University of Cincinnati in March 1997,
Targretin Gel induced responses in 43% of 48 evaluable patients with cutaneous
T-cell lymphoma ("CTCL"). In January 1996, the Company presented interim data
which showed that Targretin Gel induced responses in 15% of 46 patients with
AIDS-related KS, a result which confirmed earlier interim results presented in
September 1995. The Company met with the FDA on trial design and in late 1996
and early 1997 initiated three Phase II/III and pivotal Phase III clinical
trials in CTCL; two studies with Targretin Capsules and one with Targretin Gel.
In September 1997, researchers from the University of Texas M.D. Anderson Cancer
Center reported on interim findings with respect to two Phase II/III pivotal
trials of Targretin Capsules. Forty-one percent of early and advanced stage CTCL
patients who had been refractory or intolerant to prior therapy and then
received higher dose Targretin capsules achieved a complete or partial response
compared to none of a group of early stage patients who received a lower dose of
Targretin capsules.
Ligand initiated clinical trials for Targretin Capsules for cancer
indications in January 1994. Phase I/IIA trials in patients with advanced cancer
were conducted at centers including Sloan-Kettering and the Lombardi Cancer
Center. These studies were designed to gather human safety data and to determine
the maximum tolerated dose of Targretin Capsules to facilitate design of Phase
IIB and later studies. Phase I/IIA interim trial results of Targretin Capsules
were presented by Sloan-Kettering investigators at ASCO in May 1995. The
Sloan-Kettering team reported on 33 patients with various cancers treated at
oral daily doses up to 140 mg/m(2)/day. No dose limiting toxicities were
reported in the study and investigators reported that the bioavailability of the
drug is excellent. In April 1996, clinical investigators reported stabilization
of disease in many of their patients with non-small cell lung cancer ("NSCLC").
Investigators from the Lombardi Cancer Center reported eight of 15 lung cancer
patients with stable disease in excess of three months. Investigators at
Sloan-Kettering reported that eight of 20 lung patients demonstrated
stabilization of disease for three to eight-plus months. Lombardi Cancer Center
investigators reported results of an ongoing Phase I-IIa human clinical trial on
Targretin Capsules at the annual meeting of the American Association for Cancer
Research and investigators from Sloan-Kettering reported results of a closed
Phase I-IIa human clinical trial of Targretin Capsules at the NCI and European
Organization for Research and Treatment of Cancer Symposium on New Drugs in
Cancer Therapy. In September 1997, the Company announced that 41% of early and
advanced stage CTCL patients who had been refractory or intolerant to prior
therapy and then received higher dose Targretin Capsules achieved a complete or
partial response. For the group of early stage CTCL patients, 37% who received
higher dose Targretin Capsules achieved complete or partial response compared to
none of the patients who received a lower dose of Targretin Capsules. Findings
for patients with advanced stage CTCL who received higher dose Targretin
Capsules showed 43% response. None of the advanced stage patients received lower
dosed Targretin Capsules. The interim findings of the first 35 patients enrolled
in these two multicenter Phase II/III trails were based on the Physicians'
Global Assessment of Response provided in the protocol. CTCL is a debilitating
cancer characterized initially by skin lesions that can affect more than 50% of
a person's skin surface, making day-to-day living painful and difficult.
Eventually, the disease becomes visceral and life threatening. The safety
profile of Targretin Capsules remains favorable. The drug also has displayed
milder side effects than those often seen with other retinoids, and it appears
to be well-tolerated at doses which are clinically active. Phase I/IIA studies
are continuing. A Phase II/III clinical trial has begun in lung cancer, Phase II
clinical trials have begun in KS, ovarian cancer, head and neck and prostate
cancer, and a Phase II clinical trial has begun in kidney cancer (in combination
therapy with interferon alpha).
Preclinical studies conducted with RXR-selective retinoids such as
Targretin Capsules indicate possible utilities in breast cancer and metabolic
disorders such as diabetes mellitus. Preclinical studies conducted in
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1996 in mouse models of human type II diabetes, a subset of diabetes mellitus,
and obesity demonstrated the ability of Targretin to decrease blood glucose,
triglyceride and insulin levels. In a rat model of breast cancer prevention
conducted in 1996, Targretin reduced incidence and tumor frequency at least as
well as an estrogen antagonist compared to control, without the undesirable
reduction in mean body weight produced by the estrogen antagonist. In February
1998, the Company announced that Targretin caused complete regression in 72% of
established breast cancer tumors in one of the most commonly used rat models of
this disease, according to a study published by scientists from Ligand in the
journal Cancer Research. The study is the first to compare the treatment
potential of Targretin and tamoxifen both individually and in combination
therapy. The use of tamoxifen alone resulted in complete regression in 33.3% of
tumors, compared to Targretin's rate of regression in 72% of tumors. Tamoxifen
is currently the most widely prescribed breast cancer therapy.
A Phase II multicenter trial in type II diabetes in Europe was initiated
with Targretin Capsules in the first quarter of 1997. The clinical studies have
two main objectives: to study the safety and tolerability of different dose
levels of Targretin in type II diabetic patients and to determine the potential
for this RXR agonist to have positive metabolic effects on carbohydrate and/or
lipid metabolism in this population. Ligand initiated a significant
collaboration in metabolic disease, including type II diabetes, in November 1997
with Lilly and future development of Targretin in metabolic disease is now a
part of that collaboration.
In addition, as part of the restructured Ligand-Allergan arrangement,
Ligand will pay to Allergan a royalty based on Ligand's net sales of Targretin
for uses other than oncology and dermatology indications; in the event that
Ligand licenses commercialization rights to Targretin to a third party, Ligand
will pay to Allergan a percentage of royalties payable to Ligand with respect to
sales of Targretin other than in oncology and dermatology indications.
SEX STEROIDS
The primary objective of Ligand's sex steroid program is to define
agonists, partial agonists and antagonists of the sex steroid receptors as drugs
for hormonally responsive cancers of men and women, hormone replacement
therapies and the treatment and prevention of diseases affecting women's health
as well as hormonal disorders prevalent in men. Ligand's programs in the sex
steroid areas target (i) development of tissue-selective modulators of the
progesterone receptor ("PR") and estrogen receptor ("ER") for uses including
various chronic disease indications and (ii) the development of androgen
receptor ("AR") agonists and antagonists for use in cancer and other
indications. Lead compounds have been identified in each of these project areas.
Substantial medicinal chemistry efforts have yielded compounds active in animals
as PR and AR modulators. Ligand is pursuing these programs alone and in
collaboration with certain partners. In the research phase of a collaboration
with Pfizer, an advanced clinical compound in breast cancer and osteoporosis was
evaluated and potentially attractive ER modulators were identified as
development candidates and backup candidates. In a collaboration with AHP,
several advanced sex hormone receptor modulators are progressing in preclinical
evaluation with one scheduled for an IND in the first quarter of 1998. Ligand
has filed a patent application on fundamental advances made in understanding sex
steroid receptor function with significant drug discovery implications.
Progesterone Receptor Antagonists and Agonists. The objective of this
program is to develop novel PR antagonists, partial agonists and agonists for
chronic therapies. As part of this program, Ligand is also pursuing PR agonists
and partial agonists with related chemical structures for use in hormone
replacement therapy, breast cancer, contraception and other applications in
women's health.
Exploratory clinical research indicates that PR antagonists may have
utility in a variety of chronic diseases, including endometriosis and cancer.
Although PR antagonists currently are used clinically for acute indications,
their use in chronic diseases is likely to be limited by their cross-reaction
with the glucocorticoid receptor, which is anticipated to produce adverse side
effects with chronic administration. Ligand believes that more selective PR
antagonists will be useful in the treatment of many hormone responsive diseases,
including gynecological and malignant disorders, such as breast and uterine
cancer, uterine fibroids (benign smooth muscle tumors) and endometriosis.
Because of the very close structural similarity of the IRs for progesterone and
glucocorticoids, it has proven difficult to find noncross-reactive compounds.
This has been made even
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more difficult because medicinal chemists have been largely constrained to
steroid structures as lead compounds.
Ligand believes that it has an opportunity, based on its proprietary tools
and approaches, to develop a specific PR antagonist that does not cross-react
with the IR for glucocorticoids. Ligand has discovered several nonsteroidal lead
compounds that are PR antagonists. Ligand has also discovered closely related
compounds that are full agonists of the PR, which may be useful in breast
cancer, contraception and hormone replacement therapy. These lead compounds were
detected in Ligand's natural product and defined chemical screening programs
using the co-transfection assay and the cloned human PR. Medicinal chemistry
efforts at Ligand based on one of these non-steroidal antiprogestin leads have
yielded potent, selective compounds with demonstrable antiprogestin
pharmacological effects both in vitro in human breast cancer cells and in vivo
in rodents.
In January 1996, AHP exercised its option to include compounds that Ligand
had discovered that modulate PRs and to expand the collaboration to encompass
the treatment or prevention of osteoporosis through the ER. Ligand's proprietary
PR modulators added to the collaboration include three series: LG1447 PR
antagonists, and LG2527 and LG2716 PR agonists. In 1997, Ligand regained rights
to progesterone agonists (LG2527 and LG2716) in the AHP collaboration. In May
1996, AHP expanded the collaboration further to include four advanced chemical
compound series from the Wyeth-Ayerst internal ER-osteoporosis program. See
"Tissue Selective Estrogen and Progesterone Agonists."
Estrogen Agonists. Osteoporosis is a disease characterized by significant
loss of bone mass. The disease, which predominantly affects post-menopausal
women, leads to a greater susceptibility to traumatic bone fractures and can
lead to curved spine ("dowager's hump") or hip fractures in elderly women. The
disease is ordinarily treated by giving women therapeutic doses of estrogen or
other steroidal analogues of estrogen. Estrogen therapy is a suboptimal
treatment of the disease because of significant side effects, including an
increased risk of developing uterine cancer. Estrogen therapy is not well
tolerated, and over 60% of women abandon the therapy within the first year.
Nevertheless, the market for estrogen therapy in the United States alone exceeds
$850 million annually and is estimated by Ligand to approximate $1.4 billion
worldwide.
The objective of the collaboration between Ligand and Pfizer was to
discover and develop novel therapies for osteoporosis acting through IRs. The
program focused on estrogen agonists that have greater tissue specificity for
bone than current forms of estrogen replacement therapy. In November 1993,
Ligand and Pfizer announced the successful completion of the research phase of
their alliance with the identification of a development candidate and backups
for the prevention and treatment of osteoporosis. In preclinical studies, the
candidates from the program mimic the beneficial effects of estrogen on bone
(stabilization of bone mineral density and skeletal integrity) and have an
impact on serum lipids often associated with cardioprotection without increasing
uterine or breast tissue proliferation.
Tissue Selective Estrogen and Progesterone Agonists. In addition to the
effects of estrogens and progesterones on the reproductive system, estrogens
exert a number of other influences in the body, including beneficial effects on
the cardiovascular and skeletal systems. After menopause, replacement of lost
estrogens is effective but not well tolerated due to adverse side effects.
Building on insights emerging from its research, Ligand believes that it has
developed a novel approach to achieving tissue selective estrogen or
progesterone agonist action. Ligand's approach is not dependent on the existence
of receptor subtypes, although subtypes have been demonstrated for the ER and PR
which may offer other drug discovery opportunities. Ligand has designed and
implemented novel screens which Ligand believes will detect sex steroid receptor
agonists with desirable pharmacological profiles. Ligand believes that these
compounds will be useful in treating a variety of hormone-responsive diseases,
such as endometriosis, uterine fibroids and cancers of the uterus and breast.
Additionally, Ligand believes that the compounds emerging from this program can
be used in reproductive medicine and hormone replacement therapy.
In September 1994, Ligand entered into a collaboration with AHP in the area
of ER and PR modulators for use in women's health. The objective of this
collaborative program is to discover and develop drugs which interact with the
ER or PR to produce tissue-selective actions. An important additional aspect of
this collaboration is Ligand's right to assay AHP's extensive chemical library
for activity against a selected set of
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targets of Ligand's internal programs. Ligand may select up to 24 lead compounds
for internal development to which Ligand has worldwide rights. AHP has agreed to
provide up to $21.5 million in research funding to support up to 18 Ligand
scientists during the term of the collaboration.
The first potential clinical product of the AHP collaboration is a tissue
selective estrogen modulator called TSE424. In 1997, AHP announced its intention
to file an investigational new application (IND) and begin clinical trials for
this selective estrogen agonist in osteoporosis in the first quarter of 1998. A
second potential clinical candidate may be designated for an IND track for
reproductive cancer in early 1998.
Androgen Receptor Agonists and Antagonists. The primary objective of this
project is to develop novel AR agonists or antagonists for male hormone
replacement therapy and the treatment of skin disorders, osteoporosis, prostate
cancer and other diseases. The growth of most prostate cancers appears to be
stimulated by or dependent upon androgens. The use of androgen antagonists has
shown efficacy in the treatment of prostate cancer. Currently, the FDA has
approved two androgen antagonists for use in the treatment of prostate cancer
and a third is in clinical development. None of these are Ligand compounds.
These agents appear to have significant side effects. Ligand believes that there
is a substantial medical need for improved androgen modulators for use in the
treatment of prostate cancer.
AR agonists and antagonists with an improved side effect profile may also
provide utility in the treatment of benign prostatic hypertrophy, acne,
hirsutism, male-pattern baldness and cachexia associated with chronic disease
(e.g., cancer, auto-immune disorders and AIDS). Ligand has exclusively licensed
patent applications for the cloned human AR and is employing it to identify
novel AR agonists and antagonists. Ligand has identified non-steroidal lead
compounds from its internal screening programs. An internally directed medicinal
chemistry effort has produced potent, selective, patentable AR agonists and
antagonists which show pharmacological activity in vivo in rodents. Compounds
from these series are being optimized and will be further evaluated as potential
preclinical candidates. Ligand intends to pursue the specialty applications
emerging from these projects internally, but may seek a collaboration with a
pharmaceutical company to exploit broader clinical applications.
Ligand researchers have identified an orally available, non-steroidal
androgen receptor antagonist, LGD1331, which preclinical studies indicate may
have utility for treating hirsutism, a disorder that affects a significant
number of women, prostate cancer, balding in men and benign prostatic
hyperplasia. In vivo studies of LGD1331 have revealed very favorable
characteristics, including dramatically diminished effects on the central
nervous system, compared with currently marketed drugs of this type for the
treatment of these conditions. This antagonist is also being evaluated for its
systemic and topical utility in the treatment of acne.
CARDIOVASCULAR/METABOLIC DISEASE
Ligand scientists are exploring the role of certain orphan IRs in disorders
affecting the cardiovascular system. Data suggest that these receptors regulate
the expression of apolipoprotein A1 ("ApoA1"). ApoA1 is the major protein
constituent of high-density lipoprotein ("HDL"), and recent data link increased
levels of ApoA1 to prevention of atherosclerosis.
Another subfamily of orphan IRs, PPARs, have been implicated in lowering
plasma levels of very low density lipoproteins and triglycerides. Data implicate
PPARs in the mechanism of action of lipid lowering drugs such as Lopid(R).
Ligand has discovered three subtypes of this PPAR class and defined novel
aspects of their action. The subtype PPAR alpha appears to regulate the
metabolism of certain lipids. PPAR alpha agonists may be useful to treat
atherosclerosis and diabetes mellitus. PPAR gamma plays roles in fat cell
differentiation and cellular responses to insulin. Modulators of PPAR gamma
activity (e.g., the glitazone class of insulin sensitizers) may have utilities
in the management of diabetes mellitus and/or obesity.
PPARs function in cells with RXRs as partner proteins. In addition to
compounds that act directly on PPARs, which may have utility in various
cardiovascular and metabolic disorders, certain retinoids able to activate RXRs
(e.g., Targretin Capsules and LGD1268) and indirectly activate PPARs may also
have utilities in these disorders. Preclinical animal studies have demonstrated
that Targretin Capsules have beneficial effects in animal models of diabetes.
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Ligand has established sophisticated high throughput assays to screen for
drug selectivity associated with structural classes of thyroid hormone receptors
to identify compounds which could selectively mimic the thyroid hormone's
cardioprotective lipid lowering effects without its impact on heart rate and
nervous system activity.
In September 1992, Ligand entered into a collaboration with Glaxo to
discover and develop drugs for the prevention or treatment of atherosclerosis
and other disorders affecting the cardiovascular system. In collaboration with
Glaxo, Ligand worked to discover drugs which produce beneficial alterations in
lipid and lipoprotein metabolism in projects focused on (i) regulation of
cholesterol biosynthesis and expression of a receptor which removes cholesterol
from the blood stream, (ii) the IRs influencing circulating ADL levels, and
(iii) PPARs, the subfamily of IRs activated by the clofibrate class of lipid
lowering drugs, Lopid and Atromid-S. The collaboration with Glaxo has also
identified a novel lead structure that activates selected PPAR subfamily
members.
Ligand and Glaxo have screened compounds to identify potential lead
compounds. A lead compound showing in vivo activity in rodents has been selected
for lowering low-density lipoprotein ("LDL") cholesterol by up-regulating LDL
receptor gene expression in liver cells. Once leads are identified, Glaxo has
primary responsibility for pharmacology, medicinal chemistry to optimize the
drug candidates, preclinical testing and for conducting clinical trials of the
drug candidates for marketing approval by the FDA and certain other regulatory
agencies. The research phase of the collaborative research agreement was
completed in September 1997.
In November 1997, the Company and Lilly entered into a strategic alliance
for the discovery and development of products based upon Ligand's IR technology.
The collaboration focuses on products with broad applications across metabolic
diseases, including diabetes, obesity, dislipidemia, insulin resistance and
cardiovascular diseases associated with insulin resistance and obesity. Under
the alliance Lilly received worldwide, exclusive rights to Targretin and other
Ligand compounds and technology associated with the RXR receptor. Lilly received
additional rights to use Ligand technology to develop an RXR compound in
combination with a SERM in cancer. Ligand retains exclusive rights to
independently research, develop and commercialize Targretin and other RXR
compounds in the fields of cancer and dermatology. Lilly also received
worldwide, exclusive rights in certain areas to Ligand's PPAR technology, along
with rights to use PPAR research technology with the RXR technology. Lilly and
Ligand also intend to begin research programs aimed at discovering novel
compounds which therapeutically activate PPAR subtypes for treatment of
cardiovascular disease. Finally, Lilly received exclusive rights to Ligand's
HNF4 receptor and the obesity gene promoter technology. Ligand has the option to
obtain selected rights to one Lilly specialty pharmaceutical product. The
product would fit into a current area of strategic focus for Ligand. Should
Ligand elect to obtain selected rights to the product, Lilly could receive
milestones of up to $20 million in Ligand stock. In the event that Ligand does
not exercise this product option, Ligand could sell an additional $20 million in
equity to Lilly at a 20% premium to the then market price, and Ligand would
qualify for certain additional royalties of up to 1.5% on net sales of Ligand's
choice of Targretin, LGD1268 or LGD1324. Ligand will receive double-digit
royalties on net sales of the most advanced products and single-digit royalties
on net sales of earlier compounds. Ligand will also receive milestones,
royalties and options to obtain certain co-development and co-promotion rights
for the Lilly-selected RXR compound in combination with a SERM.
INFLAMMATORY DISEASE
Ligand is utilizing three innovative approaches to discover drugs for the
treatment of inflammation. One approach is being pursued in partnership with
Abbott, one approach is being pursued internally and a third approach is being
pursued in collaboration with Sankyo. These programs and approaches target
diseases such as rheumatoid arthritis, asthma and reperfusion injury.
In collaboration with Abbott, Ligand is seeking novel small molecule
anti-inflammatory drugs. The collaborative program includes several approaches
to discovering modulators of glucocorticoid receptor activity that are better
than currently known anti-inflammatory steroids such as hydrocortisone and
dexamethasone. Internally, Ligand scientists are pursuing approaches to the
discovery of blockers of the actions of
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the inflammation-promoting cytokines, interferon alpha and interferon gamma,
through inhibition of their STAT-mediated signal transduction. A number of lead
compounds have been identified and are currently being optimized for further
drug development.
In collaboration with Sankyo, Glycomed scientists are synthesizing and
testing compounds that block the adhesion of white blood cells to tissue. Some
forms of inflammation are thought to be maintained by continued accumulation of
white blood cells at sites of tissue injury. This accumulation is caused by
adhesion of the white cells to the endothelial linings of blood vessels in the
injured tissue. Research suggests the inflammatory process can be blocked by
interfering with white blood cell adhesion, thus reducing tissue localization of
the white cells. Inhibiting this process at its early stages by blocking the
action of selectins (cell surface proteins mediating adhesion) may provide
potent treatments for a variety of acute and chronic inflammatory diseases such
as rheumatoid arthritis and asthma. Two lead compound series show improved
potency over the natural adhesion Ligand's and a potential third lead series is
currently under evaluation.
Galardin(TM) (GM6001). MMPIs are also potent inhibitors of a class of
enzymes involved in the degradation of proteoglycans and collagen. Galardin, a
metalloproteinase inhibitor, is a small, easily-synthesizable molecule that has
demonstrated effectiveness at very low concentrations in the prevention of
corneal ulceration in animals following alkali injury to the eye. The MMPI
Galardin was the first compound for which Glycomed filed an IND. Glycomed
received Orphan Drug designation for Galardin in December 1991 and completed
enrollment for the Phase II/III clinical trials in July 1994. The study,
involving over 500 patients with corneal injury, produced the statistically
significant finding that Galardin treatment reduced the number of patients in
which perforation of the cornea developed in the period after injury. In
contrast, the results of this Phase II/III study of Galardin in corneal injury
did not demonstrate a statistically significant impact of Galardin, applied
topically in the eye, on the rate of healing of corneal ulcers, the principal
intended study endpoint. Perforation is caused by destruction of the full
thickness of the cornea. It is one of the most serious complications associated
with corneal ulcers and can lead to blindness. Corneal perforation is a
significant risk for an estimated 120,000 of the patients with corneal ulcers in
the United States each year. Sankyo has Galardin in Phase II trials in Japan and
Ligand is seeking a partner to further the development and commercialization of
Galardin for ophthalmic use. Composition of matter and use patents (in corneal
ulceration) have been issued in the United States.
In February 1994, Glycomed signed a License Agreement with Sankyo for all
ophthalmic indications in the Far East for Galardin and analogues, while
Glycomed retained rights in the rest of the world.
STATS
The recent discovery of the role of STATs and JAKs explains the mechanism
through which many cytokines modulate gene expression and cellular function. The
cytokines that produce cellular responses through the JAK/STAT pathway include
the interferons, most of the interleukins, the hematopoietic growth factors,
growth hormone and leptin.
Ligand's JAK/STAT signaling programs are focused on applications for
inflammation, infection, transplant rejection, allergy and blood cell
deficiencies induced in patients receiving chemotherapy. Ligand's first
collaborative effort to utilize the JAK/STAT approach to drug discovery was with
Abbott in the field of inflammation. Screening in this program led to the
selection of a lead compound for interferon antagonist activity which Ligand is
developing internally.
Ligand's second collaboration in the JAK/STAT area is with SmithKline
Beecham to discover and characterize small molecule, orally bioavailable drugs
to enhance the formation and development of blood cells (hematopoiesis). Working
together, Ligand and SmithKline Beecham scientists were able to validate a
JAK/STAT-based high throughput screen for hematopoietic growth factors, thus
achieving the first milestone of the collaboration in under nine months. Based
on this and additional collaborative work, the research teams of SmithKline
Beecham and Ligand are exploiting recent insights into the roles of JAKs and
STATs in mediating hematopoietic growth factor signal transduction and blood
cell formation. The Company's goal is to discover orally active compounds that
effectively enhance blood cell formation in a variety of anemias and after
cancer therapy. Several lead compounds have been identified. In January 1997,
SmithKline Beecham
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and Ligand expanded the collaboration to include screens aimed at discovering
small molecule mimics of thrombopoietin to stimulate blood platelet production.
In March of 1998, Ligand and SmithKline Beecham agreed, subject to
regulatory approval, to initiate a new collaboration to develop small molecule
drugs that modulate the signaling pathway controlled by leptin as a means of
discovering orally available drugs for treatment or prevention of obesity.
Ligand's internal STATs research group is focused on the discovery of new
leads with potential utility as cancer therapeutics and the development of high
throughput screens for agonists and/or antagonists of therapeutically relevant
cytokines that use the JAK/STAT pathway. Additional screening efforts have led
to the selection of a lead compound for interferon activity in inflammation.
Current efforts have allowed the Company to identify the components required for
high throughput screening for IL-4 antagonists to treat allergy and asthma and
IL-12 antagonists to treat transplant rejections and autoimmine diseases such as
rheumatoid arthritis.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses were $72.4 million, $59.5 million and
$41.6 million in fiscal 1997, 1996 and 1995, respectively, of which
approximately 29%, 38% and 41%, respectively, was sponsored by the Company and
the remainder of which was funded pursuant to product development collaboration
arrangements. See "Strategic Alliances."
IN-LICENSED PRODUCTS
PHOTOFRIN. In March 1995, Ligand acquired from QLT PhotoTherapeutics, Inc.
("QLT") exclusive Canadian marketing rights to PHOTOFRIN, porfimer sodium, a
laser-activated drug for use in photodynamic therapy for esophageal and
superficial bladder cancer. In July 1995, Ligand, through its wholly-owned
Canadian subsidiary, Ligand (Canada) Inc. ("Ligand Canada") began distribution
of PHOTOFRIN. There are over 3,500 new cases of superficial bladder cancer and
1,200 new cases of esophageal cancer diagnosed each year in Canada. Ligand
Canada also has rights to sell the product for any other approved indications in
Canada. PHOTOFRIN has been approved in the United States in esophageal cancer,
in the Netherlands for lung and esophageal cancers and in Japan for early-stage
lung, esophageal, gastric and cervical cancers. In August 1997, QLT filed a
supplemental new drug submission with the Canadian Health Protection Branch for
PHOTOFRIN in renal cell carcinoma.
Proleukin. In September 1994, Ligand entered into an agreement with Cetus
Oncology Corporation ("Cetus Oncology"), a subsidiary of Chiron Corporation, to
exclusively market in Canada, Proleukin, its recombinant human Interleukin-2
(aldesleukin) for the treatment of kidney cancer. In April 1995, Ligand Canada
began distribution of Proleukin. It is also being tested with alpha interferon
to determine if additional indications are feasible. There are nearly 5,000 new
cases of kidney cancer reported in Canada each year. In August 1997, Chiron
Corporation filed a supplemental new drug submission with the Canadian Health
Protection Branch for Proleukin in malignant melanoma.
The Company has initiated Phase IV trials in Canada with both Proleukin and
PHOTOFRIN to further characterize the drugs clinically and facilitate broader
acceptance of both products.
STRATEGIC ALLIANCES
Eli Lilly and Company. In November 1997, the Company and Lilly entered into
a strategic alliance for the discovery and development of products based upon
Ligand's IR technology. The collaboration focuses on products with broad
applications across metabolic diseases, including diabetes, obesity,
dislipidemia, insulin resistance and cardiovascular diseases associated with
insulin resistance and obesity. Under the alliance Lilly received worldwide,
exclusive rights to Targretin and other Ligand compounds and technology
associated with the RXR receptor. Lilly received additional rights to use Ligand
technology to develop an RXR compound in combination with a SERM in cancer.
Ligand retains exclusive rights to independently research, develop and
commercialize Targretin and other RXR compounds in the fields of cancer and
dermatology. Lilly also
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received worldwide, exclusive rights in certain areas to Ligand's PPAR
technology, along with rights to use PPAR research technology with the RXR
technology. Lilly and Ligand also intend to begin research programs aimed at
discovering novel compounds which therapeutically activate PPAR subtypes for
treatment of cardiovascular disease. Finally, Lilly received exclusive rights to
Ligand's HNF4 receptor and the obesity gene promoter technology. Ligand has the
option to obtain selected rights to one Lilly specialty pharmaceutical product.
The product would fit into a current area of strategic focus for Ligand. Should
Ligand elect to obtain selected rights to the product, Lilly could receive
milestones of up to $20 million in Ligand stock. In the event that Ligand does
not exercise this product option, Ligand could sell an additional $20 million in
equity to Lilly at a 20% premium to the then market price, and Ligand would
qualify for certain additional royalties of up to 1.5% on net sales of Ligand's
choice of Targretin, LGD1268 or LGD1324. Ligand will receive double-digit
royalties on net sales of the most advanced products and single-digit royalties
on net sales of earlier compounds. Ligand will also receive milestones,
royalties and options to obtain certain co-development and co-promotion rights
for the Lilly-selected RXR compound in combination with a SERM. Lilly has the
right to terminate the development of compounds under the agreements, with
Ligand receiving rights to certain of such compounds in return for a royalty to
Lilly, the rate of which is dependent on the stage at which the development is
terminated. In addition, either party may terminate the agreements following a
material breach remains uncured for 90 days. Lilly also has the right to
terminate the agreement regarding development of Targretin at any time on or
before December 15, 1998 if it decides not to proceed with the development of
Targretin; Lilly has the right to terminate development of Targretin following
December 15, 1998 in certain other instances.
In connection with the alliance, Lilly made a $31.2 million equity
investment in the Company's Common Stock, provided an upfront non-refundable
milestone payment of $12.5 million and could provide the Company with up to $49
million in research funding over five years. As of December 31, 1997, Lilly had
funded approximately $1.0 million of the total $49 million in potential research
funding under the agreements.
SmithKline Beecham Corporation. In February 1995, Ligand entered into a
collaborative agreement with SmithKline Beecham providing for a three-year
research program (with an option to extend the program for two years at
SmithKline Beecham's election) to utilize Ligand's proprietary STATs technology
to discover and characterize small molecule, orally bioavailable drugs to
control hematopoiesis (the formation and development of blood cells). Under the
terms of the agreement, SmithKline Beecham has been granted exclusive worldwide
rights for products resulting from the collaboration in certain targeted areas.
In exchange, SmithKline Beecham has agreed to provide Ligand up to $9.0 million
in research funding and up to $12.5 million in equity investments. This amount
includes an initial equity investment of $5.0 million in Common Stock. In
November 1995, a second equity investment of $2.5 million in Ligand's Common
Stock was provided upon the achievement of certain milestones. In January 1997,
a third equity investment of $2.5 million in Ligand's Common Stock was provided
upon SmithKline Beecham's election to include screens aimed at discovering small
molecule mimics of thrombopoietin. The final installment of $2.5 million was
provided in October 1997 as a convertible note as a result of SmithKline
Beecham's election to extend the collaboration and provide an additional $3.1
million in research funding. SmithKline Beecham will make additional milestone
payments to Ligand as compounds progress in clinical development and will also
make royalty payments on product sales. Ligand has the right to select up to
three compounds related to hematopoietic targets for development as anti-cancer
products other than those compounds selected for development by SmithKline
Beecham. SmithKline Beecham has the option to co-promote these products with
Ligand in North America and to develop and market them outside North America.
SmithKline Beecham can terminate the research program upon 60 days notice in the
event of any breach by Ligand or upon six months notice at any time after August
1996. In March of 1998, Ligand and SmithKline Beecham agreed, subject to
regulatory approval, to initiate a new collaboration to develop small molecule
drugs that modulate the signaling pathway controlled by leptin as a means of
discovering orally available drugs for treatment or prevention of obesity. As
part of the leptin-obesity collaboration, SmithKline Beecham will purchase
274,423 shares of Ligand Common Stock for $5.0 million ($18.22 per share, a 20%
premium over a 15-day trading average of stock prior to execution agreement and
will also purchase for $1 million a warrant under certain circumstances after
three years. SmithKline Beecham will also purchase additional Ligand Common
Stock at 20% premium if a research milestone is achieved. The agreement also
provides for cash
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payments if subsequent milestones are met. Under the new agreement, SmithKline
Beecham will obtain exclusive worldwide rights to products resulting from the
obesity collaboration and has agreed to make milestone payments to Ligand as
compounds progress through preclinical and clinical development, and royalty
payments on sales, if products result from the research. As of December 31,
1997, SmithKline Beecham had funded approximately $7.7 million of the total of
$10.9 million in potential research funding under the agreement.
American Home Products Corporation. In September 1994, Ligand entered into
a collaborative research agreement with AHP providing for a three-year research
program (with an option to extend the program for two years at AHP's election)
to discover and develop drugs which interact with estrogen or progesterone
receptors for use in hormone replacement therapy, anti-cancer therapy,
gynecological diseases, central nervous system disorders associated with
menopause and fertility control. AHP has been granted exclusive worldwide rights
to all products discovered in the collaboration that are agonists or antagonists
to the PRs and ERs for application in the fields of women's health and cancer
therapy. Under the agreement, AHP agreed to provide up to $21.5 million in
research funding and up to $25.0 million in equity and convertible notes, in
addition to milestone and royalty payments to Ligand for such products. An
important additional aspect of this collaboration is Ligand's right to assay
AHP's extensive chemical library for activity against a selected set of targets
of Ligand's internal programs. Ligand may select up to 24 lead compounds for
internal development to which Ligand has worldwide rights. AHP made a $5.0
million equity investment in Ligand and provided $10.0 million to Ligand in the
form of a convertible note. In the second quarter of 1995, Ligand had achieved
certain milestones which qualified the Company to receive the second installment
of a $5.0 million convertible note which the Company elected to receive in
December 1996. A final convertible note installment of $5.0 million will be
provided if AHP exercises its option to extend the period of collaboration from
three to five years. In September 1997, the research program was extended for
one year. The first two notes issued to AHP are convertible into the Company's
Common Stock at $10.01 per share and the final note is convertible at $10.88 per
share. The conversion prices are subject to adjustment if certain dilutive
events occur to outstanding Common Stock. In August 1996, February 1997, July
1997 and again in December 1997, the Company converted $3.8 million, $3.8
million, $2.5 million and $1.3 million, respectively of the convertible notes
outstanding into 374,626, 374,626, 249,749 and 124,875 shares of Common Stock at
a $10.01 conversion price.
In January 1996, AHP exercised its option to include compounds discovered
by Ligand that modulate PRs and to expand the collaboration to encompass the
treatment or prevention of osteoporosis through the ER. In connection with the
exercise of the option, the Company received $2.5 million in additional research
revenue and funding commitments. Ligand's proprietary PR modulators added to the
collaboration include three series: LG1447 PR antagonists, LG2527 and LG2716 PR
agonists. In May 1996, AHP expanded the collaboration to include four advanced
chemical compound series from its internal ER-osteoporosis program. As of
December 31, 1997, AHP had funded approximately $16.5 million of the total of
$21.5 million in potential research funding under the agreement.
Abbott Laboratories. In July 1994, Ligand entered into a collaborative
research agreement with Abbott providing for a five-year research program to
discover and develop small molecule compounds for the prevention or treatment of
inflammatory diseases. Under the agreement, research funding provided by Abbott
may total up to approximately $16.0 million. Abbott has also committed
significant internal resources to the collaboration. Abbott was granted
exclusive worldwide rights for all products discovered in the collaboration for
use in inflammation. Ligand was granted exclusive worldwide rights for all
anti-cancer products discovered in the collaboration. Abbott will make milestone
and royalty payments on products targeted at inflammation resulting from the
collaboration, while Ligand will make milestone and royalty payments on products
targeted at anti-cancer resulting from the collaboration. Each party will be
responsible for the development, registration and commercialization of the
products in its respective field. Abbott made an initial $5.0 million equity
investment in Ligand and purchased an additional $5.0 million of equity in
August 1995. Abbott can terminate the research program at any time upon 90 days
notice in the event of any breach by Ligand or upon four months notice at any
time. As of December 31, 1997, Abbott had funded approximately $8.0 million of
the total of $16.0 million in potential research funding under the agreement.
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Sankyo Company Limited. As part of the Glycomed acquisition, the Company
acquired a collaborative research agreement with Sankyo which Glycomed had
entered into in June 1994 providing for a three-year research program. Under the
agreement, Sankyo reimburses a portion of the Company's research expenses
related to the collaboration up to an aggregate of $8.9 million. The agreement
also provides that upon being presented with a target compound arising from the
research collaboration with the Company, Sankyo will notify the Company whether
it wishes to pursue development of the compound. If Sankyo exercises its option
to develop the compound, the Company and Sankyo will negotiate in good faith the
terms and conditions for an option and license agreement and Sankyo will make
additional milestone payments. In connection with the collaborative research
agreement, in September 1995, Sankyo purchased $1.5 million of the Company's
Common Stock. In June 1997, the research program was extended through October
1997, at which time the research program terminated. Sankyo funded the total
potential research funding of $8.9 million, of which $6.5 million was funded
since the Merger.
Glaxo-Wellcome plc. In September 1992, Ligand entered into a five-year
collaborative research agreement with Glaxo to develop drugs for the prevention
or treatment of cardiovascular disease. The collaboration significantly enhances
Ligand's pharmacological, medicinal chemistry and clinical development resources
related to cardiovascular disease. Glaxo has committed significant internal
resources to the collaboration and will fund one-half of Ligand's research
expenses to support 18 Ligand scientists assigned to the collaboration. Ligand
and Glaxo will screen compounds to identify potential lead compounds. Once leads
have been identified, Glaxo will have primary responsibility for pharmacology,
medicinal chemistry to optimize the drug candidates and preclinical testing.
Glaxo also has responsibility for conducting clinical trials of the drug
candidates for marketing approval by the FDA and certain other regulatory
agencies. Ligand will receive milestone payments as compounds progress through
the development cycle and a royalty on any commercialized products. Ligand has
retained the right to develop and commercialize products arising from the
collaboration in markets not exploited by Glaxo or where Glaxo is not developing
a product for the same indication. Glaxo has made a total of $10.0 million in
equity investments in Ligand. In connection with the agreement, Glaxo purchased
$7.5 million of the Company's Common Stock. Glaxo also purchased $2.5 million of
the Company's Common Stock as part of the Company's initial public offering. The
collaborative research program was completed in September 1997. Glaxo funded
approximately $9.2 million of the total of $10.0 million in potential research
funding under the agreement.
Allergan, Inc. In June 1992, Ligand and Allergan formed Allergan-Ligand
Joint Venture ("the Joint Venture"), owned 50% by each party, to discover,
develop and commercialize retinoid drugs. In December 1994, the Company and
Allergan formed Allergan Ligand Retinoid Therapeutics, Inc. ("ALRT") to continue
the research and development activities previously conducted by the Joint
Venture. In June 1995, the Company and ALRT completed a public offering of
3,250,000 units (the "Units") with aggregate proceeds of $32.5 million ("the
ALRT Offering") and cash contributions by Allergan and Ligand of $50.0 million
and $17.5 million, respectively, providing for net proceeds of $94.3 million for
retinoid product research and development. Each Unit consisted of one share of
ALRT's Callable Common Stock and two warrants, each warrant entitling the holder
to purchase one share of Common Stock of the Company. Immediately prior to the
consummation of the ALRT Offering, Allergan Pharmaceuticals (Ireland) Ltd., Inc.
("Allergan Ireland") made a $6.0 million investment in the Company's Common
Stock. Since 1992, Allergan Ireland, a wholly owned subsidiary of Allergan, has
made $30.0 million in equity investments in Ligand. As part of the ALRT
Offering, all rights held by the Joint Venture were licensed to ALRT. The
Company, Allergan and ALRT entered into certain other various agreements in
connection with the funding of ALRT, including a Technology License Agreement, a
Research and Development Agreement, a Commercialization Agreement, and a
Services and Administrative Agreements. Ligand's $17.5 million in cash
contribution, as well as warrants were in exchange for (i) a right to acquire
all of the Callable Common Stock at specified future dates and amounts (the
"Stock Purchase Plan") and (ii) a right to acquire all rights to the Panretin
(ALRT 1057) product, jointly with Allergan (the "1057 Option"). Allergan's $50.0
million cash contribution to ALRT was in exchange for (i) the right to acquire
onehalf of technologies and other assets in the event Ligand exercises its right
to acquire all of the Callable Common Stock (the "Asset Purchase Option"), (ii)
a similar right to acquire all of the Callable Common Stock if Ligand does not
exercise its right and (iii) a right to acquire all rights to Panretin (ALRT
1057) product, jointly with Ligand.
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In September 1997, Ligand and Allergan announced that they had exercised
their respective Stock Purchase Option and Asset Purchase Option at the original
prices provided by the agreements. Ligand's notice of exercise of the Stock
Purchase Option included a stock purchase option exercise price of $21.97 per
share of outstanding Callable Common Stock, the original exercise price
designated for the exercise of the Stock Purchase Option at any time prior to
June 3, 1998. Allergan's notice of exercise of its Asset Purchase Option
included the aggregate Asset Purchase Option exercise price of $8.9 million, the
original exercise price designated for the exercise of the Asset Purchase Option
at any time prior to June 3, 1998. The Asset Purchase Option exercise price was
paid in cash to ALRT concurrently with the payment to holders of ALRT Callable
Common Stock of the Stock Purchase Option exercise price and was used to pay a
portion of such Stock Purchase Option exercise price.
Ligand and Allergan also agreed to restructure the terms and conditions
relating to research, development, commercialization and sublicense rights for
the ALRT compounds in the period following the closing of the exercise of
Ligand's Stock Purchase Option and Allergan's Asset Purchase Option. Prior to
the restructuring and following the exercise of the Stock Purchase Option and
Asset Purchase Option, Ligand and Allergan would have had equal, co-exclusive
development, commercialization and sublicense rights in the compounds and assets
developed by ALRT. Ligand would have owned all of the outstanding Callable
Common Stock of ALRT and Allergan would have acquired (i) a co-exclusive (with
ALRT) right to ALRT technology as of the date of the acquisition and (ii) 50% of
all tangible assets related to ALRT's activities in the retinoid program. Under
the restructured arrangement, however, Ligand received exclusive, worldwide
development, commercialization and sublicense rights to Panretin Capsules and
Panretin Gel, LGD1550, LGD268 and LGD324. Allergan received exclusive, worldwide
development, commercialization and sublicense rights to LGD4310, an RAR
antagonist being developed for topical application against mucocutaneous
toxicity associated with currently marketed retinoids as well as for psoriasis.
Allergan also received LGD326 and LGD4204 (two advanced preclinical RXR
selective compounds). In addition, Ligand and Allergan participated in a lottery
for each of the approximately 2,000 retinoid compounds existing in the ALRT
compound library as of the closing date, with each party acquiring exclusive,
worldwide development, commercialization and sublicense rights to the compounds
which they select.
Ligand and Allergan will each pay the other a royalty based on net sales of
products developed from (i) the compounds selected by each in the lottery and
(ii) the other ALRT compounds to which each acquires exclusive rights. Ligand
will also pay to Allergan a royalty based on Ligand's net sales of Targretin for
uses other than oncology and dermatology indications; in the event that Ligand
licenses commercialization rights to Targretin to a third party, Ligand will pay
to Allergan a percentage of royalties payable to Ligand with respect to sales of
Targretin other than in oncology and dermatology indications. Under the
restructured arrangement, on the closing of the exercise of the Stock Purchase
Option and the Asset Purchase Option, Ligand paid Allergan a non-refundable cash
payment in the amount of $4.5 million.
ALRT had provided approximately $52.0 million in research funding to Ligand
under the Research and Development Agreement.
Pfizer Inc. In May 1991, Ligand entered into a five-year collaborative
research and development and license agreement with Pfizer to develop better
alternative therapies for osteoporosis. Pfizer agreed to provide up to $3.0
million per year in research funding to Ligand in addition to committing
significant internal resources. In November 1993, Ligand and Pfizer announced
the successful completion of the research phase of their alliance with the
identification of a development candidate and backups for the prevention and
treatment of osteoporosis. In preclinical studies, the candidates from the
program mimic the beneficial effects of estrogen on bone and have an impact on
blood serum lipids often associated with cardiac benefits without increasing
uterine or breast tissue proliferation. Under the terms of the collaboration,
Pfizer has primary responsibility for pharmacology, medicinal chemistry to
optimize the drug candidates, preclinical testing, and clinical trials of drug
candidates for marketing approval by the FDA and certain other regulatory
agencies. Ligand has granted Pfizer exclusive worldwide rights to manufacture
and market any compounds jointly developed for osteoporosis. Ligand is to
receive up to $7.5 million in milestone payments as development objectives are
achieved, in addition to royalties on sales of successful drugs that emerge from
the alliance. As
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of December 31, 1993, Pfizer had made a total of $7.5 million of equity
investments in Ligand and had funded approximately $9.4 million in research
funding.
In December 1994, Ligand filed suit against Pfizer in the Superior Court of
California in San Diego County for breach of contract and for a declaration of
future rights as they relate to droloxifene, a compound upon which Ligand
performed work at Pfizer's request during the collaboration between Pfizer and
Ligand to develop drugs in the field of osteoporosis. Droloxifene is an estrogen
antagonist/partial agonist with potential indications in the treatment of
osteoporosis and breast cancer as well as other applications. Ligand and Pfizer
entered into a settlement agreement with respect to the lawsuit in April 1996.
Under the terms of the settlement agreement, Ligand is entitled to receive
milestone payments if Pfizer continues development and royalties if Pfizer
commercializes droloxifene. At the option of either party, milestone and royalty
payments owed Ligand can be satisfied by Pfizer transferring to Ligand shares of
Common Stock at an exchange ratio of $12.375 per share. To date, Ligand has
received approximately $1.3 million in milestone payments from Pfizer as a
result of the continued development of droloxifene. These milestones were paid
in the form of an aggregate of 101,011 shares of Common Stock, which were
subsequently retired from treasury stock in September 1996. According to
announcements by Pfizer, droloxifene has entered Phase II clinical trials for
osteoporosis.
The Salk Institute of Biological Studies. In October 1988, Ligand
established an exclusive relationship with The Salk Institute which is one of
the research centers in the area of IR technology. Dr. Ronald Evans, who cloned
and characterized the first IR in 1985 and who invented the co-transfection
assay used by Ligand, is a professor in the Gene Expression Laboratory of The
Salk Institute and an Investigator of the Howard Hughes Medical Institute. Under
the agreement, Ligand has an exclusive, worldwide license to the IR technology
developed by Dr. Evans' laboratory at The Salk Institute. Subject to compliance
with the terms of the agreement, the term of the license extends for the life of
the patents covering such developments.
Under the agreement, Ligand made an initial payment to The Salk Institute
and issued shares of Common Stock as partial consideration for the license.
Ligand is also obligated to make certain royalty payments based on sales of
certain products developed using the licensed technology, as well as certain
minimum annual royalty payments.
Ligand also entered into exclusive consulting agreements with Dr. Evans
that continue through July 1998. Under these agreements, Dr. Evans has purchased
Common Stock and has been granted options to purchase Common Stock. As a
consultant, Dr. Evans meets on a regular basis with Company personnel to review
ongoing research and to assist Ligand in defining the technical objectives of
future research. Dr. Evans is also involved in identifying new developments made
in other leading academic laboratories which relate to Ligand's research
interests. Dr. Evans serves as Chairman of Ligand's Scientific Advisory Board.
Baylor College of Medicine. In January 1990, Ligand established an
exclusive relationship with Baylor, which is a center of IR technology. Dr. Bert
W. O'Malley is a professor and the Chairman of the Center for Reproductive
Biology at Baylor and leads IR research at that institution. Important features
of Ligand's co-transfection assay were developed in Dr. O'Malley's laboratory
and are exclusively licensed by Ligand. Ligand has entered into a series of
agreements with Baylor under which it has an exclusive, worldwide license to IR
technology developed at Baylor and to future improvements made in Dr. O'Malley's
laboratory through September 1999. Subject to compliance with the terms of the
agreements, the term of the license may extend for the life of the patents
covering such developments.
Ligand works closely with Dr. O'Malley and Baylor in scientific IR
research, particularly in the area of sex steroids and orphan IRs. Under the
agreement, Ligand is obligated to make payments to Baylor College of Medicine in
support of research done in Dr. O'Malley's laboratory for the period from April
1992 through March 1997. Ligand is also obligated to make certain royalty
payments based on the sales of products developed using the licensed technology.
Ligand also entered into an exclusive consulting agreement with Dr. O'Malley
through September 1997. Discussions are under way to extend such agreement;
there can be no assurance such an extension will be negotiated. Dr. O'Malley is
a member of Ligand's Scientific Advisory Board. Dr. O'Malley has purchased
Common Stock and has been granted options to purchase Common Stock.
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Rockefeller University. In September 1992, Ligand entered into a worldwide,
exclusive license agreement with Rockefeller University and exclusive consulting
agreements with Dr. James Darnell of Rockefeller University and Dr. David Levy
of NYU to develop and commercialize certain technology involving STATs to
control gene expression. Dr. Darnell is one of the leading investigators of the
control of gene expression by STATs. Rockefeller University will receive (i)
payments upon the transfer of the technology to Ligand and upon the first four
anniversary dates of the agreement, (ii) a royalty on any commercialized
products and (iii) subject to a vesting schedule, shares of Common Stock and
warrants to purchase shares of Common Stock. In consideration of related
technology assigned by NYU to Rockefeller University and covered by the license
agreement with Ligand, NYU received, subject to a vesting schedule, shares of
Common Stock and warrants to purchase shares of Common Stock. Subject to a
vesting schedule tied to their consulting agreements, Dr. Darnell and Dr. Levy
received shares of Common Stock. In addition, in October 1994 Ligand granted Dr.
Darnell options to purchase shares of Common Stock.
In addition to the collaborations discussed above, the Company also has a
number of other consulting, licensing, development and academic agreements by
which it strives to advance its technology.
PATENTS AND PROPRIETARY RIGHTS
Ligand believes that patents and other proprietary rights are important to
its business. Ligand's policy is to file patent applications to protect
technology, inventions and improvements to its inventions that are considered
important to the development of its business. Ligand also relies upon trade
secrets, know-how, continuing technological innovations and licensing
opportunities to develop and maintain its competitive position.
To date, Ligand has filed or participated as licensee in the filing of
approximately 150 currently pending patent applications in the United States
relating to Ligand's technology, as well as foreign counterparts of certain of
these applications in many countries. In addition, Ligand is the exclusive
licensee to rights covered by approximately 200 patents issued or allowed
worldwide to The Salk Institute, Baylor and other licensors. Subject to
compliance with the terms of the respective agreements, Ligand's rights under
its license with The Salk Institute and other exclusive licensors extend for the
life of the patents covering such developments.
The patent positions of pharmaceutical and biotechnology firms, including
Ligand, are uncertain and involve complex legal and factual questions for which
important legal principles are largely unresolved. In addition, the coverage
claimed in a patent application can be significantly reduced before or after a
patent is issued. The situation is also affected by the fact that the patent law
of the United States is changed from time to time. For example, during 1995, the
patent term was changed from 17 years from patent grant to 20 years from the
filing date of the application for patent. Since a patent has no effect until
granted, and because the time during which a patent application spends before
the Patent Office cannot be predicted, the actual term of a patent cannot be
known until it is granted and that term may be substantially less than the 17
years allowed under former law. Also during 1995, certain advantages of U.S.
inventors over foreign inventors were eliminated from the patent law. There are
currently pending before the Congress other changes to the patent law which may
adversely affect pharmaceutical and biotechnology firms. The extent to which the
changes made in 1995 and changes which might occur if pending legislation is
adopted would affect the operations of Ligand cannot be ascertained. There can
be no assurance that any patent applications will result in the issuance of
patents or, if any patents are issued, that they will provide significant
proprietary protection or, instead, will be circumvented or invalidated. Since
under current law patent applications in the United States are maintained in
secrecy until foreign counterparts, if any, publish or patents issue and since
publication of discoveries in the scientific or patent literature often lag
behind actual discoveries, Ligand cannot be certain that it or any licensor was
the first creator of inventions covered by pending patent applications or that
it or such licensor was the first to file patent applications for such
inventions. Moreover, Ligand might have to participate in interference
proceedings declared by the U.S. Patent and Trademark Office to determine
priority of invention, which could result in substantial cost to Ligand, even if
the eventual outcome were favorable to Ligand. There can be no assurance that
Ligand's patents or those of its licensors, if issued, would be held valid by a
court or that a competitor's technology or product would be found to infringe
such patents.
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A number of pharmaceutical and biotechnology companies, and research and
academic institutions have developed technologies, filed patent applications or
received patents on various technologies that may be related to Ligand's
business. Some of these technologies, applications or patents may conflict with
Ligand's technologies or patent applications. Such conflict could limit the
scope of the patents (if any) that Ligand may be able to obtain or result in the
denial of Ligand's patent applications. In addition, if patents that cover
Ligand's activities are issued to other companies, there can be no assurance
that Ligand would be able to obtain licenses to these patents at a reasonable
cost or be able to develop or obtain alternative technology.
Ligand also relies upon trade secret protection for its confidential and
proprietary information. There can be no assurance that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to Ligand's trade secrets or disclose such
technology or that Ligand can meaningfully protect its trade secrets.
It is Ligand's policy to require its employees, consultants, members of the
Scientific Advisory Board and parties to collaborative agreements to execute
confidentiality agreements upon the commencement of employment or consulting
relationships or a collaboration with Ligand. These agreements provide that all
confidential information developed or made known during the course of the
relationship with Ligand is to be kept confidential and not disclosed to third
parties except in specific circumstances. In the case of employees, the
agreements provide that all inventions resulting from work performed for Ligand,
utilizing property of Ligand or relating to Ligand's business and conceived or
completed by the individual during employment shall be the exclusive property of
Ligand to the extent permitted by applicable law. There can be no assurance,
however, that these agreements will provide meaningful protection of Ligand's
trade secrets or adequate remedies in the event of unauthorized use or
disclosure of such information.
SALES AND MARKETING
The creation of infrastructure to commercialize products is a difficult,
expensive and time-consuming process. Ligand currently has no sales and only
limited marketing capability outside Canada. To market any of its products
directly, the Company will need to develop a marketing and sales force with
technical expertise and distribution capability or contract with other
pharmaceutical and/or health care companies with distributions systems and
direct sales forces. There can be no assurance that the Company will be able to
establish direct or indirect sales and distribution capabilities or be
successful in gaining market acceptance for proprietary products or for other
products. To the extent the Company enters into co-promotion or other licensing
arrangements, any revenues received by the Company will be dependent on the
efforts of third parties, and there can be no assurance that any such efforts
will be successful.
In September 1994, Ligand was appointed by Cetus Oncology as the sole
distributor of Proleukin, an oncology product, within Canada for a five-year
period beginning on the date of the first sale of Proleukin by Ligand in Canada.
Ligand paid Cetus Oncology $250,000 upon execution of the agreement and made an
additional milestone payment of $250,000 to Cetus Oncology upon the receipt of
government approval for the sale of Proleukin in Canada. In accordance with the
agreement, Ligand initially hired three sales representatives to market
Proleukin in Canada.
In March 1995, Ligand was also appointed by QLT as the sole distributor
within Canada of PHOTOFRIN, a product for the treatment of esophageal and
superficial bladder cancer. The agreement covers an initial 10 year period
beginning on the date of the first sale of PHOTOFRIN by Ligand in Canada. Ligand
paid QLT $180,800 upon execution of the agreement with future payments based on
sales volume.
MANUFACTURING
Ligand currently has no manufacturing facilities, and accordingly relies on
third parties, including its collaborative partners, for clinical or commercial
production of any compounds under consideration as products. Ligand is currently
constructing and validating a current Good Manufacturing Practices ("cGMP")
pilot manufacturing capability in order to produce sufficient quantities of
products for preclinical testing and initial clinical trials. If Ligand is
unable to develop or contract on acceptable terms for manufacturing services,
Ligand's ability to conduct preclinical testing and human clinical trials will
be adversely affected, resulting in
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the delay of submission of products for regulatory approval and delay of
initiation of new development programs, which in turn could materially impair
Ligand's competitive position. Although drugs acting through IRs and STATs have
been manufactured on a commercial scale by other companies, there can be no
assurance that Ligand will be able to manufacture its products on a commercial
scale or that such products can be manufactured by Ligand or any other party on
behalf of Ligand at costs or in quantities to make commercially viable products.
GOVERNMENT REGULATION
The manufacturing and marketing of Ligand's products and its ongoing
research and development activities are subject to regulation for safety and
efficacy by numerous governmental authorities in the United States and other
countries. In the United States, pharmaceuticals are subject to rigorous
regulation by federal and various state authorities, including FDA. The Federal
Food, Drug, and Cosmetic Act and the Public Health Service Act govern the
testing, manufacture, safety, efficacy, labeling, storage, record keeping,
approval, advertising and promotion of Ligand's products. There are often
comparable regulations which apply at the state level. Product development and
approval within this regulatory framework takes a number of years and involves
the expenditure of substantial resources.
The steps required before a pharmaceutical agent may be marketed in the
United States include (i) preclinical laboratory and animal tests, (ii) the
submission to the FDA of an IND, which must become effective before human
clinical trials may commence, (iii) adequate and well-controlled human clinical
trials to establish the safety and efficacy of the drug, (iv) the submission of
an NDA to the FDA and (v) the FDA approval of the NDA prior to any commercial
sale or shipment of the drug. A company must pay a one time user fee for NDA
submissions, and annually pay user fees for each approved product and
manufacturing establishment. In addition to obtaining FDA approval for each
product, each domestic drug manufacturing establishment must be registered with
the FDA and in California, with the Food and Drug Branch of California. Domestic
manufacturing establishments are subject to preapproved inspections by the FDA
prior to marketing approval and then to biennial inspections and must comply
with cGMP. To supply products for use in the United States, foreign
manufacturing establishments must comply with cGMP and are subject to periodic
inspection by the FDA or by regulatory authorities in such countries under
reciprocal agreements with the FDA.
Preclinical tests include laboratory evaluation of product chemistry and
animal studies to assess the safety and efficacy of the product and its
formulation. The results of the preclinical tests are submitted to the FDA as
part of an IND, and unless the FDA objects, the IND will become effective 30
days following its receipt by the FDA.
Clinical trials involve the administration of the pharmaceutical product to
healthy volunteers or to patients identified as having the condition for which
the pharmaceutical is being tested. The pharmaceutical is administered under the
supervision of a qualified principal investigator. Clinical trials are conducted
in accordance with protocols previously submitted to the FDA as part of the IND
that detail the objectives of the study, the parameters used to monitor safety
and the efficacy criteria that are being evaluated. Each clinical study is
conducted under the auspices of an Institutional Review Board ("IRB") at the
institution at which the study is conducted. The IRB considers, among other
things, ethical factors, the safety of the human subjects and the possible
liability risk for the institution.
Clinical trials are typically conducted in three sequential phases that may
overlap. In Phase I, the initial introduction of the pharmaceutical into healthy
human volunteers, the emphasis is on testing for safety (adverse effects),
dosage tolerance, metabolism, distribution, excretion and clinical pharmacology.
Phase II involves studies in a limited patient population to determine the
efficacy of the pharmaceutical for specific targeted indications, to determine
dosage tolerance and optimal dosage and to identify possible adverse side
effects and safety risks. Once a compound is found to be effective and to have
an acceptable safety profile in Phase II evaluations, Phase III trials are
undertaken to evaluate clinical efficacy further and to further test for safety
within an expanded patient population at multiple clinical study sites. The FDA
reviews both the
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clinical plans and the results of the trials and may discontinue the trials at
any time if there are significant safety issues.
The results of the preclinical and clinical trials are submitted to the FDA
in the form of an NDA for marketing approval. The testing and approval process
is likely to require substantial time and effort and there can be no assurance
that any approval will be granted on a timely basis, if at all. The approval
process is affected by a number of factors, including the severity of the
disease, the availability of alternative treatments and the risks and benefits
demonstrated in clinical trials. Additional animal studies or clinical trials
may be requested during the FDA review process and may delay marketing approval.
After FDA approval for the initial indications, further clinical trials would be
necessary to gain approval for the use of the product for any additional
indications. The FDA may also require post-marketing testing to monitor for
adverse effects, which can involve significant expense.
The results of preclinical studies and initial clinical trials are not
necessarily predictive of results that will be obtained from large-scale
clinical trials, and there can be no assurance that clinical trials of any
product under development will demonstrate the safety and efficacy of such
product or will result in a marketable product. The safety and efficacy of a
therapeutic product under development by the Company must be supported by
extensive data from clinical trials. A number of companies have suffered
significant setbacks in advanced clinical trials, despite promising results in
earlier trials. The failure to demonstrate adequately the safety and efficacy of
a therapeutic drug under development would delay or prevent regulatory approval
of the product and could have a material adverse effect on the Company. In
addition, the FDA may require additional clinical trials, which could result in
increased costs and significant development delays.
The rate of completion of clinical trials of the Company's products is
dependent upon, among other factors, obtaining adequate clinical supplies and
the rate of patient accrual. Patient accrual is a function of many factors,
including the size of the patient population, the proximity of patients to
clinical sites and the eligibility criteria for the trial. Delays in planned
patient enrollment in clinical trials may result in increased costs, program
delays or both, which could have a material adverse effect on the Company. In
addition, some of the Company's current corporate partners have certain rights
to control the planning and execution of product development and clinical
programs, and there can be no assurance that such corporate partners' rights to
control aspects of such programs will not impede the Company's ability to
conduct such programs in accordance with the schedules and in the manner
currently contemplated by the Company for such programs. There can be no
assurance that, if clinical trials are completed, the Company will submit an NDA
with respect to any potential products or that any such application will be
reviewed and approved by the FDA in a timely manner, if at all.
For both currently marketed and future products, failure to comply with
applicable regulatory requirements after obtaining regulatory approval can,
among other things, result in the suspension of regulatory approval, as well as
possible civil and criminal sanctions. In addition, changes in existing
regulations could have a material adverse effect on Ligand.
A drug that receives Orphan Drug designation by the FDA and is the first
product to receive FDA marketing approval for its product claim is currently
entitled to a seven-year exclusive marketing period in the United States for
that product claim. A drug that is considered by the FDA to be different than a
particular Orphan Drug, however, is not barred from sale in the United States
during such seven-year exclusive marketing period. The FDA approved an
application by Ligand to have Panretin Capsules designated an "Orphan Drug" for
the treatment of APL. Ligand is preparing additional applications for Orphan
Drug designations in other indications. Congress is currently considering
significant changes to the Orphan Drug Act, including a reduction in the
exclusive marketing period from seven years to four years, with the possibility
of a three-year extension for certain drugs.
For marketing outside the United States before FDA approval to market, the
Company must submit an export permit application to the FDA. The Company also
will be subject to foreign regulatory requirements governing human clinical
trials and marketing approval for drugs. The requirements relating to the
conduct of clinical trials, product licensing, pricing and reimbursement vary
widely from country to country and there can be no assurance that the Company or
any of its partners will meet and sustain any such requirements.
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COMPETITION
Some of the drugs which Ligand is developing will compete with existing
therapies. In addition, a number of companies are pursuing the development of
novel pharmaceuticals which target the same diseases that Ligand is targeting. A
number of pharmaceutical and biotechnology companies are pursuing IR-related or
STAT-related approaches to drug discovery and development. Furthermore, academic
institutions, government agencies, and other public and private organizations
conducting research may seek patent protection with respect to potentially
competing products or technologies and may establish collaborative arrangements
with competitors of Ligand.
Many of Ligand's existing or potential competitors, particularly large
pharmaceutical companies, have substantially greater financial, technical and
human resources than Ligand and may be better equipped to develop, manufacture
and market products. In addition, many of these companies have extensive
experience in preclinical testing and human clinical trials. These companies may
develop and introduce products and processes competitive with or superior to
those of Ligand. The development by others of new treatment methods for those
indications for which Ligand is developing pharmaceuticals could render these
pharmaceuticals noncompetitive or obsolete.
Ligand's products under development are expected to address a broad range
of markets. Ligand's competition will be determined in part by the potential
indications for which Ligand's products are developed and ultimately approved by
regulatory authorities. For certain of Ligand's potential products, an important
factor in competition may be the timing of market introduction of Ligand's or
competitors' products. Accordingly, the relative speed at which Ligand or its
existing or its future corporate partners can develop products, complete the
clinical trials and regulatory approval processes, and supply commercial
quantities of the products to the market are expected to be important
competitive factors. Ligand expects that competition among products approved for
sale will be based, among other things, on product efficacy, safety,
reliability, availability, price and patent position.
Ligand's competitive position also depends upon its ability to attract and
retain qualified personnel, obtain patent protection or otherwise develop
proprietary products or processes and secure sufficient capital resources for
the often substantial period between technological conception and commercial
sales.
PRODUCT LIABILITY AND INSURANCE
Ligand's business exposes it to potential product liability risks which are
inherent in the testing, manufacturing and marketing of human therapeutic
products. Ligand currently has limited product liability insurance; however,
there can be no assurance that Ligand will be able to maintain such insurance on
acceptable terms or that such insurance will provide adequate coverage against
potential liabilities. The Company expects to procure additional insurance when
its products progress to a later stage of development and if any rights to
later-stage products are in-licensed in the future. To the extent that product
liability insurance, if available, does not cover potential claims, the Company
will be required to self-insure the risks associated with such claims. A
successful product liability claim or series of claims brought against the
Company could have a material adverse effect on the Company.
HUMAN RESOURCES
As of December 31, 1997, Ligand had 345 full-time employees, of whom 266
were involved directly in scientific research and development activities. Of
these employees, approximately 76 hold Ph.D. or M.D. degrees.
RISKS AND UNCERTAINTIES
In addition to the other business information contained herein, the
following are among the factors that should also be considered carefully in
evaluating Ligand, its wholly-owned subsidiaries, Glycomed Inc., Ligand (Canada)
Inc. and Allergan Ligand Retinoid Therapeutics, Inc. and its business.
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Early Stage of Product Development; Technological Uncertainty. Ligand was
founded in 1987 and has not generated any revenues from the sale of products
developed by Ligand or its collaborative partners. To achieve profitable
operations, the Company, alone or with others, must successfully develop,
clinically test, market and sell its products. Any products resulting from the
Company's or its collaborative partners' product development efforts are not
expected to be available for sale for at least several years, if at all.
The development of new pharmaceutical products is highly uncertain and
subject to a number of significant risks. Potential products that appear to be
promising at early stages of development may not reach the market for a number
of reasons. Such reasons include the possibilities that potential products are
found during preclinical testing or clinical trials to be ineffective or to
cause harmful side effects, that they fail to receive necessary regulatory
approvals, are difficult or uneconomical to manufacture on a large scale, fail
to achieve market acceptance or are precluded from commercialization by
proprietary rights of third parties. To date, Ligand's resources have been
substantially dedicated to the research and development of potential
pharmaceutical products based upon its expertise in IR and STATs technologies.
Even though certain pharmaceutical products act through IRs, some aspects of the
Company's IR technologies have not been used to produce marketed products. In
addition, the Company is not aware of any drugs that have been developed and
successfully commercialized that interact directly with STATs. Much remains to
be learned about the location and function of IRs and STATs. Most of the
Company's potential products will require extensive additional development,
including preclinical testing and clinical trials, as well as regulatory
approvals, prior to commercialization. No assurance can be given that the
Company's product development efforts will be successful, that required
regulatory approvals from the FDA or equivalent foreign authorities for any
indication will be obtained or that any products, if introduced, will be capable
of being produced in commercial quantities at reasonable costs or will be
successfully marketed. Further, the Company has no sales and only limited
marketing capabilities outside Canada, and even if the Company's products in
internal development are approved for marketing, there can be no assurance that
the Company will be able to develop such capabilities or successfully market
such products.
History of Operating Losses; Accumulated Deficit; Future Capital Needs;
Uncertainty of Additional Funding. Ligand has experienced significant operating
losses since its inception in 1987. As of December 31, 1997, Ligand had an
accumulated deficit of approximately $278 million. To date, substantially all of
Ligand's revenues have consisted of amounts received under collaborative
arrangements. The Company expects to incur additional losses at least over the
next several years and expects losses to increase as the Company's research and
development efforts and clinical trials progress.
The discovery and development of products will require the commitment of
substantial resources to conduct research, preclinical testing and clinical
trials, to establish pilot scale and commercial scale manufacturing processes
and facilities, and to establish and develop quality control, regulatory,
marketing, sales and administrative capabilities. The future capital
requirements of the Company will depend on many factors, including the pace of
scientific progress in its research and development programs, the magnitude of
these programs, the scope and results of preclinical testing and clinical
trials, the time and costs involved in obtaining regulatory approvals, the costs
involved in preparing, filing, prosecuting, maintaining and enforcing patent
claims, competing technological and market developments, the ability to
establish additional collaborations, changes in existing collaborations, the
cost of manufacturing scale-up and the effectiveness of the Company's
commercialization activities. To date, Ligand has not generated any revenue from
the sales of products developed by Ligand or its collaborative partners. There
can be no assurance that Ligand independently or through its collaborations will
successfully develop, manufacture or market any products or ever achieve or
sustain revenues or profitability from the commercialization of such products.
Moreover, even if profitability is achieved, the level of that profitability
cannot be accurately predicted. Ligand expects that operating results will
fluctuate from quarter to quarter as a result of differences in the timing of
expenses incurred and the revenues received from collaborative arrangements and
other sources. Some of these fluctuations may be significant. The Company
believes that its available cash, cash equivalents, marketable securities and
existing sources of funding will be adequate to satisfy its anticipated capital
requirements through 1999.
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Glycomed's outstanding indebtedness includes $50 million principal amount
of 7 1/2% Convertible Subordinated Debentures Due 2003 (the "Debentures"). There
can be no assurance that Glycomed will have the funds necessary to pay the
interest on and the principal of the Debentures or, if not, that it will be able
to refinance the Debentures.
The Company expects that it will seek any additional capital needed to fund
its operations through new collaborations, the extension of existing
collaborations, or through public or private equity or debt financings. There
can be no assurance that additional financing will be available on acceptable
terms, if at all. Any inability of the Company to obtain additional financing or
of Glycomed to service its obligations under the Debentures could have a
material adverse effect on the Company.
Uncertainties Related to Clinical Trials. Before obtaining required
regulatory approvals for the commercial sale of each product under development,
the Company and its collaborators must demonstrate through preclinical studies
and clinical trials that such product is safe and efficacious for use. The
results of preclinical studies and initial clinical trials are not necessarily
predictive of results that will be obtained from large-scale clinical trials,
and there can be no assurance that clinical trials of any product under
development will demonstrate the safety and efficacy of such product or will
result in a marketable product. The safety and efficacy of a therapeutic product
under development by the Company must be supported by extensive data from
clinical trials. A number of companies have suffered significant setbacks in
advanced clinical trials, despite promising results in earlier trials. The
failure to demonstrate adequately the safety and efficacy of a therapeutic drug
under development would delay or prevent regulatory approval of the product and
could have a material adverse effect on the Company. In addition, the FDA may
require additional clinical trials, which could result in increased costs and
significant development delays.
The rate of completion of clinical trials of the Company's potential
products is dependent upon, among other factors, obtaining adequate clinical
supplies and the rate of patient accrual. Patient accrual is a function of many
factors, including the size of the patient population, the proximity of patients
to clinical sites and the eligibility criteria for the trial. Delays in planned
patient enrollment in clinical trials may result in increased costs, program
delays or both, which could have a material adverse effect on the Company. In
addition, some of the Company's current collaborative partners have certain
rights to control the planning and execution of product development and clinical
programs, and there can be no assurance that such corporate partners' rights to
control aspects of such programs will not impede the Company's ability to
conduct such programs in accordance with the schedules and in the manner
currently contemplated by the Company for such programs. There can be no
assurance that, if clinical trials are completed, the Company or its
collaborative partners will submit an NDA with respect to any potential products
or that any such application will be reviewed and approved by the FDA in a
timely manner, if at all.
Reliance on Collaborative Relationships. The Company's strategy for the
development, clinical testing, manufacturing and commercialization of certain of
its potential products includes entering into collaborations with corporate
partners, licensors, licensees and others. To date, Ligand has entered into drug
discovery and development collaborations with Lilly, SmithKline Beecham, AHP,
Abbott, Sankyo, Glaxo, Allergan and Pfizer. These collaborations provide Ligand
with funding and research and development resources for potential products for
the treatment or control of metabolic diseases, hematopoiesis, women's health
disorders, inflammation, cardiovascular disease, cancer and skin disease, and
osteoporosis, respectively. The Company's collaborative agreements allow its
collaborative partners significant discretion in electing to pursue or not to
pursue any development program. There can be no assurance that the Company's
collaborations will continue or that the collaborations will be successful. In
addition, there can be no assurance that Ligand's collaborators will not pursue
alternative technologies either on their own or in collaboration with others as
a means of developing drugs competitive with the types of drugs currently being
developed in collaboration with Ligand, and any such action may result in the
withdrawal of support and increased competition for the Company's programs. In
addition, if products are approved for marketing under these programs, any
revenues to Ligand from these products will be dependent on the manufacturing,
marketing and sales efforts of its collaborators, which generally retain
commercialization rights under the collaborative agreements. Ligand's current
collaborators also generally have the right to terminate their respective
collaborations under certain circumstances. If any of the Company's
collaborative partners were to breach or terminate its agreements with the
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Company or otherwise fail to conduct its collaborative activities successfully,
the development of the Company's products under such agreements would be delayed
or terminated. The delay or termination of any of the collaborations could have
a material adverse effect on Ligand.
There can be no assurance that disputes will not arise in the future with
Ligand's collaborators, including with respect to the ownership of rights to any
technology developed. For example, the Company was involved in litigation with
Pfizer, which was settled in April 1996, with respect to Ligand's rights to
receive milestones and royalties based on the development and commercialization
of droloxifene. These and other possible disagreements between collaborators and
the Company could lead to delays in the achievement of milestones or receipt of
milestone payments or research revenue, to delays or interruptions in, or
termination of, collaborative research, development and commercialization of
certain potential products, or could require or result in litigation or
arbitration, which could be time consuming and expensive and could have a
material adverse effect on the Company.
Uncertainty of Patent Protection; Dependence on Proprietary Technology. The
patent positions of pharmaceutical and biopharmaceutical firms, including
Ligand, are uncertain and involve complex legal and technical questions for
which important legal principles are largely unresolved. In addition, the
coverage sought in a patent application can be significantly reduced before or
after a patent is issued. This uncertain situation is also affected by revisions
to the United States patent law adopted in recent years to give effect to
international accords to which the United States has become a party. The extent
to which such changes in law will affect the operations of Ligand cannot be
ascertained. In addition, there is currently pending before Congress legislation
providing for other changes to the patent law which may adversely affect
pharmaceutical and biopharmaceutical firms. If such pending legislation is
adopted, the extent to which such changes would affect the operations of the
Company cannot be ascertained.
Ligand's success will depend in part on its ability to obtain patent
protection for its technology both in the United States and other countries. A
number of pharmaceutical and biotechnology companies and research and academic
institutions have developed technologies, filed patent applications or received
patents on various technologies that may be related to Ligand's business. Some
of these patent applications, patents or technologies may conflict with Ligand's
technologies or patent applications. Any such conflict could limit the scope of
the patents, if any, that Ligand may be able to obtain or result in the denial
of Ligand's patent applications. In addition, if patents that cover Ligand's
activities are issued to other companies, there can be no assurance that Ligand
would be able to obtain licenses to such patents at a reasonable cost, if at
all, or be able to develop or obtain alternative technology. The Company has
from time to time had, continues to have and may have in the future discussions
with its current and potential collaborators regarding the scope and validity of
the Company's patent and other proprietary rights to its technologies, including
the Company's cotransfection assay. If a collaborator or other party were
successful in having substantial patent rights of the Company determined to be
invalid, it could adversely affect the ability of the Company to retain existing
collaborations beyond their expiration or, where contractually permitted,
encourage their termination. Such a determination could also adversely affect
the Company's ability to enter into new collaborations. If any disputes should
arise in the future with respect to the rights in any technology developed with
a collaborator or with respect to other matters involving the collaboration,
there could be delays in the achievement of milestones or receipt of milestone
payments or research revenues, or interruptions or termination of collaborative
research, development and commercialization of certain potential products, and
litigation or arbitration could result. Any of the foregoing matters could be
time consuming and expensive and could have a material adverse effect on the
Company.
Ligand owns or has exclusively licensed over 150 currently pending patent
applications in the United States relating to Ligand's technology, as well as
foreign counterparts of certain of these applications in many countries. There
can be no assurance that patents will issue from any of these applications or,
if patents do issue, that claims allowed will be sufficient to protect Ligand's
technology. In addition, Ligand is the owner or exclusive licensee of rights
covered by approximately 200 worldwide patents issued or allowed to it or to The
Salk Institute, Baylor and other licensors. Further, there can be no assurance
that any patents issued to Ligand or to licensors of Ligand's technology will
not be challenged, invalidated, circumvented or rendered unenforceable based on,
among other things, subsequently discovered prior art, lack of entitlement to
the
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priority of an earlier, related application, or failure to comply with the
written description, best mode, enablement or other applicable requirements, or
that the rights granted under any such patents will provide significant
proprietary protection or commercial advantage to Ligand. The invalidation,
circumvention or unenforceability of any of Ligand's patent protection could
have a material adverse effect on the Company.
The commercial success of Ligand will also depend in part on Ligand's not
infringing patents issued to competitors and not breaching technology licenses
that cover technology used in Ligand's products. It is uncertain whether any
thirdparty patents will require Ligand to develop alternative technology or to
alter its products or processes, obtain licenses or cease certain activities. If
any such licenses are required, there can be no assurance that Ligand will be
able to obtain such licenses on commercially favorable terms, if at all. Failure
by Ligand to obtain a license to any technology that it may require to
commercialize its products could have a material adverse effect on Ligand.
Litigation, which could result in substantial cost to Ligand, may also be
necessary to enforce any patents issued or licensed to Ligand or to determine
the scope and validity of third-party proprietary rights. There can be no
assurance that Ligand's patents or those of its licensors, if issued, would be
held valid by a court or that a competitor's technology or product would be
found to infringe such patents. If any of its competitors have filed patent
applications in the United States which claim technology also invented by
Ligand, Ligand may be required to participate in interference proceedings
declared by the U.S. Patent and Trademark Office ("PTO") in order to determine
priority of invention and, thus, the right to a patent for the technology, which
could result in substantial cost to Ligand to determine its rights.
Ligand has learned that a United States patent has been issued to, and
foreign counterparts have been filed by, Hoffman LaRoche ("Roche") that include
claims to a formulation of 9-cis-Retinoic acid (Panretin) and use of that
compound to treat epithelial cancers. Ligand had previously filed an application
which has an earlier filing date than the Roche patent and which has claims that
the Company believes are broader than but overlap in part with claims under the
Roche patent. Ligand's rights under its patent application have been exclusively
licensed to ALRT. Ligand acquired the exclusive right to develop and
commercialize Panretin Capsules and Gel. Ligand is currently investigating the
scope and validity of this patent to determine its impact upon the Panretin
Capsules and Gel products. The PTO has informed Ligand that the overlapping
claims are patentable to Ligand and initiated an interference proceeding to
determine whether Ligand or Roche is entitled to a patent by having been first
to invent the common subject matter. The Company cannot be assured of a
favorable outcome in the interference proceeding because of factors not known at
this time upon which the outcome may depend. In addition, the interference
proceeding may delay the decision of the PTO regarding the Company's application
with claims covering the Panretin Capsules and Gel products. While the Company
believes that the Roche patent does not cover the use of Panretin Capsules and
Gel to treat leukemias such as APL and sarcomas such as KS, or the treatment of
skin diseases such as psoriasis, if the Company and ALRT do not prevail in the
interference proceeding, the Roche patent might block the Company's use of
Panretin Capsules and Gel in certain cancers, and the Company may not be able to
obtain patent protection for the Panretin Capsules and Gel products.
Ligand also relies upon trade secrets, know-how, continuing technological
innovations and licensing opportunities to develop and maintain its competitive
position. There can be no assurance that others will not independently develop
substantially equivalent proprietary information or otherwise gain access to or
disclose such information regarding Ligand. It is Ligand's policy to require its
employees, certain contractors, consultants, members of its Scientific Advisory
Board and parties to collaborative agreements to execute confidentiality
agreements upon the commencement of employment or consulting relationships or a
collaboration with Ligand. There can be no assurance that these agreements will
not be breached, that they will provide meaningful protection of Ligand's trade
secrets or adequate remedies in the event of unauthorized use or disclosure of
such information or that Ligand's trade secrets will not otherwise become known
or be independently discovered by its competitors.
Lack of Manufacturing Capability; Reliance on Third-Party
Manufacturers. Ligand currently has no manufacturing facilities and,
accordingly, relies on third parties, including its collaborative partners, for
clinical or commercial production of any compounds under consideration as
products. Ligand is currently constructing and validating a cGMP pilot
manufacturing capability in order to produce sufficient quantities of products
for preclinical testing and initial clinical trials. If Ligand is unable to
develop or contract on
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acceptable terms for manufacturing services, Ligand's ability to conduct
preclinical testing and human clinical trials will be adversely affected,
resulting in the delay of submission of products for regulatory approval and
delay of initiation of new development programs, which in turn could materially
impair Ligand's competitive position. Although drugs acting through IRs and
STATs have been manufactured on a commercial scale by other companies, there can
be no assurance that Ligand will be able to manufacture its products on a
commercial scale or that such products can be manufactured by Ligand or any
other party on behalf of Ligand at costs or in quantities to make commercially
viable products.
Limited Sales and Marketing Capability. The creation of infrastructure to
commercialize pharmaceutical products is a difficult, expensive and
time-consuming process. Ligand currently has no sales and only limited marketing
capability outside Canada. In Canada, Ligand has been appointed as the sole
distributor of two oncology products, Proleukin, which was developed by Cetus
Oncology Corporation and PHOTOFRIN, which was developed by QLT
PhotoTherapeutics, Inc. To market any of its products directly, the Company will
need to develop a marketing and sales force with technical expertise and
distribution capability or contract with other pharmaceutical and/or health care
companies with distribution systems and direct sales forces. There can be no
assurance that the Company will be able to establish direct or indirect sales
and distribution capabilities or be successful in gaining market acceptance for
proprietary products or for other products. To the extent the Company enters
into co-promotion or other licensing arrangements, any revenues received by the
Company will be dependent on the efforts of third parties, and there can be no
assurance that any such efforts will be successful.
Substantial Competition; Risk of Technological Obsolescence. Some of the
drugs which Ligand is developing will compete with existing therapies. In
addition, a number of companies are pursuing the development of novel
pharmaceuticals which target the same diseases that Ligand is targeting as well
as IR-related, STAT-related and complex carbohydrate-related approaches to drug
discovery and development. Many of Ligand's existing or potential competitors,
particularly large pharmaceutical companies, have substantially greater
financial, technical and human resources than Ligand and may be better equipped
to develop, manufacture and market products. In addition, many of these
companies have extensive experience in preclinical testing and human clinical
trials, obtaining FDA and other regulatory approvals and manufacturing and
marketing pharmaceutical products. Academic institutions, governmental agencies
and other public and private research organizations are conducting research to
develop technologies and products that may compete with those under development
by the Company. These institutions are becoming increasingly aware of the
commercial value of their findings and are becoming more active in seeking
patent protection and licensing arrangements to collect royalties for the use of
technology that they have developed. These institutions also may market
competitive commercial products on their own or through joint ventures and will
compete with the Company in recruiting highly qualified scientific personnel.
Any of these companies, academic institutions, government agencies or research
organizations may develop and introduce products and processes competitive with
or superior to those of Ligand. The development by others of new treatment
methods for those indications for which Ligand is developing products could
render Ligand's products noncompetitive or obsolete.
Ligand's products under development target a broad range of markets.
Ligand's competition will be determined in part by the potential indications for
which Ligand's products are developed and ultimately approved by regulatory
authorities. For certain of Ligand's potential products, an important factor in
competition may be the timing of market introduction of Ligand's or competitors'
products. Accordingly, the relative speed at which Ligand or its existing or
future corporate partners can develop products, complete the clinical trials and
regulatory approval processes, and supply commercial quantities of the products
to the market is expected to be an important competitive factor. Ligand expects
that competition among products approved for sale will be based, among other
things, on product efficacy, safety, reliability, availability, price and patent
position.
Ligand's competitive position also depends upon its ability to attract and
retain qualified personnel, obtain patent protection or otherwise develop
proprietary products or processes, and secure sufficient capital resources.
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Extensive Government Regulation; No Assurance of Regulatory Approval. The
manufacturing and marketing of Ligand's products and its ongoing research and
development activities are subject to and regulation for safety and efficacy by
numerous governmental authorities in the United States and other countries.
Prior to marketing, any drug developed by the Company must undergo rigorous
preclinical and clinical testing and an extensive regulatory approval process
mandated by the FDA and equivalent foreign authorities. These processes can take
a number of years and require the expenditure of substantial resources.
The time required for completing such testing and obtaining such approvals
is uncertain, and there is no assurance that any such approval will be obtained.
The Company or its collaborative partners may decide to replace a compound in
testing with a modified or optimized compound, thus extending the test period.
In addition, delays or rejections may be encountered based upon changes in FDA
policy during the period of product development and FDA review of each submitted
new drug application or product license application. Similar delays may also be
encountered in other countries. There can be no assurance that even after such
time and expenditures, regulatory approval will be obtained for any products
developed by the Company. Moreover, prior to receiving FDA or equivalent foreign
authority approval to market its products, the Company may be required to
demonstrate that its products represent improved forms of treatment over
existing therapies. If regulatory approval of a product is granted, such
approval may entail limitations on the indicated uses for which the product may
be marketed. Further, even if such regulatory approval is obtained, a marketed
product, its manufacturer and its manufacturing facilities are subject to
continual review and periodic inspections, and subsequent discovery of
previously unknown problems with a product, manufacturer or facility may result
in restrictions on such product or manufacturer, including withdrawal of the
product from the market.
Dependence on Third-Party Reimbursement and Health Care Reform. Ligand's
commercial success will be heavily dependent upon the availability of
reimbursement for the use of any products developed by the Company or its
collaborative partners. There can be no assurance that Medicare and third-party
payors will authorize or otherwise budget reimbursement for the prescription of
any of Ligand's potential products. Additionally, third-party payors, including
Medicare, are increasingly challenging the prices charged for medical products
and services and may require additional cost-benefit analysis data from the
Company in order to demonstrate the cost-effectiveness of its products. There
can be no assurance that the Company will be able to provide such data in order
to gain market acceptance of its products with respect to pricing and
reimbursement.
In the United States, the Company expects that there will continue to be a
number of federal and state proposals to implement government control of pricing
and profitability of prescription pharmaceuticals. In addition, increasing
emphasis on managed health care will continue to put pressure on such pricing.
Cost control initiatives could decrease the price that the Company or any of its
collaborative partners or other licensees receives for any drugs it or they may
discover or develop in the future and, by preventing the recovery of development
costs, which could be substantial, and an appropriate profit margin, could have
a material adverse effect on the Company. Further, to the extent that cost
control initiatives have a material adverse effect on the Company's
collaborative partners, the Company's ability to commercialize its products and
to realize royalties may be adversely affected. Furthermore, federal and state
regulations govern or influence the reimbursement to health care providers of
fees and capital equipment costs in connection with medical treatment of certain
patients. If any actions are taken by federal and/or state governments, such
actions could adversely affect the prospects for sales of the Company's
products. There can be no assurance that action taken by federal and/or state
governments, if any, with regard to health care reform will not have a material
adverse effect on the Company.
Product Liability and Insurance Risks. Ligand's business exposes it to
potential product liability risks which are inherent in the testing,
manufacturing and marketing of human therapeutic products. Certain of the
compounds the Company is investigating could be injurious to humans. For
example, retinoids as a class are known to contain compounds which can cause
birth defects. Ligand currently has limited product liability insurance;
however, there can be no assurance that Ligand will be able to maintain such
insurance on acceptable terms or that such insurance will provide adequate
coverage against potential liabilities. The Company expects to procure
additional insurance when its products progress to a later stage of development
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and if any rights to later-stage products are in-licensed in the future. To the
extent that product liability insurance, if available, does not cover potential
claims, the Company will be required to self-insure the risks associated with
such claims. A successful product liability claim or series of claims brought
against the Company could have a material adverse effect on the Company.
Dependence on Key Employees. Ligand is highly dependent on the principal
members of its scientific and management staff, the loss of whose services might
impede the achievement of development objectives. Furthermore, Ligand is
currently experiencing a period of rapid growth which requires the hiring of
significant numbers of scientific, management and operational personnel.
Accordingly, recruiting and retaining qualified management, operations and
scientific personnel to perform research and development work in the future will
also be critical to Ligand's success. Although Ligand believes it will be
successful in attracting and retaining skilled and experienced management,
operational and scientific personnel, there can be no assurance that Ligand will
be able to attract and retain such personnel on acceptable terms given the
competition among numerous pharmaceutical and biotechnology companies,
universities and other research institutions for such personnel.
Use of Hazardous Materials. Ligand's research and development involves the
controlled use of hazardous materials, chemicals and various radioactive
compounds. For example, retinoids as a class are known to contain compounds
which can cause birth defects. Although the Company believes that its current
safety procedures for handling and disposing of such materials, chemicals and
compounds, comply with the standards prescribed by state and federal
regulations, the risk of accidental contamination or injury from these materials
cannot be completely eliminated. In the event of any accident, the Company could
be held liable for any damages that result and any such liability could be
significant. The Company may incur substantial costs to comply with
environmental regulations. Any such event could have a material adverse effect
on the Company.
Volatility of Stock Price. The market prices and trading volumes for
securities of emerging companies, like Ligand, have historically been highly
volatile and have experienced significant fluctuations unrelated to the
operating performance of such companies. Future announcements concerning the
Company or its competitors may have a significant impact on the market price of
the Common Stock. Such announcements might include the results of research,
development testing, technological innovations, new commercial products,
government regulation, developments concerning proprietary rights, litigation or
public concern as to the safety of the products.
Absence of Cash Dividends. No cash dividends have been paid on the
Company's Common Stock to date, and Ligand does not anticipate paying cash
dividends in the foreseeable future.
Effect of Shareholder Rights Plan and Certain Anti-Takeover Provisions. In
September 1996, the Company's Board of Directors adopted a preferred shares
rights plan (the "Shareholder Rights Plan") which provides for a dividend
distribution of one preferred share purchase right (a "Right") on each
outstanding share of the Company's Common Stock. Each Right entitles
stockholders to buy 1/1000th of a share of Ligand Series A Participating
Preferred Stock at an exercise price of $100, subject to adjustment. The Rights
will become exercisable following the tenth day after a person or group
announces acquisition of 20% or more of the Company's Common Stock, or announces
commencement of a tender offer, the consummation of which would result in
ownership by the person or group of 20% or more of the Company's Common Stock.
The Company will be entitled to redeem the Rights at $0.01 per Right at any time
on or before the earlier of the tenth day following acquisition by a person or
group of 20% or more of the Company's Common Stock and September 13, 2006.
Ligand's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") includes a provision that requires the approval
of the holders of 66 2/3% of Ligand's voting stock as a condition to a merger or
certain other business transactions with, or proposed by, a holder of 15% or
more of Ligand's voting stock, except in cases where certain directors approve
the transaction or certain minimum price criteria and other procedural
requirements are met (the "Fair Price Provision"). The Certificate of
Incorporation also requires that any action required or permitted to be taken by
stockholders of Ligand must be effected at a duly called annual or special
meeting of stockholders and may not be effected by any consent
39
<PAGE> 41
in writing. In addition, special meetings of the stockholders of Ligand may be
called only by the Board of Directors, the Chairman of the Board or the
President of Ligand or by any person or persons holding shares representing at
least 10% of the outstanding Common Stock of the Company. The Shareholder Rights
Plan, the Fair Price Provision and other charter provisions may discourage
certain types of transactions involving an actual or potential change in control
of Ligand, including transactions in which the stockholders might otherwise
receive a premium for their shares over then current market prices, and may
limit the ability of the stockholders to approve transactions that they may deem
to be in their best interests. In addition, the Board of Directors has the
authority to fix the rights and preferences of and issue shares of preferred
stock, which may have the effect of delaying or preventing a change in control
of Ligand without action by the stockholders.
40
<PAGE> 42
ITEM 2. PROPERTIES
Ligand currently leases and occupies three facilities in San Diego,
California.
In July 1994, the Company entered into a 20-year lease related to the
construction of a new build-to-suit laboratory facility. This 52,800 square foot
facility was completed and occupied in August 1995. In March 1997, the Company
entered into a long term lease for laboratory and administrative office space
related to a second build-to-suit facility. This 82,000 square foot facility was
completed and occupied in December 1997. The third facility in San Diego is
occupied under a lease of approximately 7,500 square feet of laboratory space
which continues through February 1999.
The Company believes these facilities will be adequate to meet the
Company's near-term space requirements.
ITEM 3. LEGAL PROCEEDINGS
From time to time the Company is a party to other litigation arising in the
normal course of business. As of the date of the filing, the Company is not a
party to any litigation which would have a material effect on its financial
position or business operations taken as a whole.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders in the fourth
quarter ended December 31, 1997.
41
<PAGE> 43
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
(A) MARKET INFORMATION
The Company's Common Stock trades on the Nasdaq National Market tier of the
Nasdaq Stock Market under the symbol "LGND." The following table sets forth the
high and low sales prices for the Company's Common Stock on the Nasdaq National
Market for the periods indicated.
<TABLE>
<CAPTION>
PRICE RANGE
---------------
HIGH LOW
---- ---
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
Quarter..............................................
1st $13 3/4 $ 9 3/4
Quarter..............................................
2nd 19 3/4 11 1/8
Quarter..............................................
3rd 16 1/8 10 3/8
Quarter..............................................
4th 15 11/16 11 1/4
YEAR ENDING DECEMBER 31, 1997:
Quarter..............................................
1st $17 $10 1/4
Quarter..............................................
2nd 14 1/2 9 1/8
Quarter..............................................
3rd 17 3/4 11 5/8
Quarter..............................................
4th 18 3/8 11 1/4
</TABLE>
(B) HOLDERS
As of February 28, 1998, there were approximately 1,539 holders of record
of the Common Stock.
(C) DIVIDENDS
The Company has never declared or paid any cash dividends on its capital
stock and does not intend to pay any cash dividends in the foreseeable future.
The Company currently intends to retain its earnings, if any, to finance future
growth.
(D) RECENT SALES OF UNREGISTERED SECURITIES
In November 1997, the Company issued to Eli Lilly and Company 2,176,279
shares of the Company's Common Stock at $17.23 per share for a total purchase
price of $37.5 million in cash under an exemption from registration pursuant to
Section 4(2) of Securities Act of 1933, as amended (the "Securities Act"). In
December 1997, Wyeth-Ayerst Laboratories, the pharmaceutical division of
American Home Products converted $1.3 million of convertible notes outstanding
into 124,875 shares of the Company's Common Stock, at a predetermined conversion
rate of $10.01 in a transaction exempt from registration of Section 4(2) of the
Securities Act.
42
<PAGE> 44
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected financial data set forth below with respect to the Company's
consolidated financial statements has been derived from the audited financial
statements. The data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's consolidated financial statements and related
notes included elsewhere in this filing.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT NET LOSS PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERA-
TIONS DATA:
Revenues:
Collaborative research and
development
Related parties.......... $ 18,997 $ 18,641 $ 11,972 $ 8,342 $ 9,974
Unrelated parties........ 32,284 17,994 12,424 4,893 6,138
Other...................... 418 207 120 74 150
----------- ----------- ----------- ----------- -----------
Total revenues........ 51,699 36,842 24,516 13,309 16,262
----------- ----------- ----------- ----------- -----------
Costs and expenses:
Research and development... 72,426 59,494 41,636 27,205 24,301
Selling, general and
administrative........... 10,108 10,205 8,181 6,957 6,192
Write-off of acquired
in-process technology.... 64,970 -- 19,564 -- --
ALRT contribution.......... -- -- 17,500 -- --
----------- ----------- ----------- ----------- -----------
Total operating
expenses............ 147,504 69,699 86,881 34,162 30,493
----------- ----------- ----------- ----------- -----------
Loss from operations............ (95,805) (32,857) (62,365) (20,853) (14,231)
Interest income................. 3,743 3,704 3,603 1,298 2,005
Interest expense................ (8,088) (8,160) (5,410) (679) (353)
Equity in operations of Joint
Venture....................... -- -- -- (6,845) (6,879)
----------- ----------- ----------- ----------- -----------
Net loss........................ $ (100,150) $ (37,313) $ (64,172) $ (27,079) $ (19,458)
=========== =========== =========== =========== ===========
Basic and diluted net loss per
share......................... $ (3.02) $ (1.30) $ (2.70) $ (1.57) $ (1.19)
=========== =========== =========== =========== ===========
Shares used in computing net
loss per share................ 33,128,372 28,780,914 23,791,542 17,240,535 16,356,656
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents, short term
investments and restricted cash........ $ 86,287 $ 84,179 $ 76,903 $ 38,403 $ 42,354
Working capital.......................... 62,399 71,680 57,349 33,567 40,588
Total assets............................. 107,423 102,140 93,594 46,696 50,790
Long-term debt........................... 14,751 19,961 18,585 12,285 2,324
Convertible subordinated debentures...... 36,628 33,953 31,279 -- --
Accumulated deficit...................... (277,744) (177,594) (140,281) (76,108) (49,029)
Total stockholders' equity............... 34,349 34,461 28,071 26,335 42,934
</TABLE>
43
<PAGE> 45
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This annual report on Form 10-K may contain predictions, estimates and
other forward-looking statements that involve a number of risks and
uncertainties, including those discussed in Item 1 above at "Risks and
Uncertainties." While this outlook represents management's current judgment on
the future direction of the business, such risks and uncertainties could cause
actual results to differ materially from any future performance suggested below.
The Company undertakes no obligation to release publicly the results of any
revisions to these forward-looking statements to reflect events or circumstances
arising after the date hereof.
OVERVIEW
Since January 1989, the Company has devoted substantially all of its
resources to its intracellular receptor ("IR") and Signal Transducers and
Activators of Transcription drug discovery and development programs. The Company
has been unprofitable since its inception and expects to incur substantial
additional operating losses due to continued requirements for research and
development, preclinical testing, clinical trials, regulatory activities,
establishment of manufacturing processes and sales and marketing capabilities
until the approval and commercialization of the Company's products generate
sufficient revenues, expected in 1999. The Company expects that losses will
fluctuate from quarter to quarter as a result of differences in the timing of
expenses incurred and the revenues earned from collaborative arrangements. Some
of these fluctuations may be significant. As of December 31, 1997, the Company's
accumulated deficit was approximately $277.7 million.
In May 1995, Glycomed Incorporated ("Glycomed") was merged into a
wholly-owned subsidiary of the Company ("the Merger"). Glycomed is a
biopharmaceutical company conducting research and development of pharmaceuticals
based on biological activities of complex carbohydrates. The Merger was
accounted for using the purchase method of accounting. The excess of the
purchase price over the fair value of the net assets acquired was allocated to
in-process technology and was written off, resulting in a one time non-cash
charge to results of operations of approximately $19.6 million. The results of
operations of Glycomed are included in the Company's consolidated results of
operations from the date of the Merger.
In December 1994, the Company and Allergan, Inc. ("Allergan") formed
Allergan Ligand Retinoid Therapeutics, Inc. ("ALRT") to continue the research
and development activities previously conducted by the Allergan Ligand Joint
Venture (the "Joint Venture"). In June 1995, the Company and ALRT completed a
public offering of 3,250,000 units (the "Units") with aggregate proceeds of
$32.5 million (the "ALRT Offering") and cash contributions by Allergan and the
Company of $50.0 million and $17.5 million, respectively, providing for net
proceeds of $94.3 million for retinoid product research and development. Each
Unit consisted of one share of ALRT's callable common stock ("Callable Common
Stock") and two warrants, each warrant entitling the holder to purchase one
share of the Common Stock of the Company. The Company's $17.5 million cash
contribution resulted in a one-time charge to operations. The Company also
recorded a warrant subscription receivable and corresponding increase in paid-in
capital of $5.9 million pursuant to the ALRT Offering. From June 3, 1995,
through September 23, 1997 cash received from ALRT pursuant to Research and
Development Agreement was prorated between contract revenue and warrant
subscription receivable based on their respective values. In September 1997, the
Company and Allergan exercised their respective options to purchase all of the
Callable Common Stock (the "Stock Purchase Option") and certain assets (the
"Asset Purchase Option") of ALRT. The Company's exercise of the Stock Purchase
Option required the issuance of 3,166,567 shares of the Company's Common Stock
along with cash payments totaling $25.0 million, to holders of the Callable
Common Stock in November 1997. Allergen's exercise of the Asset Purchase Option
required a cash payment of $8.9 million to ALRT in November 1997, which was used
by the Company to pay a portion of the Stock Purchase Option. The buyback of
ALRT was accounted for using the purchase method of accounting. The excess of
the purchase price over the fair value of net assets acquired was allocated to
in-process technology and written off, resulting in a one time noncash charge to
results of operations of $65.0 million.
44
<PAGE> 46
In November 1997, the Company initiated a strategic alliance with Eli Lilly
and Company ("Lilly") for the discovery and development of products based upon
Ligands' IR technology. The collaboration focuses on products with broad
applications across metabolic diseases, including diabetes, obesity,
dislipidemia, insulin resistance and cardiovascular disease associated with
insulin resistance and obesity. The alliance provided a $31.2 million equity
investment by Lilly in the Company, $7.2 million of research revenue in 1997, an
upfront non-refundable milestone payment of $12.5 million and could provide the
Company with up to $49 million in research funding over five years (the "Lilly
Collaboration").
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 ("1997"), AS COMPARED TO THE YEAR ENDED DECEMBER
31, 1996 ("1996")
The Company had revenues of $51.7 million for 1997 compared to revenues of
$36.8 million for 1996. The increase in revenues is primarily due to the Lilly
Collaboration revenues offset by decreased revenues from the research and
development collaboration with Wyeth-Ayerst Laboratories, the pharmaceutical
division of American Home Products Corporation ("AHP"), due to a one-time
payment of $1.5 million in 1996, which expanded and amended the research and
development agreement, as well as a $1.3 million milestone payment received from
Pfizer Inc. ("Pfizer") in 1996. Revenues in 1997 were derived from the Company's
research and development agreements with (i) Lilly of $19.7 million, (ii) ALRT
of $19.0 million, (iii) AHP of $4.0 million, (iv) SmithKline Beecham Corporation
("SmithKline Beecham") of $3.2 million, (v) Sankyo Company, Ltd. ("Sankyo") of
$2.3 million, (vi) Abbott Laboratories ("Abbott") of $1.7 million, (vii)
Glaxo-Wellcome plc ("Glaxo") of $1.3 million and product sales of Ligand
(Canada) in-licensed products of $418,000. Revenues for 1996 were derived from
the Company's research and development agreements with (i) ALRT of $18.6
million, (ii) AHP of $6.9 million, (iii) Sankyo of $2.7 million, (iv) Abbott of
$2.5 million, (v) SmithKline Beecham of $2.4 million, (vi) Glaxo of $2.1 million
as well as from a milestone payment received from Pfizer of $1.3 million,
products sales of Ligand (Canada) in-licensed products of $207,000 and revenues
from a National Institutes of Health ("NIH") grant of $99,000.
For 1997, research and development expenses increased to $72.4 million from
$59.5 million in 1996. These expenses increased primarily due to expansion of
the Company's clinical and development activities, as well as related additions
of clinical and development personnel. Selling, general and administrative
expenses decreased to $10.1 million in 1997 from $10.2 million in 1996. The
decrease was primarily attributable to higher legal expenses incurred in 1996
related to the settlement of future product rights litigation offset by
additions to personnel in 1997 to support expanded clinical and development
activities. Interest income was $3.7 million for 1997 and 1996. Interest expense
decreased slightly to $8.1 million for 1997, from $8.2 million in 1996, due to
conversion of $7.5 million convertible notes from AHP to equity in 1997, offset
by the addition of $2.5 million of convertible notes from SmithKline Beecham in
1997 and increases in capital lease obligations used to finance equipment.
A one-time charge of $65.0 million was incurred in 1997 for the write off
of in-process technology related to the exercise of the Stock Purchase Option.
The Company has significant net operating loss carry forwards for federal
and state income taxes. See Note 13 to Consolidated Financial Statements.
YEAR ENDED DECEMBER 31, 1996 ("1996"), AS COMPARED TO THE YEAR ENDED DECEMBER
31, 1995 ("1995")
The Company had revenues of $36.8 million for 1996 compared to revenues of
$24.5 million for 1995. The increase in revenues is primarily due to increased
collaborative research and development revenues from ALRT, milestone revenues
from Pfizer, increased revenues under an expanded and amended research and
development agreement entered into in January 1996 (which began in September
1994) with AHP, and a full year effect of the collaborative research agreement
with Sankyo (which became effective the date of the Merger). Revenues in 1996
were derived from the Company's research and development agreements with (i)
ALRT of $18.6 million, (ii) AHP of $6.9 million, (iii) Sankyo of $2.7 million,
(iv) Abbott of $2.5 million, (v) SmithKline Beecham of $2.4 million, (vi) Glaxo
of $2.1 million, as well as from milestone revenues from Pfizer of $1.3 million,
product sales of Ligand (Canada) in-licensed products of $207,000 and revenues
from
45
<PAGE> 47
an NIH grant of $99,000. Revenues in 1995 were derived from the Company's
research and development agreements with (i) ALRT of $12.0 million, (ii) AHP of
$4.0 million, (iii) Abbott of $2.6 million, (iv) Glaxo of $2.1 million, (v)
SmithKline Beecham of $2.1 million, (vi) Sankyo of $1.7 million, and from
product sales of Ligand (Canada) in-licensed products of $120,000.
For 1996, research and development expenses increased to $59.5 million from
$41.6 million in 1995. These expenses increased due to expansion of the
Company's clinical and development activities, and expanded collaborative
research programs, related additions of clinical, development and research
personnel and inclusion of the cost of Glycomed's operations for a full year in
1996. Selling, general and administrative expenses increased to $10.2 million in
1996 from $8.2 million in 1995. The increase was primarily due to additions to
personnel to support clinical, development and research programs, as well as
expanded sales and marketing activities. Interest income increased slightly to
$3.7 million in 1996 from $3.6 million in 1995. Increases in interest income
were a result of the completion of a public offering of approximately $35.3
million in October 1996, and increased research revenues, offset by usage of
cash to support expansion activities. Interest expense increased to $8.2 million
in 1996 from $5.4 million in 1995. The increase was primarily due to interest
required under Glycomed's Convertible Subordinated Debentures ("Debentures"),
accretion of debt discount under the Debentures and capital lease obligations
used to finance equipment.
One-time charges of $19.6 million and $17.5 million were incurred in 1995
due to the Merger and ALRT offering, respectively.
The Company has significant net operating loss carry forwards for federal
and state income taxes. See Note 13 to Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations through private and public
offerings of its equity securities, collaborative research revenues, capital and
operating lease transactions, issuance of convertible notes, investment income
and product sales. From inception through December 1997, the Company has raised
$195.7 million from sales of equity securities: $78.2 million from the Company's
public offerings and an aggregate of $117.5 million from private placements and
the exercise of options and warrants.
In March 1997, July 1997 and again in December 1997 the Company converted
$3.8 million, $2.5 million and $1.3 million respectively, of the convertible
notes outstanding to AHP into 374,626, 249,749 and 124,875 shares, respectively,
of Common Stock at a $10.01 conversion price, resulting in an outstanding
balance of convertible notes to AHP of $3.8 million.
In February 1997, SmithKline Beecham provided a third installment equity
investment of $2.5 million by purchasing 164,474 shares of Common Stock as a
result of its election to expand the scope of research under its research
agreement with the Company. The final installment of $2.5 million was provided
in October 1997 to the Company as a convertible note as a result of SmithKline
Beecham's election to extend the collaboration. The note is convertible into
Common Stock at $13.56 per share and is due October 2002 unless converted into
Common Stock earlier. The interest rate on the note is payable semi-annually at
prime.
As of December 31, 1997, the Company had acquired an aggregate of $22.0
million in property, laboratory and office equipment, and $4.7 million in tenant
leasehold improvements, substantially all of which has been funded through
capital lease and equipment note obligations and which also includes laboratory
and office equipment acquired in the Merger. In addition, the Company leases its
office and laboratory facilities under operating leases. In July 1994, the
Company entered into a long-term lease related to the construction of a new
laboratory facility, which was completed and occupied in August 1995. In March
1997, the Company entered into a long-term lease, related to a second
build-to-suit facility and loaned the construction partnership $3.7 million at
an interest rate of 8.5% which will be paid back monthly over a 10-year period.
In November 1997, the Company closed its Glycomed facility in Alameda at the
expiration of the leases and Glycomed's assets and programs were integrated into
Ligand's operations. At the end of 1997, one of the Company's main operating
lease agreements for office and research facilities expired, at which time the
Company moved into its second build-to-suit facility. In February 1997, the
Company signed a master lease
46
<PAGE> 48
agreement to finance future capital equipment up to $1.5 million, and in July
1997, the master lease agreement was extended to December 1998 to include up to
an additional $4.5 million. Each individual schedule under the extended master
lease agreement will be paid back monthly with interest over a five-year period.
As of December 31, 1997, the Company had $3.6 million available to finance
future capital equipment.
Working capital decreased to $62.4 million as of December 31, 1997, from
$71.7 million at the end of 1996. The decrease in working capital resulted from
an increase in accrued liabilities relating to the increase in operating
expenses, previously described. Cash and cash equivalents, short-term
investments and restricted cash increased to $86.3 million at December 31, 1997
from $84.2 million at December 31, 1996, due to increases in cash related to the
Lilly Collaboration and the issuance of convertible notes to SmithKline Beecham,
offset by increases in operating expenses, as described above, and exercise of
the Stock Purchase Option. The Company primarily invests its cash in United
States government and investment grade corporate debt securities.
The Company believes that its available cash, cash equivalents, marketable
securities and existing sources of funding will be adequate to satisfy its
anticipated capital requirements through 1999. The Company's future capital
requirements will depend on many factors, including the pace of scientific
progress in research and development programs, the magnitude of these programs,
the scope and results of preclinical testing and clinical trials, the time and
costs involved in obtaining regulatory approvals, the costs involved in
preparing, filing, prosecuting, maintaining and enforcing patent claims,
competing technological and market developments, the ability to establish
additional collaborations, changes in the existing collaborations, the cost of
manufacturing scale-up and the effectiveness of the Company's commercialization
activities.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, many companies' software and computer systems
may need to be upgraded or replaced in order to comply with such "Year 2000"
requirements. Certain of the Company's internal computer systems are not year
2000 compliant, and the Company utilizes third-party equipment and software that
may not be Year 2000 compliant. The Company has commenced taking actions to
correct or convert such internal systems and is in the early stages of
conducting an audit of its third-party suppliers as to the Year 2000 compliance
of their systems. The Company does not believe that the cost of these actions
will have a material adverse affect on the Company's business, financial
condition or operating results. However, there can be no assurance that a
failure of the Company's internal computer systems or of third-party equipment
or software used by the Company, or of systems maintained by the Company's
suppliers, to be Year 2000 compliant will not have a material adverse effect on
the Company's business, financial condition or operating results. In addition,
there can be no assurance that adverse changes in the purchasing patterns of the
Company's potential customers as a result of Year 2000 issues affecting such
customers will not have a material adverse effect on the Company's business,
financial condition or results of operations. These expenditures may result in
reduced funds available to purchase the Company's products which could have a
material adverse effect on the Company's business, operating results and
financial condition.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary data of the Company
required by this item are set forth at the pages indicated in Item 14 (a)(1).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
47
<PAGE> 49
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections labeled "Election of Directors", "Executive Officers" and
"Section 16(a) Beneficial Ownership Reporting Compliance" appearing in the
Company's Proxy Statement to be delivered to stockholders in connection with the
1998 Annual Meeting of Stockholders are incorporated herein by reference (the
"Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
The section labeled "Executive Compensation and Other Information"
appearing in the Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The sections labeled "Principal Stockholders" and "Security Ownership of
Directors and Management" appearing in the Proxy Statement are incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The sections labeled "Executive Compensation and Other Information" and
"Certain Relationships and Related Transactions" appearing in the Proxy
Statement are incorporated herein by reference.
48
<PAGE> 50
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS
The financial statements required by this item are submitted in a separate
section beginning on Page F-1 of this report.
CONSOLIDATED FINANCIAL STATEMENTS OF LIGAND PHARMACEUTICALS INCORPORATED
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Consolidated Balance Sheets at December 31, 1997 and 1996... F-3
Consolidated Statements of Operations for each of the three
years in the period ended
December 31, 1997......................................... F-4
Consolidated Statements of Stockholders' Equity for each of
the three years in the period ended December 31, 1997..... F-5
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 1997............... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
(b) REPORTS ON FORM 8-K.
There were no reports on Form 8-K filed by the Registrant during the fourth
quarter of the fiscal year ended December 31, 1997.
(c) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
# 2.1 Agreement of Merger, dated February 7, 1995 by and among
Ligand Pharmaceuticals Incorporated, LG Acquisition Corp.
and Glycomed Incorporated (other Exhibits omitted, but will
be filed by the Company with the Commission upon request).
# 2.2 Form of Plan of Merger.
# 3.2 Amended and Restated Certificate of Incorporation of the
Company.
& 3.3 Bylaws of the Company, as amended.
x 3.4 Certificate of Designation of Rights, Preferences and
Privileges of Series A Participating Preferred Stock of
Ligand Pharmaceuticals Incorporated. (Exhibit 3.1).
* 4.1 Specimen stock certificate for shares of Common Stock of the
Company.
#10.1 The Company's 1992 Stock Option/Stock Issuance Plan, as
amended.
*10.2 Form of Stock Option Agreement.
*10.3 Form of Stock Issuance Agreement.
*10.7 The Company's 1988 Stock Option Plan, as amended.
*10.8 Form of Incentive Stock Option Agreement (Installment
Vesting).
*10.9 Form of Non-Qualified Stock Option Agreement (Installment
Vesting).
*10.10 Form of Consultant Non-Qualified Stock Option Agreement
(Immediate Vesting).
*10.12 1992 Employee Stock Purchase Plan.
*10.13 Form of Stock Purchase Agreement.
</TABLE>
49
<PAGE> 51
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
*10.29 Consulting Agreement, dated October 20, 1988, between the
Company and Dr. Ronald M. Evans, as amended by Amendment to
Consulting Agreement, dated August 1, 1991, and Second
Amendment to Consulting Agreement, dated March 6, 1992.
*10.30 Form of Proprietary Information and Inventions Agreement.
Research and License.
*10.31 Agreement, dated March 9, 1992, between the Company and
Baylor College of Medicine (with certain confidential
portions omitted).
*10.33 License Agreement, dated November 14, 1991, between the
Company and Rockefeller University (with certain
confidential portions omitted).
*10.34 License Agreement and Bailment, dated July 22, 1991, between
the Company and the Regents of the University of California
(with certain confidential portions omitted).
*10.35 Agreement, dated May 1, 1991, between the Company and Pfizer
Inc (with certain confidential portions omitted).
*10.36 License Agreement, dated July 3, 1990, between the Company
and the Brigham and Woman's Hospital, Inc. (with certain
confidential portions omitted).
*10.37 Compound Evaluation Agreement, dated May 17, 1990, between
the Company and SRI International (with certain confidential
portions omitted).
*10.38 License Agreement, dated January 5, 1990, between the
Company and the University of North Carolina at Chapel Hill
(with certain confidential portions omitted).
*10.40 License Agreement, dated January 4, 1990, between the
Company and Baylor College of Medicine (with certain
confidential portions omitted).
*10.41 License Agreement, dated October 1, 1989, between the
Company and Institute Pasteur (with certain confidential
portions omitted).
*10.42 Sublicense Agreement, dated September 13, 1989, between the
Company and AndroBio Corporation (with certain confidential
portions omitted).
*10.43 License Agreement, dated June 23, 1989, between the Company
and La Jolla Cancer Research Foundation (with certain
confidential portions omitted).
*10.44 License Agreement, dated October 20, 1988, between the
Company and the Institute for Biological Studies, as amended
by Amendment to License Agreement dated September 15, 1989,
Second Amendment to License Agreement, dated December 1,
1989 and Third Amendment to License Agreement dated October
20, 1990 (with certain confidential portions omitted).
*10.45 Agreement dated June 12, 1989, between the Company and the
Regents of the University of California.
*10.46 Form of Indemnification Agreement between the Company and
each of its directors.
*10.47 Form of Indemnification Agreement between the Company and
each of its officers.
*10.50 Consulting Agreement, dated October 1, 1991, between the
Company and Dr. Bert W. O'Malley.
</TABLE>
50
<PAGE> 52
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
*10.53 Stock and Warrant Purchase Agreement, dated June 30, 1992
between the Company and Allergan, Inc. and Allergan
Pharmaceuticals (Ireland) Ltd., Inc.
*10.58 Stock Purchase Agreement, dated September 9, 1992, between
the Company and Glaxo, Inc.
*10.59 Research and Development Agreement, dated September 9, 1992,
between the Company and Glaxo, Inc. (with certain
confidential portions omitted).
*10.60 Stock Transfer Agreement, dated September 30, 1992, between
the Company and the Rockefeller University.
*10.61 Stock Transfer Agreement, dated September 30, 1992, between
the Company and New York University.
*10.62 License Agreement, dated September 30, 1992, between the
Company and the Rockefeller University (with certain
confidential portions omitted).
*10.63 Professional Services Agreement, dated September 30, 1992,
between the Company and Dr. James E. Darnell.
*10.64 Letter Agreement, dated August 24, 1992, between the Company
and Dr. Howard T. Holden.
*10.65 Letter Agreement, dated August 20, 1992, between the Company
and Dr. George Gill.
*10.66 Letter Agreement, dated September 3, 1992, between the
Company and Dr. Lloyd E. Flanders.
*10.67 Letter Agreement, dated September 11, 1992, between the
Company and Mr. Paul Maier.
!!10.69 Form of Automatic Grant Option Agreement.
**10.73 Supplementary Agreement, dated October 1, 1993, between the
Company and Pfizer, Inc. to Agreement, dated May 1, 1991.
!10.76 Amended Registration Rights Agreement, dated June 24, 1994,
between the Company and the individuals listed on attached
Schedule A, as amended (Exhibit 4.1).
!10.77 First Addendum to Amended Registration Rights Agreement,
dated July 6, 1994, between Company and Abbott Laboratories.
(Exhibit 4.2).
***10.78 Research, Development and License Agreement, dated July 6,
1994, between the Company and Abbott Laboratories (with
certain confidential portions omitted). (Exhibit 10.75).
***10.79 Stock and Note Purchase Agreement, dated September 2, 1994,
between the Company and American Home Products Corporation
(with certain confidential portions omitted).
***10.80 Unsecured Convertible Promissory Note dated September 2,
1994, in the face amount of $10,000,000 executed by the
Company in favor of American Home Products Corporation (with
certain confidential portions omitted). (Exhibit 10.78).
***10.81 Second Addendum to Amended Registration Rights Agreement,
dated September 2, 1994, between the Company and American
Home Products Corporation.
</TABLE>
51
<PAGE> 53
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
***10.82 Research, Development and License Agreement, dated September
2, 1994, between the Company and American Home Products
Corporation, as represented by its Wyeth-Ayerst Research
Division (with certain confidential portions omitted).
(Exhibit 10.77).
***10.83 Option Agreement, dated September 2, 1994, between the
Company and American Home Products Corporation, as
represented by its Wyeth-Ayerst Research Division (with
certain confidential portions omitted). (Exhibit 10.80).
***10.84 Distribution and Marketing Agreement, dated September 16,
1994, between the Company and Cetus Oncology Corporation, a
wholly owned subsidiary of the Chiron Corporation (with
certain confidential portions omitted). (Exhibit 10.82).
&10.93 Indemnity Agreement, dated June 3, 1995, between the
Company, Allergan, Inc. and Allergan Ligand Retinoid
Therapeutics, Inc.
&10.94 Tax Allocation Agreement, dated June 3, 1995, between the
Company, Allergan, Inc. and Allergan Ligand Retinoid
Therapeutics, Inc.
&10.95 Stock Purchase Agreement, dated June 3, 1995, between the
Company, Allergan, Inc. and Allergan Pharmaceuticals
(Ireland), Ltd.
&10.97 Research, Development and License Agreement, dated December
29, 1994, between SmithKline Beecham Corporation and the
Company (with certain confidential portions omitted).
&10.98 Stock and Note Purchase Agreement, dated February 2, 1995,
between SmithKline Beecham Corporation, S.R. One Limited and
the Company (with certain confidential portions omitted).
&10.99 Third Addendum to Amended Registration Rights Agreement,
dated February 3, 1995, between S. R. One, Limited and the
Company.
#10.100 PHOTOFRIN(R) Distribution Agreement, dated March 8, 1995,
between the Company and Quadra Logic Technologies Inc. (with
certain confidential portions omitted).
10.119(1) Option and Development Agreement, dated August 15, 1990,
between Glycomed and Dr. Richard E. Galardy and Dr. Damian
Grobelny with exhibit thereto (with certain portions
omitted). (Exhibit 10 10.20).
10.120(1) Option and Development Agreement, dated November 27, 1989,
between Glycomed and the President and Fellows of Harvard
College with appendices thereto (with certain confidential
portions omitted). (Exhibit 10.21)
10.121(1) Option and Development Agreement, dated January 1, 1991,
between Glycomed and UAB Research Foundation with exhibits
thereto (with certain confidential portions omitted).
(Exhibit 10.22).
10.122(1) Joint Venture Agreement, dated December 18, 1990, among
Glycomed, Glyko, Inc., Millipore Corporation, Astroscan,
Ltd., Astromed, Ltd., Gwynn R. Williams and John Klock,
M.D., with exhibits thereto (with certain confidential
portions omitted). (Exhibit 10.23).
10.127(2) Research and License Agreement, dated April 29, 1992,
between Glycomed and the Alberta Research Council with
Appendix thereto (with certain confidential portions
omitted). (Exhibit 10.28).
10.130(3) Amendment to Research and License Agreement, dated July 12,
1993, (confidential portions omitted). (Exhibit 10.32).
</TABLE>
52
<PAGE> 54
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10.131(4) Amendments to Research and License Agreement, dated October
22, 1993, December 16, 19 and May 9, 1994 between Glycomed
and the Alberta Research Council (with certain confidential
portions omitted). (Exhibit 10.33).
10.132(4) License Agreement, dated February 14, 1994 between Glycomed
and Sankyo Company, Ltd., for the Far East marketing rights
of ophthalmic indications of Galardin(TM) MPI and analogs
(with certain confidential portions omitted). (Exhibit
10.34).
10.133(4) Collaborative Technology Research and Development Agreement
between Glycomed and Sankyo Company, Ltd., dated June 27,
1994 (with certain confidential portions omitted). (Exhibit
10.35).
10.136(5) Amendment to Research and License Agreement, dated September
22, 1994 between Glycomed and Alberta Research Council (with
certain confidential portions omitted). (Exhibit 10.38).
#10.137 First Supplemental Indenture among the Company, Glycomed and
Chemical Trust Company of California, Trustee. (Exhibit
10.133).
%%10.140 Promissory Notes, General Security Agreements and a Credit
Terms and Conditions letter dated March 31, 1995, between
the Company and Imperial Bank (Exhibit 10.101).
-10.142 Stock Purchase Agreement, dated June 27, 1995, between the
Company and Sankyo Company, Ltd.
-10.143 Fifth Addendum to Amended Registration Rights Agreement,
dated September 11, 1995 between the Company and Sankyo
Company Limited.
-10.144 Stock Purchase Agreement, dated August 28, 1995, between the
Company and Abbott Laboratories.
-10.145 Sixth Addendum to Amended Registration Rights Agreement,
dated August 31, 1995, between the Company and Abbott
Laboratories.
-10.146 Amendment to Research and Development Agreement, dated
January 16, 1996, between the Company and American Home
Products Corporation, as amended.
-10.147 Amendment to Stock Purchase Agreement, dated January 16,
1996, between the Company and American Home Products
Corporation.
-10.148 Lease, dated July 6, 1994, between the Company and
Chevron/Nexus partnership, First Amendment to lease dated
July 6, 1994.
x10.149 Successor Employment Agreement, signed May 1, 1996, between
the Company and David E. Robinson.
10.150(6) Master Lease Agreement, signed May 30, 1996, between the
Company and USL Capital Corporation.
x10.151 Settlement Agreement and Mutual Release of all Claims,
signed April 20, 1996, between the Company and Pfizer, Inc.
(with certain confidential portions omitted).
x10.152 Letter Amendment to Abbott Agreement, dated March 14, 1996,
between the Company and Abbott Laboratories (with certain
confidential portions omitted).
Xx10.153 Letter Agreement, dated August 8, 1996, between the Company
and Dr. Andres Negro-Vilar.
</TABLE>
53
<PAGE> 55
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
##10.154 Preferred Shares Rights Agreement, dated as of September 13,
1996, by and between Ligand Pharmaceuticals Incorporated and
Wells Fargo Bank, N.A. (Exhibit 10.1).
10.155(6) Letter Agreement, dated November 4, 1996, between the
Company and William Pettit.
10.156(6) Letter Agreement, dated February 6, 1997, between the
Company and Russell L. Allen.
10.157(6) Master Lease Agreement, signed February 13, 1997, between
the Company and Lease Management Services.
10.158(6) Lease, dated March 7, 1997, between the Company and Nexus
Equity VI LLC.
10.159(6) Eighth Addendum to amended registration rights agreement,
dated June 24, 1994, as amended between Ligand
Pharmaceuticals and S.R. One, Limited and is effective as of
February 10, 1997.
10.160(6) Seventh Addendum to amended registration rights agreement,
dated June 24, 1994, as amended between Ligand
Pharmaceuticals and S.R. One, Limited and is effective as of
November 10, 1995.
10.161(7) Settlement Agreement, License and Mutual General Release
between Ligand Pharmaceuticals and SRI/LJCRF, dated August
23, 1995 (with certain confidential portions omitted).
10.162(8) Limited Extension of Collaborative Technology Research,
Option and Development Agreement between Ligand
Pharmaceuticals and Sankyo Company Limited, dated June 24,
1997.
10.163(8) Extension of Master Lease Agreement between Lease Management
Services and Ligand Pharmaceuticals dated July 29, 1997.
10.164(9) Third Amendment to Agreement, dated September 2, 1997,
between the Company and American Home Products Corporation.
10.165 Amended and Restated Technology Cross License Agreement,
dated September 24, 1997, among the Company, Allergan, Inc.
and Allergan Ligand Retinoid Therapeutics, Inc.
10.166 Transition Agreement, dated September 24, 1997, among the
Company, Allergan, Inc. and Allergan Ligand Retinoid
Therapeutics, Inc.
10.167 Development and License Agreement, dated November 25, 1997,
between the Company and Eli Lilly and Company (with certain
confidential portions omitted).
10.168 Collaboration Agreement, dated November 25, 1997, among the
Company, Eli Lilly and Company, and Allergan Ligand Retinoid
Therapeutics, Inc. (with certain confidential portions
omitted).
10.169 Option and Wholesale Purchase Agreement, dated November 25,
1997, between the Company and Eli Lilly and Company (with
certain confidential portions omitted).
10.170 Stock Purchase Agreement, dated November 25, 1997, between
the Company and Eli Lilly and Company.
10.171 First Amendment to Option and Wholesale Purchase Agreement
dated February 23, 1998, between the Company and Eli Lilly
and Company (with certain confidential portions omitted).
</TABLE>
54
<PAGE> 56
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <C> <S> <C>
10.172 Second Amendment to Option and Wholesale Purchase Agreement,
dated March 16, 1998, between the Company and Eli Lilly and
Company (with certain confidential portions omitted).
21.1 Subsidiaries of Registrant.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney (See Page 57).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* These exhibits were previously filed as part of, and are hereby
incorporated by reference to, the same numbered exhibit filed with the
Company's Registration Statement on Form S-1 (No. 33-47257) filed on April
16, 1992 as amended.
% These exhibits were previously filed as part of, and are hereby
incorporated by reference to, the same numbered exhibit filed with the
Company's Annual Report on Form 10-K for the year ended December 31, 1992.
** These exhibits were previously filed as part of, and are hereby
incorporated by reference to, the same numbered exhibit filed with the
Company's Annual Report on Form 10-K for the year ended December 31, 1993.
*** These exhibits were previously filed as part of, and are hereby
incorporated by reference to, the same numbered exhibit (except as
otherwise noted) filed with the Company's Quarterly Report on Form 10-Q for
the period ended September 30, 1994.
! These exhibits were previously filed as part of, and are hereby
incorporated by reference to, the exhibit filed with the Company's Form
8-K, filed on July 14, 1994.
!! This exhibit was previously filed as part of, and is hereby incorporated
by reference to Exhibit 99.1 filed with the Company's Form S-8 (No.
33-85366), filed on October 17, 1994.
& These exhibits were previously filed as part of, and are hereby
incorporated by reference to, the same numbered exhibit filed with the
Registration Statement on Form S-1/S-3 (No. 33-87598 and 33-87600) filed on
December 20, 1994, as amended.
# These exhibits were previously filed as part of, and are hereby
incorporated by reference to the numbered exhibit filed with the
Registration Statement on Form S-4 (No. 33-90160) filed on March 9, 1995,
as amended.
%% This exhibit was previously filed as part of, and are hereby incorporated by
reference to the same numbered exhibit filed with the Company's Quarterly
report on Form 10-Q for the period ended September 30, 1995.
- - These exhibits were filed previously, and are hereby incorporated by
reference to the same numbered exhibit filed with the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
x These exhibits were previously filed as part of, and are hereby
incorporated by reference to the same numbered exhibit filed with the
Company's Quarterly report on Form 10-Q for the period ended June 30, 1996.
Xx This exhibit was previously filed as part of, and are hereby incorporated
by reference at the same numbered exhibit filed with the Company's
Quarterly report on Form 10-Q for the period ended September 30, 1996.
## These exhibits were previously filed as part of, and are hereby incorporated
by reference, the same numbered exhibit filed with the Company's
Registration Statement on Form S-3 (No. 333-12603) filed on September 25,
1996, as amended.
(1) Filed as an exhibit to Glycomed's Registration Statement on Form S-1 (No.
33-39961) filed on or amendments thereto and incorporated herein by
reference.
55
<PAGE> 57
(2) Filed as an exhibit to Glycomed's Annual Report on Form 10-K (File No.
0-19161) filed on September 25, 1992 and incorporated herein by reference.
(3) Filed as an exhibit to Glycomed's Annual Report on Form 10-K (File No.
0-19161) filed on September 13, 1993 and incorporated herein by reference.
(4) Filed as an amendment to Glycomed's Annual Report on Form 10-K (File No.
0-19161) filed on September 27, 1994 and incorporated herein by reference.
(5) Filed as an exhibit to Glycomed's Quarterly Report on Form 10-Q (File No.
0-19161) filed on February 10, 1995 and incorporated herein by reference.
(6) This exhibit was previously filed as part of, and is hereby incorporated by
reference to the same numbered exhibit filed with the Company's Annual
Report on Form 10-K for the period ended December 31, 1996.
(7) This exhibit was previously filed as part of, and is hereby incorporated by
reference to the same numbered exhibit filed with the Company's Quarterly
Report on Form 10-Q for the period ended March 31, 1997.
(8) This exhibit was previously filed as part of, and is hereby incorporated by
reference to the same same numbered exhibit filed with the Company's
Quarterly Report on Form 10-Q for the period ended June 30, 1997.
(9) This exhibit was previously filed as part of, and is hereby incorporated by
reference to the same numbered exhibit filed with the Company's Quarterly
Report on Form 10-Q for the period ended September 30, 1997.
56
<PAGE> 58
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
LIGAND PHARMACEUTICALS
INCORPORATED
By: /s/ DAVID E. ROBINSON
------------------------------------
David E. Robinson,
President and Chief Executive
Officer
Date: March 31, 1998
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature appears
below constitutes and appoints David E. Robinson or Paul V. Maier, his or her
attorney-in-fact, with power of substitution in any and all capacities, to sign
any amendments to this Annual Report on Form 10-K, and to file the same with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that the
attorney-in-fact or his or her substitute or substitutes may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ DAVID E. ROBINSON Chairman of the Board, President, March 31, 1998
- --------------------------------------- Chief Executive Officer and Director
David E. Robinson (Principal Executive Officer)
/s/ PAUL V. MAIER Senior Vice President, Chief March 31, 1998
- --------------------------------------- Financial Officer and Treasurer
Paul V. Maier (Principal Financial and
Accounting Officer)
Director
- ---------------------------------------
Henry F. Blissenbach
/s/ ALEXANDER D. CROSS Director March 30, 1998
- ---------------------------------------
Alexander D. Cross
/s/ JOHN GROOM Director March 30, 1998
- ---------------------------------------
John Groom
/s/ IRVING S. JOHNSON Director March 30, 1998
- ---------------------------------------
Irving S. Johnson
/s/ CARL C. PECK Director March 30, 1998
- ---------------------------------------
Carl C. Peck
/s/ VICTORIA R. FASH Director March 30, 1998
- ---------------------------------------
Victoria R. Fash
</TABLE>
57
<PAGE> 59
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Stockholders' Equity............. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 60
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Ligand Pharmaceuticals Incorporated
We have audited the accompanying consolidated balance sheets of Ligand
Pharmaceuticals Incorporated as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Ligand
Pharmaceuticals Incorporated at December 31, 1997 and 1996, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
January 30, 1998
F-2
<PAGE> 61
LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 62,252 $ 34,830
Short-term investments.................................... 20,978 45,822
Receivable from a related party........................... -- 3,087
Other current assets...................................... 864 1,706
--------- ---------
Total current assets.............................. 84,094 85,445
Restricted short-term investments........................... 3,057 3,527
Property and equipment, net................................. 14,853 11,680
Notes receivable from officers and employees................ 559 534
Other assets................................................ 4,860 954
--------- ---------
$ 107,423 $ 102,140
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 10,717 $ 4,137
Accrued liabilities....................................... 5,609 4,870
Deferred revenue.......................................... 2,616 2,151
Current portion of obligations under capital leases....... 2,753 2,607
--------- ---------
Total current liabilities......................... 21,695 13,765
Long-term obligations under capital leases.................. 8,501 8,711
Convertible subordinated debentures......................... 36,628 33,953
Convertible note............................................ 6,250 11,250
Commitments
Stockholders' equity:
Convertible preferred stock, $0.001 par value, 5,000,000
shares authorized; none issued......................... -- --
Common stock, $0.001 par value; 80,000,000 shares
authorized, 38,504,459 shares and 31,799,617 shares
issued at December 31, 1997 and 1996, respectively..... 39 32
Paid-in capital........................................... 311,681 214,887
Warrant subscription receivable........................... -- (2,453)
Adjustment for unrealized gains (losses) on
available-for-sale securities.......................... 384 (78)
Accumulated deficit....................................... (277,744) (177,594)
Deferred compensation and consulting...................... -- (322)
--------- ---------
34,360 34,472
Less treasury stock, at cost (1,114 shares in 1997 and
1996).................................................. (11) (11)
--------- ---------
Total stockholders' equity................................ 34,349 34,461
--------- ---------
$ 107,423 $ 102,140
========= =========
</TABLE>
See accompanying notes.
F-3
<PAGE> 62
LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Collaborative research and development:
Related parties................................... $ 18,997 $ 18,641 $ 11,972
Unrelated parties................................. 32,284 17,994 12,424
Other................................................ 418 207 120
---------- ---------- ----------
51,699 36,842 24,516
Costs and expenses:
Research and development............................. 72,426 59,494 41,636
Selling, general and administrative.................. 10,108 10,205 8,181
Write-off of acquired in-process technology.......... 64,970 -- 19,564
ALRT contribution.................................... -- -- 17,500
---------- ---------- ----------
Total operating expenses..................... 147,504 69,699 86,881
---------- ---------- ----------
Loss from operations................................... (95,805) (32,857) (62,365)
Interest income........................................ 3,743 3,704 3,603
Interest expense....................................... (8,088) (8,160) (5,410)
---------- ---------- ----------
Net loss............................................... $ (100,150) $ (37,313) $ (64,172)
========== ========== ==========
Basic and diluted net loss per share................... $ (3.02) $ (1.30) $ (2.70)
========== ========== ==========
Shares used in computing net loss per share............ 33,128,372 28,780,914 23,791,542
========== ========== ==========
</TABLE>
See accompanying notes.
F-4
<PAGE> 63
LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENT FOR
UNREALIZED GAINS
(LOSSES) ON
COMMON STOCK WARRANT AVAILABLE- DEFERRED
------------------- PAID-IN SUBSCRIPTION FOR-SALE ACCUMULATED COMPENSATION AND
SHARES AMOUNT CAPITAL RECEIVABLE SECURITIES DEFICIT CONSULTING
---------- ------ -------- ------------ ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994... 17,954,064 $18 $104,684 $ -- $(727) $ (76,109) $(1,530)
Issuance of Common Stock...... 2,903,622 3 20,966 -- -- -- --
Issuance of Common Stock for
merger net of transaction
costs of $1,235,000......... 6,942,911 7 41,952 -- -- -- --
Amortization of deferred
compensation and consulting
fees........................ -- -- -- -- -- -- 711
Adjustment for unrealized
gains (losses) on
available-for-sale
securities.................. -- -- -- -- 944 -- --
Purchase of treasury stock.... -- -- -- -- -- -- --
Warrant subscription
receivable.................. -- -- 5,850 (5,850) -- -- --
Cash received from ALRT and
applied to warrant
subscription receivable..... -- -- -- 1,326 -- -- --
Net loss...................... -- -- -- -- -- (64,172) --
---------- --- -------- ------- ----- --------- -------
Balance at December 31, 1995... 27,800,597 28 173,452 (4,524) 217 (140,281) (819)
Issuance of Common Stock...... 3,999,020 4 41,082 -- -- -- --
Amortization of deferred
compensation and consulting
fees........................ -- -- -- -- -- -- 497
Adjustment for unrealized
gains (losses) on
available-for-sale
securities.................. -- -- -- -- (295) -- --
Receipt of Common Stock for
milestone revenue........... -- -- -- -- -- -- --
Retirement of shares.......... -- -- -- -- -- -- --
Purchase of treasury shares... -- -- -- -- -- -- --
Issuance of Common Stock held
in Treasury................. -- -- -- -- -- -- --
Option term extension......... -- -- 353 -- -- -- --
Amortization of warrant
subscription receivable..... -- -- -- 2,071 -- -- --
Net loss...................... -- -- -- -- -- (37,313) --
---------- --- -------- ------- ----- --------- -------
Balance at December 31, 1996... 31,799,617 32 214,887 (2,453) (78) (177,594) (322)
Issuance of Common Stock...... 6,704,842 7 96,794 -- -- -- --
Amortization of deferred
compensation and consulting
fees........................ -- -- -- -- -- -- 322
Adjustment of unrealized gains
(losses) on
available-for-sale
securities.................. -- -- -- -- 462 -- --
Amortization of warrant
subscription receivable..... -- -- -- 1,535 -- -- --
Write-off of warrant
subscription receivable..... -- -- -- 918 -- -- --
Net loss...................... (100,150)
---------- --- -------- ------- ----- --------- -------
Balance at December 31, 1997... 38,504,459 $39 $311,681 $ -- $ 384 $(277,744) $ --
========== === ======== ======= ===== ========= =======
<CAPTION>
TREASURY STOCK TOTAL
------------------- STOCKHOLDERS'
SHARES AMOUNT EQUITY
--------- ------- -------------
<S> <C> <C> <C>
Balance at December 31, 1994... (4,952) $ (2) $ 26,334
Issuance of Common Stock...... -- -- 20,969
Issuance of Common Stock for
merger net of transaction
costs of $1,235,000......... -- -- 41,959
Amortization of deferred
compensation and consulting
fees........................ -- -- 711
Adjustment for unrealized
gains (losses) on
available-for-sale
securities.................. -- -- 944
Purchase of treasury stock.... (34) -- --
Warrant subscription
receivable.................. -- -- --
Cash received from ALRT and
applied to warrant
subscription receivable..... -- -- 1,326
Net loss...................... -- -- (64,172)
--------- ------- ---------
Balance at December 31, 1995... (4,986) (2) 28,071
Issuance of Common Stock...... -- -- 41,086
Amortization of deferred
compensation and consulting
fees........................ -- -- 497
Adjustment for unrealized
gains (losses) on
available-for-sale
securities.................. -- -- (295)
Receipt of Common Stock for
milestone revenue........... (101,011) (1,320) (1,320)
Retirement of shares.......... 101,011 1,320 1,320
Purchase of treasury shares... (3,164) (23) (23)
Issuance of Common Stock held
in Treasury................. 7,036 14 14
Option term extension......... -- -- 353
Amortization of warrant
subscription receivable..... -- -- 2,071
Net loss...................... -- -- (37,313)
--------- ------- ---------
Balance at December 31, 1996... (1,114) (11) 34,461
Issuance of Common Stock...... -- -- 96,801
Amortization of deferred
compensation and consulting
fees........................ -- -- 322
Adjustment of unrealized gains
(losses) on
available-for-sale
securities.................. -- -- 462
Amortization of warrant
subscription receivable..... -- -- 1,535
Write-off of warrant
subscription receivable..... -- -- 918
Net loss...................... (100,150)
--------- ------- ---------
Balance at December 31, 1997... (1,114) $ (11) $ 34,349
========= ======= =========
</TABLE>
See accompanying notes.
F-5
<PAGE> 64
LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................... $(100,150) $(37,313) $(64,172)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization.......................... 4,133 3,879 2,687
Amortization of notes receivable from officers and
employees............................................. 230 235 339
Amortization of warrant subscription receivable........ 2,453 2,071 1,326
Write-off of acquired in-process technology............ 64,970 -- 19,564
Amortization of deferred compensation and consulting... 322 497 711
Accretion of debt discount............................. 2,675 2,674 1,654
Company stock received for milestone revenue........... -- (1,320) --
Gain on sale of property and equipment................. (6) -- --
Change in operating assets and liabilities, net of
Glycomed merger:
Other current assets.............................. 856 (1,129) 1,626
Receivable from a related party................... 3,087 (801) (1,128)
Accounts payable and accrued liabilities.......... 7,605 (1,638) 380
Deferred revenue.................................. 465 (457) 465
--------- -------- --------
Net cash used in operating activities....................... (13,360) (33,302) (36,548)
INVESTING ACTIVITIES
Purchases of short-term investments......................... (35,033) (53,123) (17,684)
Proceeds from short-term investments........................ 60,339 61,188 37,205
Purchase of property and equipment.......................... (4,278) (399) (175)
Proceeds from sale of property and equipment................ 109 -- --
Increase in note receivable from officers and employees..... (270) (350) (135)
Payment of notes receivable from officers and employees..... 16 66 --
Increases in deposits and other assets...................... (4,036) (2) (33)
Decreases in deposits and other assets...................... 130 118 60
Investment in joint venture................................. -- -- (822)
Net cash paid for exercise of ALRT stock purchase option.... (12,661) -- --
Net cash acquired in Glycomed acquisition................... -- -- 10,225
--------- -------- --------
Net cash provided by investing activities................... 4,316 7,498 28,641
FINANCING ACTIVITIES
Principal payments on obligations under capital leases...... (3,210) (2,561) (1,448)
Net change in restricted short-term investment.............. 470 3,232 (2,043)
Net proceeds from the issuance of convertible note.......... 2,500 5,000 --
Net proceeds from sale of common stock...................... 36,706 39,000 19,733
--------- -------- --------
Net cash provided by financing activities................... 36,466 44,671 16,242
--------- -------- --------
Net increase in cash and cash equivalents................... 27,422 18,867 8,335
Cash and cash equivalents at beginning of period............ 34,830 15,963 7,628
--------- -------- --------
Cash and cash equivalents at end of period.................. $ 62,252 $ 34,830 $ 15,963
========= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid............................................... $ 5,444 $ 5,559 $ 3,178
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Additions to obligations under capital leases............... $ 3,146 $ 2,888 $ 8,415
Retirement of treasury stock................................ $ -- $ 1,320 $ --
</TABLE>
See accompanying notes.
F-6
<PAGE> 65
LIGAND PHARMACEUTICALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. THE COMPANY
Ligand Pharmaceuticals Incorporated, a Delaware corporation (the "Company"), is
a biopharmaceutical company primarily committed to the discovery and development
of new drugs that regulate hormone activated intracellular receptors and Signal
Transducers and Activators of Transcription. The Company includes its wholly
owned subsidiaries, Glycomed Incorporated ("Glycomed"), Ligand Pharmaceuticals
(Canada) Incorporated, and Allergan Ligand Retinoid Therapeutics, Inc. ("ALRT").
The Company's potential products are in various stages of development. Potential
products that appear to be promising at early stages of development may not
reach the market for a number of reasons. Substantially all of the Company's
revenues to date have been derived from its research and development agreements
with major pharmaceutical collaborators. Prior to generating product revenues
from these products, the Company must complete the development of its products
in the human health care market. No assurance can be given that the Company's
product development efforts will be successful, that required regulatory
approvals for any indication will be obtained, or that any products, if
introduced will be capable of being produced in commercial quantities at
reasonable costs or that patient and physician acceptance of these products will
be achieved. There can be no assurance that Ligand will successfully
commercialize, manufacture or market its products or ever achieve or sustain
product revenues or profitability.
The Company faces those risks associated with companies whose products are in
various stages of development. These risks include, among others, the Company's
need for additional financing to complete its research and development programs
and commercialize its technologies. The Company expects to incur substantial
additional research and development expenses, including continued increases in
personnel and costs related to preclinical testing, clinical trials, and sales
and marketing expenses related to product sales. The Company intends to seek
additional funding sources of capital and liquidity through collaborative
arrangements, collaborative research or through public or private financing.
There is no assurance such financing would be available under favorable terms,
if at all.
The Company believes that patents and other proprietary rights are important to
its business. The Company's policy is to file patent applications to protect
technology, inventions and improvements to its inventions that are considered
important to the development of its business. The patent positions of
pharmaceutical and biotechnology firms, including the Company, are uncertain and
involve complex legal and technical questions for which important legal
principles are largely unresolved.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and disclosures made in
the accompanying notes to the consolidated financial statements. Actual results
could differ from those estimates.
Cash, Cash Equivalents and Short-term Investments
Cash and cash equivalents consist primarily of cash, certificates of deposits,
treasury securities and repurchase agreements with original maturities at the
date of acquisition of less than three months.
F-7
<PAGE> 66
LIGAND PHARMACEUTICALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
The Company invests its excess cash principally in United States government debt
securities, investment grade corporate debt securities and certificates of
deposit. The Company has established guidelines relative to diversification and
maturities that maintain safety and liquidity. These guidelines are periodically
reviewed and modified to take advantage of trends in yields and interest rates.
Loss Per Share
Net loss per share is computed using the weighted average number of common
shares outstanding.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) 128, Earnings Per Share, which is
effective for fiscal periods ending after December 15, 1997. SFAS 128 includes a
new computation for earnings per share and presentation of basic and diluted
earnings per share. The Company retroactively adopted SFAS 128 in the fourth
quarter of 1997. Upon adoption, there was no impact on the net loss per share or
presentation of net loss per share for any periods previously reported.
Accounting for Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. In
January 1996, the Company adopted the disclosure requirements of SFAS 123,
Accounting for Stock-Based Compensation (Note 8).
New Accounting Standards
In June 1997, the Financial Accounting Standards Board issued SFAS 130,
Reporting Comprehensive Income and SFAS 131, Segment Information. Both of these
standards are effective for fiscal years beginning after December 15, 1997. SFAS
130 requires that all components of comprehensive income, including net income,
be reported in the financial statements in the period in which they are
recognized. The Company's comprehensive income or loss will not be materially
different than net income or loss as reported. SFAS 131 amends the requirements
for public enterprises to report financial and descriptive information about its
reportable operating segments. The Company currently operates in one business
and operating segment and does not believe adoption of this standard will have a
material impact on the Company's financial statements as reported.
Research and Development Revenues and Expenses
Collaborative research and development revenues are recorded as earned based on
the performance criteria of each contract. Payments received which have not met
the appropriate criteria are recorded as deferred revenue. Research and
development costs are expensed as incurred.
For the years ended December 31, 1997, 1996 and 1995, costs and expenses related
to collaborative research and development agreements were $51.3 million, $36.6
million and $24.4 million, respectively.
F-8
<PAGE> 67
LIGAND PHARMACEUTICALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
Property and Equipment
Property and equipment is stated at cost and consists of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Property.................................................... $ 2,649 $ --
Equipment and leasehold improvements........................ 26,662 22,674
Less accumulated depreciation and amortization.............. (14,458) (10,994)
-------- --------
Net property and equipment........................ $ 14,853 $ 11,680
======== ========
</TABLE>
Depreciation of equipment and leasehold improvements is computed using the
straight-line method over the estimated useful lives of the assets which range
from three to fifteen years. Assets acquired pursuant to capital lease
arrangements and leasehold improvements are amortized over their estimated
useful lives or their related lease term, whichever is shorter.
3. INVESTMENTS
Investments are recorded at estimated fair market value at December 31, 1997 and
1996, and consist principally of United States government debt securities,
investment grade corporate debt securities and certificates of deposit with
maturities at the date of acquisition of three months or longer. The Company has
classified all of its investments as available-for-sale securities. The
following table summarizes the various investment categories at (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------------------- ---------------------------------
GROSS GROSS
UNREALIZED UNREALIZED
GAINS ESTIMATED GAINS ESTIMATED
COST (LOSSES) FAIR VALUE COST (LOSSES) FAIR VALUE
------- ---------- ---------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Available-for-Sale:
U.S. Government Securities.... $11,790 $ 9 $11,799 $18,541 $(52) $18,489
Corporate Obligations......... 7,085 2 7,087 22,005 (16) 21,989
Certificates of Deposit....... 2,093 (1) 2,092 5,354 (10) 5,344
------- ---- ------- ------- ---- -------
20,968 10 20,978 45,900 (78) 45,822
Certificates of Deposit --
restricted................. 3,057 -- 3,057 3,527 -- 3,527
Equity securities............. 440 374 814 440 -- 440
------- ---- ------- ------- ---- -------
$24,465 $384 $24,849 $49,867 $(78) $49,789
======= ==== ======= ======= ==== =======
</TABLE>
Equity securities are included in long-term other assets.
The realized gains (losses) on sales of available-for-sale securities for the
years ended December 31, 1997 and 1996 have not been material.
F-9
<PAGE> 68
LIGAND PHARMACEUTICALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
The amortized cost and estimated fair value of debt and marketable securities at
December 31, 1997 and 1996, by contractual maturity, are shown below (in
thousands). Expected maturities will differ from contractual maturities because
the issuers of the securities may have the right to prepay obligations without
prepayment penalties.
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------- ---------------------
ESTIMATED ESTIMATED
COST FAIR VALUE COST FAIR VALUE
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Due in one year or less........................... $17,148 $17,151 $15,941 $15,938
Due after one year through three years............ 6,782 6,792 33,388 33,315
Due after three years............................. 94 92 98 96
------- ------- ------- -------
24,025 24,035 49,427 49,349
Equity securities................................. 440 814 440 440
------- ------- ------- -------
$24,465 $24,849 $49,867 $49,789
======= ======= ======= =======
</TABLE>
4. MERGER WITH GLYCOMED
In May 1995, Glycomed was merged into a wholly owned subsidiary of the Company
("the Merger"). Glycomed is a biopharmaceutical company conducting research and
development of pharmaceuticals based on biological activities of complex
carbohydrates. The results of operations of Glycomed are included in the
Company's consolidated results of operations with effect from the date of the
Merger. Each outstanding share of Glycomed Common Stock was converted into .5301
shares of the Company's Common Stock, resulting in the issuance of 6,942,911
shares of the Company's Common Stock to Glycomed shareholders. The Merger was
accounted for using the purchase method of accounting. The excess of the
purchase price over the fair value of the net assets acquired was allocated to
in-process technology and was written off, resulting in a one-time non-cash
charge to results of operations of $19.6 million.
Details of the merger are as follows (in thousands):
<TABLE>
<S> <C>
Total consideration:
Common stock.............................................. $43,193
Convertible debentures assumed............................ 29,625
Other liabilities assumed................................. 6,897
-------
79,715
Less:
Fair value of assets acquired, including cash, restricted
cash and short-term investments of $46,698................ 49,926
Write-off of in-process technology.......................... 19,564
-------
Net cash acquired........................................... $10,225
=======
</TABLE>
The common stock issued as consideration was valued at the market price on the
date the transaction was consummated.
In November 1997, the Company closed Glycomed's Alameda facilities and
Glycomed's assets and research programs were integrated into Ligand's
operations.
F-10
<PAGE> 69
LIGAND PHARMACEUTICALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
5. ACCRUED LIABILITIES
Accrued liabilities are comprised of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Accrued legal......................................... $ 451 $ 463
Accrued interest...................................... 2,088 2,116
Accrued compensation.................................. 1,446 925
Other................................................. 1,624 1,366
------ ------
$5,609 $4,870
====== ======
</TABLE>
6. CONVERTIBLE SUBORDINATED DEBENTURES
In conjunction with the Glycomed merger, the Company adjusted the carrying value
of the Glycomed 7 1/2% Convertible Subordinated Debentures due 2003 (the
"Debentures") issued by Glycomed in 1992 in the original amount of $50 million
to $29.6 million, which was their fair market value at the date of the Merger.
The current carrying value approximates fair market value. The Company has
entered into a supplemental indenture which provides for conversion of the
Debentures into the Company's Common Stock at $26.52 per share. The Debentures
pay interest semi-annually at 7.5% per annum and are due in 2003. The difference
between the face value and the fair market value at the acquisition date will be
accreted up to the face value over the remaining term of the Debentures and the
accretion is charged to interest expense.
7. COMMITMENTS
Leases and Equipment Notes Payable
The Company has entered into capital lease and equipment note payable agreements
which require monthly payments through December 2002. The carrying value of
equipment under these agreements at December 31, 1997 and 1996 was $16.9 million
and $19.0 million, respectively. At December 31, 1997 and 1996, accumulated
amortization was $6.0 million and $9.7 million, respectively.
The Company has also entered into operating lease agreements for office and
research facilities with varying terms through August 2015. The agreements also
provide for increases in annual rentals based on changes in the Consumer Price
Index or fixed percentage increases varying from three to six percent. One of
these leases requires an irrevocable standby letter of credit of $1.3 million to
secure the performance of the Company's lease obligations.
Rent expense for the years ended December 31, 1997, 1996 and 1995 was $3.4
million, $3.1 million and $2.5 million, respectively.
F-11
<PAGE> 70
LIGAND PHARMACEUTICALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
At December 31, 1997, annual minimum rental payments due under the Company's
leases and equipment notes payable are as follows (in thousands):
<TABLE>
<CAPTION>
OBLIGATIONS
UNDER CAPITAL LEASES
AND EQUIPMENT OPERATING
NOTES PAYABLE LEASES
-------------------- ---------
<S> <C> <C>
1998............................................. $ 3,661 $ 3,055
1999............................................. 3,372 2,910
2000............................................. 3,345 2,920
2001............................................. 2,120 2,760
2002............................................. 882 2,813
Thereafter....................................... -- 37,787
------- -------
Total minimum lease payments..................... 13,380 $52,245
=======
Less amounts representing interest............... 2,126
-------
Present value of minimum lease payments.......... 11,254
Less current portion............................. 2,753
-------
$ 8,501
=======
</TABLE>
In 1997, one of the Company's main operating lease agreements for office and
research facilities expired, and the Company moved into a second build-to-suit
facility. In early 1998, the Company entered into a 17-year lease and the
Company loaned the construction partnership $3.7 million which will be repaid
with interest over a 10-year period.
Royalty Agreements
The Company has entered into royalty agreements requiring payments ranging from
1% to 10% of net sales and 10% to 30% of license and other income for certain
products developed by the Company. Currently, the Company is making minimum
royalty payments under four agreements, which increase annually to a maximum of
$285,000 per year and aggregate $1.4 million through 2002. Royalty expense under
the agreements for the years ended December 31, 1997, 1996 and 1995 was
$276,000, $261,000 and $195,000, respectively.
No royalty payments have been received by the Company.
8. STOCKHOLDERS' EQUITY
Public Offering
In October 1996, the Company completed a secondary public offering of 3,162,500
shares of common stock at a price of $12.00 per share, resulting in net proceeds
of approximately $35.3 million.
Warrants
At December 31, 1997, the Company had outstanding warrants to purchase 6,606,094
shares of the Company's Common Stock, of which 6,497,844 warrants relate to the
ALRT transaction (see Note 10). The ALRT warrants have an exercise price of
$7.12 per share, the additional warrants have exercise prices ranging from $1.80
to $14.00 per share and expire at various dates through September 30, 2001.
F-12
<PAGE> 71
LIGAND PHARMACEUTICALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
Stock Plans
The Company's 1992 Stock Option Stock Issuance Plan incorporates all outstanding
stock options and unvested share issuances under a prior plan. In May of years
1993 through 1997 inclusive, the plan was amended to increase the aggregate
shares available for grant or issuance to 7,303,457 shares of Common Stock. The
large majority of the options granted have 10 year terms and vest and become
fully exercisable at the end of four years of continued employment. As part of
this plan, on the date of the Merger, all outstanding in-the-money stock options
from Glycomed's stock option plan were converted into options to purchase
470,008 shares of the Company's Common Stock based on the exchange ratio in
effect. The Company's employee stock purchase plan also provides for the sale of
up to 206,500 shares of the Company's Common Stock.
Pro forma information regarding net loss and loss per share is required by SFAS
123, and has been determined as if the Company had accounted for its employee
stock options under the fair value method of that Statement. The fair value for
these options was estimated at the dates of grant using a Black-Scholes option
pricing model with the following weighted average assumptions for 1997, 1996 and
1995:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Risk free interest rates......... 6.1% - 6.9% 5.3% - 6.6% 5.7% - 7.6%
Dividend yields.................. -- -- --
Volatility....................... 42.7% 44.40% 44.40%
Weighted average expected life... 5 or 7 years 5 or 7 years 5 or 7 years
</TABLE>
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information is as follows (in thousands, except for net loss per share
information):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
Net loss as reported...................... $(100,150) $(37,313) $(64,172)
Net loss pro forma........................ (102,929) (39,210) (65,082)
Net loss per share as reported............ (3.02) (1.30) (2.70)
Net loss per share pro forma.............. (3.11) (1.36) (2.74)
</TABLE>
The pro forma effect on net loss for 1997, 1996 and 1995 is not representative
of the pro forma effect on net loss in future years because it does not take
into consideration pro forma compensation expense related to grants made prior
to 1995.
F-13
<PAGE> 72
LIGAND PHARMACEUTICALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
Following is a summary of the Company's stock option plans activity and related
information:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES PRICE RANGE EXERCISE PRICE
--------- -------------- --------------
<S> <C> <C> <C>
Balance at December 31, 1994.......... 2,418,904 $ .22 - 11.59 $ 8.75
Merger options granted.............. 470,008 .68 - 6.37 3.37
Granted............................. 1,077,540 4.68 - 10.00 7.36
Exercised........................... (215,530) .29 - 7.97 4.10
Cancelled........................... (146,816) 3.89 - 11.59 7.57
--------- -------------- ------
Balance at December 31, 1995.......... 3,604,106 .29 - 11.59 7.33
Granted............................. 974,015 10.31 - 16.38 12.85
Exercised........................... (498,456) .22 - 12.75 5.61
Cancelled........................... (282,783) 3.89 - 13.31 7.91
--------- -------------- ------
Balance at December 31, 1996.......... 3,796,882 .22 - 16.38 9.55
Granted............................. 875,339 9.50 - 16.06 12.75
Exercised........................... (384,340) .68 - 14.50 8.59
Cancelled........................... (219,375) 5.50 - 16.06 10.65
--------- -------------- ------
Balance at December 31, 1997.......... 4,068,506 $ .68 - 16.06 $10.26
========= ============== ======
Options exercisable at
December 31, 1997................... 2,442,187 $ .68 - 16.06
========= ==============
</TABLE>
Of the total options granted from 1995 through 1997, 3,338,890 were granted at a
price equal to the fair value of the options at the time of grant, and 58,012
were granted at a price below the fair value of the options at the time of
grant.
Following is a further breakdown of the options outstanding as of December 31,
1997:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS REMAINING LIFE WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES OUTSTANDING IN YEARS EXERCISE PRICE
- ------------------------ ----------- ---------------- ----------------
<S> <C> <C> <C>
$ 0.68 - $ 0.79 15,287 2.24 $ 0.73
$ 3.89 - $ 4.60 27,962 6.77 $ 4.06
$ 4.68 - $ 9.10 1,594,638 6.55 $ 7.78
$ 9.21 - $12.13 1,604,174 7.56 $10.96
$12.75 - $16.38 826,445 8.91 $14.03
--------- ------
4,068,506 $10.26
========= ======
</TABLE>
At December 31, 1997, 642,246 shares were available under the plans for future
grants of stock options or sale of stock.
For certain shares issued under these plans and certain other issuances of
stock, the Company has recognized as compensation and consulting expense the
excess of the deemed value for accounting purposes over the aggregate issue
price for such shares. The compensation expense is amortized ratably over the
vesting period of each share.
Amortization of deferred compensation and consulting for the years ended
December 31, 1997, 1996 and 1995 was $322,000, $497,000 and $711,000,
respectively.
F-14
<PAGE> 73
LIGAND PHARMACEUTICALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
Shareholder Rights Plan
In September 1996, the Company's Board of Directors adopted a preferred
shareholder rights plan (the "Shareholder Rights Plan") which provides for a
dividend distribution of one preferred share purchase right (a "Right") on each
outstanding share of the common stock. Each Right entitles stockholders to buy
1/1000(th) of a share of Ligand Series A Participating Preferred Stock at an
exercise price of $100, subject to adjustment. The Rights will become
exercisable following the tenth day after a person or group announces an
acquisition of 20% or more of the Common Stock, or announces commencement of a
tender offer, the consummation of which would result in ownership by the person
or group of 20% or more of the Common Stock. The Company will be entitled to
redeem the Rights at $0.01 per Right at any time on or before the earlier of the
tenth day following acquisition by a person or group of 20% or more of the
common stock and September 13, 2006.
9. COLLABORATIVE RESEARCH AGREEMENTS
Eli Lilly and Company
In November 1997, the Company entered into a strategic alliance with Eli Lilly
and Company ("Lilly") for the discovery and development of products based on
Ligand's Intracellular Receptor technology. Lilly made an investment of $37.5
million by purchasing 2,176,279 shares of the Company's Common Stock at $17.23
per share at the inception of the agreement. The price per share included a 20%
premium to the market value as defined in the agreement. The 20% premium was in
recognition of Ligand's past research and development efforts and accordingly,
$6.25 million (the premium) was included in 1997 revenues. Ligand also received
a $12.5 million up-front non-refundable milestone payment following inception of
the agreement. Under the agreement, Lilly also agreed to support up to $49
million in research funding. Revenues for research funding are recognized
ratably over the term of the agreement. Revenues recognized for the year ended
December 31, 1997 were $19.7 million.
The Company also has the option to obtain selected rights to one Lilly specialty
pharmaceutical product. Should the Company elect to obtain selected rights to
the product, Lilly could receive milestone payments of up to $20 million payable
in the Company's Common Stock. In the event that Ligand does not exercise this
product option during the first 120 days after the effective date of the
agreements, the Company will sell an additional $20 million in equity to Lilly
at a 20% premium to the then current market price, and the Company will qualify
for certain additional royalties of up to 1.5% on net sales of the Company's
choice of Targetin (LGD1069), LGD1268 or LGD1324.
SmithKline Beecham Corporation
In February 1995, the Company entered into a research collaboration with
SmithKline Beecham Corporation ("SmithKline Beecham") to discover and
characterize small molecule drugs to control hematopoiesis. Revenues under the
agreement are recognized ratably over the term of the agreement. Revenues
recognized under the agreement for the years ended December 31, 1997, 1996 and
1995 were $3.2 million, $2.4 million and $2.1 million, respectively. SmithKline
Beecham has agreed to provide the Company up to $21.5 million in research
funding and equity investments. SmithKline Beecham made an investment of $5.0
million by purchasing 674,127 shares of the Company's Common Stock at $7.41 per
share at the inception of the agreement. In November 1995, a second equity
investment of $2.5 million by purchasing 260,200 shares of the Company's Common
Stock at $9.60 per share, was provided to the Company upon the achievement of
certain milestones. In January 1997, a third installment of equity investment of
$2.5 million by purchasing 164,474 shares of the Company's Common Stock at
$15.20 per share was provided to the Company as a result of SmithKline Beecham's
election to expand the scope of research as defined. The final installment of
$2.5 million was provided in October 1997 as a convertible note as a result of
SmithKline Beecham's election to extend the collaboration. The note is
convertible into the Company's Common Stock at $13.56 per share
F-15
<PAGE> 74
LIGAND PHARMACEUTICALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
and is due October 002 unless converted into the Company's Common Stock earlier.
The interest rate on the note is payable semi-annually at prime.
American Home Products Corporation
In September 1994, the Company entered into a collaborative research agreement
with Wyeth-Ayerst Laboratories, the pharmaceutical division of American Home
Products ("AHP"), to discover and develop drugs which interact with the estrogen
or progesterone receptors. AHP agreed to provide up to $19.0 million of the
Company's research activities, to invest $5.0 million by purchasing 574,513
shares of the Company's Common Stock at $8.70 per share, and to provide, in
three installments, up to $20.0 million in convertible notes over the life of
the agreement.
In January 1996, the Company and AHP expanded and amended the research and
development collaboration. The Company received $1.5 million in additional
research revenue from AHP, AHP expanded the research funding by $1.0 million in
years two and three of the agreement, the contract-specified milestone payments
increased, AHP granted rights to the Company to cause the conversion of the
convertible note into Common Stock, and the parties agreed to extend the period
for Ligand to draw down the second convertible note installment until December
1996.
Revenues under the agreement are recognized ratably over the term of the
agreement. Revenues recognized under the agreement for the years ended December
31, 1997, 1996 and 1995 were $4.0 million, $6.9 million and $4.0 million,
respectively. The $5.0 million equity investment plus the initial $10.0 million
convertible note was provided to the Company upon inception of the agreement. In
the second quarter of 1995, the Company achieved certain milestones which
qualified the Company to receive the second installment of a $5.0 million
convertible note, which the Company elected to receive in December 1996. The
final convertible note installment of $5.0 million will be provided if the
collaboration agreement is extended from three to five years. The first two
notes are convertible into the Company's Common Stock at $10.01 per share and
the final note is convertible at $10.88 per share. The conversion prices are
subject to adjustment if certain dilutive events occur to the Company's
outstanding Common Stock. In August 1996, March 1997, July 1997 and again in
December 1997, the Company converted $3.8 million, $3.8 million, $2.5 million
and $1.3 million of the convertible notes outstanding into 374,626, 374,626,
249,749 and 124,875 shares of Common Stock, at the $10.01 conversion price. The
notes bear interest at 7.75% payable semi-annually and are due September 1999
unless converted into the Company's Common Stock. If conversion has not occurred
by September 1999, the Company may extend the due date of the notes to September
2001.
Abbott Laboratories
In July 1994 the Company entered into a long-term collaborative research
agreement with Abbott Laboratories ("Abbott") to discover and develop drugs for
the prevention or treatment of inflammatory diseases. Abbott agreed to support
up to $16.0 million of the Company's research activities over a five-year period
in connection with the agreement.
Revenues under the agreement are recognized ratably over the term of the
agreement and for the years ended December 31, 1997, 1996 and 1995 revenues were
$1.7 million, $2.5 million and $2.6 million, respectively. Abbott made an equity
investment of $5.0 million by purchasing 571,305 shares of the Company's Common
Stock at $8.75 per share at the inception of the agreement, and in August 1995
Abbott made another equity investment of $5.0 million by purchasing 516,129
shares of the Company's Common Stock at $9.68 per share, as provided in the
contract.
F-16
<PAGE> 75
LIGAND PHARMACEUTICALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
Sankyo Company, Limited
As part of the Glycomed acquisition, the Company acquired a collaborative
research agreement with Sankyo Company, Limited ("Sankyo") which Glycomed had
entered into in June 1994. Under the agreement, Sankyo reimburses a portion of
the Company's research expenses related to the collaboration up to an aggregate
of $8.9 million. Revenues under the agreement are recognized ratably over the
term of the agreement. Revenues recognized under the agreement and for the years
ended December 31, 1997 and 1996, and since the date of Merger through December
31, 1995 were $2.3 million, $2.7 million and $1.7 million, respectively. The
agreement also provides that upon being presented with a target compound arising
from the research collaboration by the Company, Sankyo shall notify the Company
whether it wishes to pursue development of the compound. If Sankyo exercises its
option to develop the compound, the Company and Sankyo shall negotiate in good
faith the terms and conditions for an option and license agreement within 180
days of Sankyo's exercise. Sankyo shall pay the Company an initial payment of
$1.0 million within 30 days after execution of each option and license agreement
as a license fee. Sankyo shall make additional payments of license fees as
follows: $1.0 million within 30 days after Sankyo decides to initiate Phase II
clinical trials of the approved compound in Japan; $1.0 million within 30 days
after the filing of an NDA for the approved compound in Japan; and $2.0 million
within 30 days after the date of approval of an NDA for the approved compound in
Japan.
In connection with the collaborative research agreement, in September 1995,
Sankyo purchased 189,274 shares of the Company's Common Stock at $7.92 per share
for net proceeds of $1.5 million. In June 1997, the collaborative research
agreement was extended through October 1997. No further extension of the
research agreement is anticipated.
Glaxo-Wellcome plc
In September 1992 the Company entered into a five-year collaborative research
agreement with Glaxo-Wellcome plc ("Glaxo") to develop drugs for the treatment
of cardiovascular disease. Under the agreement, Glaxo reimburses a portion of
the Company's research expenses related to the collaboration to a maximum of
approximately $2.0 million annually. Revenues under the agreement are recognized
ratably over the term of the agreement. Revenues recognized under the agreement
for the years ended December 31, 1997, 1996 and 1995 were $1.3 million, $2.1
million and $2.1 million, respectively. In connection with the agreement, Glaxo
purchased 662,755 shares of the Company's Common Stock at $11.31 per share for
net proceeds of $7.5 million. Glaxo also purchased 315,465 shares of the
Company's Common Stock at $7.92 per share as part of the Company's initial
public offering for net proceeds of $2.5 million.
Pfizer Inc.
In 1991, the Company entered into a collaborative research and development and
license agreement with Pfizer Inc. ("Pfizer") to perform services related to the
joint development of pharmaceuticals for the treatment of osteoporosis. Due to
the early success in meeting research-stage objectives for drug candidates, the
two companies phased out the ongoing research collaboration by July 1, 1994.
In connection with the collaborative research agreement, Pfizer purchased
1,353,125 shares of the Company's Common Stock for $5.54 per share for net
proceeds of $7.5 million.
In December 1994, the Company filed suit against Pfizer in the Superior Court of
California in San Diego County for breach of contract and for a declaration of
future rights as they relate to droloxifene, a compound upon which the Company
performed work at Pfizer's request during a collaboration between Pfizer and the
Company to develop drugs in the field of osteoporosis. Droloxifene is an
estrogen antagonist/partial agonist with potential indications in the treatment
of osteoporosis and breast cancer as well as other applications. The
F-17
<PAGE> 76
LIGAND PHARMACEUTICALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
Company and Pfizer entered into a settlement agreement with respect to the
lawsuit in April 1996. Under the terms of the settlement agreement, the Company
is entitled to receive milestone payments if Pfizer continues development and
royalties if Pfizer commercializes droloxifene. At the option of either party,
milestone and royalty payments owed the Company can be satisfied by Pfizer
transferring to the Company shares of Common Stock at an exchange ratio of
$12.375 per share. To date, the Company has received approximately $1.3 million
in milestone payments from Pfizer as a result of the continued development of
droloxifene. These milestones were paid in the form of an aggregate of 101,011
shares of Common Stock, which were subsequently retired from treasury stock in
September 1996. According to recent announcements by Pfizer, droloxifene has
entered Phase II/III clinical trials for osteoporosis.
10. ALLERGAN LIGAND RETINOID THERAPEUTICS , INC. - RELATED PARTY
In December 1994, the Company and Allergan, Inc. ("Allergan") formed Allergan
Ligand Retinoid Therapeutics, Inc. ("ALRT") to continue the research and
development activities previously conducted by Allergan-Ligand Joint Venture
("the Joint Venture"). In June 1995, the Company and ALRT completed a public
offering of 3,250,000 units (the "Units") with aggregate proceeds of $32.5
million (the "ALRT Offering") and cash contributions by Allergan and Ligand of
$50.0 million and $17.5 million, respectively, providing for net proceeds of
$94.3 million for retinoid product research and development. Ligand's $17.5
million in cash contribution, as well as warrants were in exchange for (i) a
right to acquire all of the Callable Common Stock at specified future dates and
amounts and (ii) a right to acquire all rights to the Panretin (ALRT 1057)
product, jointly with Allergan. Allergan's $50.0 million cash contribution to
ALRT was in exchange for (i) the right to acquire one-half of technologies and
other assets in the event Ligand exercises its right to acquire all of the
Callable Common Stock, (ii) a similar right to acquire all of the Callable
Common Stock if Ligand does not exercise its right and (iii) a right to acquire
all rights to the Panretin (ALRT1057) product, jointly with Ligand. Each Unit
consisted of one share of ALRT's callable common stock and two warrants, each
warrant entitling the holder to purchase one share of the Company's Common
Stock. Immediately prior to the consummation of the ALRT Offering, Allergan
Pharmaceuticals (Ireland) Ltd., Inc. made a $6.0 million investment by
purchasing 994,819 shares of the Company's Common Stock at $6.03 per share. The
Company's $17.5 million cash contribution resulted in a one-time charge to
operations. The Company also recorded a warrant subscription receivable and
corresponding increase in paid-in capital of $5.9 million (6,500,000 warrants
valued at $.90 per warrant) pursuant to the ALRT Offering. From June 3, 1995
through September 23, 1997, cash received from ALRT pursuant to a Research and
Development Agreement was prorated between contract revenue and the warrant
subscription receivable based on their respective values.
In 1997, 1996 and 1995, $1.5 million, $2.1 million and $1.3 million,
respectively, of the proceeds received from ALRT were applied to the warrant
subscription receivable. In conjunction with the consummation of the ALRT
Offering, all rights held by the Joint Venture were licensed to ALRT.
In September 1997, the Company and Allergan exercised their respective options
to purchase the Callable Common Stock (the "Stock Purchase Option") and certain
assets (the "Asset Purchase Option") of ALRT. The Company's exercise of the
Stock Purchase Option required the issuance of 3,166,567 shares of the Company's
Common Stock along with cash payments totaling $25.0 million to holders of the
Callable Common Stock in November 1997.
Allergan's exercise of the Asset Purchase Option required a cash payment of $8.9
million which was used by the Company to pay a portion of the Stock Purchase
Option.
In November 1997, ALRT became a wholly owned subsidiary of the Company. The
transaction was accounted for using the purchase method of accounting. The
excess of the purchase price over the fair value of
F-18
<PAGE> 77
LIGAND PHARMACEUTICALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
the net assets acquired was allocated to in-process technology and was written
off, resulting in a one-time non-cash charge to results of operations of $65.0
million.
Details of the acquisition are as follows (in thousands):
<TABLE>
<S> <C>
Total consideration:
Common stock.............................................. $52,595
Liabilities assumed....................................... 1,010
Warrant subscription receivable write-off................. 918
Net cash paid for ALRT net of cash received............... 12,661
-------
$67,184
=======
Less:
Deferred liabilities write-off.............................. $ 2,214
Write-off of in-process technology.......................... 64,970
-------
$67,184
=======
</TABLE>
The following unaudited pro forma data reflects the Company's 1997 and 1996
results of operations as if the ALRT acquisition occurred on January 1, 1996 (in
thousands, except per share data):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Revenues.................................................. $32,702 $18,201
Net loss.................................................. (54,177) (83,286)
Loss per share............................................ (1.64) (2.89)
</TABLE>
11. LICENSE AGREEMENT
In September 1992, the Company acquired certain licenses and technology rights
from Rockefeller University and New York University in exchange for an initial
cash payment, shares of Common Stock and warrants to purchase Common Stock of
the Company. Under the terms of the agreements, the Company acquired worldwide
licensing rights to certain transcription technology developed by Rockefeller
University. The agreements also provide for certain additional payments if
certain milestones are achieved. In connection with these agreements, the
Company entered into consulting agreements whereby two scientists received
shares of Common Stock from the Company's restricted stock plan. These shares
were issued at par value and resulted in deferred consulting of $2.2 million
which were recognized over the five-year vesting period.
12. NOTES RECEIVABLE FROM OFFICERS AND EMPLOYEES
The Company has advanced funds to certain officers and employees in connection
with various employment agreements. The agreements provide for forgiveness of
the advances over four-year and five-year periods. If an individual terminates
the relationship with the Company, the unforgiven portion of the advances and
any accrued interest are due and payable upon termination. The notes are secured
by shares of the Company's Common Stock owned by the individual or second trust
deeds on the personal residences of the respective employees.
F-19
<PAGE> 78
LIGAND PHARMACEUTICALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
13. INCOME TAXES
At December 31, 1997, the Company had consolidated federal and combined
California income tax net operating loss carryforwards of approximately $226
million and $36 million, respectively. The difference between the federal and
California tax loss carryforwards is primarily attributable to the
capitalization of research and development expenses for California income tax
purposes and the 50% limitation on California loss carryforwards.
The federal tax loss carryforward will begin to expire in 2002, unless
previously utilized. The California tax loss carryforwards began expiring in
1997 (approximately $1,087,000 expired in 1997). The Company also had
consolidated federal and combined California research tax credit carryforwards
of approximately $8 million and $3.1 million respectively, which will begin to
expire in 2002 unless previously utilized.
Pursuant to Internal Revenue Code Sections 382 and 383, use of a portion of net
operating loss and credit carryforwards will be limited because of cumulative
changes in ownership of more than 50% which occurred within three year periods
during 1989, 1992 and 1996. However, the Company does not believe the
limitations will have a material impact upon the future utilization of these
carryforwards. In addition, use of Glycomed's preacquisition tax net operating
and credit carryforwards will also be limited because the acquisition by the
Company represents a change in ownership of more than 50%. Such tax net
operating losses and credit carryforwards have been reduced, including the
related deferred tax assets.
Significant components of the Company's deferred tax assets as of December 31,
1997 and 1996 are shown below (in thousands). A valuation allowance has been
recognized to fully offset the deferred tax assets as of December 31, 1997 and
1996 as realization of such assets is uncertain.
<TABLE>
<CAPTION>
1996 1997
--------- --------
<S> <C> <C>
Deferred tax liability:
Acquired subordinated debt.......................... $ 5,483 $ 6,579
Deferred tax assets:
Net operating loss carryforwards.................... 82,552 62,615
Research and development credits.................... 9,979 8,260
Capitalized research and development................ 10,252 8,655
Other -- net........................................ 3,472 5,100
--------- --------
Total deferred tax assets............................. 111,738 84,630
Valuation allowance for deferred tax assets........... (106,255) (78,051)
--------- --------
Net deferred tax assets............................... 5,483 6,579
--------- --------
Net deferred taxes.................................... $ -- $ --
========= ========
</TABLE>
Approximately $1.9 million of the valuation allowance for deferred tax assets
relates to benefits of stock option deductions which, when recognized, will be
allocated directly to paid-in capital.
F-20
<PAGE> 1
EXHIBIT 10.165
AMENDED AND RESTATED
TECHNOLOGY CROSS LICENSE AGREEMENT
AMONG
ALLERGAN, INC.,
LIGAND PHARMACEUTICALS INCORPORATED
AND
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
SEPTEMBER 24, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Definitions........................................................... 1
1.1 "Affiliate"................................................... 1
1.2 "Allergan".................................................... 2
1.3 "Allergan Selected Compounds"................................. 2
1.4 "Allergan Technology"......................................... 2
1.5 "ALRT"........................................................ 2
1.6 "Asset Purchase Option"....................................... 2
1.7 "Bankruptcy Code"............................................. 2
1.8 "Business Day"................................................ 2
1.9 "Cancer Indications".......................................... 2
1.10 "Change of Control"........................................... 2
1.11 "Closing Date"................................................ 3
1.12 "Commercialization"........................................... 3
1.13 "Compound 168"................................................ 3
1.14 "Compound 168 Products"....................................... 3
1.15 "Compound 268"................................................ 3
1.16 "Compound 268 Product"........................................ 3
1.17 "Compound 324"................................................ 3
1.18 "Compound 324 Product"........................................ 3
1.19 "Compound 1057"............................................... 3
1.20 "Compound 1057 Product"....................................... 3
1.21 "Compound 1069"............................................... 3
1.22 "Compound 1069 Product"....................................... 3
1.23 "Control" or "Controlled"..................................... 4
1.24 "Corporate Partnering Transaction"............................ 4
1.25 "Co-Transfection Assay"....................................... 4
1.26 "Development"................................................. 4
1.27 "Drug Approval Application"................................... 4
1.28 "Effective Date".............................................. 4
1.29 "Eye or Skin Indications"..................................... 4
1.30 "FDA"......................................................... 4
1.31 "Field"....................................................... 4
1.32 "Force Majeure"............................................... 4
1.33 "IND"......................................................... 5
1.34 "Information"................................................. 5
1.35 "Joint Agreements"............................................ 5
1.36 "Know-how".................................................... 5
1.37 "Ligand"...................................................... 5
1.38 "Ligand Selected Compounds"................................... 5
1.39 "Ligand Technology"........................................... 5
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
1.40 "Net Sales".................................................. 6
1.41 "Non-Retinoid Technology".................................... 7
1.42 "North America".............................................. 7
1.43 "Party"...................................................... 7
1.44 "Patent"..................................................... 7
1.45 "Patent Application"......................................... 7
1.46 "Patent Costs"............................................... 7
1.47 "Patent Rights".............................................. 7
1.48 "Person"..................................................... 7
1.49 "Program Agreements"......................................... 8
1.50 "Program Compound"........................................... 8
1.51 "Program Product"............................................ 8
1.52 "Program Technology"......................................... 8
1.53 "Regulatory Approval"........................................ 9
1.54 "Regulatory Authority" ...................................... 9
1.55 "Research"................................................... 9
1.56 "Retinoid"................................................... 9
1.57 "Royalty Term"............................................... 9
1.58 "Selected Compounds"......................................... 9
1.59 "Stock Purchase Option"...................................... 9
1.60 "Territory".................................................. 9
1.61 "Third Party"................................................ 9
1.62 "Third Party Royalties"...................................... 10
1.63 "Transition Plan"............................................ 10
1.64 "Unsynthesized Compound"..................................... 10
2. Grant Of Licenses.................................................... 10
2.1 Allergan's Licenses to Ligand................................ 10
2.2 Licenses to Allergan......................................... 11
2.3 Licenses Back to use Compounds as Intermediates.............. 11
2.4 Cross-License of Non-Retinoid Technology..................... 12
2.5 Licensed Rights Restrictions................................. 12
2.6 Obligations to Other Parties................................. 12
2.7 No Implied Licenses.......................................... 12
3. Selection of Program Compounds....................................... 12
3.1 List of Compounds; Exchange of Information................... 13
3.2 Lottery Procedure............................................ 14
3.3 Selected Compounds........................................... 15
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
4. Fee.................................................................. 15
5. Royalty Payments..................................................... 15
5.1 Royalty Payments to Allergan.................................. 15
5.2 Royalty Payments to Ligand.................................... 16
6. Milestone Payments................................................... 16
7. Payment; Records; Audits............................................. 17
7.1 Payment; Reports.............................................. 17
7.2 Exchange Rate; Manner and Place of Payment.................... 17
7.3 Records and Audits............................................ 17
7.4 Combination Products.......................................... 19
7.5 Withholding of Taxes.......................................... 19
7.6 Prohibited Payments........................................... 19
8. Representations, Warranties And Covenants............................ 19
8.1 Representations, Warranties and Covenants by the Parties...... 19
8.2 Program Technology............................................ 20
8.3 Representations, Warranties and Covenants by Ligand........... 21
8.4 Non-Solicitation of Employees................................. 22
8.5 Corporate Partnering Restrictions............................. 22
9. Disclosure And Use Of Technology And Rights.......................... 22
9.1 Patent Prosecution............................................ 22
9.2 Infringement.................................................. 23
9.3 Cooperation................................................... 24
10. Confidentiality...................................................... 24
10.1 Obligation of Non-Disclosure.................................. 24
10.2 Permitted Disclosures......................................... 25
10.3 Publications.................................................. 25
10.4 Publicity Review.............................................. 25
10.5 Survival...................................................... 26
</TABLE>
-iii-
<PAGE> 5
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
11. Disclaimer Of Warranty; Consequential Damages........................ 26
11.1 Disclaimer of Warranty....................................... 26
11.2 Consequential Damages........................................ 26
12. Indemnification...................................................... 26
12.1 Indemnification by Allergan................................... 26
12.2 Indemnification by Ligand..................................... 26
12.3 Notices; Participation........................................ 27
12.4 Survival...................................................... 27
13. Term And Termination................................................. 27
13.1 Term.......................................................... 27
13.2 Termination by Mutual Agreement............................... 27
13.3 Rights in Bankruptcy.......................................... 27
13.4 No Termination for Breach..................................... 27
14. Miscellaneous........................................................ 28
14.1 Retained Rights............................................... 28
14.2 Force Majeure................................................. 28
14.3 Further Actions............................................... 28
14.4 No Trademark Rights........................................... 28
14.5 Notices....................................................... 29
14.6 Governing Law................................................. 29
14.7 Waiver........................................................ 29
14.8 Severability.................................................. 29
14.9 Headings; Ambiguities......................................... 30
14.10 Entire Agreement; Amendment................................... 30
14.11 Mutual Releases............................................... 30
14.12 Relationship of the Parties................................... 30
14.13 Successors and Assigns........................................ 30
14.14 Counterparts.................................................. 30
14.15 Dispute Resolution............................................ 30
</TABLE>
-iv-
<PAGE> 6
AMENDED AND RESTATED
TECHNOLOGY CROSS LICENSE AGREEMENT
This AMENDED AND RESTATED TECHNOLOGY CROSS LICENSE AGREEMENT
("Agreement") is entered into as of the 24th day of September, 1997 among
ALLERGAN, INC., a Delaware corporation having offices at 2525 Dupont Drive,
Irvine, California 92715-1599 ("Allergan"), LIGAND PHARMACEUTICALS INCORPORATED,
a Delaware corporation having offices at 9393 Towne Centre Drive, San Diego,
California 92121 ("Ligand"), and, subject to Section 14.14 hereof, ALLERGAN
LIGAND RETINOID THERAPEUTICS, INC., a Delaware corporation having offices at
9393 Towne Centre Drive, San Diego, California 92121 ("ALRT").
A. (i) Allergan, Ligand and ALRT are Parties to the Program
Agreements, (ii) Allergan and Ligand have entered into the Joint Agreements
between themselves, (iii) pursuant to the Stock Purchase Option, Ligand will
deliver, within two (2) business days, irrevocable notice of its election to
acquire all of the outstanding Callable Common Stock of ALRT in accordance with
the terms of the Stock Purchase Option pursuant to the Ligand exercise notice in
the form attached hereto as Exhibit A and (iv) pursuant to the Asset Purchase
Option, Allergan will deliver, within two (2) business days, notice of its
election to acquire from ALRT the Purchased Assets (as defined in Section 1.1 of
that certain Asset Purchase Option Agreement dated June 3, 1995 among Allergan,
Ligand and ALRT) in accordance with the terms of the Asset Purchase Option
pursuant to the Allergan exercise notice in the form attached hereto as Exhibit
B.
B. The Parties have entered into a Transition Agreement
concurrently herewith providing for, among other things, the transition upon the
Effective Date of research and development being conducted with respect to
Selected Compounds by ALRT.
C. On or prior to the date hereof, Ligand has, or within two (2)
days following the date hereof Ligand will have, prepared and filed with the
Securities and Exchange Commission ("SEC") a Registration Statement with respect
to the issuance of any shares of Ligand Common Stock being issued in payment of
the Stock Purchase Option Exercise Price in accordance with Sections 5.3 and 5.6
of ALRT's Amended and Restated Certificate of Incorporation.
D. The Parties desire to enter into this Agreement to provide for
the grant of certain technology licenses on the terms specified herein, and
Allergan and Ligand desire to supersede by this Agreement all of the terms and
provisions of the Joint Agreements.
NOW, THEREFORE, in consideration of the foregoing premises and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Allergan, Ligand and ALRT hereby agree as follows:
1. DEFINITIONS. All capitalized terms used herein shall have the
following meanings:
1.1 "AFFILIATE" shall mean any entity that directly or indirectly Owns, is
Owned by, or is under common Ownership, with a Party, where "Owns" or
"Ownership" means direct or
<PAGE> 7
indirect possession and/or control of at least 50% of the outstanding voting
securities of a corporation or a comparable equity interest in any other type of
entity.
1.2 "ALLERGAN" shall mean Allergan, Inc., a Delaware corporation.
1.3 "ALLERGAN SELECTED COMPOUNDS" shall mean the Program
Compounds set forth on Exhibit G attached hereto as of the date hereof and each
of the Program Compounds added to such Exhibit G in accordance with Section 3.
1.4 "ALLERGAN TECHNOLOGY" shall mean all rights to Program
Technology acquired by Allergan pursuant to the exercise of the Asset Purchase
Option.
Notwithstanding the foregoing, for purposes of this Agreement, in
no event shall "Allergan Technology" include (A) Compound 168 or Compound 168
Products or any rights to Compound 168 or Compound 168 Products or the making
and/or using of Compound 168 or Compound 168 Products for any purpose or (B) any
test data including pharmacological and clinical test data, analytical and
quality control data, manufacturing, marketing and sales data and drug
distribution data created, developed, learned or reduced to practice in the
course of researching, developing and/or commercializing Compound 168 or
Compound 168 Products.
1.5 "ALRT" shall mean Allergan Ligand Retinoid Therapeutics,
Inc., a Delaware corporation.
1.6 "ASSET PURCHASE OPTION" shall have the meaning assigned in
Section 1.1 of that certain Asset Purchase Option Agreement dated as of June 3,
1995 among Allergan, Ligand and ALRT.
1.7 "BANKRUPTCY CODE" shall mean Title 11 of the United States
Code, as amended from time to time.
1.8 "BUSINESS DAY" shall mean any day, excluding Saturday, Sunday
and any other day on which banking institutions in San Diego, California are
authorized or required by law, regulation or executive order to be closed.
1.9 "CANCER INDICATIONS" shall mean the treatment, palliation or
prevention (including chemoprevention) of ***
***
***
***
***
1.10 "CHANGE OF CONTROL" shall be deemed to have occurred upon
the occurrence of any of the following: (i) the sale, lease, transfer or other
disposition, in one or a series of transactions, of all or substantially all of
a Party's assets (excluding any pledge or hypothecation of assets pursuant to a
security agreement in connection with borrowed funds) or (ii) any merger,
acquisition, consolidation, reorganization or other transaction or series of
transactions pursuant
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to which the holders of voting securities of a Party immediately prior to such
transaction own, immediately thereafter, less than *** of the voting power of
the resulting entity.
1.11 "CLOSING DATE" shall mean the date of the last to occur of
the closing of (A) Ligand's exercise of the Stock Purchase Option or (B)
Allergan's exercise of the Asset Purchase Option, each in accordance with the
terms thereof.
1.12 "COMMERCIALIZATION" shall mean the manufacturing, marketing,
sale, supply, import, export and distribution of Program Products.
1.13 "COMPOUND 168" shall mean the compound known as tazarotene
(AGN 190168) with the following molecular structure: Ethyl 6 - [2-(4, 4 -
Dimethylthiochroman - 6 - yl) -Ethynyl] Nicotinate, and its ***
***
1.14 "COMPOUND 168 PRODUCTS" shall mean products containing
Compound 168 that do not contain any other active ingredient that is a Retinoid.
1.15 "COMPOUND 268" shall mean that certain compound designated
as LGD 268 with the molecular structure shown in Exhibit C attached hereto, and
(i) *** thereof and (ii) if it is a ***
***
1.16 "COMPOUND 268 PRODUCT" shall mean any dosage form of
Compound 268 which receives Regulatory Approval for medical uses.
1.17 "COMPOUND 324" shall mean that certain compound designated
as LGD 324 with the molecular structure shown in Exhibit D attached hereto, and
(i) *** thereof and (ii) if it is a ***.
1.18 "COMPOUND 324 PRODUCT" shall mean any dosage form of
Compound 324 which receives Regulatory Approval for medical uses.
1.19 "COMPOUND 1057" shall mean that certain compound designated
as LGD 1057 with the molecular structure shown in Exhibit E attached hereto, and
(i) *** thereof and (ii) if it is a ***
***
1.20 "COMPOUND 1057 PRODUCT" shall mean any dosage form of
Compound 1057 which receives Regulatory Approval for medical uses.
1.21 "COMPOUND 1069" shall mean that certain compound designated
as LGD 1069 with the molecular structure shown in Exhibit F attached hereto, and
its *** thereof.
1.22 "COMPOUND 1069 PRODUCT" shall mean any dosage form of
Compound 1069 which receives Regulatory Approval for medical uses.
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<PAGE> 9
1.23 "CONTROL" OR "CONTROLLED" means possession of the ability to
grant a license or sublicense as provided for herein.
1.24 "CORPORATE PARTNERING TRANSACTION" shall mean any
transaction involving the assignment, licensing or sublicensing or any other
transfer of any Program Technology, Allergan Technology or Ligand Technology or
the research, development and/or commercialization of any Program Compounds,
with one or more Third Parties; provided, however, that Corporate Partnering
Transactions shall exclude any transaction or series of related transactions (i)
which are solely financing transactions (for example, "special purpose
corporation," "SWORD" or similar transactions) or (ii) which constitute a Change
of Control of Allergan, Ligand or ALRT, as applicable.
1.25 "CO-TRANSFECTION ASSAY" shall mean the assay generally
described in the U.S. Patents Nos. 5,071,773 and 4,981,784 and biological
materials useful with such assay generally described in the U.S. Patents Nos.
5,298,429, 5,597,693, 5,171,671, 5,599,904, 5,091,518 and 5,534,418, and shall
include all Ligand Technology useful in the practice of the assay described in
such Patents.
1.26 "DEVELOPMENT" shall mean those activities undertaken in the
Field following the filing (and approval) of an IND devoted to the exploration
of Program Compounds in human clinical trials and/or the conduct of any other
studies (including pre-clinical studies - in vitro and animal) subsequent to the
filing of an IND.
1.27 "DRUG APPROVAL APPLICATION" shall mean an application
submitted to a Regulatory Authority for Regulatory Approval to commence
commercial sale or use of a product as a drug in a regulatory jurisdiction
(e.g., in the United States, a New Drug Application, a Product License
Application or an Abbreviated New Drug Application, but not an IND).
1.28 "EFFECTIVE DATE" shall mean the Closing Date.
1.29 "EYE OR SKIN INDICATIONS" shall mean (i) the treatment,
palliation, or prevention of diseases, disorders, irritations or conditions of
the eyes or the skin and (ii) the treatment, palliation or prevention of any
***
***
***
1.30 "FDA" means the United States Food and Drug Administration.
1.31 "FIELD" shall mean Retinoids, together with the receptors to
which such compounds bind, for any use in humans or animals, excluding any
rights to and the making, using, importing and/or selling of Compound 168 and/or
Compound 1069.
1.32 "FORCE MAJEURE" shall mean any act of God, any accident,
explosion, fire, storm, earthquake, flood, drought, peril of the sea, riot,
embargo, war or foreign, federal, state or municipal law, regulation or order of
general application, federal governmental action or inaction, seizure,
requisition or allocation, any failure or delay of transportation, shortage of
or inability
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<PAGE> 10
to obtain supplies, equipment, fuel or labor or any other circumstances or event
beyond the reasonable control of the Party relying upon such circumstance or
event.
1.33 "IND" shall mean an Investigational New Drug Application
filed with the FDA, or an equivalent application filed with a foreign Regulatory
Authority.
1.34 "INFORMATION" shall mean any and all information as of the
Effective Date relating to the Field, including but not limited to techniques,
inventions, practices, knowledge, Program Technology, Know-how, skill,
experience, test data including pharmacological and clinical test data,
analytical and quality control data, manufacturing, marketing and sales data and
drug distribution data.
1.35 "JOINT AGREEMENTS" shall mean the Technology Cross License
Agreement, the Joint Development Agreement and the Joint Commercialization
Agreement, each dated June 3, 1995 between Allergan and Ligand.
1.36 "KNOW-HOW" shall mean any method, procedure, process, assay,
composition of matter, device, trade secret, invention, data, technology,
Information or other subject matter within the knowledge and possession of
Allergan, Ligand or ALRT as of the Effective Date, or developed, learned or
conceived by any of them during the course of conducting Research, Development
and/or Commercialization pursuant to the Program Agreements, in any form in
which any of the foregoing may exist, whether patentable or unpatentable, which
contributes in whole or in part to the performance of Research, Development or
Commercialization in the Field.
1.37 "LIGAND" shall mean Ligand Pharmaceuticals Incorporated, a
Delaware corporation.
1.38 "LIGAND SELECTED COMPOUNDS" shall mean the Program Compounds
set forth on Exhibit H attached hereto as of the date hereof and each of the
Program Compounds added to such Exhibit H in accordance with Section 3.
1.39 "LIGAND TECHNOLOGY" shall mean all rights to Program
Technology acquired by Ligand (directly or indirectly, by reason of the
acquisition of all outstanding shares of ALRT Callable Common Stock) pursuant to
the exercise of the Stock Purchase Option.
Notwithstanding the foregoing, in no event shall "Ligand
Technology" include (A) Compound 1069 or Compound 1069 Products or any rights to
Compound 1069 or Compound 1069 Products or the making and/or using of Compound
1069 or Compound 1069 Products for any purpose or (B) any test data including
pharmacological and clinical test data, analytical and quality control data,
manufacturing, marketing and sales data and drug distribution data created,
developed, learned or reduced to practice in the course of researching,
developing and/or commercializing Compound 1069 or Compound 1069 Products.
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<PAGE> 11
1.40 "NET SALES" shall have the following meaning:
(a) "Net Sales," except as provided in subsection (b) of
this Section 1.40, shall mean, with respect to any Program Product, Compound
1069 Product or Allergan or Ligand Exclusive Unsynthesized Compound that is
subject to a royalty obligation under the terms of this Agreement, the gross
sales invoiced to Third Parties by each of a Party, an Affiliate of a Party and
any sublicensee(s) or assignee(s) of such Party or its or any of their direct or
indirect sublicensee(s) or assignee(s), or any combination of the foregoing, in
any jurisdiction or territory covered by a Regulatory Approval for such Product
less the following items, as allocable to such Product: (i) trade discounts,
credits or allowances actually allowed and taken (including allowances for bad
debts actually taken), (ii) credits or allowances actually granted upon returns,
rejections or recalls (except when such recall arises out of the selling Party's
gross negligence, willful misconduct or fraud) actually allowed and taken, (iii)
freight, shipping and insurance charges, (iv) taxes, duties, or other government
tariffs (other than income taxes) and (v) government mandated rebates actually
paid.
(b) "Net Sales," notwithstanding subsection (a) of this
Section 1.40, shall mean, in the circumstance where a Party enters into a
license or sublicense with a Third Party with respect to a Program Product or
Compound 1069 Product providing for a royalty based upon "net sales" as defined
in such license or sublicense, the net sales base actually prescribed in such
license or sublicense with the Third Party, including any net sales adjustment
for a Combination Product, as defined in Section 7.4 of this Agreement, upon
which a royalty is calculated for payment by the Third Party to the licensing
Party.
(c) The royalty payable to a Party by another Party may be
reduced by *** of the royalty which must be paid on sales for the same period of
the affected Program Product or Compound 1069 Product to a Third Party;
provided, however, that the royalty owed a Party under this Agreement shall in
no event be reduced by more than *** *** from the royalty rate otherwise
specified in this Agreement. In the circumstance where a Party pays a minimum
royalty or pre-paid royalty prior to the sale of a Product or Compound 1069
Product which generates a royalty obligation under this Agreement, that minimum
royalty or pre-paid royalty may be credited against royalties owed under this
Agreement based on actual invoiced sales; provided that in any given quarter,
the royalty owed on actual invoiced sales shall in no event be reduced by more
than *** from the royalty rate otherwise specified.
(d) Net Sales of Combination Products shall be calculated
as provided in Section 7.4.
(e) In the circumstance where a Party or its Affiliate
makes a sale of a Program Product, Compound 1069 Product or Allergan or Ligand
Exclusive Unsynthesized Product upon which a royalty is owed to an Affiliate,
and no subsequent sale is intended to a Third Party upon which a royalty would
be owed, Net Sales shall be calculated as provided in Subpart (a) of this
Section 1.40 except that the invoiced gross sales shall be the greater of (i)
the actual invoiced sales to the Affiliate or (ii) a deemed gross sales which is
calculated using the average selling price of such product to Third Parties in
the same country as such Affiliate during
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<PAGE> 12
the same royalty reporting period or, if no sales to Third Parties in the same
country as such Affiliate were made in the same reporting period, using the
average selling price during the most recent reporting period in which sales to
Third Parties of the Product were made in such country.
1.41 "NON-RETINOID TECHNOLOGY" shall mean all technical
information, whether tangible or intangible, outside of the Field, including any
and all patent rights, know-how, data, pre-clinical and clinical results,
license application materials and all supporting documents, methods, devices,
techniques, discoveries, inventions (whether or not patentable), ideas,
processes, trade secrets and other proprietary information, including screening
technologies and assay systems, and any physical, chemical or biological
material and any replication or any part of such material, which Allergan,
Ligand or ALRT, either alone or jointly with one or both of the others,
conceives, develops, acquires or Controls (under licenses from others or
otherwise) using ALRT funding; provided, however, that in no event shall
"Non-Retinoid Technology" include (i) Compound 168 and any rights thereto, (ii)
Compound 1069 and any rights thereto and (iii) the making and/or using of
Compound 168 or Compound 1069 for any purpose.
1.42 "NORTH AMERICA" shall mean the United States of America, its
possessions and territories, Canada, Mexico and the Commonwealth of Puerto Rico.
1.43 "PARTY" shall mean Allergan, Ligand or ALRT and their
permitted successors and assigns.
1.44 "PATENT" shall mean (i) a patent having claims that cover,
and only to the extent they cover, Program Technology, including any extension,
registration, confirmation, reissue, renewal or reexamination of such patent and
(ii) to the extent rights are granted by a governmental authority thereunder, a
Patent Application.
1.45 "PATENT APPLICATION" shall mean an application for a Patent.
1.46 "PATENT COSTS" shall mean the direct fees and expenses
incurred after the Effective Date associated with the filing, prosecuting and
maintaining of Patents and Patent Applications and direct maintenance expenses
incurred in connection with the establishment and direct maintenance of Patent
Rights, except as otherwise provided in Section 9 of this Agreement.
1.47 "PATENT RIGHTS" shall mean the rights granted by any
governmental authority under those claims of a Patent which cover a method,
process, product by-process, composition or material or device, or any
improvement thereon, relating to Program Technology, which Patent is owned or
Controlled, as of the Effective Date or anytime thereafter, by the Party
granting a license herein or an Affiliate of such Party, provided that such
Patent issues from a Patent Application (i) that claims an invention made prior
to the Closing Date or (ii) which claims priority from, or has an effective
filing date of, any Patent Application that claims an invention made prior to
the Closing Date disclosing that method, process, product by-process,
composition or material or device, or any improvement thereon.
1.48 "PERSON" shall mean any individual, partnership,
corporation, firm, association, unincorporated organization, joint venture,
trust or other entity.
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<PAGE> 13
1.49 "PROGRAM AGREEMENTS" shall mean the Technology License
Agreement, the Research and Development Agreement, the Commercialization
Agreement, the 1057 Purchase Option Agreement and the Asset Purchase Option
Agreement, each dated as of June 3, 1995, among Allergan, Ligand and ALRT, and
the Stock Purchase Option.
1.50 "PROGRAM COMPOUND" shall mean any compound in the Field
chemically synthesized by Allergan, Ligand or ALRT or determined by any of the
Parties to have activity in the Field on or prior to the Effective Date, ***
***
***. The term "Program Compound" shall not include (i) Compound 168 or (ii)
Compound 1069.
1.51 "PROGRAM PRODUCT" shall mean any dosage form of a Program
Compound which receives Regulatory Approval for medical uses.
1.52 "PROGRAM TECHNOLOGY" shall mean, collectively, (i) the
intellectual property and other rights in the Field licensed by Allergan,
Allergan Retinoid Corporation, Ligand and Ligand JVR, INC. to ALRT pursuant to
the Program Agreements, including rights to use the Co-Transfection Assay but
only in the Field, (ii) all technical information, whether tangible or
intangible, necessary or useful to conduct Research or Development or to make,
use, import or sell Program Products in the Field, including any and all Patent
Rights, rights in and under Patents and Patent Applications, Know-how, data,
routes of synthesis, pre-clinical and clinical results, INDs, Drug Approval
Applications, Regulatory Approvals and all supporting documents, techniques,
discoveries, inventions (whether or not patentable), ideas, processes, trade
secrets and other proprietary information, and any physical, chemical or
biological material and any replication or any part of such material and (iii)
all test data including pharmacological and clinical test data, analytical and
quality control data, manufacturing, marketing and sales data and drug
distribution data created, developed, learned or reduced to practice in the
course of Researching, Developing and/or Commercializing Program Compounds
pursuant to the Program Agreements, in each case that is owned or Controlled by
ALRT as of the Effective Date. Program Technology as defined in this Agreement
shall include "Program Technology" as defined in Section 1.90 of the Glossary to
the Program Agreements.
Allergan's right to use the Co-Transfection Assay is limited to
use in the Field with the proviso that, in screening for Retinoid compounds
using Retinoid receptors or genes encoding for Retinoid receptors, Allergan
shall have the right to use the Co-Transfection Assay with other receptors which
form heterodimers with Retinoid receptors, but not with other receptors or genes
therefor for which Ligand or ALRT acquires a patent (or a license to a patent)
to such receptor or gene based on any invention made after the Closing Date. For
example, if Ligand obtains a patent claim (or a license to a patent claim)
limited to a novel human receptor based on an invention made after the Closing
Date, Allergan would be prevented from using such human receptor in the
Co-Transfection Assay but would not be prevented from utilizing the
Co-Transfection Assay with the corresponding murine receptor. Nothing in this
Agreement shall limit Allergan's right to Develop and Commercialize any Retinoid
compound identified as a result of the use of the Co-Transfection Assay in
accordance with the terms and conditions of this
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Agreement. Program Technology does not include the use of Co-Transfection Assay
to screen for non-Retinoid compounds.
1.53 "REGULATORY APPROVAL" shall mean the final approval,
license, registration or authorization of any Regulatory Authority, necessary to
commence commercial sale or use of a Program Product as a drug in a regulatory
jurisdiction.
1.54 "REGULATORY AUTHORITY" shall mean any federal, state, local
or foreign regulatory agency, department bureau or other government entity
having the authority to grant Regulatory Approval.
1.55 "RESEARCH" shall mean activities undertaken in the Field for
identification of lead Retinoid compounds, pharmacology and toxicology testing
in preclinical models (in vitro and animal) and chemical scale-up to gather data
required to comply with applicable regulations prior to commencement of human
clinical trials but excluding Development activities.
1.56 "RETINOID" shall mean any and all compounds included within
the metabolic pathways of beta-carotene and other naturally occurring carotenes
acting through the retinoid receptors to which such compounds bind and any and
all compounds which bind to such receptors, but excluding Compound 168 and
Compound 1069.
1.57 "ROYALTY TERM" shall mean, with respect to sales of any
product for which a royalty is payable hereunder, the period commencing with the
Closing Date and ending on the later of (A) the expiration of the last to expire
Patent covering such product or (B) *** following the date of the first
commercial sale of such product; provided that in the circumstances where a
Party enters into a license or sublicense with a Third Party pursuant to which
the Third Party is obligated to make royalty payments to a Party, "Royalty
Term," for purposes of this Agreement, shall, with respect to each such license
or sublicense, be coincident with the period during which the Third Party has an
obligation to make such royalty payments under its agreement with the Party even
though such period is shorter or longer than the Royalty Term as otherwise
provided herein, but in no event shall such period be less than the longer of
(i) *** *** following the date of the first commercial sale of such product or
(ii) the expiration of the last to expire Patent covering such product.
1.58 "SELECTED COMPOUNDS" shall mean the Allergan Selected
Compounds and the Ligand Selected Compounds.
1.59 "STOCK PURCHASE OPTION" shall mean the Stock Purchase Option
provided for pursuant to Article V of the Amended and Restated Certificate of
Incorporation of ALRT.
1.60 "TERRITORY" shall mean all countries, nations, states,
provinces and territories of the world.
1.61 "THIRD PARTY" shall mean, with respect to Allergan, any
Person or entity other than Allergan and its Affiliates and, with respect to
Ligand and ALRT, any Person or entity other than Ligand and ALRT and their
respective Affiliates.
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1.62 "THIRD PARTY ROYALTIES" shall mean royalties payable to a Third Party
in respect of the sale of Program Products or Compound 1069 Products.
1.63 "TRANSITION PLAN" shall mean the Transition Agreement of even date
herewith among the Parties and referred to in Recital B of this Agreement.
1.64 "UNSYNTHESIZED COMPOUND" shall mean any compound including its
individual enantiomers and mixtures of said enantiomers (for example, racemic
mixtures of enantiomers) and (i) *** thereof and (ii) if it is a
*** in the Field which has not been chemically synthesized by Allergan, Ligand
or ALRT
***
***
*** The term "Unsynthesized Compound" shall not include (i) Compound 168, (ii)
Compound 1069 or (iii) any Program Compound.
2. GRANT OF LICENSES
2.1 ALLERGAN'S LICENSES TO LIGAND.
2.1.1 LIGAND SELECTED COMPOUNDS. Allergan hereby grants to Ligand and
ALRT an exclusive, even as to Allergan, fully-paid (except for the royalties
provided for in Section 5.1), irrevocable and perpetual worldwide license under
the Allergan Technology, with the right to sublicense, to conduct Development
and Commercialization with respect to Ligand Selected Compounds, subject to the
terms and conditions of this Agreement.
2.1.2 UNSYNTHESIZED COMPOUNDS. Subject to the terms and conditions of
this Agreement, Allergan hereby grants to Ligand and ALRT an exclusive,
fully-paid (except for the royalties provided for in Section 5.1), irrevocable
and perpetual worldwide license under the Allergan Technology, with the right to
sublicense, to use the Allergan Technology to conduct development and
commercialization in the Field with respect to Unsynthesized Compounds ("Ligand
Exclusive Unsynthesized Compounds") ***
***
***
***. Notwithstanding the foregoing, in no event shall Allergan or any Affiliate
or sublicensee of Allergan be deemed to have infringed any rights of Ligand or
ALRT by reason of any activities conducted by Allergan or such Affiliate or
sublicensee pursuant to Section 2.2.2 with respect to any such Unsynthesized
Compound prior to or within thirty (30) days after notification to Allergan of
such filing and FDA approval.
2.1.3 RESEARCH. Allergan hereby grants to Ligand and ALRT a
non-exclusive, fully-paid, irrevocable and perpetual worldwide license under the
Allergan Technology, with the right to sublicense, to use the Allergan
Technology to conduct Research in the Field using Allergan Selected Compounds,
Allergan Exclusive Unsynthesized Compounds and/or Compound 168, subject to the
terms and conditions of this Agreement.
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2.2 LICENSES TO ALLERGAN.
2.2.1 ALLERGAN SELECTED COMPOUNDS. Ligand and ALRT hereby
grant to Allergan exclusive, even as to Ligand and ALRT, fully-paid (except for
the royalties provided for in Section 5.2), irrevocable and perpetual, worldwide
licenses under the Ligand Technology and the Program Technology, with the right
to sublicense, to conduct Development and Commercialization with respect to
Allergan Selected Compounds, subject to the terms and conditions of this
Agreement.
2.2.2 UNSYNTHESIZED COMPOUNDS. Subject to the terms and conditions of this
Agreement, Ligand and ALRT hereby grant to Allergan an exclusive, fully-paid
(except for the royalties provided for in Section 5.2), irrevocable and
perpetual worldwide license under the Ligand Technology and the Program
Technology, with the right to sublicense, to use the Ligand Technology and the
Program Technology to conduct development and commercialization in the Field
with respect to Unsynthesized Compounds ("Allergan Exclusive Unsynthesized
Compounds") ***
***
***
***
*** Notwithstanding the foregoing, in no event shall Ligand or any Affiliate or
sublicensee of Ligand be deemed to have infringed any rights of Allergan by
reason of any activities conducted by Ligand or such Affiliate or sublicensee
pursuant to Section 2.1.2 with respect to any such Unsynthesized Compound prior
to or within thirty (30) days after notification to Ligand of such filing and
FDA approval.
2.2.3 RESEARCH. Ligand and ALRT hereby grant to Allergan
non-exclusive, fully-paid, irrevocable and perpetual worldwide licenses under
the Ligand Technology, with the right to sublicense, to use the Ligand
Technology to conduct Research in the Field using Ligand Selected Compounds, or
Ligand Exclusive Unsynthesized Compounds, and/or Compound 1069, subject to the
terms and conditions of this Agreement.
2.2.4 PPAR RECEPTORS. Ligand and ALRT hereby grant to
Allergan a non- exclusive, fully paid, irrevocable and perpetual worldwide
license, with the right to sublicense, to use the PPAR receptors and genes
encoding for PPAR receptors (including, but not limited to, the human PPAR gamma
receptor), in the Co-Transfection Assay to conduct Research in the Field. This
license grant is subject to the terms and conditions of this Agreement and is
limited to all technical information relating to PPAR receptors and genes
encoding for such receptors, including, but not limited to, any and all patent
rights, know-how, data, and inventions (whether or not patentable) conceived,
developed acquired or Controlled (under licenses from others or otherwise) by
Ligand or ALRT prior to the Closing Date.
2.3 LICENSES BACK TO USE COMPOUNDS AS INTERMEDIATES.
2.3.1 LICENSE TO LIGAND. Allergan hereby grants to Ligand
and ALRT a non-exclusive, fully-paid, irrevocable and perpetual worldwide
license under the Allergan Technology and the licenses granted to Allergan under
Section 2.2, with the right to sublicense, to use Allergan Selected Compounds,
Allergan Exclusive Unsynthesized Compounds and Compound 168
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as intermediates in connection with the manufacture of Ligand Selected Compounds
and/or Ligand Exclusive Unsynthesized Compounds, subject to the terms of this
Agreement.
2.3.2 LICENSE TO ALLERGAN. Ligand and ALRT hereby grant to
Allergan a non-exclusive, fully-paid, irrevocable and perpetual worldwide
license under the Ligand Technology, the Program Technology and the licenses
granted to Ligand under Section 2.1, with the right to sublicense, to use Ligand
Selected Compounds, Ligand Exclusive Unsynthesized Compounds and Compound 1069
as intermediates in connection with the manufacture of Allergan Selected
Compounds and/or Allergan Exclusive Unsynthesized Compounds, subject to the
terms of this Agreement.
2.4 CROSS-LICENSE OF NON-RETINOID TECHNOLOGY. Allergan, on the
one hand, and Ligand and ALRT, on the other, each hereby grants to the other a
co-exclusive, with the granting party, royalty-free, irrevocable, perpetual,
worldwide license to use the Non-Retinoid Technology for any purpose, including,
without limitation, the research, development and commercialization of medical
products. The license granted hereunder shall include the right to grant
sublicenses.
2.5 LICENSED RIGHTS RESTRICTIONS. None of the Parties, without
the prior written approval of all of the other Parties (with Ligand and ALRT
treated as one and the same Party for purposes of the foregoing), can grant a
license or sublicense, or assign its rights acquired hereunder, to a Third Party
which has the effect of retroactively forgiving or licensing conduct of the
Third Party which was an infringement of the Patent Rights occurring before
grant of such license or sublicense or such assignment. As used in this Section
2.4, the term "Third Party" includes a party who becomes an Affiliate of a Party
after September 1, 1997 provided that no such approval shall be required with
respect to any such license, sublicense or assignment of rights licensed under
Section 2.1.1 or 2.2.1, as applicable.
2.6 OBLIGATIONS TO OTHER PARTIES. Allergan, in the case of use of
Program Technology by it and its Affiliates and their licensees and
sublicensees, and Ligand and ALRT, in the case of use of Program Technology by
them and their Affiliates and their licensees and sublicensees, shall be
responsible for obligations to report and pay royalties and milestones which
arise from such use under any of the agreements with Third Parties which
preexist this Agreement and all of which, to the best of Ligand's knowledge, are
listed on Exhibit L attached hereto.
2.7 NO IMPLIED LICENSES. The licenses granted hereunder do not
include by implication any license to practice in conjunction therewith
intellectual property of a Party not included in Program Technology.
3. SELECTION OF PROGRAM COMPOUNDS. A lottery (the "Lottery") shall be conducted
by Allergan and Ligand in accordance with the provisions of this Section 3 for
the purpose of equitably dividing between Ligand and ALRT on the one hand and
Allergan on the other all Program Compounds existing as of the Closing Date
(other than those Program Compounds listed as of the date hereof on Exhibits G
and H as Allergan Selected Compounds and Ligand Selected Compounds,
respectively) (the "Lottery Compounds"). It is understood and agreed that each
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Lottery Compound selected shall include such Compound as well as (i) ***
thereof and (ii) if it is a ***
***The Lottery Compounds so selected by Allergan and Ligand shall become
Allergan Selected Compounds and Ligand Selected Compounds, respectively, and the
Parties' respective rights with respect to such Compounds shall be as set forth
in this Agreement.
3.1 LIST OF COMPOUNDS; EXCHANGE OF INFORMATION.
(a) Continuing through the Closing Date, Allergan and Ligand
shall share all information regarding Lottery Compounds which is included within
the meaning of Program Technology. Without limiting the foregoing, the Parties
shall promptly prepare a database which shall contain the information described
in Exhibit J attached hereto. Ligand and Allergan shall each be provided with a
copy of such database, and the Parties shall regularly and fully update such
database through the Closing Date.
(b) Allergan and Ligand have developed a list of Lottery
Compounds in existence on the date hereof organized by category, which is
attached hereto as Exhibit K. The list of such categories consists of the
following:
(I) RXR compounds;
(II) RAR alpha selective compounds;
(III) RAR antagonist compounds;
(IV) ***
(V) ***
(VI) ***
(VII) ***
Allergan and Ligand shall regularly and fully inform each other of any and all
additional Lottery Compounds synthesized by any of the Parties or determined by
any of the Parties to have activity in the Field following the preparation of
such list and prior to the date that is ten (10) days prior to the mutually
agreed upon date of the Lottery, each of which Lottery Compounds shall be added
to Exhibit K in the appropriate category. Such list of compounds organized by
category shall be finalized ten (10) days prior to the mutually agreed upon date
of the Lottery. Ligand's and Allergan's participation in the Lottery will be
deemed to constitute its representation and warranty under this Agreement that
all Lottery Compounds known to it, and all applicable information relating
thereto as aforesaid, have been fully disclosed to the other Party prior to any
selection of a Lottery Compound and included in such list as of the Closing
Date. Each Party hereby covenants that it will not synthesize any compounds as
Program Compounds not already included as Lottery Compounds on Exhibit K
following the date that is ten (10) days prior to the mutually agreed upon date
of the Lottery.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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3.2 LOTTERY PROCEDURE. Prior to the Closing Date and after
finalization of the list referred to in Section 3.1 above, the Lottery shall be
conducted on a mutually agreed date (in any event not less than ten (10) days
prior to the Closing Date). Allergan and Ligand shall conduct the Lottery as
follows:
(a) Allergan shall initially select two (2) Lottery
Compounds from the RXR category (which may be selected at any time prior to the
Lottery), followed by Ligand and Allergan alternating selections (with Ligand
selecting first) of remaining Lottery Compounds in the RXR category on a single
compound for single compound basis, until such time as either (i) there are no
Lottery Compounds remaining in the RXR category or (ii) Allergan and Ligand
mutually agree to divide the remaining Lottery Compounds in the RXR category in
accordance with subsection (e) below;
(b) Allergan shall then have the initial selection
of one Lottery Compound from each of the RAR alpha selective category and the
RAR antagonist category. Ligand shall then have the right to select two (2)
Lottery Compounds in each of such categories. Thereafter, Allergan and Ligand
shall alternate selecting single Lottery Compounds in each of these categories
(with Allergan selecting first in each category) until such time as either (i)
there are no Lottery Compounds remaining in such categories or (ii) Allergan and
Ligand mutually agree to divide the remaining Lottery Compounds in such
categories in accordance with subsection (e) below;
(c) Ligand shall then have the right to select the
next category of Lottery Compounds to be subject to the Lottery and will have
the first selection of a single Lottery Compound in such category. Allergan
shall then have the right to select two (2) Lottery Compounds in such category.
Thereafter, Ligand and Allergan shall alternate selecting single Lottery
Compounds in such category (with Ligand selecting first) until such time as
either (i) there are no Lottery Compounds remaining in such category or (ii)
Allergan and Ligand mutually agree to divide the remaining Lottery Compounds in
such category in accordance with subsection (e) below;
(d) The process described in subsection (c) above
shall continue with each of Ligand and Allergan alternating selection of a
category of Lottery Compounds (with Allergan selecting first). The Party
selecting such category shall be the first to select a Lottery Compound in such
category, the other party selecting the second and third Lottery Compounds in
such category and the parties thereafter alternating single selections until
such time as either (i) there are no Lottery Compounds remaining in such
category or (ii) Allergan and Ligand mutually agree to divide the remaining
Lottery Compounds in such category in accordance with subsection (e) below; and
(e) At any time during Allergan's and Ligand's
selection of Lottery Compounds in a given category, Allergan and Ligand may, by
mutual agreement, elect to divide the remaining Lottery Compounds in such
category between them on an equal and random basis, or by such other means as
the parties may choose. In the event that the parties are unable to agree on a
method of allocation of the remaining Lottery Compounds in such category, the
parties
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shall resume alternating selections as described in subsection (d) above until
all Lottery Compounds in such category have been selected by a party.
3.3 SELECTED COMPOUNDS. Following completion of the Lottery and on or
prior to the Closing Date, Lottery Compounds selected by Allergan or Ligand
pursuant to the Lottery shall be added to Exhibits G and H, respectively, and
shall thereupon be deemed Allergan Selected Compounds and Ligand Selected
Compounds, respectively, for purposes of this Agreement. All then existing
supplies of Allergan Selected Compounds and Ligand Selected Compounds shall
thereupon be delivered to and owned, respectively, by Allergan, on one hand, and
Ligand and ALRT, on the other hand (except that Ligand, with respect to Allergan
Selected Compounds, and Allergan, with respect to Ligand Selected Compounds,
shall be entitled to retain research quantities of such supplies in an amount
equal to the lesser of (i) fifty percent (50%) of the total amount of each such
Selected Compound, respectively, in the Parties' possession and control as of
the Closing Date or (ii) 50 mg of each such Selected Compound, respectively).
4. FEE. On the Effective Date, Ligand shall pay to Allergan or its designated
Affiliate a non-refundable cash payment in the amount of $4,500,000.
5. ROYALTY PAYMENTS.
5.1 ROYALTY PAYMENTS TO ALLERGAN. The following royalty payments shall be
made to Allergan during the Royalty Term on a country-by-country basis. It is
understood that royalties shall be calculated based upon each and every invoiced
sale on which a royalty is owed of Program Products or Compound 1069 Products in
accordance with the provisions set forth below in this Section 5.1 and in
Section 1.40, which payments may be made by either Ligand or ALRT (provided that
Ligand shall remain obligated under this Section 5.1 with respect to all
royalties payable hereunder):
5.1.1 COMPOUND 1069. Royalties equal to (i) *** of Net Sales of
Compound 1069 Products by Ligand, ALRT and/or any other Affiliate of Ligand and
(ii) thirty-three and one-third percent (33-1/3%) of any and all royalties
payable to Ligand, ALRT and/or any other Affiliate of Ligand by Third Parties
with respect to sales of Compound 1069 Products, in each case for all
indications excluding Cancer Indications and Eye or Skin Indications.
5.1.2 COMPOUND 268. Royalties equal to the greater of (i) six percent
(6%) of Net Sales of Compound 268 Products for all indications or (ii) fifty
percent (50%) of any and all royalties payable to Ligand, ALRT and/or any other
Affiliate of Ligand by Third Parties with respect to sales of Compound 268
Products for all indications.
5.1.3 COMPOUND 324. Royalties equal to the greater of (i) six percent
(6%) of Net Sales of Compound 324 Products for all indications or (ii) fifty
percent (50%) of any and all royalties payable to Ligand, ALRT and/or any other
Affiliate of Ligand by Third Parties with respect to sales of Compound 324
Products for all indications.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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5.1.4 COMPOUND 1057. Royalties equal to (i) fifteen percent (15%)
of Net Sales in North America of Compound 1057 Products for all indications and
(ii) *** of Net Sales outside of North America of Compound 1057 Products for all
indications.
5.1.5 OTHER LIGAND SELECTED COMPOUNDS. Royalties equal to six
percent (6%) of Net Sales of Program Products incorporating any dosage form of a
Ligand Selected Compound (excluding Compound 268, Compound 324 and Compound
1057) for all indications.
5.1.6 LIGAND EXCLUSIVE UNSYNTHESIZED COMPOUNDS. Royalties equal to
*** of Net Sales of Ligand Exclusive Unsynthesized Compounds in any dosage form
which is covered by a Patent for which Allergan incurs Patent Costs under
Section 9.1.3. For purposes of this Agreement, "covered by a Patent" shall mean
that the manufacture, use or sale of the subject compound would, in the absence
of rights under such patent, infringe a claim under such patent which has not
expired and which has not been held unenforceable, unpatentable or invalid by a
decision of a court or other governmental agency of competent jurisdiction
following exhaustion of all possible appeal processes, and which has not been
admitted to be invalid or unenforceable through reissue, reexamination or
disclaimer. Further, for purposes of this Agreement, the determination of
whether a compound is covered by a Patent shall be made on a country-by-country
basis.
5.2 ROYALTY PAYMENTS TO LIGAND. Allergan shall make the following royalty
payments to Ligand (which shall be allocated by Ligand between Ligand and ALRT)
during the Royalty Term on a country-by-country basis:
5.2.1 ALLERGAN SELECTED COMPOUNDS. Royalties equal to six percent
(6%) of Net Sales of Program Products incorporating any dosage form of an
Allergan Selected Compound for all indications.
5.2.2 ALLERGAN EXCLUSIVE UNSYNTHESIZED COMPOUNDS. Royalties equal
to *** of Net Sales of Allergan Exclusive Unsynthesized Compounds in any dosage
form which is covered by a Patent for which Ligand incurs Patent Costs under
Section 9.1.3.
6. MILESTONE PAYMENTS. Ligand shall make the following milestone payments to
Allergan:
(a) Thirty-three and one-third percent (33-1/3%) of any and
all upfront cash payments made to Ligand, ALRT and/or any other Affiliate of
Ligand by one or more Third Parties (other than pursuant to the currently
proposed transaction with that certain large pharmaceutical company hereinafter
referred to as Company X) with respect to the licensing of Compound 268 and/or
Compound 324 for any and all indications, excluding payments received by Ligand
solely for the purchase of equity securities in which Ligand and the Third Party
have agreed to a premium of no more than *** over the fair market value of such
securities, where "fair market value" is as defined in Ligand's agreement with
such Third Party; provided, however, that in no event shall such fair market
value be defined as an amount which is less than the average of the last sales
prices of such securities as traded on the Nasdaq National Market for the number
of trading days preceding (A) the date such Third Party agreement is publicly
announced, or (B) if no public announcement is made, the date such agreement is
signed,
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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which is equal to (i) the number of days specified in such agreement, if so
specified and if such number exceeds five (5) days or (ii) five (5) days, if
such number is not so specified or does not exceed five (5) days; and
(b) thirty-three and one-third percent (33-1/3%) of any and all
milestone payments payable to Ligand by one or more Third Parties with respect
to Compound 268 and/or Compound 324 for any and all indications. For purposes of
this subsection (b) only, the term "milestone payments" shall include all cash
payments made to Ligand with respect to the achievement of any research,
development or commercialization milestone or similar event, including, but not
limited to, identification of an active compound, selection of a lead compound,
initiation of preclinical studies, filing of an IND, initiation of clinical
trials, filing of a Drug Approval Application with the FDA or the equivalent
application in any other country or jurisdiction, or Regulatory Approval.
7. PAYMENT; RECORDS; AUDITS.
7.1 PAYMENT; REPORTS. Royalty payments and reports for the sale of Program
Products and Compound 1069 Products and milestone payments due hereunder shall
be calculated and reported for each calendar quarter. All such payments due to a
Party under this Agreement shall be paid (i) within forty-five (45) days of the
end of each calendar quarter or (ii) in connection with payments under any
agreement between the Paying Party and a Third Party, within forty-five (45)
days of the end of the calendar quarter in which such payments are received by
the Paying Party (but not later than the end of the calendar quarter following
the calendar quarter in which such payments would be due under the foregoing
clause (i)). Each such payment shall be accompanied by a report of Net Sales of
Program Products and Compound 1069 Products, as applicable, and milestone
payments in sufficient detail to permit confirmation of the accuracy of the
payment made, including, without limitation, the number of such Products sold,
the gross sales and Net Sales of such Products, royalty and milestone payments
received and payable, in U.S. dollars, the method used to calculate the same and
the exchange rates used.
7.2 EXCHANGE RATE; MANNER AND PLACE OF PAYMENT. All payments hereunder
shall be payable in U.S. dollars. With respect to each quarter, for countries
other than the United States, whenever conversion of payments from any foreign
currency shall be required, such conversion shall be made (i) at the rate of
exchange reported in The Wall Street Journal either on a daily basis or on the
last business day of the applicable quarter, or (ii) in accordance with the
terms of any agreement between the paying Party and a Third Party with respect
to which such payment is being made, in each case, at the payor's option
consistently applied. All payments owed under this Agreement shall be made by
wire transfer to a bank and account designated in writing by the payee, unless
otherwise specified by such payee.
7.3 RECORDS AND AUDITS. During the Royalty Term and for three (3) years
thereafter, each Party shall maintain and keep complete and accurate records and
books of account documenting all of Net Sales with respect to which any royalty
may be payable by them hereunder and documenting all milestone payments that may
be payable by Ligand hereunder; provided that no Party shall be required to
maintain or keep such records or books with respect to any Net Sales or
milestone payments for more than three (3) years following the end of the
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fiscal year in which such Net Sales or milestone payments occurred or became
payable. In order to permit Allergan to confirm the accuracy of all milestone
payments due under this Agreement, Allergan shall have the right to review,
under standard confidentiality terms, any agreement (with non-commercial terms
redacted as filed with and granted confidential treatment by the SEC or, if not
so filed, in a manner otherwise substantially compliant with SEC requirements
applicable to public companies filing material agreements) that Ligand may enter
into with respect to Compound 268 and/or Compound 324. Accordingly, upon the
execution of any agreement pursuant to which Ligand may be or become entitled to
receive any cash payments with respect to Compound 268 and/or Compound 324,
Ligand shall provide prompt written notice thereof to Allergan. Thereafter,
Ligand shall, upon receipt of written notice from Allergan that it wishes to
review the terms of such agreement (which notice shall be given in Allergan's
sole discretion), promptly provide Allergan with a copy of such agreement (which
may be so redacted). After Allergan has had a reasonable opportunity to review
such agreement, Allergan shall, at Ligand's option, either return all copies of
such agreement to Ligand or destroy such copies; provided, however, that
Allergan may maintain one copy of each such agreement for its records.
At the request and expense of either Allergan or Ligand or any of
its Affiliates, the other Party and its Affiliates shall permit an independent
certified public accountant appointed by the requesting Party and reasonably
acceptable to the other Party, at reasonable times and upon reasonable notice
(but not exceeding once in any twelve (12) month period), to examine those
records as may be necessary to determine, with respect to any calendar year
ending not more than three (3) years prior to such Party's request, the
correctness of any royalty or milestone payments or nonpayments hereunder
(including but not limited to an unredacted copy of any applicable agreement to
which such other Party is a party). Results of any such examination shall be
made available to the Parties. Said independent certified public accountant
shall verify to the requesting Party only the amounts of royalties or milestone
payable hereunder and disclose no other information revealed in its audit. If
such certified independent public accountant reasonably determines that any
royalties or milestone payments have been, for any calendar year, underpaid by
either Allergan or Ligand (the "Paying Party"), then the Paying Party shall
immediately pay the full amount of such underpayment to the other Party plus
interest on the unpaid amount accrued from the date such payment was due until
the date paid at the then applicable commercial prime lending rate of Citibank,
N.A., New York (or equivalent banking institution) and, if such underpayment is
equal to or greater than ten percent (10%) of the amount actually due, then the
Paying Party, subject to the right to seek recourse under Section 14.15, shall
promptly pay to the other Party all reasonable fees and disbursements of such
certified independent public accountant incurred in the course of examining the
Paying Party's records and books. Notwithstanding the foregoing, however in the
event of any dispute regarding the obligation to pay amounts alleged to be
payable under this Section 7.3, payment of such amounts may be deferred pending
resolution of such dispute (at which time such amounts shall be paid in full
with interest at the rate specified above to the extent such alleged obligation
to pay such amounts is confirmed pursuant to such resolution). Any disputes
under this Section 7.3 shall be resolved in accordance with Section 14.15. If
the audit reveals an overpayment, the amount overpaid may be claimed as a credit
against future royalties to be paid under this Agreement.
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7.4 COMBINATION PRODUCTS. For purposes of this Agreement,
"Combination Product" means a product in a single dosage form which, in addition
to utilizing or containing a Program Compound or Compound 1069, contains another
component as an active ingredient and which receives Regulatory Approval for
medical uses. Net Sales of Combination Products shall be calculated by
multiplying the amounts received by a Party, its sublicensee(s) or assignee(s)
attributable to Combination Products by the Combination Allocation Portion (as
defined below) attributable to such Combination Product. The "Combination
Allocation Portion," as used herein, shall mean that portion of any amounts
received by a Party, its sublicensee(s) or assignee(s) from the sale of any
Combination Product that results from multiplying the total amount received by a
Party, its sublicensee(s) or assignee(s) from such sale by a fraction, the
numerator of which is the fair market value of the Program Compound or Compound
1069 included in the Combination Product and the denominator of which is the
fair market value of such Program Compound or Compound 1069 and the fair market
value of the biologically active component(s) of such Combination Product which
are neither Program Compounds nor Compound 1069. Fair market value shall be
determined in good faith by Allergan and Ligand in the event that no market
price is available. However, in no event shall any royalty payable under this
Agreement be reduced by reason of any reduction under this Section below *** of
the rate otherwise specified in this Agreement. Any dispute under this Section
7.4 shall be resolved in accordance with Section 14.15.
7.5 WITHHOLDING OF TAXES. Any withholding of taxes levied by tax
authorities on the payments hereunder shall be borne by the party receiving the
payment and deducted by the party making the payment from the sums otherwise
payable by it hereunder for payment to the proper tax authorities on behalf of
the party receiving the payment. The party making the payment agrees to
cooperate with the party receiving the payment in the event that the receiving
party claims exemption from such withholding or seeks credits or deductions
under any double taxation or similar treaty or agreement from time to time in
force, such cooperation to consist of providing receipts of payment of such
withheld tax or other documents reasonably available to the party making the
payment.
7.6 PROHIBITED PAYMENTS. Notwithstanding any other provision of
this Agreement, if a party is prevented from paying any such payment by virtue
of the statutes, laws, codes or governmental regulations of the country from
which the payment is to be made, then such payment may be paid by depositing
funds in the currency in which accrued to the other party's account in a bank
acceptable to such other party in the country whose currency is involved.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS.
8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE PARTIES.
Each Party hereby represents, warrants and covenants to each other Party, as of
the date such Party becomes a party to this Agreement, as follows:
8.1.1 CORPORATE POWER. It is duly organized and
validly existing under the laws of Delaware and has full corporate power and
authority to enter into this Agreement and to carry out the provisions hereof.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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8.1.2 DUE AUTHORIZATION. It is duly authorized to execute and
deliver this Agreement and to perform its obligations hereunder.
8.1.3 BINDING AGREEMENT. This Agreement is a legal
and valid obligation binding upon it and enforceable in accordance with its
terms. The execution, delivery and performance of this Agreement by it does not
conflict in any material respect with any agreement, instrument or
understanding, oral or written, to which it is a party or by which it may be
bound, nor violate any material law or regulation of any court, governmental
body or administrative or other agency having jurisdiction over it.
8.1.4 GRANT OF RIGHTS; MAINTENANCE OF AGREEMENTS
AND PATENTS. It has not, and shall not during the term of this Agreement, grant
any right to any Third Party relating to the Field which would violate the terms
of or conflict with the rights granted to any other Party pursuant to this
Agreement. It has (or will have at the time performance is due) maintained and
will keep in full force and effect all agreements (including license agreements)
and filings (including patent filings) necessary to perform its obligations
hereunder (including but not limited to, with respect to Ligand, agreements and
patent filings relating to the Co-Transfection Assay).
8.1.5 VALIDITY. It is aware of no action, suit or
inquiry or investigation instituted by any federal, state, local or foreign
governmental agency or instrumentality which questions or threatens the validity
of this Agreement.
8.1.6 REGULATORY FILINGS. Promptly following the
date hereof, Allergan and Ligand shall make any and all applicable filings
required with respect to the transactions contemplated under this Agreement
pursuant to the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended
(the "HSR Act"). Allergan's and Ligand's respective obligations under this
Agreement shall be subject to the expiration or early termination, on or prior
to the Closing Date, of any applicable waiting period under the HSR Act with
respect to such filings.
8.2 PROGRAM TECHNOLOGY. The Parties agree that "Program
Technology," as defined in Section 1.90 of the Glossary to the Program
Agreements, survived and became Program Technology under this Agreement and that
Allergan acquired a fifty percent (50%) undivided interest therein at the
Closing Date as Allergan Technology upon its exercise of the Asset Purchase
Option and that Ligand (through its ownership of all outstanding ALRT stock)
retained a fifty percent (50%) undivided interest therein at the Closing Date as
Ligand Technology and that Allergan has relinquished no rights to Allergan
Technology except as expressly provided under this Agreement, and that Ligand
and ALRT have relinquished no rights to Ligand Technology except as expressly
provided under this Agreement. For purposes of further clarifying the rights
constituting the Program Technology as defined in this Agreement, each of
Allergan and Ligand agree that the intellectual property licensed to ALRT
pursuant to the first sentences of Sections 2.1.1, 2.1.2, 2.2.1 and 2.2.2 of the
Technology License Agreement dated June 3, 1995 among Allergan, Ligand and ALRT
(the "Prior License Agreement"), disregarding the final clause in each such
sentence cross-referencing other sections of the Prior License Agreement,
constitutes both Ligand Technology and Allergan Technology, to the extent owned
or Controlled by or licensed to ALRT immediately prior to exercise of the Stock
Purchase Option. To the extent, and only to the extent, necessary to cause the
immediately preceding
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sentence to be true and accurate, each of Allergan, Ligand and ALRT hereby agree
that the licenses contained in the first sentence of such sections of the Prior
License Agreement (disregarding such cross-referencing clauses) shall continue
indefinitely on a non-exclusive basis, and shall not terminate upon termination
of the Prior License Agreement. For purposes of this Agreement and the Program
Agreements, the Parties agree that a "fifty percent (50%) undivided interest"
means that subject to the terms of this Agreement and the Transition Plan
(including but not limited to the licenses granted in Section 2 and the royalty
and milestone provisions of Sections 5 and 6 of this Agreement), Allergan and
Ligand are free to use the Program Technology in any manner and for any purpose
without any obligation to any other Party by reason thereof, including but not
limited to any obligation to account to, pay royalties to, or obtain consent
from any other Party. The Parties further covenant and agree that no Party shall
assert in a claim against another Party, or defend a claim asserted by another
Party, on the basis that Program Technology as defined in Section 1.90 of the
Glossary to the Program Agreements, did not transfer to and become,
collectively, Program Technology as defined in this Agreement upon the Closing
Date or which is otherwise inconsistent with the foregoing. To the extent that,
by reason of any provision of the second paragraph of Section 1.52, "Program
Technology" for purposes of this Agreement could be interpreted to be broader
than "Program Technology" as used in Section 1.90 of the Glossary to the Program
Agreements, then for the avoidance of doubt "Program Technology" for purposes of
this Agreement shall also include all additional rights included in such broader
interpretation. This Section 8.2 shall supersede any contrary provision of the
Program Agreements (including without limitation the termination provisions of
Section 9.3.1 of the Prior License Agreement).
8.3 REPRESENTATIONS, WARRANTIES AND COVENANTS BY LIGAND. Ligand
hereby represents, warrants and covenants to Allergan as follows:
8.3.1 COMPOUND 1069. Prior to the date hereof,
Ligand has delivered or made available to Allergan copies of substantially all
information relevant to Compound 1069 and its medical potential which has
previously been disclosed by Ligand to Third Parties in connection with
potential Corporate Partnering Transactions (other than with respect to Cancer
Indications and Eye and Skin Indications).
8.3.2 CORPORATE PARTNERING TRANSACTION WITH COMPANY
X. Prior to the date hereof, Ligand has delivered to Allergan true, complete and
correct copies of a draft Development and License (Targretin) Agreement and a
Draft Collaboration Agreement, each between Company X and Ligand, under cover of
a letter dated September 17, 1997 from *** of Ligand to *** of Allergan, with
non-financial terms redacted in a manner substantially consistent with SEC
filing requirements for public companies filing material agreements. Ligand
agrees to promptly deliver to Allergan copies of such subsequent drafts of such
agreements in Ligand's possession or control subsequent to the date of such
letter and prior to the Closing Date as are requested by Allergan (but no more
frequently than once per week). Ligand hereby represents, warrants and covenants
that the provisions in such agreements providing for royalty and milestone
payments to Ligand, when and as executed and delivered by Ligand and Company X,
shall be *** *** , such as so delivered to Allergan under cover of such letter.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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8.4 NON-SOLICITATION OF EMPLOYEES. Until the date that is two (2)
years after the Closing Date:
8.4.1 ALLERGAN NON-SOLICITATION. Allergan shall
not, without the written consent of Ligand, solicit into the employment of
Allergan or any Affiliate any person who during the course of employment by
Ligand was at any time involved with activities related to the Research,
Development or Commercialization within the Field.
8.4.2 LIGAND NON-SOLICITATION. Ligand shall not,
without the written consent of Allergan, solicit into the employment of Ligand
or any Affiliate any person who during the course of employment by Allergan was
at any time involved with activities related to the Research, Development or
Commercialization within the Field.
8.5 CORPORATE PARTNERING RESTRICTIONS.
8.5.1 Ligand agrees that for a period of ***
following the Effective Date, it will not enter into a Corporate Partnering
Transaction with any Third Party which involves Research, Development and/or
Commercialization of any Ligand Selected Compounds (other than Compound 1057)
for Eye or Skin Indications.
8.5.2 Allergan agrees that for a period of ***
following the Effective Date, it will not enter into a Corporate Partnering
Transaction with any Third Party which involves Research, Development and/or
Commercialization of any Allergan Selected Compounds for Cancer Indications.
9. DISCLOSURE AND USE OF TECHNOLOGY AND RIGHTS.
9.1 PATENT PROSECUTION. Allergan shall diligently file,
prosecute, issue and maintain Patent Applications and Patents issuing therefrom
arising out of inventions made solely by Allergan employees or consultants; and
Ligand shall diligently file, prosecute, issue and maintain Patent Applications
and Patents issuing therefrom arising out of inventions made solely by Ligand
employees or consultants. Patent Applications and Patents issuing therefrom
arising out of joint inventions between Allergan and Ligand shall be prosecuted
and maintained by the Party best placed to carry out such activities, as
reasonably determined by Allergan and Ligand. Each of Allergan and Ligand shall
pursue prosecution and maintenance activities hereunder according to their
respective internal standards to effectively cover discoveries and inventions in
the Field made by their respective employees and consultants. Allergan and
Ligand shall discuss and evaluate with each other such discoveries and
inventions, including joint discoveries and inventions, and shall confer
regarding the advisability of filing Patent Applications to cover those
discoveries and inventions, including the countries in which such Patent
applications should be filed. Each of Allergan and Ligand shall submit to the
other a substantially complete draft of each Patent Application that is directed
to an invention or discovery either useful in the Field or which is applicable
to Program Technology, in each case which has been licensed to the other Party
hereunder (other than counterparts of filings previously made) for review and
comment at least *** prior to the contemplated filing date, provided that in
those circumstances
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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where a Party believes time is of the essence, it shall endeavor to provide each
other Party such advance notice as it reasonably can under the circumstances.
9.1.1 CONSULTATION. Each of Allergan and Ligand
shall endeavor to follow guidance provided by the other Party with respect to
the necessity and timing of filing relevant Patent Applications. Each of
Allergan and Ligand shall endeavor to ensure that all relevant Patent
Applications are filed before any public disclosure of the discovery or
invention claimed by the application. Allergan and Ligand shall confer with each
other regarding the prosecution of such Patent Applications and shall provide
each with periodic reports regarding the status of Patents and Patent
Applications applicable to the Field. Each of Allergan and Ligand shall ensure
that the other Party has a complete and up-to-date file history for each such
Patent Application.
9.1.2 MUTUAL GRANT OF AUTHORITY. Should any Party
not wish to file, prosecute, maintain or issue a Patent Application or maintain
a Patent in the Field at all or in a particular country, then such Party shall
provide the other Party with reasonable written notice thereof and, at the
request of any other Party and at such other Party's expense, grant any
necessary authority to such other Party to file, prosecute, maintain and issue
such a Patent Application or maintain such a Patent in the name of the Party
holding rights to such Patent Application or Patent. Nothing in this Section
9.1.2, however, shall preclude a Party from abandoning a Patent Application in
favor of a continuation application or a continuation-in-part application
thereof, or to seek reissue or re-examination of a Patent, and no obligation
hereunder is implied so as to permit another Party to prosecute such abandoned
Patent Application or provide rights to a Patent subject to reissue or
re-examination which would be inconsistent with the right to seek reissuance or
re-examination.
9.1.3 FEES AND COSTS. Except as provided in Section
9.1.2, Patent Costs shall be borne by the filing Party.
9.2 INFRINGEMENT.
9.2.1 NOTIFICATION OF INFRINGEMENT. Each Party
shall notify the other Party of any infringement by any Person of any Patent and
shall provide the other Party with the available evidence, if any, of such
infringement.
9.2.2 ENFORCEMENT OF PATENT RIGHTS.
9.2.2.1 If any Party has actual notice of
infringement by any Person of any Patent, Allergan and Ligand shall confer to
determine in good faith (a) an appropriate course of action and (b) the Party
best suited to carrying out such course of action. If the Parties determine that
enforcement of the Patent is appropriate, the Party determined by Allergan and
Ligand as best suited to carrying out such course of action shall take such
action. If Allergan and Ligand are unable to come to an agreement regarding the
appropriate course of action, either Allergan or Ligand may, if the Patent
covers a compound which is a Selected Compound of such Party, upon written
notice to the other take any appropriate course of action, including, commence
litigation with respect to the alleged or threatened infringement, with the
Party proceeding with the infringement action bearing all costs thereof. The
costs of any action
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commenced pursuant to this Section 9.2.2.1, including attorneys' fees and
expenses, shall be borne by the Party taking action, unless approved in writing
in advance by the other Party, in which case such costs shall be shared equally.
In all cases, the Parties shall cooperate fully, including if required to bring
such action, the furnishing of a power of attorney. No Party shall have the
right to settle any patent infringement litigation under this Section 9.2.2.1 in
a manner that diminishes the rights or interests of the other Party without the
consent of such other Party. Any recovery realized resulting from infringement
in the Field as a result of such litigation shall be shared in accordance with
the costs contributed by each Party to such action.
9.2.2.2 Each Party shall promptly notify the other Party
in writing of any allegation by a Third Party that the activity of any Party in
the Field infringes or may infringe the intellectual property rights of such
Third Party. The Parties shall then seek to agree on a common strategy to
respond to such allegation. In the absence of agreement, each Party may take
such action as it deems in its best interest.
9.3 COOPERATION. Each Party agrees to cause each of its employees and
agents to take all actions and to execute, acknowledge and deliver all
instruments or agreements reasonably requested by any other Party, and necessary
for the perfection, maintenance, enforcement or defense of that Party's rights
as set forth above.
10. CONFIDENTIALITY.
10.1 OBLIGATION OF NON-DISCLOSURE. Subject to this Section 10, any
Information (a) communicated by the Parties under any of the Program Agreements
or this Agreement; or (b) communicated by a Party to another Party prior to the
Effective Date; or (c) communicated by one Party to the other Party in
accordance with Section 9, shall be maintained by the receiving Party in strict
confidence and shall not be disclosed by any Party to any Third Party, except as
provided in Sections 10.1.1, 10.2, 10.4 or 10.5 or to an Affiliate of the Party,
to a consultant retained by the Party or retained by an Affiliate of the Party,
or to any other Person approved in advance by the other Parties, unless such
Affiliate, consultant or other Person agrees to be bound substantially to the
same extent as the Parties under this Section 10.1. Nothing shall prevent a
Party from disclosing or sharing Information that also applies outside of the
Field, provided that such disclosure or sharing is for the purpose of and is
useful for drug discovery, research or development outside of the Field and the
Third Party receiving such Information agrees to be bound substantially to the
same extent as the Parties under this Section 10.1. The obligations set forth in
this Section 10.1 shall survive for a period of five (5) years from the
Effective Date. Without limiting the generality of the foregoing, each Party
shall use commercially reasonable efforts to obtain, if not already in place,
confidentiality agreements from their respective employees and agents, similar
in scope to this Section 10.1, to protect the Information.
10.1.1 EXCEPTIONS. The Section 10.1 obligation of non-disclosure
of Information shall apply to all such Information except that which: (a)
becomes known to the receiving Party from a Third Party under no obligation of
non-disclosure regarding such Information; (b) is public knowledge or later
becomes public knowledge through no act on the part of the receiving Party; (c)
is released from the restrictions of this Section 10.1 by the express written
consent of the disclosing Party; (d) is disclosed to any permitted assignee or
permitted sublicensee or
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permitted subcontractor of either Allergan or Ligand hereunder (if such assignee
or sublicensee is subject to the provisions of this Section 10.1 or
substantially similar provisions); or (e) is required by law, statute, rule or
court order to be disclosed (the disclosing Party shall, however, notify the
Party whose Information is required to be disclosed, which Party shall be
entitled to direct the efforts to be taken to obtain confidential treatment of
any such disclosure and shall be entitled to the cooperation of the other Party
as required). Nothing in this Section 10.1 shall prevent a Party from disclosing
Information received hereunder or generated solely by such Party to government
authorities which is necessary, in the good faith opinion of such Party, to
receive Patents and/or government permission to make, have made, use, sell,
supply or import Program Products.
10.2 PERMITTED DISCLOSURES. Notwithstanding the provisions of
Section 10.1 hereof, Allergan, Ligand or ALRT may, to the extent necessary,
disclose and use Information, consistent with the rights of Allergan, Ligand and
ALRT otherwise granted hereunder (a) to the extent necessary or useful in
conducting activities which are the subject of the licenses granted hereunder
(including disclosure to sublicensees or potential sublicensees or in connection
with other business relationships in connection with a potential Corporate
Partnering Transaction or Change of Control), (b) for the purpose of securing
institutional or government approval to conduct Development or Commercialization
of any Program Product, or (c) for the purpose of securing patent protection for
an invention within the scope of the Program Technology; provided, that the
disclosing Party in each case obtains an agreement from any Person to whom such
Information is disclosed to preserve the confidentiality thereof upon terms
reasonably equivalent to those set forth herein.
10.3 PUBLICATIONS. Each Party shall submit to each other Party
manuscripts, including abstracts, and texts of poster presentations and other
presentations, (a) of any research applicable to the Field and (b) containing
confidential Information that has been invented or developed by ALRT, invented
or developed jointly by Allergan, on the one hand, and Ligand or ALRT, on the
other hand, or that is jointly owned by Allergan, on the one hand, and Ligand or
ALRT, on the other hand, at least thirty (30) days prior to presentation or
submission for publication for purposes of allowing Allergan, in the case where
Ligand or ALRT is the submitting party, or Ligand or ALRT, in the case where
Allergan is the submitting party, to request the filing by the submitting Party
of a Patent Application under Section 9.2, or initiate the filing of a Patent
Application under Section 9.2.2 prior to publication of any such Information.
10.4 PUBLICITY REVIEW. Allergan and Ligand shall consult with
each other on any statements to be made to the public with respect to the
transactions contemplated by this Agreement and any related Corporate Partnering
Transactions which occur on or prior to December 31, 1997. If Allergan or Ligand
is required by law or regulation to make a public disclosure or announcement
concerning such matters, such Party shall give reasonable prior advance notice
of the proposed text of such disclosure or announcement to the other Party for
its review and comment. The principles to be observed by Allergan or Ligand
shall be: accuracy, the requirements for confidentiality under Section 10, the
advantage a competitor of Allergan or Ligand may gain from any public statements
under this Section 10.4, the requirements of disclosure under any applicable
securities laws or regulations, and the standards and customs in
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the pharmaceutical industry for such disclosures by companies comparable to
Allergan and Ligand.
10.5 SURVIVAL. Except as set forth in Section 10.1, the rights
and obligations set forth in this Section 10 shall survive any termination of
this Agreement.
11. DISCLAIMER OF WARRANTY; CONSEQUENTIAL DAMAGES.
11.1 DISCLAIMER OF WARRANTY. Nothing in this Agreement shall be
construed as a representation made or warranty given by any Party hereto that
any Patents shall issue based on pending applications within the Patent Rights,
or that any such Patent Rights which do issue shall be valid, or that the
practice by any Party hereto of any license granted hereunder, or that the use
of any Program Technology licensed hereunder, shall not infringe the patent or
proprietary rights of any other Person. Allergan, Ligand and ALRT acknowledge
that THE RETINOID TECHNOLOGY IS LICENSED AS IS AND ALLERGAN, LIGAND AND ALRT
EXPRESSLY DISCLAIM AND HEREBY WAIVE, RELEASE AND RENOUNCE ANY WARRANTY, EXPRESS
OR IMPLIED, WITH RESPECT TO SUCH TECHNOLOGY, INCLUDING, WITHOUT LIMITATION, ANY
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
NONINFRINGEMENT. Except as expressly set forth in this Agreement, Allergan,
Ligand and ALRT disclaim all warranties of any nature, express or implied.
11.2 CONSEQUENTIAL DAMAGES. NO PARTY TO THIS AGREEMENT SHALL BE
ENTITLED TO RECOVER FROM ANY OTHER PARTY ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL
OR PUNITIVE DAMAGES.
12. INDEMNIFICATION.
12.1 INDEMNIFICATION BY ALLERGAN. Allergan hereby agrees to
indemnify and hold Ligand and its Affiliates and their respective agents and
employees harmless from and against any and all suits, claims, actions, demands,
liabilities, expenses and/or losses, including reasonable legal expenses and
attorneys' fees ("Losses"), including, without limitation, any claim or
liability based upon negligence, warranty, strict liability, violation of
government regulation or infringement of patent or other proprietary rights,
arising from or occurring as a result of (a) the use of the Program Technology
or the Non-Retinoid Technology by Allergan or any Affiliate, agent or
sublicensee of Allergan, (b) the research, development, manufacture, sale or use
of Allergan Selected Compounds or (c) subject to Section 11.2, any material
breach of this Agreement by Allergan. Allergan shall have no indemnification
obligations hereunder in any case where such Losses are based upon the gross
negligence or willful misconduct of Ligand.
12.2 INDEMNIFICATION BY LIGAND. Ligand hereby agrees to indemnify
and hold Allergan and its Affiliates and their respective agents and employees
harmless from and against any and all Losses, including, without limitation, any
claim or liability based upon negligence, warranty, strict liability, violation
of government regulation or infringement of patent or other proprietary rights,
arising from or occurring as a result of (a) the use of the Program Technology
or the Non-Retinoid Technology by Ligand or any Affiliate, agent or sublicensee
of Ligand, (b) the research, development, manufacture, sale or use of Ligand
Selected Compounds or (c) subject
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<PAGE> 32
to Section 11.2, any material breach of this Agreement by Ligand. Ligand shall
have no indemnification obligations hereunder in any case where such Losses are
based upon the gross negligence or willful misconduct of Allergan.
12.3 NOTICES; PARTICIPATION. Each Party shall promptly notify the
other Party of any claim of Losses with respect to which such Party is seeking
indemnification hereunder, upon becoming aware thereof. The indemnified Party,
at the indemnifying Party's cost, shall be permitted to retain counsel and to
defend against such claim of Losses. All costs and expenses reasonably incurred
by the indemnified Party hereunder shall be reimbursed to the indemnified Party
by the indemnifying Party as incurred and the indemnifying Party may, at its
option and expense, have its own counsel participate in any proceeding that is
under the direction of the indemnified Party and will cooperate with the
indemnified Party in the disposition of any such matter. Notwithstanding the
foregoing, notices and participation in actions regarding Patent infringement
shall be governed by Section 9.3.2.2 hereunder.
12.4 SURVIVAL. The rights and obligations set forth in this
Section 12 shall survive any termination of this Agreement.
13. TERM AND TERMINATION.
13.1 TERM. This Agreement shall become effective as of the
Effective Date and, unless and until sooner terminated as provided in Sections
13.2 or 13.3 hereof, shall continue in full force and effect indefinitely;
provided, however, that the provisions of Sections 3 and 9.1 shall be effective
as to the Parties as of the date hereof.
13.2 TERMINATION BY MUTUAL AGREEMENT. By mutual agreement, the
Parties may at any time terminate this Agreement on mutually acceptable terms.
13.3 RIGHTS IN BANKRUPTCY. All rights and licenses granted under
or pursuant to this Agreement by Allergan, Ligand and ALRT are, and shall
otherwise be deemed to be, for purposes of Section 365(n) of the Bankruptcy
Code, licenses of rights to "intellectual property" as defined under Section 101
of the Bankruptcy Code. The Parties agree that Allergan, Ligand and ALRT, as
licensees of such rights under this Agreement, shall retain and may fully
exercise all of their rights and elections under the Bankruptcy Code. The
Parties further agree that, in the event of the commencement of a bankruptcy
proceeding by or against Allergan, Ligand or ALRT under the Bankruptcy Code, the
Party hereto which is not a Party to such proceeding shall be entitled to a
complete duplicate of (or complete access to, as appropriate) any such
intellectual property and all embodiments of such intellectual property, and
same, if not already in their possession, shall be promptly delivered to them
(a) upon any such commencement of a bankruptcy proceeding upon their written
request therefore, unless the Party subject to such proceeding elects to
continue to perform all of its obligations under this Agreement, or (b) if not
delivered under (a) above, upon rejection of this Agreement by or on behalf of
the Party subject to such proceeding upon written request therefor by any
non-subject Party.
13.4 NO TERMINATION FOR BREACH. Without limitation of the
foregoing, it is the intent of the Parties that the sole and exclusive remedies
for any Party with respect to any breach or
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failure to perform under this Agreement by the other Party shall be money
damages and/or appropriate injunctive relief and that this Agreement shall not
be terminated by reason of such breach or non-performance.
14. MISCELLANEOUS.
14.1 RETAINED RIGHTS. Nothing in this Agreement shall limit in
any respect the right of any Party to conduct research and development in, and
market products outside of, the Field using such Party's technology, and except
as expressly provided in Section 2 of this Agreement, no license to use the
other Party's technology to do so is granted herein.
14.2 FORCE MAJEURE. No Party shall lose any rights hereunder or
be liable to any other Party for damages or losses on account of failure of
performance by the defaulting Party if the failure is occasioned by Force
Majeure and the Force Majeure shall extend any applicable cure periods provided
for herein; provided that the Party claiming Force Majeure has exerted all
reasonable efforts to avoid or remedy such Force Majeure; provided, further,
that in no event shall a Party be required to settle any labor dispute or
disturbance.
14.3 FURTHER ACTIONS. Each Party agrees to execute, acknowledge
and deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
14.4 NO TRADEMARK RIGHTS. No right, express or implied, is
granted by this Agreement to use in any manner the name "Allergan" or "Ligand"
or any other trade name or trademark of another Party or its Affiliates in
connection with the performance of this Agreement. All rights to the trademarks
"PANRETIN" and "DURARET" shall belong solely to Ligand and/or ALRT.
Notwithstanding the foregoing, (i) no later than forty-five (45) days following
the Closing Date the legal name for ALRT shall be amended by Ligand to remove
any reference to Allergan, and (ii) both Allergan and Ligand shall have the
right to use the acronym "ALRT" solely for purposes of identifying the following
Selected Compounds: 268, 324, 1057, 1550, 4310 and the first two compounds
selected by Allergan from the RXR category pursuant to Section 3.2(a).
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<PAGE> 34
14.5 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
facsimile transmission (receipt verified), or upon receipt if mailed by
registered or certified mail (return receipt requested), postage prepaid, or
sent by express courier service (receipt verified), to the Parties at the
following addresses (or at such other address for a Party as shall be specified
by like notice; provided, that notices of a change of address shall be effective
only upon receipt thereof):
If to Allergan, addressed to:
Allergan, Inc.
2525 Dupont Drive
Irvine, CA 92715-1599
Attn: Corporate Vice President, General Counsel
With copy to: Corporate Vice President, Science and Technology
fax: (714) 246-4774
If to Ligand or ALRT, addressed to:
Ligand Pharmaceuticals Incorporated
9393 Towne Centre Drive
San Diego, CA 92121
Attn: Senior Vice President, General Counsel, Government Affairs
With copy to: President
fax: (619) 625-4521
14.6 GOVERNING LAW. This Agreement shall be governed by the laws
of the State of California, as such laws are applied to contracts entered into
and to be performed within such state. Subject to Section 14.15, any claim or
controversy arising out of or related to this contract or any breach hereof
shall be submitted to a court of competent jurisdiction in the State of
California, and the Parties hereby consent to the jurisdiction and venue of such
court. In the event of any proceeding to enforce the provisions of this
Agreement, the prevailing Party shall be entitled to reasonable attorneys' fees
and legal costs.
14.7 WAIVER. Except as specifically provided for herein, the
waiver from time to time by a Party of any of its rights or its failure to
exercise any remedy shall not operate or be construed as a continuing waiver of
same or of any other of such Party's rights or remedies provided in this
Agreement.
14.8 SEVERABILITY. If any term, covenant or condition of this
Agreement or the application thereof to any Party or circumstance shall, to any
extent, be held to be invalid or unenforceable, then (i) the remainder of this
Agreement, or the application of such term, covenant or condition to parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent permitted by law;
and (ii) the Parties hereto covenant and agree to renegotiate any such term,
covenant or application thereof in good faith in order to provide a reasonably
acceptable alternative to the term, covenant or
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condition of this Agreement or the application thereof that is invalid or
unenforceable, it being the intent of the Parties that the basic purposes of
this Agreement are to be effectuated.
14.9 HEADINGS; AMBIGUITIES. The section and paragraph headings
contained herein are for the purposes of convenience only and are not intended
to define or limit the content of said sections or paragraphs. Ambiguities, if
any, in this Agreement shall not be construed against a Party, irrespective of
which Party may be deemed to have authorized the ambiguous provision.
14.10 ENTIRE AGREEMENT; AMENDMENT. This Agreement (including all
exhibits attached hereto), with the Transition Plan, the Mutual General Release
and the Program Agreements, sets forth all the covenants, promises, agreements,
warranties, representations, conditions and understandings between the Parties
hereto with respect to the subject matter hereof, and supersedes and terminates
all prior agreements and understandings between the Parties. There are no
covenants, promises, agreements, warranties, representations, conditions or
understandings, either oral or written, between the Parties other than as set
forth herein and therein. Without limiting the foregoing, effective as of the
Effective Date, the Joint Agreements shall be terminated and of no further force
or effect. No subsequent alteration, amendment, change or addition to this
Agreement shall be binding upon the Parties hereto unless reduced to writing and
signed by the respective authorized officers of the Parties.
14.11 MUTUAL RELEASES. On the Closing Date, the Parties have
executed and delivered a Mutual General Release in the form attached hereto as
Exhibit I.
14.12 RELATIONSHIP OF THE PARTIES. Nothing contained in this
Agreement is intended or is to be construed to constitute Allergan, Ligand or
ALRT as partners or joint venturers. Except as expressly provided herein (or,
with respect to Ligand and ALRT, as permitted by law), no Party hereto shall
have any express or implied right or authority to assume or create any
obligations on behalf of or in the name of the other Party or to bind any other
Party to any contract, agreement or undertaking with any Third Party.
14.13 SUCCESSORS AND ASSIGNS. Any Party may assign its rights or
obligations under this Agreement to any other Person without the prior written
consent of the other Party; provided, however, that no such assignment shall
relieve any Party of its obligations to another Party under this Agreement.
Subject to the foregoing, any reference to Allergan, Ligand or ALRT hereunder
shall be deemed to include the successors thereto and assigns hereof.
14.14 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which counterparts, when so executed and delivered,
shall be deemed to be an original, and all of which counterparts, taken
together, shall constitute one and the same instrument. As provided in the
Transition Plan, this Agreement shall initially constitute an agreement between
Allergan and Ligand. Upon the Closing Date, Ligand and Allergan shall take all
actions necessary to cause ALRT to execute and deliver this Agreement, and ALRT
shall thereupon become a party hereto.
14.15 DISPUTE RESOLUTION. In an effort to resolve informally and
amicably any claim, controversy, or dispute arising out of or related to the
interpretation, performance, or breach of
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this Agreement or the Transition Plan (a "Dispute") without commencing formal
legal action, each Party shall notify each other Party to the Dispute in writing
of any Dispute hereunder that requires resolution. Such notice shall set forth
the nature of the Dispute, the amount involved, if any, and the remedy sought.
Each Party to such Dispute shall designate an employee to investigate, discuss
and seek to settle the matter between them. If such employees are unable to
settle the matter within *** after delivery of such notification,
the matter shall be submitted to the Chief Executive Officers of each of the
Parties involved in such Dispute for consideration. If settlement cannot be
reached through their efforts within an additional *** (or such
longer time period as they shall agree upon in writing) then any Party may
thereafter take such actions as it deems appropriate. During such ***
(or longer period as agreed in writing), the Chief Executive Officers shall meet
no less than once face-to-face. The Parties agree that any applicable statute of
limitations shall be tolled during the pendency of such informal dispute
resolution process and that no Party shall raise or assert any claim of laches
or other legal or equitable principle of limitation or repose of action based
upon such process. The Parties agree that in no event shall any of them be
subject to the awarding of any punitive or exemplary damages in any legal action
arising out of or related to this Agreement or the Transition Plan.
[Remainder of This Page Intentionally Left Blank]
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*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 37
IN WITNESS WHEREOF the Parties have executed this Agreement as of
the date first above written.
ALLERGAN, INC.
By /s/ William C. Shepherd
--------------------------------------------------
William C. Shepherd
Chairman and Chief Executive Officer
LIGAND PHARMACEUTICALS INCORPORATED
By /s/ David E. Robinson
--------------------------------------------------
David E. Robinson
President and Chief Executive Officer
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
By /s/ David E. Robinson
--------------------------------------------------
David E. Robinson
President
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<PAGE> 38
Exhibit A
Ligand Exercise Notice
<PAGE> 39
[LOGO]
LIGAND
Pharmaceuticals
September 24, 1997
Allergan, Inc.
2525 Dupont Drive
Irvine, CA 92715-1599
Attn: Corporate Vice President, General Counsel
Allergan Ligand Retinoid Therapeutics, Inc.
9393 Towne Centre Drive
San Diego, CA 92121
Attn: Secretary
Re: Notice of Exercise of Stock Purchase Option
Dear Sirs:
This letter will serve as notice, pursuant to Article V of the Amended and
Restated Certificate of Incorporation of Allergan Ligand Retinoid Therapeutics,
Inc. (ALRT), of Ligand's election to exercise its Stock Purchase Option pursuant
to said Amended and Restated Certificate of Incorporation of ALRT. Attached
hereto is a copy of the notice to ALRT shareholders, along with accompanying
cover letter and transmittal, being mailed on even date herewith.
Very Truly Yours,
/s/ David E. Robinson
David E. Robinson
Chairman, President and CEO
Ligand Pharmaceuticals Incorporated
Attachment
cc: Faye H. Russell, Esq.
Thomas A. Coll, Esq.
Mary Rosenthale
<PAGE> 40
[LOGO]
LIGAND
Pharmaceuticals
LIGAND PHARMACEUTICALS INCORPORATED
9393 Towne Center Drive
San Diego, California 92121
September 24, 1997
To the Holders of Callable Common Stock of
Allergan Ligand Retinoid Therapeutics, Inc.:
Ligand Pharmaceuticals Incorporated ("Ligand") has exercised its
Stock Purchase Option, granted to it under the Amended and Restated Certificate
of Incorporation of Allergan Ligand Retinoid Therapeutics, Inc. ("ALRT"), to
purchase all of the issued and outstanding shares of Callable Common Stock,
$.001 par value per share, of ALRT (the "Callable Common Stock") at an exercise
price of $21.97 (the "Exercise Price") for each outstanding share of Callable
Common Stock. Upon surrender of your certificates representing shares of
Callable Common Stock in accordance with the instructions referred to herein,
payment shall be made with a combination of cash and shares of Ligand Common
Stock, or at Ligand's option, all cash.
Enclosed is a formal Notice of Exercise and a Letter of
Transmittal to use in surrendering the certificates representing your shares of
Callable Common Stock for payment in the form of cash and certificates
representing shares of Ligand Common Stock. The Letter of Transmittal contains
instructions that you should read and follow carefully. Please make sure it is
properly completed, signed and dated. Your shares of Callable Common Stock were
issued as part of a Unit comprised of one share of Callable Common Stock and a
Warrant to purchase two shares of Ligand Common Stock. Please separate the
certificate(s) representing the shares of Callable Common Stock from the
certificate(s) representing the Warrant(s) if this has not been previously done.
You may submit your certificates representing shares of Callable
Common Stock and your Letter of Transmittal either by mail or by hand at the
addresses set forth in the Letter of Transmittal. The method of delivery of
stock certificates is at your option and risk. If sent by mail, it is strongly
recommended that certificates be sent by registered mail, properly insured, with
return receipt requested.
If you have any questions regarding how to surrender your stock
certificates for payment, or if you need additional copies of the Letter of
Transmittal, please contact the Payment Agent, ChaseMellon Shareholder Services,
L.L.C., at 888-216-8061. Questions related to Notice of Exercise should be
directed to Ligand Investor Relations request line 619-550-7700.
Sincerely,
/s/ David E. Robinson
David E. Robinson
President and Chief Executive Officer
LIGAND PHARMACEUTICALS INC. 9393 Towne Centre Drive, San Diego, CA 92121 (619)
535-3900 fax (619) 535-3906
<PAGE> 41
NOTICE OF EXERCISE OF STOCK PURCHASE OPTION
This Notice of Exercise of Stock Purchase Option shall constitute
notice of the intent of Ligand Pharmaceuticals Incorporated ("Ligand") to
exercise the Stock Purchase Option (as defined in Article V of the Amended and
Restated Certificate of Incorporation of Allergan Ligand Retinoid Therapeutics,
Inc. (the "Certificate")). Defined terms not otherwise defined herein shall have
the meanings given them in the Certificate.
1. The Stock Purchase Option Exercise Price, as determined pursuant
to Section 5.2 of the Certificate, shall be $21.97 per share of
outstanding Callable Common Stock, for an aggregate Stock
Purchase Option Exercise Price of $71,402,500.
2. 35 percent, or $7.69 of the Stock Purchase Option Exercise
Price, shall be paid in cash.
3. 65 percent, or $14.28 of the Stock Purchase Option Exercise
Price, shall be paid in shares of Ligand Common Stock.
4. -0- percent, or $ -0- of the Stock Purchase Option Exercise
Price, shall be paid in shares of Allergan Common Stock.
5. Notwithstanding the foregoing, and in accordance with the terms
of Article V of the Certificate of Incorporation, Ligand
reserves the right to make payment of a greater amount of the
Stock Purchase Option Exercise Price in cash than set forth
herein.
6. The Record Date shall be October 14, 1997.
7. The Stock Purchase Closing Date shall be November 3, 1997, or
such other date as permitted under the last sentence of Section
5.6 of the Certificate.
8. Holders of shares of Callable Common Stock may obtain payment of
the Stock Purchase Option Exercise Price for their shares of
Callable Common Stock from the Payment Agent, as set forth on
Exhibit A attached to this Notice.
9. Questions related to this Notice of Exercise should be directed
to Ligand Investor Relations request line 619-550-7700. Payment
Agent will assist you regarding the completion of Letter of
Transmittal, if necessary.
A registration statement relating to the shares of Ligand Common
Stock to be issued on the Stock Purchase Closing Date will be filed with the
Securities and Exchange Commission but has not yet become effective. These
securities may not be sold nor may offers be accepted prior to the time the
registration statement becomes effective. This Notice of Exercise of Stock
Purchase Option shall not constitute an offer to sell nor the solicitation of an
offer to buy nor shall there by any sale of these securities in any state in
which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such state.
Dated: September 24, 1997
/s/ David E. Robinson
----------------------------------------
David E. Robinson, President
Ligand Pharmaceuticals Incorporated
<PAGE> 42
LETTER OF TRANSMITTAL TO ACCOMPANY SHARES OF
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
CALLABLE COMMON STOCK, PAR VALUE $.001 PER SHARE
<TABLE>
<CAPTION>
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DESCRIPTION OF SHARES SURRENDERED
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If there is any error in this name and Registration address
shown below, please make the necessary corrections Certificate No(s) Number of Shares
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<S> <C> <C>
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--------------------------------------------------------------
--------------------------------------------------------------
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Total
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</TABLE>
NOTE: If your certificate(s) has been lost, stolen, misplaced or
mutilated, contact the Payment Agent at 1-888-216-8061. See
Instruction 5.
Please issue my new certificate and/or check in the name shown
above and deliver such check to the address reflected above unless instructions
are given in the boxes below:
Mail or deliver this Letter of Transmittal, or a facsimile,
together with the certificate(s) representing your shares to ChaseMellon
Shareholder Services, L.L.C., the Payment Agent, at one of the following
addresses. Your stock and/or cash entitlement is described in the accompanying
notice.
ChaseMellon Shareholder Services, L.L.C.
<TABLE>
<S> <C> <C>
BY HAND BY MAIL BY OVERNIGHT DELIVERY
120 Broadway, 13th Fl. Post Office Box 3305 85 Challenger Road - Mail Drop-Reorg
New York, NY 10271 South Hackensack, NJ 07606 Ridgefield Park, NY 07660
ATTN: Reorganization Department Attn: Reorganization Department Attn: Reorganization Department
TELEPHONE
1-888-216-8061
</TABLE>
SPECIAL ISSUANCE INSTRUCTIONS
(See Instruction 4 on the reverse hereof)
Complete only if new certificate and/or check is to be issued in a name which
differs from the name on the surrendered certificate(s).
Name
------------------------------------------------------------------------
Address
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please also complete Substitute Form W-9 on the reverse AND see instructions
regarding signature guarantee.)
- --------------------------------------------------------------------------------
SIGNATURE(S) REQUIRED
(Signature(s) of Registered Holder(s) or Agent)
Must be signed by the registered holder(s) EXACTLY as name(s) appear(s) on
Unless shares are surrendered by the registered holder(s) or for the account of
a member stock certificate(s) or on a security position listing. If signature is
by a trustee, of a "Signature Guarantee Program ("STAMP"), Stock Exchange
Medallion Program executor, administrator, guardian, attorney-in-fact, officer
of a corporation acting in ("SEMP") or New York Stock Exchange Medallion
Signature Program ("MSP") (an a fiduciary or representative capacity, or other
person please set forth full title. See "Eligible Institution") signature(s)
must be guaranteed by an Eligible Institution. See Instructions 2, 3 and 4.
Instruction 3.
- --------------------------------------------------------------------------------
Registered Holder
- --------------------------------------------------------------------------------
Registered Holder
- --------------------------------------------------------------------------------
Title, if any
- --------------------------------------------------------------------------------
Date: Phone No.:
- ----------------------------- ------------------------
SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 4 on the reverse hereof)
Complete only if new certificate and/or check is to be mailed to some address
other than the address reflected above.
Name
------------------------------------------------------------------------
Address
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) GUARANTEED
(IF REQUIRED)
Unless shares are surrendered by the registered holder(s) or for the account of
a member of a "Signature Guarantee Program ("STAMP"), Stock Exchange Medallion
Program ("SEMP") or New York Stock Exchange Medallion Signature Program ("MSP")
(an "Eligible Institution") signature(s) must be guaranteed by an Eligible
Institution. See Instruction 3.
- --------------------------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Name of Firm)
- --------------------------------------------------------------------------------
(Address of Firm - Please Print)
NOTE: YOU MUST COMPLETE THE SUBSTITUTE FORM W-9 ON THE REVERSE HEREOF.
<PAGE> 43
INSTRUCTIONS FOR SURRENDERING CERTIFICATES
1. Method of Delivery: Your old certificate(s) and the Letter of
Transmittal must be sent or delivered to the Payment Agent. The method of
delivery of Certificates to be surrendered to the Payment Agent at one of the
addresses set forth on the front of the Letter of Transmittal is at the option
and risk of the surrendering stockholder. Delivery will be deemed effective only
when received. If the certificate(s) are sent by mail, registered mail with
return receipt requested, properly insured, is suggested. A return envelope is
enclosed.
2. New Certificate and/or check is issued to registered holder.
If the new certificate and/or check is issued in the same name as the
surrendered certificate is registered, the Letter of Transmittal should be
completed and signed exactly as the surrendered certificate is registered. Do
not sign the Certificate(s). If any Certificate surrendered hereby is owned by
two or more joint owners, all such owners must sign this Letter of Transmittal
exactly as written on the face of the certificate(s). If any shares are
registered in different names on several certificates, it will be necessary to
complete, sign and submit as many separate Letters of Transmittal as there are
different registrations.
3. New Certificate and/or check is issued to another person.
Except as otherwise provided below, signatures on this Letter of Transmittal
must be guaranteed by a firm that is a bank, broker, dealer, credit union,
savings association or other entity which is a member in good standing of the
Securities Transfer Agents' Medallion Program (each an "Eligible Institution").
Signature guarantees are not required if the certificate(s) surrendered herewith
are submitted by the registered owner of such shares who has not completed the
section entitled "Special Issuance Instructions" or for the account of an
Eligible Institution. If the surrendered certificates are registered in the name
of a person other than the signer of this Letter of Transmittal, or if issuance
is to be made to a person other than the signer of this Letter of Transmittal,
or if the issuance is to be made to a person other than the registered owner or
owners, then the surrendered certificates must be endorsed or accompanied by
duly executed stock powers, in either case signed exactly as the name or names
of the registered owner or owners appear on such certificates or stock powers,
with the signatures on the certificates or stock powers guaranteed by an
Eligible Institution as provided herein.
4. Special Issuance and Delivery Instructions: Indicate the name
and address to which the new certificate and/or checks to be sent if different
from the name and/or address of the person(s) signing this Letter of
Transmittal.
5. Letter of Transmittal Required, Surrender of Certificate(s),
Lost Certificate(s): You will not receive your new certificate and/or check
unless and until you deliver this Letter of Transmittal, properly completed and
duly executed, to the Payment Agent, together with the certificate(s) evidencing
your shares and any required accompanying evidences of authority. If your
certificates have been lost, stolen, misplaced or mutilated, contact the Payment
Agent for instructions at 1-888- 216-8061 prior to submitting your certificates
for exchange.
6. Substitute Form W-9. Each stockholder who surrenders one or
more certificates is required to provide the Payment Agent with such
stockholder's correct Taxpayer Identification Number ("TIN") on Substitute Form
W-9, which is attached. Failure to provide the information on the form may
subject the surrendering stockholders to 31% federal income tax withholding on
the payment of any cash consideration due for the former shares evidenced by the
certificate(s) surrendered. The words "Applied For" should be written in the
space for the TIN in Part III of the form if the surrendering stockholder has
not been issued a TIN and has applied for a number or intends to apply for a
number in the near future. If the words "Applied For" are written in Part III
and the Payment Agent is not provided with a TIN within 60 days, the Payment
Agent will withhold 31% on all payments to such surrendering stockholders of any
cash consideration due for their former shares until a TIN is provided to the
Payment Agent.
IMPORTANT TAX INFORMATION
What Taxpayer Identification Number to Give the Payment Agent
The registered holder or transferee(s), if any, is required to
give the Payment Agent the social security number or employer identification
number of the registered holder of the certificate(s). If the certificate(s) are
in more than one name or are in the name of the actual owner, consult the
enclosed Form W-9 guidelines for additional guidance on which number to report.
<TABLE>
PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
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<S> <C> <C>
SUBSTITUTE Part 1 - PLEASE PROVIDE YOUR TIN IN THE BOX AT Part III - Social Security Number OR
RIGHT AND CERTIFY BY SIGNING AND DATING BELOW Employer Identification Number
Form W-9
Department of the Treasury
Internal Revenue Service __________________________________________
(If awaiting TIN write "Applied For")
Payer's Request for Taxpayer
Identification Number (TIN)
and Certification
----------------------------------------------------------------------------------------------
Payer's Request for Taxpayer Part II - For Payees exempt from backup withholding, see the enclosed Guidelines
Identification Number (TIN) for Certification of Taxpayer Identification Number on Substitute Form W-9 and complete as
and Certification instructed therein.
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Certification -- Under penalties of perjury, I certify that: (1) The Number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me); and (2) I am not subject to backup withholding either because I have not
been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of failure to report all
interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. Certification Instructions -
You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup
withholding, you received another notification from the IRS that you were no longer subject to backup withholding, do not cross out
item (2). (Also see instructions on the enclosed Guidelines)
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SIGNATURE DATE
--------------------------------------- ---------------------------------------
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</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING YOUR TIN.
<PAGE> 44
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a TIN has not been issued to me,
and either (1) I have mailed or delivered an application to receive a TIN to the
appropriate IRS Center or Social Security Administration Office or (2) I intend
to mail or deliver an application in the near future. I understand that if I do
not provide a TIN by the time of payment, 31% of all payments made to me
thereafter will be withheld until I provide a number.
____________________________________ _________________________
Signature Date
<PAGE> 45
Exhibit B
Allergan Exercise Notice
<PAGE> 46
ALLERGAN [LOGO]
2525 Dupont Drive, P.O. Box 19534, Irvine CA 92623-9534 (714) 752-4500
William C. Shepherd, Chairman and
Chief Executive Officer
Direct: (714) 246-4601
FAX: (714) 246-5918
September 24, 1997
Ligand Pharmaceuticals Incorporated VIA PERSONAL DELIVERY
9393 Towne Centre Drive
San Diego, CA 92121
Attention: Senior Vice President,
General Counsel, Government Affairs
Allergan Ligand Retinoid Therapeutics, Inc.
9393 Towne Centre Drive
San Diego, CA 92121
Attention: Secretary
Re: Asset Purchase Option Agreement
Notice of Exercise of Asset Purchase Option
Dear Sirs:
This letter shall serve as notice, pursuant to Section 1.5 of the Asset Purchase
Option Agreement by and among Ligand Pharmaceuticals Incorporated, Allergan,
Inc. ("Allergan") and Allergan Ligand Retinoid Therapeutics, Inc. ("ALRT") dated
June 3, 1995 (the "Agreement"), of Allergan's election to exercise the Asset
Purchase Option pursuant to Section 1.5 of the Agreement. Capitalized terms not
otherwise defined herein shall have the meanings given to them in the Agreement.
As determined in accordance with Section 1.3 of the Agreement, the Asset
Purchase Option Exercise Price is $8,900,000, all of which, in accordance with
Section 1.4 of the Agreement, will be paid to ALRT in cash via wire transfer at
the Asset Purchase Closing.
Very truly yours,
ALLERGAN, INC.
/s/ William C. Shepherd
William C. Shepherd
Chairman, President and
Chief Executive Officer
cc: Ligand Pharmaceuticals Incorporated
Attention: President
Faye H. Russell, Esq.
Thomas A. Coll, Esq.
<PAGE> 47
Exhibit C
Compound 268
* * *
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 48
Exhibit D
Compound 324
* * *
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 49
Exhibit E
Compound 1057
LIGAND Name: * * *
IUPAC Name: * * *
Common name: * * *
CAS Number: * * *
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 50
Exhibit F
Compound 1069
LIGAND Name: * * *
Chemical Name: * * *
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 51
Exhibit G
Allergan Selected Compounds
AGN 4310: * * *
ALRT 4204: * * *
INCLUDING: ALRT 4277: Enantiomer of ALRT 4204
ALRT 2599: Racemic Mixture; ALRT 4204 + ALRT 4277
ALRT 326: * * *
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 52
Exhibit H
Ligand Selected Compounds
LGD 268: See Exhibit C
LGD 324: See Exhibit D
LGD: 1057: See Exhibit E
AGN: 1550:
* * *
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 53
Exhibit I
Mutual General Release
<PAGE> 54
MUTUAL GENERAL RELEASE
THIS MUTUAL GENERAL RELEASE (the "Release") is being executed and
delivered as of ________________, 1997 by and among ALLERGAN, INC., a Delaware
corporation having offices at 2525 Dupont Drive, Irvine, California 92715-1599
("Allergan"), LIGAND PHARMACEUTICALS INCORPORATED, a Delaware corporation having
offices at 9393 Towne Centre Drive, San Diego, California 92121 ("Ligand"), and
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC., a Delaware corporation having
offices at 9393 Towne Centre Drive, San Diego, California 92121 ("ALRT"). Terms
used herein but not defined herein shall have the meanings given such terms in
the Amended and Restated Technology Cross License Agreement dated September __,
1997 (the "License Agreement").
RECITALS
WHEREAS, (i) Allergan, Ligand and ALRT are Parties to the License
Agreement and the Transition Agreement dated September ___, 1997 (the
"Transition Agreement"), (ii) Allergan, Ligand and ALRT are Parties to the
Program Agreements, (iii) Allergan and Ligand have entered into the Joint
Agreements between themselves, (iv) pursuant to the Stock Purchase Option,
Ligand has delivered irrevocable notice of its election to acquire all of the
outstanding Callable Common Stock of ALRT in accordance with the terms thereof
and (v) pursuant to the Asset Purchase Option, Allergan has delivered
irrevocable notice of its election to acquire from ALRT the Purchased Assets in
accordance with the terms thereof; and
WHEREAS, under Section 14.11 of the License Agreement, the
Parties have agreed to execute and deliver this Release.
AGREEMENT
The Parties acknowledge that, in order to induce each other to
consummate the transactions contemplated by the License Agreement and the
Transition Agreement, respectively, the Parties hereby for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged and
intending to be legally bound, covenant and agree as follows:
1. RELEASE. Each Party to this Release, when executed by all other
Parties, for itself and for each of such Party's Associated Parties (as defined
in Section 2), hereby generally, irrevocably, unconditionally and completely
releases, acquits and forever discharges each of the Releasees (as defined in
Section 2) from, and hereby irrevocably, unconditionally and completely waives
and relinquishes, each of the Released Claims (as defined in Section 2).
2. DEFINITIONS.
(a) "Associated Party" when used herein with respect to a Party,
shall mean and include: (i) such Party's past, present and future assigns,
agents and representatives; (ii) each entity that such Party has the power to
bind (by such Party's acts or signature) or over which such Party directly or
indirectly exercises control; and (iii) each entity of which such Party owns,
<PAGE> 55
directly or indirectly, at least 50% of the outstanding equity, beneficial,
proprietary, ownership or voting interests.
(b) "Releasees" shall mean and include Allergan, Ligand and ALRT
and their respective successors, and past, present and future assigns,
directors, officers, partners, employees, agents, attorneys and representatives.
(c) "Claims" shall mean and include all past, present and future
disputes, claims, damages, controversies, demands, rights, obligations,
liabilities, actions and causes of action of every kind and nature, in equity or
otherwise, whether known, unknown, suspected, unsuspected, disclosed or
undisclosed.
(d) "Released Claims" shall mean and include each and every Claim
that a Party or any Associated Party of such Party may have had in the past, may
now have or may have in the future against any of the Releasees, and that has
arisen or arises directly or indirectly out of, or relates directly or
indirectly to, any circumstance, agreement, activity, action, omission, event or
matter occurring or existing on or prior to the date of this Release and which
arises out of or relates to the Program Agreements or any other prior
association among Allergan, Ligand and/or ALRT (excluding only such Party's
continuing rights as expressly set forth in the Program Agreements and in any
event excluding such Party's rights under the License Agreement, the Transition
Agreement and any agreement executed and delivered in connection with the
License Agreement and/or the Transition Agreement).
3. REPRESENTATIONS AND WARRANTIES. Each Party represents and
warrants that as of the Closing Date:
(a) such Party has not assigned, transferred, conveyed or
otherwise disposed of any Claim against any of the Releasees, or any direct or
indirect interest in any such Claim, in whole or in part;
(b) to the best of such Party's knowledge, no other person or
entity has any interest in any of the Released Claims;
(c) no Associated Party of such Party has or has had any Claim
against any of the Releasees;
(d) no Associated Party of such Party will in the future have any
Claim against any Releasee that arises directly or indirectly from or relates
directly or indirectly to any circumstance, activity, action, omission, event or
matter occurring or existing on or before the date of this Release;
(e) this Release has been duly and validly executed and delivered
by such Party;
-2-
<PAGE> 56
(f) this Release is a valid and binding obligation of such Party
and such Party's Associated Parties, and is enforceable against such Party and
each of such Party's Associated Parties in accordance with its terms;
(g) there is no action, suit, proceeding, dispute, litigation,
claim, complaint or investigation by or before any court, tribunal, governmental
body, governmental agency or arbitrator pending, or to the best knowledge of
such Party, threatened against such Party or any of such Party's Associated
Parties that challenges or would challenge the execution and delivery of this
Release or the taking of any of the actions required to be taken by such Party
under this Release;
(h) neither the execution and delivery of this Release nor the
performance hereof will (i) result in any violation or breach of any agreement
or other instrument to which such Party or any of such Party's Associated
Parties is bound, or (ii) result in a violation or any law, rule, regulation,
treaty, ruling, directive, order, arbitration award, judgment or decree to which
such Party or any of such Party's Associated Parties is subject; and
(i) no authorization, instruction, consent or approval of any
person or entity is required to be obtained by such Party or any of such Party's
Associated Parties in connection with the execution and delivery of this Release
or the performance hereof.
4. CIVIL CODE SECTION 1542. Each Party represents, warrants and agrees that it
has been fully advised by its attorney of the contents of Section 1542 of the
Civil Code of the State if California. Each party expressly waives and
relinquishes all rights and benefits under that section and any similar law or
common law principle of similar effect of any state or territory of the United
States with respect to the Released Claims. Section 1542 reads as follows:
"A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
effected his settlement with the debtor."
5. INDEMNIFICATION. Without in any way limiting any of the rights or remedies
otherwise available to any Releasee, each Party shall, severally not jointly,
indemnify, defend and hold harmless each Releasee against and from any loss,
damage, injury, harm, detriment, lost opportunity, liability, exposure, claim,
demand, settlement, judgment, award, fine, penalty, tax, fee, charge or expense
(including reasonable attorneys' fees) that is directly or indirectly suffered
or incurred at any time by such Releasee, or to which such Releasee otherwise
becomes subject at any time, and that arises directly or indirectly out of or by
virtue of, or relates directly or indirectly to, (a) any failure on the part of
such Party to observe, perform or abide by, or any other breach of, any
restriction, covenant, obligation, representation, warranty or other provision
contained herein, or (b) the assertion or purported assertion of any of the
Released Claims by such Party or any of such Party's Associated Parties.
-3-
<PAGE> 57
6. MISCELLANEOUS.
(a) This Release sets forth the entire understanding of the
Parties relating to the subject matter hereof and supersedes all prior
agreements and understandings among or between the Parties relating to the
subject matter hereof.
(b) Each party represents and warrants that such Party is not
relying on any representation or warranty of any Party other than those
contained herein in the execution and delivery of this Release.
(c) If any provision of this Release or any part of any such
provision is held under any circumstances to be invalid or unenforceable in any
jurisdiction, then (i) such provision or part thereof shall, with respect to
such circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (ii) the invalidity or unenforceability of such provision or part
thereof under such circumstances and in such jurisdiction shall not affect the
validity or enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (iii) such invalidity or
unenforceability of such provision or part thereof shall not affect the validity
or enforceability of the remainder of such provision or the validity or
enforceability of any other provision of this Release. If any provision of this
Release or any part of such provision is held to be unenforceable against a
Party, then the unenforceability of such provision or any part thereof against
such Party shall not affect the enforceability thereof against any other Party.
Each provision of this Release is separable from every other provision of this
Release, and each part of each provision of this Release is separable from every
other part of such provision.
(d) This Release shall be construed in accordance with, and
governed in all respects by, the laws of the State of California (without giving
effect to principles of conflicts of laws).
(e) Any legal action or other legal proceeding relating to this
Release or the enforcement of any provision of this Release may be brought or
otherwise commenced by any Releasee in any state or federal court located in ***
County in the State of California. Each Party expressly and irrevocably consents
and submits to the jurisdiction of each state and federal court located in ***
County in the State of California in connection with any such legal proceeding.
Each Party agrees that any such state and federal courts located in such
counties in the State of California shall be deemed to be a convenient forum.
Each Party agrees not to assert (by way of motion, as a defense or otherwise),
in any such legal proceeding commenced in any such state or federal court, any
claim that such Party is not subject personally to the jurisdiction of such
court, that such legal proceeding has been brought in an inconvenient forum,
that the venue of such proceeding is improper or that this Release or the
subject matter of this Release may not be enforced in or by such court. Nothing
contained in this Release shall be deemed to limit or otherwise affect the right
of any Releasee (1) to commence any legal proceeding or to otherwise proceed
against a
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
-4-
<PAGE> 58
Party or any other person or entity in any other forum or jurisdiction, or (2)
to raise this Release as a defense in any legal proceeding in any other forum or
jurisdiction.
(f) Each Party shall execute and/or cause to be delivered to each
Releasee such instruments and other documents, and shall take such other
actions, as such Releasee may reasonably request for the purpose of carrying out
or evidencing any of the actions contemplated by this Release.
(g) This Release shall be interpreted and construed mutually in
accordance with the plain meaning of the language contained herein and shall not
be preemptively construed against the drafters.
(h) If any legal action or other legal proceeding relating to
this Release or the enforcement of any provision hereof is brought by a Party,
the prevailing Party shall be entitled to recover reasonable attorneys' fees,
costs and disbursements to the extent actually incurred (in addition to any
other relief to which the prevailing Party may be entitled).
IN WITNESS WHEREOF the Parties have executed this Release as of
the date first above written.
ALLERGAN, INC.
By___________________________________
_____________________________________
[TITLE]
LIGAND PHARMACEUTICALS INCORPORATED
By___________________________________
_____________________________________
David E. Robinson
President and Chief Executive Officer
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
By___________________________________
_____________________________________
<PAGE> 59
Exhibit J
Database Information
<PAGE> 60
[LOGO] PHARMACEUTICAL R & D
RETINOID TEAM
INTEROFFICE MEMORANDUM
TO: Les Kaplan
FROM: Rosh Chandraratna
RE: EXHIBIT J: Database information
DATE: September 19, 1997
FROM LIGAND
* * *
* * *
* * *
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 61
Memorandum
September 19, 1997
Page 2
FROM ALLERGAN:
* * *
* * *
* * *
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 62
EXHIBIT K
LIST OF LOTTERY COMPOUNDS BY CATEGORY
REFERENCE IS MADE TO THAT CERTAIN LETTER DATED SEPTEMBER 19, 1997 FROM ***
***
***
*** . FOR PURPOSES OF THIS AMENDED AND RESTATED TECHNOLOGY CROSS LICENSE
AGREEMENT ("AGREEMENT"), THE LOTTERY COMPOUNDS REFERENCED IN SECTION 3.1(B) OF
THE AGREEMENT AS BEING IN EXISTENCE ON THE DATE HEREOF AND LISTED ON EXHIBIT K
SHALL BE DEEMED TO INCLUDE THE PROGRAM COMPOUNDS SET FORTH ON THE LISTS
DELIVERED UNDER COVER OF THE LETTERS. THE PARTIES ACKNOWLEDGE AND AGREE THAT (I)
THAT SUCH LISTS MAY NOT CONTAIN A FULL LISTING OF ALL PROGRAM COMPOUNDS IN
EXISTENCE AS OF THE DATE HEREOF, (II) SUCH LISTS MAY CONTAIN MORE THAN ONE
REFERENCE TO THE SAME PROGRAM COMPOUND, (III) ALLERGAN AND LIGAND HAVE NOT YET
AGREED UPON THE CLASSIFICATION OF SUCH PROGRAM COMPOUNDS INTO EACH OF THE
RESPECTIVE CATEGORIES PROVIDED FOR IN THE AGREEMENT AND (IV) ALLERGAN AND LIGAND
SHALL DILIGENTLY WORK TO FINALIZE THE LIST OF LOTTERY COMPOUNDS AND CLASSIFY
SUCH FINAL LIST INTO THE CATEGORIES SPECIFIED IN THE AGREEMENT AS SOON AS
PRACTICABLE BUT NOT LATER THAN TEN (10) DAYS PRIOR TO THE MUTUALLY AGREED UPON
DATE OF THE LOTTERY IN ACCORDANCE WITH THE AGREEMENT. SUCH FINAL LIST WITH
LOTTERY COMPOUNDS ORGANIZED BY CATEGORY SHALL BE ATTACHED TO THIS EXHIBIT K ON
OR PRIOR TO THE CLOSING DATE.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 63
EXHIBIT L
CERTAIN THIRD PARTY AGREEMENTS
1. Salk Institute License Agreement with Ligand Pharmaceuticals
Incorporated of October 20, 1988, as amended on September 15,
1989, December 1, 1989 and October 20, 1990; and agreements
covering the transfer of biological reagents of September 15,
1989, February 9, 1990, June 8, 1990 and November 14, 1990.
2. Baylor College of Medicine Sponsored Research and License
Agreement with Ligand Pharmaceuticals Incorporated of March 9,
1992, as amended on September 1, 1992.
3. Baylor College of Medicine License Agreement with Ligand
Pharmaceuticals Incorporated to 9-cis retinoc acid technology and
patents, of August 25, 1995.
4. Institut Pasteur Exclusive License Agreement with Ligand
Pharmaceuticals Incorporated of October 1, 1989.
5. HSC Research and Development Limited Partnership and Mount Sinai
Hospital Exclusive License Agreement with Ligand Pharmaceuticals
Incorporate of January 27, 1992.
6. Settlement Agreement, License and Mutual General Release of
August 23, 1995 between La Jolla Center Research Foundation (now
the Burnham Institute), SelectRA Pharmaceuticals, Inc. and SRI
International (collectively, "Defendants") and Ligand
Pharmaceuticals Incorporated, Allergan Ligand, a California
partnership (collectively, "Plaintiffs") and Allergan Ligand
Retinoid Therapeutics, Inc.
<PAGE> 1
EXHIBIT 10.166
TRANSITION AGREEMENT
This TRANSITION AGREEMENT ("Agreement") is entered into as of the 24th
day of September, 1997 among ALLERGAN, INC., a Delaware corporation having
offices at 2525 Dupont Drive, Irvine, California 92715-1599 ("Allergan"), LIGAND
PHARMACEUTICALS INCORPORATED, a Delaware corporation having offices at 9393
Towne Centre Drive, San Diego, California 92121 ("Ligand"), and ALLERGAN LIGAND
RETINOID THERAPEUTICS, INC., a Delaware corporation having offices at 9393 Towne
Centre Drive, San Diego, California 92121 ("ALRT").
A. (i) Allergan, Ligand and ALRT are Parties to the Amended and Restated
Technology Cross License Agreement of even date herewith (the "License
Agreement"), (ii) Allergan, Ligand and ALRT are Parties to the Program
Agreements, (iii) Allergan and Ligand have entered into the Joint Agreements
between themselves, (iv) pursuant to the Stock Purchase Option, Ligand will
deliver, within two (2) business days, irrevocable notice of its election to
acquire all of the outstanding Callable Common Stock of ALRT in accordance with
the terms of the Stock Purchase Option pursuant to the Ligand exercise notice in
the form attached to the License Agreement as Exhibit A and (v) pursuant to the
Asset Purchase Option, Allergan will deliver, within two (2) business days,
notice of its election to acquire from ALRT the Purchased Assets (as defined in
Section 1.1 of that certain Asset Purchase Option Agreement dated June 3, 1995
among Allergan, Ligand and ALRT) in accordance with the terms of the Asset
Purchase Option pursuant to the Allergan exercise notice in the form attached to
the License Agreement as Exhibit B.
B. The Parties desire to enter into this Agreement to provide for, among
other things, the transition prior to and following the Effective Date of
research and development being conducted with respect to Selected Compounds and
other costs incurred by or on behalf of ALRT.
C. On or prior to the date hereof, Ligand has, or within two (2) days
following the date hereof Ligand will have, prepared and filed with the
Securities and Exchange Commission ("SEC") a Registration Statement with respect
to the issuance of any shares of Ligand Common Stock being issued in payment of
the Stock Purchase Option Exercise Price in accordance with Sections 5.3 and 5.6
of ALRT's Amended and Restated Certificate of Incorporation (the "Restated
Certificate").
NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Allergan, Ligand and ALRT hereby agree as follows:
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1. DEFINITIONS. Terms used herein but not defined herein shall have the
meanings given such terms in the License Agreement.
2. SHARING OF COSTS
2.1 CLASSIFICATION OF ALRT COSTS. All costs incurred by, on behalf of or
which are reimbursable under the Program Agreements by ALRT (the "ALRT Costs")
shall be classifiable into three categories consistent with the ALRT financial
statements, as follows:
(a) Research consulting agreements classified by ALRT as
research costs;
(b) All other costs classified by ALRT as research and
development costs ("R&D Costs"); and
(c) Costs classified by ALRT as general and administrative
costs ("G&A Costs").
2.2 PAYMENT OF ALRT COSTS. ALRT Costs will be paid by ALRT to Third
Parties, or reimbursed to Allergan and Ligand, in accordance with the terms
stated below:
(a) All research consulting agreements referred to in
Section 2.1(a) are listed on Exhibit A to this Agreement. These agreements shall
be assigned to and assumed by either Allergan or Ligand as of the Cut-Off Date
(defined below), as prescribed on Exhibit A, and the costs of continuing such
agreements shall be the responsibility of the assigned party after such date. As
between Allergan and Ligand, the consultant under each such agreement shall
perform services under such agreement for the assigned party after such date;
provided that all inventions and discoveries made by such consultant pursuant to
such agreement (i) on or prior to the Closing Date shall be included in "Program
Technology" and (ii) subsequent to the Closing Date shall be owned by the
assigned party.
(b) ALRT shall pay or reimburse all R&D Costs incurred
prior to the date which is thirty (30) days following the date of the License
Agreement (the "Cut-Off Date").
R&D costs will consist of (i) R&D costs incurred, identified and invoiced prior
to the Cut-Off Date, (ii) R&D costs incurred, identified and not invoiced prior
to the Closing Date and (iii) R&D costs incurred, not identified and not
invoiced prior to the Closing Date. Expenditures and commitments for R&D Costs
shall be consistent with previously-approved R&D activities on behalf of ALRT.
(c) ALRT Costs incurred with respect to Selected Compounds
after the Cut-Off Date shall be the responsibility of Allergan with respect to
Allergan Selected Compounds and Ligand with respect to Ligand Selected
Compounds.
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(d) ALRT shall pay or reimburse all G&A Costs incurred
prior to the Closing Date. Such costs will include all salary, benefit and
severance costs of ALRT's employee.
ALRT shall also pay all G&A Costs related to termination of operation of ALRT as
a publicly traded company, including costs which may be incurred after the
Closing Date. Any such post-Closing costs shall be paid out of the Cash Reserve
(defined below).
(e) All other expenses incurred after the Closing Date
shall be the responsibility of the party incurring such costs.
(f) Allergan and Ligand agree not to incur, or seek
reimbursement from ALRT for, any ALRT Costs in a manner inconsistent with this
Agreement.
2.3 INVOICING OF ALRT COSTS. Within five (5) business days following the
Cut-Off Date, Ligand and Allergan will present to ALRT for payment all invoices
for ALRT Costs incurred and identified through such Cut-Off Date. Such invoices
will be paid by ALRT within five (5) business days of presentation.
At the Closing, Ligand and Allergan will identify all additional ALRT Costs and
shall agree on a cash reserve ("Cash Reserve") to be established out of ALRT
cash on hand as of the Closing Date to pay such additional ALRT costs in
accordance with Section 2.3. Any remaining cash on hand in ALRT at the Closing
shall be divided equally between Allergan and ALRT as set forth in the Asset
Purchase Option Agreement, with a payment to Allergan within three (3) business
days of the Closing.
Ligand and Allergan shall each take appropriate diligent action to ensure timely
presentation of invoices for payment of ALRT Costs in accordance with Section
2.3 and shall continue to collect invoices and other expenses incurred prior to
the Cut-Off Date. Ligand and Allergan will send requests to each provider of
development services, such as contract research organizations, requesting that
each provider submit an invoice up to the Cut-Off Date. Ligand and Allergan
shall present such invoices for payment no later than the last day of the
Reserve Period. The Reserve Period shall continue through sixty (60) days
following the Closing Date. Following the Reserve Period, the cash remaining in
the Cash Reserve shall be divided equally between Allergan and ALRT. Any ALRT
Costs for which an invoice is not presented prior to the end of the Reserve
Period shall be the responsibility of the party whose responsibility it was to
present such invoice.
2.4 SELECTED COMPOUND LIABILITIES. Selected Compound liabilities
(liabilities relating directly to each party's respective Selected Compounds,
including related contingent and any other known or unknown liabilities) shall
be assumed by the party receiving exclusive rights to the respective Selected
Compounds under the License Agreement.
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<PAGE> 4
2.5 OTHER LIABILITIES. All contingent and any other known or unknown
liabilities of ALRT (other than those relating directly to a party's Selected
Compounds) shall be allocated on a 50-50 basis as of the Closing Date between
Allergan and Ligand in accordance with the Asset Purchase Option Agreement,
subject to Section 2.3 above.
3. ONGOING ACTIVITIES
3.1 PRE-CLOSING ACTIVITIES.
3.1.1 RESEARCH AND DEVELOPMENT ACTIVITIES. Each party will
continue its existing, ordinary course activities through the Closing Date.
3.1.2 COMPLETION OF CLINICAL TRIALS. All ALRT clinical trials
being conducted as of the date hereof are listed on Exhibit B to this Agreement.
Each party will continue its existing clinical trial activity on behalf of ALRT
through the Closing Date, subject to reimbursement of expenses in accordance
with the provisions of this Agreement.
3.2 POST-CLOSING ACTIVITIES.
3.2.1 Each party will be responsible for its own activities
following the Closing Date.
3.2.2 Allergan may agree to continue existing work following the
Cut-Off Date with respect to Ligand Selected Compounds on a fee-for-services
basis.
3.2.3 INDs and other regulatory filings will be promptly
transferred following the Closing Date to the proper party in accordance with
this Agreement and the License Agreement.
3.2.4 Allergan financial personnel will close ALRT's books as of
the Closing Date and ALRT will reimburse Allergan therefor in accordance with
ALRT's administrative reimbursement procedures. ALRT financial records will be
transferred to Ligand thirty (30) days after the Closing Date; subsequently,
Ligand will have the responsibility for payment of additional ALRT invoices and
reconciliation of the Cash Reserve accrual in accordance with this Agreement.
4. PURCHASE OF ASSETS OF ALLERGAN
4.1 All ALRT assets as of the date hereof, excluding Program Technology
and Selected Compounds, are listed by category (e.g., cash, prepaid assets,
equipment, etc.) on Exhibit C to this Agreement. Such list shall be updated on
and as of the Closing Date.
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4.2 All assets on such list shall be allocated on such list, as nearly
as possible, on a 50-50 basis (or as the parties may otherwise agree), to
Allergan and ALRT in accordance with the Asset Purchase Option Agreement.
4.3 Notwithstanding the foregoing, ALRT patent rights (including patent
claims against third parties) shall be governed by Section 9 of the License
Agreement.
5. CLOSING LOGISTICS
5.1 NOTICE OF EXERCISE. Ligand will deliver, within two (2) business
days of the date of this Agreement, revocable notice of its election to acquire
all of the outstanding shares of Callable Common Stock of ALRT in accordance
with the terms of the Stock Purchase Option pursuant to the Ligand exercise
notice in the form attached to the License Agreement as Exhibit A ("Ligand
Notice"). Pursuant to the Asset Purchase Option, Allergan will deliver, within
two (2) business days, notice of its election to acquire from ALRT the Purchased
Assets (as defined in Section 1.1 of that certain Asset Purchase Option
Agreement dated June 3, 1995 among Allergan, Ligand and ALRT) in accordance with
the terms of the Asset Purchase Option pursuant to the Allergan exercise notice
in the form attached to the License Agreement as Exhibit B ("Allergan Notice").
5.2 NATURE OF CONSIDERATION TO BE PAID BY ALLERGAN AND LIGAND.
(a) Ligand intends to make payment at the Closing per
share of outstanding ALRT Callable Common Stock, in connection with its exercise
of the Stock Purchase Option, as follows: Fourteen Dollars and Twenty-Eight
Cents ($14.28) in shares of Ligand Common Stock and Seven Dollars and Sixty-Nine
Cents ($7.69) in cash; provided, Ligand reserves its right, pursuant to terms of
Article V of the Restated Certificate, to make payment of a greater amount of
the Stock Purchase Option Exercise Price (as defined in the Restated
Certificate) in cash than set forth herein or in its exercise notice.
(b) Allergan intends to make payment at the Closing, in
connection with its exercise of the Asset Purchase Option as follows: Eight
Million Nine Hundred Thousand Dollars ($8,900,000) in cash. Any amounts due by
Allergan in connection with its exercise of the Asset Purchase Option shall be
delivered by wire transfer to a bank account selected by Ligand on behalf of
ALRT, and notice of which will be delivered no less than two (2) business days
prior the Closing.
5.3 REGULATORY FILINGS.
(a) Ligand intends to file a registration statement with
the SEC within two (2) business days following the date of this Agreement. Such
registration statement will register the issuance of any shares of Ligand Common
Stock being issued in payment of the Stock Purchase Option Exercise Price in
accordance with Sections 5.3 and 5.6 of the Restated Certificate.
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<PAGE> 6
(b) Ligand and Allergan shall, with two (2) business days
following the date of this Agreement, make any and all applicable filings
required pursuant to the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended ("HSR Act"), with respect to the transactions contemplated under the
License Agreement and the exercise of the Stock Purchase Option and Asset
Purchase Option. Each of Ligand and Allergan shall use its commercially
reasonable best efforts to obtain early termination, on or prior to the Closing
Date, of any applicable waiting period under the HSR Act with respect to such
filings.
(c) Ligand and Allergan shall use reasonable efforts to
assist each other with applicable filings under the HSR Act arising out of the
transactions contemplated under the License Agreement and the exercise of the
Stock Purchase Option and Asset Purchase Option.
5.4 REDEMPTION OF ALLERGAN'S SPECIAL COMMON STOCK. On the Closing Date,
ALRT shall redeem all of the outstanding shares of ALRT Special Common Stock
owned by Allergan in accordance with Section 4.5 of the Restated Certificate
(notwithstanding the requirement for the written notice referred to in such
Section to be delivered fifteen (15) days before the date of redemption).
Allergan hereby agrees to submit to ALRT its share certificates representing
such Special Common Stock on or promptly following the Closing Date. Thereafter,
Allergan shall have no rights as a stockholder of ALRT except the right to
receive the Redemption Price in accordance with the Restated Certificate.
6. TECHNOLOGY TRANSFER
Promptly following the date hereof but in any event prior to the Closing Date,
Allergan and Ligand will deliver to each other the technology transfer items
listed on Exhibit D. From the date of execution of this Agreement through ***
following the Closing Date (and without limiting the obligations of the parties
under Section 3 of the License Agreement), each Party shall (i) provide access
to the other Party to all physical manifestations of the Program Technology
which they own or Control and (ii) provide, at the requesting Party's expense,
reasonable technical assistance and instruction in understanding, interpreting
and applying the Program Technology for the purposes of further exploiting the
Program Technology and commercially developing products. The obligations set
forth in this Section 6 shall not include any obligation to disclose matters
outside the Field. Nothing contained in this Agreement shall affect the
respective ongoing obligations of Ligand and ALRT under the Asset Purchase
Option Agreement to, among other things, share information regarding Purchased
Assets with Allergan.
7. INDEMNIFICATION
7.1 BY ALLERGAN. Allergan hereby agrees to indemnify and hold Ligand and
its Affiliates and their respective agents and employees harmless from and
against any and all suits, claims, actions, demands, liabilities, expenses
and/or losses, including reasonable legal expenses and attorneys' fees
("Losses"), including, without limitation, any claim or liability based upon
negligence, warranty, strict liability, violation of government regulation or
infringement of patent
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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or other proprietary rights, arising from or occurring as a result of (a) the
research, development, manufacture, sale or use of Allergan Selected Compounds,
regardless of whether Ligand conducted any such activities with respect to one
or more Allergan Selected Compounds prior to the Closing Date or during the
Transition Period, or (b) subject to Section 11.2 of the License Agreement, any
material breach of this Agreement by Allergan. Allergan shall have no
indemnification obligations hereunder in any case where such Losses are based
upon the gross negligence or willful misconduct of Ligand.
7.2 BY LIGAND. Ligand hereby agrees to indemnify and hold Allergan and
its Affiliates and their respective agents and employees harmless from and
against any and all Losses, including, without limitation, any claim or
liability based upon negligence, warranty, strict liability, violation of
government regulation or infringement of patent or other proprietary rights,
arising from or occurring as a result of (a) the research, development,
manufacture, sale or use of Ligand Selected Compounds, regardless of whether
Allergan conducted any such activities with respect to one or more Ligand
Selected Compounds prior to the Closing Date or during the Transition Period, or
(b) subject to Section 11.2 of the License Agreement, any material breach of
this Agreement by Ligand. Ligand shall have no indemnification obligations
hereunder in any case where such Losses are based upon the gross negligence or
willful misconduct of Allergan.
8. MISCELLANEOUS
8.1 RETAINED RIGHTS. Nothing in this Agreement shall limit in any
respect the right of any Party to conduct research and development in, and
market products outside of, the Field using such Party's technology, and except
as expressly provided in Section 2 of the License Agreement, no license to use
the other Party's technology to do so is granted herein.
8.2 FORCE MAJEURE. No Party shall lose any rights hereunder or be liable
to any other Party for damages or losses on account of failure of performance by
the defaulting Party if the failure is occasioned by Force Majeure and the Force
Majeure shall extend any applicable cure periods provided for herein; provided
that the Party claiming Force Majeure has exerted all reasonable efforts to
avoid or remedy such Force Majeure; provided, further, that in no event shall a
Party be required to settle any labor dispute or disturbance.
8.3 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
8.4 NO TRADEMARK RIGHTS. No right, express or implied, is granted by
this Agreement to use in any manner the name "Allergan" or "Ligand" or any other
trade name or trademark of another Party or its Affiliates in connection with
the performance of this Agreement. All rights to the trademarks "PANRETIN" and
"DURARET" shall belong solely to Ligand and/or ALRT. Notwithstanding the
foregoing, no later than forty-five (45) days following the Closing Date the
legal name for ALRT shall be amended by Ligand to remove any reference to
Allergan,
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and both Allergan and Ligand shall have the right to use the acronym "ALRT"
solely for purposes of identifying the following Selected Compounds: 268, 324,
1057, 1550 and 4310.
8.5 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by facsimile
transmission (receipt verified), or upon receipt if mailed by registered or
certified mail (return receipt requested), postage prepaid, or sent by express
courier service (receipt verified), to the Parties at the following addresses
(or at such other address for a Party as shall be specified by like notice;
provided, that notices of a change of address shall be effective only upon
receipt thereof):
If to Allergan, addressed to:
Allergan, Inc.
2525 Dupont Drive
Irvine, CA 92715-1599
Attn: Corporate Vice President, General Counsel
With copy to: Corporate Vice President, Science and Technology
fax: (714) 246-4774
If to Ligand or ALRT, addressed to:
Ligand Pharmaceuticals Incorporated
9393 Towne Centre Drive
San Diego, CA 92121
Attn: Senior Vice President, General Counsel, Government Affairs
With copy to: President
fax: (619) 625-4521
8.6 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California, as such laws are applied to contracts entered into and to
be performed within such state. Subject to Section 8.15, any claim or
controversy arising out of or related to this contract or any breach hereof
shall be submitted to a court of competent jurisdiction in the State of
California, and the Parties hereby consent to the jurisdiction and venue of such
court. In the event of any proceeding to enforce the provisions of this
Agreement, the prevailing Party shall be entitled to reasonable attorneys' fees
and legal costs.
8.7 WAIVER. Except as specifically provided for herein, the waiver from
time to time by a Party of any of its rights or its failure to exercise any
remedy shall not operate or be construed as a continuing waiver of same or of
any other of such Party's rights or remedies provided in this Agreement.
8.8 SEVERABILITY. If any term, covenant or condition of this Agreement
or the application thereof to any Party or circumstance shall, to any extent, be
held to be invalid or unenforceable, then (i) the remainder of this Agreement,
or the application of such term, covenant
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or condition to parties or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby and each term, covenant
or condition of this Agreement shall be valid and be enforced to the fullest
extent permitted by law; and (ii) the Parties hereto covenant and agree to
renegotiate any such term, covenant or application thereof in good faith in
order to provide a reasonably acceptable alternative to the term, covenant or
condition of this Agreement or the application thereof that is invalid or
unenforceable, it being the intent of the Parties that the basic purposes of
this Agreement are to be effectuated.
8.9 HEADINGS; AMBIGUITIES. The section and paragraph headings contained
herein are for the purposes of convenience only and are not intended to define
or limit the content of said sections or paragraphs. Ambiguities, if any, in
this Agreement shall not be construed against a Party, irrespective of which
Party may be deemed to have authorized the ambiguous provision.
8.10 ENTIRE AGREEMENT; AMENDMENT. This Agreement (including all exhibits
attached hereto), with the License Agreement, the Mutual General Release and the
Program Agreements, sets forth all the covenants, promises, agreements,
warranties, representations, conditions and understandings between the Parties
hereto with respect to the subject matter hereof, and supersedes and terminates
all prior agreements and understandings between the Parties. There are no
covenants, promises, agreements, warranties, representations, conditions or
understandings, either oral or written, between the Parties other than as set
forth herein and therein. Without limiting the foregoing, effective as of the
Effective Date, the Joint Agreements shall be terminated and of no further force
or effect. No subsequent alteration, amendment, change or addition to this
Agreement shall be binding upon the Parties hereto unless reduced to writing and
signed by the respective authorized officers of the Parties.
8.11 MUTUAL RELEASES. On the Closing Date, the Parties have executed and
delivered a Mutual General Release in the form attached to the License Agreement
as Exhibit I.
8.12 RELATIONSHIP OF THE PARTIES. Nothing contained in this Agreement is
intended or is to be construed to constitute Allergan, Ligand or ALRT as
partners or joint venturers. Except as expressly provided herein (or, with
respect to Ligand and ALRT, as permitted by law), no Party hereto shall have any
express or implied right or authority to assume or create any obligations on
behalf of or in the name of the other Party or to bind any other Party to any
contract, agreement or undertaking with any Third Party.
8.13 SUCCESSORS AND ASSIGNS. Any Party may assign its rights or
obligations under this Agreement to any other Person without the prior written
consent of the other Party; provided, however, that no such assignment shall
relieve any Party of its obligations to another Party under this Agreement.
Subject to the foregoing, any reference to Allergan, Ligand or ALRT hereunder
shall be deemed to include the successors thereto and assigns hereof.
8.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, taken together,
shall constitute one and the same instrument. This
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Agreement shall initially constitute an agreement between Allergan and Ligand.
Upon the Closing Date, Ligand and Allergan shall take all actions necessary to
cause ALRT to execute and deliver this Agreement, and ALRT shall thereupon
become a party hereto.
8.15 DISPUTE RESOLUTION. In an effort to resolve informally and amicably
any claim, controversy, or dispute arising out of or related to the
interpretation, performance, or breach of this Agreement or the License
Agreement (a "Dispute") without commencing formal legal action, each Party shall
notify each other Party to the Dispute in writing of any Dispute hereunder that
requires resolution. Such notice shall set forth the nature of the Dispute, the
amount involved, if any, and the remedy sought. Each Party to such Dispute shall
designate an employee to investigate, discuss and seek to settle the matter
between them. If such employees are unable to settle the matter within *** after
delivery of such notification, the matter shall be submitted to the Chief
Executive Officers of each of the Parties involved in such Dispute for
consideration. If settlement cannot be reached through their efforts within an
additional *** (or such longer time period as they shall agree upon in writing)
then any Party may thereafter take such actions as it deems appropriate. During
such *** (or longer period as agreed in writing), the Chief Executive Officers
shall meet no less than once face-to-face. The Parties agree that any applicable
statute of limitations shall be tolled during the pendency of such informal
dispute resolution process and that no Party shall raise or assert any claim of
laches or other legal or equitable principle of limitation or repose of action
based upon such process. The Parties agree that in no event shall any of them be
subject to the awarding of any punitive or exemplary damages in any legal action
arising out of or related to this Agreement or the License Agreement.
[Remainder of This Page Intentionally Left Blank]
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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IN WITNESS WHEREOF the Parties have executed this Agreement as of the
date first above written.
ALLERGAN, INC.
By /s/ William C. Shepard
--------------------------------------
William C. Shepard
Chairman and Chief
Executive Officer
LIGAND PHARMACEUTICALS INCORPORATED
By /s/ David E. Robinson
--------------------------------------
- ----------------------------------------
David E. Robinson
President
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
By /s/ David E. Robinson
--------------------------------------
- ----------------------------------------
David E. Robinson
President
11
<PAGE> 12
EXHIBIT A
RESEARCH CONSULTING AGREEMENTS
<PAGE> 13
EXHIBIT A
CONFIDENTIAL
***
***
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 14
EXHIBIT B
ALRT CLINICAL TRIALS
<PAGE> 15
22-Aug-97 06:44 A.M.
COMMENTS: 1057 Oral
Indication Status Last Edit Comments
***
***
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 16
22-Aug-97 06:44 A.M.
COMMENTS: 1057 Topical
Indication Status Last Edit Comments
***
***
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 17
22-Aug-97 06:44 A.M.
INDICATIONS: 1550
<TABLE>
<CAPTION>
INDICATION # OF
PTS STATUS DRUG ROUTE MNGMT SITES START STOP LAST ACCRUAL F/U
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
***
***
***
</TABLE>
*** Draft/Confidential/Not For Distribution ***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 18
ALRT 1057 Oral Capsules
- --------------------------------------------------------------------------------
INDICATION STATUS
- --------------------------------------------------------------------------------
***
***
***
Closed=closed to accrual; Complete=all patients off-study; Protocol=commitments
made; Ongoing=patients on study
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 19
ALRT 1550 Oral Capsules
- --------------------------------------------------------------------------------
INDICATION STATUS
- --------------------------------------------------------------------------------
***
***
***
Closed=closed to accrual; Complete=all patients off-study; Protocol=commitments
made; Ongoing=patients on study
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 20
ACRT 1057 Topical Gel
- --------------------------------------------------------------------------------
INDICATION STATUS
- --------------------------------------------------------------------------------
***
***
***
Closed=closed to accrual; Complete=all patients off-study; Protocol=commitments
made; Ongoing=patients on study
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 21
EXHIBIT C
ALRT ASSETS
<PAGE> 22
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC. (ALRT)
EXHIBIT C TO TRANSITION AGREEMENT - SCHEDULE OF ASSETS @ SEPTEMBER 24, 1997
(100%) (50%)* (50%)*
ALRT Ligand Allergan
***
***
***
* Allocation subject to cost-sharing arrangement specified in the Agreement.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 23
EXHIBIT D
TECHNOLOGY TRANSFER ITEMS
<PAGE> 24
[LOGO] Allergan
CORPORATE OFFICES
New Products, Science and Technology
FACSIMILE
DATE: September 19, 1997
------------------------------------------------------------------------
TO: ***
------------------------------------------------------------------------
FAX: ***
------------------------------------------------------------------------
FROM ***
------------------------------------------------------------------------
PHONE: *** FAX: ***
------------------------- ----------------------------------
THIS FAX MESSAGE CONSISTS OF THIS COVER SHEET AND 1 PAGE(S).
If you do not receive all of this message or it is not legible, please contact
us at the above telephone number. Our FAX number is (714) 246-6987.
Andres,
As we discussed yesterday, attached is a memo describing Allergan's priority
technology transfer items. We have tried to limit this list to critical
protocols and reagents that Allergan will need to start running some of the key
assays currently done at Ligand.
Please supply a list of Ligand priorities based on similar criteria. If we can
agree that items on both lists will be transferred prior to closing, we can
include this in the transition agreement.
Best regards.
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 25
[LOGO] PHARMACEUTICAL R & D
RETINOID TEAM
INTEROFFICE MEMORANDUM
TO: ***
FROM: ***
RE: Request for reagents & protocols from Ligand
DATE: September 19, 1997
REAGENTS:
***
***
***
PROTOCOLS:
***
***
***
RLC:kg
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 26
[LOGO]
LIGAND PHARMACEUTICALS INCORPORATED
10255 SCIENCE CENTER DRIVE
SAN DIEGO, CALIFORNIA 92121
TELEPHONE: (619) 535-3900
FAX NO.: (619) 550-7801
FACSIMILE COVER SHEET
NUMBER OF PAGES BEING TRANSMITTED: 3
(INCLUDING COVER SHEET) CONFIDENTIAL
(If you do not receive all of the pages, please call (619) 550-7554)
TO: ***
ALLERGAN, INC. URGENT
FAX: ***
DATE: SEPTEMBER 22, 1997
FROM: ***
Please see attached letter.
This message is intended only for the use of the individual or entity to which
it is addressed, and may contain information that is privileged, confidential
and exempt from disclosure under applicable law. If the reader of this message
is not the intended recipient, or the employee or agent responsible for
delivering the message to the intended recipient, you are hereby notified that
any discrimination, distribution or copying of this communication is strictly
prohibited. If you have received this communication in error, please notify us
immediately by telephone and return the original message to us at the above
address via the U.S. postal service. Thank you.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 27
[LOGO]
LIGAND ***
PHARMACEUTICALS ***
***
September 22, 1997
Via facsimile: (714) 246-6987
***
Allergan, Inc.
2525 Dupont Drive
Irvine, CA 92715-1599
***
Please find enclosed our short list of critical reagents and protocols to
include in the priority technology transfer items. It has been prepared in the
spirit of our conversation of Friday to have a very short list of items that can
meet our most immediate critical needs.
Regarding information on compounds on the ALRT database, I would request that
you provide us as soon as possible with the following key priority data to
facilitate the enhancement of the current database. The key information
presently needed is:
1. ***
2. ***
3. ***
It would be extremely useful if those data can be provided in a simple tabular
format or a spread sheet to facilitate quick analysis and evaluation.
Best regards,
***
ANV/dd
Enclosure
Ligand Pharmaceuticals Inc.: 9393 Town Center Drive, San Diego, CA 92121 (619)
535-3900 Fax (619) 535-3906
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 28
REAGENTS
***
***
***
PROTOCOLS
***
***
***
***
***
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 1
EXHIBIT 10.167
DEVELOPMENT AND LICENSE AGREEMENT
(TARGRETIN)
BETWEEN
ELI LILLY AND COMPANY
AND
LIGAND PHARMACEUTICALS INCORPORATED
DATED NOVEMBER 25, 1997
<PAGE> 2
DEVELOPMENT AND LICENSE AGREEMENT
(TARGRETIN)
THIS DEVELOPMENT AND LICENSE AGREEMENT ("AGREEMENT") is entered into as
of November 25, 1997 between ELI LILLY AND COMPANY, an Indiana corporation
having its principal place of business at Lilly Corporate Center, Indianapolis,
Indiana 46285 ("LILLY"),
AND
LIGAND PHARMACEUTICALS INCORPORATED, a Delaware corporation having its
principal place of business at 9393 Towne Centre Drive, San Diego, California
92121 ("LIGAND").
RECITALS
WHEREAS, Ligand is developing a compound known as Targretin for
oncology, dermatology and metabolic diseases, and is engaged in a specific
research program and development program aimed at understanding the applications
of Targretin; and
WHEREAS, Lilly is interested in developing and commercializing
pharmaceutical products to treat and prevent medical conditions, including, but
not limited to, diabetes mellitus, obesity, insulin resistance, dyslipidemia and
cardiovascular disorders associated with insulin resistance and obesity and
would like to collaborate with Ligand in an effort to develop and commercialize
Targretin for use in treating these medical conditions; and
WHEREAS, Ligand and Lilly believe that each party can bring significant
and complementary strengths to such a collaboration.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter recited, the parties agree as follows:
ARTICLE 1
DEFINITIONS
When used in this Agreement, each of the following terms shall have the
meanings as set forth below:
1
<PAGE> 3
1.1 "AFFILIATE" shall mean any company or entity controlled by,
controlling, or under common control with a party hereto and shall include
without limitation any company fifty percent (50%) or more of whose voting stock
(or other comparable ownership interest for an entity other than a corporation)
is owned or controlled, directly or indirectly, by a party, and any company or
entity which owns or controls, directly or indirectly, fifty percent (50%) or
more of the voting stock (or other comparable ownership interest for an entity
other than a corporation) of a party or equivalent power to direct the
management or policies of such company or entity.
1.2 "AGREEMENT TERM" shall mean the term of this Agreement, including
any extensions thereof, commencing on the Effective Date and ending upon the
expiration or earlier termination of this Agreement.
1.3 "ALLIANCE DIRECTORS COMMITTEE" shall mean the committee described in
Section 2.3.
1.4 "CALENDAR QUARTER" shall mean a quarter ending on March 31, June 30,
September 30 or December 31 of each Calendar Year.
1.5 "CALENDAR YEAR" shall mean the twelve month period ending on
December 31.
1.6 "COLLABORATION AGREEMENT" shall mean the Collaboration Agreement of
even date herewith among Lilly, Ligand and Allergan Ligand Retinoid
Therapeutics, Inc.
1.7 "COMBINATION PRODUCT" shall mean a Drug Product which, in addition
to Targretin, contains one or more pharmaceutically active ingredients.
1.8 "COMMERCIALIZATION PROGRAM" shall mean all activities related to the
development and commercialization of a Drug Product that occur after Phase III
Enrollment including, without limitation, the conduct of Phase III Clinical
Trials, activities associated with the preparation, filing and prosecution of an
NDA and all activities related to commercialization of a Drug Product. The
Commercialization Program shall also include all activities relating to
manufacturing, including, without limitation, manufacturing process development
and scale-up, chemistry, manufacturing and controls, and related activities
regardless of whether they occur before or after Phase III Enrollment, and all
research and related activities in support of an NDA that occur after Phase III
Enrollment.
1.9 "CONFIDENTIAL INFORMATION" shall mean all information, inventions,
know-how and data disclosed by one party to the other party, or its respective
Affiliates, pursuant to this Agreement, including without limitation,
information relating to research and development plans, experiments, results and
plans, the existence of compounds, therapeutic leads, candidates and products,
clinical and preclinical data, trade secrets and manufacturing,
2
<PAGE> 4
marketing, financial, regulatory, personnel and other business information and
plans, whether in oral, written, graphic or electronic form and whether in
existence as of the Effective Date or developed or acquired in the future,
except where such information (i) is public knowledge at the time of disclosure
by the disclosing party, (ii) becomes public knowledge through no fault of the
receiving party, (iii) was in the possession of the receiving party at the time
of disclosure by the disclosing party as evidenced by proper business records or
(iv) is disclosed to the receiving party by a Third Party, to the extent such
Third Party's disclosure was not in violation of any obligation of
confidentiality.
1.10 "COVER" (including variations thereof such as "Covering",
"Covered", and "Coverage") shall mean that the manufacture, use, import, offer
for sale or sale of Targretin or Drug Product would infringe a Valid Claim;
provided, with respect to a process or manufacturing patent, that such a Valid
Claim therein effectively precludes Third Parties from manufacturing, using,
importing, offering for sale and selling Drug Products. The determination of
whether Targretin or a Drug Product is Covered by a particular Valid Claim shall
be made on a country by country basis. A Valid Claim shall be deemed to provide
effective preclusion hereunder where (i) there is no competing Drug Product
being marketed or (ii) if a Drug Product is being marketed by a competitor, it
infringes the Valid Claim (including any period in which, and provided that, the
Valid Claim is being litigated).
1.11 "DATA EXCLUSIVITY PERIOD" shall mean the period, if any, during
which the FDA, or other equivalent regulatory agency in the case of countries
other than the United States, prohibits reference, for purposes of seeking
Regulatory Approval, to clinical and other data contained in the Regulatory
Approval package relating to a Drug Product, without the consent of the party
holding the NDA or equivalent Regulatory Approval.
1.12 "DEVELOPMENT PLAN" shall mean the plan described in Section 3.1.
1.13 "DEVELOPMENT PROGRAM" shall mean those activities with respect to a
Drug Product that occur after the earlier of December 15, 1998 or the filing of
an IND with respect to such Drug Product.
1.14 "DRUG DELIVERY SYSTEM" shall mean enhancements of a Drug Product
related to convenience of administration of the active ingredient such as
injectors, pens, inhalers, sustained release formulations or transdermal
patches, but not capsules, tablets, gel caps, solutions, normal pharmaceutical
excipients or the like.
1.15 "DRUG PRODUCT" shall mean every pharmaceutical composition in
finished product form which contains therapeutic levels of Targretin and which
is intended for administration to humans in the Field.
1.16 "EFFECTIVE DATE" shall mean the effective date of the Collaboration
Agreement.
3
<PAGE> 5
1.17 "FDA" shall mean the United States Food and Drug Administration.
1.18 "FIELD" shall mean the development and commercialization of Drug
Products for use in the treatment, palliation, prevention and/or remission of
all medical conditions including, but not limited to, diabetes mellitus,
obesity, insulin resistance, dyslipidemia and cardiovascular disorders
associated with insulin resistance and obesity, but excluding the treatment,
palliation, prevention and/or remission of cancer and dermatological disease.
1.19 "FIRST COMMERCIAL SALE" shall mean, in any particular country, the
first sale for use by the general public of a Drug Product after receipt of
Regulatory Approval in that country.
1.20 "GAAP" shall mean U.S. generally accepted accounting principles,
consistently applied.
1.21 "IND" shall mean an Investigational New Drug Application as defined
in the United States Food, Drug, and Cosmetic Act and applicable regulations
promulgated thereunder, as they are amended or supplemented from time to time,
or an equivalent application under any successor law or regulations.
1.22 "IND ACCEPTANCE" shall mean the earliest of (i) the filing with the
FDA of an IND and the failure by the FDA, within thirty (30) days following
filing, to object to the IND or institute a clinical hold, (ii) the removal of
the objection or clinical hold referred to in (i) above, if any, or (iii) the
acceptance of an equivalent application by the equivalent agency in a Major
Foreign Market country.
1.23 "JOINT PATENTS" shall mean all patents, both foreign and domestic
(including without limitation, all substitutions, extensions, reissues,
renewals, reexaminations, patents of addition, supplementary protection
certificates and inventors' certificates thereof), and all patent applications
(including provisional applications, divisions, continuations and
continuations-in-part), heretofore or hereafter filed or having any legal force
in any country together with any patents that have issued or in the future issue
therefrom, jointly owned, in whole or in part, or jointly licensed by Ligand or
any Ligand Affiliate and Lilly or any Lilly Affiliate. In the circumstance where
the addition of new matter to a solely-owned patent application results in a
continuation-in-part that is a Joint Patent, only the new matter shall be deemed
jointly owned under this Agreement.
1.24 "JOINT PROGRAM COMMITTEE" shall mean the committee described in
Section 2.4 of this Agreement.
1.25 "JOINT TECHNOLOGY" shall mean all tangible or intangible know-how,
trade secrets, routes of synthesis, ideas, processes, inventions (whether or not
patentable), tests, assays, quality control or other data, clinical and
preclinical results, technical information, and
4
<PAGE> 6
any physical, chemical or biological material, or any replication of any part of
such material, which are jointly developed or acquired by Ligand or any Ligand
Affiliate and Lilly or any Lilly Affiliate.
1.26 "LIGAND PATENTS" shall mean all patents, both foreign and domestic
(including without limitation, all substitutions, extensions, reissues,
renewals, reexaminations, patents of addition, supplementary protection
certificates and inventors' certificates thereof), and all patent applications
(including provisional applications, divisions, continuations and
continuations-in-part), heretofore or hereafter filed or having any legal force
in any country together with any patents that have issued or in the future issue
therefrom, which are owned, controlled, or licensed (with the right to disclose
and sublicense and subject to the rights of Third Parties as of the Effective
Date), in whole or in part, by Ligand or any Ligand Affiliate, and which Cover
Targretin and/or Drug Products, but excluding any Joint Patents.
1.27 "LIGAND SYSTEMIC PRODUCT" shall mean any product sold or marketed
by or on behalf of Ligand or any Ligand Affiliate or sublicensee for use outside
the Field which contains Targretin and is intended for Systemic Administration.
1.28 "LIGAND TECHNOLOGY" shall mean all tangible or intangible know-how,
trade secrets, routes of synthesis, ideas, processes, inventions (whether or not
patentable or patented), tests, assays, quality control or other data, clinical
and preclinical results, technical information, and any physical, chemical or
biological material, or any replication of any part of such material, which is
or has been developed or acquired either before or after the Effective Date
(with the right to disclose and sublicense and subject to the rights of Third
Parties as of the Effective Date) by Ligand or any Ligand Affiliate reasonably
necessary for the development, manufacture, use, import, offer for sale or sale
of Targretin and/or Drug Products.
1.29 "LIGAND TOPICAL PRODUCT" shall mean any product sold or marketed by
or on behalf of Ligand or any Ligand Affiliate which contains Targretin and is
topically applied but does not result in Systemic Administration of Targretin.
1.30 "LILLY PATENTS" shall mean all patents, both foreign and domestic
(including without limitation, all substitutions, extensions, reissues,
renewals, reexaminations, patents of addition, supplementary protection
certificates and inventors' certificates thereof), and all patent applications
(including provisional applications, divisions, continuations and
continuations-in-part), heretofore or hereafter filed or having any legal force
in any country, together with any patents that have issued or in the future
issue therefrom, owned, controlled, or licensed (with the right to disclose and
sublicense and subject to the rights of Third Parties as of the Effective Date)
in whole or in part, by Lilly or any Lilly Affiliate and which Cover Targretin
and/or Drug Products, but excluding any Joint Patents.
5
<PAGE> 7
1.31 "LILLY TECHNOLOGY" shall mean all tangible or intangible know-how,
trade secrets, routes of synthesis, ideas, processes, inventions (whether or not
patentable or patented), tests, assays, quality control or other data, clinical
and preclinical results, technical information, and any physical, chemical or
biological material, or any replication of any part of such material, which is
or has been developed or acquired either before or after the Effective Date
(with the right to disclose and sublicense and subject to the rights of Third
Parties as of the Effective Date) by Lilly or any Lilly Affiliate, reasonably
necessary for the development, manufacture, use, import, offer for sale or sale
of Targretin and/or Drug Products.
1.32 "LILLY ROYALTY TERM" shall mean, with respect to a Drug Product in
each country, (a) if the manufacture, use, import, offer for sale or sale of the
Drug Product in such country is Covered by a Lilly Patent, Ligand Patent or
Joint Patent, the period of time equal to the longer of (i) *** from the date of
First Commercial Sale of such Drug Product in such country or (ii) the
expiration of the last-to-expire applicable patent in such country; provided,
however, if the manufacture, use, import, offer for sale or sale of such Drug
Product is Covered only by a Valid Claim of a pending patent application in such
country, the Royalty Term shall expire, except as provided in (b) below, ***
from the date of the First Commercial Sale in such country unless (A) the
pending patent application Covering such Drug Product issues prior to the end of
such *** period, in which case the Lilly Royalty Term shall not expire at the
end of such *** period, or (B) the pending patent application Covering such Drug
Product issues after the end of such *** period, in which case the Lilly Royalty
Term shall expire at the end of such *** period but shall be reinstated from the
date the patent issues, or (b) if the manufacture, use, import, offer for sale
or sale of such Drug Product in such country is not so Covered by a Lilly
Patent, Ligand Patent or Joint Patent, the period of time *** in such country.
Ligand shall pay all royalties due to Allergan, Inc. on sales of Drug Products
by Ligand.
1.33 "MAJOR FOREIGN MARKETS" shall mean Japan, the United Kingdom,
France, Germany, Spain, Italy, or the European Union as an entity.
1.34 "MARKETING APPROVAL" shall mean the date on which Lilly, any Lilly
Affiliate, Sublicensee or permitted assignee first receives final approval of
the labeling letter in the United States or the equivalent approval in a Major
Foreign Market with respect to a particular Drug Product.
1.35 "NDA" shall mean, with respect to a particular Drug Product, the
New Drug Application filed with the FDA pursuant to 21 U.S.C. Section 357 and 21
C.F.R. Section 314 with respect to that Drug Product, as they are amended or
supplemented from time to time, or an equivalent application under any successor
law or regulations.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
6
<PAGE> 8
1.36 "NDA FILING" shall mean, with respect to a particular Drug Product,
the acceptance of an NDA by the FDA or acceptance of an equivalent filing by the
equivalent agency in a Major Foreign Market country.
1.37 "NET SALES" shall mean, with respect to a Drug Product, the gross
amount invoiced by Lilly, a Lilly Affiliate or Sublicensee (other than Ligand
and any Ligand Affiliate) to unrelated third parties for the Drug Product, less:
***
***
***
***
***
***
***
***
***
***
***
***
Such amounts shall be determined from the books and records of Lilly,
Lilly's Affiliate or Lilly's Sublicensee which shall be maintained in accordance
with GAAP.
In the event the Drug Product is sold in a country as part of a
Combination Product, the Net Sales of the Drug Product, for the purposes of
determining royalty payments, shall be determined by multiplying the Net Sales
(as defined above in this Section) of the Combination Product by the fraction,
A/(A+B) where A is the average sale price of the Drug Product for the reporting
period when sold separately in finished form and B is the average sale price of
the other product(s) sold separately in finished form; provided that, ***
***
***
***
***
***
***
***
***
***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
7
<PAGE> 9
***
***
***
In the event a Combination Product contains a Drug Product and a "Drug
Product" as defined in the Collaboration Agreement (which, for purposes of this
Section 1.37 shall be deemed a Drug Product hereunder), Net Sales of each Drug
Product in the Combination Product shall be separately calculated as follows:
(i) if both Drug Products are sold separately in finished form, the Net Sales
for each Drug Product in the Combination Product shall be separately calculated
by multiplying the Net Sales of the Combination Product by the fraction A/A+B
where A is the average sale price of the particular Drug Product for which Net
Sales is being determined and B is the average sale price of the other Drug
Product in the Combination Product; (ii) ***
***
***
***
***
***
***
1.38 "OPTION AGREEMENT" shall mean that certain Option and Wholesale
Purchase Agreement of even date herewith between Ligand and Lilly.
1.39 "PHASE II CLINICAL TRIALS" shall mean small scale human clinical
trials conducted by Lilly or any Lilly Affiliate in subjects to collect
preliminary data regarding efficacy of the Drug Product in the particular
medical condition for which it is being studied, as well as to obtain some
indication of the dosage regimen required.
1.40 "PHASE III CLINICAL TRIALS" shall mean large scale human clinical
trials conducted by Lilly or any Lilly Affiliate in subjects and intended to
generate data concerning the safety and efficacy of a Drug Product in the
particular medical condition for which it is being studied sufficient to support
registration of the Drug Product with drug regulatory authorities.
1.41 "PHASE III ENROLLMENT" shall mean the enrollment and treatment of
the first subject in Phase III Clinical Trials of a Drug Product.
1.42 "PROTOCOLS" shall have the meaning set forth in Section 3.3 of this
Agreement.
1.43 "OPTION TERRITORY" shall have the meaning set forth in Section 4.4
of this Agreement.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
8
<PAGE> 10
1.44 "OPTION NOTICE" shall have the meaning set forth in Section 4.4 of
this Agreement.
1.45 "REGULATORY APPROVAL" shall mean all authorizations by the
appropriate governmental entity or entities necessary for commercial sale of a
Drug Product (including exports) in a jurisdiction in which Lilly or any Lilly
Affiliate elects to market the Drug Product including, without limitation,
approval of labeling, price, reimbursement and manufacturing.
1.46 "RESEARCH PROGRAM" shall mean those activities with respect to
Targretin that occur prior to the earlier of December 15, 1998 or the filing of
an IND with respect to a Drug Product.
1.47 "ROYALTY TERM" shall mean, with respect to a Drug Product in each
country, (a) if the manufacture, use, import, offer for sale or sale of the Drug
Product in such country is Covered by a Joint Patent, Lilly Patent or Ligand
Patent, the period of time equal to ***
***
***
***
***
***
***
***
***
***
***
***
***
***
***
1.48 "STEERING COMMITTEE" shall mean the committee described in Section
2.2 of this Agreement.
1.49 "SUBLICENSEE" shall mean (a) a Third Party to which Lilly or any
Lilly Affiliate has licensed the right to sell a Drug Product or (b) a Third
Party to which Lilly or any Lilly Affiliate has granted the exclusive right to
promote and distribute a Drug Product in the United States, Japan, the United
Kingdom, France, Germany, Spain or Italy under an arrangement substantially
different from wholesale distributor arrangements typically employed in such
countries.
1.50 "SYSTEMIC ADMINISTRATION" shall mean administration of a
pharmaceutical composition by any approved means with the purpose of obtaining
pharmacological activity after the pharmaceutical composition reaches the
systemic circulation.
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
9
<PAGE> 11
1.51 "TARGRETIN" shall mean
4-[1-(3,5,5,8,8,-pentamethyl-5,6,7,8-tetrahydro-2-
naphthalenyl)-1-ethenyl]-benzoic acid, ***
***
***
1.52 "TECHNICAL OPERATING PLAN" shall mean the Research and Development
Technical Operating Plan as revised from time to time.
1.53 "THIRD PARTY" shall mean any entity which is not a party or
Affiliate of any party to this Agreement.
1.54 "VALID CLAIM" shall mean any claim (a) issued in an unexpired
patent which has not been held unenforceable, unpatentable or invalid by a
decision of a court or other governmental agency of competent jurisdiction
following exhaustion of all possible appeal processes, and which has not been
admitted to be invalid or unenforceable through reissue, reexamination or
disclaimer, or (b) of a pending patent application, so long as such patent
application is being diligently prosecuted.
ARTICLE 2
RESEARCH SCOPE AND GOVERNANCE
2.1 PURPOSE AND SCOPE. The parties desire to collaborate in a Research
Program and a Development Program to develop and commercialize Drug Product for
use in the Field. Subject to the terms described herein, both Ligand and Lilly
shall use their respective commercially reasonable efforts to achieve the goals
set forth in this Agreement. Promptly after the Effective Date, Ligand will
submit a draft Technical Operating Plan, covering the general subjects set forth
on Schedule 2.1. The parties will promptly after submission by Ligand finalize
the Technical Operating Plan. The governance provisions described herein shall
relate to the conduct of the Research Program and the Development Program. Lilly
shall be solely responsible for governance of the Commercialization Program. The
Technical Operating Plan is intended as a work plan summarizing the present
plans regarding key activities with respect to Drug Products. It is subject to
amendment from time to time by the committees described below. Notwithstanding
anything in the Technical Operating Plan to the contrary, the rights of the
parties with respect to Drug Products shall be governed in all respects by the
terms of this Agreement.
2.2 STEERING COMMITTEE.
(a) The Research Program and the Development Program shall be conducted
under the overall direction of the Steering Committee comprised of four (4)
members, with two (2) appointed by Ligand and two (2) appointed by Lilly. The
Steering
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Committee established by this Agreement shall be the same committee as the
Steering Committee established by the Collaboration Agreement. All actions of
the Steering Committee with respect to the activities contemplated by this
Agreement shall be governed by the terms of this Agreement. The initial members
of the Steering Committee shall be: (a) for Ligand, D. Robinson and A.
Negro-Vilar, and (b) for Lilly, J. Harper and J. Caro. *** Either party may
change its representative on the Steering Committee at any time by prior written
notice to the other party. The party hosting the meeting of the Steering
Committee shall prepare and deliver to the other party one week prior to the
meeting the agenda for the meeting. The party hosting the meeting of the
Steering Committee shall prepare and deliver to the other party within ten (10)
days after the date of such meeting, minutes of the meeting that set forth all
decisions of the Steering Committee relating to the Research Program and the
Development Program in form and content reasonably acceptable to the other
party. Minutes shall be deemed approved unless any member of the Steering
Committee objects to the accuracy of such minutes in writing to the other party
within ten (10) business days of receipt. If a party objects to the minutes and
the objection is not resolved, the objection will be deemed a dispute and
resolved pursuant to Section 2.6.
(b) The purpose of the Steering Committee shall be to make key
strategy, policy and resource decisions regarding the Research Program and the
Development Program and to carry out its other responsibilities described in
this Agreement. The Steering Committee shall meet at least once in each Calendar
Quarter, at such times and places as are agreed to by Ligand and Lilly,
alternating between San Diego and Indianapolis, or such other locations as the
members of the Steering Committee shall agree. Meetings of the Steering
Committee may be attended by such other directors, officers and employees of
each party as such party deems necessary, and by such consultants and
non-employee agents of each party as the members of the Steering Committee may
from time to time agree, but only members of the Steering Committee shall have
the right to vote at such meetings. The Steering Committee, by unanimous
consent, shall have the authority to amend or waive compliance with the
provisions of this Agreement relating to the scheduling and conduct of the
meetings of all committees established pursuant to this Agreement. Any dispute
regarding any such amendment or waiver shall not be subject to the dispute
resolution provisions of Section 2.6.
2.3 ALLIANCE DIRECTORS COMMITTEE.
(a) Promptly after the Effective Date, Lilly and Ligand each
shall appoint one of their respective employees (each an "Alliance Director") to
coordinate the execution of the Research Program and the Development Program.
The Alliance Directors shall be the primary contacts between the parties with
respect to the Research Program and the Development Program. Either party may
change its designee as the Alliance Director upon prior written notice to the
other party.
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(b) Promptly after the Effective Date, Lilly and Ligand each
shall appoint an Alliance Directors Committee to assist the Alliance Directors
in the implementation and execution of the Research Program and the Development
Program. The Alliance Directors Committee shall consist of both Alliance
Directors and two (2) additional voting members, one (1) appointed by Ligand and
one (1) appointed by Lilly. Meetings of the Alliance Directors Committee may be
attended by Joint Program Committee representatives, as well as consultants and
other agents of Ligand and Lilly as are deemed necessary by the Alliance
Directors, but only members of the Alliance Directors Committee shall have the
right to vote at such meetings. The Alliance Directors Committee shall report to
the Steering Committee which shall have the right to review, accept, reject or
modify all actions of the Alliance Directors Committee. Either party may change
its members of the Alliance Directors Committee upon prior written notice to the
other party.
(c) ***
*** The party hosting the meeting of the
Alliance Directors Committee shall prepare and deliver to the other party one
week prior to the meeting the agenda for the meeting. The party hosting the
meeting of the Alliance Directors Committee shall prepare and deliver to the
other party within ten (10) days after the date of such meeting, minutes of the
meeting that set forth all decisions of the Alliance Directors Committee
relating to the Research Program and the Development Program in form and content
reasonably acceptable to the other party. Minutes shall be deemed approved
unless any member of the Alliance Directors Committee objects to the accuracy of
such minutes in writing to the other party within ten (10) business days of
receipt. If a party objects to the minutes and the objection is not resolved,
the objection will be deemed a dispute and resolved pursuant to Section 2.6.
(d) The Alliance Directors Committee shall be responsible for the
execution of the Research Program and the Development Program and direction of
the Joint Program Committee. It may appoint such other committees or working
groups, with such duties and memberships, as it deems appropriate. The Alliance
Directors Committee shall have such additional duties and responsibilities as
are given to it by the Steering Committee and shall meet with such frequency as
is necessary to complete its duties and as may otherwise be required by the
Steering Committee.
2.4 JOINT PROGRAM COMMITTEE. Promptly after the Effective Date, Ligand
and Lilly through the Alliance Directors Committee shall appoint the Joint
Program Committee. The Joint Program Committee will be responsible for the day
to day implementation of the Research Program and the Development Program. The
Joint Program Committee shall consist of six (6) voting members, two (2)
appointed by Ligand and four (4) appointed by Lilly. Decisions of the committee
shall be made by majority vote with a quorum for any meeting consisting of all
six members, provided, however, that if the Joint Program Committee is unable to
act because of a lack of a quorum, either Lilly or Ligand may call a new meeting
pursuant to five (5) days written notice at which a quorum shall consist of four
(4) members.
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Meetings of the Joint Program Committee may be attended by such other directors,
officers and employees of each party as such party deems necessary, and by such
consultants and non-employee agents of each party as the members of the Joint
Research Committee may from time to time agree, but only members of the
committee shall be entitled to vote. This committee shall report to the Alliance
Directors Committee which shall have the right to review, accept, reject or
modify all actions of the Committee subject to the dispute resolution mechanism
set forth in Section 2.6. Any failure of the Alliance Directors Committee to
review, accept, reject or modify actions of the Joint Program Committee may be
treated as a dispute by the written request of a party and be resolved pursuant
to Section 2.6. Either party may change its representatives on the Joint Program
Committee upon written notice to the other party. The party hosting the meeting
of the Joint Program Committee shall prepare and deliver to the other party one
week prior to the meeting the agenda for the meeting. The party hosting the
meeting of the Joint Program Committee shall prepare and deliver to the other
party within ten (10) days after the date of such meeting, minutes of the
meeting that set forth all decisions of the Joint Program Committee relating to
the Research Program and the Development Program in form and content reasonably
acceptable to the other party. Minutes shall be deemed approved unless any
member of the Joint Program Committee objects to the accuracy of such minutes in
writing to the other party within ten (10) business days of receipt.
2.5 STAFFING AND FUNDING. Lilly shall pay to Ligand such research funds
with respect to Drug Product, as are provided in the Collaboration Agreement.
Lilly shall pay Ligand for costs incurred by Ligand in association with the
performance of the preclinical activities required for the development of the
Drug Products, as provided in Section 3.3. The resource requirements for the
Research Program and the Development Program shall be determined by the Joint
Program Committee and approved by the Alliance Directors Committee. Each party
shall provide with respect to the Research Program and the Development Program
such accounting, research and other information as is required of such party
pursuant to the Collaboration Agreement. For reimbursement by Lilly to Ligand of
costs associated with the Research Program and the Development Program, Lilly
shall have such audit and review rights as are provided in the Collaboration
Agreement. Staffing levels and credentials for personnel provided by Ligand
shall be as set forth in the Collaboration Agreement.
2.6 DISPUTE RESOLUTION. Any dispute arising from the Joint Program
Committee shall first be presented to the Alliance Directors Committee for
resolution. Any dispute arising from the Alliance Directors Committee shall be
presented to the Steering Committee for resolution. Any disputes arising from
the Steering Committee shall be presented to David Robinson or his successor as
Chief Executive Officer of Ligand on behalf of Ligand, and August M. Watanabe or
his successor as Chief Scientific Officer of Lilly on behalf of Lilly. These
executives shall confer and consider each party's view and shall attempt in good
faith to resolve such disagreements between themselves. If the executives cannot
promptly resolve such disagreements and if such disagreements relate to the
conduct of or decisions made as a part of the Development Program or the
Commercialization Program, for example,
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disagreements regarding the initiation and termination of preclinical tests and
clinical trials, the matter shall be decided by August M. Watanabe or his
successor as Chief Scientific Officer of Lilly. If the dispute relates to the
Research Program, the executives shall establish a mechanism to resolve the
disagreement promptly and efficiently, without waiving any rights which either
party may have under this Agreement, by law or otherwise. Any action requiring
Steering Committee approval shall be subject to the dispute resolution
provisions of this Section 2.6.
2.7 STAFF AVAILABILITY. Each party shall make its employees,
consultants, subcontractors and investigative sites engaged in the Research
Program and the Development Program or serving on any committee available upon
reasonable notice during normal business hours at their respective places of
employment to consult with the other party on issues arising during the Research
Program and the Development Program and in connection with any request from any
regulatory agency, including regulatory, scientific, technical and clinical
testing issues.
2.8 FACILITY VISITS. Representatives of Lilly and Ligand may, upon
reasonable notice during normal business hours, (a) visit the facilities where
the Research Program and the Development Program are being conducted and use
commercially reasonable efforts to obtain permission to visit facilities where
Targretin or Drug Product are or will be manufactured and tested, (b) consult
informally, during such visits and by telephone, with personnel for the other
party performing work on the Research Program and the Development Program, and
(c) with the other party's prior approval, which approval shall not be
unreasonably withheld, visit (i) the sites of any experiments or tests being
conducted by such party in connection with the Research Program and the
Development Program, but only to the extent in each case such experiments or
tests relate to Drug Products, and (ii) any manufacturing facility where
Targretin or Drug Product are being manufactured. On such visits, an employee of
the party conducting the research or development shall accompany the employee(s)
of the visiting party. If requested by the other party, Ligand and Lilly shall
cause appropriate individuals working on the Research Program and the
Development Program to be available for meetings at times and places reasonably
convenient to the party responding to such request.
ARTICLE 3
CLINICAL DEVELOPMENT PROGRAM
3.1 DEVELOPMENT PLAN. The Joint Program Committee or its designee shall
prepare and oversee an overall development plan (the "Development Plan") for the
Drug Product which shall describe the proposed toxicology studies, clinical
trials, regulatory plans, and other key elements of the development work
necessary for completion of development activities through completion of Phase
II Clinical Trials. In developing such plan, the Joint
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Program Committee shall take into account Lilly's requirements for the
Commercialization Program. To be effective, the Development Plan shall be
reviewed by the Alliance Directors Committee and shall be subject to review and
approval by the Steering Committee prior to its implementation. Progress towards
the goals of the plan shall be reviewed by the Steering Committee on a
semi-annual basis. Lilly shall be responsible for the conduct of the Development
Program and Ligand shall provide reasonable consultation and advice. The
Development Plan is intended as a work plan for the development activities with
respect to Drug Products and may be amended from time to time by the appropriate
committee. Notwithstanding anything in the Development Plan to the contrary, the
rights of the parties with respect to Drug Products shall be governed in all
respects by the terms of this Agreement.
3.2 REGULATORY APPROVALS. The parties shall use commercially reasonable
efforts consistent with their respective responsibilities hereunder to obtain
all necessary Regulatory Approvals. Except where Regulatory Approvals for the
Drug Product are legally required to be in Ligand's name, Lilly shall have the
sole right to obtain Regulatory Approvals for the Drug Product, which shall be
in Lilly's name, and Lilly shall own all submissions in connection therewith.
All formulary or marketing approvals for the Drug Product shall also be obtained
by and in the name of Lilly. Notwithstanding anything to the contrary herein,
Lilly shall handle all matters with drug regulatory agencies concerning Drug
Products and shall be the sole contact with such agencies. Nothing in this
Section 3.2 shall constitute a limitation on Ligand's right to seek, obtain or
own regulatory, marketing or formulary approvals for any product outside the
Field.
3.3 DEVELOPMENT COSTS. Lilly shall pay all costs incurred by Ligand
after the Effective Date in the Development Program (including those costs
related to Regulatory Approvals), except that (a) Ligand shall pay all costs
incurred in connection with the completion of clinical protocols L1069DM-01, and
pre-clinical protocols 97-2520, 97-3346, 97-7068, 97-7065 and all other clinical
and pre-clinical protocols ongoing as of the Effective Date in the Field (the
"Protocols"), except for such costs, if any, related to changes in the Protocols
requested by Lilly in writing and approved by the Joint Program Committee or the
Lilly Alliance Director as an expense to by paid by Lilly, and (b) Ligand shall
pay its own costs of providing reasonable consultation and advice to Lilly. The
costs to be paid by Lilly shall include all costs incurred by Ligand after the
Effective Date in connection with preclinical activities required by the
Development Program, except to the extent such services are paid for by
"Research Funds" as contemplated by and defined in the Collaboration Agreement.
Lilly shall pay Ligand for all expenses incurred pursuant to this Section 3.3
and which are not otherwise paid for with the Research Funds as contemplated by
and defined in the Collaboration Agreement as follows: Ligand will be paid for
all Ligand employees at the rate of *** for each Scientific Person Year (as
defined in the Collaboration Agreement) and all third party costs at Ligand's
costs. Ligand shall permit Lilly to review Ligand's records of the hours worked
by Ligand employees and the third party costs incurred by Ligand for the purpose
of verifying the costs to be paid by Lilly pursuant to this Section 3.3.
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ARTICLE 4
COMMERCIALIZATION
4.1 COMMERCIALIZATION. All decisions regarding the Commercialization
Program, including without limitation pricing and terms of sale and assignment
of Ligand personnel allocated under Section 3.1 of the Collaboration Agreement
with respect to the Drug Product, shall be determined by Lilly, in its sole
discretion; provided, however, that Ligand's participation in the
Commercialization Program shall be approved by the Steering Committee, subject
to the dispute resolution provisions of Section 2.6, and in no event shall such
Ligand participation be disruptive of Ligand programs not funded by Lilly.
4.2 MARKETING PARTNERS FOR DRUG PRODUCT. Lilly shall have the right to
appoint one or more Lilly Affiliates and one or more Third Party marketing
partners to promote, co-promote, distribute, market or co-market any Drug
Product in any country of the world where such an arrangement would be
beneficial for pricing approvals or overall market share. In the event Lilly
elects to appoint a marketing partner, Lilly shall have the right to supply the
Drug Product to such partner at such prices as Lilly shall determine. With the
consent of Ligand, which consent will not be unreasonably withheld, Lilly may,
in connection with the appointment of a marketing partner, assign to such
partner some or all of Lilly's obligations under the Development Program with
respect to one or more countries, provided that such assignment shall not
release Lilly from any obligations it may have under this Agreement.
4.3 COMMERCIAL DILIGENCE. Lilly shall use commercially reasonable
efforts to obtain Regulatory Approval for and to market, sell and distribute
Drug Products in all countries of the world.
4.4 OPTION TO DISTRIBUTE LIGAND SYSTEMIC PRODUCTS. Lilly shall have the
exclusive option to distribute all Ligand Systemic Products in the United
States, the European Union as an entity and Japan (the "Option Territory") for
such period of time as Lilly shall have the inchoate or actual obligation to pay
Ligand a royalty on Net Sales of Drug Products. For such distribution services,
Ligand shall pay Lilly *** of net sales of Ligand Systemic Products, determined
in the same manner as Net Sales are calculated pursuant to Section 1.37,
substituting therein "Ligand" for "Lilly" wherever such term appears. Each party
shall provide written notice (the "Option Notice") to the other party no later
than seven (7) months prior to the date the first party estimates in good faith
that it will file an application for Regulatory Approval with respect to the
first Ligand Systemic Product, in the case of Ligand, or the first Drug Product,
in the case of Lilly, in any country in the Option Territory, informing the
other party of the estimated filing date for the application. Lilly shall then
have a period of thirty (30) days after the date of the Option Notice to
exercise its option under this Section 4.4 by delivering a written notice of
exercise to Ligand. The option provided hereunder may only be exercised in any
or all of the United States, the European Union as an entity and/or Japan and,
if Lilly exercises the option, not later than the filing of
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an application for Regulatory Approval with respect to the first Drug Product in
any country in the Option Territory, Lilly and Ligand shall execute a written
distribution agreement providing for Lilly's distribution of Ligand Systemic
Products under terms substantially similar to those set forth in this Section
4.4 and Schedule 4.4.
4.5 TARGRETIN MANUFACTURE. If Lilly or any Lilly Affiliate is
manufacturing Targretin, Ligand shall have the right to purchase Targretin from
Lilly or the Lilly Affiliate pursuant to a written supply agreement in form
reasonably satisfactory to the parties, for use in Ligand Systemic Products and
Ligand Topical Products. During the Research Program and the Development
Program, Lilly will develop a manufacturing plan with the advice and
consultation of Ligand. In connection with clinical trials with respect to Drug
Products, Lilly anticipates purchasing, and shall have the right to purchase
through Ligand, Targretin from Ligand's current suppliers at the price charged
to Ligand by its current suppliers plus Ligand's direct order costs, including
all material and labor costs, whether direct or reasonably allocated, directly
related to Lilly's orders hereunder. Ligand will use commercially reasonable
efforts to cause its suppliers to permit quality assurance and quality control
inspections of their facilities and otherwise to cooperate with Lilly. Ligand
recognizes that Lilly does not intend to use any clinical material that does not
meet Lilly quality assurance/quality control standards; accordingly, Ligand will
not process any order from Lilly to Ligand's supplier that Ligand reasonably
believes would be filled with clinical material that does not meet such
standards and will promptly notify Lilly of its failure to process the order. In
the event that inadequate supply is available, the parties will agree upon an
equitable division of supply. Ligand shall take commercially reasonable efforts
to obtain supplies of Targretin for Lilly subject to Ligand's needs to conduct
development and commercialization activities outside the Field. For so long as
Lilly is purchasing Targretin from Ligand, Lilly shall provide Ligand with
rolling annual forecasts of its needs for Targretin on a quarterly basis.
4.6 TRADEMARKS. Lilly shall select one or more trademarks, not likely to
cause confusion, mistake or to deceive, with respect to Targretin or such other
marks as Ligand selects for the Ligand Systemic Products and/or the Ligand
Topical Products to be used in connection with the marketing of the Drug
Products. Such trademarks shall be owned solely by Lilly.
ARTICLE 5
ROYALTY AND MILESTONE PAYMENTS
5.1 ROYALTIES.
(a) Subject to the terms set forth in this Agreement (including, but not
limited to, Section 5.1(b) below) and during the Royalty Term, in partial
consideration for the licenses
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and services provided hereunder, Lilly shall pay Ligand the following royalties
based on worldwide aggregate Net Sales of each Drug Product during a Calendar
Year:
*** of Net Sales for that portion of Net Sales of the Drug
Product in such Calendar Year that are less than *** .
*** of Net Sales for that portion of Net Sales of the Drug
Product in such Calendar Year that equal or exceed *** but are
less than *** .
*** of Net Sales for that portion of Net Sales of the Drug
Product in such Calendar Year that equal or exceed *** but are
less than *** .
*** of Net Sales for that portion of Net Sales of the Drug
Product in such Calendar Year that equal or exceed *** .
Commencing January 1, 1999 and on January 1 of each year thereafter the
threshold and ceilings for the different royalty percentages will be increased
by *** over the levels in effect during the immediately preceding Calendar Year.
No royalty shall be paid on sales by Lilly or any Lilly Affiliate of Ligand
Systemic Products.
(b) In the event Ligand does not exercise the "Ligand Option" or gives
the "Rejection Notice" as provided in Section 1 of the Option Agreement and has
not previously exercised the "268/324 Royalty Option" under Section 6.1(b) of
the Collaboration Agreement, Ligand shall have the option to increase the
royalties payable on Targretin (the "Targretin Royalty Option") by *** of the
royalty rates provided in Section 5.1(a) above (e.g., the royalty for that
portion of Net Sales in such Calendar Year that are less than *** would be
increased from *** ). To exercise the Targretin Royalty Option, Ligand must
deliver written notice to Lilly within thirty (30) days after the first to occur
of (i) the date Ligand receives (A) the payment of the Phase III Enrollment
milestone for Compound 268 (as defined in the Collaboration Agreement) pursuant
to Section 7.2 of the Collaboration Agreement or (B) written notice from Lilly
acknowledging that the Phase III Enrollment milestone for Compound 268 has been
satisfied, (ii) the date Ligand receives (A) the payment of the Phase III
Enrollment milestone for Compound 324 (as defined in the Collaboration
Agreement) pursuant to Section 7.2 of the Collaboration Agreement or (B) written
notice from Lilly acknowledging that the Phase III Enrollment milestone for
Compound 324 has been satisfied or (iii) the date Ligand receives (A) the
payment of the first Phase III Enrollment milestone for Targretin pursuant to
Section 5.4 of this Agreement or (B) written notice from Lilly acknowledging
that the first Phase III Enrollment milestone for Targretin has been satisfied.
If Ligand does not deliver written notice within the required thirty (30) days,
the Targretin Royalty Option shall be deemed to have expired.
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5.2 ROYALTY PAYMENTS. Royalty payments under this Agreement shall be
made to the receiving party within seventy-five (75) days following the end of
each Calendar Quarter for which royalties are due.
5.3 ROYALTY TO LILLY. Subject to Section 6.5 of the Collaboration
Agreement, if Lilly and its Affiliates terminate development and
commercialization of all Drug Products under Section 10.4 after filing an IND or
an equivalent application in any Major Foreign Market with respect to a Drug
Product and, thereafter, Ligand manufactures, sells or causes to be manufactured
or sold the Drug Product, Ligand shall pay Lilly, during the Lilly Royalty Term,
a royalty on Net Sales of the Drug Product during each Calendar Year, calculated
as provided in Section 1.37, substituting therein "Ligand" for "Lilly" wherever
such term appears. The percentage of Net Sales to be paid by Ligand shall vary
in connection with the progress Lilly or any Lilly Affiliate shall have made
toward obtaining Marketing Approval of the Drug Product as follows:
(a) If Lilly or any Lilly Affiliate has not filed an IND or an
equivalent application in any Major Foreign Market with respect to the Drug
Product, Ligand shall *** of the Drug Product.
(b) If Lilly or any Lilly Affiliate has filed an IND or an
equivalent application in any Major Foreign Market but has not enrolled and
treated a patient in Phase III Clinical Trials with respect to the Drug Product,
Ligand shall *** of the Drug Product.
(c) If Lilly or any Lilly Affiliate has enrolled and treated a
patient in Phase III Clinical Trials but has not filed an NDA or an equivalent
application in any Major Foreign Market with respect to the Drug Product, Ligand
shall *** of the Drug Product.
(d) If Lilly or any Lilly Affiliate has filed an NDA or an
equivalent application in any Major Foreign Market with respect to the Drug
Product, Ligand shall *** of the Drug Product.
5.4 MILESTONE PAYMENTS. Provided that Lilly has not terminated this
Agreement under Section 10.3, upon achievement of any milestone event listed
below with respect to a Drug Product, Lilly shall pay a milestone fee to Ligand
on or before the seventy-fifth (75th) day following achievement of the milestone
as provided below:
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Milestone
1 IND Acceptance (other than pursuant ***
to the Protocols)
2 Phase III Enrollment ***
3 NDA Acceptance ***
4 Marketing Approval ***
Notwithstanding the immediately preceding sentence, unless Lilly
terminates this Agreement as provided in Section 10.3 before IND
Acceptance,Lilly shall pay the IND Acceptance milestone amount within three (3)
Lilly working days after the earlier of: (i) IND Acceptance or (ii) December 15,
1998. The milestone payments set forth above will be paid only for the first
indication of the Drug Product to achieve the required status and no milestone
payment shall be made more than once with respect to any other formulations or
indications of the Drug Product. *** In the event that Phase II Clinical Trials
and Phase III Clinical Trials are combined or other doubts exist regarding the
achievement of the Phase III Clinical Trials milestone, the Steering Committee
or its designee shall determine the point in the trials at which the Phase III
milestone has been achieved. Notwithstanding the provisions of Section 2.6 of
this Agreement, in the event that the Steering Committee (i) is unable to agree
or (ii) is no longer in existence and no designee has been named, the
determination shall be made by the mutual agreement of the parties.
ARTICLE 6
LICENSES
6.1 LICENSES TO LILLY. Subject to the other provisions of this
Agreement, Ligand and its Affiliates hereby grant to Lilly and its Affiliates an
exclusive, worldwide license, even as to Ligand and its Affiliates, with the
right to grant sublicenses, under Ligand's and its Affiliates' interests in the
Joint Patents, Joint Technology, Ligand Patents and Ligand Technology to
develop, make, have made, use, have used, import, offer for sale, sell and have
sold Drug Products, including the right to sell Targretin to Sublicensees for
formulation as Drug Products. Ligand and its Affiliates shall retain all their
respective rights under Joint Patents, Joint Technology, Ligand Patents and
Ligand Technology not explicitly granted to Lilly and its Affiliates hereunder.
*** Portions of this page have been omitted pursuant to a request for
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6.2 LICENSES TO LIGAND.
(a) Subject to the other provisions of this Agreement, Lilly and
its Affiliates hereby grant to Ligand and its Affiliates an exclusive, worldwide
license, even as to Lilly and its Affiliates, with the right to grant
sublicenses, under Lilly's and its Affiliates' interests in the Joint Patents,
Joint Technology, Lilly Patents and Lilly Technology to make, have made, use,
have used, import, offer for sale, sell and have sold formulations of Targretin
for use outside the Field. Notwithstanding the above, neither Lilly nor its
Affiliates grant any license under this Section 6.2(a) under the Lilly Patents
or the Lilly Technology that was not actually used by Lilly or any of its
Affiliates in connection with the research, development or manufacture of
Targretin at any time prior to First Commercial Sale.
(b) In the event that Lilly terminates this Agreement pursuant to
Section 10.3 or terminates development and commercialization with respect to all
Drug Products pursuant to Section 10.4, the licenses granted under Section 6.1
to Lilly and its Affiliates shall terminate and Ligand shall have the right to
obtain from Lilly and its Affiliates an exclusive, worldwide license, even as to
Lilly and its Affiliates, with the right to grant sublicenses, under Lilly's and
its Affiliates' interests in the Joint Patents, Joint Technology, Lilly Patents
and Lilly Technology to develop, make, have made, use, have used, import, offer
for sale, sell and have sold Drug Products. Lilly shall provide written
notification of early termination of this Agreement under Section 10.3 or
termination of development and commercialization with respect to all Drug
Products under Section 10.4, as the case may be, and Ligand shall have ninety
(90) days from the receipt of such notification from Lilly to elect to obtain
the exclusive license referred to above in this Section 6.2(b). Such election
shall be made by written notification to Lilly. If Ligand elects to obtain such
an exclusive license, such license shall be granted upon receipt by Lilly of
Ligand's written election to obtain such license and shall be subject to the
royalty provisions of Section 5.3. Notwithstanding the above, neither Lilly nor
its Affiliates grant any license under this Section 6.2(b) under the Lilly
Patents or the Lilly Technology that was not actually used by Lilly or any of
its Affiliates in connection with the research, development or manufacture of
Targretin at any time prior to First Commercial Sale.
ARTICLE 7
INFORMATION AND REPORTS
7.1 INFORMATION DISCLOSURE. Promptly after the Effective Date, Ligand
shall disclose and make available to Lilly all Ligand Patents and Ligand
Technology relating to Targretin. During the Research Program and the
Development Program, Lilly and Ligand will disclose and make available to each
other promptly (and in any event as soon as it is generally available within
their respective organizations) the results of the work conducted in connection
with the Research Program and the Development Program, including without
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limitation all structural, preclinical, clinical, regulatory, and other
information known by Lilly or Ligand concerning Targretin and Drug Products.
Lilly shall own and maintain its database of clinical trial data and adverse
drug event information accumulated from all clinical trials of Drug Products for
which it was responsible. In the event that Lilly terminates this Agreement
pursuant to Section 10.3 or terminates development and commercialization with
respect to all Drug Products pursuant to Section 10.4, Lilly will permit Ligand,
at no cost to Ligand other than the direct costs of assembling, reproducing and
transmitting the data, to make copies of all material information described in
the immediately preceding sentence and use such information in connection with
Regulatory Approvals. Ligand shall own and maintain its database of clinical
trial data and adverse drug event information accumulated from all clinical
trials of Targretin outside the Field. Lilly and Ligand each shall have the
right, during normal business hours and upon reasonable notice, to inspect and
copy all records of the other party to the extent reasonably required for the
performance of its obligations under this Agreement (with the party owning the
records determining what is reasonably required). Each party shall treat the
records and the information of the other party contained therein as Confidential
Information and shall not use or disclose such records or information except to
the extent permitted by this Agreement.
7.2 COMPLAINTS. Each party shall maintain a record of all complaints it
receives with respect to Drug Products or any Ligand product containing
Targretin. Except as otherwise provided in Section 7.3, each party shall notify
the responsible party in reasonable detail of any complaint received by it and
within three (3) days after the event, and in any event in sufficient time to
allow the responsible party to comply with any and all regulatory requirements
imposed upon it in any country in which the Drug Product is being marketed.
7.3 ADVERSE EVENT REPORTING. Lilly and Ligand agree to provide each
other with all information necessary or desirable to comply with the laws and
regulations of governmental regulatory authorities with respect to Targretin and
Drug Products, as the case may be. In furtherance thereof, Lilly and Ligand
agree to develop appropriate adverse experience reporting procedures and to:
(a) provide to each other any significant information on
Targretin or any Drug Product from preclinical laboratory, animal toxicology and
pharmacology studies, as well as serious or unexpected adverse experience
reports from clinical trials and commercial experiences with Targretin or a Drug
Product.
(b) report to one another in such a manner and time so as to
enable each party to comply with all governmental laws and regulations in
countries for which Regulatory Approval is or will be sought.
7.4 USE OF INFORMATION. Information contained in reports made pursuant
to this Article 7 or otherwise communicated between the parties will be subject
to the confidentiality provisions of Article 9 below. Lilly may use any
information obtained by it (either by its
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own efforts or by disclosure from Ligand) pursuant to this Agreement for the
purposes of obtaining Regulatory Approval for Drug Products throughout the
world. Each party shall have the right to use the Confidential Information
disclosed by the other party without charge, but only to the extent necessary to
enable each party to carry out their respective roles defined in this Agreement.
7.5 PUBLICATIONS. During the term of the Research Program, Ligand and
Lilly each acknowledge the other party's interest in publishing certain
information gathered during the collaboration to obtain recognition within the
scientific community and to advance the state of scientific knowledge. Each
party also recognizes the mutual interest in obtaining valid patent protection
and protecting business interests. The Steering Committee, or its designee, will
establish procedures for review of publications that will address the process,
timing and criteria for decision while taking into account both Ligand's and
Lilly's policies for publication review and approval. The Steering Committee, or
its designee (the "Publication Subcommittee"), shall consider each such proposed
publication that arises during the term of the Research Program by reviewing an
advance draft of all written publications and an abstract of all oral
presentations, which shall be submitted not later than 45 days prior to the
first submission for publication in the case of written publications and 45 days
prior to submission of the abstract to the organizers of the forum at which the
oral presentation is to be made. If, within 30 days of receipt of the advance
copy of a party's proposed written publication or abstract of a proposed oral
presentation, the Steering Committee or its Publication Subcommittee informs
such party that its proposed publication or presentation could be expected to
have a material adverse effect on any Ligand Patents, Ligand Technology, Lilly
Patents, Lilly Technology, Joint Patents or Joint Technology developed or
acquired during the term of the Research Program, then such party shall delay
such proposed publication or presentation for a period of up to 90 days or, if
longer, a commercially reasonable period of time, to enable modifications to the
publication or presentation for patent, trade secret, or commercial reasons or
to allow for patent(s) preparation and filing of the information involved, if
such information pertains to a patentable invention. If any material changes are
made to the advance copy prior to publication or presentation, the final version
shall be submitted for review by the Steering Committee or the Publication
Subcommittee, which shall then have a period of 10 business days to review the
final version.
If, within 30 days of receipt of an advance copy or within 10 business
days of receipt of the final version of a party's proposed publication or
presentation, the Steering Committee or the Publication Subcommittee has failed
to act with respect to such party's proposed publication or presentation, then
such proposed publication or presentation shall be regarded as approved by the
Steering Committee and may be published or presented. The disclosure of
information that has been previously approved or is not Confidential Information
shall not require the review and approval of the Steering Committee under this
Section 7.5.
7.6 REGULATORY REPORTING. The parties acknowledge that either or both
parties will be required to submit information and file reports with various
governmental agencies in
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addition to those contemplated by the preceding sections. Without limiting the
generality of Article 3 above, the Joint Program Committee or its designee, with
the approval of the Steering Committee, shall establish procedures to be
followed by the parties which will facilitate the coordination of the parties in
complying with their respective regulatory obligations, and the parties agree to
cooperate with each other as necessary to allow each party to comply with its
regulatory obligations. Lilly shall coordinate all contacts with regulatory
agencies with respect to Drug Products, keeping Ligand appropriately advised of
such contacts. Each party shall consult with the other party before responding
to any inquiries from regulatory agencies regarding Targretin or the manufacture
thereof, provided however, each party may make such communication as required by
law.
7.7 SALES REPORTS.
(a) During the term of this Agreement and after First Commercial
Sale of a Drug Product in any country, Lilly shall furnish or cause to be
furnished to Ligand on a quarterly basis a written report or reports covering
each Calendar Quarter (each such Calendar Quarter being sometimes referred to
herein as a "reporting period") showing (i) the Net Sales of each Drug Product
in each country during the Royalty Term by Lilly, its Affiliates, Sublicensees
and assigns, and (ii) the royalties which shall have accrued under Article 5 in
respect of such sales and the basis for calculating those royalties. With
respect to sales of Drug Products invoiced in United States Dollars ("Dollars"),
the Net Sales amounts and the amounts due to Ligand hereunder shall be expressed
in Dollars.
With respect to sales of Drug Products invoiced in a currency
other than Dollars, the Net Sales shall be calculated using Lilly's then current
standard exchange rate methodology for the translation of foreign currency sales
into Dollars. Each quarterly report shall be accompanied by a listing of the
exchange rates used in calculating Net Sales covered by such quarterly report.
Lilly will at Ligand's reasonable request but not more frequently than once a
Calendar Quarter inform Ligand as to the specific exchange rate translation
methodology, if any, used for a particular country or countries. In the event
that any exchange rate translation methodology changes, Lilly will inform Ligand
of the change in the quarterly report next due.
Each quarterly report shall be due on the seventy-fifth (75th)
day following the close of each reporting period. Lilly shall keep accurate
records in sufficient detail to enable the amounts due hereunder to be
determined and to be verified by the independent public accountants described
hereunder. Lilly shall furnish annually to Ligand appropriate evidence of
payment of any tax or other amount required by applicable laws or regulations to
be deducted from any royalty payment, including any tax or withholding levied by
a foreign taxing authority in respect of the payment or accrual of any royalty.
(b) All payments shall be made in Dollars at the time of
quarterly reporting. If at any time legal restrictions prevent the prompt
remittance of any payments with respect to
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any country where Drug Products are sold, Lilly or its sublicensees or marketing
partners shall have the right and option to make such payments by depositing the
amount thereof in local currency to Ligand's account in a bank or depository in
such country.
Upon the written request of Ligand, at Ligand's expense and not more than once
in or in respect of any Calendar Year, ***
***
***
***
Upon the expiration of thirty-six (36) months following the end of any Calendar
Year, the calculation of amounts payable with respect to such fiscal year shall
be binding and conclusive upon Ligand, and Lilly and its sublicensees and
marketing partners shall be released from any liability or accountability with
respect to payments for such year. The report prepared by the independent public
accountant, a copy of which shall be sent or otherwise provided to Lilly by such
independent public accountant at the same time it is sent or otherwise provided
to Ligand, shall contain the conclusions of such independent public accountant
regarding the audit and will specify that the amounts paid to Ligand pursuant
thereto were correct or, if incorrect, the amount of any underpayment or
overpayment. If such independent public accountant's report shows any
underpayment, Lilly shall remit or shall cause its sublicensees or marketing
partners to remit to Ligand within thirty (30) days after Lilly's receipt of
such report, (i) the amount of such underpayment and (ii) if such underpayment
exceeds ten percent (10%) of the total amount owed for the Calendar Year then
being audited, the reasonable and necessary fees and expenses of such
independent public accountant performing the audit, subject to reasonable
substantiation thereof. Any overpayments shall be fully creditable against
amounts payable in subsequent payment periods. Ligand agrees that all
information delivered or subject to review under this Section 7.7 or under any
sublicensee or marketing agreement is Confidential Information and that Ligand
shall retain all such information in confidence.
7.8 STATUS REPORTS. At any time after the committees referred to in
Article 2 cease to exist, Lilly shall, upon request, and not more frequently
than semi-annually, provide to Ligand a written report summarizing the
activities of Lilly with respect to the Drug Products, the contents of
such report to be as set forth on Schedule 7-8.
ARTICLE 8
INTELLECTUAL PROPERTY
8.1 PATENTABLE INVENTIONS AND TECHNOLOGY.
(a) OWNERSHIP. Lilly will disclose to Ligand all Lilly Technology
and Joint Technology and Ligand will disclose to Lilly all Ligand Technology and
Joint Technology to the extent developed or acquired during the Research Program
and the
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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Development Program promptly after the disclosing party recognizes the
significance thereof unless the same shall have been developed as part of a
collaboration with a Third Party, the terms of which prohibit disclosure to the
other party. All Ligand Patents and Ligand Technology shall be owned by Ligand,
all Lilly Patents and Lilly Technology shall be owned by Lilly and all Joint
Patents and Joint Technology shall be owned jointly by Ligand and Lilly,
inventorship to be determined in accordance with U.S. laws of inventorship,
where applicable.
(b) PATENT PROSECUTION. Ligand shall be responsible for
preparing, filing, prosecuting, maintaining and taking such other actions as are
reasonably necessary or appropriate with respect to the Ligand Patents and any
patentable inventions encompassed by Ligand Technology. Lilly shall be
responsible for preparing, filing, prosecuting, maintaining and taking such
other actions as are reasonably necessary or appropriate with respect to the
Lilly Patents, Joint Patents and any patentable inventions based on or arising
from Lilly Technology or Joint Technology. Each party will consult the other
party with respect to its choice of external patent counsel and will keep that
party continuously informed of all material developments relating to the
preparation, filing, prosecution and maintenance of patents and patent
applications covered by this Agreement. Each party shall endeavor in good faith
to coordinate its efforts with those of the other party to minimize or avoid
interference with the prosecution of the other party's patent applications. To
the extent practicable, each party shall provide the Steering Committee or its
designee with a copy of any patent application which first discloses any
specific Lilly Technology, Ligand Technology or Joint Technology, prior to
filing the first of such applications in any jurisdiction, for review and
comment by such committee or its designee.
(c) COSTS. Subject to the provisions of subsection (d) below, the
party initially responsible for all costs incurred in the preparation, filing,
prosecution and maintenance of a patent pursuant to Section 8.1(b) shall bear
all costs incurred in the preparation, filing, prosecution and maintenance of
such patents; provided, however, that Ligand shall pay *** of all reasonable
external expenses incurred by Lilly while prosecuting and maintaining Joint
Patents. External expenses will include patent office fees and taxes in
connection with the filing, prosecution and maintenance of any patent or patent
application and the fees of any outside patent attorneys or agents in connection
with the ex parte preparation, filing, prosecution and maintenance thereof. The
allocation of such expenses will occur on an annual basis at the end of each
Calendar Year, at which time Lilly will provide Ligand with an itemized list of
external expenses denominated in Dollars incurred during the previous annual
period in prosecuting and maintaining Joint Patents and Ligand will reimburse
Lilly's expenses within sixty (60) days of the date of receipt of this itemized
list.
(d) DISCONTINUANCE OF PATENT PROSECUTION. The party initially
responsible for preparation, filing, prosecution and maintenance of a particular
Lilly Patent, Ligand Patent or Joint Patent (the "Initial Responsible Party")
shall give thirty (30) days advance notice (the
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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"Discontinuance Election") to the other party of any intention or decision to
cease preparation, filing, prosecution and maintenance of that patent (a
"Discontinued Patent"); provided, however, that abandonment of a patent
application in favor of a continuation or continuation-in-part thereof shall not
constitute discontinuance of the parent application. In such case, the other
party may elect at its sole discretion to continue preparation, filing and
prosecution or maintenance of the Discontinued Patent at its sole expense
subject to the prior rights of Third Parties. The party so continuing shall own
any such patent or patent application and patents maturing therefrom, subject to
the prior rights of Third Parties, and the Initial Responsible Party shall
execute such documents and perform such acts as may be reasonably necessary for
the other party to file or to continue prosecution or maintenance, including
assigning ownership of such patents and patent applications to the party
electing to continue. Discontinuance may be on a country-by-country basis or for
a patent application or patent series in total. In the event that Lilly
exercises its Discontinuance Election with respect to a Discontinued Patent in a
particular country, Lilly's license under Section 6.1 with respect to that
Discontinued Patent shall terminate with respect to such country.
8.2 INFRINGEMENT CLAIMS BY THIRD PARTIES.
(a) In the case of any claim of infringement of a patent owned by
a Third Party based upon the making, having made, using, having used, importing,
offering for sale, selling or having sold Targretin in a Drug Product, and the
patent Covers Targretin per se, or the use of Targretin per se in the treatment
of diabetes mellitus, obesity, insulin resistance, dyslipidemia, and
cardiovascular disorders associated with diabetes mellitus or insulin
resistance, (i) Lilly shall have the right to obtain a license from the Third
Party and credit *** of any royalty payable to the Third Party against the
royalty payable to Ligand, but in no event will Ligand's royalty each year be
reduced by more than *** , or (ii) if Lilly and/or Ligand is sued for
infringement by such Third Party, Lilly shall control and defend or settle the
action at its expense and shall pay any damages or other monetary awards
resulting therefrom, and Lilly shall be entitled to credit *** of such monetary
award against the royalties payable to Ligand, but in no event will Ligand's
royalty each year be reduced by more than *** .
(b) If a claim of infringement is made against Lilly and/or
Ligand by a Third Party and that claim is based upon a claim of infringement for
use of an assay system or biological material used in an assay system (for
example, the co-transfection assay or a gene or protein used therein) which is
Ligand Technology and the claim of infringement is not based on a patent claim
which covers a compound or its method of use or any other separately patented
technology, then (i) Lilly shall have the right to obtain a license from the
Third Party and credit *** of any royalty payable to the Third Party against the
royalty payable to Ligand arising from the infringing use, but in no event will
Ligand's royalty each year be reduced by more than *** , or (ii) if Lilly and/or
Ligand is sued for infringement by such Third Party, Ligand shall control and
defend or settle the action and Ligand and Lilly shall share equally all
expenses of the action and any damages or
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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other monetary award resulting therefrom. Lilly shall have the right to approve
any settlement of any such action, which approval will not be unreasonably
withheld.
(c) If a claim of infringement is made against Lilly by a Third
Party based upon a claim of patent infringement not arising under (a) or (b)
above, Lilly shall have the obligation to control and defend or settle the claim
at its sole expense (including the payment of any damages, attorneys' fees or
other monetary awards).
8.3 INFRINGEMENT CLAIMS AGAINST THIRD PARTIES.
(a) Ligand and Lilly each agree to take commercially reasonable
actions to protect their respective Patents and Technology from infringement and
from unauthorized possession or use.
(b) If any Ligand Patent, Ligand Technology, Lilly Patent, Lilly
Technology, Joint Patent or Joint Technology is infringed or misappropriated, as
the case may be, by a Third Party, the party to this Agreement first having
knowledge of such infringement or misappropriation, or knowledge of a reasonable
probability of such infringement or misappropriation, shall promptly notify the
other in writing. The notice shall set forth the facts of such infringement or
misappropriation in reasonable detail. Subject to the rights of Third Parties,
the owner of the Patent or Technology shall have the primary right, but not the
obligation, to institute, prosecute and control any action or proceeding with
respect to infringement or misappropriation of such Patent or Technology by a
Third Party using its own counsel and the other party shall have the right, to
be represented in such action by its own counsel. The Steering Committee shall
determine, or if the Steering Committee is no longer in existence, the parties
shall mutually determine, which party shall have the primary responsibility to
institute, prosecute, and control any action or proceeding with respect to
infringement or misappropriation of Joint Patents or Joint Technology and the
other party shall have the right to be represented by its counsel. The costs and
expenses of all suits brought by the party having the primary right or
responsibility to institute, prosecute, and control such action or prosecution
(including the costs and expenses of the other party and its separate counsel,
if any, should the other party elect to participate in such action or
proceeding) shall be paid *** by Lilly and *** by Ligand and all damages or
other monetary awards recovered therein remaining after the pro rata
reimbursement of such costs and expenses shall be split (i) *** to Lilly and
(ii) *** to Ligand. If the party having the primary right or responsibility to
institute, prosecute, and control such action or prosecution fails to do so
within a period of one hundred twenty (120) days after receiving notice of the
infringement, the other party, subject to the prior rights of any Third Party,
shall have the right to bring and control any such action by counsel of its own
choice, and the other shall not have the right to participate in such action or
proceeding except that such party may be joined as a party plaintiff and, in
case of joining, such party agrees to give the other party reasonable assistance
and authority to file and to prosecute such suit. All costs and expenses
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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of any suit brought by the party not having the primary right or responsibility
to institute, prosecute and control such action or prosecution (including the
costs and expenses incurred by the other party in providing reasonable
assistance to the party initiating the action or proceeding) shall be paid, and
all damages or other monetary awards recovered therein shall be retained, by the
party initiating the action or proceeding. No settlement or consent judgment or
other voluntary final disposition of a suit under this Section 8.3 may be
entered into without the joint consent of Ligand and Lilly (which consent shall
not be unreasonably withheld).
8.4 NOTICE OF CERTIFICATION. Ligand and Lilly each shall immediately
give notice to the other of any certification filed under the U.S. Drug Price
Competition and Patent Term Restoration Act of 1984 claiming that a Joint
Patent, a Ligand Patent or a Lilly Patent is invalid or that any infringement
will not arise from the manufacture, use or sale of any Drug Product by a Third
Party. If Ligand decides not to bring infringement proceedings against the
entity making such a certification with respect to a Ligand Patent, Ligand shall
give notice to Lilly of its decision not to bring suit within twenty-one (21)
days after receipt of notice of such certification. Lilly may then, but is not
required to, bring suit against the party that filed the certification. If Lilly
decides not to bring infringement proceedings against the entity making such a
certification with respect to a Joint Patent or a Lilly Patent, Lilly shall give
notice to Ligand of its decision not to bring suit within twenty-one (21) days
after receipt of notice of such certification. Ligand may then, but is not
required to, bring suit against the party that filed the certification. Any suit
by Lilly or Ligand may be in the name of Lilly or in the name of Ligand, or
jointly by Lilly and Ligand, as may be required by law. For this purpose, the
party not bringing suit shall execute such legal papers necessary for the
prosecution of such suit as may be reasonably requested by the party bringing
suit.
8.5 PATENT TERM EXTENSIONS. The parties shall cooperate with each other
in gaining patent term extensions and/or supplementary protection certificates
wherever applicable to patents Covering Drug Products and for products which
Ligand has rights to market outside the Field. The party first eligible to seek
extension of such patent shall have the right to do so; provided, that if in any
country the first party has an option to extend the patent term for only one of
several products, the first party will consult with the other party before
making the election. If more than one patent is eligible for extension, the
Steering Committee shall agree upon a strategy that will maximize patent
protection for Drug Products and for products which Ligand has rights to market
outside the Field. All filings for such extensions and certificates shall be
made by the party to whom the patent is assigned, provided, however, that in the
event that the party to whom the patent is assigned elects not to file for an
extension or supplementary protection certificate, such party shall (i) inform
the other party of its intention not to file and (ii) grant the other party the
right to file for such extension or certificate.
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ARTICLE 9
CONFIDENTIALITY AND NONDISCLOSURE
9.1 CONFIDENTIALITY. Unless otherwise set forth in this Agreement, for a
period from the Effective Date until five (5) years following the later of: (a)
the termination of this Agreement or (b) if Lilly or one or more of its
Affiliates is marketing a Drug Product, the date on which Lilly and its
Affiliates cease to market any Drug Product, each party and its respective
Affiliates shall maintain in confidence all Confidential Information, and shall
not, except as contemplated by this Agreement, disclose Confidential Information
or use Confidential Information for its benefit or the benefit of others,
without the consent of the disclosing party (the "Disclosing Party"). Documents
made available to the receiving party (the "Receiving Party") shall remain the
property of the Disclosing Party and shall be returned upon written request of
the Disclosing Party, except that one copy of all such information may be
retained for legal archival purposes by the Receiving Party.
9.2 AUTHORIZED DISCLOSURE. Each party may disclose Confidential
Information for the purpose of making various regulatory filings and complying
with applicable governmental regulations, and to sublicensees (potential and
actual), marketing partners (potential and actual), consultants and others
having a need to know for the purposes of development, manufacture or marketing
of Targretin or Drug Products pursuant to this Agreement, provided that such
sublicensees, marketing partners, consultants and others shall also agree to
appropriate and comparable confidentiality and non-use provisions. In addition,
each party shall be entitled to disclose Confidential Information to the extent
required by applicable law, orders of courts, regulatory authorities or similar
bodies having jurisdiction over the party ("Legal Process"). The Receiving Party
shall promptly notify the Disclosing Party of any request or demand by Legal
Process for disclosure of Confidential Information. With respect to any
disclosure of Confidential Information, including the text of this Agreement,
for the purpose of complying with applicable government regulations, the
disclosing party shall give the other party an opportunity to review and comment
upon the extent of any such disclosure of Confidential Information prior to
disclosure.
9.3 NONDISCLOSURE OF AGREEMENT. Neither party shall disclose any
information about this Agreement without the prior written consent of the other.
Consent shall not be required, however, for (a) disclosures to tax or other
governmental authorities or to potential or actual sublicensees, or marketing
partners to the extent required or contemplated by this Agreement, provided,
that in connection with such disclosure, each party agrees to use its
commercially reasonable efforts to secure confidential treatment of such
information, (b) disclosures of information for which consent has previously
been obtained or (c) information which has previously been publicly disclosed.
Each party shall have the further right to disclose the terms of this Agreement
as required by applicable law, including the rules and
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regulations promulgated by the Securities and Exchange Commission, and to
disclose such information to shareholders or potential investors as is customary
for publicly-held companies. Any copy of this Agreement to be filed with the
Securities and Exchange Commission shall be redacted to the satisfaction of both
parties; provided, in the event that the Securities and Exchange Commission
objects to the redaction of any portion of the Agreement after the initial
submission, the filing party shall inform the other party of the objections and
shall in good faith respond to the objections in an effort to limit the
disclosure required by the Securities and Exchange Agreement, but in any event
the filing party shall be free to include any portions of the Agreement it deems
necessary to respond to the objections in any future filings. Without limiting
the generality of the foregoing and except in the circumstance where a party's
outside counsel advises the party that immediate disclosure is required, in the
event that a Receiving Party intends to disclose Confidential Information as
permitted under this Article 9, such a party will provide to the Disclosing
Party a copy of the information to be disclosed and an opportunity to comment
thereon prior to such disclosure, and, to the extent practicable, consult with
the other on the necessity for the disclosure and the text of the proposed
release within a reasonable time in advance of the proposed disclosure. Without
limiting the generality of this Section 9.3, Ligand may allow Allergan, Inc.
("Allergan") to review a copy of this Agreement, for the sole purpose of
complying with Ligand's obligation to Allergan under that certain Amended and
Restated Technology Cross License Agreement, dated as of September 24, 1997,
among Allergan, Ligand and Allergan Ligand Retinoid Therapeutics, Inc. Any copy
of this Agreement disclosed under this Article 9 shall be redacted to the
satisfaction of both parties.
9.4 SURVIVAL. The confidentiality obligations of this Article 9 shall
survive the termination or expiration of the Agreement.
9.5 PRESS RELEASES. Press releases or other public communication by
either party relating to the collaboration contemplated by this Agreement shall
be approved in advance by the other party, except for those communications
required by law, disclosures of information for which consent has previously
been obtained or information which has been previously disclosed, or as
otherwise set forth in this Agreement.
ARTICLE 10
TERM AND TERMINATION OF AGREEMENT
10.1 TERM. This Agreement shall become effective on the Effective Date
and shall continue in effect, unless terminated earlier as described hereunder
or by mutual written agreement of the parties, until the later of either: (1)
the expiration of the last to expire Lilly Patent, Ligand Patent or Joint Patent
Covering a Drug Product; (2) in the event that Lilly or any Lilly Affiliate is
developing or marketing a Drug Product in accordance with the terms of this
Agreement but there is no issued Lilly Patent, Ligand Patent or Joint Patent
Covering a
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Drug Product, then *** from the date of the most recent First Commercial Sale
with respect to a Drug Product, if any; or (3) the expiration of the last
applicable Data Exclusivity Period with respect to a Drug Product.
10.2 TERMINATION FOR MATERIAL BREACH. Either party shall have the right
to terminate this Agreement after ninety (90) days written notice to the other
in the event the other is in material breach of this Agreement, unless the other
party cures the breach before the expiration of such period of time. Such notice
shall set forth in reasonable detail the specifics of the breach. In the event
of termination under this Section 10.2 by Lilly, all licenses granted under this
Agreement to Lilly and its Affiliates shall not be affected and shall continue
in full force and effect, and Lilly and its Affiliates shall have the right to
exercise all such licenses (subject to all payment and other surviving
obligations as set forth in Section 10.6). All licenses granted under this
Agreement to Ligand and its Affiliates shall automatically terminate upon such
termination by Lilly. In the event of termination under this Section 10.2 by
Ligand, all licenses granted under this Agreement to Ligand and its Affiliates
shall not be affected and shall continue in full force and effect, and Ligand
and its Affiliates shall have the right to exercise all such licenses (subject
to all payment and other surviving obligations as set forth in Section 10.6).
All licenses granted under this Agreement to Lilly and its Affiliates shall
automatically terminate upon such termination by Ligand. Notwithstanding the
foregoing, Lilly shall be permitted to distribute and sell all supplies of Drug
Products in its inventory at the time of termination until such supplies are
exhausted.
10.3 EARLY TERMINATION. At any time on or before December 15, 1998,
Lilly shall have the right to terminate this Agreement upon written notice to
Ligand if Lilly determines, for any reason, that it does not wish to proceed
with development of any Drug Product. In the event Lilly terminates the
Agreement under this Section 10.3, Lilly's and its Affiliates' license
(including any royalty obligations related thereto) granted under Section 6.1
shall terminate. The rights granted Ligand and its Affiliates under Section 6.2
shall survive any early termination of this Agreement by Lilly under this
Section 10.3.
10.4 TERMINATION OF DEVELOPMENT FOR FAILURE TO MEET GOALS. Ligand
acknowledges that the development and commercialization of Drug Products is an
inherently uncertain process, and that there can be no assurance either that
Drug Products can be successfully developed or that the potential commercial
rewards available for the commercialization of Drug Products, when weighed
against the costs and uncertainties involved and compared to Lilly's other
commercial opportunities, will be sufficient to justify Lilly's continued
efforts to develop and/or commercialize Drug Products. After December 15, 1998,
if Lilly in good faith concludes that further efforts under this Agreement would
not be in the best interests of Lilly, or if Lilly's Portfolio Management
Committee or its successor decides to cease work on the Drug Product, Lilly
shall so notify Ligand, and the parties shall then promptly meet to explore
whether any steps may be taken that would lead Lilly to conclude that further
efforts would be justified. In the event the parties are unable to agree to
continue efforts within ninety (90) days of Lilly's notice to Ligand provided
for above, Lilly
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shall be entitled to terminate further development or commercialization of a
Drug Product upon written notice to Ligand and Lilly's and its Affiliates'
license (including any royalty obligations related thereto) granted under
Section 6.1 with respect to such Drug Product shall terminate. The rights
granted Ligand and its Affiliates under Section 6.2 shall survive any early
termination of development or commercialization by Lilly under this Section
10.4.
10.5 TERMINATION UPON INSOLVENCY. This Agreement may be terminated by
either party upon notice to the other should the other party:
(a) consent to the appointment of a receiver or a general
assignment for the benefit of creditors, or
(b) file or consent to the filing of a petition under any
bankruptcy or insolvency law or have any such petition filed against it which
has not been stayed within 60 days of such filing.
10.6 ACCRUED RIGHTS, SURVIVING OBLIGATIONS, RESIDUAL RIGHTS. Upon
expiration or early termination of this Agreement, except as provided herein to
the contrary, all rights and obligations of the parties shall cease, except as
follows:
(a) obligations to pay royalties and other sums accruing
hereunder up to the date of termination;
(b) the right to complete the manufacture and sale of Drug
Products, which qualify as "work in process" under GAAP or which are in stock at
the date of termination, and the obligation to pay royalties on Net Sales of
such Drug Products;
(c) the obligations to pay milestones and royalties with respect
to Drug Products;
(d) all provisions regarding confidentiality shall continue in
full force and effect;
(e) obligations for record-keeping and accounting reports for so
long as Drug Products are sold, plus three (3) years. At such time after
termination of this Agreement when sales or other dispositions of Drug Products
have ceased, Lilly or Ligand, as the case may be, shall render a final report
along with any royalty payment due;
(f) the parties rights to inspect books and records as described
in Article 7;
(g) in the event that Lilly terminates this Agreement pursuant to
Section 10.3, the obligation to provide information to Ligand pursuant to
Section 7.1;
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(h) the obligations of defense and indemnity as described in
Article 11;
(i) any cause of action or claim of a party accrued or to accrue
because of any breach or default by the other party hereunder (subject to
applicable statutes of limitation);
(j) in the event of expiration of this Agreement under Section
10.1, Lilly shall have a fully paid-up, perpetual license to the rights granted
pursuant to Section 6.1 solely with respect to the unpatented Ligand Technology,
and Ligand shall have a fully paid-up, perpetual license to the rights granted
pursuant to Section 6.2 solely with respect to the unpatented Lilly Technology;
and
(k) all other terms, provisions, representations, rights and
obligations contained in this Agreement that by their sense and content are
intended to survive.
ARTICLE 11
INDEMNITY
11.1 CLAIMS. Each party hereby agrees to indemnify, defend and hold
harmless the other party and its Affiliates, and their respective officers,
directors, agents and employees from and against any and all suits, claims,
actions, demands, liabilities, expenses and/or losses, including reasonable
attorneys' fees and other costs of defense other than claims for patent
infringement (which shall be resolved pursuant to Article 8) ("Claims"), (a)
resulting directly or indirectly from the manufacture, use, handling, storage,
sale or other disposition of Targretin or Drug Products by the indemnifying
party, its Affiliates, agents or Sublicensees (other than a party hereunder),
but only to the extent such Claims do not result from the negligence or
intentional misconduct of the party seeking indemnification, or (b) resulting
directly from a breach of any representation or warranty of the indemnifying
party contained in Article 12 of this Agreement.
11.2 DEFENSE. Any entity entitled to indemnification under this Article
11 shall give prompt written notice to the indemnifying party of any Claims with
respect to which it seeks indemnification, and the indemnifying party shall have
the option to assume the defense of such Claims with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed by the
indemnifying party with counsel so selected, the indemnifying party will not be
obligated to pay the fees and expenses of any separate counsel retained by the
indemnified party with respect to such Claims. Except with the prior written
consent of the indemnified party, which consent shall not be unreasonably
withheld, the indemnifying party may not enter into any settlement of such
litigation unless such settlement includes an unqualified release of the
indemnified party.
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11.3 INSURANCE. Ligand and Lilly shall each have and maintain such type
and amounts of liability insurance covering the manufacture, supply, use and
sale of Targretin and Drug Products as is normal and customary in the
pharmaceutical industry generally for parties similarly situated, and will upon
request provide the other party with a copy of its policies of insurance in that
regard, along with any amendments and revisions thereto.
ARTICLE 12
REPRESENTATIONS AND WARRANTIES
Each party hereby represents and warrants to the other party as of the
Effective Date as follows:
12.1 CORPORATE EXISTENCE AND POWER. Such party (a) is a corporation duly
organized, validly existing and in good standing under the laws of the state in
which it is incorporated, and (b) has full corporate power and authority and the
legal right to own and operate its property and assets and to carry on its
business as it is now being conducted and is contemplated in this Agreement.
12.2 AUTHORIZATION. Such party (a) has the corporate power and authority
and the legal right to enter into the Agreement and perform its obligations
hereunder, and (b) has taken all necessary corporate action on its part required
to authorize the execution and delivery of the Agreement and the performance of
its obligations hereunder. The Agreement has been duly executed and delivered on
behalf of such party and constitutes a legal, valid, binding obligation of such
party and is enforceable against it in accordance with its terms subject to the
effects of bankruptcy, insolvency or other laws of general application affecting
the enforcement of creditor rights and judicial principles affecting the
availability of specific performance and general principles of equity whether
enforceability is considered a proceeding at law or equity.
12.3 ABSENCE OF LITIGATION. Such party is not aware of any pending or
threatened litigation (and has not received any communication) which alleges
that such party's activities related to this Agreement have violated, or that by
conducting the activities as contemplated herein such party would violate, any
of the intellectual property rights of any other person.
12.4 CONSENTS. All necessary consents, approvals and authorizations of
all governmental authorities and other persons or entities required to be
obtained by such party in connection with the Agreement have been obtained.
12.5 NO CONFLICT. The execution and delivery of the Agreement and the
performance of such party's obligations hereunder (a) do not conflict with or
violate any requirement of applicable law or regulation or any provision of
articles of incorporation or
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bylaws of such party in any material way, and (b) do not conflict with, violate
or breach or constitute a default or require any consent under, any contractual
obligation or court or administrative order by which such party is bound.
12.6 PATENTS. Except as such party has otherwise advised the other party
in writing, such party represents and warrants to the other that, to the best of
its knowledge, it has sufficient legal and/or beneficial title and ownership
under its intellectual property rights necessary for it to fulfill its
obligations under this Agreement and that it is not aware of any communication
alleging that it has violated or by conducting its business as contemplated by
this Agreement would violate any of the intellectual property rights of any
other person. As used herein, "intellectual property rights" means all patent
rights, copyrights, trademarks, trade secret rights, chemical and biological
material rights and know-how rights necessary or useful to make, use, import,
offer for sale or sell Targretin and/or Drug Products.
12.7 PRIOR DATA. Ligand represents and warrants to Lilly that it has
made (or will make) available to Lilly (to the extent the same exists and is
material to assessing the commercial, medical, clinical or regulatory potential
of Targretin) all toxicology studies, clinical data, manufacturing process data
and other information in its possession regarding Targretin that would be
reportable to the FDA under 21 C.F.R. 200 et. seq., and that to the best of its
knowledge, such data and information is accurate and complete and is what it
purports to be. Lilly represents and warrants to Ligand that it will make
available to Ligand (to the extent the same exists and is material to assessing
the commercial, medical, clinical or regulatory potential of Targretin) all
toxicology studies, clinical data, manufacturing process data and other
information in its possession regarding Targretin that would be reportable to
the FDA under 21 C.F.R. 200 et. seq., and that to the best of its knowledge,
such data and information will be accurate and complete and what it purports to
be.
12.8 NO DEBARMENT. Such party will comply at all times with the
provisions of the Generic Drug Enforcement Act of 1992 and will upon request
certify in writing to the other that none of it, its employees, or any person
providing services to such party in connection with the collaboration
contemplated by this Agreement have been debarred under the provisions of such
Act.
12.9 ADDITIONAL REPRESENTATIONS AND WARRANTIES. Ligand hereby agrees to
use its commercially reasonable efforts to comply with the terms and conditions
of those certain license agreements set forth in Schedule 12.9. In addition,
Ligand hereby agrees to timely pay all royalty and milestone payments required
to be paid under those certain license agreements set forth in Schedule 12.9
during the Research Program Term and thereafter only as necessary to grant Lilly
the licenses granted pursuant to Section 6.1. Ligand hereby represents and
warrants to Lilly that to Ligand's knowledge, there is no material unauthorized
use, infringement or misappropriation of the Ligand Patents Covering Targretin.
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ARTICLE 13
MISCELLANEOUS PROVISIONS
13.1 GOVERNING LAW. The Agreement shall be governed by the laws of the
State of Indiana, without regard to Indiana choice of law provisions.
13.2 DISPUTE RESOLUTION PROCESS. In the event of any dispute relating to
this Agreement or the collaborative effort contemplated hereby, the parties
shall, prior to instituting any lawsuit, arbitration or other dispute resolution
process on account of such dispute, follow the procedures for dispute resolution
set forth in Section 2.6 of this Agreement if such dispute relates to the
conduct of or decisions made as part of the Research Program or the Development
Program. In the event of any dispute relating to or arising from this Agreement
which a party does not believe is covered by Section 2.6 and prior to
instituting any litigation with respect thereto, the dispute shall be presented
to David Robinson or his successor as Chief Executive Officer of Ligand on
behalf of Ligand, and August M. Watanabe or his successor as chief scientific
officer of Lilly on behalf of Lilly; provided, however, that this provision
shall not prevent either party from seeking a preliminary injunction or other
equitable relief in the event such party believes it will suffer irreparable
harm. These executives shall confer and consider each party's view and shall
attempt in good faith to resolve the dispute between themselves or, if they are
unable to so resolve the dispute, to establish a mechanism to resolve the
dispute promptly and efficiently. In the event said executives are unable to
resolve such dispute or agree upon a mechanism to resolve such dispute within
thirty (30) days, either party shall be entitled to institute litigation and
seek such remedies as may be available.
13.3 NOTICES. All notices required or permitted to be given under this
Agreement shall be in writing and shall be deemed given, upon receipt, if mailed
by registered or certified mail (return receipt requested), postage prepaid, or
sent by overnight delivery (receipt verified) to the address below, or given
personally or transmitted by facsimile to the number indicated below (with
confirmation).
To Lilly:
Eli Lilly and Company
Lilly Corporate Center
Indianapolis, IN 46285
Attention: General Counsel
Fax: (317) 276-9152
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To Ligand:
Ligand Pharmaceuticals Incorporated
9393 Towne Centre Drive
San Diego, CA 92121
Attention: General Counsel
Fax: (619) 625-4521
Any party may, by written notice to the others, designate a new address or fax
number to which notices to the party giving the notice shall thereafter be
mailed or faxed.
13.4 FORCE MAJEURE. If either party's performance hereunder is affected
by any extraordinary, unexpected and unavoidable event such as acts of God,
floods, fires, riots, war, accidents, labor disturbances, breakdown of plant or
equipment, lack or failure of transportation facilities, unavailability of
equipment, sources of supply or labor, raw materials, power or supplies,
infectious diseases of animals, or by the reason of any law, order,
proclamation, regulation, ordinance, demand or requirement of the relevant
government or any sub-division, authority or representative thereof, or by
reason of any other cause whatsoever (provided that in all such cases the party
claiming relief on account of such event can demonstrate that such event was
extraordinary, unexpected and unavoidable by the exercise of reasonable care)
("Force Majeure") it shall as soon as reasonably practicable notify the other
party of the nature and extent thereof and take all reasonable steps to overcome
the Force Majeure and to minimize the loss occasioned to that other party.
Neither party shall be deemed to lose any rights under this Agreement or be in
breach of this Agreement or otherwise be liable to the other party by reason of
any delay in performance or nonperformance of any of its obligations hereunder,
except with respect to payment obligations, to the extent that such delay and
nonperformance is due to any Force Majeure of which it has notified the other
party and the time for performance of that obligation shall be extended
accordingly.
13.5 WITHHOLDING TAXES. If either party is required by the United States
government or other authorities to withhold any tax on the amounts payable by
that party to the other party under this Agreement, that party shall be allowed
to do so, and shall in such case remit payments to the other party net of such
withheld amount, provided that the withholding party furnishes the other party
with reasonable evidence of such withholding payment in electronic or written
form as soon as practicable after such withholding in order that the other party
may use the withholding tax paid as a tax credit.
13.6 ENTIRE AGREEMENT. This Agreement, its exhibits and schedules, the
Confidentiality Agreements between Ligand and Lilly dated September 30, 1996,
January 23, 1997 and May 8, 1997, the Collaboration Agreement, the Option
Agreement and the Stock Purchase Agreement between Ligand and Lilly of even date
herewith sets forth the entire agreement and understanding of the parties
relating to the subject matter contained herein and merges all prior discussions
and agreements between them. No party shall be bound by any
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representation other than as expressly stated in this Agreement, or by a written
amendment to this Agreement signed by authorized representatives of both
parties. No termination of the Collaboration Agreement shall terminate this
Agreement. Any terms of the Collaboration Agreement referred to in this
Agreement shall be deemed incorporated herein by reference and shall survive any
termination of the Collaboration Agreement.
13.7 NON-WAIVER. The failure of a party in any one or more instances to
insist upon strict performance of any of the terms and conditions of this
Agreement shall not be construed as a waiver or relinquishment, to any extent,
of the right to assert or rely upon any such terms or conditions on any future
occasion.
13.8 DISCLAIMER OF AGENCY. This Agreement shall not constitute any party
the legal representative or agent of another, nor shall any party have the right
or authority to assume, create, or incur any Third Party liability or obligation
of any kind, express or implied, against or in the name of or on behalf of
another except as expressly set forth in this Agreement.
13.9 SEVERABILITY. If any term, covenant or condition of this Agreement
or the application thereof to any party or circumstance shall, to any extent, be
held to be invalid or unenforceable, then (i) the remainder of this Agreement,
or the application of such term, covenant or condition to parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent permitted by law;
and (ii) the parties hereto covenant and agree to renegotiate any such term,
covenant or application thereof in good faith in order to provide a reasonably
acceptable alternative to the term, covenant or condition of this Agreement or
the application thereof that is invalid or unenforceable, it being the intent of
the parties that the basic purposes of this Agreement are to be effectuated.
13.10 ASSIGNMENT. Lilly may discharge any obligations and exercise any
right hereunder through an Affiliate although Lilly shall remain ultimately
responsible for the proper discharge of all obligations hereunder
notwithstanding any assignment or delegation to any such Affiliate. References
to Lilly shall include any Affiliate of Lilly to whom such an assignment or
delegation has been made in accordance with this Agreement. Except as provided
in this Section 13.10, or otherwise expressly provided in this Agreement,
neither Lilly nor Ligand shall delegate duties of performance or assign, in
whole or in part, rights or obligations under this Agreement without the prior
written consent of the other party, not to be unreasonably withheld, and any
attempted delegation or assignment without such written consent shall be of no
force or effect. Without such written consent, either Ligand or Lilly may assign
the Agreement and its rights and obligations hereunder in connection with the
transfer or sale of all or substantially all of its business, or in the event of
its merger or consolidation or change in control or similar transaction. This
Agreement shall be binding upon the permitted successors and assigns of the
parties.
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13.11 HEADINGS. The headings contained in this Agreement have been added
for convenience only and shall not be construed as limiting or defining the
content of said sections or paragraphs.
13.12 LIMITATION OF LIABILITY. No party shall be liable to another for
indirect, incidental, consequential or special damages, including but not
limited to lost profits, arising from or relating to any breach of this
Agreement, regardless of any notice of the possibility of such damages. Nothing
in this Section is intended to limit or restrict the indemnification rights or
obligations of any party.
13.13 INTERPRETATION. This Agreement has been jointly prepared by the
parties and their respective legal counsel and ambiguities shall not be strictly
construed against either party.
13.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
13.15 COMPLIANCE WITH LAWS. Each party shall, and shall cause its
respective Affiliates to, comply in all material respects with all federal,
state, local and foreign laws, statutes, rules and regulations applicable to the
parties and their respective activities under this Agreement.
13.16 FURTHER ACTIONS. Each party agrees to execute, acknowledge, and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first written above.
ELI LILLY AND COMPANY
By: /s/ August M. Watanabe
------------------------------------------
August M. Watanabe
Executive Vice President
LIGAND PHARMACEUTICALS INCORPORATED
By: /s/ David E. Robinson
------------------------------------------
David E. Robinson
President and Chief Executive Officer
[SIGNATURE PAGE TO DEVELOPMENT AND LICENSE AGREEMENT]
<PAGE> 43
SCHEDULE 2.1
TECHNICAL OPERATING PLAN
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Schedule 4.4
This Schedule sets forth the material terms of the distribution
agreement to be executed by Ligand and Lilly in the event that Lilly properly
exercises its option to distribute all Ligand Systemic Products under Section
4.4 of the Agreement. Capitalized terms used but not defined herein will have
the meaning given to them in the Agreement.
1. Ligand shall appoint Lilly as its exclusive distributor of the Ligand
Systemic Products for that portion of the Option Territory for which Lilly
exercises the Option (the "Lilly Territory").
2. Lilly shall use its commercially reasonable efforts to distribute,
sell and book sales of the Ligand Systemic Products in all countries in the
Lilly Territory. Ligand reserves the exclusive right to sell the Ligand Systemic
Products to Lilly and to market and promote but not to sell or distribute the
Ligand Systemic Products in the Lilly Territory. Lilly shall not distribute or
sell the Ligand Systemic Products to any person or entity located or taking
delivery outside the Lilly Territory or that Lilly has reason to believe plans
to use or sell the Ligand Systemic Products outside the Lilly Territory.
3. Lilly shall establish the price for and distribute, sell and book
sales of the Ligand Systemic Products. Lilly shall purchase from Ligand the
Ligand Systemic Products at a price equal to *** of the sales price established
by Lilly. For orders of the Ligand Systemic Products for the initial commercial
sales of the Ligand Systemic Products, and for any subsequent periods in which
actual Net Sales may subsequently vary from the prices of the Ligand Systemic
Products estimated by Lilly or in effect when the Ligand Systemic Products are
ordered or shipped under the distribution agreement, the purchase price and Net
Sales amount for purposes of the distribution agreement shall be based upon
Lilly's good faith estimate of the Net Sales for the applicable purchase order
or period. Subsequently, the actual purchase price paid shall be adjusted on a
semiannual basis based upon the most recently available Net Sales information.
Lilly shall adjust the purchase price for the Ligand Systemic Products as
necessary to reflect actual Net Sales of the Ligand Systemic Products. Any
amount due Ligand on account of such adjustments shall be paid by check or wire
transfer within fifteen (15) days of the completion of such calculation.
4. Lilly shall drop ship the Ligand Systemic Products to the location
specified by Ligand in its orders and bill on a Ligand invoice the third party
identified by Ligand. Lilly shall also provide to Ligand no later than
seventy-five (75) days after the end of each Calendar Quarter a report showing
the sales of the Ligand Systemic Products in each country in the Lilly Territory
during the Calendar Quarter and Lilly's inventory of Ligand Systemic Products by
item and package size as of the end of the Calendar Quarter certified to be
accurate by an officer of Lilly.
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5. Ligand shall provide to Lilly no later than forty-five (45) days
prior to the beginning of each Calendar Quarter a forecast of what Ligand
anticipates Lilly's sales of Ligand Systemic Products will be for the Calendar
Quarter. Lilly and Ligand shall agree on what is an adequate inventory of the
Ligand Systemic Products and Lilly shall purchase from Ligand sufficient
quantities to supply demand for the Ligand Systemic Products and maintain an
adequate inventory. Lilly shall have the right to return any Ligand Systemic
Products that (a) are not in conformance with the specifications or (b) when
shipped have an expiry date of less than sixty (60) days from the date of
shipment.
6. Lilly shall purchase all of its requirements of Ligand Systemic
Products from Ligand and shall pay for the Ligand Systemic Products in full
within thirty (30) days of the date of Ligand's invoice. Lilly shall not be
entitled to manufacture or have manufactured the Ligand Systemic Products. Lilly
shall be entitled to appoint sub-distributors that are part of Lilly's normal
distribution network solely for physical distribution of the Ligand Systemic
Products. Lilly shall not be entitled to otherwise appoint sub-distributors,
other than Lilly Affiliates without first obtaining Ligand's written consent,
which consent will not be unreasonably withheld.
7. Lilly shall indemnify and hold Ligand harmless from any and all
claims based upon (a) Lilly's activities in connection with, or the death or
bodily injury or property damage resulting from, Lilly's handling, storage,
distribution or sale of the Ligand Systemic Products (including product
liability claims but excluding any claims resulting from Ligand's manufacture,
marketing or promotion of the Ligand Systemic Products) or (b) Lilly's
negligence or willful misconduct or material breach of the distribution
agreement, except in the case of (a) or (b) to the extent the claims result from
Ligand's negligence or willful misconduct or material breach of the distribution
agreement. Ligand shall indemnify and hold Lilly harmless from any and all
claims based upon (a) Ligand's manufacture, marketing or promotion of the Ligand
Systemic Products (including product liability claims but only to the extent the
claims result from Ligand's manufacture, marketing or promotion of the Ligand
Systemic Products), (b) Ligand's activities relating to the Ligand Systemic
Products outside the Lilly Territory or (c) Ligand's negligence or willful
misconduct or material breach of the distribution agreement, except in the case
of (a), (b) or (c) to the extent the claims result from Lilly's negligence or
willful misconduct or material breach of the distribution agreement.
8. Ligand shall be responsible for the coordination of all recall
activities with respect to the Ligand Systemic Products and shall pay all costs
of any recall.
9. The distribution agreement shall be terminable by either party after
60 days written notice in the event of an uncured material breach by the other
party. The distribution agreement shall also terminate automatically in the
event Lilly terminates all research, development and commercialization with
respect to Targretin.
10. Neither party shall be permitted to assign its rights under the
distribution agreement without first obtaining the prior written consent of the
other party, except in connection with the sale of all or substantially all of a
party's assets, whether by merger or otherwise.
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11. The distribution agreement shall contain such other standard terms
for the distribution of the Ligand Systemic Products in the Lilly Territory as
the parties may mutually agree, which terms shall be consistent with the terms
contained in the Option Agreement.
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SCHEDULE 7.8
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Schedule 12.9
1. The Settlement Agreement, License and Mutual General Release between
La Jolla Cancer Research Foundation, SelectRA Pharmaceutical Inc., Allergan
Ligand, and Allergan Ligand Retinoid Therapeutics, Inc., effective August 23,
1995.
2. The Amended and Restated Technology Cross License Agreement among
Allergan, Inc., Ligand Pharmaceuticals Inc. and Allergan Ligand Retinoid
Therapeutics, Inc., effective September 24, 1997.
3. The license agreement between Salk Institute for Biological Studies
and Ligand Pharmaceuticals Inc., effective October 20, 1988, and as amended on
September 15, 1989, December 1, 1989 and October 20, 1990.
4. The agreements between Insitut Pasteur de Lille and Ligand
Pharmaceuticals Inc., effective March 1, 1995 and December 1, 1995.
5. The agreement between Rockefeller and Ligand Pharmaceuticals Inc.,
effective November 14, 1991.
6. The agreement between Baylor College of Medicine and Ligand
Pharmaceuticals Inc., effective March 9, 1992 and September 1, 1992.
<PAGE> 1
EXHIBIT 10.168
COLLABORATION AGREEMENT
AMONG
ELI LILLY AND COMPANY
AND
LIGAND PHARMACEUTICALS INCORPORATED
AND
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
DATED NOVEMBER 25, 1997
<PAGE> 2
COLLABORATION AGREEMENT
THIS COLLABORATION AGREEMENT ("AGREEMENT") is entered into as of
November 25, 1997 among ELI LILLY AND COMPANY, an Indiana corporation having its
principal place of business at Lilly Corporate Center, Indianapolis, Indiana
46285 ("LILLY"),
AND
LIGAND PHARMACEUTICALS INCORPORATED, a Delaware corporation having its
principal place of business at 9393 Towne Centre Drive, San Diego, California
92121 ("LIGAND"),
AND
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC., a Delaware corporation
having its principal place of business at 9393 Towne Centre Drive, San Diego,
California 92121 ("ALRT")
RECITALS
WHEREAS, Lilly is interested in developing and commercializing
pharmaceutical products to treat and prevent medical conditions, including, but
not limited to, diabetes mellitus, insulin resistance, obesity, dyslipidemia,
and cardiovascular disorders associated with insulin resistance and obesity, and
would like to collaborate with Ligand in a research and development effort to
determine whether modulators of certain intracellular receptors or transcription
factors will be useful in treating these medical conditions; and
WHEREAS, Ligand and ALRT, its wholly owned subsidiary, own or control
certain patents and technology useful in the collaboration; and
WHEREAS, ALRT, Ligand and Lilly believe that each party can bring
significant and complementary strengths to a collaboration and wish to proceed
in accordance with the terms of the following agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter recited, the parties agree as follows:
ARTICLE 1
DEFINITIONS
When used in this Agreement, each of the following terms shall have the
meanings as set forth below:
<PAGE> 3
1.1 "AFFILIATE" shall mean any company or entity controlled by,
controlling, or under common control with a party hereto and shall include
without limitation any company fifty percent (50%) or more of whose voting stock
(or other comparable ownership interest for an entity other than a corporation)
is owned or controlled, directly or indirectly, by a party, and any company or
entity which owns or controls, directly or indirectly, fifty percent (50%) or
more of the voting stock (or other comparable ownership interest for an entity
other than a corporation) of a party or equivalent power to direct the
management or policies of such company or entity.
1.2 "ALLERGAN" shall mean Allergan, Inc., a Delaware corporation, and
its affiliates.
1.3 "ALLERGAN ROYALTY COMPOUND" shall mean an ALRT Compound with respect
to which a royalty must be paid by Ligand or ALRT under the ALRT Agreement;
provided, however, with respect to Section 7.2, Allergan Royalty Compound shall
not include Compound 324 or Compound 268.
1.4 "ALLIANCE DIRECTORS COMMITTEE" shall mean the committee described in
Section 2.3.
1.5 "ALRT AGREEMENT" shall mean that certain Amended and Restated
Technology Cross License Agreement dated as of September 24, 1997 among
Allergan, Ligand and ALRT.
1.6 "ALRT COMPOUND" shall mean a compound which is both (i) a Modulator
or a Regulator, and (ii) licensed to Ligand and ALRT pursuant to the ALRT
Agreement.
1.7 "ANALOG" shall mean a compound which is structurally closely related
to a reference compound in that
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1.8 "CALENDAR QUARTER" shall mean a quarter ending on March 31, June 30,
September 30 or December 31 of each Calendar Year.
1.9 "CALENDAR YEAR" shall mean the twelve month period ending on
December 31.
1.10 "COMBINATION PRODUCT" shall mean a Drug Product which, in addition
to utilizing a Research Compound, contains another component, which may also be
a Research Compound, as a pharmaceutically active ingredient.
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1.11 "COMMERCIALIZATION PROGRAM" shall mean all activities related to
the development and commercialization of a Drug Product that occur after Phase
III Enrollment including, without limitation, the conduct of Phase III Clinical
Trials, activities associated with the preparation, filing and prosecution of an
NDA and all activities related to commercialization of a Drug Product. The
Commercialization Program shall also include all activities relating to
manufacturing, including, without limitation, manufacturing process development
and scale-up, chemistry, manufacturing and controls, and related activities
regardless of whether they occur before or after Phase III Enrollment, and all
research and related activities in support of an NDA that occur after Phase III
Enrollment.
1.12 "COMPOUND 268" shall mean that certain compound designated as LGD
268 with the molecular structure shown in Schedule 1.12 attached hereto, and
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324 with the molecular structure shown in Schedule 1.13 attached hereto, and
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1.14 "CONFIDENTIAL INFORMATION" shall mean all information, inventions,
know-how and data disclosed by one party to the other party pursuant to this
Agreement, including without limitation, information relating to research and
development plans, experiments, results and plans, the existence of compounds,
therapeutic leads, candidates and products, clinical and preclinical data, trade
secrets and manufacturing, marketing, financial, regulatory, personnel and other
business information and plans, whether in oral, written, graphic or electronic
form and whether in existence as of the Effective Date or developed or acquired
in the future, except where such information (i) is public knowledge at the time
of disclosure by the disclosing party, (ii) becomes public knowledge through no
fault of the receiving party, (iii) was in the possession of the receiving party
at the time of disclosure by the disclosing party as evidenced by proper
business records or (iv) is disclosed to the receiving party by a Third Party,
to the extent such Third Party's disclosure was not in violation of any
obligation of confidentiality.
1.15 "COVER" (including variations thereof such as "Covering",
"Covered", and "Coverage") shall mean that the manufacture, use, import, offer
for sale or sale of a Research Compound, Drug Product, SERM Oncology Product,
Discontinued Drug Product or Ligand Option Compound would infringe a Valid
Claim; provided, with respect to a process or manufacturing patent, that a Valid
Claim therein effectively precludes Third Parties from manufacturing, using,
importing, offering for sale or selling Drug Products, SERM Oncology Products,
Discontinued Drug Products or Ligand Option Compounds. The determination of
whether a Research Compound, Drug Product, SERM Oncology Product, Discontinued
Drug Product or Ligand Option Compound is Covered by a particular Valid Claim
shall be made on a country by country basis. A Valid Claim shall be deemed to
provide effective preclusion hereunder where (i) there is no competing Drug
Product, SERM Oncology Product, Discontinued Drug Product or Ligand Option
Compound being marketed or (ii) if a Drug Product, SERM
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Oncology Product, Discontinued Drug Product or Ligand Option Compound is being
marketed by a competitor, it infringes the Valid Claim (including any period in
which, and provided that, the Valid Claim is being litigated).
1.16 "DATA EXCLUSIVITY PERIOD" shall mean the period, if any, during
which the FDA, or other equivalent regulatory agency in the case of countries
other than the United States, prohibits reference, for purposes of seeking
Regulatory Approval, to clinical and other data contained in the Regulatory
Approval package relating to a Drug Product, without the consent of the party
holding the NDA or equivalent Regulatory Approval.
1.17 "DESIGNATED RECEPTORS" shall mean the RXR, PPAR and HNF-4
receptors, all subtypes, splice forms and variants of each of them.
1.18 "DEVELOPMENT CANDIDATE" shall mean, during the Research Program
Term and subject to the dispute resolution provisions of Section 2.5, a Research
Compound with respect to which the Joint Program Committee has recommended and
the Steering Committee has decided, or during the one (1) year period after the
Research Program Term, Lilly has decided, based on toxicology, ADME and
preclinical pharmacology findings to proceed to Phase I Clinical Trials for
development in the Field.
1.19 "DEVELOPMENT PLAN" shall mean the plan described in Section 2.10.
1.20 "DEVELOPMENT PROGRAM" shall mean those activities with respect to a
Research Compound that occur after designation of the Research Compound as a
Development Candidate and until Phase III Enrollment.
1.21 "DISCONTINUED DRUG PRODUCT" shall have the meaning assigned thereto
in Section 2.12(b).
1.22 "DRUG DELIVERY SYSTEM" shall mean enhancements of a Drug Product
related to convenience of administration of the active ingredient such as
injectors, pens, inhalers, sustained release formulations or transdermal
patches, but not capsules, tablets, gel caps, solutions, normal pharmaceutical
excipients or the like.
1.23 "DRUG PRODUCT" shall mean (i) every pharmaceutical formulation
containing a Research Compound which has been declared a Development Candidate
during the Research Program Term plus one (1) year and which is intended for
administration to humans in the Field, (ii) any compound deemed to be a Drug
Product pursuant to Section 2.13 and (iii) both Lilly Option Compounds, but
shall not include any pharmaceutical composition to which Ligand acquires rights
under this Agreement.
1.24 "EFFECTIVE DATE" shall mean the date hereof.
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1.25 "FDA" shall mean the United States Food and Drug Administration.
1.26 "FIELD" shall mean the discovery, development and commercialization
of Drug Products for use in the treatment, palliation, prevention and/or
remission of all medical conditions including, but not limited to, diabetes
mellitus, insulin resistance, obesity, dyslipidemia, cardiovascular disorders
associated with insulin resistance and obesity, but excluding the treatment,
palliation, prevention and/or remission of cancer and dermatological disease.
1.27 "FIRST COMMERCIAL SALE" shall mean, in any particular country, the
first sale for use by the general public of a particular Drug Product after
receipt of Regulatory Approval in that country.
1.28 "GAAP" shall mean U.S. generally accepted accounting principles,
consistently applied.
1.29 "HOMOLOG" shall mean
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1.30 "IND" shall mean an Investigational New Drug Application as defined
in the United States Food, Drug, and Cosmetic Act and applicable regulations
promulgated thereunder, as they are amended or supplemented from time to time,
or an equivalent application under any successor law or regulations.
1.31 "IND ACCEPTANCE" shall mean the earliest of (i) the filing with the
FDA of an IND and the failure by the FDA, within thirty (30) days following
filing, to object to the IND or institute a clinical hold, (ii) the removal of
the objection or clinical hold referred to in (i) above, if any, or (iii) the
acceptance of an equivalent application by the equivalent agency in a Major
Foreign Market country.
1.32 "JOINT PATENTS" shall mean all patents, both foreign and domestic
(including without limitation, all substitutions, extensions, reissues,
renewals, reexaminations, patents of addition, supplementary protection
certificates and inventors' certificates thereof), and all patent applications
(including provisional applications, divisions, continuations and
continuations-in-part), heretofore or hereafter filed or having any legal force
in any country together with any patents that have issued or in the future issue
therefrom, jointly owned, in whole or in part, or jointly licensed by Ligand or
any Ligand Affiliate and Lilly or any Lilly Affiliate. In the circumstance where
the addition of new matter to a solely-owned patent application results in a
continuation-in-part that is a Joint Patent, only the new matter shall be deemed
jointly owned under this Agreement.
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1.33 "JOINT PROGRAM COMMITTEE" shall mean the committee described in
Section 2.4(b) of this Agreement.
1.34 "JOINT RESEARCH COMMITTEE" shall mean the committee described in
Section 2.4(a) of this Agreement.
1.35 "JOINT TECHNOLOGY" shall mean all tangible or intangible know-how,
trade secrets, routes of synthesis, ideas, processes, inventions (whether or not
patentable), tests, assays, quality control or other data, clinical and
preclinical results, technical information, and any physical, chemical or
biological material, or any replication of any part of such material, which are
jointly developed or acquired by Ligand or any Ligand Affiliate and Lilly or any
Lilly Affiliate.
1.36 "LIGAND COMPOUNDS" shall mean ***
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1.37 "LIGAND OPTION COMPOUND" shall have the meaning as set forth in
Section 4.6.
1.38 "LIGAND PATENTS" shall mean all patents, both foreign and domestic
(including without limitation, all substitutions, extensions, reissues,
renewals, reexaminations, patents of addition, supplementary protection
certificates and inventors' certificates thereof), and all patent applications
(including provisional applications, divisions, continuations and
continuations-in-part), heretofore or hereafter filed or having any legal force
in any country, together with any patents that have issued or in the future
issue therefrom, owned, in whole or in part, by Ligand or any Ligand Affiliate,
or licensed by Ligand or any Ligand Affiliate (with the right to disclose and
sublicense and subject to the rights of Third Parties as of the Effective Date)
as of the Effective Date, or any such patents and/or applications that are
acquired thereafter and which Cover Research Compounds, Drug Products, New
Compounds and/or the SERM Oncology Product, but excluding any Joint Patents.
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1.39 "LIGAND TECHNOLOGY" shall mean all tangible or intangible know-how,
trade secrets, routes of synthesis, ideas, processes, inventions (whether or not
patentable or patented), tests, assays, quality control or other data, clinical
and preclinical results, technical information, and any physical, chemical or
biological material, or any replication of any part of such material, which is
owned or controlled (with the right to disclose and sublicense and subject to
the rights of Third Parties as of the Effective Date) by Ligand or any Ligand
Affiliate as of the Effective Date or acquired on or before the end of the one
year period immediately following the end of the Research Program Term, to the
extent such Technology relates to the identification, development, manufacture,
use, import, offer for sale or sale of Research Compounds, Drug Products, New
Compounds and/or the SERM Oncology Product, but excluding any Joint Technology.
1.40 "LILLY COMPOUNDS" shall mean ***
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1.41 "LILLY OPTION COMPOUND" shall have the meaning as set forth in
Section 4.6.
1.42 "LILLY PATENTS" shall mean all patents, both foreign and domestic
(including without limitation, all substitutions, extensions, reissues,
renewals, reexaminations, patents of addition, supplementary protection
certificates and inventors' certificates thereof), and all patent applications
(including provisional applications, divisions, continuations and
continuations-in-part), heretofore or hereafter filed or having any legal force
in any country, together with any patents that have issued or in the future
issue therefrom, owned, in whole or in part, by Lilly or any Lilly Affiliate, or
licensed by Lilly or any Lilly Affiliate (with the right to disclose and
sublicense and subject to the rights of Third Parties as of the Effective Date)
as of the Effective Date, or any such patents and/or applications that are
acquired thereafter and which Cover Research Compounds, Drug Products, the SERM
Oncology Product, Discontinued Drug Products and/or Ligand Option Compounds, but
excluding any Joint Patents.
1.43 "LILLY TECHNOLOGY" shall mean all tangible or intangible know-how,
trade secrets, routes of synthesis, ideas, processes, inventions (whether or not
patentable or patented), tests, assays, quality control or other data, clinical
and preclinical results, technical information, and any physical, chemical or
biological material, or any replication of any part of such material, which is
owned or controlled (with the right to disclose and sublicense and subject to
the rights of Third Parties as of the Effective Date) by Lilly or any Lilly
Affiliate as of the Effective Date or acquired on or before the end of the one
year period immediately following the end of the Research Program Term, to the
extent such Technology relates to the identification, development, manufacture,
use, import, offer for sale or sale of Research Compounds, Drug Products, the
SERM Oncology Product, Discontinued Drug Products and/or Ligand Option
Compounds, but excluding any Joint Technology.
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1.44 "LILLY ROYALTY TERM" shall mean, with respect to a Discontinued
Drug Product or Ligand Option Compound (other than an Allergan Royalty Compound)
in each country, (a) if the manufacture, use, import, offer for sale or sale of
the Discontinued Drug Product or Ligand Option Compound in such country is
Covered by a Joint Patent, Lilly Patent or Ligand Patent, the period of time
equal to the *** of (i) *** from the date of First Commercial Sale of such
Discontinued Drug Product or Ligand Option Compound in such country or (ii) the
expiration of the last-to-expire applicable patent in such country; provided,
however, if the manufacture, use, import, offer for sale or sale of such
Discontinued Drug Product or Ligand Option Compound is Covered only by a Valid
Claim of a pending patent application in such country, the Lilly Royalty Term
shall expire, except as provided in (b) below, *** from the date of the First
Commercial Sale in such country unless (A) the pending patent application
Covering such Discontinued Drug Product or Ligand Option Compound issues prior
to the end of such *** period, in which case the Lilly Royalty Term shall not
expire at the end of such *** period, or (B) the pending patent application
Covering such Discontinued Drug Product or Ligand Option Compound issues after
the end of such *** period, in which case the Lilly Royalty Term shall expire at
the end of such *** period but shall be reinstated from the date the patent
issues, or (b) if the manufacture, use, import, offer for sale or sale of such
Discontinued Drug Product or Ligand Option Compound in such country is not so
Covered by a Joint Patent, Lilly Patent or Ligand Patent, the period of time ***
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1.45 "MAJOR FOREIGN MARKET(S)" shall mean Japan, the United Kingdom,
France, Germany, Spain, Italy, or the European Union as an entity.
1.46 "MARKETING APPROVAL" shall mean the date on which Lilly, any Lilly
Affiliate, Sublicensee or permitted assignee first receives final approval of
the labeling letter in the United States or its equivalent in a Major Foreign
Market with respect to a particular Drug Product, SERM Oncology Product or Lilly
SERM compound referred to in Section 4.4.
1.47 "MODULATOR" shall mean a compound which modulates, i.e., activates
or inhibits, a Designated Receptor in a homo- or heterodimer form, including ***
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1.48 "NDA" shall mean, with respect to a particular Drug Product, the
New Drug Application filed with the FDA pursuant to 21 U.S.C. Section 357 and 21
C.F.R. Section 314 with respect to that Drug Product, as they are amended or
supplemented from time to time, or an equivalent application under any successor
law or regulations.
1.49 "NDA FILING" shall mean, with respect to a particular Drug Product,
the acceptance of an NDA by the FDA or acceptance of an equivalent filing by the
equivalent agency in a Major Foreign Market country.
1.50 "NET SALES" shall mean, with respect to a Drug Product or the SERM
Oncology Product, the gross amount invoiced by Lilly, a Lilly Affiliate or Lilly
Sublicensee to unrelated third parties for the Drug Product or SERM Oncology
Product, less:
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Such amounts shall be determined from the books and records of Lilly,
Lilly's Affiliate or Lilly's Sublicensee which shall be maintained in accordance
with GAAP.
In the event the Drug Product or SERM Oncology Product is sold in a
country as part of a Combination Product, the Net Sales of the Drug Product or
SERM Oncology Product, as the case may be, for the purposes of determining
royalty payments, shall be determined by multiplying the Net Sales (as defined
above in this Section) of the Combination Product by the fraction, A/(A+B) where
A is the average sale price of the Drug Product or the SERM Oncology Product for
the reporting period when sold separately in finished form and B is the average
sale price of the other product(s) sold separately in finished form; ***
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In the event a Combination Product contains two Drug Products or a Drug
Product and a SERM Oncology Product, Net Sales of each Drug Product or the Drug
Product and the SERM Oncology Product in the Combination Product shall be
separately calculated as follows: (i) if both Drug Products or the Drug Product
and the SERM Oncology Product are sold separately in finished form, the Net
Sales for each Drug Product or the Drug Product and the SERM Oncology Product in
the Combination Product shall be separately calculated by multiplying the Net
Sales of the Combination Product by the fraction A/A+B where A is the average
sale price of the particular Drug Product or the SERM Oncology Product for which
Net Sales is being determined and B is the average sale price of the other Drug
Product or the SERM Oncology Product in the Combination Product; ***
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1.51 "NEW COMPOUND" shall mean ***
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1.52 "NOVEL PROTEIN" shall mean a protein the levels of which can be
up-regulated or down-regulated by a Designated Receptor or Regulator and, such
up-regulation or down-regulation has the potential to provide a therapeutic
benefit in the Field.
1.53 "OBESITY GENE PROMOTER" shall mean the transcriptional control
regime of the human obesity gene, described in *** .
1.54 "OPTION AGREEMENT" shall mean that certain Option and Wholesale
Purchase Agreement of even date herewith between Ligand and Lilly.
1.55 "PHASE I CLINICAL TRIALS" shall mean small scale human clinical
trials conducted in subjects to establish the initial safety profile and
pharmacokinetics of a Drug Product.
1.56 "PHASE II CLINICAL TRIALS" shall mean small scale human clinical
trials conducted in subjects to collect preliminary data regarding efficacy of a
Drug Product in the particular medical condition for which it is being studied,
as well as to obtain some indication of the dosage regimen required.
1.57 "PHASE II ENROLLMENT" shall mean the enrollment and treatment of
the first subject in Phase II Clinical Trials of a Drug Product.
1.58 "PHASE III CLINICAL TRIALS" shall mean large scale human clinical
trials conducted in subjects and intended to generate data concerning the safety
and efficacy of a Drug Product in the particular medical condition for which it
is being studied sufficient to support registration of the Drug Product with
drug regulatory authorities.
1.59 "PHASE III ENROLLMENT" shall mean the enrollment and treatment of
the first subject in Phase III Clinical Trials of a Drug Product.
1.60 "POSITION ISOMER" shall mean ***
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1.61 "PROGRAM" shall have the meaning set forth in Section 8.4(f) of
this Agreement.
1.62 "REGULATOR" ***
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1.63 "REGULATORY APPROVAL" shall mean all authorizations by the
appropriate governmental entity or entities necessary for commercial sale of a
Drug Product or SERM Oncology Product (including exports) in a jurisdiction in
which Lilly or any Lilly Affiliate elects to market the Drug Product or SERM
Oncology Product including, without limitation, approval of labeling, price,
reimbursement and manufacturing.
1.64 "RESEARCH COMPOUNDS" shall mean ***
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1.65 "RESEARCH FUNDS" shall have the meaning set forth in Section 3.1 of
this Agreement.
1.66 "RESEARCH PROGRAM" shall mean those activities with respect to a
Research Compound that occur prior to designation of the Research Compound as a
Development Candidate.
1.67 "RESEARCH PROGRAM TERM" shall mean the five (5) year period of the
collaboration measured from the Effective Date and any extensions thereof, as
provided for in Section 2.8.
1.68 "RESEARCH YEAR" shall mean a twelve-month period during the
Research Program Term. The first Research Year shall be deemed to have commenced
on the Effective Date. Subsequent Research Years shall commence on the
anniversaries of the Effective Date.
1.69 "ROYALTY TERM" shall mean, with respect to a Drug Product and the
SERM Oncology Product in each country, (a) if the manufacture, use, import,
offer for sale or sale of the Drug Product or the SERM Oncology Product in such
country is Covered by a Joint Patent, Lilly Patent or Ligand Patent, the period
of time equal to the ***
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1.70 "SCIENTIFIC PERSON YEAR" shall mean the equivalent of the
scientific work of one Ligand scientist full-time for one year which equates to
a total of *** or *** hours per year of scientific work on or directly related
to the Research Program and Development Program. Each Ligand scientist billed to
the collaboration may be an equivalent of less than or greater than one
Scientific Person Year, based on their hours worked, to meet Research Program
and Development Program requirements, but no less than *** of the Ligand
scientists billed to the Collaboration each Research Year will work on a
full-time basis on the Research Program and/or Development Program. Scientific
work on or directly related to the Research Program and Development Program to
be performed by Ligand employees can include, but is not limited to,
experimental laboratory work, recording and writing up results, reviewing
literature and references, holding scientific discussions, and attending
appropriate seminars and symposia.
1.71 "SCREENING" shall mean conducting any assay, screen or other test
using intracellular receptors or other in vitro cell systems or reagents
involved in other signal transduction pathways on a compound for the purpose of
determining whether such compound functions as a Modulator or a Regulator or
testing such compound to confirm activity with a Designated Receptor or the
Obesity Gene Promoter or for cross-reactivity with receptors or promoters other
than the Designated Receptors or the Obesity Gene Promoter.
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1.72 "SERM ONCOLOGY PRODUCT" shall mean a pharmaceutical composition
containing a Research Compound, which is a Modulator of the RXR receptor and is
developed and approved for use in the treatment, palliation, prevention and/or
remission of cancer in combination with a Selective Estrogen Receptor Modulator
("SERM") for which Lilly has received or will seek Marketing Approval in a
jurisdiction in which Lilly elects to market the SERM, including, without
limitation, approval of labeling, price, reimbursement and manufacturing.
1.73 "STAGE II COMPOUNDS" shall mean Ligand Compounds, New Compounds and
Lilly Compounds that are RXR Modulators and are first synthesized or identified
as being Modulators within *** after the Effective Date.
1.74 "STAGE III COMPOUNDS" shall mean Ligand Compounds, New Compounds
and Lilly Compounds that are RXR Modulators and are first synthesized or
identified as being a Modulator after *** after the Effective Date.
1.75 "STEERING COMMITTEE" shall mean the committee described in Section
2.2 of this Agreement.
1.76 "SUBLICENSEE" shall mean (a) a Third Party to which Lilly or any
Lilly Affiliate has licensed the right to sell a Drug Product or the SERM
Oncology Product or (b) a Third Party to which Lilly or any Lilly Affiliate has
granted the exclusive right to promote and distribute a Drug Product or the SERM
Oncology Product in the United States, Japan, the United Kingdom, France,
Germany, Spain or Italy under an arrangement substantially different from
wholesale distributor arrangements typically employed in such countries.
1.77 "TARGRETIN AGREEMENT" shall mean that certain Development and
License Agreement (Targretin) of even date herewith between Lilly and Ligand
related to the development and commercialization of Targretin.
1.78 "TECHNICAL OPERATING PLAN" shall mean the Research and Development
Technical Operating Plan referred to in Section 2.1, as revised from time to
time.
1.79 "THIRD PARTY" shall mean any entity which is not a party or
Affiliate of any party to this Agreement.
1.80 "TRADEMARKS" shall have the meaning assigned thereto in Section 9.1
of this Agreement.
1.81 "VALID CLAIM" shall mean any claim (a) issued in an unexpired
patent which has not been held unenforceable, unpatentable or invalid by a
decision of a court or other governmental agency of competent jurisdiction
following exhaustion of all possible appeal processes, and which has not been
admitted to be invalid or unenforceable through reissue,
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reexamination or disclaimer, or (b) of a pending patent application, so long as
such patent application is being diligently prosecuted.
ARTICLE 2
COLLABORATION SCOPE AND GOVERNANCE
2.1 PURPOSE AND SCOPE. The parties desire to collaborate in a research
program aimed at the identification and development of Research Compounds for
use in the Field. Subject to the terms described herein, both Ligand and Lilly
shall use their respective commercially reasonable efforts to achieve the goals
set forth in this Agreement. Promptly after the Effective Date, Ligand will
submit a draft Technical Operating Plan, covering the general subjects set forth
on Schedule 2.1. The parties will promptly after submission by Ligand finalize
the Technical Operating Plan. Specific research programs provided for in the
Technical Operating Plan in addition to those contemplated under the Targretin
Agreement are: (a) RXR Modulators, (b) PPAR Modulators, (c) HNF-4 Modulators and
(d) Regulators. The governance provisions described herein shall relate to the
conduct of the Research Program and Development Program. Lilly shall be solely
responsible for governance of the Commercialization Program. The Technical
Operating Plan is intended as a work plan summarizing the present plans
regarding key activities of the collaboration. It is subject to amendment from
time to time by the committees described below. Notwithstanding anything in the
Technical Operating Plan to the contrary, the rights of the parties with respect
to the collaboration shall be governed in all respects by the terms of this
Agreement.
2.2 STEERING COMMITTEE
(a) The Research Program and the Development Program shall be
conducted under the overall direction of the Steering Committee comprised of
four (4) members with two (2) appointed by Ligand and two (2) appointed by
Lilly. The Steering Committee established by this Agreement shall be the same
committee as the Steering Committee established by the Targretin Agreement. All
actions of the Steering Committee with respect to the activities contemplated by
this Agreement shall be governed by the terms of this Agreement. The initial
members of the Steering Committee shall be (a) for Ligand, D. Robinson and A.
Negro-Vilar, and (b) for Lilly, J. Harper and J. Caro. ***
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Either party may change its representatives on the Steering Committee at any
time by prior written notice to the other party. The party hosting the meeting
of the Steering Committee shall prepare and deliver to the other party one week
prior to the meeting the agenda for the meeting. The party hosting the meeting
of the Steering Committee shall prepare and deliver to the other party within
ten (10) days after the date of such meeting, minutes of the meeting that set
forth all decisions of the Steering Committee relating to the Research Program
and the Development Program in form and content reasonably acceptable to the
other party. Minutes shall be deemed approved unless any member of the
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Steering Committee objects to the accuracy of such minutes in writing to the
other party within ten (10) business days of receipt. If a party objects to the
minutes and the objection is not resolved, the objection will be deemed a
dispute and resolved pursuant to Section 2.5.
(b) The purpose of the Steering Committee shall be to make key
strategy, policy and resource decisions regarding the Research Program and the
Development Program and to carry out its other responsibilities described in
this Agreement. The Steering Committee shall meet at least once in each Calendar
Quarter, at such times and places as are agreed to by Ligand and Lilly,
alternating between San Diego and Indianapolis, or such other locations as the
members of the Steering Committee shall agree. Meetings of the Steering
Committee may be attended by such other directors, officers and employees of
each party as such party deems necessary, and by such consultants and
non-employee agents of each party as the members of the Steering Committee may
from time to time agree, but only members of the Steering Committee shall have
the right to vote at such meetings. The Steering Committee, by unanimous
consent, shall have the authority to amend or waive compliance with the
provisions of this Agreement relating to the scheduling and conduct of the
meetings of all committees established pursuant to this Agreement. Any dispute
regarding any such amendment or waiver shall not be subject to the dispute
resolution provisions of Section 2.5.
2.3 ALLIANCE DIRECTORS COMMITTEE
(a) Promptly after the Effective Date, Lilly and Ligand each
shall appoint one of their respective employees (each an "Alliance Director") to
coordinate the execution of the Research Program and the Development Program.
The Alliance Directors shall be the primary contacts between the parties with
respect to the Research Program and the Development Program. Either party may
change its designee as the Alliance Director upon prior written notice to the
other party.
(b) Promptly after the Effective Date, Lilly and Ligand each
shall appoint an Alliance Directors Committee to assist the Alliance Directors
in the implementation and execution of the Research Program and the Development
Program. The Alliance Directors Committee shall consist of both Alliance
Directors and two (2) additional voting members, one (1) appointed by Ligand and
one (1) appointed by Lilly. Meetings of the Alliance Directors Committee may be
attended by Joint Research Committee and Joint Program Committee
representatives, as well as consultants and other agents of Ligand and Lilly as
are deemed necessary by the Alliance Directors, but only members of the Alliance
Directors Committee shall have the right to vote at such meetings. The Alliance
Directors Committee shall report to the Steering Committee which shall have the
right to review, accept, reject or modify all actions of the Alliance Directors
Committee. Either party may change its members of the Alliance Directors
Committee upon prior written notice to the other party.
(c) ***
*** The party hosting the meeting of the Alliance Directors
*** Portions of this page have been omitted pursuant to a request for
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<PAGE> 18
Committee shall prepare and deliver to the other party one week prior to the
meeting the agenda for the meeting. The party hosting the meeting of the
Alliance Directors Committee shall prepare and deliver to the other party within
ten (10) days after the date of such meeting, minutes of the meeting that set
forth all decisions of the Alliance Directors Committee relating to the Research
Program and the Development Program in form and content reasonably acceptable to
the other party. Minutes shall be deemed approved unless any member of the
Alliance Directors Committee objects to the accuracy of such minutes in writing
to the other party within ten (10) business days of receipt. If a party objects
to the minutes and the objection is not resolved, the objection will be deemed a
dispute and resolved pursuant to Section 2.5.
(d) The Alliance Directors Committee shall be responsible for the
execution of the Research Program and the Development Program and direction of
the Joint Research Committee and Joint Program Committee. It may appoint such
other committees or working groups, with such duties and memberships, as it
deems appropriate. The Alliance Directors Committee shall have such additional
duties and responsibilities as are given to it by the Steering Committee and
shall meet with such frequency as is necessary to complete its duties and as may
otherwise be required by the Steering Committee.
2.4 JOINT RESEARCH COMMITTEE AND JOINT PROGRAM COMMITTEE
(a) Promptly after the Effective Date, Ligand and Lilly through
the Alliance Directors Committee shall appoint the Joint Research Committee. The
Joint Research Committee will be responsible for the day to day implementation
of the Research Program related to Drug Products outlined in the Technical
Operating Plan. The Joint Research Committee shall consist of eight (8) voting
members, four (4) appointed by Ligand and four (4) appointed by Lilly. Meetings
of the Joint Research Committee may be attended by such other directors,
officers and employees of each party as such party deems necessary, and by such
consultants and non-employee agents of each party as the members of the Joint
Research Committee may from time to time agree, but only members of the Joint
Research Committee shall be entitled to vote. The Joint Research Committee shall
direct the activities of the research teams managing the following research
projects: (a) RXR Modulators, (b) PPAR Modulators, (c) HNF-4 Modulators and (d)
Regulators. The Joint Research Committee shall report to the Alliance Directors
Committee which shall have the right to review, accept, reject or modify all
actions of the Joint Research Committee. Any failure of the Alliance Directors
Committee to review, accept, reject or modify actions of the Joint Research
Committee may be treated as a dispute by the written request of a party and
shall thereafter be resolved pursuant to Section 2.5. Either party may change
its members of the Joint Research Committee upon prior written notice to the
other party. All decisions of the Joint Research Committee shall be unanimous
with all members voting. The party hosting the meeting of the Joint Research
Committee shall prepare and deliver to the other party one week prior to the
meeting the agenda for the meeting. The party hosting the meeting of the Joint
Research Committee shall prepare and deliver to the other party within ten (10)
days after the date of such meeting, minutes of the meeting that set forth all
decisions of the Joint Research Committee relating to the Research Program in
form and content reasonably acceptable
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<PAGE> 19
to the other party. Minutes shall be deemed approved unless any member of the
Joint Research Committee objects to the accuracy of such minutes in writing to
the other party within ten (10) business days of receipt. If a party objects to
the minutes and the objection is not resolved, the objection will be deemed a
dispute and resolved pursuant to Section 2.5.
(b) Promptly after the Effective Date, Ligand and Lilly through
the Alliance Directors Committee shall appoint the Joint Program Committee. The
Joint Program Committee will be responsible for the day to day implementation of
the Development Program, and will supervise the development teams (e.g.,
Targretin, Compound 268 and Compound 324 ) related to Drug Product as outlined
in the Technical Operating Plan. The Joint Program Committee shall consist of
six (6) voting members, two (2) appointed by Ligand and four (4) appointed by
Lilly. Decisions of the committee shall be made by majority vote with a quorum
for any meeting consisting of all six members, provided, however, that if the
Joint Program Committee is unable to act because of a lack of a quorum, either
Lilly or Ligand may call a new meeting pursuant to five (5) days written notice
at which a quorum shall consist of four (4) members. Meetings of the Joint
Program Committee may be attended by such other directors, officers, employees,
consultants and other agents of Ligand and Lilly as are deemed necessary, but
only members of the committee shall be entitled to vote. As the Alliance
Directors Committee reviews and the Steering Committee approves the development
of Research Compounds, the Joint Program Committee shall put into place such
additional teams as are necessary to proceed with the Development Plan. The
Joint Program Committee shall report to the Alliance Directors Committee which
shall have the right to review, accept, reject or modify all actions of the
Joint Program Committee. Any failure of the Alliance Directors Committee to
review, accept, reject or modify actions of the Joint Program Committee may be
treated as a dispute by the written request of a party and be resolved pursuant
to Section 2.5 Either party may change its members of the Joint Program
Committee upon prior written notice to the other party. The party hosting the
meeting of the Joint Program Committee shall prepare and deliver to the other
party one week prior to the meeting the agenda for the meeting. The party
hosting the meeting of the Joint Program Committee shall prepare and deliver to
the other party within ten (10) days after the date of such meeting, minutes of
the meeting that set forth all decisions of the Joint Program Committee relating
to the Development Program in form and content reasonably acceptable to the
other party. Minutes shall be deemed approved unless any member of the Joint
Program Committee objects to the accuracy of such minutes in writing to the
other party within ten (10) business days of receipt. If a party objects to the
minutes and the objection is not resolved, the objection will be deemed a
dispute and resolved pursuant to Section 2.5.
2.5 DISPUTE RESOLUTION. Any dispute arising from the Joint Research
Committee or the Joint Program Committee shall first be presented to the
Alliance Directors Committee for resolution. Any dispute arising from the
Alliance Directors Committee shall be presented to the Steering Committee for
resolution. Any disputes arising from the Steering Committee shall be presented
to David Robinson or his successor as Chief Executive Officer of Ligand on
behalf of Ligand, and August M. Watanabe or his successor as Chief Scientific
Officer of Lilly on behalf of Lilly. These executives shall confer and consider
each party's view and shall attempt in good
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<PAGE> 20
faith to resolve such disagreements between themselves. If the executives cannot
promptly resolve such disagreements and if such disagreement relates to the
conduct of or decisions made as a part of the Development Program or the
Commercialization Program, for example, disagreements regarding the initiation
and termination of preclinical tests and clinical trials or the selection of
Development Candidates, the matter shall be decided by August M. Watanabe or his
successor as Chief Scientific Officer of Lilly. If the dispute relates to the
Research Program, the executives shall establish a mechanism to resolve the
disagreement promptly and efficiently, without waiving any rights which either
party may have under this Agreement, by law or otherwise. Any action requiring
Steering Committee approval shall be subject to the dispute resolution
provisions of this Section 2.5.
2.6 STAFF AVAILABILITY. Each party shall make its employees,
consultants, subcontractors and investigative sites engaged in the Research
Program and the Development Program or serving on any committee available upon
reasonable notice during normal business hours at their respective places of
employment to consult with the other party on issues arising during the Research
Program and the Development Program and in connection with any request from any
regulatory agency, including those relating to regulatory, scientific, technical
and clinical testing issues.
2.7 FACILITY VISITS. Representatives of Lilly and Ligand may, upon
reasonable notice during normal business hours, (a) visit the facilities where
the Research Program and the Development Program are being conducted and each
party will permit, or use commercially reasonable efforts if the manufacture or
testing is being performed by a Third Party to obtain permission for, such
representatives of the other party to visit facilities where a Research Compound
or Drug Product is or will be manufactured or tested, (b) consult informally,
during such visits and by telephone, with personnel for the other party
performing work on the Research Program and the Development Program, and (c)
with the other party's prior approval, which approval shall not be unreasonably
withheld, visit the sites of any experiments or tests being conducted by such
other party in connection with the Research Program and the Development Program,
but only to the extent in each case such experiments or tests relate to Research
Compounds or Drug Products. On such visits, an employee of the party conducting
the research or development shall accompany the employee(s) of the visiting
party. If requested by the other party, Ligand and Lilly shall cause appropriate
individuals working on the Research Program and the Development Program to be
available for meetings at times and places reasonably convenient to the party
responding to such request.
2.8 EXTENSION OF COLLABORATION. Lilly shall have the option to extend
the Research Program Term for up to three (3) additional years in one-year
increments by giving written notice not later than six (6) months prior to the
end of the initial Research Program Term and each one-year extension. Lilly
shall specify in such notice the level of Research Funding it will pay to Ligand
during the extended term, which shall not be more than the level applicable to
the Research Year immediately preceding such one (1) year extension nor less
than *** Scientific Person Years without Ligand's consent.
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<PAGE> 21
2.9 RESEARCH FEASIBILITY. Each party shall promptly notify the other if
it should determine that any part of the Research Program and the Development
Program is not feasible or commercially justifiable, and will outline in
reasonable detail the reasons therefor and the parties shall mutually determine
in good faith whether termination of that portion of the Research Program and
Development Program is appropriate under such circumstances. In the event that
research activities to be performed by Ligand in accordance with the Technical
Operating Plan (the "Research Work") have been unreasonably delayed, Lilly and
Ligand shall review Ligand's staffing of the Research Program and Development
Program and Ligand shall assign such additional personnel or make such other
adjustments as may be reasonably required to complete the Research Work in a
timely fashion. Lilly may also undertake such Research Work, at its own expense,
if the parties cannot reach mutual agreement regarding such Research Work.
Ligand will provide reasonable assistance to Lilly to accommodate its efforts in
undertaking the Research Work.
2.10 DEVELOPMENT PLAN. The Joint Program Committee or its designee shall
prepare and oversee an overall development plan (the "Development Plan") for the
Drug Product which shall describe the proposed toxicology studies, clinical
trials, regulatory plans, and other key elements of the development work
necessary for completion of development activities through completion of Phase
II Clinical Trials. In developing such plan, the Joint Program Committee shall
take into account Lilly's requirements for the Commercialization Program. To be
effective, the Development Plan shall be reviewed by the Alliance Directors
Committee and shall be subject to review and approval by the Steering Committee
prior to its implementation, subject to the dispute resolution provisions of
Section 2.5. Progress towards the goals of the plan shall be reviewed by the
Steering Committee on a semi-annual basis. Lilly shall be responsible for the
conduct of the Development Program and Ligand shall provide consultation and
advice. The Development Plan is intended as a work plan for the development
activities of the collaboration and may be amended from time to time by the
appropriate committee. The rights of the parties with respect to the
collaboration shall be governed in all respects by the terms of this Agreement.
2.11 REGULATORY APPROVALS. The parties shall use commercially reasonable
efforts consistent with their respective responsibilities hereunder to obtain
all necessary Regulatory Approvals. Except where Regulatory Approvals are
legally required to be in Ligand's name, Lilly or its Affiliates shall have the
sole right to obtain Regulatory Approvals for Drug Products, which shall be in
Lilly's or its Affiliate's name, and Lilly shall own all submissions in
connection therewith. All formulary or marketing approvals for a Drug Product
shall also be obtained by and in the name of Lilly or its Affiliates.
Notwithstanding anything to the contrary herein, Lilly or its Affiliates shall
solely handle all matters with drug regulatory agencies concerning any Drug
Product, and shall be the sole contact with such agencies. Nothing in this
Section 2.11 shall constitute a limitation on Ligand's right to seek, obtain or
own regulatory, marketing or formulary approvals for any pharmaceutical
composition to which Ligand acquires rights in the Field under this Agreement as
well as any product outside the Field.
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<PAGE> 22
2.12 TERMINATION OF DEVELOPMENT.
(a) Ligand acknowledges that the development and
commercialization of Drug Products is an inherently uncertain process, and that
there can be no assurance either that the Drug Products can be successfully
developed or that the potential commercial rewards available from the
commercialization of the Drug Products, when weighed against the costs and
uncertainties involved and compared to Lilly's other commercial opportunities,
will be sufficient to justify Lilly's continued efforts to discover, develop
and/or commercialize the Drug Products. Lilly will devote the same degree of
skill and effort to development of Drug Products as it devotes to its own
products of similar risk and potential. If Lilly in good faith determines that
further efforts under this Agreement, with respect to a particular Research
Compound or Drug Product that has begun development, would not be in the best
interests of Lilly, Lilly may cease development of such Research Compound or
Drug Product. Lilly shall promptly notify Ligand of any election to discontinue
development of a Development Candidate or Drug Product hereunder.
(b) If Lilly terminates development of a Drug Product under this
Section 2.12 (a "Discontinued Drug Product") and Lilly or its Affiliates is not
diligently researching, developing or selling another Research Compound or Drug
Product that is a Modulator of the same Designated Receptor as the Discontinued
Drug Product if the Discontinued Drug Product is a Modulator, or a Research
Compound or Drug Product that is a Regulator if the Discontinued Drug Product is
a Regulator, Lilly shall transfer back to Ligand all rights to the Discontinued
Drug Product and the related Program (including all rights to any IND or other
filing related to the Regulatory Approval and the right to reference the
relevant Drug Master File with respect to the Discontinued Drug Product) as
contemplated by Section 8.2(b), shall use commercially reasonable efforts to
promptly provide Ligand with access to all material clinical and preclinical
data at no cost to Ligand other than the direct costs of assembling, reproducing
and transmitting the data to Ligand and shall grant Ligand the licenses set
forth in Section 8.2(b). In the event that Ligand thereafter manufactures, sells
or causes to be manufactured or sold such Discontinued Drug Product, Ligand
shall pay Lilly, during the Lilly Royalty Term, a royalty on Net Sales of the
Discontinued Drug Product during each Calendar Year, calculated as provided in
Section 1.50, substituting therein "Ligand" for "Lilly" and "Discontinued Drug
Product" for "Drug Product" wherever such terms appear. The percentage of Net
Sales to be paid by Ligand shall vary in connection with the progress Lilly
shall have made toward obtaining Marketing Approval of the Drug Product as
follows:
(i) If Lilly has not filed an IND or an equivalent
application in any Major Foreign Market with respect to the Discontinued Drug
Product, Ligand shall owe *** *** on Net Sales of the Discontinued Drug Product.
(ii) If Lilly has filed an IND or an equivalent
application in any Major Foreign Market but has not enrolled and treated a
patient in Phase III Clinical Trials with respect
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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<PAGE> 23
to the Discontinued Drug Product, Ligand shall *** of Net Sales of the
Discontinued Drug Product.
(iii) If Lilly has enrolled and treated a patient in Phase
III Clinical Trials but has not filed an NDA or an equivalent application in any
Major Foreign Market with respect to the Discontinued Drug Product, Ligand shall
*** of Net Sales of the Discontinued Drug Product.
(iv) If Lilly has filed a NDA or an equivalent application
in any Major Foreign Market with respect to the Discontinued Drug Product,
Ligand shall *** of Net Sales of the Discontinued Drug Product.
2.13 NOVEL PROTEIN PROGRAM. Lilly may, at its option, add one or more
research programs directed to the discovery of research targets that are a Novel
Protein for use in the Field, unless Ligand is prohibited from engaging in
research with Lilly with respect to the Novel Protein under the terms of an
existing collaboration with a Third Party. To the extent Lilly desires that
Ligand personnel provide services in connection with such program, the Steering
Committee shall determine whether it is feasible to staff such program with
existing Scientific Person Years funded by Lilly, or whether additional
Scientific Person Years funding is required. Any compound resulting from such
research program that Lilly develops shall be deemed to be a Drug Product, and
Lilly shall pay royalties and milestones to Ligand ***
***
***
***
***
***
***
***
***
***
***
***
***
***
ARTICLE 3
FUNDING PROGRAM
3.1 STAFFING AND FUNDING. Lilly shall provide research funds (the
"Research Funds") for the Research Program and Development Program and Ligand
shall during each Research Year assign to the Research Program and Development
Program sufficient personnel to provide no less than the number of Scientific
Person Years reflected in the schedule below. At least *** of the
Scientific Person Years shall be provided by scientists with a Ph.D. or M.D.
degree or
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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equivalent academic credentials. Ligand shall, from time to time, consult with
Lilly regarding assignment of Ligand personnel to the Research Program and
Development Program and shall consider in good faith any changes suggested by
Lilly. Ligand shall not, to the disadvantage of the Research Program and
Development Program, transfer personnel from the professional staff engaged in
the Research Program and Development Program to participate in another program.
The amount of Research Funds to be paid by Lilly shall be *** per Scientific
Person Year *** . Commencing January 1, 1999 and on January 1 of each year
thereafter, the amount to be paid by Lilly per Scientific Person Year will be
increased by *** over the amount applicable to the immediately preceding
Calendar Year. The following table shows the allocation of research scientists
presently contemplated by the parties. The resources shown in the table for
Targretin will support the further development of Targretin as contemplated by
the Targretin Agreement. The Steering Committee, from time to time, may
reallocate such resources as it deems appropriate.
<TABLE>
<CAPTION>
RESEARCH YEAR 1 2 3 4 5
<S> <C> <C> <C> <C> <C>
*** *** *** *** *** ***
*** *** *** *** *** ***
*** *** *** *** *** ***
*** *** *** *** *** ***
*** *** *** *** *** ***
Total *** *** *** *** ***
</TABLE>
3.2 SCHEDULING PAYMENT OF RESEARCH FUNDS. Research Funds during the
Research Program Term shall be paid to Ligand by Lilly in United States Dollars
by any bank wire transfer in next day funds.***
***
***
***
***
*** Any payment for
part of a quarter shall be prorated. Any variance of expected Scientific Person
Years from actual Scientific Person Years will be adjusted with the next payment
following the end of each Research Year.
3.3 ACCOUNTING. Ligand shall maintain complete records of all monies
paid by Ligand under the Research Program and Development Program. During the
Research Program Term, Ligand shall submit to Lilly within seventy-five (75)
days following each Calendar Quarter a written statement accompanied by a
certificate signed by the chief financial officer or controller
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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of Ligand setting forth the name of each Ligand employee who worked on the
Research Program and the Development Program during that Calendar Quarter, the
functional department in which each such employee worked and the actual number
of Scientific Person Years each such employee worked during that Calendar
Quarter. Lilly shall be entitled to any tax credits due on account of research
and development expenses, to the extent permitted by law, for the Research Funds
or any other funds paid by Lilly. Lilly may, at its own expense, obtain an audit
of such report by independent certified public accountants designated by Lilly
and reasonably acceptable to Ligand. Such a request shall be made within one
year from receipt of the reports. The independent certified public accountant
shall have the right to examine all records kept pursuant to this Section and
shall report to Lilly the findings of said examination of records insofar as
necessary to verify the reports. Such findings shall be maintained in confidence
by Lilly. To the extent that the hours of scientific work Lilly has paid for
through Research Funds in any Research Year (number of Scientific Person Years
multiplied by 1,880 hours) have not been completed. Ligand shall credit Lilly at
the rate provided in Section 3.1 per uncompleted hour. If credit is owed to
Lilly, the credit may be taken against the next payment due to Ligand, or in the
event that the Research Program Term has expired, within seventy-five (75) days
of such termination by wire transfer. If credit is owed to Ligand, the credit
may be taken in the next payment due Ligand; provided, however, in no event
shall Ligand be entitled to actual cash reimbursement for excess hours completed
nor shall any credit owed to Ligand carry forward from one Research Year to the
next Research Year. Any unpaid credit after the Research Program Term shall be
paid to Lilly by wire transfer within forty-five (45) days after the final
Calendar Year report regarding the Research Program and Development Program is
due to be delivered to Lilly.
3.4 RESEARCH PROGRAM AND DEVELOPMENT PROGRAM COSTS. Ligand shall pay all
expenses incurred by it pursuant to the Research Program and shall not be
entitled to any payment therefor except the Research Funds and the milestones
and royalties provided herein. If Lilly requests any modification to the
Technical Operating Plan as it relates to the Research Program or additional
activities which Ligand anticipates will cause it to incur expenses in excess of
the Research Funds, Ligand shall so advise Lilly, and Ligand shall not be
obligated to provide such services unless the services are approved by the
appropriate committee or the Lilly Alliance Director agrees in writing to pay
such expenses. ***
***
***
***
***
***
***
***
***
*** Lilly shall be responsible for its own costs in providing
consultation, advice and research efforts to support the Research Program and
the Development Program. Services of Third Parties, such as academic
collaborators and contract laboratories utilized in the Research Program and the
Development Program must be approved by the Steering Committee and any
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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payment by Ligand for such services will be reimbursed at cost. Ligand will pay
the costs of providing advice and consultation. Lilly shall be responsible for
all costs of the Commercialization Program, except that Ligand shall provide
reasonable advice or other assistance at its expense.
3.5 RESEARCH PROGRAM AND DEVELOPMENT PROGRAM DURING DEVELOPMENT. In the
event that Lilly is pursuing the development of a Research Compound, Ligand and
Lilly shall regularly confer, with the objective of reaching agreement, on what
further research under the Research Program and the Development Program is most
appropriate in light of Lilly's development efforts with respect to such
Research Compound. The parties acknowledge that a principal focus of the
Research Program and Development Program under these circumstances shall be to
coordinate research activities with Lilly's development activities so as to
commercialize a Drug Product as expeditiously as reasonably practicable. From
time to time, Lilly may request that, to the extent practicable, Ligand shift
personnel allocated under Section 3.1 above from one project to another project
or support research activities directed to the advancement of development of
Drug Products.
3.6 REDUCTION IN FUNDING. The parties may agree, from time to time, to
end or reduce funding on a Program by Program basis, if they believe that such
research efforts are not as productive as they had intended. The Steering
Committee may also determine that resources used in one Program should be
allocated to another Program. Lilly, in its sole discretion and by providing not
less than six (6) months prior written notice to Ligand, may reduce its payment
of Research Funds in the *** Research Year by up to *** Scientific Person Years
from the level funded in the *** Year and, in the *** Research Year by up to ***
*** Scientific Person Years from the level funded in the *** Research Year.
ARTICLE 4
ADDITIONAL ASPECTS OF RESEARCH PROGRAM AND
DEVELOPMENT PROGRAM
4.1 SCREENING LILLY COMPOUNDS. During the Research Program Term, Lilly
shall have the right to submit to Ligand for Screening such Lilly Compounds as
it deems appropriate. Lilly may also use any Ligand Technology licensed to Lilly
under this Agreement at Lilly facilities for Screening compounds in the Field.
The scheduling of Screening and other research activity shall be determined by
the Steering Committee or the Alliance Directors Committee. Ligand will not
subject any Lilly Compound to any binding or other assay or test which has not
been specifically approved by the Steering Committee or other appropriate
committee. No royalty or other fee shall be paid or payable by Lilly for the
Screening of Lilly Compounds unless the Lilly Compound becomes a Drug Product
for which milestones or royalties are owing. If a Lilly Compound reaches the
status equivalent to a Development Candidate within one (1) year after the end
of the Research Program Term, royalty and other payments will be paid as set
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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forth in this Agreement. If a Lilly Compound does not reach the status
equivalent to a Development Candidate within one (1) year after the end of the
Research Program Term, Lilly shall have the right to develop and commercialize
such compound or product without the obligation to make royalty and other
payments set forth in this Agreement.
4.2 TREATMENT OF LILLY COMPOUNDS. Ligand will not chemically or
physically analyze or have analyzed any Lilly Compound to determine its
structure and shall not permit any Third Party to observe or have access to any
Lilly Compound without the express written consent of Lilly. Lilly will provide
to Ligand all information related to, including information regarding the
structure of, all Lilly Compounds which upon Screening show the ability to
activate or inhibit a Designated Receptor or up-regulate or down-regulate the
expression of a coding gene under control of the Obesity Gene Promoter that is
material to Ligand's activities hereunder, except to the extent Lilly is legally
prohibited as of the Effective Date from disclosing such information. All
information, results or data generated in connection with any Screening of a
Lilly Compound submitted by Lilly shall be deemed Lilly Technology. All
information provided to Ligand in connection with such Screening shall be
treated in the manner proscribed in Article 12. Lilly will provide Ligand with
handling instructions and all safety information relating to any Lilly Compound
submitted by Lilly and access to such other information as is useful to
facilitate Ligand's Screening activities.
4.3 SCREENING OF LIGAND COMPOUNDS AND NEW COMPOUNDS. Ligand shall submit
all Ligand Compounds and New Compounds, and Lilly shall submit all New
Compounds, for Screening. The compounds to be screened, the schedule for such
screening and the tests used shall be determined by the Joint Research Committee
or other appropriate committee established under this Agreement. All
information, results or data generated in connection with any such Screening
conducted by Ligand shall be deemed Ligand Technology. All information, results
or data generated in connection with any Screening conducted by Lilly shall be
deemed Lilly Technology. The Research Committee shall have the option, from time
to time, to submit to Ligand and Lilly a list of compounds by name and structure
and each party shall promptly notify the Research Committee if, to its
knowledge, a royalty obligation would be owing if any compound identified on the
list were commercialized.
4.4 SERM ONCOLOGY PRODUCT.
(A) LILLY RIGHT. During the Research Program Term and for one (1)
year thereafter, Lilly shall have the right to select *** Research Compounds
that are Allergan Royalty Compounds or New Compounds that are RXR Modulators for
use in a SERM Oncology Product, subject to Ligand's selection rights under
Section 4.5. In the event a SERM Oncology Product *** selected does not receive
Regulatory Approval or if Lilly, in its sole discretion, terminates development
of such SERM Oncology Product, Lilly shall have the right to select ***
additional Research Compounds that are Allergan Royalty Compounds and/or New
Compounds that are RXR Modulators for use in a SERM Oncology Product. ***
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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***
***
***
***
***
***
*** The Research Compound
used in the SERM Oncology Product may be developed for any indication in the
Field but shall not be developed or marketed for any indication outside the
Field other than as the SERM Oncology Product. Milestones and royalties for the
Research Compound used in the SERM Oncology Product shall be as provided in
Sections 7.2 and 6.1 for the applicable RXR Modulator. In addition, if such
Research Compound is also developed for use other than in combination with a
SERM, Ligand shall also be entitled to any milestones and royalties payable
pursuant to Section 7.2 and 6.1 with respect to such other use of the Research
Compound; provided, however, that in no event shall more than one royalty be
paid with respect to the same Net Sales. Lilly shall be solely responsible for
all research and development activities relating to the development of a SERM
Oncology Product and costs related thereto, and shall not provide Research Funds
to Ligand with respect to such SERM Oncology Product. Ligand shall use
commercially reasonable efforts to provide to Lilly, at no cost to Lilly other
than the direct costs of assembling, reproducing and transmitting the data,
information already in Ligand's possession, and shall provide such reasonable
assistance to Lilly as Lilly agrees to pay for at a reasonable rate to be
agreed, to facilitate Lilly's research efforts with respect to the SERM Oncology
Product.
(b) CO-PROMOTION OPTION. Ligand shall have the option to
co-promote the SERM Oncology Product to physicians in the United States who are
board certified or eligible in the medical specialties of oncology and/or
hematology. Lilly shall notify Ligand within ninety (90) days prior to any
anticipated NDA Filing with respect to a SERM Oncology Product and provide
Ligand with a reasonably detailed summary of the relevant scientific and
commercial information related to the SERM Oncology Product. Within sixty (60)
days of delivery of such notice, Ligand shall notify Lilly whether it will
exercise its co-promotion option. If Ligand elects to exercise its option, Lilly
and Ligand shall negotiate in good faith reasonable terms and conditions under
which Ligand will co-promote the SERM Oncology Product,***
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(c) CO-DEVELOPMENT FUNDING OPTION. Ligand shall have the option
to co-fund the worldwide development of the SERM Oncology Product. Lilly shall
fund the development of such product until Phase II Enrollment. No later than
ninety (90) days prior to initiation of Phase II Clinical Trials for the SERM
Oncology Product, Lilly shall provide Ligand with a reasonably detailed summary
of all preclinical and clinical data along with an estimate of all remaining
costs required to obtain Regulatory Approval for the SERM Oncology Product and a
budget for such costs. Ligand shall then have ninety (90) days following receipt
of the information described above in which to advise Lilly, in writing, that it
intends to exercise its co-funding option. If Ligand exercises its option,
Ligand shall then be responsible for *** *** of all further costs incurred by
Lilly in obtaining Regulatory Approval for use in the treatment, palliation,
prevention and/or remission of cancer based on funding levels of ***
per full time equivalent (inflated in the manner provided for funding of
Ligand Scientific Person Years in Section 3.1) and Lilly's reasonable additional
expenses in every market where marketing is contemplated. Lilly shall provide to
Ligand semi-annually each year in the months of March and September an update of
the budget of all remaining costs required to obtain Regulatory Approval for the
SERM Oncology Product and shall allow Ligand to, at its own expense, obtain an
audit by independent certified accountants designated by Ligand and reasonably
acceptable to Lilly of expenses incurred. If, in obtaining Regulatory Approval
with respect to the SERM Oncology Product, Lilly combines the clinical trials
relating to use in cancer with clinical trials relating to use for other
indications, the parties shall agree on the portion of such expenses which
relate to use in cancer. Lilly shall bill Ligand for its portion of expenses in
arrears within thirty (30) days of the end of each Calendar Quarter. Ligand
shall pay Lilly in U.S. Dollars by any bank wire transfer within thirty (30)
days of receiving Lilly's invoice. If Ligand does not exercise its co-funding
option within the ninety (90) day period: (i) Ligand shall be deemed to have
waived its rights to co-develop the SERM Oncology Product, (ii) Lilly shall
remain responsible for funding and obtaining Regulatory Approval for such SERM
Oncology Product, and (iii) Lilly shall pay Ligand royalties and milestones as
set forth in Section 4.4(a). If Ligand co-funds the development of the SERM
Oncology Product, as contemplated by this Section 4.4(c), Lilly shall pay
Ligand, in addition to any royalty described in Section 4.4(a), *** of that
portion of such royalty applicable to sales of the SERM Oncology Product for use
in the treatment, palliation, palliation, prevention and/or remission of cancer
("Oncology Portion"). If the SERM Oncology Product receives Regulatory Approval
for uses in addition to the treatment, palliation, prevention and/or remission
of cancer, the Oncology Portion will be determined by the mutual agreement of
the parties. If the parties cannot agree on the determination of the Oncology
Portion, the parties shall agree upon an appropriate survey mechanism to be
utilized to determine the Oncology Portion. The survey will be conducted as
follows: A statistical expected accuracy of *** will be considered sufficient
for each registered indication (all non-registered indications will be
considered as one group and the *** accuracy threshold shall be applied to the
group as a whole). The survey will be done in a manner that minimizes cost while
providing the desired level of accuracy. This may mean that the survey is
conducted differently in each country. Eligible methods of surveying end use
include the following plus any others agreed upon by the parties: (i) use of an
independent third party to do random surveys of customers; (ii) use of coupons
or incentives for customers
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to track use in their institution; (iii) inclusion of coupons or incentives in
the vial or case packaging for customers to track use in their institutions;
(iv) use of telephone surveys of customers; and (v) logical deduction from the
customer list (e.g., product purchased by oncologists or hematologists will be
assumed to have been purchased for use in the treatment, palliation, prevention
or remission of cancer). The first survey will be conducted promptly after the
end of the first full Calendar Quarter in which sales of the SERM Oncology
Product are made and triennially thereafter, and the cost of these surveys will
be shared equally by the parties. Either party may conduct surveys more
frequently at its own expense (using a methodology approved by the other party,
whose approval shall not be unreasonably withheld), but no more frequently than
one time per calendar year. Regardless of the time that has elapsed since the
last survey, the time period to be examined will be the most recently completed
three (3) month period for which marketing information is available at the time
the survey is commenced. If, at the time of the survey, marketing information is
not available for a three (3) month period, the survey will be delayed until
such information is available; provided, however, that if the information is not
available within ninety (90) days after the end of any Calendar Quarter, the
survey for the most recent three (3) month period will be used. The Oncology
Portion determined by the agreement of the parties or by the survey will be
binding on the parties. The amount of the additional royalty due under this
Section 4.4(c) shall be calculated by multiplying any royalty described in
Section 4.4(a) by the Oncology Portion most recently set by agreement of the
parties or the survey, as the case may be.
4.5 LIGAND RIGHTS TO SELECT COMPOUNDS OUTSIDE THE FIELD. Promptly
following the Effective Date, Ligand shall disclose to Lilly all information
with respect to the Allergan Royalty Compounds that Lilly may reasonably
request. Within the first ninety (90) days following the Effective Date, Ligand
shall have the right to select *** Allergan Royalty Compounds (other than
Compound 268 and Compound 324) for use outside the Field, in which case such
Allergan Royalty Compounds shall not be available for development by Lilly or
its Affiliates in the Field. The Steering Committee shall approve the selection
of Allergan Royalty Compounds by Ligand, such approval not to be unreasonably
withheld. Any dispute arising at the Steering Committee with respect to the
selection of such compounds shall be subject to resolution under Section 2.5 in
the manner provided for Research Program disputes. The compounds so selected
shall not be available to Lilly or its Affiliates and will not be subject to
royalty and milestone payments to Lilly. All Allergan Royalty Compounds other
than the *** selected by Ligand shall be available to Lilly and its Affiliates
exclusively and may not be developed by Ligand or its Affiliates for any purpose
during the Research Program Term plus one (1) year, subject to Ligand's and its
Affiliates' rights under Section 2.12(b), 4.6(b), 8.1(b), 8.2(b) and 8.5(f) and
subject to any license granted to Lilly under Section 8.1 with respect to
Allergan Royalty Compounds that become Drug Products or the SERM Oncology
Product.
4.6 OPTION COMPOUNDS
(a) LILLY OPTION COMPOUNDS. Ligand shall on a quarterly basis
share information with Lilly with respect to the status of its internal research
or other programs related
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to development of RXR Modulators outside the Field (to the extent any agreements
to which Ligand is a party as of the Effective Date do not prohibit Ligand from
disclosing the information to Lilly ). At the time the third of *** compounds
from Ligand's internal research efforts on RXR Modulators outside the Field or
other programs related to RXR Modulators outside the field has reached a stage
after the Effective Date that is equivalent to Development Candidate, Ligand
shall so notify Lilly and Lilly shall have up to ninety (90) days from receipt
of such notice to select for use in the Field up to *** compounds (other than
Ligand Option Compounds or Allergan Royalty Compounds selected by Ligand under
Section 4.5) synthesized in the course of such internal research or other
programs. The compounds so selected by Lilly shall be deemed Research Compounds
and shall be referred to as a "Lilly Option Compounds." Lilly shall have the
sole right to develop Lilly Option Compounds for use in the Field. Neither
Ligand nor any Ligand Affiliate shall have any right to develop any Lilly Option
Compound for any use, whether in or outside the Field. If a Lilly Option
Compound is further developed and commercialized, milestone payments and royalty
payments on such Lilly Option Compound shall be paid by Lilly with respect to
the development and commercialization of such compound in a manner equivalent to
those set forth in Sections 6.1 and 7.2 with respect to Drug Products containing
HNF-4 Modulators, regardless of the date upon which the milestones are achieved
and whether or not the Lilly Option Compounds are declared a Development
Candidate during the Research Program Term plus one (1) year. If at the end of
the Research Program Term plus one year Lilly has not selected *** compounds, it
shall be permitted to make its selection at that time, regardless of whether
Ligand has brought forward *** compounds to a stage equivalent to Development
Candidate.
(b) LIGAND OPTION COMPOUNDS. At the time the *** Research
Compounds has reached the status of Development Candidate, Ligand shall have up
to ninety (90) days to select up to *** other compounds (other than Lilly Option
Compounds and any Allergan Royalty Compounds chosen for the SERM Oncology
Product) from Allergan Royalty Compounds and/or New Compounds that are RXR
Modulators for use outside the Field. The compounds so selected by Ligand shall
be deemed "Ligand Option Compounds." Ligand shall have the sole right to develop
Ligand Option Compounds for use outside the Field. Neither Lilly nor any of its
Affiliates shall have any right to develop any Ligand Option Compound for any
use, whether in or outside the Field. If a Ligand Option Compound is further
developed and commercialized, milestone payments and royalty payments on such
Ligand Option Compound shall be paid by Ligand with respect to the development
and commercialization of such compound in a manner equivalent to those set forth
in Sections 6.1 and 7.2 with respect to Drug Products containing HNF-4
Modulators, regardless of the date upon which the milestones are achieved,
provided no milestone or royalty payments shall be due under this Section if the
Ligand Option Compound is an Allergan Royalty Compound. If at the end of the
Research Program Term plus one year Ligand has not selected *** compounds, it
shall be permitted to make its selections at that time, regardless of whether
Lilly has brought forward any Development Candidates. Other than the right to
select Ligand Option Compounds as provided in this Section 4.6(b) and the right
to New Compounds that are Discontinued Drug Products as provided in this
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Agreement, Ligand shall have no right under this Agreement to research, develop,
make, use, import, offer for sale or sell any New Compound.
ARTICLE 5
COMMERCIALIZATION
5.1 COMMERCIALIZATION. All decisions regarding the Commercialization
Program for each Drug Product, including pricing and terms of sale and
assignment of Ligand personnel allocated under Section 3.1 above with respect to
the Drug Product, shall be determined by Lilly, in its sole discretion;
provided, however, that Ligand's participation in the Commercialization Program
shall be approved by the Steering Committee, subject to the dispute resolution
provisions of Section 2.5, and in no event shall such Ligand participation be
disruptive of Ligand programs not funded by Lilly.
5.2 MARKETING PARTNERS FOR DRUG PRODUCT. Lilly shall have the right to
appoint one or more Third Party marketing partners to promote, co-promote,
distribute, market or co-market any Drug Product in any country of the world
where such an arrangement would be beneficial for pricing approvals or overall
market share. In the event Lilly elects to appoint a marketing partner, Lilly
shall have the right to supply the Drug Product to such partner at such prices
as Lilly shall determine. With the consent of Ligand, which consent will not be
unreasonably withheld, Lilly may, in connection with the appointment of a
marketing partner, assign to such partner some or all of Lilly's obligations
under the Development Program with respect to one or more countries, provided
that such assignment shall not release Lilly from any obligations it may have
under this Agreement.
5.3 COMMERCIAL DILIGENCE. Lilly shall use commercially reasonable
efforts to obtain Regulatory Approval for and to market, sell and distribute
Drug Products in all countries of the world.
ARTICLE 6
ROYALTIES
6.1 ROYALTIES.
(a) Subject to the terms and conditions of this Agreement (including,
but not limited to, Section 6.1(b) below) and during the Royalty Term, in
partial consideration for the licenses and services provided hereunder, Lilly
shall pay Ligand the following royalties based on
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worldwide Net Sales of each Drug Product incorporating one of the following
Research Compounds during a Calendar Year:
<TABLE>
<CAPTION>
ROYALTY TIER I II III IV
<S> <C> <C> <C> <C>
Allergan Royalty Compound *** *** *** ***
Stage II Compounds *** *** *** ***
Stage III Compounds *** *** *** ***
HNF-4 Modulator *** *** *** ***
PPAR Modulator *** *** *** ***
Regulator *** *** *** ***
</TABLE>
I: Percentage of Net Sales paid for that portion of Net Sales of
each Drug Product in the Calendar Year that are less than *** .
II: Percentage of Net Sales paid for that portion of Net Sales of
each Drug Product in the Calendar Year that equal or exceed ***
but are less than *** .
III: Percentage of Net Sales paid for that portion of Net Sales of
each Drug Product in the Calendar Year that equal or exceed ***
but are less than *** .
IV: Percentage of Net Sales paid for that portion of Net Sales of
each Drug Product in the Calendar Year that equal or exceed ***.
Commencing January 1, 1999 and on January 1 of each year
thereafter the threshold and ceilings for the different royalty tiers will be
increased by *** over the levels in effect during the immediately preceding
Calendar Year. Royalties shall be calculated on a Drug Product by Drug Product
basis, and sales of various Drug Products shall not be aggregated for purposes
of determining the applicable royalty rate. For this purpose, all formulations
of a Research Compound shall be regarded as one Drug Product.
(b) In the event Ligand does not exercise the "Ligand Option" or gives
the "Rejection Notice" as provided in Section 1 of the Option Agreement and has
not previously exercised the "Targretin Royalty Option" under Section 5.1(b) of
the Targretin Agreement, Ligand shall have the option to increase the royalties
payable on either Compound 268 or Compound 324 (but not both) (the "268/324
Royalty Option") by *** *** over the royalty rates
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provided in Section 6.1(a) above (i.e., the royalty rate would increase from ***
To exercise the 268/324 Royalty Option, Ligand must deliver written notice to
Lilly within thirty (30) days after the first to occur of (i) the date Ligand
receives (A) the payment of the Phase III Enrollment milestone for Compound 268
pursuant to Section 7.2 of this Agreement or (B) written notice from Lilly
acknowledging that the Phase III Enrollment milestone for Compound 268 has been
satisfied, (ii) the date Ligand receives (A) the payment of the Phase III
Enrollment milestone for Compound 324 pursuant to Section 7.2 of this Agreement
or (B) written notice from Lilly acknowledging that the Phase III Enrollment
milestone for Compound 324 has been satisfied or (iii) the date Ligand receives
(A) the payment of the first Phase III Enrollment milestone for Targretin (as
defined in the Targretin Agreement) pursuant to Section 5.4 of the Targretin
Agreement or (B) written notice from Lilly acknowledging that the first Phase
III Enrollment milestone for Targretin has been satisfied. If Ligand does not
deliver written notice within the required thirty (30) days, the 268/324 Royalty
Option shall be deemed to have expired.
6.2 PAYMENTS REGARDING CERTAIN COMPOUNDS. Ligand shall pay Allergan any
royalty or other amount payable with respect to any Allergan Royalty Compound.
6.3 ROYALTY PAYMENTS. Royalty payments under this Agreement shall be
made to the receiving party within seventy-five (75) days following the end of
each Calendar Quarter for which royalties are due.
6.4 PAYMENTS FOR LICENSED PPAR MODULATORS. In the event that Lilly
exercises its option to license a PPAR Modulator from a Third Party pursuant to
Section 8.5(c) of this Agreement and such compound is used in a Combination
Product with a Research Compound or Targretin, Net Sales of the Combination
Product shall be calculated as set forth in Section 1.50 of this Agreement or
Section 1.37 of the Targretin Agreement, as the case may be, ***
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ARTICLE 7
INITIAL AND MILESTONE PAYMENTS
7.1 INITIAL PAYMENT. Within three (3) business days of the submission by
Ligand of the draft Technical Operating Plan to the Steering Committee, Lilly
shall pay Ligand twelve million five hundred thousand dollars ($12,500,000).
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7.2 MILESTONES. Upon achievement of any milestone event listed below
with respect to a Drug Product, Lilly shall pay Ligand on or before the *** day
following achievement of the milestone as provided below:
<TABLE>
<CAPTION>
DEVELOPMENT IND Phase II Phase III NDA Marketing
CANDIDATE Acceptance Enrollment Enrollment Filing Approval
<S> <C> <C> <C> <C> <C> <C>
Allergan Royalty
Compound *** *** *** *** *** ***
Compound 268/
Compound 324 *** *** *** *** *** ***
Stage II Compound *** *** *** *** *** ***
Stage III Compound *** *** *** *** *** ***
HNF-4 Modulator *** *** *** *** *** ***
PPAR Modulator *** *** *** *** *** ***
Regulator *** *** *** *** *** ***
</TABLE>
Amounts shown on the above table are in millions of U.S. dollars. The milestone
payments set forth above will be paid only for the first indication of a Drug
Product to achieve the required status and no milestone payment shall be made
more than once with respect to the same Drug Product. For purposes of paying
milestones, all formulations of a Research Compound shall be regarded as the
same Drug Product.
***
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***
In the event that Phase II Clinical Trials and Phase III Clinical Trials are
combined or other doubts exist regarding the achievement of such milestones, the
Steering Committee or its designee shall determine the point in the trials at
which the Phase II Enrollment and Phase III Enrollment milestones have been
achieved. Notwithstanding the provisions of Section 2.5 of this Agreement, in
the event that the Steering Committee (i) is unable to agree or (ii) is no
longer in existence and no designee has been named, the determination shall be
made by the mutual agreement of the parties.
ARTICLE 8
LICENSES
8.1 LICENSES TO LILLY.
(a) Subject to the other provisions of this Agreement (including,
without limitation, Section 8.1(b)) and except as provided below, Ligand and its
Affiliates hereby grant to Lilly and its Affiliates an exclusive, worldwide
license, with the right to sublicense, the
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exclusivity being even as to Ligand and its Affiliates, under the Joint Patents,
Joint Technology, Ligand Patents and Ligand Technology:
(i) to make, have made, use, have used, import, offer
for sale, sell and have sold, the SERM Oncology
Product as provided in Section 4.4;
(ii) to make, have made, use, have used, import, offer
for sale, sell and have sold, Drug Products;
(iii) to make, have made, use, have used, import, offer
for sale, sell and have sold, New Compounds for
which Lilly has disclosed in writing to Ligand the
chemical and physical structure not later than
*** days after Lilly's receipt of a written
request for such disclosure made by Ligand at any
time after the end of the Research Program Term ***
; and
(iv) to co-exclusively with Ligand and its Affiliates,
with the right to sublicense, conceive, discover,
evaluate, identify, characterize, research and
develop the SERM Oncology Product, Research
Compounds in the Field and Drug Products during the
Research Program Term *** ; provided that Ligand
shall exercise its rights hereunder solely in
connection with the performance of its obligations
under this Agreement and shall not sublicense its
rights hereunder; and
(v) to exclusively research and develop in the Field
after the Research Program Term plus one (1) year
Research Compounds which are declared to be
Development Candidates during the Research Program
Term *** .
Lilly shall exercise the licenses granted pursuant to this
Section 8.1(a) only in accordance with the terms of this Agreement.
(b) All rights to Ligand Compounds which are not New Compounds,
other than those declared to be Development Candidates during the Research
Program Term plus one (1) year and those, if any, that are selected as Lilly
Option Compounds pursuant to Section 4.6(a), shall revert to Ligand following
the Research Program Term *** . In addition, the licenses granted to Lilly and
its Affiliates in Section 8.1(a) do not extend and are subject to Allergan's
rights to Unsynthesized Compounds and Allergan Selected Compounds (each as
defined in the ALRT Agreement) to which Allergan has exclusive rights under the
ALRT Agreement.
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***
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After the Research Program Term *** , Ligand shall have the right
to conduct research using Research Compounds which are declared to be
Development Candidates during the Research Program Term *** .
8.2 LICENSES TO LIGAND.
(a) Subject to the other provisions of this Agreement, Lilly
hereby grants to Ligand an exclusive, worldwide license, with the right to
sublicense, the exclusivity being even as to Lilly and its Affiliates, under the
Joint Patents, Joint Technology, Lilly Patents and Lilly Technology to make,
have made, use, have used, import, offer for sale, sell and have sold drug
products containing Ligand Option Compounds for use outside the Field.
(b) In the event Lilly discontinues development of a Discontinued
Drug Product pursuant to Section 2.12 of this Agreement and Lilly or its
Affiliates is not diligently researching, developing or selling another Research
Compound or Drug Product that is a Modulator of the same Designated Receptor as
the Discontinued Drug Product if the Discontinued Drug Product is a Modulator,
or another Research Compound or Drug Product that is a Regulator if the
Discontinued Drug Product is a Regulator, the licenses granted to Lilly and its
Affiliates under Section 8.1 with respect to such Discontinued Drug Product and
the related Program (and any Research Compound contained in such Drug Product or
Program) shall terminate and Lilly and its Affiliates shall grant to Ligand an
exclusive, worldwide license, with the exclusivity being even as to Lilly and
its Affiliates, with the right to sublicense, under the Joint Patents, Joint
Technology, Lilly Patents and Lilly Technology to develop, make, have made, use,
import, offer for sale, sell and have sold the Discontinued Drug Product (and
any Research Compound contained in such Discontinued Drug Product); provided,
however, that Lilly shall retain the exclusive license to any New Compounds
other than the Discontinued Drug Products and the Ligand Option Compounds, that
may have been synthesized or identified as part of the Program. If Lilly elects
to discontinue development of a Discontinued Drug Product, such license shall be
granted upon receipt by Ligand of Lilly's written election to discontinue
development and shall be subject to the royalty provisions of Section 2.12.
Notwithstanding the above, neither Lilly nor its Affiliates grant any license
under this Section 8.2(b) under the Lilly Patents or the Lilly Technology
applicable to making a Drug Product that was not used to make the Drug Product
in the development or commercialization of the Drug Product by Lilly or its
Affiliates.
8.3 DEVELOPMENT OUTSIDE FIELD. Neither Ligand nor its Affiliates shall
develop any Research Compound or Drug Product, including a SERM Oncology
Product, for use or sale outside the Field for so long as Lilly or any Lilly
Affiliate or Sublicensee is developing, manufacturing, or selling such Research
Compound or Drug Product, including the SERM Oncology Product.
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8.4 ROYALTIES ON NEW COMPOUNDS.
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***
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(f) Subject to Section 3.6, Lilly shall have the right, pursuant
to Section 2.12 of this Agreement or otherwise, to terminate all Research Funds
for any of the RXR Program, the PPAR Program, the HNF-4 Program and/or the OB
Gene Program (each, a "Program"). In the event that Lilly terminates all
Research Funds for a Program without Ligand's agreement, (i) all rights to the
Program shall revert to Ligand, subject to obligations imposed herein, (ii) all
licenses from Ligand and its Affiliates to Lilly and its Affiliates affecting
the Program shall terminate, except that Lilly shall retain all licenses under
Section 8.1(a)(ii), 8.1(a)(iv) and 8.1(a)(v) with respect to Research Compounds
that were declared to be Development Candidates in the Program prior to
termination of all Research Funds for the Program, and (iii) the exclusivity
covenants of both Ligand and Lilly contained in this Section 8.5 with respect to
the Program shall terminate. If all Research Funds for a Program are terminated
by the mutual agreement of Lilly and Ligand, Lilly's rights to the Program and
its licenses affecting the Program shall not terminate and the exclusivity
covenants of both Ligand and Lilly contained in this Section 8.5 with respect to
the Program shall not terminate. If Ligand requests from Lilly a report on the
status of a Program, Lilly will promptly report to Ligand whether it has
discontinued the development and/or commercialization of all Research Compounds
and Drug Products in the Program. Notwithstanding the foregoing, Lilly shall
retain the exclusive license under Section 8.1(a)(iii) to any New Compounds,
other than any New Compound contained in a Discontinued Drug Product and any
Ligand Option Compounds that are New Compounds.
ARTICLE 9
TRADEMARKS
9.1 SELECTION; LICENSE; EXPENSES. Lilly may select one or more
trademarks, as it deems appropriate, but not one which could be reasonably
expected to be likely to cause confusion, mistake or to deceive with respect to
Targretin, for the marketing of Drug Products. Such trademarks shall be owned
solely by Lilly (collectively, the "Trademarks"); provided, however, that if
required by law in any country, Ligand shall own the Trademarks in that country
and shall grant an exclusive license to Lilly. Expenses for registration of the
Trademarks shall be borne solely by Lilly.
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ARTICLE 10
INFORMATION AND REPORTS
10.1 INFORMATION DISCLOSURE. Lilly and Ligand will disclose and make
available to each other promptly (and in any event as soon as it is generally
available within their respective organizations) the results of the work
conducted in connection with the Research Program and Development Program,
including without limitation all structural, preclinical, clinical, regulatory,
and other information known by Lilly or its Affiliates or Ligand or its
Affiliates concerning Research Compounds and Drug Products. Lilly shall own and
maintain its database of clinical trial data and adverse drug event information
accumulated from all clinical trials of the Drug Products for which it was
responsible. In the event that Lilly terminates this Agreement or Ligand
acquires rights to a Discontinued Drug Product, Lilly will permit Ligand, at no
cost to Ligand other than the direct costs of assembling, reproducing and
transmitting the data, to make copies of all material information described in
the immediately preceding sentence and use such information in connection with
Regulatory Approvals; provided, however, that if Ligand subsequently sublicenses
the right to develop and market the Discontinued Drug Product to any Third
Party, Ligand shall reimburse Lilly for its direct costs incurred in obtaining
such information, including, without limitation, the direct costs of clinical
trials. Ligand shall own and maintain its database of clinical trial data and
adverse drug event information accumulated from all clinical trials of drug
products containing Research Compounds outside the Field. Lilly and Ligand each
shall have the right, during normal business hours and upon reasonable notice,
to inspect and copy all records of the other party to the extent reasonably
required for the performance of its obligations under this Agreement (with the
party owning the records determining what is reasonably required). Each party
shall treat the records and the information of the other party contained therein
as Confidential Information and shall not use or disclose such records or
information except to the extent permitted by this Agreement as well as to
provide to the sponsor of the IND, NDA, or other regulatory submission, for
initial and/or periodic submission to governmental agencies, significant
information on any Drug Product from preclinical laboratory, animal toxicology
and pharmacology studies, as well as serious or unexpected adverse experience
reports from clinical trials and commercial experiences with such Drug Product.
10.2 COMPLAINTS. Each party shall maintain a record of all complaints it
receives with respect to Drug Products. Except as otherwise provided in Section
10.3, each party shall notify the responsible party in reasonable detail of any
complaint received by it and within three (3) days after the event, and in any
event in sufficient time to allow the responsible party to comply with any and
all regulatory requirements imposed upon it in any country in which the Drug
Product is being marketed.
10.3 ADVERSE EVENT REPORTING. The party who has responsibility for and
sponsorship of the regulatory submission will also have responsibility for
submitting information and filing reports to various governmental agencies, to
the extent they are lawfully required, on Drug
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Products. Information must be submitted at the time of initial filing for
investigational use in humans and at the time of NDA filing in the U.S., or the
foreign equivalent of any such filing. In addition, supplemental information
must be provided on Drug Products at periodic intervals and adverse drug
experiences must be reported at more frequent intervals depending on the
severity of the experience. Consequently, Lilly and Ligand agree to provide each
other with all information necessary or desirable to comply with the laws and
regulations of governmental regulatory authorities in the applicable country and
to develop and follow appropriate adverse experience reporting procedures and:
(a) provide to the sponsor of the IND, NDA, or other regulatory
submission, for initial and/or periodic submission to governmental agencies,
significant information on any Drug Product from preclinical laboratory, animal
toxicology and pharmacology studies, as well as serious or unexpected adverse
experience reports from clinical trials and commercial experiences with such
Drug Product.
(b) report to one another in such a manner and time so as to
enable each party to comply with all governmental laws and regulations in
countries for which Regulatory Approval is or will be sought.
10.4 USE OF INFORMATION. Information contained in reports made pursuant
to this Article 10 or otherwise communicated between the parties will be subject
to the confidentiality provisions of Article 12 below. Lilly may use any
information obtained by it (either by its own efforts or by disclosure from
Ligand) pursuant to this Agreement for the purposes of obtaining Regulatory
Approval for Drug Products throughout the world. Each party shall have the right
to use the Confidential Information disclosed by the other party without charge,
but only to the extent necessary to enable each party to carry out their
respective roles defined in this Agreement.
10.5 PUBLICATIONS. During the Research Program Term, Ligand and Lilly
each acknowledge the other party's interest in publishing certain information
gathered during the collaboration to obtain recognition within the scientific
community and to advance the state of scientific knowledge. Each party also
recognizes the mutual interest in obtaining valid patent protection and
protecting business interests. The Steering Committee, or its designee, will
establish procedures for review of publications that will address the process,
timing and criteria for decision while taking into account both Ligand's and
Lilly's policies for publication review and approval. The Steering Committee, or
its designee (the "Publication Subcommittee"), shall consider each such proposed
publication that arises during the Research Program Term by reviewing an advance
draft of all written publications and an abstract of all oral presentations,
which shall be submitted not later than 45 days prior to the first submission
for publication in the case of written publications and 45 days prior to
submission of the abstract to the organizers of the forum at which the oral
presentation is to be made. If, within 30 days of receipt of the advance copy of
a party's proposed written publication or abstract of a proposed oral
presentation, the Steering Committee or its Publication Subcommittee informs
such party that its
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proposed publication or presentation could be expected to have a material
adverse effect on any Ligand Patents, Ligand Technology, Lilly Patents, Lilly
Technology, Joint Patents or Joint Technology developed or acquired during the
Research Program Term, then such party shall delay such proposed publication or
presentation for a period of up to 90 days or, if longer, a commercially
reasonable period of time, to enable modifications to the publication or
presentation for patent, trade secret, or commercial reasons or to allow for
patent(s) preparation and filing of the information involved, if such
information pertains to a patentable invention. If any material changes are made
to the advance copy prior to publication or presentation, the final version
shall be submitted for review by the Steering Committee or the Publication
Subcommittee, which shall then have a period of 10 business days to review the
final version.
If, within 30 days of receipt of an advance copy or within 10 business
days of receipt of the final version of a party's proposed publication or
presentation, the Steering Committee or the Publication Subcommittee has failed
to act with respect to such party's proposed publication or presentation, then
such proposed publication or presentation shall be regarded as approved by the
Steering Committee and may be published or presented. The disclosure of
information that has been previously approved or is not Confidential Information
shall not require the review and approval of the Steering Committee under this
Section 10.5.
10.6 REGULATORY REPORTING. The parties acknowledge that either or both
parties will be required to submit information and file reports with various
governmental agencies in addition to those contemplated by the preceding
sections. Without limiting the generality of Sections 2.10 and 2.11 above, the
Joint Program Committee or its designee, with the approval of the Steering
Committee, shall establish procedures to be followed by the parties which will
facilitate the coordination of the parties in complying with their respective
regulatory obligations, and the parties agree to cooperate with each other as
necessary to allow each party to comply with its regulatory obligations. Lilly
shall coordinate all contacts with regulatory agencies with respect to Drug
Products and the SERM Oncology Product keeping Ligand appropriately advised of
such contacts. Each party shall consult with the other party before responding
to any inquiries from regulatory agencies regarding Research Compounds or Drug
Products, provided however, each party may make such communication as required
by law.
10.7 SALES REPORTS.
(a) During the term of this Agreement and after First Commercial
Sale of a Drug Product or the SERM Oncology Product in any country, Lilly shall
furnish or cause to be furnished to Ligand on a quarterly basis a written report
or reports covering each Calendar Quarter (each such Calendar Quarter being
sometimes referred to herein as a "reporting period") showing (i) the Net Sales
of each Drug Product and the SERM Oncology Product in each country during the
Royalty Term by Lilly, its Affiliates, Sublicensees and assigns, and (ii) the
royalties which shall have accrued under Article 6 in respect of such sales and
the basis for calculating those royalties. With respect to sales of Drug
Products and the SERM Oncology Product
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invoiced in United States Dollars ("Dollars"), the Net Sales amounts and the
amounts due to Ligand hereunder shall be expressed in Dollars.
With respect to sales of Drug Products and the SERM Oncology
Product invoiced in a currency other than Dollars, the Net Sales shall be
calculated using Lilly's then current standard exchange rate methodology for the
translation of foreign currency sales into Dollars. Each quarterly report shall
be accompanied by a list of the exchange rates used in calculating Net Sales
covered by such quarterly report. Lilly will at Ligand's reasonable request but
not more frequently than once a Calendar Quarter inform Ligand as to the
specific exchange rate translation methodology, if any, used for a particular
country or countries. In the event that any exchange rate translation
methodology changes, Lilly will inform Ligand of the change in the quarterly
report next due.
Each quarterly report shall be due on the seventy-fifth (75th)
day following the close of each reporting period. Lilly shall keep accurate
records in sufficient detail to enable the amounts due hereunder to be
determined and to be verified by the independent public accountants described
hereunder. Lilly shall furnish annually to Ligand appropriate evidence of
payment of any tax or other amount required by applicable laws or regulations to
be deducted from any royalty payment, including any tax or withholding levied by
a foreign taxing authority in respect of the payment or accrual of any royalty.
(b) All payments shall be made in Dollars at the time of
quarterly reporting. If at any time legal restrictions prevent the prompt
remittance of any payments with respect to any country where Drug Products or
the SERM Oncology Product are sold, Lilly or its sublicensees or marketing
partners shall have the right and option to make such payments by depositing the
amount thereof in local currency to Ligand's account in a bank or depository in
such country.
Upon the written request of Ligand, at Ligand's expense and not
more than once in or in respect of any Calendar Year,
***
***
***
***
Upon the expiration of thirty-six (36) months following the end of any Calendar
Year, the calculation of amounts payable with respect to such fiscal year shall
be binding and conclusive upon Ligand, and Lilly and its sublicensees and
marketing partners shall be released from any liability or accountability with
respect to payments for such year. The report prepared by such independent
public accountant, a copy of which shall be sent or otherwise provided to Lilly
by such independent public accountant at the same time it is sent or otherwise
provided to Ligand, shall contain the conclusions of such independent public
accountant regarding the audit and will specify that the amounts paid to Ligand
pursuant thereto were correct or, if incorrect, the amount of any underpayment
or overpayment. If such independent public accountant's report shows any
underpayment, Lilly shall remit or shall cause its sublicensees or marketing
partners to remit to Ligand within thirty (30) days after Lilly's receipt of
such report, (i) the amount of
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such underpayment and (ii) if such underpayment exceeds ten percent (10%) of the
total amount owed for the Calendar Year then being audited, the reasonable and
necessary fees and expenses of such independent public accountant performing the
audit, subject to reasonable substantiation thereof. Any overpayments shall be
fully creditable against amounts payable in subsequent payment periods. Ligand
agrees that all information delivered or subject to review under this Section
10.7 or under any sublicensee or marketing agreement is Confidential Information
and that Ligand shall retain all such information in confidence.
10.8 STATUS REPORTS. At any time after the committees referred to in
Article 2 cease to exist, Lilly shall, upon request, and not more frequently
than semi-annually , provide to Ligand a written report summarizing the
activities of Lilly with respect to the Drug Products and the SERM Oncology
Product, and in the event that Ligand obtains rights to any Discontinued Drug
Product, Ligand shall, upon request, and not more frequently than semi-annually,
provide to Lilly a written report summarizing the activities of Ligand with
respect to the Discontinued Drug Products, the contents of each such report to
be as set forth on Schedule 10.8.
ARTICLE 11
INTELLECTUAL PROPERTY
11.1 PATENTABLE INVENTIONS AND TECHNOLOGY.
(a) OWNERSHIP. Ligand will disclose to Lilly all Ligand
Technology and Joint Technology and Lilly will disclose to Ligand all Lilly
Technology and Joint Technology to the extent developed or acquired during the
Research Program and the Development Program promptly after the disclosing party
recognizes the significance thereof unless the same shall have been developed as
part of a collaboration with a Third Party, the terms of which prohibit
disclosure to the other party. All Ligand Patents and Ligand Technology shall be
owned by Ligand, all Lilly Patents and Lilly Technology shall be owned by Lilly
and all Joint Patents and Joint Technology shall be owned jointly by Ligand and
Lilly, inventorship to be determined in accordance with U.S. laws of
inventorship, where applicable.
(b) PATENT PROSECUTION. Ligand shall be responsible for
preparing, filing, prosecuting, maintaining and taking such other actions as are
reasonably necessary or appropriate with respect to the Ligand Patents and any
patentable inventions encompassed by Ligand Technology. Lilly shall be
responsible for preparing, filing, prosecuting, maintaining and taking such
other actions as are reasonably necessary or appropriate with respect to the
Joint Patents, Lilly Patents and any patentable inventions encompassed by Lilly
Technology or Joint Technology. Each party will consult the other party with
respect to its choice of external patent counsel and will keep that party
continuously informed of all material developments relating to the preparation,
filing, prosecution and maintenance of patents and patent applications covered
by this Agreement. Each party shall endeavor in good faith to coordinate its
efforts with those
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of the other party to minimize or avoid interference with the prosecution of the
other party's patent applications. To the extent practicable, each party shall
provide the Steering Committee with a copy of any patent application which first
discloses any specific Lilly Technology, Ligand Technology or Joint Technology,
prior to filing the first of such applications in any jurisdiction, for review
and comment by the Steering Committee or its designees.
(c) COSTS. Subject to the provisions of subsection (d) below, the
party initially responsible for all costs incurred in the preparation, filing,
prosecution and maintenance of a patent pursuant to Section 11.1(b) shall bear
all costs incurred in the preparation, filing, prosecution and maintenance of
such patents; provided, however, that Ligand shall pay one-half (1/2) of all
reasonable external expenses incurred by Lilly while prosecuting and maintaining
Joint Patents. External expenses will include patent office fees and taxes in
connection with the filing, prosecution and maintenance of any patent or patent
application and the fees of any outside patent attorneys or agents in connection
with the ex parte preparation, filing, prosecution and maintenance thereof. The
allocation of such expenses will occur on an annual basis at the end of each
Calendar Year, at which time Lilly will provide Ligand with an itemized list of
external expenses denominated in Dollars incurred during the previous annual
period in prosecuting and maintaining Joint Patents and Ligand will reimburse
Lilly's expenses within sixty (60) days of the date of receipt of this itemized
list.
(d) DISCONTINUANCE OF PATENT PROSECUTION. The party initially
responsible for preparation, filing, prosecution and maintenance (including the
costs or reimbursement of costs related thereto) of a particular Ligand Patent,
Lilly Patent or Joint Patent (the "Initial Responsible Party") shall give thirty
(30) days advance notice (the "Discontinuance Election") to the other party of
any decision to cease preparation, filing, prosecution and maintenance of that
patent (a "Discontinued Patent") provided, however, that abandonment of a patent
application in favor of a continuation or continuation-in-part thereof shall not
constitute discontinuance of the parent application. In such case, the other
party may elect at its sole discretion to continue preparation, filing and
prosecution or maintenance of the Discontinued Patent at its sole expense. The
party so continuing shall own any such patent or patent application and patents
maturing therefrom; and the Initial Responsible Party shall execute such
documents and perform such acts as may be reasonably necessary for the other
party to file or to continue prosecution or maintenance, including assigning
ownership of such patents and applications to such electing party.
Discontinuance may be on a country-by-country basis or for a patent application
or patent series in total. In the event that Lilly exercises its Discontinuance
Election with respect to a Discontinued Patent in a particular country, Lilly's
license under Section 8.1 with respect to that Discontinued Patent shall
terminate with respect to such country.
11.2 INFRINGEMENT CLAIMS BY THIRD PARTIES.
(a) In the case of any claim of infringement of a patent owned by
a Third Party based upon the making, having made, using, having used, importing,
offering for sale, selling or having sold Compound 268 or Compound 324 in a Drug
Product, and the patent Covers
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Compound 268 or Compound 324 per se, or the use of Compound 268 or Compound 324
per se in the treatment of diabetes mellitus, obesity, insulin resistance,
dyslipidemia, and cardiovascular disorders associated with diabetes mellitus or
insulin resistance, (i) Lilly shall have the right to obtain a license from the
Third Party and credit *** of any royalty payable to the Third Party against the
royalty payable to Ligand, but in no event will Ligand's royalty each year be
reduced by more than *** , or (ii) if Lilly and/or Ligand is sued for
infringement by such Third Party, Lilly shall control and defend or settle the
action at its expense and shall pay any damages or other monetary awards
resulting therefrom, and Lilly shall be entitled to credit *** of such monetary
award against the royalties payable to Ligand, but in no event will Ligand's
royalty each year be reduced by more than *** .
(b) In the case of any claim of infringement of a patent owned by
a Third Party based upon the making, having made, using, having used, importing,
offering for sale, selling or having sold any Research Compound in a Drug
Product other than Compound 268 or Compound 324, and the patent Covers the
Research Compound per se, or the use of the Research Compound per se in the
treatment of diabetes mellitus, obesity, insulin resistance, dyslipidemia, and
cardiovascular disorders associated with diabetes mellitus or insulin
resistance, (i) Lilly shall have the right to obtain a license from the Third
Party and credit *** of any royalty payable to the Third Party against the
royalty payable to Ligand, but in no event will Ligand's royalty each year be
reduced by more than *** , or (ii) if Lilly and/or Ligand is sued for
infringement by such Third Party, Lilly shall control and defend or settle the
action at its expense and shall pay any damages or other monetary awards
resulting therefrom, and Lilly shall be entitled to credit *** of such monetary
award against the royalties payable to Ligand, but in no event will Ligand's
royalty each year be reduced by more than *** *** .
(c) If a claim of infringement is made against Lilly and/or
Ligand by a Third Party and that claim is based upon a claim of infringement for
use of an assay system or biological material used in an assay system (for
example, the co-transfection assay or a gene or protein used therein) which is
Ligand Technology and the claim of infringement is not based on a patent claim
which covers a compound or its method of use or any other separately patented
technology, then (i) Lilly shall have the right to obtain a license from the
Third Party and credit *** of any royalty payable to the Third Party against the
royalty payable to Ligand arising from the infringing use, but in no event will
Ligand's royalty each year be reduced by more than *** , or (ii) if Lilly and/or
Ligand is sued for infringement by such Third Party, Ligand shall control and
defend or settle the action and Ligand and Lilly shall share equally all
expenses of the action and any damages or other monetary award resulting
therefrom. Lilly shall have the right to approve any settlement of any such
action, which approval will not be unreasonably withheld.
(d) If a claim of infringement is made against Lilly by a Third
Party based upon a claim of patent infringement not arising under (a), (b) or
(c) above, Lilly shall have the
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obligation to control and defend or settle the claim at its sole expense
(including the payment of any damages, attorneys' fees or other monetary
awards).
11.3 INFRINGEMENT CLAIMS AGAINST THIRD PARTIES.
(a) Ligand and Lilly each agree to take commercially reasonable
actions to protect their respective Patents and Technology from infringement and
from unauthorized possession or use.
(b) If any Ligand Patent, Ligand Technology, Lilly Patent, Lilly
Technology, Joint Patent or Joint Technology is infringed or misappropriated, as
the case may be, by a Third Party, the party to this Agreement first having
knowledge of such infringement or misappropriation, or knowledge of a reasonable
probability of such infringement or misappropriation, shall promptly notify the
other in writing. The notice shall set forth the facts of such infringement or
misappropriation in reasonable detail. Subject to the rights of Third Parties,
the owner of the Patent or Technology shall have the primary right, but not the
obligation, to institute, prosecute and control any action or proceeding with
respect to infringement or misappropriation of such Patent or Technology by a
Third Party seeking to develop or market a Modulator or Regulator using its own
counsel and the other party shall have the right to be represented in such
action by its own counsel. The Steering Committee shall determine, or, if the
Steering Committee is no longer in existence, the parties shall mutually
determine, which party shall have the primary responsibility to institute,
prosecute, and control any action or proceeding with respect to infringement or
misappropriation of Joint Patents or Joint Technology and the other party shall
have the right to be represented by its counsel. The costs and expenses of all
suits brought by the party having the primary right or responsibility to
institute, prosecute, and control such action or prosecution (including the
costs and expenses of the other party and its separate counsel, if any, should
the other party elect to participate in such action or proceeding) shall be paid
*** by Lilly and *** by Ligand and all damages or other monetary awards
recovered therein remaining after the pro rata reimbursement of such costs and
expenses shall be split (i) *** to Lilly and (ii) *** to Ligand. If the party
having the primary right or responsibility to institute, prosecute, and control
such action or prosecution fails to do so within a period of one hundred twenty
(120) days after receiving notice of the infringement, the other party, subject
to the prior rights of any Third Party, shall have the right to bring and
control any such action by counsel of its own choice, and the other shall not
have the right to participate in such action or proceeding, except that such
party may be joined as a party plaintiff and, in case of joining, such party
agrees to give the other party reasonable assistance and authority to file and
to prosecute such suit. All costs and expenses of any suit brought by the party
not having the primary right or responsibility to institute, prosecute and
control such action or prosecution (including the costs and expenses incurred by
the other party in providing reasonable assistance to the party initiating the
action or proceeding) shall be paid, and all damages or other monetary awards
recovered therein shall be retained, by the party initiating the action or
proceeding. No settlement or consent judgment or other voluntary final
disposition of
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a suit under this Section 11.3 may be entered into without the joint consent of
Ligand and Lilly (which consent shall not be unreasonably withheld).
11.4 NOTICE OF CERTIFICATION. Ligand and Lilly each shall immediately
give notice to the other of any certification filed under the U.S. "Drug Price
Competition and Patent Term Restoration Act of 1984" claiming that a Joint
Patent, a Ligand Patent or a Lilly Patent is invalid or that any infringement
will not arise from the manufacture, use, import, offer for sale, or sale of any
product by a Third Party. If Ligand decides not to bring infringement
proceedings against the entity making such a certification with respect to a
Ligand Patent, Ligand shall give notice to Lilly of its decision not to bring
suit within twenty-one (21) days after receipt of notice of such certification.
Lilly may then, but is not required to, bring suit against the party that filed
the certification. If Lilly decides not to bring infringement proceedings
against the entity making such a certification with respect to a Joint Patent,
or a Lilly Patent, Lilly shall give notice to Ligand of its decision not to
bring suit within twenty-one (21) days after receipt of notice of such
certification. Ligand may then, but is not required to, bring suit against the
party that filed the certification. Any suit by Lilly or Ligand shall either be
in the name of Lilly or in the name of Ligand, or jointly by Lilly and Ligand,
as may be required by law. For this purpose, the party not bringing suit shall
execute such legal papers necessary for the prosecution of such suit as may be
reasonably requested by the party bringing suit.
11.5 PATENT TERM EXTENSIONS. The parties shall cooperate with each other
in gaining patent term extensions wherever applicable to patents Covering Drug
Products and products to which Ligand acquires rights under this Agreement or
that also cover products for which Ligand has rights to market outside the
Field. The party first eligible to seek extension of such patent shall have the
right to do so; provided, that if in any country the first party has an option
to extend the patent term for only one of several products, the first party will
consult with the other party before making the election. If more than one patent
is eligible for extension, the Steering Committee shall agree upon a strategy
that will maximize patent protection for Drug Products and for products to which
Ligand acquires rights under this Agreement and products which Ligand has rights
to market outside the Field. All filings for such extensions and certificates
shall be made by the party to whom the patent is assigned, provided, however,
that in the event that the party to whom the patent is assigned elects not to
file for an extension or supplementary protection certificate, such party shall
(i) inform the other party of its intention not to file and (ii) grant the other
party the right to file for such extension or certificate.
ARTICLE 12
CONFIDENTIALITY AND NONDISCLOSURE
12.1 CONFIDENTIALITY. Unless otherwise set forth in this Agreement, for
a period from the Effective Date until five (5) years following the later of:
(a) the termination of this Agreement or (b) if Lilly or one or more of its
Affiliates is marketing a Drug Product, the date on which
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Lilly and its Affiliates cease to market any Drug Product, each party and its
respective Affiliates shall maintain in confidence all Confidential Information,
and shall not, except as contemplated by this Agreement, disclose Confidential
Information or use Confidential Information for its benefit or the benefit of
others, without the consent of the disclosing party (the "Disclosing Party").
Documents made available to the receiving party (the "Receiving Party") shall
remain the property of the Disclosing Party and shall be returned upon written
request of the Disclosing Party, except that one copy of all such information
may be retained for legal archival purposes by the Receiving Party.
12.2 AUTHORIZED DISCLOSURE. Each party may disclose Confidential
Information for the purpose of making various regulatory filings and complying
with applicable governmental regulations, and to sublicensees (potential and
actual), marketing partners (potential and actual), consultants and others
having a need to know for the purposes of development, manufacture or marketing
of Drug Products pursuant to this Agreement, provided that such sublicensees,
marketing partners, consultants and others shall also agree to appropriate and
comparable confidentiality and non-use provisions. In addition, each party shall
be entitled to disclose Confidential Information to the extent required by
applicable law, orders of courts, regulatory authorities or similar bodies
having jurisdiction over the party ("Legal Process"). The Receiving Party shall
promptly notify the Disclosing Party of any request or demand by Legal Process
for disclosure of Confidential Information. With respect to any disclosure of
Confidential Information, including the text of this Agreement, for the purpose
of complying with applicable government regulations, the disclosing party shall
give the other party an opportunity to review and comment upon the extent of any
such disclosure of Confidential Information prior to disclosure.
12.3 NONDISCLOSURE OF AGREEMENT. Neither party shall disclose any
information about this Agreement without the prior written consent of the other.
Consent shall not be required, however, for (a) disclosures to tax or other
governmental authorities or to potential or actual sublicensees, or marketing
partners to the extent required or contemplated by this Agreement, provided,
that in connection with such disclosure, each party agrees to use its
commercially reasonable efforts to secure confidential treatment of such
information, (b) disclosures of information for which consent has previously
been obtained or (c) information which had previously been publicly disclosed.
Each party shall have the further right to disclose the terms of this Agreement
as required by applicable law, including the rules and regulations promulgated
by the Securities and Exchange Commission, and to disclose such information to
shareholders or potential investors as is customary for publicly-held companies.
Any copy of this Agreement to be filed with the Securities and Exchange
Commission shall be redacted to the satisfaction of both parties; provided, in
the event that the Securities and Exchange Commission objects to the redaction
of any portion of the Agreement after the initial submission, the filing party
shall inform the other party of the objections and shall in good faith respond
to the objections in an effort to limit the disclosure required by the
Securities and Exchange Agreement, but in any event the filing party shall be
free to include any portions of the Agreement it deems necessary to respond to
the objections in any future filings. Without limiting the generality of the
foregoing
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and except in the circumstance where a party's outside counsel advises the party
that immediate disclosure is required, in the event that a Receiving Party,
intends to disclose Confidential Information as permitted under this Article 12,
such a party will provide to the Disclosing Party a copy of the information to
be disclosed and an opportunity to comment thereon prior to such disclosure,
and, to the extent practicable, consult with the Disclosing Party on the
necessity for the disclosure and the text of the proposed release within a
reasonable time in advance of the proposed disclosure. Without limiting the
generality of this Section 12.3, Ligand may allow Allergan to review a copy of
this Agreement, for the sole purpose of complying with Ligand's obligation to
Allergan under the ALRT Agreement. Any copy of this Agreement disclosed under
this Article 12 shall be redacted to the satisfaction of both parties.
12.4 SURVIVAL. The confidentiality obligations of this Article 12 shall
survive the termination or expiration of the Agreement.
12.5 PRESS RELEASES. Press releases or other public communication by
either party relating to the collaboration contemplated by this Agreement shall
be approved in advance by the other party, except for those communications
required by law, disclosures of information for which consent has previously
been obtained or information which has been previously disclosed, or as
otherwise set forth in this Agreement.
ARTICLE 13
TERM AND TERMINATION OF AGREEMENT
13.1 TERM. This Agreement shall become effective on the Effective Date
and shall continue in effect, unless terminated earlier as described hereunder
or by mutual written agreement of the parties, until the later of either: (1)
the expiration of the last to expire Lilly Patent, Ligand Patent or Joint Patent
Covering a Drug Product or a Discontinued Drug Product, New Compound, Ligand
Option Compound; (2) in the event that Lilly or any Lilly Affiliate is
developing or marketing a Research Compound or Drug Product in accordance with
the terms of this Agreement but there is no issued Lilly Patent, Ligand Patent
or Joint Patent Covering a Drug Product, then *** from the date of the most
recent First Commercial Sale with respect to a Drug Product, if any, or (3) the
expiration of the last applicable Data Exclusivity Period with respect to a Drug
Product.
13.2 TERMINATION FOR MATERIAL BREACH. Either party shall have the right
to terminate this Agreement after ninety (90) days written notice to the other
in the event the other is in material breach of this Agreement, unless the other
party cures the breach before the expiration of such period of time. Such notice
shall set forth in reasonable detail the specifics of the breach. In the event
of termination under this Section 13.2 by Lilly, all licenses granted under this
Agreement to Lilly and its Affiliates shall not be affected and shall continue
in full force and effect, and Lilly and its Affiliates shall have the right to
exercise all such licenses (subject to all
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payment and other surviving obligations as set forth in Section 13.4). All
licenses granted under this Agreement to Ligand and its Affiliates shall
automatically terminate upon such termination by Lilly. In the event of
termination under this Section 13.2 by Ligand, all licenses granted under this
Agreement to Ligand and its Affiliates shall not be affected and shall continue
in full force and effect, and Ligand and its Affiliates shall have the right to
exercise all such licenses (subject to all payment and other surviving
obligations as set forth in Section 13.4). All licenses granted under this
Agreement to Lilly and its Affiliates shall automatically terminate upon such
termination by Ligand. Notwithstanding the foregoing, Lilly shall be permitted
to distribute and sell all supplies of Drug Products in its inventory at the
time of termination until such supplies are exhausted.
13.3 TERMINATION UPON INSOLVENCY. This Agreement may be terminated by
either party upon notice to the other should the other party:
(a) consent to the appointment of a receiver or a general
assignment for the benefit of creditors, or
(b) file or consent to the filing of a petition under any
bankruptcy or insolvency law or have any such petition filed against it which
has not been stayed within 60 days of such filing.
13.4 ACCRUED RIGHTS, SURVIVING OBLIGATIONS, RESIDUAL RIGHTS. Upon the
expiration or early termination of this Agreement, except as provided herein to
the contrary, all rights and obligations of the parties shall cease, except as
follows:
(a) obligations to pay royalties and other sums accruing
hereunder up to the date of termination;
(b) the right to complete the manufacture and sale of Drug
Products, Discontinued Drug Products and Ligand Option Compounds, which qualify
as "work in process" under GAAP or which are in stock at the date of
termination, and the obligation to pay royalties on Net Sales of such Drug
Products, the SERM Oncology Product, Discontinued Drug Products and Ligand
Option Compounds;
(c) the obligations to pay milestones and royalties with respect
to Drug Products, the SERM Oncology Product, Discontinued Drug Products and
Ligand Option Compounds;
(d) all provisions regarding confidentiality shall continue in
full force and effect;
(e) obligations for record-keeping and accounting reports for so
long as Drug Products, the SERM Oncology Product, Discontinued Drug Products and
Ligand Option
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Compounds are sold, plus three (3) years. At such time after termination of this
Agreement when sales or other dispositions of Drug Products, the SERM Oncology
Product, Discontinued Drug Products and Ligand Option Compounds have ceased,
Lilly or Ligand, as the case may be, shall render a final report along with any
royalty payment due;
(f) the parties rights to inspect books and records as described
in Article 10;
(g) the obligations of defense and indemnity as described in
Article 14;
(h) any cause of action or claim of a party accrued or to accrue
because of any breach or default by the other party hereunder (subject to
applicable statutes of limitations); and
(i) in the event of expiration of this Agreement under Section
13.1, Lilly shall have a fully paid-up, perpetual license to the rights granted
pursuant to Section 8.1 solely with respect to the unpatented Ligand Technology,
and Ligand shall have a fully paid-up, perpetual license to the rights granted
pursuant to Section 8.2 solely with respect to the unpatented Lilly Technology;
and
(j) all other terms, provisions, representations, rights and
obligations contained in this Agreement that by their sense and content are
intended to survive.
ARTICLE 14
INDEMNITY
14.1 CLAIMS. Each party hereby agrees to indemnify, defend and hold
harmless the other party and its Affiliates, and their respective officers,
directors, agents and employees from and against any and all suits, claims,
actions, demands, liabilities, expenses and/or losses, including reasonable
attorneys' fees and other costs of defense other than claims for patent
infringement (which shall be resolved pursuant to Article 11) ("Claims"), (a)
resulting directly or indirectly from the manufacture, use, handling, storage,
sale or other disposition of Research Compounds, New Compounds, Drug Products,
the SERM Oncology Product, Discontinued Drug Products or Ligand Option Compounds
by the indemnifying party, its Affiliates, agents or Sublicensees (other than a
party hereunder), but only to the extent such Claims do not result from the
negligence or intentional misconduct of the party seeking indemnification, or
(b) resulting directly from a breach of any representation or warranty of the
indemnifying party contained in Article 15 of this Agreement.
14.2 DEFENSE. Any entity entitled to indemnification under this Article
14 shall give prompt written notice to the indemnifying party of any Claims with
respect to which it seeks indemnification, and the indemnifying party shall have
the option to assume the defense of such Claims with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed
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by the indemnifying party with counsel so selected, the indemnifying party will
not be obligated to pay the fees and expenses of any separate counsel retained
by the indemnified party with respect to such Claims. Except with the prior
written consent of the indemnified party, which consent shall not be
unreasonably withheld, the indemnifying party may not enter into any settlement
of such litigation unless such settlement includes an unqualified release of the
indemnified party.
14.3 INSURANCE. Ligand and Lilly shall each have and maintain such type
and amounts of liability insurance covering the manufacture, supply, use, and
sale of Research Compounds and Drug Products as is normal and customary in the
pharmaceutical industry generally for parties similarly situated, and will upon
request provide the other party with a copy of its policies of insurance in that
regard, along with any amendments and revisions thereto.
ARTICLE 15
REPRESENTATIONS AND WARRANTIES
15.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Each party hereby represents
and warrants to the other party as of the Effective Date as follows:
(a) CORPORATE EXISTENCE AND POWER. Such party (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the state in which it is incorporated, and (ii) has full corporate power and
authority and the legal right to own and operate its property and assets and to
carry on its business as it is now being conducted and is contemplated in this
Agreement.
(b) AUTHORIZATION. Such party (i) has the corporate power and
authority and the legal right to enter into the Agreement and perform its
obligations hereunder, and (ii) has taken all necessary corporate action on its
part required to authorize the execution and delivery of the Agreement and the
performance of its obligations hereunder. The Agreement has been duly executed
and delivered on behalf of such party, and constitutes a legal, valid, binding
obligation of such party and is enforceable against it in accordance with its
terms subject to the effects of bankruptcy, insolvency or other laws of general
application affecting the enforcement of creditor rights and judicial principles
affecting the availability of specific performance and general principles of
equity whether enforceability is considered a proceeding at law or equity.
(c) ABSENCE OF LITIGATION. Such party is not aware of any pending
or threatened litigation (and has not received any communication) which alleges
that such party's activities related to this Agreement have violated, or that by
conducting the activities as contemplated herein such party would violate, any
of the intellectual property rights of any other person.
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(d) CONSENTS. All necessary consents, approvals and
authorizations of all governmental authorities and other persons or entities
required to be obtained by such party in connection with the Agreement have been
obtained.
(e) NO CONFLICT. The execution and delivery of the Agreement and
the performance of such party's obligations hereunder (i) do not conflict with
or violate any requirement of applicable law or regulation or any provision of
articles of incorporation or bylaws of such party in any material way, and (ii)
do not conflict with, violate or breach or constitute a default or require any
consent under, any contractual obligation or court or administrative order by
which such party is bound.
(f) PATENTS. Except as such party has otherwise advised the other
party in writing, such party represents and warrants to the other that, to the
best of its knowledge, it has sufficient legal and/or beneficial title and
ownership under its intellectual property rights necessary for it to fulfill its
obligations under this Agreement and that it is not aware of any communication
alleging that it has violated or by conducting its business as contemplated by
this Agreement would violate any of the intellectual property rights of any
other person. As used herein, "intellectual property rights" means all patent
rights, copyrights, trademarks, trade secret rights, chemical and biological
material rights and know-how rights necessary or useful to make, use, import,
offer for sale or sell Research Compounds and/or Drug Products.
(g) PRIOR DATA. Ligand represents and warrants to Lilly that it
has made (or will make) available to Lilly (to the extent the same exists and is
material to assessing the commercial, medical, clinical or regulatory potential
of Research Compounds) all toxicology studies, clinical data, manufacturing
process data and other information in its possession regarding Research
Compounds that is material and would be reportable to the FDA under 21 C.F.R.
200 et. seq., and that to the best of its knowledge, such data and information
is accurate and complete and is what it purports to be. Lilly represents and
warrants to Ligand that it will make available to Ligand (to the extent the same
exists and is material to assessing the commercial, medical, clinical or
regulatory potential of Discontinued Drug Products) all toxicology studies,
clinical data, manufacturing process data and other information in its
possession regarding Discontinued Drug Products that is material and would be
reportable to the FDA under 21 C.F.R. 200 et. seq., and that to the best of its
knowledge, such data and information will be accurate and complete and what it
purports to be.
(h) NO DEBARMENT. Such party will comply at all times with the
provisions of the Generic Drug Enforcement Act of 1992 and will upon request
certify in writing to the other that none of it, its employees, or any person
providing services to such party in connection with the collaboration
contemplated by this Agreement have been debarred under the provisions of such
Act.
15.2 ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS. Ligand and
ALRT hereby represent, warrant and covenant to Lilly as follows:
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(c) Ligand hereby agrees to use its commercially reasonable
efforts to comply with the terms and conditions of those certain license
agreements set forth in Schedule 15.2. In addition, Ligand hereby agrees to
timely pay all royalty and milestone payments required to be paid under those
certain license agreements set forth in Schedule 15.2 during the Research
Program Term and thereafter only as necessary to grant Lilly the licenses
granted pursuant to Section 8.1(a). Ligand has provided to Lilly complete and
correct copies of such license agreements prior to the Effective Date. Each such
license agreement is in full force and effect and, to Ligand's knowledge, no
event has occurred which with notice or the passage of time would constitute a
breach or event of default under, or permit termination of, such license
agreement. To Ligand's knowledge, there is no material unauthorized use,
infringement or misappropriation of the Ligand Patents Covering Compound 268 or
Compound 324. There are no administrative, judicial or other proceedings
pending, or to the knowledge of Ligand, threatened, in which a person or
government body is or would be contesting directly the ownership of, or any
rights of Ligand or any licensee under, any Ligand Patent or Ligand Technology.
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ARTICLE 16
MISCELLANEOUS PROVISIONS
16.1 GOVERNING LAW. The Agreement shall be governed by the laws of the
State of Indiana, without regard to Indiana choice of law provisions.
16.2 DISPUTE RESOLUTION PROCESS. In the event of any dispute relating to
this Agreement or the collaborative effort contemplated hereby, the parties
shall, prior to instituting any lawsuit, arbitration or other dispute resolution
process on account of such dispute, follow the procedures for dispute resolution
set forth in Section 2.5 of this Agreement if such dispute relates to the
conduct of or decisions made as part of the Research Program or the Development
Program. In the event of any dispute relating to or arising from this Agreement
which a party does not believe is covered by Section 2.5 and prior to
instituting any litigation with respect thereto, the dispute shall be presented
to David Robinson or his successor as Chief Executive Officer of Ligand on
behalf of Ligand, and August M. Watanabe or his successor as chief scientific
officer of Lilly on behalf of Lilly; provided, however, that this provision
shall not prevent either party from seeking a preliminary injunction or other
equitable relief in the event such party believes it will suffer irreparable
harm. These executives shall confer and consider each party's view and shall
attempt in good faith to resolve the dispute between themselves or, if they are
unable to so resolve the dispute, to establish a mechanism to resolve the
dispute promptly and efficiently. In the event said executives are unable to
resolve such dispute or agree upon a mechanism to resolve such dispute within
thirty (30) days, either party shall be entitled to institute litigation and
seek such remedies as may be available.
16.3 NOTICES. All notices required or permitted to be given under this
Agreement shall be in writing and shall be deemed given, upon receipt, if mailed
by registered or certified mail (return receipt requested), postage prepaid, or
sent by overnight delivery (receipt verified) to the address below, or given
personally or transmitted by facsimile to the number indicated below (with
confirmation).
To Lilly:
Eli Lilly and Company
Lilly Corporate Center
Indianapolis, IN 46285
Attention: General Counsel
Fax: (317) 276-9152
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To Ligand:
Ligand Pharmaceuticals Incorporated
9393 Towne Centre Drive
San Diego, CA 92121
Attention: General Counsel
Fax: (619) 625-4521
Any party may, by written notice to the others, designate a new address or fax
number to which notices to the party giving the notice shall thereafter be
mailed or faxed.
16.4 FORCE MAJEURE. If either party's performance hereunder is affected
by any extraordinary, unexpected and unavoidable event such as acts of God,
floods, fires, riots, war, accidents, labor disturbances, breakdown of plant or
equipment, lack or failure of transportation facilities, unavailability of
equipment, sources of supply or labor, raw materials, power or supplies,
infectious diseases of animals, or by the reason of any law, order,
proclamation, regulation, ordinance, demand or requirement of the relevant
government or any sub-division, authority or representative thereof, or by
reason of any other cause whatsoever (provided that in all such cases the party
claiming relief on account of such event can demonstrate that such event was
extraordinary, unexpected and unavoidable by the exercise of reasonable care)
("Force Majeure") it shall as soon as reasonably practicable notify the other
party of the nature and extent thereof and take all reasonable steps to overcome
the Force Majeure and to minimize the loss occasioned to that other party.
Neither party shall be deemed to lose any rights under, be in breach of this
Agreement or otherwise be liable to the other party by reason of any delay in
performance or nonperformance of any of its obligations hereunder, except with
respect to payment obligations, to the extent that such delay and nonperformance
is due to any Force Majeure of which it has notified the other party and the
time for performance of that obligation shall be extended accordingly.
16.5 WITHHOLDING TAXES. If either party is required by the United States
government or other authorities to withhold any tax on the amounts payable by
that party to the other party under this Agreement, that party shall be allowed
to do so, and shall in such case remit payments to the other party net of such
withheld amount, provided that the withholding party furnishes the other party
with reasonable evidence of such withholding payment in electronic or written
form as soon as practicable after such withholding in order that the other party
may use the withholding tax paid as a tax credit.
16.6 ENTIRE AGREEMENT. This Agreement, its exhibits and schedules, the
Confidentiality Agreements between Ligand and Lilly dated September 30, 1996,
January 23, 1997 and May 8, 1997, the Targretin Agreement, the Option Agreement
and the Stock Purchase Agreement between Ligand and Lilly of even date herewith
set forth the entire agreement and understanding of the parties relating to the
subject matter contained herein and merges all prior discussions and agreements
between them. No party shall be bound by any representation other than as
expressly
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stated in this Agreement, or by a written amendment to this Agreement signed by
authorized representatives of both parties.
16.7 NON-WAIVER. The failure of a party in any one or more instances to
insist upon strict performance of any of the terms and conditions of this
Agreement shall not be construed as a waiver or relinquishment, to any extent,
of the right to assert or rely upon any such terms or conditions on any future
occasion.
16.8 DISCLAIMER OF AGENCY. This Agreement shall not constitute any party
the legal representative or agent of another, nor shall any party have the right
or authority to assume, create, or incur any Third Party liability or obligation
of any kind, express or implied, against or in the name of or on behalf of
another except as expressly set forth in this Agreement.
16.9 SEVERABILITY. If any term, covenant or condition of this Agreement
or the application thereof to any party or circumstance shall, to any extent, be
held to be invalid or unenforceable, then (i) the remainder of this Agreement,
or the application of such term, covenant or condition to parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent permitted by law;
and (ii) the parties hereto covenant and agree to renegotiate any such term,
covenant or application thereof in good faith in order to provide a reasonably
acceptable alternative to the term, covenant or condition of this Agreement or
the application thereof that is invalid or unenforceable, it being the intent of
the parties that the basic purposes of this Agreement are to be effectuated.
16.10 ASSIGNMENT. Lilly may discharge any obligations and exercise any
right hereunder through an Affiliate although Lilly shall remain ultimately
responsible for the proper discharge of all obligations hereunder
notwithstanding any assignment or delegation to any such Affiliate. References
to Lilly shall include any Affiliate of Lilly to whom such an assignment or
delegation has been made in accordance with this Agreement. Except as provided
in this Section 16.10 or otherwise expressly provided in this Agreement, neither
Lilly nor Ligand shall delegate duties of performance or assign, in whole or in
part, rights or obligations under this Agreement without the prior written
consent of the other party, not to be unreasonably withheld, and any attempted
delegation or assignment without such written consent shall be of no force or
effect. Notwithstanding the foregoing, Ligand or Lilly may assign the Agreement
and its rights and obligations hereunder in connection with the transfer or sale
of all or substantially all of its business, or in the event of its merger or
consolidation or change in control or similar transaction. This Agreement shall
be binding upon the permitted successors and assigns of the parties.
16.11 HEADINGS. The headings contained in this Agreement have been added
for convenience only and shall not be construed as limiting or defining the
content of said sections or paragraphs.
16.12 LIMITATION OF LIABILITY. No party shall be liable to another for
indirect, incidental, consequential or special damages, including but not
limited to lost profits, arising from or relating to any breach of this
Agreement, regardless of any notice of the possibility of such damages. Nothing
in this Section is intended to limit or restrict the indemnification rights or
obligations of any party.
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16.13 INTERPRETATION. This Agreement has been jointly prepared by the
parties and their respective legal counsel and ambiguities shall not be strictly
construed against either party.
16.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
16.15 COMPLIANCE WITH LAWS. Each party shall, and shall cause its
respective Affiliates to, comply in all material respects with all federal,
state, local and foreign laws, statutes, rules and regulations applicable to the
parties and their respective activities under this Agreement.
16.16 FURTHER ACTIONS. Each party agrees to execute, acknowledge, and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first written above.
ELI LILLY AND COMPANY
By: /s/ August M. Watanabe
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August M. Watanabe
Executive Vice President
LIGAND PHARMACEUTICALS INCORPORATED
By: /s/ David E. Robinson
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David E. Robinson
President and Chief Executive Officer
ALLERGAN LIGAND RETINOID THERAPEUTICS, INC.
By: /s/ David E. Robinson
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David E. Robinson
President
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SCHEDULE 1.12
COMPOUND 268
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SCHEDULE 1.13
COMPOUND 324
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Schedule 1.47
Intracellular Receptors
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SCHEDULE 2.1
TECHNICAL OPERATING PLAN
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SCHEDULE 10.8
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Schedule 15.2
5. The Settlement Agreement, License and Mutual General Release between
La Jolla Cancer Research Foundation, SelectRA Pharmaceutical Inc., Allergan
Ligand, and Allergan Ligand Retinoid Therapeutics, Inc., effective August 23,
1995.
6. The Amended and Restated Technology Cross License Agreement among
Allergan, Inc., Ligand Pharmaceuticals Inc. and Allergan Ligand Retinoid
Therapeutics, Inc., effective September 24, 1997.
7. The license agreement between Salk Institute for Biological Studies
and Ligand Pharmaceuticals Inc., effective October 20, 1988, and as amended on
September 15, 1989, December 1, 1989 and October 20, 1990.
8. The agreements between Insitut Pasteur de Lille and Ligand
Pharmaceuticals Inc., effective March 1, 1995 and December 1, 1995.
9. The agreement between Rockefeller and Ligand Pharmaceuticals Inc.,
effective November 14, 1991.
10. The agreement between Baylor College of Medicine and Ligand
Pharmaceuticals Inc., effective March 9, 1992 and September 1, 1992.
<PAGE> 1
EXHIBIT 10.169
OPTION AND
WHOLESALE
PURCHASE AGREEMENT
THIS OPTION AND WHOLESALE PURCHASE AGREEMENT (the "Agreement") is
entered into as of November 25, 1997 (the "Effective Date") at Indianapolis,
Indiana, between ELI LILLY AND COMPANY ("Lilly") and LIGAND PHARMACEUTICALS
INCORPORATED ("Ligand").
Whereas, ***
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Whereas, Lilly desires to grant to Ligand an option pursuant to which,
if and when *** receives appropriate governmental approvals for marketing for
the treatment *** in humans, Lilly will, subject to the terms and conditions of
this Agreement ***
*** , utilize Ligand as Lilly's exclusive (even as to Lilly) wholesaler of
Lilly products consisting of, or containing as the active ingredient, *** (the
"Products"), to be sold under the *** name for the treatment of *** in the
territory defined below; and
Whereas, ***
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Now, therefore, in consideration of the foregoing, the mutual covenants
set forth below and other consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. LIGAND OPTION TO BECOME EXCLUSIVE WHOLESALER.
1.1 LIGAND OPTION. For a period equal to the earlier of (a) ninety (90)
days after the Effective Date of this Agreement, (b) until February 27, 1998, or
(c) until the date which is three (3) business days after the date on which
Ligand delivers to Lilly the notice referred to in Section 1.4, (the "Ligand
Option Period"), Ligand shall have the option (the "Ligand Option") to become
Lilly's exclusive wholesaler of the Products subject to the terms and conditions
contained in this Agreement.
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1.2 MANNER OF EXERCISE. To exercise the Ligand Option, Ligand shall
deliver written notice of exercise to Lilly prior to the end of the Ligand
Option Period in the manner set forth in Section 5.9 of this Agreement.
1.3 EFFECT OF LAPSE OF LIGAND OPTION. In the event Ligand does not
exercise the Ligand Option prior to the end of the Ligand Option Period, or, in
the event Ligand delivers written notice to Lilly prior to the end of the Ligand
Option Period informing Lilly of its decision not to exercise the Ligand Option
(the "Rejection Notice"), this Agreement shall automatically terminate and the
parties only surviving rights and obligations under this Agreement shall be as
follows:
(a) Subject to the terms and conditions set forth in the stock
purchase agreement described in Section 4.6, Lilly shall purchase from Ligand,
and Ligand shall sell and issue to Lilly, for Twenty Million Dollars
($20,000,000), the number of shares of Ligand's voting common stock (the
"Shares") equal to Twenty Million Dollars ($20,000,000) divided by one hundred
twenty percent (120%) of the average daily closing price for the Shares as
reported by the National Association of Securities Dealers, Inc. on the twenty
(20) consecutive trading days immediately preceding the date which is five (5)
days prior to the earlier of (A) the date of the Rejection Notice or (B) the
last day of the Ligand Option Period; and
(b) Ligand shall have the right to designate either Targretin (as
defined in that certain Development and License Agreement (Targretin) dated the
date of this Agreement), Compound 268 or Compound 324 (each as defined in that
certain Collaboration Agreement dated the date of this Agreement) for increased
royalties, which right shall be exercised in the manner set forth and on the
terms and conditions provided in Section 5.1(b) of the Targretin Agreement with
respect to Targretin, or Section 6.1(b) of the Collaboration Agreement with
respect to Compound 268 or Compound 324.
1.4 ***
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2. CERTAIN COVENANTS OF LIGAND.
2.1 PROMOTION AND INVENTORIES.
(a) Ligand agrees to promote, sell and book sales of, the
Products in the Territory (as defined below) as the exclusive (even as to Lilly)
wholesaler of the Products
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*** *** in the Territory; and to purchase from Lilly
Ligand's entire requirements for the Products. ***
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The United States, Canada, and, upon Ligand's appointment as exclusive
wholesaler of the Products in the European Union, as provided for in Section 3,
the European Union and the European Union Countries *** are referred to
collectively in this Agreement as the "Territory."
(b) To the extent that Ligand shall, with the prior approval of
both Ligand and Lilly given or withheld in their respective sole discretion,
undertake the physical distribution of the Products, Ligand agrees to provide
full distribution efforts for the Products; to maintain the Products under
proper conditions, both in storage and in transit to its customers, ***
*** ; and to supply only Products that are not out-of-date,
damaged, or shopworn; provided, however, unless and until the parties agree
otherwise, Lilly shall provide the distribution services specified in Section
3.1(c). If Ligand does undertake physical distribution, Ligand shall provide to
Lilly quarterly upon Lilly's request a listing of Ligand's complete and current
inventory of Products by item and package size certified to be accurate by
Ligand.
2.2 SALES EFFORT. Ligand agrees to use commercially reasonable selling
efforts to, and otherwise promote, the Products, and not to:
(a) Refuse or fail to supply promptly the Products when
specified;
(b) Fail to include in its system for determining its prices to
its customers any provisions necessary to comply with the other provisions of
this Agreement or enter into any agreement which would preclude Ligand from
offering for sale a Product at any price acceptable to Ligand; or
(c) Sell any Products to any party Ligand has reason to believe
plans to use the Products or sell the Products for use outside the Territory.
Ligand agrees that it shall hire and maintain a sales force appropriate for
marketing of the Products in the Territory, develop and implement appropriate
marketing plans, develop and utilize sales literature and other promotional
aids, hold symposia for key physicians, and otherwise perform the duties
associated with a promoter of the Products in the Territory.
2.3 SALES REPORTS.
(a) Ligand shall have the right, but not the obligation, to
report information regarding its sales of Products to one or more third parties
organized to collect and report sales data to its subscribers.
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(b) During the term of this Agreement and after first commercial
sale of a Product, in the Territory, Ligand shall furnish or cause to be
furnished to Lilly on a quarterly basis a written report or reports covering
each calendar quarter (each such calendar quarter being sometimes referred to
herein as a "reporting period") showing
(i) the Net Sales (as defined in Schedule 3.1(a) to this
Agreement) of the Product in each country during the reporting period by Ligand,
its affiliates, sublicensees and assigns, and
(ii) the royalties which shall have accrued under this
Agreement in respect of such sales and the basis for calculating those
royalties. With respect to sales of the Products invoiced in United States
Dollars ("Dollars"), the Net Sales amounts and the amounts due to Lilly
hereunder shall be expressed in Dollars calculated by using Ligand's
then-current standard procedures and methodology.
With respect to sales of the Products invoiced in a currency
other than Dollars, the Net Sales shall be calculated using Ligand's then
current standard exchange rate methodology for the translation of foreign
currency sales into Dollars. Each quarterly report shall be accompanied by a
listing of the exchange rates used in calculating Net Sales for such quarterly
report. Ligand will at Lilly's reasonable request but not more frequently than
once a calendar quarter inform Lilly as to the specific exchange rate
translation methodology, if any, used for a particular country or countries. In
the event that any exchange rate translation methodology changes, Ligand will
inform Lilly of the change in the quarterly report next due.
Each quarterly report shall be due on the seventy-fifth (75th)
day following the close of each reporting period. Ligand shall keep accurate
records in sufficient detail to enable the amounts due hereunder to be
determined and to be verified by the independent public accountants described
hereunder. Ligand shall furnish annually to Lilly appropriate evidence of
payment of any tax or other amount required by applicable laws or regulations to
be deducted from any royalty payment, including any tax or withholding levied by
a foreign taxing authority in respect of the payment or accrual of any royalty.
(c) All payments shall be made in Dollars at the time of
quarterly reporting. If at any time legal restrictions prevent the prompt
remittance of any payments with respect to any country where the Products are
sold, Ligand, its affiliates, assigns and sublicensees or marketing partners
shall have the right and option to make such payments by depositing the amount
thereof in local currency to Lilly's account in a bank or depository in such
country.
(d) Upon the written request of Lilly, at Lilly's expense and not
more than once in or in respect of any calendar year, independent public
accountants designated by Lilly and reasonably acceptable to Ligand shall verify
the accuracy of the sales reports furnished by Ligand in respect of any calendar
year ending not more than thirty-six (36) months prior to the date of such
notice. Upon the expiration of thirty-six (36) months following the end of any
calendar year, the calculation of amounts payable with respect to such fiscal
year shall be binding and conclusive upon Lilly, and Ligand, its Affiliates, and
its sublicensees and
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marketing partners shall be released from any liability or accountability with
respect to payments for such year. The report prepared by the independent public
accountant, a copy of which shall be sent or otherwise provided to Ligand by
such independent public accountant at the same time it is sent or otherwise
provided to Lilly, shall contain the conclusions of such independent public
accountant regarding the audit and will specify that the amounts paid to Lilly
pursuant thereto were correct or, if incorrect, the amount of any underpayment
or overpayment. If such independent public accountant's report shows any
underpayment, Ligand shall remit or shall cause its sublicensees or marketing
partners to remit to Ligand within thirty (30) days after Ligand's receipt of
such report,
(i) the amount of such underpayment and
(ii) if such underpayment exceeds *** of the total amount
owed for the calendar year then being audited, the reasonable and necessary fees
and expenses of such independent public accountant performing the audit, subject
to reasonable substantiation thereof. Any overpayments shall be fully creditable
against amounts payable in subsequent payment periods. Lilly agrees that all
information delivered or subject to review under this Section 2.3 or under any
sublicensee or marketing agreement is Confidential Information (as defined in
Section 5.14) and that Lilly shall retain all such information in confidence.
2.4 PAYMENT FOR PRODUCTS. Ligand agrees to pay in full within thirty
(30) days *** *** each invoice delivered by Lilly to Ligand for the Products
sold under this Agreement in accordance with the applicable provisions of this
Agreement; and to pay interest on all overdue amounts owing from Ligand to Lilly
hereunder outstanding for more than 30 days ("overdue") at the Prime Rate as
published in The Wall Street Journal in effect from time to time plus *** per
annum (or the highest amount allowed by law, if such lawful amount is lower than
the foregoing) from the date the amounts become overdue. Ligand shall bear all
credit risk in the Territory relating to collections from customers and third
parties.
2.5 CONTROLLED SUBSTANCE DETERMINATION. In the event that any of the
Products are determined to be controlled substances or subject to any regulatory
requirements not provided for in this Agreement, the parties will agree on
reporting and other responsibilities sufficient to allow each of them to fulfill
their respective regulatory and other obligations relating thereto.
2.6 COMPLIANCE WITH APPLICABLE LAWS. Ligand agrees:
(a) To comply fully with all foreign, federal, state, and local
laws, regulations and rules applicable to its activities hereunder.
(b) To provide prompt notice to Lilly of any civil, criminal, or
administrative inquiry, inspection, investigation, or other action by any
foreign, federal, state, or local authority arising under or concerning any
laws, regulations or rules referred to in
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Section 2.6(a) or any other governmental inquiry, inspection, investigation or
action known to Ligand and arising under or concerning any other laws,
regulations or rules otherwise applicable in any way to the Products or any acts
or omissions of Ligand or Ligand's employees or other agents or affiliates
relating to the Products; to provide Lilly with full and complete information
regarding the status, prosecution, proceeding and disposition of any such
action; and, to the extent Lilly may become a party to or otherwise involved in
any such matter, to fully cooperate with and assist Lilly in the prompt and
lawful resolution of any such matter.
(c) To furnish promptly to Lilly such information as Lilly may
reasonably request from time to time to evidence that Ligand is in compliance
with the applicable requirements of the laws, regulations and rules referred to
in Section 2.6(a) and (subject to other applicable provisions of this Agreement
concerning the funding of costs of regulatory compliance) to cooperate with
Lilly in meeting any obligations of Ligand and/or Lilly with respect to prior
approval, filing requirements or other compliance under any foreign, federal,
state or local laws, regulations or rules applicable within the Territory to the
Products or any labeling, materials or activities incidental to the marketing of
the Products.
(d) Not to market, sell or otherwise promote the Products in
violation of any of the requirements of the appropriate governmental or
regulatory authorities of the applicable jurisdiction(s) in the Territory; not
to make any false or misleading representations to customers or others regarding
Ligand, Lilly or the Products or any representations, warranties or guarantees
with respect to specifications, features or capabilities of the Products except
as contained in package labeling, package inserts, promotional material or other
communication media approved by Lilly; and not to promote or advertise the
Products in any manner or with any labeling, inserts, packaging or ingredients
not approved in advance by Lilly.
(e) Not to engage directly or indirectly in any transaction,
activity, or other act or omission that would violate the Foreign Corrupt
Practices Act, Anti-Referral Payments Law, any laws administered by the FDA, or
other similar laws of any other jurisdiction in the Territory.
2.7 TAX EXEMPTION CERTIFICATES. Ligand agrees to provide to Lilly a copy
of Ligand's sales tax exemption certificate, whether it be a resale certificate,
blanket exemption, or direct payment exemption under applicable laws, and to
notify Lilly promptly of any change which affects Ligand's exemption status and
to provide such other information or certifications as Lilly may reasonably
request in order to minimize tax liability and to comply with applicable tax or
other regulations of each of the jurisdictions included in the Territory in
which Ligand sells Products.
2.8 CONTROLS. Ligand agrees to establish such internal controls and
maintain such records as will assure compliance with its obligations under this
Agreement and the ability of Lilly to conduct a meaningful review of such
records.
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2.9 EVIDENCE OF FINANCIAL CONDITION. Ligand agrees to furnish Lilly upon
request a copy of its complete annual financial statement and other such
evidence of its financial condition necessary to establish, in the opinion of
Lilly, Ligand's ability to perform its obligations under this Agreement,
provided that this Section 2.9 shall not apply to any financial reporting period
as to which Ligand remains subject to and in compliance with the reporting
requirements of the Securities Exchange Act of 1934, as amended from time to
time.
2.10 OFFSET RIGHTS. Upon failure to pay any amount when due,
cancellation or termination of this Agreement, or with evidence of a condition
of insolvency of Ligand or a Ligand subsidiary, affiliate or location materially
affecting Ligand's obligations under this Agreement, Lilly reserves the right to
offset any amount due and owing Lilly against amounts otherwise owing under this
Agreement to Ligand or Ligand's subsidiaries, affiliates or locations.
2.11 FORECASTS. Ligand agrees to provide sales forecasts at such times
and in such detail as Lilly may reasonably request in order to determine
manufacturing requirements, ***
***
***
***
3. CERTAIN COVENANTS OF LILLY.
3.1 WHOLESALE, SHIPMENT AND DISTRIBUTION TERMS. Lilly agrees:
(a) To sell the Products exclusively to Ligand *** ***
within the Territory to the extent that
(i) applicable regulatory approvals for sale of the
Products in the relevant jurisdiction have been obtained,
(ii) the Products are ordered by Ligand during the Term
(defined in Section 5.12 below) in compliance with other applicable provisions
of this Agreement, and
(iii) ***
***
***
***
***
***
***
***
***
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***
***
***
***
***
***
***
***
***
(b) To carry inventory of the Products, dropship the Products to
the location specified by Ligand in its orders and send a Ligand invoice to the
third party identified by Ligand.
(c) To use commercially reasonable efforts to maintain the
Products sold to Ligand under proper conditions, both in storage and in transit
to customers, ***
***
*** and are not damaged,
or shopworn; and to provide to Ligand quarterly upon Ligand's request a listing
of Lilly's complete and current inventory of Products by item and package size
certified to be accurate by Lilly.
(d) Not to sell or market the Products directly or indirectly
within the Territory to any party other than Ligand, ***
***
***
***
***
***
***
(e) Prior to the first commercial sale of the Products in the
Territory, the parties shall agree upon the terms of a manufacturing
requirements document which shall set forth procedures for ordering and
maintaining inventory, and the coordination and timing of manufacture and
delivery to meet customer orders, compliance with adverse event reporting and
other regulatory requirements and such other matters as are incidental to this
Agreement.
(f) ***
***
***
***
(g) To exercise its option under the Seragen Agreements to
promote and distribute the Products in the European Union, if (i) Ligand
requests Lilly to do so in writing and (ii) Ligand is, in Lilly's reasonable
judgment, capable of supporting sales and promotion and to the extent necessary
regulatory operations in the European Union sufficient to perform
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the duties assigned to it under this Agreement. Upon the exercise of Lilly's
option under this Section 3.1(g), Ligand shall become Lilly's sole wholesaler in
the European Union Countries and the provisions of this Agreement shall be
amended with respect to Ligand's obligations in the European Union countries to
reflect such changes as are necessary to reflect customary business and
distribution practices in such countries.
3.2 TRANSPORTATION COSTS. Lilly shall ship the Products F.O.B. shipping
point, transportation prepaid, subject to the following. Lilly will prepay
transportation charges in a manner consistent with the method of packaging and
shipment and good industry practice when routing is selected by Lilly. If Ligand
or customer requests special routing of a shipment which results in a higher
transportation cost than would be incurred as a result of the routing of Lilly's
selection, then the extra cost shall be added to the invoice.
3.3 TITLE, RISK OF LOSS AND DAMAGE. Title and risk of loss shall pass to
Ligand when the Products are duly delivered to the carrier. Ligand shall give
Lilly written notice of any claimed shipping error within thirty (30) days after
the date of shipment from Lilly. Failure of Ligand to give such notice within
such 30-day period shall be deemed a waiver of Ligand's claim for shortages or
incorrect shipments. Lilly will not be liable for and will not grant a credit
with respect to damage to Products in the course of shipment from Lilly.
3.4 RETURN FOR CREDIT. Ligand shall have no right to return the Products
for any reason, except that Ligand may return for credit any Product that (i) is
unusable because of Lilly's delay or negligence in shipment, (ii) is not in
conformance with product specifications
***
***
***
*** Upon request by Ligand, Lilly will ship replacement Products to
customers with an invoice to the customer stating that there is no additional
charge to the customer for such replacement. Ligand shall pay the cost of such
replacement product unless the return is for credit as provided above, and shall
in any event pay applicable shipping costs.
3.5 WARRANTY. Lilly warrants that the Products delivered to Ligand
pursuant to this Agreement shall (i) at the time of shipment not be adulterated
or misbranded within the meaning of applicable federal, state or foreign laws as
in effect at the time of delivery ***
***
***
***
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, LILLY MAKES NO
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE PRODUCTS. ALL
OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE, ARE HEREBY DISCLAIMED BY LILLY. IN NO
EVENT SHALL LILLY BE LIABLE FOR INDIRECT, INCIDENTAL
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OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION, LOST REVENUES OR
PROFITS OF LIGAND.
3.6 BILLING, REBATES, ETC. Ligand shall be solely responsible for
billing and collection activities, rebate programs, return credit procedures and
similar activities related to its sales of Products, it being understood that
Lilly's responsibilities hereunder relate solely to physical distribution of the
Products.
4. APPROVAL AND PRICING MILESTONES TO LILLY.
4.1 APPROVAL MILESTONE. Within thirty (30) days after the date on which
Ligand receives notice that the United States Food and Drug Administration
("FDA") has given final approval of the labeling for the *** Ligand shall issue
that number of shares (the "Approval Shares") of its voting common stock to
Lilly as shall equal the sum of $10 million divided by the average trading price
of Ligand's voting common stock over the twenty (20) consecutive trading days
immediately preceding the date which is five (5) consecutive days prior to the
date the notice referred to above is received.
4.2 PRICING MILESTONE. Within thirty (30) days after the date that the
Products are first sold at any time during the Term in the United States ***
(the "Product Pricing Date") at an average net selling price or equivalent over
a three-month period (the "Cycle Price") *** as reported to Lilly
in a manner consistent with the reporting of Net Sales information pursuant to
Section 2.3 (but excluding any prices which are clinical study, introductory, or
special discount prices), Ligand shall issue shares (the "Pricing Shares") of
its voting common stock to Lilly on the following terms and conditions
determined with reference to the Cycle Price and the average trading price of
Ligand's voting common stock over the twenty (20) consecutive trading days
immediately preceding the date which is five (5) consecutive days prior to the
Product Pricing Date (the "Average Stock Price"). If the Cycle Price never ***
or more during the Term, Lilly shall not be entitled to any Pricing Shares.
Otherwise, the number of Pricing Shares to be issued to Lilly shall equal the
number obtained by dividing the Target Value by the Average Stock Price, whereby
the Target Value is $10 million for a Cycle Price *** and the Target Value
declines, but not below $5 million, in inverse proportion to any increase in the
Cycle Price *** . Examples of such calculation for certain Cycle Prices are set
forth below:
<TABLE>
<CAPTION>
Target Value (in millions) (No. of Pricing Shares=
--------------------------------------------------
Cycle Price Relevant Target Value divided by Average Stock Price
----------- ----------------------------------------------------
<S> <C>
*** $10.00
*** 8.75
*** 7.50
*** 6.25
*** 5.00
</TABLE>
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4.3 PRODUCT DISAPPROVAL/TARGRETIN DISCONTINUANCE. If the *** is deemed
by the FDA to be not approved following review by the FDA, and if Lilly has
elected to terminate that certain Development and License Agreement (Targretin)
of even date herewith between the parties hereto relating to Targretin pursuant
to the provisions thereof granting certain rights of termination to Lilly
exercisable on or before December 15, 1998, Lilly, at Ligand's option
exercisable by giving written notice of exercise to Lilly referring to this
section, within thirty (30) days (subject to extensions by Ligand to not later
than one (1) year if Ligand is actively pursuing reversal of the FDA's
determination) after the later of the date of the notice that the FDA deems ***
unapprovable or termination by Lilly, shall within thirty (30) days after
receipt of such notice purchase $5 million of the voting common stock of Ligand
at the average trading price for the 20 consecutive trading days immediately
preceding the date which is five (5) days prior to the date of delivery of such
notice. Thereupon, all rights to the Products, including without limitation ***
shall revert to Lilly; the parties shall have no further rights hereunder; and
Ligand shall have no further obligation to issue additional shares under
Sections 3.1 and 3.2.
4.4 LOW CYCLE PRICE TERMINATION RIGHT. If the average price of the
Product sold in the United States *** over the first six months following the
Product Pricing Date (the "Low Price Termination Period") (excluding in
calculating such average price special introduction, or other promotional
pricing not indicative of normal pricing practices) *** Ligand may elect within
thirty (30) days after the last day of the Low Price Termination Period to
relinquish all of its rights under this Agreement by delivering notice of
termination of this Agreement to Lilly, and Lilly shall within thirty (30) days
after receipt of such notice purchase $5 million of the voting common stock of
Ligand at the average trading price for the twenty (20) consecutive trading days
immediately preceding the date which is five (5) consecutive days prior to the
date of delivery of such notice.
4.5 CERTAIN ADDITIONAL TERMINATION RIGHTS. ***
***
***
***
***
***
***
***
***
Upon termination of this Agreement under this Section 4.5:
(a) All rights to Products shall revert to Lilly, and neither
party shall have any rights or obligations under this Agreement other than those
which may have accrued prior to termination; and
(b) If Lilly is the party exercising the right to terminate, ***
*** then Lilly shall,
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(i) subject to the terms and conditions set forth in the
stock purchase agreement described in Section 4.6, purchase from Ligand, and
Ligand shall sell and issue to Lilly, within thirty (30) days of the date of the
Termination Notice, for Twenty Million Dollars ($20,000,000), the number of the
common voting shares of Ligand ("Shares") equal to Twenty Million Dollars
divided by one hundred twenty percent (120%) of the average daily closing price
for Shares reported by the National Association of Securities Dealers, Inc. on
the twenty (20) consecutive trading days immediately preceding the date which is
five (5) days prior to the date of delivery of the Termination Notice; and
(ii) Ligand shall have the right to designate either
Targretin (as defined in that certain Development and License Agreement
(Targretin) dated the date of this Agreement), Compound 268 or Compound 324
(each as defined in that certain Collaboration Agreement dated the date of this
Agreement) for increased royalties, which right shall be exercised in the manner
set forth and on the terms and conditions provided in Section 5.1(b) of the
Targretin Agreement with respect to Targretin, or Section 6.1(b) of the
Collaboration Agreement with respect to Compound 268 or Compound 324.
(c) If Ligand is the party exercising the right to terminate and
(i) ***
(ii) the Product receives final approval from the FDA of
the *** *** then Lilly shall, within thirty (30) days of receipt of notice of
the *** purchase the Ligand stock referred to in subparagraph (b)(i) above and
permit Ligand to designate a compound for increased royalties as provided in
subparagraph (b)(ii) above. ***
***
***
***
***
***
***
***
***
***
***
***
***
***
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***
***
***
***
***
***
***
***
***
***
***
***
***
***
***
4.6 SHARE ISSUANCE PROCEDURE. Ligand shall issue and deliver to Lilly
duly prepared and endorsed stock certificates representing the shares, if any,
to be issued under this Section 4 no later than the dates respectively specified
in those sections, and in connection therewith Ligand and Lilly shall each
execute, deliver to each other and perform a Stock Purchase Agreement
containing, in the case of shares issued under Sections 4.1 or 4.2, terms
substantially similar to those set forth in Sections 3, 6, 7 and 9.11 of the
Stock Purchase Agreement between the parties of even date herewith (the "Stock
Purchase Agreement") and, in the case of shares issued pursuant to Sections 4.3,
4.4 or 4.5 as set forth in the form of Stock Purchase Agreement attached as
Schedule 4.6.
5. GENERAL PROVISIONS.
5.1 ORDERS FOR PRODUCTS.
(a) All orders for Products not inconsistent with the terms of
this Agreement shall be promptly accepted and executed by Lilly.
(b) In the event of a shortage of any of the Products, Lilly
shall have the right to delay or suspend deliveries of the Products to Ligand as
reasonably necessary. ***
***
***
***
(c) Lilly and Ligand will designate, by mutual agreement, the
manner of packaging the Products.
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5.2 BILLING, CREDIT, AND PAYMENT.
(a) All orders for Products shall be invoiced as of the date
shipped.
(b) Subject to the other applicable provisions of this Agreement,
each invoice will be payable, without the application of Credit Memorandum, by
means of an electronic funds transfer ("EFT") system designated or approved by
the mutual agreement of Lilly and Ligand, subject to the following:
(i) Ligand warrants to Lilly that each entry transmitted
by it or its agents or employees on its behalf to a depository financial
institution for the purpose of initiating an EFT transaction is duly authorized
by Ligand. Without Ligand's prior written consent, Lilly shall not have the
right to debit electronically any account of Ligand.
(ii) Ligand shall not be deemed in default or lose any
cash discount by reason of any delay in receipt or non-receipt by Lilly of funds
transferred by EFT unless the delay or nonreceipt is the result of the negligent
or willful act or omission of Ligand.
(iii) With respect to any EFT entry originated by Lilly's
bank, or any delay in receipt by Ligand of approved credit funds transmitted by
Lilly by means of EFT, Lilly shall be liable to Ligand only for Lilly's or
Lilly's bank's negligent acts or omissions or failure to act in good faith and
Lilly's liability to Ligand shall be limited to reasonably foreseeable actual
damages proximately caused thereby.
(iv) With respect to the use of EFT by Ligand for the
payment of funds, Ligand shall be liable to Lilly only for Ligand's negligent
acts or omissions or failure to act in good faith and Ligand's liability to
Lilly shall be limited to reasonably foreseeable actual damages proximately
caused thereby.
(v) Except as provided in (iii) and (iv) immediately
above, neither party shall be liable to the other for the act or omission of any
financial institution or any automated clearing house in connection with the use
of EFT for payment of funds and neither party shall be liable for consequential
damages to the other arising out of the use of EFT for payment of funds.
(vi) Each party agrees promptly to return by EFT any
overpayment received by it.
(vii) Ligand agrees to execute all authorizations required
by Lilly or Lilly's or Ligand's depository financial institution(s) for payment
and receipt of funds by EFT and to notify Lilly promptly of any changes in those
authorizations.
(viii) To the extent applicable to the transfer of funds
by EFT under this Agreement, each party agrees to be bound by the Operating
Rules and Guidelines of the
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National Automated Clearing House Association as those Operating Rules and
Guidelines may be in effect from time to time.
(c) Lilly may require that each order from Ligand be accompanied
by a certified check or other form of payment satisfactory to Lilly in an amount
sufficient to cover the order less a cash discount of two percent (2%), or
require that Ligand provide security in an amount and form satisfactory to
Lilly, and may declare due and owing all outstanding indebtedness from Ligand,
including invoices on which extended dating has been granted, in the event (a)
reasonable grounds for insecurity arise with respect to the performance by
Ligand under this Agreement or (b) Ligand initiates or gives notice of its
intention to initiate, a filing under bankruptcy and insolvency or (c) Lilly has
given notice of termination of this Agreement or (d) Ligand becomes insolvent.
(d) Products shipped but not paid for at the time of the
cancellation or termination of this Agreement shall be paid for in accordance
with the terms of this Agreement.
5.3 INSPECTION OF INVENTORY AND RECORDS. *** Lilly representative(s)
will consult with and advise Ligand concerning Ligand's inventory of Products
and may inspect the same at a mutually agreed upon time. A Lilly representative
may also inspect records of Ligand to determine compliance with Ligand's
obligations under this Agreement provided that no such inspection shall relate
to transactions occurring more than eighteen (18) months prior to the date of
such inspection, and provided further that the inspection shall be performed by
Lilly's regularly retained independent auditors or employee. Any Confidential
Information disclosed by Ligand under this Section 5.3 shall be maintained in
confidence.
5.4 SALES OUTSIDE TERRITORY. This Agreement does not grant or imply to
Ligand any rights in any country outside the Territory.
5.5 BUYER-SELLER RELATIONSHIP. The relationship created by this
Agreement is solely a buyer-seller relationship and is not any form of joint
venture, partnership, franchise, or other agency relationship. Ligand shall not
under any circumstance have any authority or otherwise purport to bind Lilly to
any express or implied contract or to represent or otherwise bind Lilly before
or in connection with any proceeding by any governmental agency. Nothing herein
is intended to grant or imply any license or other rights in favor of Ligand to
any patent, trademark, copyright, trade secret, technology, know-how or other
rights of Lilly *** relating to the Products or the ingredients thereof.
5.6 REPURCHASE OF INVENTORY STOCK. Upon cancellation or termination of
this Agreement, by expiration or otherwise, Lilly shall have the option to
repurchase Ligand's salable stock of Products, if any, at the net wholesale
prices then in effect as between Lilly and Ligand.
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5.7 ASSIGNMENT. Neither party shall assign its rights or obligations
under this Agreement without first obtaining the written consent of the other
party, and any attempted assignment without such written consent shall be void
and of no effect, except that a merger, sale of all or substantially all of a
party's assets, tender or exchange offer, or other corporate reorganization in
which there is a change in control of a party, or a reorganization solely for
the purposes of changing a party's corporate domicile, shall not be considered
an assignment in violation of this Section 5.7.
5.8 CONTINGENCIES AFFECTING PERFORMANCE. Except as set forth in this
Agreement, neither party shall be liable for delay in performance or
nonperformance caused by fire, flood, storm, earthquake, or other act of God,
war, rebellion, riot, failure of carriers to furnish transportation, strikes,
lockouts or other labor disturbances, act of governmental authority, inability
to obtain material or equipment, or any other cause of like or different nature
beyond the control of such party.
5.9 NOTICES. All notices required or permitted to be given under this
Agreement shall be in writing and shall be deemed given, upon receipt, if mailed
by registered or certified mail (return receipt requested), postage prepaid, or
sent by overnight delivery (receipt verified) to the address below, or given
personally or transmitted by facsimile to the number indicated below (with
confirmation).
To Lilly:
Eli Lilly and Company
Lilly Corporate Center
Indianapolis, IN 46285
Attention: General Counsel
Fax: (317) 276-9152
To Ligand:
Ligand Pharmaceuticals Incorporated
9393 Towne Centre Drive
San Diego, CA 92121
Attention: General Counsel
Fax: (619) 625-4521
Any party may, by written notice to the other, designate a new address
or fax number to which notices to the party giving the notice shall thereafter
be mailed or faxed.
5.10 INDEMNITY AND INSURANCE.
(a) Ligand shall hold harmless Lilly and its affiliates and their
respective employees and agents from and against any and all liabilities,
claims, demands, actions, suits, losses, damages, costs and expenses (including
reasonable attorney's fees) based upon
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(i) sale of the Products in the Territory, including
without limitation any product liability claims, regardless of the theory under
which such claims are brought, including any claims for death, bodily injury or
property damage arising from the use of the Products,
(ii) any of Ligand's activities under this Agreement
including Ligand's storage, promotion, marketing or distribution of the Products
or the use or sale of the Products in the Territory or (iii) which otherwise
results from Ligand's negligence or willful misconduct or its material breach of
this Agreement, except in the case of (i), (ii) or
(iii) to the extent caused by the negligence or willful
misconduct of Lilly or the material breach by Lilly of this Agreement or with
respect to product liability claims only, to the extent the injury alleged is
caused by ***
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(b) Lilly shall indemnify and hold harmless Ligand and its
affiliates and their respective employees and agents from and against any and
all liabilities, claims, demands, actions, suits, losses, damages, costs and
expenses (including reasonable attorney's fees) based upon the death or any
bodily injury or property damages resulting from
(i) Lilly's ***
*** (including product liability claims, regardless of the theory under which
such claims are brought),
(ii) Lilly's activities outside the Territory or
(iii) otherwise results from the negligence or willful
misconduct of Lilly or its material breach of this Agreement, except to the
extent caused by the negligence or willful misconduct of Ligand or the material
breach by Ligand of this Agreement; provided that, with respect to product
liability claims only, Lilly shall only have an obligation to indemnify or hold
harmless Ligand, its affiliates and their respective employees and agents to the
extent the injury alleged is caused by ***
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(c) Each of the parties shall promptly notify the other of any
such claim or potential claim covered by any of the above subsections in this
Section 5.10 and shall include sufficient information to enable the other party
to assess the facts. Each of the parties shall cooperate fully with the other
party in the defense of all such claims. No settlement or compromise shall be
binding on a party hereto without its prior written consent, which shall not be
unreasonably withheld.
(d) ***
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(e) Ligand and Lilly shall each have and maintain such type and
amounts of liability insurance covering their respective activities under this
Agreement as is normal and customary in the pharmaceutical industry generally
for parties similarly situated, and will upon request provide the other party
with a copy of its policies of insurance in that regard, along with any
amendments and revisions thereto.
5.11 RECALLS. In the event of a recall, whether voluntary or ordered by
a government agency in the Territory ("Recall"), and Lilly is then providing
physical distribution services, Lilly shall be responsible for the coordination
of Recall activities. Ligand and Lilly shall each bear and timely pay, as
coordinated and required by Lilly, an equal share of the costs of notification,
shipping and handling, retrieving the Products subject to Recall already
delivered to customers, and other expenses and costs of the Recall. Lilly shall
provide Ligand with supporting documentation of all reimbursable expenses and
costs.
5.12 TERMINATION OR CANCELLATION.
(a) ***
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(b) Either party shall have the right to terminate this Agreement
after 60 days written notice to the other in the event the other party is in
material breach of this Agreement, unless the other party cures the breach
before the expiration of such period of time. Such notice shall set forth in
reasonable detail the specifics of the breach. Without limiting the generality
of the foregoing, any failure by Ligand to comply in all material respects with
the provisions of this Agreement concerning compliance with applicable laws,
regulations and rules shall constitute a material breach of this Agreement by
Ligand.
(c) This Agreement shall be terminated upon termination under
Sections 4.3, 4.4, and 4.5 as of the applicable dates specified therein.
(d) Upon termination of this Agreement for any reason, all then
accrued rights under purchase orders and invoices issued in compliance with this
Agreement, all then accrued rights of Lilly to acquire stock of Ligand under
Section 4, the indemnity and recall provisions of Sections 5.10 and 5.11, and
any rights either party may then have as a result of any breach of this
Agreement by the other party shall survive termination of this Agreement. Upon
termination of this Agreement for any reason, and except as provided in the
preceding sentence, Ligand shall have no rights to require Lilly to sell the
Products to Ligand or otherwise grant to Ligand any license or other rights to
the Products or the technology relating thereto, and the parties shall have no
obligations to each other under this Agreement.
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(h) To the knowledge of Lilly, the sale of Product by Ligand as
contemplated by this Agreement will not infringe the patent or other
intellectual property rights of any third party. In the case of any claim of
infringement of a patent owned by a third party based upon the making, having
made, using, having used, importing, offering for sale, selling or having sold
Product, Ligand shall have the right to obtain a license from the third party
and credit *** *** of any royalty payable to the third party against the amounts
payable to Lilly under this Agreement but in no event will Lilly's royalty be
reduced by more than *** If Lilly and/or Ligand is sued for infringement by such
third party, Ligand shall control and defend or settle the action at its expense
and shall pay any damages or other monetary awards resulting therefrom, and
Ligand shall be entitled to credit *** of such monetary awards against amounts
payable to Lilly, but in no event will Lilly's payments each year be reduced by
more than *** .
(i) Ligand shall have the royalty-free right to use the trademark
*** in connection with sales of the Products. If for any reason such trademark
is not available, Ligand shall be entitled to adopt such other trademark as it
may desire, subject to the consent of Lilly, which consent shall not be
unreasonably withheld. All expenses of registering and maintaining such
alternative mark shall be paid by Ligand.
5.14 CONFIDENTIAL INFORMATION. As used in this Agreement, "Confidential
Information" shall mean all information, inventions, know-how and data disclosed
by one party to the other party, or its respective affiliates or agents,
pursuant to this Agreement, whether in oral, written, graphic or electronic form
and whether in existence as of the effective date or developed or acquired in
the future, except where such information (i) is public knowledge at the time of
disclosure by the disclosing party, (ii) becomes public knowledge through no
fault of the receiving party, (iii) was in the possession of the receiving party
at the time of disclosure by the disclosing party as evidenced by proper
business records or (iv) is disclosed to the receiving party by a third party,
to the extent such third party's disclosure was not in violation of any
obligation of confidentiality.
*** Portions of this page have been omitted pursuant to a request for
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5.15 ENTIRE AGREEMENT. This Agreement shall (1) supersede all prior
proposals, letters, negotiations, contracts, agreements, and understandings
between Ligand and Lilly relating to the subject matter hereof, all of which are
hereby terminated; (2) constitute the complete agreement between Ligand and
Lilly; and (3) be controlling to the exclusion of all terms and conditions of
Ligand's purchase orders or other documents in conflict with this Agreement.
5.16 WAIVER. The failure of any party to enforce at any time any
provision of this Agreement shall not be a waiver of such provision or effect
the right of such party thereafter to enforce such provision. No waiver shall be
deemed a waiver of any other provision or of a subsequent breach whether of the
same or another provision.
5.17 GOVERNING LAW. This Agreement shall be interpreted in accordance
with, and governed by, the laws of the State of Indiana without regard to
principles of conflicts of law.
5.18 NONDISCLOSURE OF AGREEMENT. Neither party shall disclose any
information about this Agreement without the prior written consent of the other.
Consent shall not be required, however, for (a) disclosures to tax or other
governmental authorities, provided, that in connection with such disclosure,
each party agrees to use its commercially reasonable efforts to secure
confidential treatment of such information, (b) disclosures of information for
which consent has previously been obtained or (c) information which has
previously been publicly disclosed. Each party shall have the further right to
disclose the terms of this Agreement as required by applicable law, including
the rules and regulations promulgated by the Securities and Exchange Commission,
and to disclose such information to shareholders or potential investors as is
customary for publicly-held companies. Without limiting the generality of the
foregoing and except in the circumstance where a party's outside counsel advises
the party that immediate disclosure is required, in the event that a Receiving
Party intends to disclose information about this Agreement as permitted
hereunder, such a party will provide to the other party a copy of the
information to be disclosed and an opportunity to comment thereon prior to such
disclosure, and, to the extent practicable, consult with the other on the
necessity for the disclosure and the text of the proposed release within a
reasonable time in advance of the proposed disclosure.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first written above.
Ligand:
LIGAND PHARMACEUTICALS INCORPORATED
9393 Towne Center Drive
San Diego, CA 92121
By: /s/ David E. Robinson
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LILLY:
ELI LILLY AND COMPANY
Lilly Corporate Center
Indianapolos, Indiana 46284
By /s/ August M. Watanabe
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August M. Watanabe
Executive Vice President
[Option and Wholesale Agreement
Signature Page]
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SCHEDULE 3.1(a)
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Schedule 4.6
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of the
____ day of ___________, ____ (the "Effective Date"), by and between Ligand
Pharmaceuticals Incorporated, a Delaware corporation (the "Company"), and Eli
Lilly and Company, an Indiana corporation ("Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Shares.
1.1 Sale and Issuance of Shares. Subject to the terms and
conditions of this Agreement and Section [4.3/4.4] of that certain Option and
Wholesale Purchase Agreement dated October __, 1997 (the "Wholesale Agreement"),
Investor agrees to pay ____________________________________ ($__________ ) (the
"Purchase Price") to the Company at the Closing and the Company agrees to sell
and issue to Investor at the Closing the number of shares (the "Shares") of the
Company's Common Stock equal to the Purchase Price divided by the average daily
closing price of the Company's Common Stock reported by the National Association
of Securities Dealers ("NASD") on the twenty (20) consecutive trading days
preceding the date of delivery of notice under Section [4.3/414] of the
Wholesale Purchase Agreement.
1.2 Closing. The closing for the purchase and sale of the
Shares shall take place within thirty (30) days after receipt of notice given
pursuant to Section [4.3/4.4] of the Wholesale Agreement at the offices of
Brobeck, Phleger & Harrison LLP, 550 West "C" Street, Suite 1200, San Diego,
California, or at such other time and place as the Company and Investor mutually
agree upon orally or in writing (which time and place are designated as the
"Closing"). At the Closing, the Company shall deliver to Investor a certificate
representing the Shares. In consideration of such delivery, Investor shall make
payment therefor by delivery to the Company by Investor of a check in the amount
of the Purchase Price payable to the Company's order or by wire transfer of
funds in such amount to the Company's designated bank account.
2. Representations and Warranties of the Company. Except as
otherwise set forth on the Schedule of Exceptions attached hereto as Exhibit A,
the Company hereby represents and warrants to Investor that:
2.1 Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power
and authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would be
reasonably expected to have a material adverse effect on the business,
<PAGE> 27
operations, properties, assets, prospects or condition (financial or otherwise)
of the Company (a "Material Adverse Effect"). Except as disclosed in the Form
10-K (as defined herein), the Company has no subsidiaries.
2.2 Authorization. The Company has all requisite corporate
power and authority (i) to execute, deliver and perform its obligations under
this Agreement; (ii) to issue the Shares in the manner and for the purpose
contemplated by this Agreement, and (iii) to execute, deliver and perform its
obligations under all other agreements and instruments executed and delivered by
it pursuant to or in connection with this Agreement. All corporate action on the
part of the Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the performance of all
obligations of the Company hereunder and the authorization, issuance (or
reservation for issuance) and delivery of the Shares has been taken or will be
taken prior to the Closing, and this Agreement constitutes a valid and legally
binding obligation of the Company, enforceable in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.
2.3 Valid Issuance of Securities. The Shares which are
being purchased hereunder, when issued, sold and delivered in accordance with
the terms hereof for the consideration expressed herein, will be duly and
validly issued, fully paid and nonassessable and, based in part upon the
representations of Investor in this Agreement, the Shares will be issued in
compliance with all applicable federal and state securities laws.
2.4 SEC Reports. The Company has heretofore filed with the
Securities and Exchange Commission (the "SEC") pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), all reports and other
documents required to be filed, including an Annual Report on Form 10-K for the
year ended December 31, [fiscal year prior to issuance of Shares] (the "Form
10-K"). None of such reports, or any other reports, documents, registration
statements, definitive proxy materials and other filings required to be filed
with the SEC under the rules and regulations of the SEC (the "SEC Filings")
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
made, at the time and in light of the circumstances under which they were made,
not misleading. Since December 31, [fiscal year prior to issuance of Shares],
the Company has timely filed with the SEC all SEC Filings and all such SEC
Filings complied in all material respects with all applicable requirements of
the Securities Act of 1933, as amended (the "Securities Act"), the Exchange Act,
and the rules thereunder. The audited financial statements of the Company
included or incorporated by reference in the [fiscal year prior to issuance of
Shares] Annual Report to the Stockholders (the "Annual Report") and the
unaudited financial statements contained in the Quarterly Reports on Form 10-Q
each have been prepared in accordance with such acts and rules and with United
States generally accepted accounting principles applied on a consistent basis
throughout the periods indicated therein and with each other (except as may be
indicated therein or in the notes thereto and except that the unaudited interim
financial statements may
<PAGE> 28
not contain all footnotes and adjustments required by United States generally
accepted accounting principles) and fairly present the financial condition of
the Company as at the dates thereof and the results of its operations and
statements of cash flows for the periods then ended, subject, in the case of
unaudited interim financial statements, to normal year-end adjustments. Except
as reflected in such financial statements, the Company has no material
liabilities, absolute or contingent, other than ordinary course liabilities
incurred since the date of the last such financial statements in connection with
the conduct of the business of the Company. Since December 31, [fiscal year
prior to issuance of Shares], except as set forth in the Company's SEC Filings,
there has been no:
(a) change in the assets, liabilities, financial
condition or operating results of the Company from that reflected in the Annual
Report, except changes in the ordinary course of business that have not,
individually or in the aggregate, resulted in and are not reasonably expected to
result in a Material Adverse Effect (and except that the Company expects to
continue to incur substantial operating losses, which may be material);
(b) damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the business,
properties or financial condition of the Company (and except that the Company
expects to continue to incur substantial operating losses, which may be
material);
(c) waiver or compromise by the Company of a
material right or of a material debt owed to it;
(d) satisfaction or discharge of any lien, claim
or encumbrance by the Company, except in the ordinary course of business and
which is not material to the business, properties or financial condition of the
Company (as such business is presently conducted);
(e) material change to a material contract or
arrangement by which the Company or any of its assets is bound or subject;
(f) sale, assignment or transfer to a third party
that is not an affiliate of the Company (as hereafter defined) of any material
patents, trademarks, copyrights, trade secrets or other intangible assets for
compensation which is less than fair value;
(g) mortgage, pledge, transfer of a security
interest in, or lien, created by the Company, with respect to any of its
material properties or assets, except liens for taxes not yet due or payable;
(h) declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, except any direct
or indirect redemption, purchase or other acquisition of any such stock by the
Company; or
<PAGE> 29
(i) event or condition of any type that has had
or is reasonably expected to have a Material Adverse Effect.
For purposes of this Section 2.4 of this Agreement, the
term "affiliate of the Company" means any individual or entity directly or
indirectly controlling, controlled by or under common control with, the Company.
Without limiting the foregoing, the direct or indirect ownership of 50% or more
of the outstanding voting securities of any entity, or the right to receive 50%
or more of the profits or earnings of an entity, shall be deemed to constitute
control.
2.5 Contracts. With respect to each of the material contracts,
commitments and agreements of the Company, the Company is not, and has no actual
knowledge that any other party is, in default under or in respect of any such
material contract, commitment or agreement, the result of which default would
have a Material Adverse Effect. No party to any such material contract,
commitment or agreement, would be authorized or permitted to terminate its
obligations thereunder by reason of the execution and delivery of this Agreement
or any of the transactions contemplated herein.
2.6 Compliance. The Company has complied with, and is not in
default under or in violation of its Certificate of Incorporation or Bylaws,
each as amended through the date hereof, or any and all laws, ordinances and
regulations or other governmental restrictions, orders, judgments or decrees,
applicable to the Company's business as presently conducted and as proposed to
be conducted, including individual products marketed by it, where any such
default or violation would have a Material Adverse Effect. The Company has not
received notice of any possible or actual violation of any applicable law,
ordinance, regulation or order, the result of which violation would be
reasonably expected to have a Material Adverse Effect. The Company is not a
party to any agreement or instrument, or subject to any charter or other
corporate restriction, or any judgment, order, decree, law, ordinance,
regulation or other governmental restriction which would prevent or impede, or
be breached or violated by, or would result in the creation of any event of
default or the creation of any lien or encumbrance upon any assets of the
Company by, the transactions contemplated in this Agreement, except that no
representation or warranty is made with respect to filings required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "H-S-R
Act").
2.7 Compliance with Other Instruments. The execution, delivery
and performance of this Agreement and of the transactions contemplated hereby
will not result in any violation of or constitute, with or without the passage
of time and the giving of notice, either a default under any provision of the
Company's Amended and Restated Certificate of Incorporation or Bylaws, each as
amended through the date hereof.
2.8 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority is required on
the part of the Company in connection with the Company's valid execution,
delivery and performance of this Agreement, except for any
<PAGE> 30
filings under any applicable state securities laws and except for any filing
under the H-S-R Act. The filings under state securities laws, if any, will be
effected by the Company at its cost within the applicable stipulated statutory
period.
2.9 Litigation. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company which
questions the validity of this Agreement, or the right of the Company to enter
into such agreement or to consummate the transactions contemplated hereby. There
is no action, suit, proceeding or investigation pending or currently threatened
against the Company, which singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would be reasonably expected to have a
Material Adverse Effect.
2.10 Permits. Except as disclosed in the SEC Filings (including,
among other things, the lack of FDA approvals for the commercial sale of the
Company's product candidates), the Company has all governmental franchises,
permits, licenses, and any similar authority necessary for the conduct of its
business as now being conducted by it or as proposed to be conducted by it, the
lack of which could have a Material Adverse Effect. The Company is not in
default in any material respect under any of such franchises, permits, licenses
or other similar authority.
2.11 Taxes. The Company has filed all federal, state and other
tax returns which are required to be filed and has heretofore paid all taxes
which have become due and payable, except where the failure to file or pay would
not be reasonably expected to have a Material Adverse Effect. The provision for
taxes on the balance sheet as of December 31, [fiscal year prior to issuance of
Shares], is sufficient for the payment of all accrued and unpaid taxes of the
Company with respect to the period then ended.
2.12 Title. The Company has good and marketable title to all
material property and assets reflected in the financial statements to the Annual
Report (or as described in the SEC Filings). The Company occupies its leased
properties under valid and binding leases conforming to the description thereof
set forth in the SEC Filings.
2.13 Intellectual Property. The Company owns, or possesses
adequate rights to use, all of its patents, patent rights, trade secrets,
know-how, proprietary techniques, including processes and substances,
trademarks, service marks, trade names and copyrights described or referred to
in the SEC Filings or owned or used by it or which is necessary for the conduct
of its business as presently conducted, except where the failure to own or
possess such patents, patent rights, trade secrets, know-how, proprietary
techniques, including processes and substances, trademarks, service marks, trade
names and copyrights would not have a Material Adverse Effect. The Company has
not received any notice of infringement of or conflict with asserted rights of
others with respect to any patents, patent rights, trade secrets, know-how,
proprietary techniques, including processes and substances, trademarks, service
marks, trade names and copyrights which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would be reasonably
expected to have a Material Adverse Effect.
<PAGE> 31
2.14 Capitalization; Options and Warrants. The authorized capital
stock of the Company consists of Eighty-Five million (85,000,000) shares, of
which Eighty million (80,000,000) shares are Common Stock, par value $0.001 per
share, and Five million (5,000,000) shares are Preferred Stock, par value $0.001
per share, of which Eighty thousand (80,000) shares have been designated Serial
A Participating Preferred Stock. As of [date set forth in most recently
published SEC filing, number of shares so set forth] shares of the Company's
Common Stock and no shares of Preferred Stock were issued and outstanding.
Except for the transactions contemplated hereby and except as set forth in the
Company's SEC Filings, since December 31, [fiscal year prior to issuance of
Shares], the Company has not granted any option (except for stock options
granted under the Company's stock option plans), warrants, rights (including
conversion or preemptive rights, except for stock purchased under the Company's
stock purchase plans), or similar rights to any person or entity to purchase or
acquire any rights with respect to any shares of capital stock of the Company
that in the aggregate exceed two million (2,000,000) shares.
2.15 Nasdaq National Market Designation. The Company's Common
Stock is currently included in the Nasdaq National Market and the Company knows
of no reason or set of facts which is likely to result in the termination of
inclusion of the Common Stock in the Nasdaq National Market or the inability of
such stock to continue to be included in the Nasdaq National Market. Nothing in
this Agreement shall be interpreted to preclude the Company from listing its
Common Stock on a national securities exchange in lieu of the Nasdaq National
Market.
2.16 Accuracy of Representations and Warranties. No
representation or warranty by the Company contained in this Agreement, and no
statement contained in any exhibit, schedule, disclosure, certificate, list or
other instrument delivered or to be delivered to the Investor pursuant hereto or
in connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements contained herein or therein not misleading.
3. Representations and Warranties of the Investor. Investor hereby
represents and warrants that:
3.1 Organization, Good Standing and Qualification. Investor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Indiana and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted.
3.2 Authorization. All corporate action on the part of Investor,
its officers and directors necessary for the authorization, execution and
delivery of this Agreement, the performance of all obligations of Investor
hereunder has been taken or will be taken prior to the Closing, and this
Agreement constitutes a valid and legally binding obligation of Investor
enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the
<PAGE> 32
enforcement of creditors' rights generally and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.
3.3 Purchase Entirely for Own Account. The Shares to be received
by Investor will be acquired for investment for Investor's own account, not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof, and Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, Investor further represents that Investor does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Shares. Investor represents that it has full power and authority to enter into
this Agreement.
3.4 Investment Experience. Investor acknowledges that it is able
to fend for itself, can bear the economic risk of its investment and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the Shares. Investor also
represents it has not been organized for the purpose of acquiring the Shares.
3.5 Accredited Investor. Investor an "accredited investor" within
the meaning of SEC Rule 501 of Regulation D, as presently in effect.
3.6 Restricted Securities. Investor understands that the Shares
it is purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such Shares may be resold without registration under the
Securities Act, only in certain limited circumstances. In this connection,
Investor represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act.
3.7 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, Investor further agrees not to
make any disposition of all or any portion of the Shares unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
Sections 3.7 and 6 of this Agreement, if applicable, and:
(a) There is then in effect a Registration Statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such Registration Statement; or
(b) (i) Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a reasonably
detailed statement of the circumstances surrounding the proposed disposition,
and (ii) if reasonably requested by the Company, such Investor shall have
furnished the Company with an opinion of counsel (which may be Investor's inside
counsel), in form and substance reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
<PAGE> 33
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
Notwithstanding the foregoing, this Section 3.7 and Section 6 shall not apply to
a transferee in a registered public offering or a sale under Rule 144; provided
that Section 4.2 of that certain Stock Purchase Agreement dated _____________,
1997 between the Company and the Investor (the "Purchase Agreement"), which is
incorporated herein pursuant to Section 6 of this Agreement, shall not apply to
a transferee which receives less than one percent (1%) of the outstanding Common
Stock of the Company at such time as the Investor owns Shares which represent
less than three percent (3%) of the outstanding Common Stock of the Company;
provided further Section 5 of the Purchase Agreement, which is incorporated
herein pursuant to Section 6 of this Agreement, by its terms does not apply at
such time as the Investor owns Restricted Securities which represent less than
three percent (3%) of the outstanding Common Stock of the Company.
3.8 Legends. It is understood that the certificates evidencing
the Shares may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."
(b) "These securities are subject to certain transfer
restrictions contained in a certain Stock Purchase Agreement dated
_____________, ____, as amended from time to time, a copy of which may be
obtained from the corporation without charge."
(c) Any legend required by any applicable state securities
laws.
To the extent that such legends are no longer applicable, the Company
shall cause its transfer agent to remove the legends upon request by Investor.
3.9 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority is required on
the part of Investor in connection with the Investor's valid execution, delivery
and performance of this Agreement or the issuance of the Shares, except for any
filings under any applicable federal or state securities law and except for any
filing under the H-S-R Act.
4. Conditions of Investor's Obligations at Closing. The obligations of
Investor under Section 1 of this Agreement are subject to the fulfillment on or
before the Closing of each of the following conditions, the waiver of which
shall not be effective without the consent of Investor thereto:
<PAGE> 34
4.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
4.2 Performance. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing,
and all corporate or other proceedings in connection with the transactions
contemplated at the Closing. In addition, all documents shall be reasonably
satisfactory in form and in substance to Investor.
4.3 Compliance Certificate. An officer of the Company shall have
delivered to Investor a certificate certifying that (a) the conditions specified
in Sections 4.1 and 4.2 have been fulfilled; (b) the Company has not filed a
petition in bankruptcy or insolvency or for reorganization or for an arrangement
or for the appointment of a receiver or trustee of its assets, nor is the
Company aware of any events or action that would make any such filing or
arrangement imminent; and (c) no action or event has occurred, nor is any action
or event imminent, that would impair the Company's ability to perform as
contemplated under the Wholesale Agreement.
4.4 Governmental Authorizations. All authorizations, approvals,
or permits, if any, of any governmental authority or regulatory body of the
United States or of any state that are required as of the Closing in connection
with the lawful issuance and sale of the Shares pursuant to this Agreement shall
have been duly obtained and shall be effective as of the Closing. The parties
shall have timely complied with all filing requirements of the H-S-R Act, all
time periods for governmental comment thereunder shall have expired and no
requirements or conditions shall have been imposed in connection therewith which
are not reasonably satisfactory to the Investor.
4.5 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
at the Closing and all documents incident thereto shall be reasonably
satisfactory in form and substance to Investor and they shall have received all
such counterpart original and certified or other copies of such documents as
they may reasonably request.
4.6 Wholesale Agreement. The Company shall not be in breach or
default of any of its obligations under the Wholesale Agreement.
4.7 Opinion of Company Counsel. Investor shall have received an
opinion from the Company's General Counsel, dated as of the Closing, in form and
substance reasonably acceptable to Investor.
5. Conditions of the Company's Obligations at Closing. The obligations
of the Company to Investor under Section 1.1 of this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions by
Investor:
<PAGE> 35
5.1 Representations and Warranties. The representations and
warranties of Investor contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
5.2 Performance. Investor shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing and all
corporate or other proceedings in connection with the transactions contemplated
at the Closing. In addition, all documents shall be reasonably satisfactory in
form and in substance to the Company.
5.3 Compliance Certificate. An officer of Investor shall have
delivered to the Company a certificate certifying that the conditions specified
in Sections 5.1 and 5.2 have been fulfilled.
5.4 Payment of Purchase Price. Investor shall have delivered the
Purchase Price specified in Section 1.1.
5.5 Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required as of the Closing in connection with the lawful
issuance and sale of the Shares pursuant to this Agreement shall have been duly
obtained and shall be effective as of the Closing.
5.6 Wholesale Agreement. Investor shall not be in breach or
default of any of its obligations under the Wholesale Agreement.
6. Covenant of Investor. Investor acknowledges and agrees that, to the
extent its rights and obligations under Sections 4, 5 and 7.11 continue in
effect under the Purchase Agreement, they shall apply with equal force to
Investor, any actions with respect to the Shares or otherwise as set forth in
such agreement.
7. Additional Covenants.
7.1 Nasdaq National Market Designation. The Company shall give
the Nasdaq National Market timely notice of the issuance of the Shares and shall
use all commercially reasonable efforts to maintain the Non-Quantitative
Designation Criteria contained in Rule 4460 of the NASD Manual to the extent
such criteria are within the control of the Company.
7.2 Reports Under Exchange Act. With a view to making available
to the Investor the benefits of Rule 144 and any other rule or regulation of the
SEC that may at any time permit the Investor to sell the Shares to the public
without registration, the Company agrees to: (a) make and keep public
information available, as those terms are understood and defined in Rule 144, at
all times; (a) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
<PAGE> 36
and (c) furnish to the Investor, so long as the Investor owns any Shares,
forthwith upon request (i) a written statement by the Company that it has
complied with the reporting requirements of Rule 144, the Securities Act and the
Exchange Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing the Investor
of any rule or regulation of the SEC which permits the selling of any Shares
without registration.
7.3 Filings under the H-S-R Act. Each of the Company and the
Investor shall use its commercially reasonable efforts to make all filings
required under the H-S-R Act within two (2) business days of the execution of
this Agreement, and thereafter to promptly respond to any requests for
additional information in connection with such filings.
8. Miscellaneous.
8.1 Survival of Warranties. The warranties, representations and
covenants of the Company and Investor contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investor or the Company.
8.2 Successors and Assigns. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any of the Shares sold hereunder). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
8.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware as applied to agreements among
Delaware residents entered into and to be performed entirely within Delaware.
8.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing by personal delivery to
the party to be notified or by Federal Express or other overnight package
delivery service or by registered or certified mail, postage prepaid and
addressed to the party to be notified at the following
<PAGE> 37
addresses, or at such other address as such party may designate by five (5)
days' advance written notice to the other parties (with notice deemed given upon
receipt):
If to the Company:
Ligand Pharmaceuticals Incorporated
9393 Towne Centre Drive
San Diego, California 92121
Attn: William L. Respess, Esq.
If to Investor:
Eli Lilly and Company
Lilly Corporate Center
Indianapolis, IN 46285
Attention: General Counsel
8.7 Finder's Fee. Each party represents that it neither is nor
will be obligated for any finders' fee or commission in connection with this
transaction. Each party agrees to indemnify and to hold harmless the other party
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the indemnifying party or any of its officers,
partners, employees or representatives is responsible.
8.8 Expenses. Irrespective of whether the Closing is effected,
each party shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
8.9 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively
but only if so expressly stated), only with the written consent of the Company
and Investor. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each holder of any securities purchased under this
Agreement at the time outstanding, each future holder of all such securities,
and the Company.
8.10 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provisions were so excluded and shall be enforceable in
accordance with its terms.
<PAGE> 38
8.11 Entire Agreement. This Agreement and the documents referred
to herein constitute the entire agreement among the parties and no party shall
be liable or bound to any other party regarding the subject matter hereof and
thereof in any manner by any warranties, representations, or covenants except as
specifically set forth herein or therein.
<PAGE> 39
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
LIGAND PHARMACEUTICALS
INCORPORATED
By: ______________________________________
Title: ______________________________________
INVESTOR:
ELI LILLY AND COMPANY
By: ______________________________________
Title: ______________________________________
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
<PAGE> 40
AMENDMENT TO OPTION AND WHOLESALE PURCHASE AGREEMENT
This Amendment is executed as of the 23rd day of February, 1998 by and
between Eli Lilly and Company ("Lilly") and Ligand Pharmaceuticals Incorporated
("Ligand").
Whereas, Lilly and Ligand have entered into an Option and Wholesale
Purchase Agreement dated as of November 25, 1997 (the "Agreement"), and
Whereas the parties now desire to amend the Agreement to extend the
period of time pursuant to which Ligand may exercise the Ligand Option (as
defined in the Agreement).
Now, therefore, in consideration of the foregoing, the mutual covenants
set forth below and other consideration, receipt sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Section 1.1 of the Agreement is hereby amended to read in its
entirety as follows: "Until the later of (a) April 27, 1998, or (b) the date
which is three (3) business days after the date Ligand delivers to Lilly the
notice referred to in Section 1.4 (the "Ligand Option Period"), Ligand shall
have the option (the "Ligand Option") to become Lilly's exclusive wholesaler of
the Products, subject to the terms and conditions contained in this Agreement.
2. All other terms and conditions of the Agreement shall remain in full
force and effect.
3. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one in the same.
LIGAND PHARMACEUTICALS INC. ELI LILLY AND COMPANY
By: /s/ William L. Respess By: /s/ August M. Watanabe
------------------------------------ -------------------------
Sr. Vice President, August M. Watanabe
General Counsel, Government Relations Executive Vice President
Science and Technology
Date: February 28, 1998 Date: February 28, 1998
----------------- -----------------
<PAGE> 41
AMENDMENT #2 TO OPTION AND WHOLESALE PURCHASE AGREEMENT
This Amendment is executed as of the 16th day of March, 1998 by and between
Eli Lilly and Company ("Lilly") and Ligand Pharmaceuticals Incorporated
("Ligand").
Whereas, Lilly and Ligand have entered into an Option and Wholesale
Purchase Agreement dated as of November 25, 1997, and amended on February 23,
1998 (the "Agreement"), and
Whereas the parties now desire to amend the Agreement to extend the period
of time pursuant to which Ligand may exercise the Ligand Option (as defined in
the Agreement).
Now, therefore, in consideration of the foregoing, the mutual covenants set
forth below and other consideration, receipt sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Section 1.1 of the Agreement is hereby amended to read in its
entirety as follows:
"Ligand Option. Until the date that is seven (7) days after the date on which
Lilly gives written notice (the "Option Termination Notice") to Ligand of
Lilly's desire to terminate the Ligand Option (the "Ligand Option Period"),
Ligand shall have the option (the "Ligand Option") to become Lilly's exclusive
wholesaler of the Products, subject to the terms and conditions contained in
this Agreement. Lilly shall not give the Option Termination Notice prior to
April 27, 1998. If Lilly gives the Option Termination Notice prior to May 28,
1998, it will, upon written request made by both Ligand and Seragen and
delivered to Lilly within five (5) days of the date of the Option Termination
Notice, defer effectiveness of the Option Termination Notice until May 28, 1998,
(with the effect that the Ligand Option would expire on June 4, 1998, if not
previously exercised). ***
***
***
***
***
***
2. All other terms and conditions of the Agreement shall remain in full
force and effect.
3. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one in the same.
LIGAND PHARMACEUTICALS INC. ELI LILLY AND COMPANY
By: /s/ William L. Respess By: /s/ August M. Watanabe
--------------------------- -----------------------------
Sr. Vice President, General August M. Watanabe
Counsel, Government Affairs Executive Vice President
Science and Technology
Date: February 28, 1998 Date: February 28, 1998
----------------- -----------------
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 1
EXHIBIT 10.170
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of the
25th day of November, 1997 (the "Effective Date"), by and between Ligand
Pharmaceuticals Incorporated, a Delaware corporation (the "Company"), and Eli
Lilly and Company, an Indiana corporation ("Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Shares.
1.1 Sale and Issuance of Shares. Subject to the terms and
conditions of this Agreement, Investor agrees to pay Thirty-Seven Million Five
Hundred Thousand Dollars ($37,500,000) (the "Purchase Price") to the Company at
the Closing and the Company agrees to sell and issue to Investor at the Closing
the number of shares (the "Shares") of the Company's Common Stock equal to the
Purchase Price divided by one hundred twenty percent (120%) of the average daily
closing price of the Company's Common Stock reported by the National Association
of Securities Dealers ("NASD") beginning on August 15, 1997 and continuing
through and including September 12, 1997, which amount is $17.23125 per share,
resulting in a total of two million one hundred seventy-six thousand two hundred
seventy-nine (2,176,279) Shares.
1.2 Closing. The closing for the purchase and sale of the
Shares shall take place at the offices of Brobeck, Phleger & Harrison LLP, 550
West "C" Street, Suite 1200, San Diego, California, on the third business day
following the date of this Agreement, or at such other time and place as the
Company and Investor mutually agree upon orally or in writing (which time and
place are designated as the "Closing"). At the Closing, the Company shall
deliver to Investor a certificate representing the Shares. In consideration of
such delivery, Investor shall make payment therefor by delivery to the Company
by Investor of a check in the amount of the Purchase Price payable to the
Company's order or by wire transfer of funds in such amount to the Company's
designated bank account.
2. Representations and Warranties of the Company. Except as
otherwise set forth on the Schedule of Exceptions attached hereto as Exhibit A,
the Company hereby represents and warrants to Investor that:
2.1 Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power
and authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would be
reasonably expected to have a material adverse effect on the business,
operations, properties, assets, prospects or condition (financial or otherwise)
of the Company
<PAGE> 2
(a "Material Adverse Effect"). Except as disclosed in the Form 10-K (as defined
herein), the Company has no subsidiaries.
2.2 Authorization. The Company has all requisite corporate
power and authority (i) to execute, deliver and perform its obligations under
this Agreement; (ii) to issue the Shares in the manner and for the purpose
contemplated by this Agreement, and (iii) to execute, deliver and perform its
obligations under all other agreements and instruments executed and delivered by
it pursuant to or in connection with this Agreement. All corporate action on the
part of the Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the performance of all
obligations of the Company hereunder and the authorization, issuance (or
reservation for issuance) and delivery of the Shares has been taken or will be
taken prior to the Closing, and this Agreement constitutes a valid and legally
binding obligation of the Company, enforceable in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.
2.3 Valid Issuance of Securities. The Shares which are
being purchased hereunder, when issued, sold and delivered in accordance with
the terms hereof for the consideration expressed herein, will be duly and
validly issued, fully paid and nonassessable and, based in part upon the
representations of Investor in this Agreement, the Shares will be issued in
compliance with all applicable federal and state securities laws.
2.4 SEC Reports. The Company has heretofore filed with the
Securities and Exchange Commission (the "SEC") pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), all reports and other
documents required to be filed, including an Annual Report on Form 10-K for the
year ended December 31, 1996 (the "Form 10-K"). None of such reports, or any
other reports, documents, registration statements, definitive proxy materials
and other filings required to be filed with the SEC under the rules and
regulations of the SEC (the "SEC Filings") contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements made, at the time and in light of the
circumstances under which they were made, not misleading. Since December 31,
1996, the Company has timely filed with the SEC all SEC Filings and all such SEC
Filings complied in all material respects with all applicable requirements of
the Securities Act of 1933, as amended (the "Securities Act"), the Exchange Act,
and the rules thereunder. The audited financial statements of the Company
included or incorporated by reference in the 1996 Annual Report to the
Stockholders (the "1996 Annual Report") and the unaudited financial statements
contained in the Quarterly Reports on Form 10-Q each have been prepared in
accordance with such acts and rules and with United States generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated therein and with each other (except as may be indicated therein or in
the notes thereto and except that the unaudited interim financial statements may
not contain all footnotes and adjustments required by United States generally
accepted accounting principles) and fairly present the financial condition of
the Company as at the
-2-
<PAGE> 3
dates thereof and the results of its operations and statements of cash flows for
the periods then ended, subject, in the case of unaudited interim financial
statements, to normal year-end adjustments. Except as reflected in such
financial statements, the Company has no material liabilities, absolute or
contingent, other than ordinary course liabilities incurred since the date of
the last such financial statements in connection with the conduct of the
business of the Company. Since December 31, 1996, except as set forth in the
Company's SEC Filings, there has been no:
(a) change in the assets, liabilities, financial condition
or operating results of the Company from that reflected in the 1996 Annual
Report, except changes in the ordinary course of business that have not,
individually or in the aggregate, resulted in and are not reasonably expected to
result in a Material Adverse Effect (and except that the Company expects to
continue to incur substantial operating losses, which may be material);
(b) damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties or
financial condition of the Company (and except that the Company expects to
continue to incur substantial operating losses, which may be material);
(c) waiver or compromise by the Company of a material
right or of a material debt owed to it;
(d) satisfaction or discharge of any lien, claim or
encumbrance by the Company, except in the ordinary course of business and which
is not material to the business, properties or financial condition of the
Company (as such business is presently conducted);
(e) material change to a material contract or arrangement
by which the Company or any of its assets is bound or subject;
(f) sale, assignment or transfer to a third party that is
not an affiliate of the Company (as hereafter defined) of any material patents,
trademarks, copyrights, trade secrets or other intangible assets for
compensation which is less than fair value;
(g) mortgage, pledge, transfer of a security interest in,
or lien, created by the Company, with respect to any of its material properties
or assets, except liens for taxes not yet due or payable;
(h) declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, except any direct
or indirect redemption, purchase or other acquisition of any such stock by the
Company; or
-3-
<PAGE> 4
(i) event or condition of any type that has had or is
reasonably expected to have a Material Adverse Effect.
For purposes of this Section 2.4 of this Agreement, the
term "affiliate of the Company" means any individual or entity directly or
indirectly controlling, controlled by or under common control with, the Company.
Without limiting the foregoing, the direct or indirect ownership of 50% or more
of the outstanding voting securities of any entity, or the right to receive 50%
or more of the profits or earnings of an entity, shall be deemed to constitute
control.
2.5 Contracts. With respect to each of the material contracts,
commitments and agreements of the Company, the Company is not, and has no actual
knowledge that any other party is, in default under or in respect of any such
material contract, commitment or agreement, the result of which default would
have a Material Adverse Effect. No party to any such material contract,
commitment or agreement, would be authorized or permitted to terminate its
obligations thereunder by reason of the execution and delivery of this Agreement
or any of the transactions contemplated herein.
2.6 Compliance. The Company has complied with, and is not in
default under or in violation of its Certificate of Incorporation or Bylaws,
each as amended through the date hereof, or any and all laws, ordinances and
regulations or other governmental restrictions, orders, judgments or decrees,
applicable to the Company's business as presently conducted and as proposed to
be conducted, including individual products marketed by it, where any such
default or violation would have a Material Adverse Effect. The Company has not
received notice of any possible or actual violation of any applicable law,
ordinance, regulation or order, the result of which violation would be
reasonably expected to have a Material Adverse Effect. The Company is not a
party to any agreement or instrument, or subject to any charter or other
corporate restriction, or any judgment, order, decree, law, ordinance,
regulation or other governmental restriction which would prevent or impede, or
be breached or violated by, or would result in the creation of any event of
default or the creation of any lien or encumbrance upon any assets of the
Company by, the transactions contemplated in this Agreement, except that no
representation or warranty is made with respect to filings required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "H-S-R
Act").
2.7 Compliance with Other Instruments. The execution, delivery
and performance of this Agreement and of the transactions contemplated hereby
will not result in any violation of or constitute, with or without the passage
of time and the giving of notice, either a default under any provision of the
Company's Amended and Restated Certificate of Incorporation or Bylaws, each as
amended through the date hereof.
2.8 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or
-4-
<PAGE> 5
local governmental authority is required on the part of the Company in
connection with the Company's valid execution, delivery and performance of this
Agreement, except for any filings under any applicable state securities laws and
except for any filing under the H-S-R Act. The filings under state securities
laws, if any, will be effected by the Company at its cost within the applicable
stipulated statutory period.
2.9 Litigation. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company which
questions the validity of this Agreement, or the right of the Company to enter
into such agreement or to consummate the transactions contemplated hereby. There
is no action, suit, proceeding or investigation pending or currently threatened
against the Company, which singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would be reasonably expected to have a
Material Adverse Effect.
2.10 Permits. Except as disclosed in the SEC Filings (including,
among other things, the lack of FDA approvals for the commercial sale of the
Company's product candidates), the Company has all governmental franchises,
permits, licenses, and any similar authority necessary for the conduct of its
business as now being conducted by it or as proposed to be conducted by it, the
lack of which could have a Material Adverse Effect. The Company is not in
default in any material respect under any of such franchises, permits, licenses
or other similar authority.
2.11 Taxes. The Company has filed all federal, state and other
tax returns which are required to be filed and has heretofore paid all taxes
which have become due and payable, except where the failure to file or pay would
not be reasonably expected to have a Material Adverse Effect. The provision for
taxes on the balance sheet as of December 31, 1996 is sufficient for the payment
of all accrued and unpaid taxes of the Company with respect to the period then
ended.
2.12 Title. The Company has good and marketable title to all
material property and assets reflected in the financial statements to the 1996
Annual Report (or as described in the SEC Filings). The Company occupies its
leased properties under valid and binding leases conforming to the description
thereof set forth in the SEC Filings.
2.13 Intellectual Property. The Company owns, or possesses
adequate rights to use, all of its patents, patent rights, trade secrets,
know-how, proprietary techniques, including processes and substances,
trademarks, service marks, trade names and copyrights described or referred to
in the SEC Filings or owned or used by it or which is necessary for the conduct
of its business as presently conducted, except where the failure to own or
possess such patents, patent rights, trade secrets, know-how, proprietary
techniques, including processes and substances, trademarks, service marks, trade
names and copyrights would not have a Material Adverse Effect. The Company has
not received any notice of infringement of or conflict with asserted rights of
others with respect to any patents, patent rights, trade
-5-
<PAGE> 6
secrets, know-how, proprietary techniques, including processes and substances,
trademarks, service marks, trade names and copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
be reasonably expected to have a Material Adverse Effect.
2.14 Capitalization; Options and Warrants. The authorized capital
stock of the Company consists of Eighty-Five million (85,000,000) shares, of
which Eighty million (80,000,000) shares are Common Stock, par value $0.001 per
share, and Five million (5,000,000) shares are Preferred Stock, par value $0.001
per share, of which Eighty thousand (80,000) shares have been designated Serial
A Participating Preferred Stock. As of July 31, 1997, 32,859,502 shares of the
Company's Common Stock and no shares of Preferred Stock were issued and
outstanding. Except for the transactions contemplated hereby and except as set
forth in the Company's SEC Filings, since December 31, 1996, the Company has not
granted any option (except for stock options granted under the Company's stock
option plans), warrants, rights (including conversion or preemptive rights,
except for stock purchased under the Company's stock purchase plans), or similar
rights to any person or entity to purchase or acquire any rights with respect to
any shares of capital stock of the Company that in the aggregate exceed two
million (2,000,000) shares.
2.15 Nasdaq National Market Designation. The Company's Common
Stock is currently included in the Nasdaq National Market and the Company knows
of no reason or set of facts which is likely to result in the termination of
inclusion of the Common Stock in the Nasdaq National Market or the inability of
such stock to continue to be included in the Nasdaq National Market. Nothing in
this Agreement shall be interpreted to preclude the Company from listing its
Common Stock on a national securities exchange in lieu of the Nasdaq National
Market.
2.16 Accuracy of Representations and Warranties. No
representation or warranty by the Company contained in this Agreement, and no
statement contained in any exhibit, schedule, disclosure, certificate, list or
other instrument delivered or to be delivered to the Investor pursuant hereto or
in connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements contained herein or therein not misleading.
3. Representations and Warranties of the Investor. Investor hereby
represents and warrants that:
3.1 Organization, Good Standing and Qualification. Investor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Indiana and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted.
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3.2 Authorization. All corporate action on the part of Investor,
its officers and directors necessary for the authorization, execution and
delivery of this Agreement, the performance of all obligations of Investor
hereunder has been taken or will be taken prior to the Closing, and this
Agreement constitutes a valid and legally binding obligation of Investor
enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.
3.3 Purchase Entirely for Own Account. The Shares to be received
by Investor will be acquired for investment for Investor's own account, not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof, and Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, Investor further represents that Investor does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Shares. Investor represents that it has full power and authority to enter into
this Agreement.
3.4 Investment Experience. Investor acknowledges that it is able
to fend for itself, can bear the economic risk of its investment and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the Shares. Investor also
represents it has not been organized for the purpose of acquiring the Shares.
3.5 Accredited Investor. Investor an "accredited investor" within
the meaning of SEC Rule 501 of Regulation D, as presently in effect.
3.6 Restricted Securities. Investor understands that the Shares
it is purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such Shares may be resold without registration under the
Securities Act, only in certain limited circumstances. In this connection,
Investor represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act.
3.7 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, Investor further agrees not to
make any disposition of all or any portion of the Shares unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
Sections 3.7, 4.2 and 5 of this Agreement, if applicable, and:
(a) There is then in effect a Registration Statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such Registration Statement; or
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(b) (i) Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a reasonably
detailed statement of the circumstances surrounding the proposed disposition,
and (ii) if reasonably requested by the Company, such Investor shall have
furnished the Company with an opinion of counsel (which may be Investor's inside
counsel), in form and substance reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
Notwithstanding the foregoing, this Section 3.7 and Sections 4.2 and 5 shall not
apply to a transferee in a registered public offering or a sale under Rule 144;
provided that Section 4.2 shall not apply to a transferee which receives less
than one percent (1%) of the outstanding Common Stock of the Company at such
time as the Investor owns Shares which represent less than three percent (3%) of
the outstanding Common Stock of the Company; provided further Section 5 by its
terms does not apply at such time as the Investor owns Restricted Securities
which represent less than three percent (3%) of the outstanding Common Stock of
the Company.
3.8 Legends. It is understood that the certificates evidencing
the Shares may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."
(b) "These securities are subject to certain transfer
restrictions contained in a certain Stock Purchase Agreement dated November 25,
1997 as amended from time to time, a copy of which may be obtained from the
corporation without charge."
(c) Any legend required by any applicable state securities
laws.
To the extent that such legends are no longer applicable, the Company
shall cause its transfer agent to remove the legends upon request by Investor.
3.9 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority is required on
the part of Investor in connection with the Investor's valid execution, delivery
and performance of this Agreement or the issuance of the Shares, except for any
filings under any applicable federal or state securities law and except for any
filing under the H-S-R Act.
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<PAGE> 9
4. Covenants of Investor.
4.1 Transfer Restriction. Investor hereby agrees that during the
time period commencing as of the Closing until the first anniversary of the
Effective Date (with such time period being referred to as the "Initial
Restricted Period"), that neither it nor any affiliate shall, directly or
indirectly sell, offer to sell, contract to sell (including, without limitation,
any short sale), grant any option to purchase or otherwise transfer or dispose
of (other than to donees who agree to be similarly bound) any of the Shares, any
securities acquired pursuant to Section 7.11 or any securities issued to
Investor pursuant to that certain Wholesale Purchase Agreement between the
Company and Investor dated the date hereof (the "Wholesale Agreement")
("Restricted Securities") at any time during the Initial Restricted Period.
Investor hereby also agrees that during the time period commencing as of the
last day of the Initial Restricted Period until the second anniversary date of
the Effective Date (with such time period being referred to as the "Follow-On
Restricted Period"), that neither it nor any affiliate shall, directly or
indirectly sell, offer to sell, contract to sell (including, without limitation,
any short sale), grant any option to purchase or otherwise transfer or dispose
of (other than to donees who agree to be similarly bound) any of the Restricted
Securities at any time during the Follow-On Restricted Period other than in
compliance with the volume restrictions then set forth under Rule 144 (or its
successor rule) promulgated under the Securities Act ("Rule 144") (even if such
volume limitations are not applicable to Investor under such rule). In order to
enforce the foregoing covenant, the Company may impose legends and/or
stop-transfer instructions with respect to the Restricted Securities held by
Investor (and the Restricted Securities of every other person subject to the
foregoing restriction) until the end of such periods. Following the last day of
the Follow-On Restricted Period, any restrictions under this Section 4.1 shall
terminate and be of no further force and effect.
4.2 Standstill Provisions. Commencing as of the Closing and
through the fifth anniversary of the Effective Date, Investor (including all
affiliates (as defined in Rule 144) of Investor ("Affiliate")) shall not acquire
beneficial ownership of any shares of Common Stock of the Company, any
securities convertible into or exchangeable for Common Stock, or any other right
to acquire Common Stock, except by way of stock dividends or other distributions
or offerings made available to holders of Common Stock generally (collectively,
"Company Stock"), from the Company or any other person or entity, such that such
beneficial ownership of Investor (together with all Affiliates) shall be greater
than ten percent (10%) of the Company's outstanding Common Stock without the
prior written consent of the Company, which consent may be withheld in its sole
discretion; provided, however, that in no event shall (i) the original purchase
of Shares pursuant to this Agreement, (ii) the subsequent issuance of shares of
the Company's Common Stock pursuant to the Wholesale Agreement or (iii) the
acquisition by Investor (or an Affiliate) of another Company that at the time of
the acquisition owns securities of the Company constitute a violation of this
Section 4.2. In addition, the prohibition on acquisition of beneficial ownership
under this Section 4.2 shall not prevent an Affiliate of Investor from acquiring
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<PAGE> 10
beneficial ownership of securities of the Company, provided such Affiliate is
formed primarily for the purpose of investing in the securities of companies
other than Investor or its Affiliates.
4.3 Termination Upon Certain Events. Notwithstanding the
foregoing, in the event that:
(i) a Person has taken all steps legally required to
commence a formal tender offer, or has publicly announced its intention to
commence a formal tender offer; or
(ii) the Board of Directors of the Company has made a
decision to actively consider disposing of all or substantially all of the
assets of the Company, or merging or consolidating with another entity (other
than a merger or consolidation effected for tax purposes or to change the
domicile of the Company to any state in the United States), as evidenced by its
public announcement of the transaction or its action to formally engage an
investment banker to locate a Person interested in acquiring the Company,
whichever occurs first; or
(iii) any "Person" (as defined herein) becomes the
"Beneficial Owner" (as defined herein) of 30% or more of the shares of Common
Stock of the Company after the date hereof;
Section 4.2 shall cease to have effect and Investor (or any Affiliates) may
acquire and beneficially own more than ten percent (10%) of the Common Stock of
the Company (assuming the full conversion and exercise of all convertible and
exercisable securities of the Company held by Investor and its Affiliates).
4.4 Definitions.
(a) "Person" as used herein shall mean any individual,
corporation, partnership, firm, association, unincorporated organization, joint
venture, trust or other entity, and shall include any successor (by merger or
otherwise) of such entity, or any of the foregoing acting together as a group,
but shall specifically exclude Investor (or any Affiliate of Investor).
(b) A Person shall be deemed to be the "Beneficial Owner"
of and shall be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's
Affiliates beneficially owns, directly or indirectly;
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<PAGE> 11
(ii) which such Person or any of such Person's
Affiliates has (A) the right to acquire, exercisable immediately, pursuant to
any agreement, arrangement or understanding (other than customary arrangements
with and between underwriters and selling group members with respect to a bona
fide public offering of securities), or upon the exercise of conversion rights
or exchange rights, warrants or options or otherwise; provided, however, that a
Person shall not be deemed the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates until such tendered securities
are accepted for purchase or exchange; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided, however, that a Person shall
not be deemed the Beneficial Owner of, or to beneficially own, any security if
the agreement, arrangement or understanding to vote such security (1) arises
solely from a revocable proxy or consent given to such Person in response to a
public proxy or consent solicitation made pursuant to, and in accordance with,
the applicable rules and regulations promulgated under the Exchange Act and (2)
is not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person with which such Person or any of such Person's
Affiliates has any agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members with respect
to a bona fide public offering of securities) for the purpose of acquiring,
holding, voting (except to the extent contemplated by the proviso to Section
4.4(b)(ii)(B)) or disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase, "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.
4.5 Market Stand-Off. The Investor hereby agrees that
during the period of duration not to exceed 120 days specified by the Company
and an underwriter of capital stock of the Company, following the effective date
of a registration statement pursuant to which the Company is offering securities
under the Securities Act, it shall not, to the extent requested by the Company
and such underwriter (and provided the same restriction is agreed to by the
officers and directors of the Company), directly or indirectly sell, offer to
sell, contract to sell (including, without limitation, any short sale but
excluding private placements in reliance on the so-called "4(1-1/2)" exemption
under the Securities Act), grant any option to purchase or otherwise transfer or
dispose of (other than to donees who agree to be similarly bound) any securities
of the Company held by it at any time during such period except Common Stock
included in such registration. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to the Shares until
the end of such period.
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<PAGE> 12
5. Right of First Offer.
5.1 Rights of First Offer.
(a) The Investor shall not make any disposition of all or any
portion (or any interest) of the Restricted Securities, without first giving the
Company the right to accept an offer to purchase such securities, except for any
dispositions that are exempt pursuant to the terms of Section 5.3. Subject to
Section 4.1, at the time the Investor wishes to make a disposition of any or all
of the Restricted Securities, it shall submit an offer to sell all, but not less
than all, of such Restricted Securities which Investor wishes to dispose (the
"Offered Shares") to the Company (the "Offer") by facsimile to the Company's
President or Chief Operating Officer (such facsimile to be received during the
Company's normal business hours and to be confirmed in writing by notice
pursuant to Section 7.6) as follows:
(i) If the Investor wishes to sell the Offered Shares in an open
market disposition, the Offer shall disclose the number of Offered Shares
proposed to be sold. As soon as practicable after receipt of the Offer, but in
no event later than five (5) business days after the Investor makes the Offer,
the Company shall have the option to accept the Offer to purchase the Offered
Shares at the higher of (a) the closing market price on the business day next
preceding the day of the Offer or (b) the closing market price on the business
day next preceding the day the Offer is accepted by the Company. In the event
the Company does not purchase the Offered Shares offered by the Investor
pursuant to the Offer, the Investor may sell the Offered Shares at any time
within 90 days after the expiration of the Offer. Any such sale shall be made in
the open market at the market prices prevailing at the time of the sale.
(ii) If the Investor wishes to sell or otherwise transfer the
Offered Shares in a privately negotiated transaction, whether through
brokers-dealers who may act as agent or acquire the Offered Shares as principal,
or otherwise, the Offer shall disclose the number of Offered Shares proposed to
be sold or transferred and the price at which the Offered Shares are offered to
the Company. As soon as practicable after receipt of the Offer, but in no event
later than five (5) business days after the Investor makes the Offer, the
Company shall have the option to accept the Offer to purchase the Offered Shares
at the higher of (a) the price per share set forth in the Offer or (b) the
closing market price on the business day next preceding the day the Offer is
accepted by the Company. In the event the Company does not purchase the Offered
Shares offered by the Investor pursuant to the Offer, and provided that the
price specified in the Offer is not greater than the closing market price on the
business day next preceding the day of the Offer, the Investor may sell or
transfer the Offered Shares at any time within 90 days after the expiration of
the Offer for any price.
(iii) If the Investor wishes to effect an underwritten offering
of the Offered Shares, the Offer shall disclose the number of Offered Shares
proposed to be sold to the
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<PAGE> 13
underwriters. The Company shall have the option to purchase the Offered Shares
at the higher of (a) the closing market price on the business day next preceding
the day of the Offer or (b) the closing market price on the business day next
preceding the day the Offer is accepted by the Company. As soon as practicable
after receipt of the Offer, but in no event later than five (5) business days
after the Investor makes the Offer, the Company shall have the option to accept
the Offer to purchase the Offered Shares. In the event the Company does not
purchase the Offered Shares offered by the Investor pursuant to the Offer, the
Investor may sell the Offered Shares in an underwritten offering commenced
within one hundred twenty (120) days after the expiration of the Offer.
(b) Any Offered Shares not sold in accordance with the
applicable terms and within the applicable time periods provided in subsection
(a) above shall continue to be subject to the requirements of a first offer
pursuant to this Section.
(c) The provisions of subsections (a) and (b) above shall
not apply to any disposition of Restricted Securities in which the aggregate
number of such Restricted Securities involved in such disposition is less than
two percent (2%) of the aggregate number of Restricted Securities acquired by
Investor (or its Affiliates) under this Agreement and the Wholesale Agreement
(subject to appropriate adjustment in the event of stock splits, stock
dividends, recapitalizations and the like) during any 30-day period.
(d) The provisions of subsections (a) and (b) above shall
not apply to any disposition of Restricted Securities made in a privately
negotiated transaction, whether through broker-dealers who may act as agent or
acquire such Restricted Securities as principal, or otherwise, in which: (i) the
aggregate number of such Restricted Securities involved in such disposition is
less than four percent (4%) of the aggregate number of Restricted Securities
acquired by Investor (or its Affiliates) under this Agreement and the Wholesale
Agreement (subject to appropriate adjustment in the event of stock splits, stock
dividends, recapitalizations and the like); and (ii) no other disposition under
this Section 5.1(d) shall have occurred for a period of at least thirty (30)
days prior to the applicable disposition; and (iii) such disposition shall not
be to an entity a material portion of the business operations of which relates
to the pharmaceutical industry, or to an affiliate of such entity or to a third
party purchasing on behalf of such entity. The Restricted Securities subject to
this Section 5.1(d) shall bear a legend reasonably acceptable to the Company
reflecting the restrictions set forth herein.
(e) If the Company accepts an Offer under this Section,
the closing of such purchase shall occur within ten (10) business days after
acceptance of the Offer by the Company. Upon such acceptance, the Company and
the Investor shall be legally obligated to consummate the purchase contemplated
thereby.
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<PAGE> 14
(f) The provisions of this Section 5.1 shall lapse and
cease to have any effect at such time as the Investor owns Restricted Securities
which represent less than three percent (3%) of the outstanding Common Stock of
the Company.
5.2 Binding Effect. The Company's right of first offer shall be
assignable in whole or in part by the Company, (but only after the Company
receives notice of a transfer which is subject to a right of first offer and
only with respect to that individual transaction) and shall inure to the benefit
of its successors and assigns. The Company's right of first offer shall be
binding upon any transferee of any Restricted Securities acquired pursuant to a
disposition that is exempt from the right of first offer pursuant to the terms
of Section 5.3(i).
5.3 Exempt Transfers. The Company's right of first offer shall
not apply to (i) subject to Section 5.2, transfers to controlled Affiliates of
Investor provided the transferee agrees to be bound by the obligations of this
Agreement, or (ii) transactions involving a merger, reorganization,
recapitalization or sale of all or substantially all of the business or capital
stock of the Company approved by the Company's board of directors, or (iii) any
tender or exchange offer for more than fifty percent (50%) of the Company's
outstanding voting stock.
6. Additional Covenants.
6.1 Nasdaq National Market Designation. The Company shall give
the Nasdaq National Market timely notice of the issuance of the Shares and shall
use all commercially reasonable efforts to maintain the Non-Quantitative
Designation Criteria contained in Rule 4460 of the NASD Manual to the extent
such criteria are within the control of the Company.
6.2 Reports Under Exchange Act. With a view to making available
to the Investor the benefits of Rule 144 and any other rule or regulation of the
SEC that may at any time permit the Investor to sell the Shares to the public
without registration, the Company agrees to: (a) make and keep public
information available, as those terms are understood and defined in Rule 144, at
all times; (a) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and (c) furnish to the Investor, so long as the Investor owns any Shares,
forthwith upon request (i) a written statement by the Company that it has
complied with the reporting requirements of Rule 144, the Securities Act and the
Exchange Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing the Investor
of any rule or regulation of the SEC which permits the selling of any Shares
without registration.
7. Miscellaneous.
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<PAGE> 15
7.1 Survival of Warranties. The warranties, representations and
covenants of the Company and Investor contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investor or the Company.
7.2 Successors and Assigns. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any of the Shares sold hereunder). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
7.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware as applied to agreements among
Delaware residents entered into and to be performed entirely within Delaware.
7.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing by personal delivery to
the party to be notified or by Federal Express or other overnight package
delivery service or by registered or certified mail, postage prepaid and
addressed to the party to be notified at the following addresses, or at such
other address as such party may designate by five (5) days' advance written
notice to the other parties (with notice deemed given upon receipt):
If to the Company:
Ligand Pharmaceuticals Incorporated
9393 Towne Centre Drive
San Diego, California 92121
Attn: William L. Respess, Esq.
If to Investor:
Eli Lilly and Company
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<PAGE> 16
Lilly Corporate Center
Indianapolis, IN 46285
Attention: General Counsel
7.7 Finder's Fee. Each party represents that it neither is nor
will be obligated for any finders' fee or commission in connection with this
transaction. Each party agrees to indemnify and to hold harmless the other party
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the indemnifying party or any of its officers,
partners, employees or representatives is responsible.
7.8 Expenses. Irrespective of whether the Closing is effected,
each party shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
7.9 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively
but only if so expressly stated), only with the written consent of the Company
and Investor. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each holder of any securities purchased under this
Agreement at the time outstanding, each future holder of all such securities,
and the Company.
7.10 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provisions were so excluded and shall be enforceable in
accordance with its terms.
7.11 Right of Participation in Equity Financings. Subject to the
terms and conditions specified in this Section 7.11, the Company hereby grants
to Investor a right to purchase up to the number of Additional Shares (as
defined below) in connection with any Equity Financing (as defined below)
undertaken by the Company.
(a) Each time the Company proposes to offer shares of any class
of its capital stock (not including any security convertible into a class of
capital stock) in a registered public offering ("Equity Financing"), the Company
shall deliver a notice in person, by air courier or by facsimile ("Notice") to
Investor stating (i) its bona fide intention to undertake such Equity Financing,
(ii) the number of shares to be offered in the Equity Financing (the "Equity
Financing Shares"), (iii) the number of Additional Shares up to which Investor
may elect to purchase in such Equity Financing which would be added to the
Equity
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<PAGE> 17
Financing Shares, and (iv) the price and terms, if any, upon which it proposes
to offer such shares in the Equity Financing.
(b) Within ten (10) business days after giving the Notice,
Investor may elect to purchase, at the price and on the terms specified in the
Notice, up to the number of Additional Shares set forth in the Notice. The
number of shares of capital stock ("Additional Shares") that Investor may elect
to purchase and include in the Equity Financing shall be calculated as follows:
Additional Equity Equity
Shares = Financing Shares Financing Shares
---------------- ----------------
1 - X% 1
X% represents the greater of (i) percentage of the outstanding shares of
the Company then held by Investor, which shares have been acquired by
Investor pursuant to this Agreement and the Wholesale Agreement, or (ii)
the percentage of the outstanding shares of the Company held by Investor
at the Closing.
In the event the number of Equity Financing Shares changes for any reason (other
than including the Additional Shares) after the Notice is delivered to Investor,
the number of Additional Shares shall be recalculated using the new number of
Equity Financing Shares and the Company shall promptly provide a revised Notice
to Investor reflecting such change.
(c) The right of Investor in this Section 7.11 shall not be
applicable (i) to the issuance or sale of shares under any plan, agreement or
arrangement, to employees, directors, consultants, customers, vendors, suppliers
or other persons or organizations with which the Company has a commercial
relationship, provided that such issuances are for other than primarily equity
financing purposes, (ii) to the issuance or sale of stock pursuant to Regulation
S (or successor rule or regulation) promulgated under the Securities Act, (iii)
to the issuance of shares pursuant to the conversion or exercise of convertible
or exercisable securities, (iv) to the issuance of shares in connection with a
bona fide business acquisition of or by the Company, whether by merger,
consolidation, sale of assets, sale or exchange of stock or otherwise, (v) to
the issuance of shares to a corporation, partnership, educational institution or
other entity in connection with a research and development partnership or
licensing or other collaborative arrangement between the Company and such
institution or entity, or (vi) to the issuance of shares to persons or entities
with which the Company has business relationships provided such issuances are
for other than primarily equity financing purposes.
(d) Notwithstanding anything to the contrary, Investor's right
hereunder shall not be applicable, and Investor shall have no right, to the
extent that exercising such right should cause Investor (including any
Affiliates), to own more than the greater of
-17-
<PAGE> 18
(i) percentage of the outstanding shares of the Company then held by Investor,
which shares have been acquired by Investor pursuant to this Agreement and the
Wholesale Agreement, or (ii) the percentage of the outstanding shares of the
Company held by Investor at the Closing.
(e) Investor's rights and obligations under this Section 7.11
shall not be assignable.
(f) The rights of Investor under this Section 7.11 shall
terminate on the earlier of (i) the fifth anniversary date of this Agreement or
(ii) the consummation of a merger, reorganization, recapitalization, exchange
offer or sale of all or substantially all of the assets of the Company by, with
or to a third party.
7.12 Entire Agreement. This Agreement and the documents referred
to herein constitute the entire agreement among the parties and no party shall
be liable or bound to any other party regarding the subject matter hereof and
thereof in any manner by any warranties, representations, or covenants except as
specifically set forth herein or therein.
[Remainder of This Page Intentionally Left Blank]
-18-
<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
LIGAND PHARMACEUTICALS
INCORPORATED
By: /s/ David E. Robinson
-------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
INVESTOR:
ELI LILLY AND COMPANY
By: /s/ August Watanabe
-------------------------------------
August M. Watanabe
Title: Executive Vice President and Chief
Scientific Officer
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
-19-
<PAGE> 20
EXHIBIT A
SCHEDULE OF EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
This Schedule of Exceptions is made and given pursuant to Section 2 of
the Stock Purchase Agreement (the "Agreement") dated as of November 25, 1997 by
and between Ligand Pharmaceuticals Incorporated, a Delaware corporation (the
"Company") and Eli Lilly and Company, an Indiana corporation (the "Investor").
The section numbers in this Schedule of Exceptions correspond to the section
numbers in the Agreement; however, any information disclosed herein under any
section number shall be deemed to be disclosed and incorporated into any other
section number under the Agreement where such disclosure would otherwise be
appropriate. Any terms defined in the Agreement shall have the same meaning when
used in this Schedule of Exceptions as when used in the Agreement unless the
context otherwise requires.
Nothing herein constitutes an admission of any liability or obligation
on the part of the Company nor an admission against the Company's interest. The
inclusion of any schedule herein or any exhibit hereto should not be interpreted
as indicating that the Company has determined that such an agreement or other
matter is necessarily material to the Company. The Investor acknowledges that
certain information contained in these schedules may constitute material
confidential information relating to the Company which may not be used for any
purpose other than that contemplated in the Agreement.
Schedule 2.4 -- SEC Reports
On September 26, 1997, the Company filed a Registration Statement on
Form S-1 (the "Registration Statement") with the Securities and Exchange
Commission in connection with the public offering of an indefinite number of
shares of Common Stock, par value $.001 per share (the "Shares") of the Company
with an aggregate value of $46,410,000. In addition, the Company filed a
Schedule 13e-3 with respect to the transaction. All of the Shares will be issued
to the stockholders of Allergan Ligand Retinoid Therapeutics, Inc. ("ALRT"), a
research and development company formed by the Company with Allergan, Inc.
("Allergan") in December 1994. ALRT's stockholders will receive such Shares in
connection with the Company's exercise of its option (the "Stock Purchase
Option") to acquire all of the outstanding shares of ALRT Callable Common Stock,
$0.001 par value per share (the "Callable Common Stock"). The shares of Callable
Common Stock were originally issued pursuant to a subscription offering of
rights to purchase units consisting of one share of the Callable Common Stock
and two warrants to purchase the Common Stock of the Company. The issuance of
the Shares is being registered by the Company on the Registration Statement
pursuant to the Company's obligations, as set forth in Article V of ALRT's
Amended and Restated Certificate of Incorporation to provide the holders of
Callable Common Stock with shares of the Company's Common Stock covered by an
effective registration statement upon exercise of the Stock Purchase Option.
On September 24, 1997, in connection with the Company and Allergan's
exercise of their respective options to purchase Callable Common Stock and
assets of ALRT as set forth in the
<PAGE> 21
Registration Statement, the Company and ALRT also agreed to restructure the
terms and conditions relating to research, development, commercialization and
sublicense rights for the ALRT compounds. Pursuant to the restructuring, the
Company will receive exclusive, worldwide development, commercialization and
sublicense rights to Oral and Topical Panretin (ALRT1057) (currently in pivotal
Phase III clinical trials), ALRT1550 (currently in Phase I/IIa clinical trials
for oncology applications) and ALRT268 and ALRT 324 (two advanced preclinical
RXR selective compounds). Allergan will receive exclusive, worldwide
development, commercialization and sublicense rights to ALRT4310, an RAR
antagonist being developed for topical application against mucocutaneous
toxicity associated with currently marketed retinoids as well as for psoriasis.
Allergan will also receive ALRT326 and ALRT4204 (two advanced preclinical RXR
selective compounds). In addition, Ligand and Allergan will participate in a
lottery for each of the approximately 2,000 retinoid compounds existing in the
ART compound library as of the closing date, with each party acquiring
exclusive, worldwide development, commercialization and sublicense rights to the
compounds which they select. Ligand and Allergan will each receive a royalty
based on net sales of products developed from their selected compounds in
addition to the other compounds to which they acquire exclusive rights. Ligand
will also pay to Allergan a royalty based on net sales of Targretin for uses
other than oncology and dermatology indications and will pay a percentage of
royalties payable to Ligand with respect to sales of Targretin other than in
such indications.
In addition to the various agreements reported in the Company's various
SEC filings, on or about the Closing, the Company will have entered into (i)
that certain Closing Agreement to be effective as of October 19, 1997, by and
between the Company and Investor, (ii) the Agreement, (iii) that certain
Collaboration Agreement by and between the Company, Investor and ALRT, (iv) that
certain Development and Licensing Agreement (Targretin) by and between the
Company and Investor, and (v) that certain Option and Wholesale Purchase
Agreement by and between the Company and Investor.
Schedule 2.13 -- Intellectual Property
The Company has licensed its rights under certain patent applications
which cover certain pharmaceutical uses of 9-cis-retinoic acid (ALRT1057) to
ALRT. The Company has become aware that a United States patent has been issued
to, and foreign counterparts have been filed by, Hoffman LaRoche ("LaRoche")
which covers pharmaceutical uses of 9-cis-retinoic acid which may conflict with
the Company's right under the patent applications licensed to ALRT. The U.S.
Patent and Trademark Office ("PTO") has informed the Company that the
overlapping claims are patentable to the Company and stated its intention to
initiate an interference proceeding to determine whether the Company or LaRoche
is entitled to a patent by having been first to invent the common subject
matter. The Company cannot be assured of a favorable outcome in the interference
proceeding because of factors not known at this time which may impact the
outcome. In addition, the interference proceeding may delay the decision of the
PTO regarding the Company's application for the Oral and Topical Panretin
(ALRT1057) products. While the Company believes that the LaRoche patent does not
cover the use of Oral and Topical Panretin (ALRT1057) to treat leukemias such as
APL and sarcomas such as KS, or the treatment of skin diseases such as
psoriasis, if the Company does not prevail in the interference
<PAGE> 22
proceeding, the LaRoche patent might block the Company's use of Oral and Topical
Panretin (ALRT1057) in certain cancers, and the Company may not be able to
obtain patent protection for the Oral and Topical Panretin (ALRT1057) products.
Schedule 2.14 -- Capitalization; Options and Warrants
See Schedule 2.4 regarding the issuance of the Shares to the ALRT
stockholders.
<PAGE> 1
EXHIBIT 10.171
AMENDMENT TO OPTION AND WHOLESALE PURCHASE AGREEMENT
This Amendment is executed as of the 23rd day of February, 1998 by and
between Eli Lilly and Company ("Lilly") and Ligand Pharmaceuticals Incorporated
("Ligand").
Whereas, Lilly and Ligand have entered into an Option and Wholesale
Purchase Agreement dated as of November 25, 1997 (the "Agreement"), and
Whereas the parties now desire to amend the Agreement to extend the
period of time pursuant to which Ligand may exercise the Ligand Option (as
defined in the Agreement).
Now, therefore, in consideration of the foregoing, the mutual covenants
set forth below and other consideration, receipt sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Section 1.1 of the Agreement is hereby amended to read in its
entirety as follows: "Until the later of (a) April 27, 1998, or (b) the date
which is three (3) business days after the date Ligand delivers to Lilly the
notice referred to in Section 1.4 (the "Ligand Option Period"), Ligand shall
have the option (the "Ligand Option") to become Lilly's exclusive wholesaler of
the Products, subject to the terms and conditions contained in this Agreement.
2. All other terms and conditions of the Agreement shall remain in full
force and effect.
3. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one in the same.
LIGAND PHARMACEUTICALS INC. ELI LILLY AND COMPANY
By: /s/ William L. Respess By: /s/ August M. Watanabe
------------------------------------ -------------------------
Sr. Vice President, August M. Watanabe
General Counsel, Government Relations Executive Vice President
Science and Technology
Date: February 28, 1998 Date: February 28, 1998
----------------- -----------------
<PAGE> 1
EXHIBIT 10.172
AMENDMENT #2 TO OPTION AND WHOLESALE PURCHASE AGREEMENT
This Amendment is executed as of the 16th day of March, 1998 by and between
Eli Lilly and Company ("Lilly") and Ligand Pharmaceuticals Incorporated
("Ligand").
Whereas, Lilly and Ligand have entered into an Option and Wholesale
Purchase Agreement dated as of November 25, 1997, and amended on February 23,
1998 (the "Agreement"), and
Whereas the parties now desire to amend the Agreement to extend the period
of time pursuant to which Ligand may exercise the Ligand Option (as defined in
the Agreement).
Now, therefore, in consideration of the foregoing, the mutual covenants set
forth below and other consideration, receipt sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Section 1.1 of the Agreement is hereby amended to read in its
entirety as follows:
"Ligand Option. Until the date that is seven (7) days after the date on which
Lilly gives written notice (the "Option Termination Notice") to Ligand of
Lilly's desire to terminate the Ligand Option (the "Ligand Option Period"),
Ligand shall have the option (the "Ligand Option") to become Lilly's exclusive
wholesaler of the Products, subject to the terms and conditions contained in
this Agreement. Lilly shall not give the Option Termination Notice prior to
April 27, 1998. If Lilly gives the Option Termination Notice prior to May 28,
1998, it will, upon written request made by both Ligand and Seragen and
delivered to Lilly within five (5) days of the date of the Option Termination
Notice, defer effectiveness of the Option Termination Notice until May 28, 1998,
(with the effect that the Ligand Option would expire on June 4, 1998, if not
previously exercised). ***
***
***
***
***
***
2. All other terms and conditions of the Agreement shall remain in full
force and effect.
3. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one in the same.
LIGAND PHARMACEUTICALS INC. ELI LILLY AND COMPANY
By: /s/ William L. Respess By: /s/ August M. Watanabe
--------------------------- -----------------------------
Sr. Vice President, General August M. Watanabe
Counsel, Government Affairs Executive Vice President
Science and Technology
Date: February 28, 1998 Date: February 28, 1998
----------------- -----------------
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
<PAGE> 1
EXHIBIT 21.1
Exhibit 21.1 Subsidiaries of the Registrant
LIGAND PHARMACEUTICALS, INCORPORATED
LIST OF SUBSIDIARIES
Jurisdiction of
Name Incorporation
Glycomed Incorporated California
Ligand Pharmaceuticals, (Canada) Incorporated Saskatchewan, Canada
Allergan Ligand Retinoid Therapeutics, Inc. Delaware
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements on
Form S-3 No. 333-12603 and Form S-8 No. 333-32297 pertaining to the 1992 Stock
Option/Stock Issuance Plan and the 1992 Employee Stock Purchase Plan of Ligand
Pharmaceuticals Incorporated, as amended, of our report dated January 30, 1998,
with respect to the consolidated financial statements of Ligand Pharmaceuticals
Incorporated included in Ligand Pharmaceuticals Incorporated's Annual Report
(Form 10-K) for the year ended December 31, 1997.
ERNST & YOUNG LLP
San Diego, California
March 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 62,252
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<CURRENT-ASSETS> 84,094
<PP&E> 29,311
<DEPRECIATION> 14,458
<TOTAL-ASSETS> 107,422
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<BONDS> 51,379
0
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