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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
MARK ONE
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO ______ .
COMMISSION FILE NUMBER: 0-20720
LIGAND PHARMACEUTICALS INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (619) 535-7500
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of April 30, 1999 the registrant had 46,612,073 shares of Common Stock
outstanding.
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LIGAND PHARMACEUTICALS INCORPORATED
QUARTERLY REPORT
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
COVER PAGE........................................................................................ 1
TABLE OF CONTENTS................................................................................. 2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998...................... 3
Consolidated Statements of Operations for the three months ended March 31, 1999 and 1998.... 4
Consolidated Statements of Cash Flows for the three months ended March 31, 1999 and 1998.... 5
Notes to Consolidated Financial Statements.................................................. 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................................. 7
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk......................... 16
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.................................................................. *
ITEM 2. Changes in Securities and Use of Proceeds.......................................... 17
ITEM 3. Defaults upon Senior Securities.................................................... *
ITEM 4. Submission of Matters to a Vote of Security Holders................................ *
ITEM 5. Other Information.................................................................. 17
ITEM 6. Exhibits and Reports on Form 8-K................................................... 17
SIGNATURE......................................................................................... 18
</TABLE>
* No information provided due to inapplicability of item.
2
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PART I. FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,011 $ 32,801
Short-term investments 35,694 37,166
Accounts receivable 4,327 830
Inventories 6,167 6,166
Other current assets 1,134 1,030
--------- ---------
Total current assets 58,333 77,993
Restricted short-term investments 2,244 2,554
Property and equipment, net 22,931 23,722
Acquired technology 39,976 40,312
Notes receivable from officers and employees 500 544
Other assets 11,342 10,895
--------- ---------
$ 135,326 $ 156,020
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,113 $ 12,363
Accrued liabilities 6,549 7,216
Deferred revenue 3,110 4,115
Current portion of obligations under capital leases 3,263 3,201
--------- ---------
Total current liabilities 20,035 26,895
Long-term obligations under capital leases 7,328 8,165
Accrued acquisition obligation 40,000 50,000
Convertible note 2,500 2,500
Convertible subordinated debentures 39,971 39,302
Zero coupon convertible senior notes 41,252 40,520
Stockholders' equity:
Convertible preferred stock, $.001 par value; 5,000,000
shares authorized; none issued -- --
Common stock, $.001 par value; 80,000,000 shares
authorized; 46,601,200 shares and 45,690,067 shares issued
at March 31, 1999 and December 31, 1998, respectively 47 46
Paid-in capital 394,901 384,715
Adjustment for unrealized losses on available-for-sale securities (509) (482)
Accumulated deficit (410,188) (395,630)
--------- ---------
(15,749) (11,351)
Less treasury stock, at cost (1,114 shares
at March 31, 1999 and December 31, 1998) (11) (11)
--------- ---------
Total stockholders' equity (15,760) (11,362)
--------- ---------
$ 135,326 $ 156,020
========= =========
</TABLE>
See accompanying notes.
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LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues:
Product sales $ 4,366 $ 92
Contract manufacturing sales 297 --
Collaborative research and development,
and other milestone revenues 5,618 4,974
-------- --------
Total revenues 10,281 5,066
Costs and expenses:
Cost of products sold 2,583 175
Research and development expenses 14,469 14,732
Selling, general and administrative 5,875 2,769
-------- --------
Total costs and expenses 22,927 17,676
-------- --------
Loss from operations (12,646) (12,610)
Interest income 750 1,052
Interest expense (2,663) (1,982)
-------- --------
Net loss $(14,559) $(13,540)
======== ========
Basic and diluted loss per share $ (.32) $ (.35)
======== ========
Shares used in computing net loss per share 45,794 38,565
======== ========
</TABLE>
See accompanying notes.
4
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LIGAND PHARMACEUTICALS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1999 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(14,559) $(13,540)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization 1,309 1,053
Amortization of notes receivable from officers and employees 44 50
Amortization of acquired technology 336 --
Accretion of debt discount and interest 1,401 668
Change in operating assets and liabilities:
Accounts receivable (3,497) (257)
Inventory (1) (37)
Other current assets (104) (883)
Accounts payable and accrued liabilities (5,917) (7,411)
Deferred revenue (1,005) 270
-------- --------
Net cash used in operating activities (21,993) (20,087)
INVESTING ACTIVITIES
Purchase of short-term investments (9,364) (19,878)
Proceeds from short-term investments 10,811 6,386
Increase in notes receivable from officers and employees -- (75)
Payment of notes receivable from officers and employees -- 8
Increase in other assets (3,549) (2,234)
Decrease in other assets 3,102 309
Purchase of property and equipment (518) (833)
-------- --------
Net cash (used in) provided by investing activities 482 (16,317)
FINANCING ACTIVITIES
Principal payments on obligations under capital leases (775) (784)
Net change in restricted short-term investment 310 248
Net proceeds from sale of common stock 186 742
-------- --------
Net cash provided by financing activities (279) 206
-------- --------
Net decrease in cash and cash equivalents (21,790) (36,198)
Cash and cash equivalents at beginning of period 32,801 62,252
-------- --------
Cash and cash equivalents at end of period $ 11,011 $ 26,054
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 2,242 $ 2,327
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Additions to obligations under capital leases $-- $ 827
Conversion of accrued acquisition obligation to common stock 10,000 --
</TABLE>
See accompanying notes.
5
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LIGAND PHARMACEUTICALS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1999
1. BASIS OF PRESENTATION
The consolidated financial statements of Ligand Pharmaceuticals Incorporated
("Ligand") for the three months ended March 31, 1999 and 1998 are unaudited.
These financial statements reflect all adjustments, consisting of only normal
recurring adjustments which, in the opinion of management, are necessary to
fairly present the consolidated financial position as of March 31, 1999 and the
consolidated results of operations for the three months ended March 31, 1999 and
1998. The results of operations for the period ended March 31, 1999 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1999. For more complete financial information, these financial
statements, and the notes thereto, should be read in conjunction with the
audited consolidated financial statements for the year ended December 31, 1998
included in the Ligand Pharmaceuticals Incorporated Form 10-K filed with the
Securities and Exchange Commission.
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. SFAS 130 requires the change in net unrealized gains (losses) on
available-for-sale securities to be included in comprehensive income. As
adjusted for this item, comprehensive net loss for the three month periods ended
March 31, 1999 and 1998 is $(14.6) million and $(12.3) million, respectively.
SFAS 131 amends the requirements for public enterprises to report financial and
descriptive information about its reportable operating segments. Ligand
currently operates in one business and operating segment and does not believe
adoption of this standard will have a material impact on the Ligand's financial
statements as reported.
2. NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of common
shares outstanding.
3. INVENTORIES
Inventories are stated at the lower of cost or market.
The products Panretin(R) and ONTAK(TM) received approval for marketing by the
FDA in early February 1999. Ligand outsources all manufacturing related to the
production of Panretin(R) commercial inventory. ONTAK(TM) commercial inventory
is produced at the manufacturing facility of Marathon Biopharmaceuticals,
Incorporated, a fully owned subsidiary acquired in January 1999. Inventory also
includes Targretin(R) ("Targretin") for which a New Drug Application ("NDA")
will be filed in 1999. In preparation for the approval by the FDA, if received,
Ligand has manufactured commercial quantities of Targretin of approximately $1.3
million of work-in-process inventory as of March 31, 1998. If the FDA does not
approve the NDA, and Targretin is not approved for commercial sale, any
capitalized costs related to Targretin will be expensed.
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PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This quarterly report may contain predictions, estimates and other
forward-looking statements that involve a number of risks and uncertainties,
including those discussed below at "Risks and Uncertainties." This outlook
represents our current judgment on the future direction of our business. Such
risks and uncertainties could cause actual results to differ materially from any
future performance suggested below. We undertake no obligation to release
publicly the results of any revisions to these forward-looking statements to
reflect events or circumstances arising after the date of this quarterly report.
OVERVIEW
Since January 1989, we have devoted substantially all of our resources to our
intracellular receptor, also known as IR, and signal transducers and activators
of transcription, also known as STATs, drug discovery and development programs.
We have been unprofitable since our inception. We expect to incur substantial
additional operating losses until the commercialization of our products, begun
in the first quarter of 1999, generates sufficient revenues to cover our
expenses. We expect that our operating results will fluctuate from quarter to
quarter as a result of differences in the timing of expenses incurred and
revenues earned from collaborative arrangements and product sales. Some of these
fluctuations may be significant. As of March 31, 1999, our accumulated deficit
was $410.2 million.
In January 1999, we formed Ligand Pharmaceuticals International, Inc. to
develop a global pharmaceutical business.
In January 1999, we purchased substantially all of the assets of Marathon
Biopharmaceuticals LLC for $5.0 million through the issuance of 402,820 shares
of our common stock, at $12.41 per share with an additional $3.0 million to be
paid in August 1999. The purchase of the assets was completed under an agreement
between Ligand, Marathon Biopharmaceuticals LLC and other subsidiaries of Boston
University dated May 11, 1998.
In February 1999, the FDA granted us marketing approval for our first two
products, Panretin(R) gel for the treatment of patients with cutaneous
AIDS-related Kaposi's sarcoma (KS) and ONTAK(TM) for the treatment of patients
with persistent or recurrent cutaneous T-cell lymphoma (CTCL) whose malignant
cells express the CD25 component of the IL-2 receptor.
In February 1999, we submitted a Marketing Authorization Application (MAA)
with the European Agency for the Evaluation of Medicinal Products (EMEA) for
Panretin(R) gel for the treatment of cutaneous lesions of patients with
AIDS-related KS.
In February 1999, Eli Lilly and Company (Lilly) decided to discontinue the
development efforts for three first generation compounds in the Retinoid X
Receptor (RXR) program in diabetes. Instead, Lilly and Ligand have agreed to
focus their efforts on the RXR modulator second generation program, which has
compounds with improved therapeutic indices relative to the three first
generation compounds and on co-agonists of the PPAR receptor program.
In March 1999, we signed marketing and distribution agreements with Ferrer
Internacional, S.A. (Ferrer) to exclusively market and distribute when approved,
in Spain, Portugal, Greece, and Central and South America Ligand's five
near-term oncology products: ONTAK(TM), Panretin(R) gel, Panretin(R) capsules,
Targretin(R) gel and Targretin(R) capsules.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1999 ("1999"), as compared with Three Months Ended
March 31, 1998 ("1998")
Total revenues for 1999 were $10.3 million, an increase of $5.2 million as
compared to 1998. Net loss for 1999 was $14.6 million, an increase of $1.0
million from 1998. The principal factors causing these changes are discussed
below.
Product sales for 1999 were $4.4 million, as compared to $92,000 in 1998. The
increase is due to the revenues from sales of our products, Panretin(R) gel and
ONTAK(TM), approved by the FDA in February 1999.
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Contract manufacturing sales for 1999 were $297,000 as compared to $0 in
1998. These sales were generated under contract manufacturing agreements
performed at the Marathon Biopharmaceuticals facility acquired in January 1999.
Collaborative research and development and other milestone revenues for 1999
were $5.6 million, an increase of $644,000 or 13%, over 1998. The increase was
primarily due to an initial payment of $1.5 million received from Ferrer in
connection with the marketing and distribution agreements entered into in March
1999, partially offset by (a) a one-time payment of $686,000 received from Cytel
Corporation (Cytel) in 1998 and (b) additional payments of $530,000 received
from American Home Products Corporation (AHP) in 1998. The quarter-to-quarter
comparison of collaborative research and development, and other milestone
revenues is as follows ($,000):
<TABLE>
<CAPTION>
March 31,
------------------------
1999 1998
------ ------
<S> <C> <C>
Eli Lilly and Company $2,709 $2,500
Ferrer Internacional S.A 1,500 --
SmithKline Beecham, plc 934 784
Abbott Laboratories 300 300
American Home Products 175 705
Cytel Corporation -- 686
------ ------
$5,618 $4,974
====== ======
</TABLE>
Cost of products sold increased from $175,000 in 1998 to $2.6 million in
1999. The increase is due to manufacturing costs and royalty expenses of $1.3
million associated with our new products as well as costs of $1.3 million
incurred at the Marathon Biopharmaceuticals facility which, except for the
impact of unutilized production capacity in the first quarter, we expect to
recover when services performed under contracts for our contract manufacturing
operation are completed and invoiced.
Research and development expenses were $14.5 million in 1999, compared to
$14.7 million in 1998. Selling, general and administrative expenses were $5.9
million in 1999, up from $2.8 million in 1998. The increase was due primarily to
increased costs associated with the expansion of our sales and marketing
activities related to the launch of our new products.
Interest income declined from $1.1 million in 1998 to $750,000 in 1999,
reflecting lower cash balances following the use of cash to fund development and
clinical programs and to support commercialization activities as well as lower
interest rates on the available cash balances.
Interest expense in 1999 was $2.7 million, an increase of $681,000 over 1998.
The increase is due to the accretion related to the $40.0 million in issue price
of zero coupon convertible senior notes issued to entities affiliated with Elan
Corporation plc.
We have significant net operating loss carry forwards for federal and state
income taxes which are available subject to Internal Revenue Code 382 and 383
carryforward limitations.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations through private and public offerings of our
equity securities, collaborative research revenues, issuance of convertible
notes, capital and operating lease transactions, investment income and product
sales. From inception through March 31, 1999, we have raised cash proceeds of
$244.6 million from sales of equity securities: $166.4 million from private
placements and the exercise of options and warrants and $78.2 million from
public offerings.
As of March 31, 1999, we had acquired a total of $37.0 million in property,
laboratory and office equipment (including assets used by Marathon
Biopharmaceuticals) and $5.0 million in tenant leasehold improvements. Of these
totals, $7.6 million was recorded in the merger with Seragen and will be paid in
cash or common stock, at our option, while substantially all of the balance has
been funded through capital lease and equipment note obligations. In addition,
we lease our office and laboratory facilities. In July 1994, we 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, we entered into a
long-term lease, related to a second build-to-suit facility and loaned the
construction partnership $3.7 million at an annual interest rate of 8.5% which
will be paid back monthly over a 10-year period. The second build-to-suit
facility was completed and occupied
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in December 1997. In February 1997, the Company signed a master lease agreement
to finance future capital equipment up to $1.5 million. This master lease
agreement was expanded and extended in July 1997 and again in December 1998 and
is currently available until March 31, 2000. Each individual schedule under the
master lease agreement will be paid back monthly with interest over a five-year
period. As of March 31, 1999, we had $2.0 million available to finance future
capital equipment. An additional capital equipment line of credit of $2.0
million has been negotiated in May 1999.
Working capital decreased to $38.3 million as of March 31, 1999, from $51.1
million at the end of 1998. The decrease in working capital resulted from a
decrease in cash of $21.8 million offset in part by (a) an increase in accounts
receivable of $3.5 million related to the sale of the recently introduced
products, (b) a decrease in accounts payable of $5.2 million (c) lower accrued
interest payable of $1.0 million and (d) lower deferred revenues of $1.0 million
due to the timing of completion of collaboration agreements.
For the same reasons, cash and cash equivalents, short-term investments and
restricted cash decreased to $48.9 million at March 31, 1999 from $72.5 million
at December 31, 1998. We primarily invest our cash in United States government
and investment grade corporate debt securities.
In January 1999, we purchased substantially all of the assets of Marathon
Biopharmaceuticals for $5.0 million through the issuance of 402,820 shares of
our common stock, at $12.41 per share with an additional $3.0 million to be paid
in August 1999.
We believe our available cash, cash equivalents, marketable securities and
existing sources of funding will be adequate to satisfy our anticipated
operating and capital requirements through 1999. Our future operating and
capital requirements will depend on many factors, including: (1) the
effectiveness of our commercialization activities (2) the pace of scientific
progress in our research and development programs, (3) the magnitude of these
programs, (4) the scope and results of preclinical testing and clinical trials,
(5) the time and costs involved in obtaining regulatory approvals, (6) the costs
involved in preparing, filing, prosecuting, maintaining and enforcing patent
claims, (7) competing technological and market developments, (8) the ability to
establish additional collaborations or changes in existing collaborations, (9)
the cost of manufacturing scale-up.
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 year 2000
requirements. The impact of the year 2000 issue may affect other systems that
utilize imbedded computer chip technology, including, building controls,
security systems or laboratory equipment. It may also impact the ability to
obtain products or services if the provider encounters and fails to resolve year
2000 related problems.
We have established an active program to identify and resolve year 2000
related issues. This program includes the review and assessment of our
information technology and non-information technology systems, as well as third
parties with whom we have a material relationship. This program consists of four
phases: inventory, risk assessment, problem validation and problem resolution.
The inventory phase identified potential risks we face. They include among
others computer software, computer hardware, telecommunications systems,
laboratory equipment, facilities systems (security, environment control, alarm),
service providers (contract research organizations, consultants, product
distribution), and other third parties. The risk assessment phase categorizes
and prioritizes each risk by its potential impact. The problem validation phase
tests each potential risk, according to priority, to determine if an action risk
exists. In the case of critical third parties, this step will include a review
of their year 2000 plans and activities. The problem resolution phase will, for
each validated risk, determine the method/strategy for alleviating the risk. It
may include anything from replacement of hardware or software to process
modification to selection of alternative vendors. This step also includes the
development of contingency plans.
We initiated this program in 1998. The inventory and risk assessment phases
were completed in 1998 while the problem validation phase was completed in 1998
for all areas, except for evaluating specific pieces of research equipment and
the assessment of some critical third parties. We expect that we will complete
the last portion of the problem validation phase by the end of the second
calendar quarter of 1999. Contingency plans are being developed. We expect to
have those plans completed by the end of the second quarter of 1999. We expect
the problem resolution phase to be completed by the end of the third quarter in
1999.
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To date, we have determined that some of our internal information technology
and non-information technology systems are not year 2000 compliant. However, we
have not completed our full assessment of the critical third-party service
providers we utilize. This assessment is taking place as part of the current
problem validation phase.
We are actively correcting problems as we identify them. These corrections
include the replacement of hardware and software systems, the identification of
alternative service providers and the creation of contingency plans. We
currently estimate that the cost of identified problems will be approximately
$100,000 for hardware and software upgrades or modifications. In addition, we
estimate that we will incur approximately $400,000 of internal personnel costs
to complete the remaining phases of the project. We do not believe that the cost
of these actions will have a material adverse affect on our business. We expect
that we will be able to resolve any problems we identify in the remaining phases
of the project as part of normal operating expenses.
Any failure of our internal computer systems or of third-party equipment or
software we use, or of systems maintained by our suppliers, to be year 2000
compliant may adversely effect our business. In addition, adverse changes in the
purchasing patterns of our potential customers as a result of year 2000 issues
affecting them may adversely effect our business. These expenditures by
potential customers may result in reduced funds available to purchase our
products, which could adversely effect our business.
RISKS AND UNCERTAINTIES
The following is a summary description of some of the many risks we face in
our business. You should carefully review these risks in evaluating our business
and the businesses of our subsidiaries. You should also consider the other
information described in this report.
OUR PRODUCT DEVELOPMENT AND COMMERCIALIZATION INVOLVES A NUMBER OF UNCERTAINTIES
AND WE MAY NEVER GENERATE REVENUES FROM THE SALE OF PRODUCTS SUFFICIENT TO
BECOME PROFITABLE.
We were founded in 1987. We have incurred significant losses since our
inception. At March 31, 1999, our accumulated deficit was $410.2 million. To
date, we have received the majority of our revenues from our collaborative
arrangements. We expect to incur additional losses as we continue our research
and development, testing and regulatory activities and as we establish
manufacturing and sales and marketing capabilities. To become profitable, we
must successfully develop, clinically test, market and sell our products. Even
if we achieve profitability, we cannot predict the level of that profitability
or whether we will be able to sustain profitability. We expect that our
operating results will fluctuate from period to period as a result of
differences in when we incur expenses and receive revenues from collaborative
arrangements and other sources. Some of these fluctuations may be significant.
Most of our products will require extensive additional development, including
preclinical testing and human studies, as well as regulatory approvals, before
we can market them. We do not expect that any products other than these for
which marketing approval has been received resulting from our product
development efforts or the efforts of our collaborative partners will be
available for sale until the end of the 1999 calendar year at the earliest, if
at all. There are many reasons that we may fail in our efforts to develop our
other potential products, including the possibility that:
o we may discover during preclinical testing or human studies that they are
ineffective or cause harmful side effects,
o the products may fail to receive necessary regulatory approvals from the
FDA or other foreign authorities in a timely manner or at all,
o we may fail to produce the products, if approved, in commercial
quantities or at reasonable costs, or
o the proprietary rights of other parties may prevent us from marketing
the products.
We also will rely, at least initially, on another company to distribute our
approved products and have only recently developed a sales force. Therefore,
even though two of our products have been approved for marketing, we still may
not be able to successfully market these products or potential products in the
territories chosen for marketing.
WE NEED TO BUILD MARKETING AND SALES FORCES IN THE UNITED STATES AND EUROPE
WHICH WILL BE AN EXPENSIVE AND TIME-CONSUMING PROCESS.
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Developing the sales force to market and sell products is a difficult,
expensive and time-consuming process. We recently developed a sales force for
the U.S. market and will, at least initially, rely on another company to
distribute our products. The distributor will be responsible for providing many
marketing support services, including customer service, order entry, shipping
and billing, and customer reimbursement assistance. In addition, in Canada we
are the sole marketer of two cancer products other companies have developed. We
may not be able to continue to establish and maintain the necessary sales and
marketing capabilities. To the extent we enter into co-promotion or other
licensing arrangements, any revenues we receive will depend on the marketing
efforts of others, which may or may not be successful. Our failure to establish
an effective sales force, either directly or through others, could adversely
affect our business.
SOME OF OUR KEY TECHNOLOGIES HAVE NOT BEEN USED TO PRODUCE MARKETED PRODUCTS AND
MAY NOT BE CAPABLE OF PRODUCING SUCH PRODUCTS.
To date, we have dedicated most of our resources to the research and
development of potential drugs based upon our expertise in our IR and STATs
technologies. Even though certain marketed drugs act through IRs, some aspects
of our IR technologies have not been used to produce marketed products. In
addition, we are 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. If we are unable to
apply our IR and STAT technologies to the development of our potential products,
our business could be adversely affected.
OUR DRUG DEVELOPMENT PROGRAMS WILL REQUIRE SUBSTANTIAL ADDITIONAL FUTURE CAPITAL
AND WE MAY NEED MORE CAPITAL.
Our drug development programs require substantial additional capital, arising
from costs to:
o conduct research, preclinical testing and human studies,
o establish pilot scale and commercial scale manufacturing processes and
facilities, and
o establish and develop quality control, regulatory, marketing, sales and
administrative capabilities.
Our future operating and capital needs will depend on many factors,
including:
o the pace of scientific progress in our research and development programs
and the magnitude of these programs,
o the scope and results of preclinical testing and human studies,
o the time and costs involved in obtaining regulatory approvals,
o the time and costs involved in preparing, filing, prosecuting,
maintaining and enforcing patent claims,
o competing technological and market developments,
o our ability to establish additional collaborations,
o changes in our existing collaborations,
o the cost of manufacturing scale-up, and
o the effectiveness of our commercialization activities.
OUR PRODUCTS MUST CLEAR SIGNIFICANT REGULATORY HURDLES PRIOR TO MARKETING.
Before we obtain the approvals necessary to sell any of our potential
products, we must show through preclinical studies and clinical trials that each
product is safe and effective. Our failure to show any product's safety and
effectiveness would delay or prevent regulatory approval of the product and
could adversely affect our business. The clinical trials process is complex and
uncertain. The results of preclinical studies and initial clinical trials may
not necessarily predict the results from later large-scale clinical trials. In
addition, clinical trials may not demonstrate a product's safety and
effectiveness to the satisfaction of the regulatory authorities. A number of
companies have suffered significant setbacks in advanced clinical trials or in
seeking regulatory approvals, despite promising results in earlier trials. The
FDA may also require additional
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<PAGE> 12
clinical trials post approval, which could be expensive and time-consuming, and
failure to successfully conduct those trials could jeopardize continued
commercialization.
The rate at which we complete our clinical trials depends on many factors,
including our ability to obtain adequate clinical supplies and patient
enrollment. Patient enrollment 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 patient enrollment may result in
increased costs and longer development times. In addition, some of our
collaborative partners have rights to control product development and clinical
programs for products developed under the collaborations. As a result, these
collaborators may conduct these programs more slowly or in a different manner
than we had expected. Even if clinical trials are completed, we or our
collaborative partners still may not apply for FDA approval in a timely manner
or the FDA still may not grant approval.
WE MAY NOT BE ABLE TO PAY AMOUNTS DUE ON OUR OUTSTANDING INDEBTEDNESS.
We may not have sufficient cash to make required payments due under our
existing debt. Our subsidiary, Glycomed, is obligated to make payments under
certain debentures in the total principal amount of $50.0 million. The
debentures bear interest at a rate of 7 1/2% per annum and are due in 2003.
Glycomed may not have the funds necessary to pay the interest on and the
principal of these debentures when due. If Glycomed does not have adequate
funds, it will be forced to refinance the debentures and may not be successful
in doing so. In addition, in November 1998, we issued notes with a total issue
price of $40.0 million to Elan. Glycomed's failure to make payments when due
under its debentures would cause us to default under the notes we have issued or
may issue to Elan.
WE MAY REQUIRE ADDITIONAL STOCK OR DEBT FINANCINGS TO FUND OUR OPERATIONS WHICH
MAY NOT BE AVAILABLE ON ACCEPTABLE TERMS.
We have incurred losses since our inception and do not expect to generate
positive cash flow to fund our operations for the 1999 calendar year and perhaps
for one or more subsequent years. As a result, we may need to complete
additional equity or debt financings in the near future to fund our operations.
These financings may not be available on acceptable terms. In addition, these
financings, if completed, still may not meet our capital needs and could result
in substantial dilution to our stockholders. For instance, the notes we issued
to Elan are convertible into common stock at the option of Elan, subject to some
limitations. In addition, we may issue additional notes to Elan with up to a
total issue price of $70.0 million, which also would be convertible into common
stock. If adequate funds are not available, we may be required to delay, reduce
the scope of or eliminate one or more of our drug development programs.
Alternatively, we may be forced to attempt to continue development by entering
into arrangements with collaborative partners or others that require us to
relinquish some or all of our rights to certain technologies or drug candidates
that we would not otherwise relinquish. Our inability to obtain additional
financing or to satisfy our obligations or the obligations of our subsidiaries
under outstanding indebtedness could adversely affect our business.
WE FACE SUBSTANTIAL COMPETITION.
Some of the drugs that we are developing and marketing will compete with
existing treatments. In addition, several companies are developing new drugs
that target the same diseases that we are targeting and are taking IR-related
and STAT-related approaches to drug development. Many of our existing or
potential competitors, particularly large drug companies, have greater
financial, technical and human resources than us and may be better equipped to
develop, manufacture and market products. Many of these companies also have
extensive experience in preclinical testing and human clinical trials, obtaining
FDA and other regulatory approvals and manufacturing and marketing
pharmaceutical products. In addition, academic institutions, governmental
agencies and other public and private research organizations are developing
products that may compete with the products we are developing. These
institutions are becoming more aware of the commercial value of their findings
and are seeking patent protection and licensing arrangements to collect payments
for the use of their technologies. These institutions also may market
competitive products on their own or through joint ventures and will compete
with us in recruiting highly qualified scientific personnel. Any of these
companies, academic institutions, government agencies or research organizations
may develop and introduce products and processes that compete with or are better
than ours. As a result, our products may become noncompetitive or obsolete.
OUR SUCCESS WILL DEPEND ON THIRD-PARTY REIMBURSEMENT AND MAY BE IMPACTED BY
HEALTH CARE REFORM.
The efforts of governments and third party payors to contain or reduce the
cost of health care will continue to affect the
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<PAGE> 13
business and financial condition of drug companies. A number of legislative and
regulatory proposals to change the health care system have been discussed in
recent years. In addition, an increasing emphasis on managed care in the United
States has and will continue to increase pressure on drug pricing. We cannot
predict whether legislative or regulatory proposals will be adopted or what
effect those proposals or managed care efforts may have on our business. The
announcement and/or adoption of such proposals or efforts could adversely affect
our profit margins and business.
Sales of prescription drugs depend significantly on the availability of
reimbursement to the consumer from third party payors, such as government and
private insurance plans. These third party payors frequently require drug
companies to provide predetermined discounts from list prices, and they are
increasingly challenging the prices charged for medical products and services.
Our current and potential products may not be considered cost-effective and
reimbursement to the consumer may not be available or sufficient to allow us to
sell our products on a competitive basis.
WE RELY HEAVILY ON COLLABORATIVE RELATIONSHIPS AND TERMINATION OF ANY OF THESE
PROGRAMS COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS.
Our strategy for developing and commercializing many of our potential
products includes entering into collaborations with corporate partners,
licensors, licensees and others. To date, we have entered into collaborations
with Eli Lilly and Company, SmithKline Beecham Corporation, American Home
Products, Abbott Laboratories, Sankyo Company Ltd., Glaxo-Wellcome plc,
Allergan, Inc. and Pfizer Inc. These collaborations provide us 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.
These agreements also give our collaborative partners significant discretion
when deciding whether or not to pursue any development program. We cannot be
certain that our collaborations will continue or be successful.
In addition, our collaborators may develop drugs, either alone or with others
that compete with the types of drugs they currently are developing with us. This
would result in less support and increased competition for our programs. If
products are approved for marketing under our collaborative programs, any
revenues we receive will depend on the manufacturing, marketing and sales
efforts of our collaborators, who generally retain commercialization rights
under the collaborative agreements. Our current collaborators also generally
have the right to terminate their collaborations under certain circumstances. If
any of our collaborative partners breach or terminate their agreements with us
or otherwise fail to conduct their collaborative activities successfully, our
product development under these agreements will be delayed or terminated. The
delay or termination of any of the collaborations could adversely affect our
business.
We may have disputes in the future with our collaborators, including disputes
concerning who owns the rights to any technology developed. For instance, we
were involved in litigation with Pfizer, which we settled in April 1996,
concerning our right to milestones and royalties based on the development and
commercialization of droloxifene. These and other possible disagreements between
us and our collaborators could delay our ability and the ability of our
collaborators to achieve milestones or our receipt of other payments. In
addition, any disagreements could delay, interrupt or terminate the
collaborative research, development and commercialization of certain potential
products, or could result in litigation or arbitration. The occurrence of any of
these problems could be time-consuming and expensive and could adversely affect
our business.
OUR SUCCESS DEPENDS ON OUR ABILITY TO OBTAIN AND MAINTAIN OUR PATENTS AND OTHER
PROPRIETARY RIGHTS.
Our success will depend on our ability and the ability of our licensors to
obtain and maintain patents and proprietary rights for our potential products
and to avoid infringing the proprietary rights of others, both in the United
States and in foreign countries. Patents may not be issued from any of these
applications currently on file or, if issued, may not provide sufficient
protection. In addition, if we breach our licenses, we may lose rights to
important technology and potential products.
Our patent position like that of many pharmaceutical companies, is uncertain
and involves complex legal and technical questions for which important legal
principles are unresolved. We may not develop or obtain rights to products or
processes that are patentable. Even if we do obtain patents, they may not
adequately protect the technology we own or have licensed. In addition, others
may challenge, seek to invalidate, infringe or circumvent any patents we own or
license, and rights we receive under those patents may not provide competitive
advantages to us. Further, the manufacture, use or sale of our products may
infringe the patent rights of others.
Several drug companies and research and academic institutions have developed
technologies, filed patent applications or
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<PAGE> 14
received patents for technologies that may be related to our business. Others
have filed patent applications and received patents that conflict with patents
or patent applications we have licensed for our use, either by claiming the same
methods or compounds or by claiming methods or compounds that could dominate
those licensed to us. In addition, we may not be aware of all patents or patent
applications that may impact our ability to make, use or sell any of our
potential products. For example, United States patent applications are
confidential while pending in the Patent and Trademark Office, and patent
applications filed in foreign countries are often first published six months or
more after filing. Any conflicts resulting from the patent rights of others
could significantly reduce the coverage of our patents and limit our ability to
obtain meaningful patent protection. If other companies obtain patents with
conflicting claims, we may be required to obtain licenses to those patents or to
develop or obtain alternative technology. We may not be able to obtain any such
license on acceptable terms or at all. Any failure to obtain such licenses could
delay or prevent us from pursuing the development or commercialization of our
potential products, which would adversely affect our business.
We have had and will continue to have discussions with our current and
potential collaborators regarding the scope and validity of our patent and other
proprietary rights. If a collaborator or other party successfully establishes
that our patent rights are invalid, we may not be able to continue our existing
collaborations beyond their expiration. Any determination that our patent rights
are invalid also could encourage our collaborators to terminate their agreements
where contractually permitted. Such a determination could also adversely affect
our ability to enter into new collaborations.
We may also need to initiate litigation, which could be time-consuming and
expensive, to enforce our proprietary rights or to determine the scope and
validity of others' rights. If litigation results, a court may find our patents
or those of our licensors invalid or may find that we have infringed on a
competitor's rights. If any of our competitors have filed patent applications in
the United States which claim technology we also have invented, the Patent and
Trademark Office may require us to participate in expensive interference
proceedings to determine who has the right to a patent for the technology.
We have learned that Hoffman LaRoche, Inc. has received a United States
patent and has made patent filings in foreign countries that relate to our
Panretin(R) capsules and gel products. We filed a patent application with an
earlier filing date than Hoffman LaRoche's patent, which we believe is broader
than, but overlaps in part with, Hoffman LaRoche's patent. We currently are
investigating the scope and validity of Hoffman LaRoche's patent to determine
its impact upon our products. The Patent and Trademark Office has informed us
that the overlapping claims are patentable to us and has initiated a proceeding
to determine whether we or Hoffman LaRoche are entitled to a patent. We may not
receive a favorable outcome in the proceeding. In addition, the proceeding may
delay the Patent and Trademark Office's decision regarding our earlier
application. While we believe that the Hoffman LaRoche patent does not cover the
use of Panretin(R) capsules and gel for most of our planned uses, if we do not
prevail, the Hoffman LaRoche patent might block our use of Panretin(R) capsules
and gel in certain cancers.
We also rely on unpatented trade secrets and know-how to protect and maintain
our competitive position. We require our employees, consultants, collaborators
and others to sign confidentiality agreements when they begin their relationship
with us. These agreements may be breached and we may not have adequate remedies
for any breach. In addition, our competitors may independently discover our
trade secrets. Any of these actions might adversely affect our business.
WE CURRENTLY HAVE LIMITED MANUFACTURING CAPABILITY AND WILL RELY ON THIRD-PARTY
MANUFACTURERS.
We currently have no manufacturing facilities outside of Marathon's facility
and rely on Marathon and others for clinical or commercial production of our
potential products. To be successful, we will need to manufacture our products,
either directly or through others, in commercial quantities, in compliance with
regulatory requirements and at acceptable cost. If we are unable to develop our
own facilities or contract with others for manufacturing services, our ability
to conduct preclinical testing and human clinical trials will be adversely
affected. This in turn could delay our submission of products for regulatory
approval and our initiation of new development programs. In addition, although
other companies have manufactured drugs acting through IRs and STATs on a
commercial scale, we may not be able to do so at costs or in quantities to make
marketable products. Any of these events would adversely affect our business.
Our manufacturing process also may be susceptible to contamination, which
could cause the affected manufacturing facility to close until the contamination
is identified and fixed. In addition, problems with equipment failure or
operator error also could cause delays. Any extended and unplanned manufacturing
shutdowns could be expensive and could result in inventory and product
shortages.
OUR BUSINESS EXPOSES US TO PRODUCT LIABILITY RISKS AND WE MAY NOT HAVE
SUFFICIENT INSURANCE TO COVER ANY CLAIMS.
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<PAGE> 15
Our business exposes us to potential product liability risks. A successful
product liability claim or series of claims brought against us could adversely
affect our business. Some of the compounds we are investigating may be harmful
to humans. For example, retinoids as a class are known to contain compounds,
which can cause birth defects. We have arranged to increase our product
liability insurance coverage in connection with the planned launch of two of our
potential products; however, we may not be able to maintain our insurance on
acceptable terms, or our insurance may not provide adequate protection in the
case of a product liability claim. We expect to purchase additional insurance
when more of our products progress to a later stage of development and if we
license any rights to use later-stage products in the future. To the extent that
product liability insurance, if available, does not cover potential claims, we
will be required to self-insure the risks associated with such claims.
WE ARE DEPENDENT ON OUR KEY EMPLOYEES, THE LOSS OF WHOSE SERVICES COULD
ADVERSELY AFFECT US.
We depend on our key scientific and management staff, the loss of whose
services could adversely affect our business. Furthermore, we are currently
experiencing a period of rapid growth, which requires us to hire many new
scientific, management and operational personnel. Accordingly, recruiting and
retaining qualified management, operations and scientific personnel to perform
research and development work also is critical to our success. Although we
believe we will successfully attract and retain the necessary personnel, we may
not be able to attract and retain such personnel on acceptable terms given the
competition among numerous drug companies, universities and other research
institutions for such personnel.
WE USE HAZARDOUS MATERIALS WHICH REQUIRES US TO INCUR SUBSTANTIAL COSTS TO
COMPLY WITH ENVIRONMENTAL REGULATIONS.
In connection with our research and development activities, we handle
hazardous materials, chemicals and various radioactive compounds. For example,
as we previously mentioned, retinoids as a class are known to contain compounds,
which can cause birth defects. We cannot completely eliminate the risk of
accidental contamination or injury from the handling and disposing of hazardous
materials. In the event of any accident, we could be held liable for any damages
that result, which could be significant. In addition, we may incur substantial
costs to comply with environmental regulations. Any of these events could
adversely affect our business.
OUR STOCK PRICE MAY BE ADVERSELY AFFECTED BY VOLATILITY IN THE MARKETS.
The market prices and trading volumes for our securities, and the securities
of emerging companies like us, have historically been highly volatile and have
experienced significant fluctuations unrelated to operating performance. Future
announcements concerning us or our competitors may impact the market price of
our common stock. These announcements might include the results of research,
development testing, technological innovations, new commercial products,
government regulation, receipt of regulatory approvals by competitors, our
failure to receive regulatory approvals, developments concerning proprietary
rights, litigation or public concern about the safety of the products.
YOU MAY NOT RECEIVE A RETURN ON YOUR SHARES OTHER THAN THROUGH THE SALE OF YOUR
SHARES OF COMMON STOCK.
We have not paid any cash dividends on our common stock to date, and we do
not anticipate paying cash dividends in the foreseeable future. Accordingly,
other than through a sale of your shares, you may not receive a return.
OUR CHARTER DOCUMENTS AND SHAREHOLDER RIGHTS PLAN MAY PREVENT TRANSACTIONS THAT
COULD BE BENEFICIAL TO YOU.
Our shareholder rights plan and provisions contained in our certificate of
incorporation and bylaws may discourage transactions involving an actual or
potential change in our ownership, including transactions in which you might
otherwise receive a premium for your shares over then-current market prices.
These provisions also may limit your ability to approve transactions that you
deem to be in your best interests. In addition, our board of directors may issue
shares of preferred stock without any further action by you. Such issuance's may
have the effect of delaying or preventing a change in our ownership.
WE ARE SUBJECT TO YEAR 2000 RISKS FOR WHICH WE MAY NOT BE PREPARED AND WHICH
COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS.
For a discussion of the risks associated with our year 2000 readiness, please
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000 Compliance."
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<PAGE> 16
PART I. FINANCIAL INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
At March 31, 1999 our investment portfolio includes fixed-income securities
of $37.9 million. These securities are subject to interest rate risk and will
decline in value if interest rates increase. However, due to the short duration
of our investment portfolio, an immediate 10% change in interest rates would
have no material impact on our financial condition or results of operations.
We generally conduct business including sales to foreign customers, in U.S.
dollars and as a result we have very limited foreign currency exchange rate
risk. The effect of an immediate 10% change in foreign exchange rates would not
have a material impact on our financial condition or results of operations.
16
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
On March 8, 1999, Ligand issued to Eli Lilly & Company ("Lilly") 434,546
shares of the Company's common stock as payment of a $5 million milestone due to
Lilly under an agreement with Ligand and Seragen, Inc. covering rights to
ONTAK(TM). The shares were issued to a single entity, Lilly, under an exemption
from registration under Section 4(2) of the Securities Act of 1933.
ITEM 5 OTHER INFORMATION
At April 30, 1999, Ligand had outstanding warrants to purchase 4,486,304
shares of Ligand's Common Stock, of which 4,228,054 warrants relate to the
Allergan-Ligand Retinoid Therapeutics transaction (the "ALRT warrants"). The
ALRT warrants have an exercise price of $7.12 and expire on June 3, 2000.
In May 1999, Ligand received net proceeds of approximately $3.5 million from
an investor who elected to exercise ALRT warrants to purchase 625,000 shares of
Ligand common stock. Ligand agreed to pay a cost of money incentive to the
investor for the early exercise of those warrants.
ITEM 6 (A) EXHIBITS
<TABLE>
<S> <C>
Exhibit 3.1(1) Amended and Restated Certificate of Incorporation of
the Company (filed as Exhibit 3.2).
Exhibit 3.2(1) Bylaws of the Company, as amended (filed as Exhibit 3.3).
Exhibit 3.3 (Amended) Certificate of Designation of Rights,
Preferences and Privileges of Series A Participating
Preferred Stock of Ligand Pharmaceuticals Incorporated.
Exhibit 10.1(2) Amendment, dated as of November 9, 1998, between
Ligand Pharmaceuticals Incorporated and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent (Exhibit 99.1).
Exhibit 10.2(3) Form of Second Amendment to the Preferred Share
Rights Agreement and Certificate of Compliance with Section
27 thereof (Exhibit 1).
Exhibit 10.3(4) Marketing and Distribution Agreement with Ferrer
Internacional S.A. to market and distribute Ligand
Pharmaceuticals Incorporated products in Spain, Portugal and
Greece.
Exhibit 10.4(4) Marketing and Distribution Agreement with Ferrer
Internacional S.A. to market and distribute Ligand
Pharmaceuticals Incorporated products in Central and South
America.
Exhibit 27.1 Financial Data Schedule
</TABLE>
(1) This exhibit was previously filed as part of, and is hereby incorporated
by reference to the numbered exhibit filed with, the Registration
Statement on Form S-4 (No.
333-58823) filed on July 9, 1998.
(2) This exhibit was previously filed as part of, and is hereby incorporated
by reference to the numbered exhibit filed with, the Registration
Statement on Form 8-A/A Amendment No. 1 (No. 0-20720) filed on November
10, 1998.
(3) This exhibit was previously filed as part of, and is hereby incorporated
by reference to the numbered exhibit filed with, the Registration
Statement on Form 8-A/A Amendment No. 2 (No. 0-20720 filed on December 24,
1998.
(4) Certain confidential portions of this Exhibit were omitted by means of
marking such portions with an asterisk (the "Mark"). This Exhibit has been
filed separately with the Secretary of the Commission without the Mark
pursuant to the Company's Application Requesting Confidential Treatment
under Rule 246-2 of the Securities Exchange Act of 1934.
ITEM 6 (B) REPORTS ON FORMS 8-K-
No reports on Form 8-K were filed during the quarter ended on March 31,
1999.
17
<PAGE> 18
LIGAND PHARMACEUTICALS INCORPORATED
March 31, 1999
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Ligand Pharmaceuticals Incorporated
Date: May 14, 1999 By /s/ PAUL V. MAIER
----------------------------- ---------------------------------
Paul V. Maier
Senior Vice President and
Chief Financial Officer
18
<PAGE> 1
EXHIBIT 3.3
PAGE 1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
----------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "LIGAND PHARMACEUTICALS INCORPORATED", FILED IN THIS OFFICE ON
THE EIGHTH DAY OF MARCH, A.D. 1999, AT 9 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS.
/s/ EDWARD J. FREEL
------------------------------------
Edward J. Freel, Secretary of State
[SEAL]
2138989 8100 AUTHENTICATION: 9616201
991089522 DATE: 03-09-99
<PAGE> 2
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED ON 09:00 AM 03/08/1999
991089522 - 2138989
AMENDED CERTIFICATE OF DESIGNATION
OF RIGHTS, PREFERENCES AND PRIVILEGES OF
SERIES A PARTICIPATING PREFERRED STOCK
OF LIGAND PHARMACEUTICALS INCORPORATED
The undersigned, David E. Robinson and William L. Respess, do hereby
certify:
1. That they are the duly elected and acting President and Secretary,
respectively, of Ligand Pharmaceuticals Incorporated, a Delaware corporation
(the "Corporation").
2. That pursuant to the authority conferred upon the Board of the
Corporation by the Amended and Restated Certificate of incorporation of said
Corporation, the Board adopted the following recital and resolution amending
the Certificate of Designation of Rights, Preferences and Privileges of Series
A Participating Preferred Stock (the "Certificate of Designation") that was
filed in the office of the Delaware Secretary of State on September 30, 1996:
WHEREAS, pursuant to the authority vested in the Board of the Corporation
by the Amended and Restated Certificate of Incorporation (the "Charter"),
the Board previously created by resolution a series of 80,000 shares of
Series A Participating Preferred Stock of the Corporation (the "Series A
Shares") and fixed the powers, designation, preferences and relative and
other special rights and the qualifications, limitations and restrictions
in a Certificate of Designation previously filed with the Delaware
Secretary of State.
RESOLVED FURTHER, that pursuant to authority expressly granted to and
vested in the Board by the provisions of the Charter and pursuant to the
provisions of Section 151(g) of the Delaware General Corporation Law, the
Board hereby amends in its entirety Section 1 of the Certificate of
Designation of Rights, Preferences and privileges to read as follows:
"Section 1. DESIGNATION AND AMOUNT. The shares of such series shall
be designated as "Series A Participating Preferred Stock," par value
$.001 per share, and the number of shares constituting such series
shall be 1,600,000."
3. That none of the Series A Participating Preferred Stock has been
issued.
4. That the authorized number of shares of Preferred Stock of the
Corporation is 5,000,000 and that no such Preferred Stock has been issued.
<PAGE> 3
IN WITNESS WHEREOF, this Amended Certificate of Designation of
Rights, Preferences and Privileges of Series A Participating Preferred Stock is
executed on behalf of Ligand Pharmaceuticals Incorporated by its President and
Secretary this 3rd day of March 1999.
/s/ DAVID E. ROBINSON
-----------------------------
David E. Robinson, President
/s/ WILLIAM L. RESPESS
------------------------------
William L. Respess, Secretary
[SIGNATURE PAGE TO AMENDED CERTIFICATE OF DESIGNATION
OF RIGHTS, PREFERENCES AND PRIVILEGES OF SERIES A PARTICIPATING
PREFERRED STOCK OF LIGAND PHARMACEUTICALS INCORPORATED]
<PAGE> 1
EXHIBIT 10.3
DISTRIBUTORSHIP AGREEMENT
This Distributorship Agreement ("Agreement"), is entered into as of March 26,
1999, between:
LIGAND PHARMACEUTICALS, INCORPORATED, a corporation organized and existing under
the laws of the State of Delaware, U.S.A., with its principal place of business
at 10275 Science Center Drive, San Diego, California, U.S.A. and SERAGEN, INC. a
Delaware corporation having its principle place of business at 97 South Street,
Hopkinton, Massachusetts (collectively referred to herein as "Ligand")
and
FERRER INTERNACIONAL , S.A, a corporation organized and existing under the laws
of Spain with its principal place of business at Gran Via Carlos III, 94,
Barcelona, Spain ("Distributor")
W I T N E S S E T H:
A. Ligand is a leading researcher, developer and manufacturer of
biopharmaceutical products, including the Products, and is the exclusive
owner or licensee of proprietary rights in such Products.
B. Distributor is engaged in the marketing of pharmaceutical products and
has represented to Ligand that it has the facilities, personnel and
technical expertise to market and distribute the Products in the
Territory.
C. Ligand is willing to exclusively sell Products in the Territory to
Distributor on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
1.1 "Affiliate" means any corporation or business entity which, directly or
indirectly, is controlled by, controls, or is under common control with
Ligand or Distributor, as applicable. For this purpose, "control"
includes, but is not limited to, direct or indirect ownership of more
than fifty percent (50%) of the voting shares or stock of such
corporation or business entity.
1.2 "Approvals" means and includes all filings, approvals,
registrations, permits, licenses and authorizations related to Product
pricing or marketing activities which
1
<PAGE> 2
are necessary or which, in the reasonable opinion of Ligand, are
desirable, to be made with or obtained from any Governmental Authority
for the sale of the Products in the Territory, including, without
limitation, any pricing approvals, government reimbursement approvals,
import permits and approvals concerning Distributor's facilities, but
excluding Product Authorizations.
1.3 "Base Price" means, with respect to each Product, the price set forth
in Attachment B.
1.4 "Confidential Information" means any and all data, trade secrets,
confidential knowledge, specifications, clinical data and protocols and
other proprietary information, not in the public domain, relating to
the Products and/or the business or affairs of either party (the
"Disclosing Party"). Confidential Information shall also include the
present Agreement and the terms set forth herein to the extent that it
has not been placed into the public domain by the Disclosing Party.
Confidential Information may be communicated to the other party (the
"Receiving Party") orally, visually, in writing, or in any other
recorded or tangible form. All data and information will be considered
to be Confidential Information hereunder (1) if the Disclosing Party
has marked them as such, (2) if the Disclosing Party, orally or in
writing, has advised the Receiving Party of the confidential nature,
provided that, if disclosed orally, the Disclosing Party confirms such
confidential nature in writing within two weeks thereafter; or (3) if,
due to their character or nature, a reasonable person in a like
position and under like circumstances as the Receiving Party would
treat them as secret and confidential.
1.5 "Dealer" means a sub-distributor, agent or marketing representative of
Distributor.
1.6 "Effective Date" means the date of this Agreement as designated in
preamble to this Agreement on the first page.
1.7 "Ex-Distributor Price" means the actual price at which Distributor sells
each Product to customers of Distributor, less:
(a) freight, shipping and insurance with respect to such Products;
(b) sales, excise or similar taxes imposed on the sale of the
Products;
(c) any mandatory or industry standard discounts or rebates to the
competent Governmental Authorities and/or Social Security Systems
pursuant to the regulations and/or agreements in force; and
(d) cash and trade discounts and allowances as customarily applied to
products of a similar kind in the pharmaceutical industry in the
relevant country within the Territory;
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but in each case only if paid by Distributor or actually charged
against Distributor and evidenced in Distributor's books and records of
account and the reports
provided to Ligand pursuant to Clause 9.3 hereof.
1.8 "Governmental Authority" means and includes all governmental and
regulatory bodies, agencies, departments or entities, whether or not
located in the Territory, which regulate, direct or control commerce in
or with the Territory.
1.9 "Intellectual Property Rights" means and includes all copyrights,
designs, databases, mask works, patents, trademarks, trade names and
other proprietary rights, and all registrations and applications
therefor, which Ligand may at any time own, adopt, use, license or
register with respect to a Product or its business, and includes the
Trademarks.
1.10 "Net Sale Price" means the amount equal to the percentage of the
Ex-Distributor Price for each Product in accordance with the pricing
schedule set forth in Appendix C.
1.11 "Person" means and includes any agency, association, company,
individual, or other entity regardless of the type or nature thereof.
1.12 "Product Authorizations" means and includes all filings, approvals,
registrations and authorizations relating to pharmaceutical or
medicinal products which are necessary or which, in the reasonable
opinion of Ligand, are desirable, to be made with or obtained from any
Governmental Authority in order for Distributor to lawfully market,
promote, offer for sale and sell the Products in the Territory,
including, without limitation, authorizations required from the
European MEA ("EMEA"), but excluding Approvals.
1.13 "Products" means the biopharmaceutical products manufactured by or on
behalf of Ligand, for the indications and applications specified, which
are listed in Appendix A, as amended by Ligand from time to time by
written notice to Distributor; and shall include all line extensions
and modified or improved versions of such products from time to time.
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1.14 "Resale Price" means the price from the Distributor to the wholesalers
in each respective country of the Territory, in the case of Spain as
determined by the Spanish Governmental Authorities ("Precio de Venta
Laboratorio") or, in the case of any other country of the Territory, as
determined by the competent Governmental Agency in such country, as
reduced by:
(a) freight, shipping and insurance with respect to such Products;
(b) sales, excise or similar taxes imposed on the sale of the
Products;
(c) any mandatory or industry standard discounts or rebates to the
competent Governmental Authorities and/or Social Security Systems
pursuant to the regulations and/or agreements in force; and
(d) cash and trade discounts and allowances as customarily applied to
products of a similar kind in the pharmaceutical industry in the
relevant country within the Territory;
but in either case only if paid by Distributor or actually charged
against Distributor and evidenced in Distributor's books and records of
account and the reports provided to Ligand pursuant to Clause 9.3
hereof.
1.15 "Technical Assistance" means and includes advice, training, information
and other support regarding the manufacture, specifications, clinical
trials and marketing specifically related to the Products.
1.16 "Term" means the term of this Agreement as determined in accordance
with Clause 3.1 and, where the context permits, includes the extensions
as per Clause 3.2.
1.17 "Territory" means the geographic area comprising the countries of
Spain, Portugal and Greece.
1.18 "Trademarks" means the trademarks owned or licensed and designated by
Ligand for the Products in Appendix D, as well as any substitute marks
that are used for the Products in accordance with Clause 12.2.
2. GRANT OF RIGHTS
2.1 Distribution Rights: Subject to the terms and conditions of this
Agreement, Ligand grants to Distributor, and Distributor accepts, the
exclusive right to market the Products in the Territory. Right to
market under this Agreement shall mean the Distributor's right (1) to
hold itself out as Ligand's exclusive authorized Distributor in the
Territory; (2) to acquire the Products from Ligand for resale to
customers on its own account in the Territory; and (3) to appoint
Affiliates of Distributor, or other third parties (deemed) approved by
Ligand, as Dealers in the Territory; provided, however, that (a)
Distributor shall obtain an executed copy of a sub-
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distributor or dealer agreement, in a form containing terms and
conditions substantially similar to the terms and conditions of this
Agreement, from the relevant Dealer; and (b) Distributor shall notify
Ligand in writing of the desired appointment of any third party Dealer
and, at Ligand's request, provide Ligand with adequate background
information on such Dealer. Unless Ligand reasonably objects to such
appointment within thirty calendar days after its receipt of such
notice and information, Ligand shall be deemed to have given the
requisite approval to the appointment.
2.2 Additional Rights: Ligand further grants Distributor the royalty-free
and (except as to Ligand) exclusive right to use the Confidential
Information, the assistance and information related thereto pursuant to
Clause 4.4, and the Trademarks solely to the extent reasonably
necessary for the distribution and marketing of the Products within the
Territory in accordance with this Agreement.
2.3 Independent Contractors: The relationship of Ligand and Distributor
established by this Agreement is of seller and buyer, or independent
contractors, and nothing in this Agreement shall be construed: (1) to
give either party the power to direct or control the daily activities
of the other party, or (2) to constitute the parties as principal and
agent, partners, or otherwise as participants in a joint undertaking.
Ligand shall have no obligation or authority, express or implied, to
exercise any control whatsoever over the employees or the business
affairs of Distributor. Except as specifically provided in this
Agreement, Distributor shall have no power or authority to make or give
any representation or warranty or to incur any liability or obligation,
or to waive any right, on Ligand's behalf.
2.4 Ligand's Rights: Ligand reserves the right to modify and/or to
discontinue developing or producing the Products at its discretion at
any time either (1) due to legal or regulatory requirements,
administrative or court orders, or safety risks, or (2) so long as the
Product in question is withdrawn from the market throughout the
European Union for a justified and reasonable motive; provided,
however, that Ligand shall notify Distributor as soon as practicable
after any such modification or discontinuance and that Distributor
shall be entitled to market any modified versions of Products pursuant
to the terms of this Agreement. Nothing in this Agreement shall be
deemed to restrict Ligand from selling the Products or other products
to Persons outside the Territory for use within the Territory, nor from
appointing Distributors in countries outside the Territory who may be
permitted, by operation of law, to sell the Products in the Territory,
and Distributor shall receive no compensation for such sales by Ligand
or any other Distributor; provided, however, that Ligand shall impose
upon its other Distributors restrictions on their active marketing of
the Products in the Territory equivalent to restrictions placed upon
Distributor's active marketing of Products outside the Territory in
this Agreement, to the extent such restrictions are legally
permissible.
2.5 Ligand Exclusive Supplier: During the Term, Distributor shall purchase
all of its requirements of the Products from Ligand or any party
designated by Ligand for this purpose.
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3. TERM
3.1 Term: The term of this Agreement shall commence on the Effective Date
and shall continue, with respect to a particular Product, for a period
of ten years from the date of first sale of that particular Product to
Distributor anywhere in the Territory after the Product Authorization
is obtained for such Product, unless the Agreement is earlier
terminated in accordance with Clause 16.
3.2 Extensions: Ligand and Distributor agree that, at least one year before
the expiration of the initial ten-year term of the Agreement, they
shall engage in good faith discussions for a period not to exceed six
months concerning the extension of the term of the Agreement for the
relevant Product(s) for a period of three to five years at commercial
terms and conditions to be negotiated during the six month discussion
period.
4. AUTHORIZATIONS
4.1 Distributor to Use Diligent Efforts to Apply for and Pursue Product
Authorizations: Following the application by Ligand, at Ligand's cost,
and further issuance of any Product Authorization by the EMEA or any
other agency pursuant to a mutual recognition procedure in the
Territory and in consultation with Ligand, Distributor shall be
responsible for, and shall use diligent efforts to, file applications
for, pursue and maintain, in each country within the Territory, during
the Term, all Product Authorizations. All Product Authorizations shall
be in Ligand's name, whenever legally permissible, unless otherwise
agreed to by Ligand. Distributor shall obtain Ligand's prior approval
of all applications and submissions to any Governmental Authority in
respect of any Product Authorization. Distributor shall keep Ligand
informed, in writing, of the status of its applications for Product
Authorizations on a regular basis, and in any event no less frequently
than once every three months, and shall immediately notify Ligand in
writing of any substantial change in the status of any Product
Authorization or any substantive questions received from any
Governmental Authority in respect of such Product Authorizations.
Distributor shall provide copies of all Product Authorizations to
Ligand at its request. If at any time there is a choice in respect of
the appropriate type of such Product Authorization to be obtained or
maintained in respect of any one or more of the Products, Ligand may,
in its sole and absolute discretion, exercise such choice and shall
direct Distributor as to the appropriate Product Authorization to be.
requested. If Ligand, at its sole discretion, informs Distributor that
it does not intend to apply for any requisite Product Authorization in
any country in the Territory, Distributor may give Ligand written
notice of its intention to seek such Product Authorization on its own
and shall have the right to do so, unless Ligand proceeds with or
authorizes the filing on its behalf within thirty calendar days after
its receipt of Distributor's notice. In any given case when Distributor
seeks Product Authorization, Ligand shall provide Distributor with all
reasonably necessary and available clinical data, documentation and
assistance to such effect.
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4.2 Distributor to Apply for Approvals: Distributor, at its cost, shall
file applications for and maintain Approvals for all Products listed on
Appendix A in effect as of the Effective Date in each country in the
Territory during the Term. If Distributor believes that any application
for Approval for any particular future Product or indication that may
be included within the scope of this Agreement is not economically
justified, Ligand may proceed with the application at its own cost and,
upon issuance of the Approval, Distributor shall market the Product in
the country concerned, if Ligand so requests. Distributor shall
immediately notify Ligand in writing of any substantial change in the
status of any Approval or any substantive questions received from any
Governmental Authority in respect of such Approvals. Distributor shall
provide copies of all Approvals to Ligand.
4.3 Pricing Approvals: Without limiting the generality of Clause 4.2, any
applications, submissions, negotiations and agreements with any
Governmental Authority on Product prices will require Ligand's prior
consent provided, however, that in Spain Ligand shall:
(a) give its consent, if the price from the Distributor to the
wholesalers in the relevant country of the Territory, as
determined by the Spanish Governmental Authorities ("Precio de
Venta Laboratorio") amount to not less than *** percent of the
Reference Price;
(b) have the option to either consent to the Precio de Venta
Laboratorio Resale Price or buy back from the Distributor the
exclusive marketing rights in the Territory for the relevant
Product (as listed in Appendix A) at a price of US$ *** each, if
the Resale Price negotiated by Distributor amounts to less than
*** , but more than *** , percent of the Reference Price and
Ligand wishes to withhold its consent to the sale of the
Products at such Resale Price; and
(c) have no obligation to give its consent, if the Precio de Venta
Laboratorio Resale Price negotiated by Distributor amounts to
*** percent or less of the Reference Price, in which case the
marketing rights for the relevant Product shall revert to Ligand
at no cost and Distributor shall be prevented from marketing the
relevant Product in the Territory.
If Ligand exercises its option to buy back the exclusive marketing
rights in the Territory for the relevant Product under clause 4.3 (b)
or Distributor loses its rights under clause 4.3 (c) to distribute the
relevant Product in the Territory, Ligand shall either (i) refrain from
marketing directly or indirectly in the Territory for a period of three
years the relevant Product at a price equal or inferior to the price
that caused the aforesaid transfer of marketing rights to Ligand under
4.3(b) or (c), or (ii) restore Distributor's rights to market the
relevant Product in the Territory under this Agreement.
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For purposes of this Clause 4.3, "Reference Price" shall mean the
average, same distribution level price agreed upon by Ligand or its
other Distributors for the relevant Products with the Governmental
Authorities in the first three European Union Member States outside of
the Territory where the relevant Product is sold. If Product prices
have been approved in fewer than three European Union Member States
when Distributor seeks Ligand's approval, the Reference Price shall be
the average price in such fewer countries or, if there is no such
country, a price mutually agreed upon by the parties. If Ligand
reacquires the marketing rights for any Products pursuant to Clause 4.3
(b) or (c), all obligations of the parties under this Agreement,
including those under Clause 10, shall cease with respect to such
Products.
4.4 Ligand to Provide Assistance: Ligand shall provide such assistance as
Ligand may deem reasonably necessary to Distributor in respect of
Distributor's Product Authorization and Approval obligations under
Clauses 4.1, 4.2 and 4.3, and in particular shall provide:
(a) written materials and information concerning the Products,
including copies, or summaries, of materials prepared for
submission to the United States (or, at Ligand's discretion,
European) Governmental Authorities concerning the Products or
their labeling, to the extent that Ligand is legally and
contractually permitted or required to do so, for Distributor's
use in obtaining Product Authorizations in respect of each of
the Products; and
(b) access to such clinical data and documentation in respect of the
Products generated by research and trials funded by Ligand or to
which Ligand may have access with the right to disclose, as
Ligand may deem reasonably necessary to be relevant and useful
to Distributor in obtaining Product Authorizations in respect of
each Product.
4.5 Distributor to Bear Costs: Subject to Clauses 4.1 and 4.6 below,
Distributor shall be responsible for all costs and expenses associated
with filing for and maintaining Product Authorizations and Approvals ,
including, without limitation, the Base Price of Product supplied by
Ligand and the costs of any clinical trials conducted by or on behalf
of Distributor for the purposes of any Product Authorizations, unless
otherwise agreed in writing between the parties prior to such costs
being incurred.
4.6 Clinical Trial Program: The parties agree to jointly evaluate the
merits of a clinical trial program for one or more of the Products for
severe, recalcitrant, plaque psoriasis vulgaris.
4.7 No Marketing of Products without Product Authorizations: Except to the
extent permitted by law and as may be agreed in writing between the
parties, Distributor shall not market, promote, offer for sale or sell
any one of the Products unless and until Distributor obtains the
appropriate Product Authorizations in respect of such Product. In the
event that Distributor is legally permitted, due to an individual pre-
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approval in respect of any Product, to market any Product prior to
obtaining the relevant Product Authorization, Distributor shall not do
so without obtaining the prior written consent of Ligand, which will
not be unreasonably withheld.
5. ORDERS AND FORECASTS
5.1 Forecasts: In order to permit Ligand and its suppliers to allocate
their manufacturing capacity, Distributor shall provide Ligand with
written 4-quarter rolling forecasts of its Product requirements. Such
forecast shall be broken down by Product, quantities, and shipping
dates, and shall be delivered to Ligand not later than one hundred
twenty days prior to the beginning of each calendar quarter (commencing
after Distributor has obtained the first Product Authorization and
Approval in respect of any Product). Ligand shall either accept or
reasonably reject such forecasts within thirty days after receipt. Any
forecast accepted by Ligand or not rejected within that period shall be
binding on the Parties as follows: Unless otherwise agreed, Distributor
shall order, and Ligand shall supply, one hundred percent of the
quantities forecast for the first calendar quarter and between eighty
and one hundred twenty percent of the quantities forecast for the next
quarter. Quantities forecasts for subsequent quarters shall be
non-binding indications for production schedules, only, until included
in subsequent quarterly forecasts.
5.2 Orders: Purchase of Products by Distributor hereunder shall be made
only pursuant to written orders executed by Distributor, and shall be
for a minimum of the Distributor's quarterly requirements for the
Territory. The orders of Panretin(TM) Gel, Ontak(TM) and Targretin(TM)
Gel shall separately specify the labeling requirements so as to allow
Ligand to label those products before shipment. The orders shall be
accepted in writing by Ligand at the offices specified in Clause 19.7.
Subject to Clause 5.1 above, no order shall be binding upon Ligand
until accepted by Ligand in writing. Subject to Clause 5.1 above,
Ligand reserves the right to accept or reject any order, offer or
request for Products in its sole discretion. The terms and conditions
of this Agreement shall apply to all orders placed by Distributor and
shall override and supersede any different or additional terms on
orders from or any general conditions maintained by Distributor. All
orders must be received by Ligand from Distributor at least 120 days
prior to the desired shipment date. If any order for quarters 2, 3 or 4
of a forecast exceeds the forecasts for that calendar quarter provided
by Distributor under Clause 5.1 hereof by more than twenty percent
(20%), Ligand shall use its reasonable efforts, but shall not be
obligated, to ship the requested quantities of Products, with the
normal lead time stated above. If the order cannot be fully shipped,
Ligand will notify Distributor by the end of that period, and the
parties will jointly determine an appropriate shipment schedule.
5.3 Shipment Frequency: The Products shall be shipped at a frequency no
greater than once per month with a minimum purchase price to
Distributor of $ *** U.S provided, however, that Distributor may
request shipments at a frequency greater than once per month at the
same minimum purchase price during the first year of the
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Agreement.
5.4 Inventory Requirements: Distributor shall maintain a reasonable supply
of Products adequate to serve the appropriate customer base in each
country of the Territory from time to time. For the first six months
beginning with the first sale of a Product, such inventory shall be
sufficient to cover not less than a three month supply of Ontak(TM),
Panretin(TM) and Targretin(TM) Products based on Distributor's
forecasts. Thereafter, the inventory may be reduced to a two months
supply.
5.5 Cancellation and Rescheduling. Ligand will use its reasonable best
efforts to honor any request of Distributor to reschedule shipment of
any order accepted by Ligand. For Panretin(TM) and Targretin(TM)
capsules, orders for bulk capsules or capsules in unlabeled bottles
accepted by Ligand may be canceled by Distributor, provided that
Distributor cancels the order at least forty five (45) days in advance
of the shipment date and pays a cancellation charge equal to *** of the
order price. No cancellation shall be allowed for any other Products
once a firm order has been accepted by Ligand.
5.6 Terms of Shipment and Transfer of Title. All shipments of Products
shall be made in Ligand's standard shipping packages CIF Distributor's
designated port of entry in Spain or such other port of entry agreed
upon by the parties. Unless otherwise agreed in writing between the
parties, Ligand shall select the method of shipment and the carrier,
and Distributor shall be responsible for all actions and documents
necessary to obtain clearance to import the Products into the
Territory. Ligand shall retain title to the Products until full payment
of the Base Price for the Products is irrevocably credited to Ligand's
bank account, and Distributor shall store all Products in its
facilities so that they are readily identifiable as Ligand's Products.
5.7 Product Availability. Ligand will use its reasonable efforts to deliver
to Distributor the Products in the quantities and at the dates
specified on the orders submitted by Distributor and accepted by
Ligand; provided, however, that Ligand (1) reserves the right to
allocate the Products equitably among its customers in the event of a
shortage of any Products; and (2) shall not be liable to Distributor
for any delay in delivery without Ligand being at fault.
6. REGISTRATION SERVICES AND PAYMENTS
6.1 Initial Service Reimbursement. On execution of this Agreement
Distributor shall make a non-refundable initial payment to Ligand in
the sum of US$ *** as reimbursement for services rendered in the
registration of the Products in the Territory.
6.2 Additional Service Reimbursement: On either (a) the date on which
Distributor obtains the first Product Authorization in any country in
the Territory in respect of any Product; or (b) September 30, 1999,
whichever is the earlier, Distributor shall
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make a non-refundable payment to Ligand in the sum of US$ *** as
reimbursement for services rendered in the registration of the Products
in the Territory.
6.3 Final Service Reimbursement: Within thirty days of the date on which a
Product Authorization is first obtained in any country in the Territory
for a breast cancer indication for Targretin(TM) capsules,Distributor
shall pay to Ligand US$ *** as reimbursement for services rendered in
the registration of Targretin(TM) for such indication.
6.4 Product Pricing: Ligand shall supply the Products CIF to the port of
entry designated pursuant to Clause 5.6. For all Products supplied,
Distributor shall pay to Ligand the higher of: (1) the Base Price, or
(2) the Net Sale Price. All payments under this Agreement shall be made
in United States dollars. Where payment must be converted into U.S.
dollars from another currency, the conversion shall be made based on
the applicable exchange rate as published on the European Central
Bank's Web Site for the date of Ligand's invoice.
6.5 Payment of Base Price: Unless otherwise agreed in writing by Ligand,
Distributor shall pay the invoiced estimated Base Price for each order
of Products under this Agreement within forty-five calendar days' net
by international wire transfer to the bank identified by Ligand from
time to TIME. If Distributor at any time has become delinquent, Ligand
shall have the right to make sales contingent upon Distributor's
payment by irrevocable letter of credit confirmed by a major US
merchant bank and payable in United States Dollars (US$) by draft at
sight against delivery of bill of lading (which may be marked "freight
collect" and which shall permit transshipments and partial shipments),
commercial invoice and packing list.
6.6 Payment Reconciliation: Within ninety (90) days of the end of each
calendar quarter (commencing after Distributor has made the first sale
of any product), the amounts paid by Distributor to Ligand under clause
6.5 shall be adjusted as follows:
(a) First, Distributor or Ligand, as the case may be, shall pay or
credit to the other, the amount, if any, by which the estimated
Base Prices paid by Distributor to Ligand under clause 6.5
differ from the Base Prices payable by Distributor after
deducting the deductionsactually paid or charged against
Distributor pursuant to Clause 1.14 (a)-(d) during that quarter.
(b) Second, Distributor shall pay to Ligand, the amount, if any, by
which the aggregate net sales prices for all products purchased
from Ligand and sold by Distributor during that quarter exceeds
the aggregate Base Prices payable to Ligand pursuant to clause
6.6 (a), above.
6.7 Late Payments: Whenever a late payment is due to a cause attributable
to a party, all amounts not paid to the other party when due shall
accrue interest daily at the lesser of an annual rate of twelve percent
(12%) or the highest rate permissible by
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law on the unpaid balance until paid in full.
6.8 Taxes. All amounts payable to Ligand under this Agreement are exclusive
of any income, sales, use, property, ad valorem, value added or other
taxes, levies, imposts, duties, charges or withholdings of any nature
(collectively, "Taxes"), arising out of any transaction contemplated by
this Agreement and imposed against or the Products by any taxing
authority in the Territory (excluding, however, any Taxes on, or
measured solely by, the net income of Ligand and Taxes imposed on
Ligand in the United States). Distributor shall pay all applicable
Taxes or provide Ligand with a certificate of exemption acceptable to
the relevant taxing authority, and shall also be liable for all bank
charges levied in connection with payments made to Ligand (excluding,
however, any bank charges levied by Ligand's bank). In the event that
any payments to Ligand under this Agreement are subject to any
withholding taxes, Distributor shall promptly provide all tax
certificates, applications and related documents to Ligand. If Ligand
is required to pay any Taxes in the Territory, other than Taxes imposed
upon the payments under Clause 6.1 or 6.2, Distributor shall promptly
reimburse Ligand upon written request therefor.
7. MARKETING AND PROMOTION
7.1 Marketing Plans: At least six (6) months prior to the anticipated date
on which the relevant Product Authorization and Approval shall be
issued in respect of each Product, Ligand and Distributor shall consult
in good faith to determine an appropriate marketing plan in respect of
each Product for the Territory. All such marketing plans shall be
harmonized with, and shall not prejudice, Ligand's global and regional
marketing strategies covering the Territory. Distributor shall be
responsible for implementing such marketing plans and for advertising
and promoting each Product within the Territory from the dates on which
it obtains the relevant Product Authorization and Approval for each
Product. Distributor shall at all times adhere to the policies set by
Ligand in the execution of mutually agreed upon annual marketing plans
for the Products, including any marketing plans which Ligand wishes to
implement among its Distributors in other territories and which are set
by Ligand and agreed to by Distributor in good faith, ; provided,
however, that Distributor, at its sole discretion (but in accordance
with any relevant Approvals in the Territory in respect of pricing),
may determine the Resale Prices for the Products and the terms and
conditions of distribution.
7.2 Marketing Materials. In the promotion and marketing of the Products,
Distributor shall develop sales literature and promotional materials
provided to Distributor by Ligand pursuant to Clause 7.3. Distributor
shall have the right to prepare other product descriptions and other
promotional and marketing materials relating to the Products; provided
however, that (1) all costs and expenses incurred by Distributor in the
preparation and distribution of such product descriptions and other
promotional and marketing materials shall be borne solely by
Distributor; and (2) all such product descriptions and other
promotional and marketing materials shall not be released by
Distributor until approved in writing by Ligand, such
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approval not to be unreasonably withheld. Distributor shall submit
samples of final copy for all key product descriptions and other
promotional and marketing materials it proposes to use in respect of
the Products for Ligand's approval within sixty (60) days prior to the
first date of anticipated use of such materials. Ligand shall use its
reasonable efforts to respond to any such request for approval within
thirty (30) days of its receipt thereof. If no written response is
given by Ligand denying such request within the aforesaid term, then
Ligand's approval shall be deemed granted.
7.3 Product Literature: To the extent that it is legally and contractually
permitted to do so, Ligand will share with Distributor samples of
product descriptions, sales aids and advertising and promotional
materials developed and used by Ligand, its other Distributors or
licensees (collectively "Promotional Materials") in respect of each
Product as soon as practicable. Distributor shall bear all costs of
reproducing and/or adapting such Promotional Materials for use within
the Territory, and shall not use any adaptations of such Promotional
Materials without Ligand's prior approval of such adaptations.
Likewise, Distributor agrees to share samples of its Promotional
Materials with Ligand and Ligand's other Distributors and licensees.
7.4 Rights to Reproductions: All translations, reproductions, adaptations
and creations of derivative works of all of Ligand's Promotional
Materials (collectively "Reproductions") created by Distributor will be
created as "works made for hire" with Ligand as the hirer, and
copyright and all other proprietary rights in all of the Reproductions
shall vest in Ligand from the date of completion thereof by
Distributor. To the extent that any Reproductions do not qualify as
"works made for hire", then Distributor hereby assigns to Ligand all
copyrights and all other proprietary rights in the Reproductions to
Ligand. In this event, Distributor will, at Ligand's request, execute
any assignment or "work made for hire" documents and shall take all
other steps as necessary or appropriate to perfect copyrights and all
other proprietary rights in the Reproductions in the name of Ligand.
If, notwithstanding the foregoing, Ligand, for any reason, is deemed
not to own all rights, title, and interest in and to the Reproductions,
Distributor shall be automatically considered to have granted to Ligand
a royalty-free, perpetual and transferable license to use, distribute,
translate and reproduce the Reproductions. Such license shall be
exclusive to Ligand and shall survive the expiration or termination of
this Agreement for any reason whatsoever.
7.5 Sales Assistance: Whenever Ligand considers it reasonably necessary in
order to maintain or increase the volume of sales of Products in the
Territory, Ligand shall be entitled to send, at its own cost,
representatives to visit Distributor or Distributor's customers or
prospective customers. Ligand shall keep Distributor informed of
promotional methods and techniques used by Ligand in respect of the
Products.
8. OBLIGATIONS OF DISTRIBUTOR
8.1. Diligent Efforts: Distributor shall use its diligent efforts to market
and sell the
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Products within the Territory at its own expense, including but not
limited to professional sales calls on target medical audiences (e.g.
physicians, hospitals, pharmacists, etc.), advertising the Products in
appropriate media and participating in trade shows, conferences,
expositions, and promotional seminars, all with due consideration for
the local marketing environment in the Territory. Distributor shall
conduct its marketing activities in a lawful manner with the highest
standards of pharmaceutical product promotional practices, fair trade,
fair competition, and business ethics, and shall cause its employees
and Dealers to do the same.
8.2. Offices and Personnel. Distributor shall maintain offices adequate to
market and support the Products in the Territory and shall retain and
have at its disposal at all times an adequate staff of trained and
qualified personnel to perform its obligations under this Agreement.
8.3. Dealers: Distributor may only appoint Affiliates or other third parties
pursuant to the terms and conditions set forth in Clause 2.1. Any such
appointment shall be made in writing and only in the name and for the
account of Distributor, and shall terminate upon the expiration,
non-renewal, or termination of this Agreement for any reason; provided,
however, that:
(a) Distributor shall not undertake to grant to any Dealer any rights
greater than those which are granted by Ligand to Distributor
under this Agreement;
(b) In order to protect the goodwill of Ligand and the Products in
the Territory, Distributor shall secure the agreement of each and
every Dealer that it shall assume the same obligations as have
been assumed by Distributor under this Agreement; and
(c) Distributor shall defend, indemnify and hold Ligand harmless
against any claim, loss, liability or expense (including
attorney's fees and court costs) arising out of or based upon (1)
any act or omission of any Dealer, or (2) any claim made by any
Dealer against Ligand.
8.4 Alterations: Distributor shall ensure that the Products are
distributed, sold, and advertised in the form and with the labeling or
marking designated by Ligand and in accordance with the applicable
regulations in the Territory and, in particular, shall not alter,
remove, or deface any Trademark. Distributor acknowledges that it shall
have no right to sell any products under Ligand's name or trademark if
they were not originally manufactured or supplied by, or on behalf of,
Ligand.
8.5 Clinical Evaluations: Prior to conducting any clinical evaluation of
any of the Products, Distributor shall furnish to Ligand, for its prior
review and written approval, the protocols for such evaluation written
in the English language. Ligand shall use its reasonable efforts to
respond to any such written request for approval within ninety (90)
days of its receipt thereof, granting its approval or, if duly and
reasonably justified, denying it. If no written notice is given by
Ligand denying its approval within the aforesaid term, then Ligand's
approval shall be deemed
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granted. Results from any such clinical evaluation shall not be
publicly disclosed or disclosed in confidence to any third party
without Ligand's prior written approval, such approval not to be
unreasonably withheld.
8.6 Insurance. Both parties shall obtain and at all times during the term
of this Agreement maintain, and bear the cost of, liability insurance
which, in the judgment of Ligand, is adequate to cover their respective
obligations under this Agreement . A certificate of insurance and any
other documentation necessary to prove compliance with this provision
will be provided to the other party upon request.
9. REPORTING OBLIGATIONS
9.1 Foreign Laws and Regulations: In addition to its obligations under
Clauses 4.1, 4.2 and 4.3 to provide Product Authorization and Approval
information, Distributor shall advise Ligand of any legislation, rule,
regulation or other law (including but not limited to any customs, tax,
foreign exchange or foreign trade, antimonopoly, pharmaceutical
products or intellectual property law) which is in effect or which may
come into effect in the Territory after the date of this Agreement and
which may affect the importation of the Products into the Territory or
the use of the Products or the protection of Ligand's Intellectual
Property Rights therein.
9.2 Record Keeping: At all times during the term of this Agreement,
Distributor shall maintain at its principal place of business full,
complete and accurate books of account and records with regard to its
activities under this Agreement, including, without limitation, records
of all sales of the Products including the names of customers to whom
Products are sold and total gross sales and net sales for each calendar
quarter. Upon reasonable notice, and not more than twice a year,
Distributor shall grant Ligand or its representatives access during
normal business hours to any premises of Distributor in order that
Ligand, at its expense, may inspect Distributor's books and premises
related to the Products for the sole purpose of verifying and enforcing
compliance by Distributor with its obligations under this Agreement;
provided, however, that Distributor shall reimburse Ligand for the full
amount of the inspection costs if any inspection under this Clause 9.2
reveals any substantial breach by Distributor of this Agreement,
provided that Ligand shall have the burden of establishing any such
substantial breach.
9.3 Reports: Distributor shall provide Ligand with quarterly operation
reports of Distributor's activities to register, develop and market the
Products in the Territory, and shall provide to Ligand copies of all
such reports received by Distributor from Dealers. Each such report
shall be due within thirty (30) days after the end of the period to
which it relates. Each report shall include:
(a) a monthly compilation of all Products distributed by Distributor,
including the revenues derived therefrom and a breakdown of the
prices charged in respect of each Product; and
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<PAGE> 16
(b) a monthly list of the amount of inventory on hand; and
(c) monthly gross and net sales on a per Product, per country basis
in local currency and U.S. dollars, using the average exchange
rate set forth in the European Central Bank's Web Site for the
month.
9.4 Annual Statements: Distributor shall provide Ligand with annual
statements within thirty (30) days after the end of each calendar year
showing annual sales figures and the amount of inventory on hand as at
December 31 of each year, and shall provide to Ligand copies of all
such annual statements received by Distributor from Dealers. Such
annual statements shall also contain a summary of all promotional
activities undertaken by Distributor with respect to the Product during
the preceding calendar year, and current credit references.
9.5 Exchange of Adverse Event Information: The recipient of Adverse Event
(AE) reports and/or data, either Distributor or Ligand, will mutually
exchange and promptly provide in writing, using the latest applicable
International Conference on Harmonization of Technical Requirements for
Registration of Pharmaceuticals for Human Use (ICH) and Council for
International Organizations of Medical Sciences (CIOMS) guidelines for
reporting, any adverse event information obtained by the receiving
party associated with the use of the Products either as a result of
marketed use or from investigational clinical trials:
(a) Without limiting the foregoing, the party that is the original
recipient of AE information relating to incidents of serious and
unexpected reactions and/or events associated with the use of
any of the Products, as defined by the ICH and/or CIOMS
guidelines, shall make an initial written report of that
information to the other party, via facsimile, not more than 72
hours following receipt of that information. A full written
report, following the content and format guidelines indicated in
the applicable current ICH and CIOMS guidelines, is to be sent
to and received by the other party within seven (7) days
following the date the initial recipient receives such AE
information.
(b) Distributor shall also provide Ligand with routine quarterly and
annual adverse event reports and/or safety data received from
any source in the Territory, using the ICH guidelines for the
content and format for these types of reports. These reports are
intended to be used for and incorporated into Periodic Safety
Update Reports [PSUR] as defined by ICH guidelines. Ligand will
provide a copy of each of the Products' complete PSUR to the
Distributor within five (5) days of submission of the applicable
Product's PSUR to the U.S. regulatory authorities.
(c) Distributor shall be responsible for submitting the adverse
event/ medical safety (safety surveillance) reports in the
countries of the Territory as required by the regulatory
authorities. Ligand will hold and maintain the Central AE/
safety database for the Products and reports based on this
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database, as necessary to meet the requirements of regulatory
authorities in the Territory, will be made available to
Distributor during the agreement life. Without limiting the
generality of the foregoing, Distributor shall cooperate with
Ligand for the development of standard operating procedures for
exchange of information concerning Adverse Events and Product
safety information derived from Products use in the Territory
and each party shall at all times comply with the procedures so
developed.
(d) For all of the reports specified above, the language of all
exchange between and among the Parties will be English.
Distributor will provide Ligand all of the above-required AE
reports to the following address: Ligand Medical Safety Ligand
Pharmaceuticals Inc. 10275 Science Center Drive San Diego,
California 92121 U. S. A. Tel: 1 (619) 550-7588 Fax: 1 (619)
550-1860
Ligand will provide Distributor all of the above-required AE
reports to the following address:
Ferrer Group
Pharmacoepidemiology and Safety
Medical Department
Gran Via Carlos III, 86
08028 Barcelona Spain
Tel: +34 93 330 61 11
Fax: +34 93 490 70 78
9.6 Recall Procedures: Ligand will provide Distributor with a copy of
Ligand's standard operating procedure for recalls of products.
Distributor acknowledges the importance of the development and the
observance of correct procedures in case of recalls. Distributor shall
cooperate with Ligand for the development of recall standard operating
procedures and shall at all times comply with the procedures so
developed and adhere to Ligand's instructions from time to time and
always in accordance with mandatory requirements applicable in the
Territory.
10. PRODUCT AUTHORIZATIONS AND BUY BACK OF RIGHTS
10.1 Distributor acknowledges that Ligand cannot and does not guarantee the
issuance of any Product Authorization for any or all of the Products in
any country in the Territory and that Ligand will have satisfied its
contractual obligations to Distributor concerning Product
Authorizations once it has submitted complete registration dossiers for
Products subject to the following provisions:
(a) Within a period of *** the Effective Date, Ligand shall have the
option of either (1) submitting a complete registration dossier
for
- ----------
*** Portions of this page have been omited pursuant to a request for
Confidential Treatment and filed separately with the Commission.
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Product Authorization via central EMEA or mutual recognition procedures
for at least *** Products (one of them being Targretin(TM) capsules);
or (2) offering to buy-back from the Distributor the exclusive
marketing rights for Products which Ligand has not submitted a complete
registration dossier at a price of US$ *** for each such Product.
(b) If, within *** the Effective Date, Ligand has filed
registration dossiers for at least *** Products, but has been
unable to obtain Product Authorizations for Spain for at least
*** Products (one of them being Targretin(TM) capsules),
Distributor shall have the option, exercisable by written
notice to Ligand within three months after the expiration of
the *** period, either to:
(1) (Re)submit the registration dossier for *** Products, in
which case Ligand will provide Distributor with reasonable
assistance and all product data in its possession or
available to it with the right to disclose that may be
required for the registration process; and acquire, at no
additional cost to Distributor, the exclusive marketing
rights for all Products in the Philippines for a period of
ten years from the date of Distributor's notice under the
terms and conditions specified in this Agreement; or to
(2) Sell back to Ligand the exclusive marketing rights in the
Territory for all unapproved Products in exchange, at
Distributor's option, for (i) Ligand's waiver of its
rights under Clause 6.3; or (ii) a payment of US$ *** in
the aggregate.
(c) If, within *** from the Effective Date, Ligand and Distributor
have been unable to obtain the Product Authorization in Spain
for at least one Product and Distributor has not previously
exercised either option granted under Clause 10.1 (b),
Distributor shall have the further option, exercisable by
written notice to Ligand within *** after the expiration of the
*** period, to take one of the steps described in Clause 10.1
(b); provided that the price payable by Ligand under Clause
10.1(b)(2)(ii) would be increased to US$ *** .
11. COVENANTS OF DISTRIBUTOR
11.1 Restrictions: To the extent permissible by law, Distributor is
prohibited from:
(a) Advertising, circulating price lists or otherwise soliciting
orders for the Products, and from establishing or maintaining
branches, sales offices or distribution depots, outside the
Territory for the distribution of the Products;
(b) During the term of this Agreement, seeking the Approval for, or
marketing, (a) any products of a third party for a registration
indication of CTCL or,
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(b) any oral or topical product of a third party for a
registration indication of Kaposi's Sarcoma, except as agreed
by the parties.
12. INTELLECTUAL PROPERTY RIGHTS
12.1 Acknowledgment: Distributor acknowledges Ligand's exclusive right,
title and interest in and to any and all Intellectual Property Rights
pertaining to the Products. Distributor shall not at any time during or
after the term of this Agreement take any act or step impairing the
Intellectual Property Rights or do anything that may otherwise
adversely affect the Intellectual Property Rights, provided that any
good faith legal challenge shall not be deemed to be such an act or
step.
12.2 Notices, Trademarks and Name. Distributor shall have the royalty-free
and (except as to Ligand) exclusive, right to use in the Territory, and
shall use where available, the trademarks in Appendix D designated by
Ligand for each Product. If no trademark in Appendix D is available for
a Product in a country of the Territory and Ligand is unable or elects
not to provide an alternative trademark, then Distributor shall have
the right to secure, in Ligand's name and for its benefit, trademark
rights to a substitute mark for the Products in the relevant country
and Ligand will reimburse Distributor for the pre-approved expenses of
securing such rights. The rights to the substitute mark shall remain
with the Product it is used for and shall be transferred accordingly in
the event that corresponding Product rights are transferred.
Distributor shall not alter, deface, remove, cover, mutilate, or add
to, in any manner whatsoever, any patent notice, copyright notice,
trademark, trade name, serial number, model number or brand name that
Ligand may attach or affix to the Products. Distributor shall not
market the Products under any name, sign or logo other than the
Trademarks approved by Ligand. Distributor may use the Trademarks
solely in connection with the distribution of the Products and in
accordance with Ligand's instructions and quality control standards
from time to time, and will execute any document reasonably requested
by Ligand in connection with the use and maintenance of the Trademarks
in the Territory. Distributor acknowledges and agrees that it shall not
have any rights in respect of the Trademarks except to the extent
expressly granted in this Agreement, and that all use of the Trademarks
in the Territory and all goodwill in the Trademarks shall inure to the
benefit of Ligand.
12.3 Third Party Claims: Distributor shall promptly notify Ligand of any
claims or objections that its use of the Intellectual Property Rights
in connection with the marketing, support or service of the Products
may or will infringe the copyrights, patents, trademarks or other
proprietary rights of another Person ("Third Party Claim"). If
Distributor is served with a legal action or otherwise forced to
respond in a legal proceeding due to a Third Party Claim, Distributor
shall (1) without delay, tender the defense of such Third Party Claim
to Ligand; and (2) render Ligand all reasonable assistance, at Ligand's
expense, in connection with the defense of any such third party claim
or objection, whether in the courts, before administrative agencies, or
otherwise. If Ligand refuses to assume the defense of a
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Third Party Claim, Distributor shall have the right to defend itself
against such Third Party Claim, in which case Ligand shall render
Distributor all reasonable assistance, at Ligand's expense. Distributor
shall not, except as required by law, knowingly make any admission to
jeopardize, compromise or otherwise limit the validity of Intellectual
Property Rights.
12.4 Infringement of Intellectual Property Rights: Distributor shall
promptly notify Ligand of any infringement or suspected infringement of
Intellectual Property Rights in the Territory relating to the Products
of which it becomes aware, and provide Ligand with any available
evidence of such infringement or suspected infringement.
(a) Enforcement by Ligand: Ligand, at its option, shall be entitled
to institute enforcement proceedings ("Enforcement Proceedings")
in respect of any infringement or unauthorized use of
Intellectual Property Rights in the Territory. Distributor
agrees to provide all reasonable co-operation and assistance to
Ligand in relation to any such Enforcement Proceedings (and
agrees to be named as a party if legally required). Any
reasonable fees and costs borne by Distributor shall be
reimbursed by Ligand. Ligand shall be entitled to deduct its
reasonable expenses in relation to such Enforcement Proceedings
(including reasonable attorney's fees and expenses and
reimbursements to Distributor) from any recovery and any
remaining amount shall be distributed pro rata among the parties
in which Distributor shall receive 50% of any remaining recovery
and Ligand shall receive 50% of any remaining recovery.
(b) Enforcement by Distributor: If, after six (6) months of receipt
of credible evidence of infringement or unauthorized use of
Intellectual Property Rights in the Territory or such lesser
period of time if further delay would result in a loss of right
to bring an Enforcement Proceeding, Ligand elects not to
institute or continue an already instituted, Enforcement
Proceeding then Distributor, using attorneys of Distributor's
choosing reasonably acceptable to Ligand, can undertake or
continue such Enforcement Proceeding at Distributor's expense.
In such event, Distributor shall keep Ligand fully and timely
informed of the action so as to enable Ligand to provide input
which Distributor shall reasonable consider. Distributor may not
enter into any settlement agreement or consent to judgement
relating to the invalidity, unenforceability or noninfringement
of the Intellectual Property Rights without Ligand's prior
written consent. Ligand agrees to provide all reasonable
co-operation and assistance to Distributor in relation to any
such Enforcement Proceeding at Distributor's expense and agrees
to be named as a party in any Enforcement Proceeding. Any
reasonable fees and costs borne by Ligand shall be reimbursed by
Distributor. If Distributor enforces Intellectual Property
Rights in the Territory in accordance with this paragraph,
Distributor shall be entitled to deduct its reasonable expenses
in relation to such Enforcement Proceeding (including reasonable
attorney's fees and expenses and reimbursements to Ligand)
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from any recovery and any remaining amount shall be distributed
pro rata among the parties in which Distributor shall receive
50% of any remaining recovery and Ligand shall receive 50% of
any remaining recovery.
13. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
13.1 Non-Disclosure Obligations: During the term of this Agreement, the
Disclosing Party will disclose certain Confidential Information to the
Receiving Party to permit the Receiving Party to perform its
obligations under this Agreement. The Receiving Party shall refrain
from using or exploiting any and all Confidential Information for any
purposes or activities other than those expressly authorized in this
Agreement. The Receiving Party agrees that such Confidential
Information shall be kept secret by the Receiving Party during the term
of this Agreement and after the expiration hereof. The Receiving Party
shall disclose Confidential Information only to its agents,
representatives or employees with a need to know and shall implement
appropriate security measures in order to avoid the disclosure or
misappropriation of such Confidential Information.
13.2 Confidentiality Agreements: Both parties shall cause each of their
directors, officers and employees and the directors, officers and
employees of, respectively, Distributor's Dealers and agents, and
Ligand's assignee's, who will receive Confidential Information pursuant
to Clause 13.1 to enter into a Confidentiality Agreement in a form
approved by both parties. The Distributor and Ligand, respectively,
shall at their own expense undertake the enforcement of any such
Confidentiality Agreement in the event of any breach thereof. Execution
of Confidentiality Agreements by the parties shall not, however, be
construed as limiting their duties or obligations hereunder.
13.3 Ownership of Ligand's Materials. All files, lists, records, documents,
drawings, specifications and records, whether in written or electronic
form, which incorporate or refer to all or a portion of Ligand's
Confidential Information shall remain the sole property of Ligand. Such
materials shall be promptly returned (1) upon Ligand's reasonable
request, or (2) in accordance with Clause 17.2 of this Agreement upon
termination of this Agreement, whichever is earlier.
13.4 Exceptions. The provisions of this Clause 13 shall not apply, or cease
to apply, to information supplied by Ligand if it (1) was already known
to Distributor; (2) came into the public domain without breach of
confidence by Distributor or any other Person; (3) was received by
Distributor from a third party without restrictions on their use in
favor of Ligand; or (4) is required to be disclosed pursuant to any
statutory or regulatory provision or court order; provided that
Distributor shall have the burden of establishing any of the foregoing
exceptions.
14. LIGAND WARRANTY, INDEMNITY, AND LIMITATIONS OF LIABILITY
14.1 Non-Infringement. To the best of Ligand's knowledge, the sale and use
of the Products does not infringe the proprietary rights of any third
party in the Territory,
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and no court proceedings or any other procedure for infringement of
patent, copyright, trademark, trade secret or any other property rights
have been brought against Ligand with respect to the Products as of the
effective date of this Agreement. Ligand makes no warranty or
representation, implied or otherwise, that the Products and/or their
sale or use will not infringe the property rights of any third party in
the Territory.
14.2 Products Warranty: Ligand warrants that all Products supplied hereunder
shall (1) conform to the products specifications therefor, as published
by Ligand from time to time consistent with the data contained in the
Product Authorizations, and (2) have a shelf life of one year or more
(or in the case of Ontak, nine months or more) from the date of
shipment to Distributor. The aforementioned shelf life terms shall be
proportionally increased from time to time in accordance with improved
stability data.
14.3 Indemnity: Ligand shall defend, indemnify and hold Distributor and its
shareholders, managers, officers, directors, agents and employees
harmless against any and all losses, damages, claims, liabilities,
costs and expenses (including reasonable attorney's fees) resulting
solely from the personal injury or death caused by the defective design
and/or manufacture of the Products when supplied to Distributor by
Ligand or by Ligand's appointee, provided that Distributor promptly
notifies Ligand in writing of any claim, action or suit potentially
giving rise to the indemnification obligation hereunder. Ligand shall
have the sole and absolute control of, and discretion in, the handling
of the defense and/or settlement of any such claim, action or suit,
including, without limitation, the selection of defense counsel, and
Distributor shall fully cooperate with Ligand in the defense and
settlement of all such claims, actions or suits, provided, however,
that Distributor may take any appropriate action necessary to preserve
or avoid prejudice to its interests, or the interests of Ligand as
indemnitor, in the event that (1) notice to Ligand cannot be given in
sufficient time for Ligand to take action, or (2) Ligand, after prompt
notice and inquiry from Distributor, fails to acknowledge its
obligation to indemnify Distributor under this clause.
14.4 DISCLAIMERS. TO THE FULL EXTENT PERMITTED BY LAW, APART FROM THE
FOREGOING WARRANTIES AND INDEMNITY, LIGAND MAKES NO ADDITIONAL
REPRESENTATIONS OR WARRANTIES AND HEREBY DISCLAIMS ALL WARRANTIES,
REPRESENTATIONS, AND LIABILITIES, WHETHER EXPRESS OR IMPLIED, ARISING
FROM CONTRACT OR TORT (EXCEPT FRAUD), IMPOSED BY STATUTE OR OTHERWISE,
RELATING TO THE PRODUCTS AND/OR ANY PATENTS OR TECHNOLOGY USED OR
INCLUDED IN THE PRODUCTS, INCLUDING ANY WARRANTIES AS TO
MERCHANTABILITY, FITNESS FOR PURPOSE, CORRESPONDENCE WITH DESCRIPTION,
OR NON-INFRINGEMENT.
14.5 LIMITATION. IN NO EVENT WILL LIGAND BE LIABLE FOR CONSEQUENTIAL,
INCIDENTAL OR SPECIAL DAMAGES, INCLUDING
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ANY LOSS OF PROFITS, EVEN IF LIGAND HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES.
14.6 LIABILITY CAP. IN NO EVENT SHALL LIGAND'S LIABILITY TO DISTRIBUTOR
EXCEED AN AMOUNT EQUAL TO THE AGGREGATE BASE PRICES PAID BY DISTRIBUTOR
TO LIGAND FOR PRODUCTS DURING THE LAST CALENDAR QUARTER, except that
this liability limitation shall not apply to Ligand's indemnity
obligation under section 14.3 arising from personal injury or death
caused by the defective design and/or manufacture of the Products when
supplied to Distributor by Ligand or by Ligand's appointee.
15. DISTRIBUTOR'S WARRANTIES, INDEMNITY AND LIMITATIONS OF LIABILITY
15.1 Warranties: Distributor represents and warrants to Ligand that:
(a) Distributor is a corporation duly organized, validly existing
and in good standing under the laws of Spain and has the
corporate power to execute this Agreement and to perform its
obligations hereunder;
(b) the person or persons executing this Agreement on behalf of
Distributor have been duly authorized to do so by all requisite
corporate or other actions of Distributor;
(c) this Agreement is the legal, valid and binding obligation of
Distributor, enforceable in accordance with its terms;
(d) the execution, delivery and performance of this Agreement by
Distributor does not and will not conflict with or result in a
breach of any agreement, instrument or understanding, oral or
written, to which Distributor is a party or by which Distributor
may be bound, nor violate any law or regulation of any court or
Governmental Authority having jurisdiction over Distributor;
(e) Distributor will maintain at all times during this Agreement all
necessary Approvals, according to Clause 4.2; and
(f) all Affiliates of Distributor are duly organized, validly
existing and in good standing under the laws of the country in
which they operate and have the power to perform all obligations
under this Agreement that they are assigned by Distributor.
15.2 Indemnity: Distributor shall indemnify and hold Ligand and its
shareholders, managers, officers, directors, agents and employees
harmless against any and all losses, damages, claims, liabilities,
costs and expenses (including reasonable attorneys' fees) resulting
from any breach by Distributor of this Agreement so declared by a court
of competent jurisdiction or as agreed between the parties, or
resulting from any claim that may be made by reason of any damage
caused by an
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act or omission of Distributor or any of its shareholders, managers,
officers, directors, agents or employees whenever such act or omission
is in connection with this Agreement, contrary to the law and is so
declared by a court of competent jurisdiction or as agreed between the
parties.
15.3 LIMITATION. IN NO EVENT WILL DISTRIBUTOR BE LIABLE FOR CONSEQUENTIAL,
INCIDENTAL OR SPECIAL DAMAGES, INCLUDING ANY LOSS OF PROFITS, EVEN IF
DISTRIBUTOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
16. TERMINATION
16.1 Termination by Ligand: Ligand may terminate this Agreement, at its sole
discretion: (1) in its entirety; or (2) in respect of any specified
part of the Territory and/or any one or more of the Products only, by
giving Distributor thirty (30) days written notice of termination,
effective on the date such notice is received, in the event that:
(a) Distributor breaches any of its material obligations under this
Agreement, and fails to cure such breach within thirty (30) days
of receiving a written notice from Ligand specifying such breach
and requiring it to be cured;
(b) Distributor takes any act or step impairing the Intellectual
Property Rights or does anything that may otherwise adversely
affect the Intellectual Property Rights of Ligand, provided,
however, that Ligand may exercise its rights of termination
pursuant to this Clause 16.1(b) whether or not the Distributor's
legal challenge of Ligand's rights is in good faith;
(c) Distributor enters into insolvency or bankruptcy or is unable to
pay its debts as they fall due, or a trustee or receiver or the
equivalent is appointed to Distributor, or proceedings are
instituted against Distributor in the Territory relating to
dissolution, liquidation, winding up, bankruptcy, insolvency or
the relief of creditors, if such proceedings are not terminated
or discharged within thirty days;
(d) there is a change of control of Distributor, beyond its
corporate structure and owners on the Effective Date, or a sale
or disposition by Distributor to a third party other than its
owners and companies in its corporate structure on the Effective
Date of substantially all of its assets, without the prior
written approval of Ligand, which approval may be given or
withheld in Ligand's sole discretion. For the purposes of this
Clause 16.1(d), the transfer (whether direct or indirect) of all
or a majority of the capital stock of Distributor or the merger,
consolidation or reorganization of Distributor beyond its
corporate structure and owners on the Effective Date shall be
considered a "change in control" of Distributor;
(e) any event of Force Majeure, as defined in Clause 19.6 hereof,
occurs and
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prevents Distributor from performing its obligations
under this Agreement for a period of 90 days or more, provided
there is no commercially reasonable alternative;
(f) Distributor ceases to carry on business in the marketing of
pharmaceutical products in the Territory;
(g) any law, decree, or regulation is enacted within the Territory
which would substantially impair or restrict (1) Ligand's right
to terminate or elect not to renew this Agreement as herein
provided; (2) Ligand's right, title or interest in the Products
or the Intellectual Property Rights therein; or (3) Ligand's
right to collect the purchase prices for the Products as set
forth in this Agreement; or
(h) an adverse event occurs which has substantially impaired the
ability of Distributor to continue to perform its obligations
hereunder and Distributor is unable to provide Ligand with
adequate assurance of future performance.
16.2 Termination by Distributor: Distributor may terminate this Agreement,
at its sole discretion: (1) in its entirety; or (2) in respect of any
specified part of the Territory and/or any one or more of the Products
only, by giving Ligand thirty (30) days written notice of termination,
effective on the date such notice is received, in the event that:
(a) Ligand breaches any of its material obligations under this
Agreement, and fails to cure such breach within thirty (30) days
of receiving a written notice from Distributor specifying such
breach and requiring it to be cured;
(b) any event of Force Majeure, as defined in Clause 19.6 hereof,
occurs and prevents Ligand from performing its obligations under
this Agreement for a period of 90 days or more, provided there
is no commercially reasonable alternative ;
(c) the Governmental Authorities have not issued the requisite
Product Authorization or Approval for any Product for any
country in the Territory;
(d) any law, decree, or regulation is enacted within the Territory
which would substantially impair or restrict (1) Distributor's
right to terminate or elect not to renew this Agreement as
herein provided; (2) Ligand's right, title or interest in the
Products or the Intellectual Property Rights therein; or (3)
Distributor's right to market and distribute the Products in
accordance with this Agreement; or
(e) an adverse event occurs which has substantially impaired
Ligand's ability to continue to perform its obligations
hereunder and Ligand is unable to provide Distributor with
adequate assurance of future performance.
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17. RIGHTS AND OBLIGATIONS UPON TERMINATION/NONRENEWAL
17.1 Cessation of Rights: Upon expiration or termination (collectively, the
"Termination") of this Agreement for any reason whatsoever as provided
herein all rights and obligations of the parties hereunder shall cease,
except as provided in Clauses 17.5 of this Agreement; provided,
however, that Termination of this Agreement shall not relieve the
parties hereto of any obligations accrued prior to said Termination.
Distributor, following notice of Termination by Ligand, shall be
entitled to purchase under the terms and conditions of this Agreement,
any Products the orders for which were accompanied by payment and which
were accepted by Ligand prior to the effective date of Termination,
even though shipment of the Products may be made subsequent to the date
of Termination, provided that Distributor has paid all outstanding
obligations to Ligand. Upon Termination by Ligand pursuant to Clauses
16.1, Distributor shall immediately cease to use any advertising or
promotional materials relating to the Products and discontinue any
previously authorized use of the Trademarks and Confidential
Information (except for activities permitted by the last sentence of
Clause 17.3), and shall cease all conduct that might cause any Person
to believe that Distributor is a Distributor of the Products or
otherwise connected with Ligand.
17.2 Return of Materials and Customer List: Upon Termination, Distributor
shall promptly return to Ligand, or deliver to a third party designated
by Ligand, and shall cause its Dealers and employees to return or
deliver, all sales materials, Confidential Information in written,
recorded or other tangible form and other items in Distributor's
possession, which Ligand has furnished or supplied to Distributor, or
which Distributor has furnished to its Dealers and employees, and all
customer lists for Ligand Products. If Distributor purchased any such
materials or other items, Distributor shall be reimbursed in an amount
equal to the net price paid by Distributor for the same.
17.3 Repurchase of Inventory: Ligand shall have the option, exercisable at
its sole discretion by written notice to Distributor within thirty (30)
days after Termination, to repurchase all or part of Distributor's
remaining inventory of Products. The price payable by Ligand upon the
exercise of the option shall be the net price paid by Distributor to
Ligand for the Products, plus the costs of re-shipment to San Diego,
California, or to such other destination within the Territory as Ligand
may designate. Upon receipt of Ligand's notice of exercise of its
option pursuant to this clause, Distributor shall ship its inventory of
Products on hand to such location as Ligand may designate. If Ligand
does not exercise its rights under this clause, Distributor shall have
the right to sell its existing inventory for a period of six months
months following the date of Termination.
17.4 Product Authorizations, Trademarks and other Product rights: Upon
Termination of this Agreement as provided herein for any reason
whatsoever, Distributor shall immediately take all steps necessary to
transfer to Ligand, or to Ligand's designee, any and all rights
Distributor may have to Product Authorizations, Trademarks and any
other rights associated with the Products, to the extent permitted by
applicable
26
<PAGE> 27
law and at Distributor's cost. Distributor shall, at the time for
application for Product Authorizations, take all reasonable steps to
ensure that such transfers may later be completed. If such transfer is
not possible, Distributor shall use its best efforts to arrange for
Ligand or its designee to rely upon such Product Authorizations and
shall permit Ligand or its designee to use and reference such Product
Authorizations in its own applications.
17.5 Survival of Non-Disclosure Obligation: Notwithstanding the Termination
of this Agreement, both Parties shall continue to abide by the terms of
its non-disclosure obligations with respect to Confidential Information
under Clause 12 of this Agreement.
17.6 Waiver of Termination Compensation: Neither Party shall be liable for,
and each Party hereby waives, all right to compensation and all claims
of any kind whether on account of the loss by the other of present or
prospective profits, or anticipated orders, or expenditures,
investments, or commitments made in connection with this Agreement,
goodwill created, or on account of any other cause whatsoever.
18. CERTAIN PAYMENTS
18.1 No Payments: Distributor shall not make, offer or agree to offer
anything of value to any government official, political party or
candidate for government office. Distributor undertakes that there is
not now nor will there be any employment of or beneficial ownership of
Distributor by governmental or political officials in the Territory.
Distributor will indemnify and hold harmless Ligand against any and all
losses, costs, expenses or liabilities resulting from any breach by
Distributor of its obligations under this Clause 18.
19. GENERAL PROVISIONS
19.1 Waivers: The waiver by either party of a breach or default in any of
the provisions of this Agreement by the other party shall not be
construed as a waiver of any succeeding breach of the same or other
provisions.
19.2 Entire Agreement and Amendments: This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements between the parties, whether
written or oral, relating to the same subject matter. No modification,
amendments or supplements to this Agreement shall be effective for any
purpose unless in writing, signed by each party.
19.3 Governing Language: This Agreement has been prepared and executed in
the English language. No authorized translation has been prepared or
executed. In the event that any translation is prepared, the English
language version of this Agreement shall govern. All written
correspondence between the parties shall be in the English language.
27
<PAGE> 28
19.4 Further Assurances: Each party agrees to do such acts and execute such
further documents as may be necessary or desirable to enable the
performance of and to fulfill the provisions and intent of this
Agreement.
19.5 Assignments: This Agreement is entered into by Ligand in reliance upon
the facilities, personnel and technical expertise of Distributor, and
Distributor may only transfer or delegate the performance of the
Agreement or any part thereof to a Dealer pursuant to the terms and
conditions of Clause 2.1. Nothing herein contained, however, shall
prevent Ligand or Distributor from assigning this Agreement in whole or
in part to, or causing any order or orders to be filled in whole or in
part by, any Affiliate of Ligand or the Distributor, respectively.
Ligand shall also have the right to assign this agreement in amerger or
acquisition in which Ligand is not the surviving entity, or as part of
a transfer of all or substantially all of the assets of its business to
which this Agreement pertains.
19.6 Force Majeure: Neither party shall be liable to the other party for any
delay or omission in the performance of any obligation under this
Agreement, other than the obligation to pay monies, where the delay or
omission is due to any cause or condition beyond the reasonable control
of the party obliged to perform, including, but not limited to, strikes
or other labor difficulties, acts of God, acts of government (in
particular with respect to the refusal to issue necessary import or
export licenses), war, riots, embargoes, or inability to obtain
supplies ("Force Majeure"). If Force Majeure prevents or delays the
performance by a party of any obligation under this Agreement, then the
party claiming Force Majeure shall promptly notify the other party
thereof in writing.
19.7 Notices: Unless otherwise specifically provided, all notices required
or permitted by this Agreement shall be in writing and in English,
effective upon receipt, and may be delivered personally, or may be sent
by facsimile, commercial express courier, or first class air mail,
postage prepaid, addressed as follows:
If to Ligand: Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, California 92121
Attention: General Counsel
Facsimile: (+)(1)(619) 550-1825
28
<PAGE> 29
If to Distributor: Ferrer Internacional , S.A.
Gran Via Carlos III, 94,
08028 Barcelona, Spain
Attention: Licensing Department (cc. Legal Department)
Facsimile: (+)(34)(3) 330 80 57
20. CHOICE OF LAW AND DISPUTE RESOLUTION
20.1 Choice of Law: This Agreement is governed by, and shall be construed in
accordance with, the laws of the State of California, United States of
America, excluding (a) conflicts of laws rules, and (b) the United
Nations' Convention on Contracts for the International Sale of Goods.
The parties shall endeavor to resolve amicably any and all disputes
arising under or in connection with this Agreement, including but not
limited to the interpretation of this Agreement, its validity and the
performance hereunder.
20.2 Disputes: Any dispute between the parties relating to the validity,
performance, interpretation or construction of this Agreement that
cannot be resolved amicably between the parties shall be submitted to
the exclusive jurisdiction of the courts, including the United States
District Courts, in the State of California. Each party hereto
irrevocably submits to the personal jurisdiction of the courts in
California, for the resolution of all disputes hereunder.
20.3 Right to Judicial Remedies: Nothing in this Clause 20 shall be
construed to impair or restrict either Party's right to judicial
remedies, including preliminary and permanent injunctions from any
court of competent jurisdiction to prevent any infringement of the
Intellectual Property Rights, representation of competitive products,
and/or disclosure of the Confidential Information.
IN WITNESS WHEREOF, each party has caused its duly authorized representative to
execute and deliver this Agreement in reliance on the due authority of the
representative of the other party, to be effective as of March 26, 1999.
DISTRIBUTOR: LIGAND PHARMACEUTICALS, INC.:
By: /s/ R. FOGUET By: /s/ David E. Robinson
-------------------------- ----------------------------------
Title: CEO Title: Chairman, President & CEO
----------------------- ------------------------------
SERAGEN, INC.:
By: /s/ Paul V. Maier
--------------------------
Title: CEO
-----------------------
29
<PAGE> 30
APPENDIX A
PRODUCTS
<TABLE>
<CAPTION>
PRODUCT COVERED INDICATIONS
------- -------------------
<S> <C>
Panretin(TM) Gel (alitretinoin) All indications
Panretin(TM) Capsules (alitretinoin) All indications
Ontak(TM) (denileukin diftitox) All indications
Targretin(TM) Gel (bexarotene) The treatment, palliation, prevention
and/or remission of cancer and
dermatological diseases
Targretin(TM) Capsules (bexarotene) The treatment, palliation, prevention
and/or remission of cancer and
dermatological diseases
</TABLE>
30
<PAGE> 31
APPENDIX B
BASE PRICE SCHEDULE
<TABLE>
<S> <C>
Targretin(TM) products: ***% of Resale Price.
Ontak(TM) products: ***% of Resale Price.
Panretin(TM)products: ***% of Resale Price.
</TABLE>
- ----------
*** Portions of this page have been omited pursuant to a request for
Confidential Treatment and filed separately with the Commission.
31
<PAGE> 32
APPENDIX C
NET SALE PRICE SCHEDULE
<TABLE>
<CAPTION>
<S> <C>
1. Targretin(TM) products: ***% of Ex-Distributor price in the Territory
2. Ontak(TM)(TM) products: ***% of Ex-Distributor price in the Territory
3. Panretin(TM) products: ***% of Ex-Distributor price in the Territory
</TABLE>
- ----------
*** Portions of this page have been omited pursuant to a request for
Confidential Treatment and filed separately with the Commission.
32
<PAGE> 33
APPENDIX D
LIGAND TRADEMARKS
<TABLE>
<CAPTION>
Trademark Generic Product Name Country Trademark Status
- --------- -------------------- ------- ----------------
<S> <C> <C> <C>
Panretin(TM) alitretinoin US Registered
EP (CTM) Pending
Targretin(TM) bexarotene US Registered
EP(CTM) Pending
Ontak(TM) denileukin diftitox US Pending
EP(CTM) Pending
Onact(TM) denileukin diftitox Portugal Registered
Spain Pending
</TABLE>
33
<PAGE> 1
EXHIBIT 10.4
DISTRIBUTORSHIP AGREEMENT
This Distributorship Agreement ("Agreement"), is entered into as of March 26,
1999 between:
LIGAND PHARMACEUTICALS, INCORPORATED, a corporation organized and existing under
the laws of the State of Delaware, U.S.A., with its principal place of business
at 10275 Science Center Drive, San Diego, California, U.S.A. and SERAGEN, INC. a
Delaware corporation having its principle place of business at 97 South Street,
Hopkinton, Massachusetts (collectively referred to herein as "Ligand")
and
FERRER INTERNACIONAL, S.A, a corporation organized and existing under the laws
of Spain with its principal place of business at Gran Via Carlos III, 94,
Barcelona, Spain ("Distributor")
W I T N E S S E T H:
A. Ligand is a leading researcher, developer and manufacturer of
biopharmaceutical products, including the Products, and is the exclusive
owner or licensee of proprietary rights in such Products.
B. Distributor is engaged in the marketing of pharmaceutical products and
has represented to Ligand that it has the facilities, personnel and
technical expertise to market and distribute the Products in the
Territory.
C. Ligand is willing to exclusively sell Products in the Territory to
Distributor on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the following
meanings:
1.1 "Affiliate" means any corporation or business entity which, directly or
indirectly, is controlled by, controls, or is under common control with
Ligand or Distributor, as applicable. For this purpose, "control"
includes, but is not limited to, direct or indirect ownership of more
than fifty percent (50%) of the voting shares or stock of such
corporation or business entity.
1.2 "Approvals" means and includes all filings, approvals, registrations,
permits, licenses and authorizations related to Product pricing or
marketing activities which are necessary or
<PAGE> 2
which, in the reasonable opinion of Ligand, are desirable, to be made
with or obtained from any Governmental Authority for the sale of the
Products in the Territory, including, without limitation, any pricing
approvals, government reimbursement approvals, import permits and
approvals concerning Distributor's facilities, but excluding Product
Authorizations.
1.3 "Base Price" means, with respect to each Product, the price set forth in
Attachment B.
1.4 "Confidential Information" means any and all data, trade secrets,
confidential knowledge, specifications, clinical data and protocols and
other proprietary information, not in the public domain, relating to the
Products and/or the business or affairs of either party (the "Disclosing
Party"). Confidential Information shall also include the present
Agreement and the terms set forth herein to the extent that it has not
been placed into the public domain by the Disclosing Party. Confidential
Information may be communicated to the other party (the "Receiving
Party") orally, visually, in writing, or in any other recorded or
tangible form. All data and information will be considered to be
Confidential Information hereunder (1) if the Disclosing Party has
marked them as such, (2) if the Disclosing Party, orally or in writing,
has advised the Receiving party of the confidential nature, provided
that, if disclosed orally, the Disclosing Party confirms such
confidential nature in writing within two weeks thereafter; or (3) if,
due to their character or nature, a reasonable person in a like position
and under like circumstances as the Receiving Party would treat them as
secret and confidential.
1.5 "Dealer" means a sub-distributor, agent or marketing representative of
Distributor.
1.6 "Effective Date" means the date of this Agreement as designated in
preamble to this Agreement on the first page.
1.7 [Reserved]
1.8 "Governmental Authority" means and includes all governmental and
regulatory bodies, agencies, departments or entities, whether or not
located in the Territory, which regulate, direct or control commerce in
or with the Territory.
1.9 "Intellectual Property Rights" means and includes all copyrights,
designs, databases, mask works, patents, trademarks, trade names and
other proprietary rights, and all registrations and applications
therefor, which Ligand may at any time own, adopt, use, license or
register with respect to a Product or its business, and includes the
Trademarks.
1.10 [Reserved]
1.11 "Person" means and includes any agency, association, company,
individual, or other entity regardless of the type or nature thereof.
1.12 "Product Authorizations" means and includes all filings, approvals,
registrations and
2
<PAGE> 3
authorizations relating to pharmaceutical or medicinal products which
are necessary or which, in the reasonable opinion of Ligand, are
desirable, to be made with or obtained from any Governmental Authority
in order for Distributor to lawfully market, promote, offer for sale and
sell the Products in the Territory, but excluding Approvals.
1.13 "Products" means the biopharmaceutical products manufactured by or on
behalf of Ligand, for the indications and applications specified, which
are listed in Appendix A, as amended by Ligand from time to time by
written notice to Distributor; and shall include all line extensions and
modified or improved versions of such products from time to time.
1.14 "Resale Price" means the price from the Distributor, as determined by
the Spanish Governmental Authorities ("Precio de Venta Laboratorio"), as
reduced by:
(a) freight, shipping and insurance with respect to such Products;
(b) sales, excise or similar taxes imposed on the sale of the
Products;
(c) any mandatory or industry standard discounts or rebates to the
competent Governmental Authorities and/or Social Security Systems
pursuant to the regulations and/or agreements in force; and
(d) cash and trade discounts and allowances as customarily applied to
products of a similar kind in the pharmaceutical industry in the
relevant country within the Territory;
but in no event may the quarterly total deductions to the Precio de
Venta Laboratorio in any country of the Territory exceed 5% of the
Precio de Venta Laboratorio, and in any case deductions may be taken
only if they are paid by Distributor or actually charged against
Distributor and evidenced in Distributor's books and records of account
and the reports provided to Ligand pursuant to Clause 9.3 hereof. If no
such price has been approved by the Spanish Governmental Authorities,
Resale Price shall mean the average, same distribution level price
agreed upon by Ligand or its other distributors for the relevant
Products with the Governmental Authorities in the first three European
Union Member States where the relevant Product is sold. If Product
prices have been approved in fewer than three European Union Member
States, the Resale Price shall be the average price in such fewer
countries or, if there is no such country, a price mutually agreed upon
by the parties.
1.15 "Technical Assistance" means and includes advice, training, information
and other support regarding the manufacture, specifications, clinical
trials and marketing specifically related to the Products.
1.16 "Term" means the term of this Agreement as determined in accordance with
Clause 3.1 and, where the context permits, includes the extensions as
per Clause 3.2 .
3
<PAGE> 4
1.17 "Territory" means the geographic area comprising the countries in
Central and South America, as listed on Appendix D.
1.18 "Trademarks" means the trademarks owned or licensed and designated by
Ligand for the Products in Appendix C, as well as any substitute marks
that are used for the Products in accordance with Clause 12.2.
2. GRANT OF RIGHTS
2.1 Distribution Rights: Subject to the terms and conditions of this
Agreement, Ligand grants to Distributor, and Distributor accepts, the
exclusive right to market the Products in the Territory. Right to market
under this Agreement shall mean the Distributor's right (1) to hold
itself out as Ligand's exclusive authorized distributor in the
Territory; (2) to acquire the Products from Ligand for resale to
customers on its own account in the Territory; and (3) to appoint
Affiliates of Distributor or other third parties (deemed) approved by
Ligand as Dealers in the Territory; provided, however, that (a)
Distributor shall obtain an executed copy of a sub-distributor or dealer
agreement, in a form containing terms and conditions substantially
similar to the terms and conditions of this Agreement, from the relevant
Dealer; and (b) Distributor shall notify Ligand in writing of the
desired appointment of any third party Dealer and, at Ligand's request,
provide Ligand with adequate background information on such Dealer.
Unless Ligand reasonably objects to such appointment within thirty
calendar days after its receipt of such notice and information, Ligand
shall be deemed to have given the requisite approval to the appointment.
2.2 Additional Rights: Ligand further grants Distributor the royalty-free
and (except as to Ligand) exclusive right to use the Confidential
Information, the assistance and information related thereto pursuant to
Clause 4.4, and the Trademarks solely to the extent reasonably necessary
for the distribution and marketing of the Products within the Territory
in accordance with this Agreement.
2.3 Independent Contractors: The relationship of Ligand and Distributor
established by this Agreement is of seller and buyer, or independent
contractors, and nothing in this Agreement shall be construed: (1) to
give either party the power to direct or control the daily activities of
the other party, or (2) to constitute the parties as principal and
agent, partners, or otherwise as participants in a joint undertaking.
Ligand shall have no obligation or authority, express or implied, to
exercise any control whatsoever over the employees or the business
affairs of Distributor. Except as specifically provided in this
Agreement, Distributor shall have no power or authority to make or give
any representation or warranty or to incur any liability or obligation,
or to waive any right, on Ligand's behalf.
2.4 Ligand's Rights: Ligand reserves the right to modify and/or to
discontinue developing or producing the Products at its discretion at
any time either (1) due to legal or regulatory requirements,
administrative or court orders, or safety risks, or (2) so long as the
Product in question is also withdrawn from the European or the North
American market for a justified and reasonable motive; provided,
however, that Ligand shall notify Distributor as soon as
4
<PAGE> 5
practicable after any such modification or discontinuance and that
Distributor shall be entitled to market any modified versions of
Products pursuant to the terms of this Agreement. Nothing in this
Agreement shall be deemed to restrict Ligand from selling the Products
or other products to Persons outside the Territory for use within the
Territory, nor from appointing distributors in countries outside the
Territory who may be permitted, by operation of law, to sell the
Products in the Territory, and Distributor shall receive no compensation
for such sales by Ligand or any other distributor; provided, however,
that Ligand shall impose upon its other distributors restrictions on
their active marketing of the Products in the Territory equivalent to
restrictions placed upon Distributor's active marketing of Products
outside the Territory in this Agreement, to the extent such restrictions
are legally permissible.
2.5 Ligand Exclusive Supplier: During the Term, Distributor shall purchase
all of its requirements of the Products from Ligand or any party
designated by Ligand for this purpose.
3. TERM
3.1 Term: The term of this Agreement shall commence on the Effective Date
and shall continue, with respect to a particular Product, for a period
of ten years from the date of first sale of that particular Product to
Distributor anywhere in the Territory after the Product Authorization is
obtained for such Product, unless the Agreement is earlier terminated in
accordance with Clause 16.
3.2 Extensions: Ligand and Distributor agree that, at least one year before
the expiration of the initial ten-year term of the Agreement, they shall
engage in good faith discussions for a period not to exceed six months
concerning the extension of the term of the Agreement for the relevant
Product(s) for a period of three to five years at commercial terms and
conditions to be negotiated during the six month discussion period.
4. AUTHORIZATIONS
4.1 Distributor to Use Diligent Efforts to Apply for and Pursue Product
Authorizations: Following the issuance of any Product Authorization by
the FDA, the EMEA, or any other Governmental Authority and in
consultation with Ligand, Distributor shall be responsible for, and
shall use diligent efforts to, file applications for, pursue and
maintain, in each country within the Territory, during the Term, all
Product Authorizations. All Product Authorizations shall be in Ligand's
name, whenever legally permissible, unless otherwise agreed to by
Ligand. Distributor shall obtain Ligand's prior approval of all
applications and submissions to any Governmental Authority in respect of
any Product Authorization. Distributor shall keep Ligand informed, in
writing, of the status of its applications for Product Authorizations on
a regular basis, and in any event no less frequently than once every
three months, and shall immediately notify Ligand in writing of any
substantial change in the status of any Product Authorization or any
substantive questions received from any Governmental Authority in
respect of such Product Authorizations. Distributor
5
<PAGE> 6
shall provide copies of all Product Authorizations to Ligand at its
request. If at any time there is a choice in respect of the appropriate
type of such Product Authorization to be obtained or maintained in
respect of any one or more of the Products, Ligand may, in its sole and
absolute discretion, exercise such choice and shall direct Distributor
as to the appropriate Product Authorization to be requested. If Ligand,
at its sole discretion, informs Distributor that it does not intend to
apply for any requisite Product Authorization in any country in the
Territory, Distributor may give Ligand written notice of its intention
to seek such Product Authorization on its own and shall have the right
to do so, unless Ligand proceeds with or authorizes the filing on its
behalf within thirty calendar days after its receipt of Distributor's
notice. In any given case when Distributor seeks Product Authorization,
Ligand shall provide Distributor with all reasonably necessary and
available clinical data, documentation and assistance to such effect.
4.2 Distributor to Apply for Approvals: Distributor, at its cost, shall file
applications for and maintain Approvals for all Products listed on
Appendix A in effect as of the Effective Date in each country in the
Territory during the Term. If Distributor believes that any application
for Approval for any particular future Product or indication that may be
included within the scope of this Agreement is not economically
justified, Ligand may proceed with the application at its own cost and,
upon issuance of the Approval, Distributor shall market the Product in
the country concerned, if Ligand so requests. Distributor shall
immediately notify Ligand in writing of any substantial change in the
status of any Approval or any substantive questions received from any
Governmental Authority in respect of such Approvals. Distributor shall
provide copies of all Approvals to Ligand.
4.3 Pricing Approvals: Without limiting the generality of Clause 4.2, any
applications, submissions, negotiations and agreements with any
Governmental Authority on Product prices will require Ligand's prior
consent provided, however, that Ligand shall give its consent if the
price from the Distributor to the wholesalers in the relevant country of
the Territory is not less than ***percent of the price as determined by
the Spanish Governmental Authorities ("Precio de Venta Laboratorio").
4.4 Ligand to Provide Assistance: Ligand shall provide such assistance as
Ligand may deem reasonably necessary to Distributor in respect of
Distributor's Product Authorization and Approval obligations under
Clauses 4.1, 4.2 and 4.3, and in particular shall provide:
(a) written materials and information concerning the Products,
including copies, or summaries, of materials prepared for
submission to the United States and Europe (or, at Ligand's
discretion, Central or South American) Governmental Authorities
concerning the Products or their labeling, to the extent that
Ligand is legally and contractually permitted or required to do
so, for Distributor's use in obtaining Product Authorizations in
respect of each of the Products; and
(b) access to such clinical data and documentation in respect of the
Products generated by research and trials funded by Ligand or to
which Ligand may have access with
- ----------
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
6
<PAGE> 7
the right to disclose, as Ligand may deem reasonably necessary,
to be relevant and useful to Distributor in obtaining Product
Authorizations in respect of each Product.
4.5 Distributor to Bear Costs: Subject to Clauses 4.1 and 4.6 below,
Distributor shall be responsible for all costs and expenses associated
with filing for and maintaining Product Authorizations and Approvals,
including, without limitation, the Base Price of Product supplied by
Ligand and the costs of any clinical trials conducted by or on behalf of
Distributor for the purposes of any Product Authorizations, unless
otherwise agreed in writing between the parties prior to such costs
being incurred.
4.6 Clinical Trial Program: The parties agree to jointly evaluate the merits
of a clinical trial program for one or more of the Products for severe,
recalcitrant, plaque psoriasis vulgaris.
4.7 No Marketing of Products without Product Authorizations: Except to the
extent permitted by law and as may be agreed in writing between the
parties, Distributor shall not market, promote, offer for sale or sell
any one of the Products unless and until Distributor obtains the
appropriate Product Authorizations in respect of such Product. In the
event that Distributor is legally permitted, due to an individual
pre-approval in respect of any Product, to market any Product prior to
obtaining the relevant Product Authorization, Distributor shall not do
so without obtaining the prior written consent of Ligand, which will not
be unreasonably withheld.
5. ORDERS AND FORECASTS
5.1 Forecasts: In order to permit Ligand and its suppliers to allocate their
manufacturing capacity, Distributor shall provide Ligand with written
4-quarter rolling forecasts of its Product requirements. Such forecast
shall be broken down by Product, quantities, and shipping dates, and
shall be delivered to Ligand not later than one hundred twenty days
prior to the beginning of each calendar quarter (commencing after
Distributor has obtained the first Product Authorization and Approval in
respect of any Product). Ligand shall either accept or reasonably reject
such forecasts within thirty days after receipt. Any forecast accepted
by Ligand or not rejected within that period shall be binding on the
Parties as follows: Unless otherwise agreed, Distributor shall order,
and Ligand shall supply, one hundred percent of the quantities forecast
for the first calendar quarter and between eighty and one hundred twenty
percent of the quantities forecast for the next quarter. Quantities
forecasts for subsequent quarters shall be non-binding indications for
production schedules, only, until included in subsequent quarterly
forecasts.
5.2 Orders: Purchase of Products by Distributor hereunder shall be made only
pursuant to written orders executed by Distributor, and shall be for a
minimum of the Distributor's quarterly requirements for the Territory.
The orders of Panretin(TM) Gel, Ontak(TM) and Targretin(TM) Gel shall
separately specify the labeling requirements so as to allow Ligand to
label those products before shipment. The orders shall be accepted in
writing by Ligand at the offices specified in Clause 19.7. Subject to
Clause 5.1 above, no order shall be binding upon Ligand until accepted
by Ligand in writing. Subject to Clause 5.1 above, Ligand
7
<PAGE> 8
reserves the right to accept or reject any order, offer or request for
Products in its sole discretion. The terms and conditions of this
Agreement shall apply to all orders placed by Distributor and shall
override and supersede any different or additional terms on orders from
or any general conditions maintained by Distributor. All orders must be
received by Ligand from Distributor at least 120 days prior to the
desired shipment date. If any order for quarters 2, 3 or 4 of a forecast
exceeds the forecasts for that calendar quarter provided by Distributor
under Clause 5.1 hereof by more than twenty percent (20%), Ligand shall
use its reasonable efforts, but shall not be obligated, to ship the
requested quantities of Products, with the normal lead time stated
above. If the order cannot be fully shipped, Ligand will notify
Distributor by the end of that period, and the parties will jointly
determine an appropriate shipment schedule.
5.3 Shipment Frequency: The Products shall be shipped at a frequency no
greater than once per month with a minimum purchase price to Distributor
of $ *** U.S. provided, however, that Distributor may request shipments
at a frequency greater than once per month at the same minimum purchase
price during the first year of the Agreement.
5.4 Inventory Requirements: Distributor shall maintain a reasonable supply
of Products adequate to serve the appropriate customer base in each
country of the Territory from time to time. For the first six months
beginning with the first sale of a Product, such inventory shall be
sufficient to cover not less than a three month supply of Ontak(TM),
Panretin(TM) and Targretin(TM) Products based on Distributor's
forecasts. Thereafter, the inventory may be reduced to a two months
supply.
5.5 Cancellation and Rescheduling. Ligand will use its reasonable best
efforts to honor any request of Distributor to reschedule shipment of
any order accepted by Ligand. For Panretin(TM) and Targretin(TM)
capsules, orders for bulk capsules or capsules in unlabeled bottles
accepted by Ligand may be canceled by Distributor, provided that
Distributor cancels the order at least forty five (45) days in advance
of the shipment date and pays a cancellation charge equal to *** of the
order price. No cancellation shall be allowed for any other Products
once a firm order has been accepted by Ligand.
5.6 Terms of Shipment and Transfer of Title. All shipments of Products shall
be made in Ligand's standard shipping packages CIF Distributor's
designated port of entry in Spain or such other port of entry agreed
upon by the parties. Unless otherwise agreed in writing between the
parties, Ligand shall select the method of shipment and the carrier, and
Distributor shall be responsible for all actions and documents necessary
to obtain clearance to import the Products into the Territory. Ligand
shall retain title to the Products until full payment of the Base Price
for the Products is irrevocably credited to Ligand's bank account, and
Distributor shall store all Products in its facilities so that they are
readily identifiable as Ligand's Products.
5.7 Product Availability. Ligand will use its reasonable efforts to deliver
to Distributor the
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Products in the quantities and at the dates specified on the orders
submitted by Distributor and accepted by Ligand; provided, however, that
Ligand (1) reserves the right to allocate the Products equitably among
its customers in the event of a shortage of any Products; and (2) shall
not be liable to Distributor for any delay in delivery without Ligand
being at fault.
6. REGISTRATION SERVICES AND PAYMENTS
6.1 Initial Service Reimbursement: On execution of this Agreement
Distributor shall make a non-refundable initial payment to Ligand in the
sum of US$ *** as reimbursement for services rendered in the
registration of the Products in the Territory.
6.2 Additional Service Reimbursement : On either (a) the date on which
Distributor obtains the first Product Authorization for Panretin or
Targretin, but not for Ontak, in any country in the Territory; or (b)
September 30, 1999, whichever is the earlier, Distributor shall make a
non-refundable payment to Ligand in the sum of US$ *** as reimbursement
for services rendered in the registration of the Products in the
Territory.
6.3 [Reserved]
6.4 Product Pricing: Ligand shall supply the Products CIF to the port of
entry designated pursuant to Clause 5.6. For all Products supplied,
Distributor shall pay to Ligand the Base Price. All payments under this
Agreement shall be made in United States dollars. Where payment must be
converted into U.S. dollars from another currency, the conversion shall
be made based on the applicable exchange rate as published on the
European Central Bank's Web Site for the date of Ligand's invoice.
6.5 Payment of Base Price: Unless otherwise agreed in writing by Ligand,
Distributor shall pay the invoiced estimated Base Price for each order
of Products under this Agreement within forty-five calendar days' net by
international wire transfer to the bank identified by Ligand from time
to time. If Distributor at any time has become delinquent, Ligand shall
have the right to make sales contingent upon Distributor's payment by
irrevocable letter of credit confirmed by a major US merchant bank and
payable in United States Dollars (US$) by draft at sight against
delivery of bill of lading (which may be marked "freight collect" and
which shall permit transshipments and partial shipments), commercial
invoice and packing list.
6.6 Payment Reconciliation: Within ninety (90) days of the end of each
calendar quarter (commencing after Distributor has made the first sale
of any Product), the amounts paid by Distributor to Ligand under Clause
6.5 shall be adjusted as follows:
(a) Distributor or Ligand, as the case may be, shall pay or credit to
the other, the amount, if any, by which the estimated Base Prices
paid by Distributor to Ligand under Clause 6.5 differ from the
Base Prices payable by Distributor after deducting the
deductions, not to exceed 5% of the Precio de Venta Laboratorio,
actually paid or charged against Distributor pursuant to Clause
1.14 during that quarter.
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Confidential Treatment and filed separately with the Commission.
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6.7 Late Payments: Whenever a late payment is due to a cause attributable to
a party, all amounts not paid to the other party when due shall accrue
interest daily at the lesser of an annual rate of twelve percent (12%)
or the highest rate permissible by law on the unpaid balance until paid
in full.
6.8 Taxes. All amounts payable to Ligand under this Agreement are exclusive
of any income, sales, use, property, ad valorem, value added or other
taxes, levies, imposts, duties, charges or withholdings of any nature
(collectively, "Taxes"), arising out of any transaction contemplated by
this Agreement and imposed against Distributor or the Products by any
taxing authority in the Territory (excluding, however, any Taxes on, or
measured solely by, the net income of Ligand and Taxes imposed on Ligand
in the United States). Distributor shall pay all applicable Taxes or
provide Ligand with a certificate of exemption acceptable to the
relevant taxing authority, and shall also be liable for all bank charges
levied in connection with payments made to Ligand (excluding, however,
any bank charges levied by Ligand's bank). In the event that any
payments to Ligand under this Agreement are subject to any withholding
taxes, Distributor shall promptly provide all tax certificates,
applications and related documents to Ligand. If Ligand is required to
pay any Taxes in the Territory, other than Taxes imposed upon the
payments under Clause 6.1 or 6.2, Distributor shall promptly reimburse
Ligand upon written request therefor.
7. MARKETING AND PROMOTION
7.1 Marketing Plans: At least six (6) months prior to the anticipated date
on which the relevant Product Authorization and Approval shall be issued
in respect of each Product, Ligand and Distributor shall consult in good
faith to determine an appropriate marketing plan in respect of each
Product for the Territory. All such marketing plans shall be harmonized
with, and shall not prejudice, Ligand's global and regional marketing
strategies covering the Territory. Distributor shall be responsible for
implementing such marketing plans and for advertising and promoting each
Product within the Territory from the dates on which it obtains the
relevant Product Authorization and Approval for each Product.
Distributor shall at all times adhere to the policies set by Ligand in
the execution of mutually agreed upon annual marketing plans for the
Products, including any marketing plans which Ligand wishes to implement
among its distributors in other territories and which are set by Ligand
and agreed to by Distributor in good faith provided, however, that
Distributor, at its sole discretion (but in accordance with any relevant
Approvals in the Territory in respect of pricing), may determine the
resale prices for the Products and the terms and conditions of
distribution.
7.2 Marketing Materials. In the promotion and marketing of the Products,
Distributor shall develop sales literature and promotional materials
provided to Distributor by Ligand pursuant to Clause 7.3. Distributor
shall have the right to prepare other product descriptions and other
promotional and marketing materials relating to the Products; provided
however,
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that (1) all costs and expenses incurred by Distributor in the
preparation and distribution of such product descriptions and other
promotional and marketing materials shall be borne solely by
Distributor; and (2) all such product descriptions and other promotional
and marketing materials shall not be released by Distributor until
approved in writing by Ligand, such approval not to be unreasonably
withheld. Distributor shall submit samples of final copy for all key
product descriptions and other promotional and marketing materials it
proposes to use in respect of the Products for Ligand's approval within
sixty (60) days prior to the first date of anticipated use of such
materials. Ligand shall use its reasonable efforts to respond to any
such request for approval within thirty (30) days of its receipt
thereof. If no written response is given by Ligand denying such request
within the aforesaid term, then Ligand's approval shall be deemed
granted.
7.3 Product Literature: To the extent that it is legally and contractually
permitted to do so, Ligand will share with Distributor samples of
product descriptions, sales aids and advertising and promotional
materials developed and used by Ligand, its other distributors or
licensees (collectively "Promotional Materials") in respect of each
Product as soon as practicable. Distributor shall bear all costs of
reproducing and/or adapting such Promotional Materials for use within
the Territory, and shall not use any adaptations of such Promotional
Materials without Ligand's prior approval of such adaptations. Likewise,
Distributor agrees to share samples of its Promotional Materials with
Ligand and Ligand's other distributors and licensees.
7.4 Rights to Reproductions: All translations, reproductions, adaptations
and creations of derivative works of all of Ligand's Promotional
Materials (collectively "Reproductions") created by Distributor will be
created as "works made for hire" with Ligand as the hirer, and copyright
and all other proprietary rights in all of the Reproductions shall vest
in Ligand from the date of completion thereof by Distributor. To the
extent that any Reproductions do not qualify as "works made for hire",
then Distributor hereby assigns to Ligand all copyrights and all other
proprietary rights in the Reproductions to Ligand. In this event,
Distributor will, at Ligand's request, execute any assignment or "work
made for hire" documents and shall take all other steps as necessary or
appropriate to perfect copyrights and all other proprietary rights in
the Reproductions in the name of Ligand. If, notwithstanding the
foregoing, Ligand, for any reason, is deemed not to own all rights,
title, and interest in and to the Reproductions, Distributor shall be
automatically considered to have granted to Ligand a royalty-free,
perpetual and transferable license to use, distribute, translate and
reproduce the Reproductions. Such license shall be exclusive to Ligand
and shall survive the expiration or termination of this Agreement for
any reason whatsoever.
7.5 Sales Assistance: Whenever Ligand considers it reasonably necessary in
order to maintain or increase the volume of sales of Products in the
Territory, Ligand shall be entitled to send, at its own cost,
representatives to visit Distributor or Distributor's customers or
prospective customers. Ligand shall keep Distributor informed of
promotional methods and techniques used by Ligand in respect of the
Products.
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8. OBLIGATIONS OF DISTRIBUTOR
8.1. Diligent Efforts: Distributor shall use its diligent efforts to market
and sell the Products within the Territory at its own expense, including
but not limited to professional sales calls on target medical audiences
(e.g. physicians, hospitals, pharmacists, etc.), advertising the
Products in appropriate media and participating in trade shows,
conferences, expositions, and promotional seminars, all with due
consideration for the local marketing environment in the Territory.
Distributor shall conduct its marketing activities in a lawful manner
with the highest standards of pharmaceutical product promotional
practices, fair trade, fair competition, and business ethics, and shall
cause its employees and Dealers to do the same.
8.2. Offices and Personnel. Distributor shall maintain offices adequate to
market and support the Products in the Territory and shall retain and
have at its disposal at all times an adequate staff of trained and
qualified personnel to perform its obligations under this Agreement.
8.3. Dealers: Distributor may only appoint Affiliates or other third parties
pursuant to the terms and conditions set forth in Clause 2.1. Any such
appointment shall be made in writing and only in the name and for the
account of Distributor, and shall terminate upon the expiration,
non-renewal, or termination of this Agreement for any reason; provided,
however, that:
(a) Distributor shall not undertake to grant to any Dealer any rights
greater than those which are granted by Ligand to Distributor
under this Agreement;
(b) In order to protect the goodwill of Ligand and the Products in
the Territory, Distributor shall secure the agreement of each and
every Dealer that it shall assume the same obligations as have
been assumed by Distributor under this Agreement; and
(c) Distributor shall defend, indemnify and hold Ligand harmless
against any claim, loss, liability or expense (including
attorney's fees and court costs) arising out of or based upon (1)
any act or omission of any Dealer, or (2) any claim made by any
Dealer against Ligand.
8.4. Alterations: Distributor shall ensure that the Products are distributed,
sold, and advertised in the form and with the labeling or marking
designated by Ligand and in accordance with the applicable regulations
in the Territory and, in particular, shall not alter, remove, or deface
any Trademark. Distributor acknowledges that it shall have no right to
sell any products under Ligand's name or trademark if they were not
originally manufactured or supplied by, or on behalf of, Ligand.
8.5. Clinical Evaluations: Prior to conducting any clinical evaluation of any
of the Products, Distributor shall furnish to Ligand, for its prior
review and written approval, the protocols for such evaluation written
in the English language. Ligand shall use its reasonable efforts to
respond to any such written request for approval within ninety (90) days
of its receipt thereof, granting its approval or, if duly and reasonably
justified, denying it. If no written notice is given by Ligand denying
its approval within the aforesaid term, then Ligand's
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approval shall be deemed granted. Results from any such clinical
evaluation shall not be publicly disclosed or disclosed in confidence to
any third party without Ligand's prior written approval, such approval
not to be unreasonably withheld.
8.6 Insurance. Both parties shall obtain and at all times during the term of
this Agreement maintain, and bear the cost of, liability insurance
which, in the judgment of Ligand, is adequate to cover their respective
obligations under this Agreement. A certificate of insurance and any
other documentation necessary to prove compliance with this provision
will be provided to the other party upon request.
9. REPORTING OBLIGATIONS
9.1 Foreign Laws and Regulations: In addition to its obligations under
Clauses 4.1, 4.2 and 4.3 to provide Product Authorization and Approval
information, Distributor shall advise Ligand of any legislation, rule,
regulation or other law (including but not limited to any customs, tax,
foreign exchange or foreign trade, antimonopoly, pharmaceutical products
or intellectual property law) which is in effect or which may come into
effect in the Territory after the date of this Agreement and which may
affect the importation of the Products into the Territory or the use of
the Products or the protection of Ligand's Intellectual Property Rights
therein.
9.2 Record Keeping: At all times during the term of this Agreement,
Distributor shall maintain at its principal place of business full,
complete and accurate books of account and records with regard to its
activities under this Agreement, including, without limitation, records
of all sales of the Products including the names of customers to whom
Products are sold and total gross sales and net sales for each calendar
quarter. Upon reasonable notice, and not more than twice a year,
Distributor shall grant Ligand or its representatives access during
normal business hours to any premises of Distributor in order that
Ligand, at its expense, may inspect Distributor's books and premises
related to the Products for the sole purpose of verifying and enforcing
compliance by Distributor with its obligations under this Agreement;
provided, however, that Distributor shall reimburse Ligand for the full
amount of the inspection costs if any inspection under this Clause 9.2
reveals any substantial breach by Distributor of this Agreement,
provided that Ligand shall have the burden of establishing any such
substantial breach.
9.3 Reports: Distributor shall provide Ligand with quarterly operation
reports of Distributor's activities to register, develop and market the
Products in the Territory, and shall provide to Ligand copies of all
such reports received by Distributor from Dealers. Each such report
shall be due within thirty (30) days after the end of the period to
which it relates. Each report shall include:
(a) a monthly compilation of all Products distributed by Distributor,
including the revenues derived therefrom and a breakdown of the
prices charged in respect of each Product; and
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(c) a monthly list of the amount of inventory on hand; and
(d) monthly gross and net sales on a per Product, per country basis
in local currency and U.S. dollars, using the average exchange
rate set forth in the European Central Bank's Web Site for the
month.
9.4 Annual Statements: Distributor shall provide Ligand with annual
statements within thirty (30) days after the end of each calendar year
showing annual sales figures and the amount of inventory on hand as at
December 31 of each year, and shall provide to Ligand copies of all such
annual statements received by Distributor from Dealers. Such annual
statements shall also contain a summary of all promotional activities
undertaken by Distributor with respect to the Product during the
preceding calendar year, and current credit references.
9.5 Exchange of Adverse Event Information: The recipient of Adverse Event
(AE) reports and/or data, either Distributor or Ligand, will mutually
exchange and promptly provide in writing, using the latest applicable
International Conference on Harmonization of Technical Requirements for
Registration of Pharmaceuticals for Human Use (ICH) and Council for
International Organizations of Medical Sciences (CIOMS) guidelines for
reporting, any adverse event information obtained by the receiving party
associated with the use of the Products either as a result of marketed
use or from investigational clinical trials:
(a) Without limiting the foregoing, the party that is the original
recipient of AE information relating to incidents of serious and
unexpected reactions and/or events associated with the use of any
of the Products, as defined by the ICH and/or CIOMS guidelines,
shall make an initial written report of that information to the
other party, via facsimile, not more than 72 hours following
receipt of that information. A full written report, following the
content and format guidelines indicated in the applicable current
ICH and CIOMS guidelines, is to be sent to and received by the
other party within seven (7) days following the date the initial
recipient receives such AE information.
(b) Distributor shall also provide Ligand with routine quarterly and
annual adverse event reports and/or safety data received from any
source in the Territory, using the ICH guidelines for the content
and format for these types of reports. These reports are intended
to be used for and incorporated into Periodic Safety Update
Reports [PSUR] as defined by ICH guidelines. Ligand will provide
a copy of each of the Products' complete PSUR to the Distributor
within five (5) days of submission of the applicable Product's
PSUR to the U.S. regulatory authorities.
(c) Distributor shall be responsible for submitting the adverse
event/ medical safety (safety surveillance) reports in the
countries of the Territory as required by the regulatory
authorities. Ligand will hold and maintain the Central AE/ safety
database for the Products and reports based on this database, as
necessary to meet the requirements of regulatory authorities in
the Territory, will be made available
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to Distributor during the agreement life. Without limiting the
generality of the foregoing, Distributor shall cooperate with
Ligand for the development of standard operating procedures for
exchange of information concerning Adverse Events and Product
safety information derived from Products use in the Territory and
each party shall at all times comply with the procedures so
developed.
(d) For all of the reports specified above, the language of all
exchange between and among the Parties will be English.
Distributor will provide Ligand all of the above-required AE
reports to the following address:
Ligand Medical Safety
Ligand Pharmaceuticals Inc.
10275 Science Center Drive
San Diego, California 92121 U.S.A.
Tel: 1 (619) 550-7588
Fax: 1 (619) 550-1860
Ligand will provide Distributor all of the above-required AE
reports to the following address:
Ferrer Group
Pharmacoepidemiology and Safety
Medical Department
Gran Via Carlos III, 86
08028 Barcelona Spain
Tel: +34 93 330 61 11
Fax: +34 93 490 70 78
9.6 Recall Procedures: Ligand will provide Distributor with a copy of
Ligand's standard operating procedure for recalls of products.
Distributor acknowledges the importance of the development and the
observance of correct procedures in case of recalls. Distributor shall
cooperate with Ligand for the development of recall standard operating
procedures and shall at all times comply with the procedures so
developed and adhere to Ligand's instructions from time to time and
always in accordance with mandatory requirements applicable in the
Territory.
10. PRODUCT AUTHORIZATIONS
10.1 Distributor acknowledges that Ligand cannot and does not guarantee the
issuance of any Product Authorization for any or all of the Products in
any country in the Territory.
11. COVENANTS OF DISTRIBUTOR
11.1 Restrictions: To the extent permissible by law, Distributor is
prohibited from:
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(a) Advertising, circulating price lists or otherwise soliciting
orders for the Products, and from establishing or maintaining
branches, sales offices or distribution depots, outside the
Territory for the distribution of the Products;
(b) During the term of this Agreement, seeking the Approval for, or
marketing, (a) any products of a third party for a registration
indication of CTCL or, (b) any oral or topical product of a third
party for a registration indication of Kaposi's Sarcoma, except
as agreed by the parties.
12. INTELLECTUAL PROPERTY RIGHTS
12.1 Acknowledgment: Distributor acknowledges Ligand's exclusive right, title
and interest in and to any and all Intellectual Property Rights
pertaining to the Products. Distributor shall not at any time during or
after the term of this Agreement take any act or step impairing the
Intellectual Property Rights or do anything that may otherwise adversely
affect the Intellectual Property Rights, provided that any good faith
legal challenge shall not be deemed to be such an act or step.
12.2 Notices, Trademarks and Name. Distributor shall have the royalty-free
and (except as to Ligand) exclusive right to use in the Territory, and
shall use where available, the trademarks in Appendix C designated by
Ligand for each Product. If no trademark in Appendix C is available for
a Product in a country of the Territory and Ligand is unable or elects
not to provide an alternative trademark, then Distributor shall have the
right to secure, in Ligand's name and for its benefit, trademark rights
to a substitute mark for the Products in the relevant country and Ligand
will reimburse Distributor for the pre-approved expenses of securing
such rights. The rights to the substitute mark shall remain with the
Product it is used for and shall be transferred accordingly in the event
that corresponding Product rights are transferred. Distributor shall not
alter, deface, remove, cover, mutilate, or add to, in any manner
whatsoever, any patent notice, copyright notice, trademark, trade name,
serial number, model number or brand name that Ligand may attach or
affix to the Products. Distributor shall not market the Products under
any name, sign or logo other than the Trademarks approved by Ligand.
Distributor may use the Trademarks solely in connection with the
distribution of the Products and in accordance with Ligand's
instructions and quality control standards from time to time, and will
execute any document reasonably requested by Ligand in connection with
the use and maintenance of the Trademarks in the Territory. Distributor
acknowledges and agrees that it shall not have any rights in respect of
the Trademarks except to the extent expressly granted in this Agreement,
and that all use of the Trademarks in the Territory and all goodwill in
the Trademarks shall inure to the benefit of Ligand.
12.3 Third Party Claims: Distributor shall promptly notify Ligand of any
claims or objections that its use of the Intellectual Property Rights in
connection with the marketing, support or service of the Products may or
will infringe the copyrights, patents, trademarks or other proprietary
rights of another Person ("Third Party Claim"). If Distributor is served
with a legal action or otherwise forced to respond in a legal proceeding
due to a Third Party Claim,
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Distributor shall (1) without delay, tender the defense of such Third
Party Claim to Ligand; and (2) render Ligand all reasonable assistance,
at Ligand's expense, in connection with the defense of any such third
party claim or objection, whether in the courts, before administrative
agencies, or otherwise. If Ligand refuses to assume the defense of a
Third Party Claim, Distributor shall have the right to defend itself
against such Third Party Claim, in which case Ligand shall render
Distributor all reasonable assistance, at Ligand's expense. Distributor
shall not, except as required by law, knowingly make any admission to
jeopardize, compromise or otherwise limit the validity of Intellectual
Property Rights.
12.4 Infringement of Intellectual Property Rights: Distributor shall promptly
notify Ligand of any infringement or suspected infringement of
Intellectual Property Rights in the Territory relating to the Products
of which it becomes aware, and provide Ligand with any available
evidence of such infringement or suspected infringement.
(a) Enforcement by Ligand: Ligand, at its option, shall be entitled
to institute enforcement proceedings ("Enforcement Proceedings")
in respect of any infringement or unauthorized use of
Intellectual Property Rights in the Territory. Distributor agrees
to provide all reasonable co-operation and assistance to Ligand
in relation to any such Enforcement Proceedings (and agrees to be
named as a party if legally required). Any reasonable fees and
costs borne by Distributor shall be reimbursed by Ligand. Ligand
shall be entitled to deduct its reasonable expenses in relation
to such Enforcement Proceedings (including reasonable attorney's
fees and expenses and reimbursements to Distributor) from any
recovery and any remaining amount shall be distributed pro rata
among the parties in which Distributor shall receive 50% of any
remaining recovery and Ligand shall receive 50% of any remaining
recovery.
(b) Enforcement by Distributor: If, after six (6) months of receipt
of credible evidence of infringement or unauthorized use of
Intellectual Property Rights in the Territory or such lesser
period of time if further delay would result in a loss of right
to bring an Enforcement Proceeding, Ligand elects not to
institute or continue an already instituted, Enforcement
Proceeding then Distributor, using attorneys of Distributor's
choosing reasonably acceptable to Ligand, can undertake or
continue such Enforcement Proceeding at Distributor's expense. In
such event, Distributor shall keep Ligand fully and timely
informed of the action so as to enable Ligand to provide input
which Distributor shall reasonable consider. Distributor may not
enter into any settlement agreement or consent to judgement
relating to the invalidity, unenforceability or noninfringement
of the Intellectual Property Rights without Ligand's prior
written consent. Ligand agrees to provide all reasonable
co-operation and assistance to Distributor in relation to any
such Enforcement Proceeding at Distributor's expense and agrees
to be named as a party in any Enforcement Proceeding. Any
reasonable fees and costs borne by Ligand shall be reimbursed by
Distributor. If Distributor enforces Intellectual Property Rights
in the Territory in accordance with this paragraph, Distributor
shall be entitled to deduct its reasonable expenses in relation
to such Enforcement Proceeding (including reasonable
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attorney's fees and expenses and reimbursements to Ligand) from
any recovery and any remaining amount shall be distributed pro
rata among the parties in which Distributor shall receive 50% of
any remaining recovery and Ligand shall receive 50% of any
remaining recovery.
13. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
13.1 Non-Disclosure Obligations: During the term of this Agreement, the
Disclosing Party will disclose certain Confidential Information to the
Receiving Party to permit the Receiving Party to perform its obligations
under this Agreement. The Receiving Party shall refrain from using or
exploiting any and all Confidential Information for any purposes or
activities other than those expressly authorized in this Agreement. The
Receiving Party agrees that such Confidential Information shall be kept
secret by the Receiving Party during the term of this Agreement and
after the expiration hereof. The Receiving Party shall disclose
Confidential Information only to its agents, representatives or
employees with a need to know and shall implement appropriate security
measures in order to avoid the disclosure or misappropriation of such
Confidential Information.
13.2 Confidentiality Agreements: Both parties shall cause each of their
directors, officers and employees and the directors, officers and
employees of, respectively, Distributor's Dealers and agents, and
Ligand's assignees, who will receive Confidential Information pursuant
to Clause 13.1 to enter into a Confidentiality Agreement in a form
approved by both parties. The Distributor and Ligand, respectively,
shall at their own expense undertake the enforcement of any such
Confidentiality Agreement in the event of any breach thereof. Execution
of Confidentiality Agreements by the parties shall not, however, be
construed as limiting their duties or obligations hereunder.
13.3 Ownership of Ligand's Materials. All files, lists, records, documents,
drawings, specifications and records, whether in written or electronic
form, which incorporate or refer to all or a portion of Ligand's
Confidential Information shall remain the sole property of Ligand. Such
materials shall be promptly returned (1) upon Ligand's reasonable
request, or (2) in accordance with Clause 17.2 of this Agreement upon
termination of this Agreement, whichever is earlier.
13.4 Exceptions. The provisions of this Clause 13 shall not apply, or cease
to apply, to information supplied by Ligand if it (1) was already known
to Distributor; (2) came into the public domain without breach of
confidence by Distributor or any other Person; (3) was received by
Distributor from a third party without restrictions on their use in
favor of Ligand; or (4) is required to be disclosed pursuant to any
statutory or regulatory provision or court order; provided that
Distributor shall have the burden of establishing any of the foregoing
exceptions.
14. LIGAND WARRANTY, INDEMNITY, AND LIMITATIONS OF LIABILITY
14.1 Non-Infringement. To the best of Ligand's knowledge, the sale and use of
the Products
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does not infringe the proprietary rights of any third party in the
Territory, and no court proceedings or any other procedure for
infringement of patent, copyright, trademark, trade secret or any other
property rights have been brought against Ligand with respect to the
Products as of the effective date of this Agreement. Ligand makes no
warranty or representation, implied or otherwise, that the Products
and/or their sale or use will not infringe the property rights of any
third party in the Territory.
14.2 Products Warranty: Ligand warrants that all Products supplied hereunder
shall (1) conform to the products specifications therefor, as published
by Ligand from time to time consistent with the data contained in the
Product Authorizations, and (2) have a shelf life of one year or more
(or in the case of Ontak, nine months or more) from the date of shipment
to Distributor. The aforementioned shelf life terms shall be
proportionally increased from time to time in accordance with improved
stability data.
14.3 Indemnity: Ligand shall defend, indemnify and hold Distributor and its
shareholders, managers, officers, directors, agents and employees
harmless against any and all losses, damages, claims, liabilities, costs
and expenses (including reasonable attorney's fees) resulting solely
from the personal injury or death caused by the defective design and/or
manufacture of the Products when supplied to Distributor by Ligand or by
Ligand's appointee, provided that Distributor promptly notifies Ligand
in writing of any claim, action or suit potentially giving rise to the
indemnification obligation hereunder. Ligand shall have the sole and
absolute control of, and discretion in, the handling of the defense
and/or settlement of any such claim, action or suit, including, without
limitation, the selection of defense counsel, and Distributor shall
fully cooperate with Ligand in the defense and settlement of all such
claims, actions or suits, provided, however, that Distributor may take
any appropriate action necessary to preserve or avoid prejudice to its
interests, or the interests of Ligand as indemnitor, in the event that
(1) notice to Ligand cannot be given in sufficient time for Ligand to
take action, or (2) Ligand, after prompt notice and inquiry from
Distributor, fails to acknowledge its obligation to indemnify
Distributor under this clause.
14.4 DISCLAIMERS. TO THE FULL EXTENT PERMITTED BY LAW, APART FROM THE
FOREGOING WARRANTIES AND INDEMNITY, LIGAND MAKES NO ADDITIONAL
REPRESENTATIONS OR WARRANTIES AND HEREBY DISCLAIMS ALL WARRANTIES,
REPRESENTATIONS, AND LIABILITIES, WHETHER EXPRESS OR IMPLIED, ARISING
FROM CONTRACT OR TORT (EXCEPT FRAUD), IMPOSED BY STATUTE OR OTHERWISE,
RELATING TO THE PRODUCTS AND/OR ANY PATENTS OR TECHNOLOGY USED OR
INCLUDED IN THE PRODUCTS, INCLUDING ANY WARRANTIES AS TO
MERCHANTABILITY, FITNESS FOR PURPOSE, CORRESPONDENCE WITH DESCRIPTION,
OR NON-INFRINGEMENT.
14.5 LIMITATION. IN NO EVENT WILL LIGAND BE LIABLE FOR CONSEQUENTIAL,
INCIDENTAL OR SPECIAL DAMAGES, INCLUDING ANY LOSS OF PROFITS, EVEN IF
LIGAND HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
19
<PAGE> 20
DAMAGES.
14.6 LIABILITY CAP. IN NO EVENT SHALL LIGAND'S LIABILITY TO DISTRIBUTOR
EXCEED AN AMOUNT EQUAL TO THE AGGREGATE BASE PRICES PAID BY DISTRIBUTOR
TO LIGAND FOR PRODUCTS DURING THE LAST CALENDAR QUARTER, except that
this liability limitation shall not apply to Ligand's indemnity
obligation under section 14.3 arising from personal injury or death
caused by the defective design and/or manufacture of the Products when
supplied to Distributor by Ligand or by Ligand's appointee.
15. DISTRIBUTOR'S WARRANTIES, INDEMNITY AND LIMITATIONS OF LIABILITY
15.1 Warranties: Distributor represents and warrants to Ligand that:
(a) Distributor is a corporation duly organized, validly existing and
in good standing under the laws of Spain and has the corporate
power to execute this Agreement and to perform its obligations
hereunder;
(b) the person or persons executing this Agreement on behalf of
Distributor have been duly authorized to do so by all requisite
corporate or other actions of Distributor;
(c) this Agreement is the legal, valid and binding obligation of
Distributor, enforceable in accordance with its terms;
(d) the execution, delivery and performance of this Agreement by
Distributor does not and will not conflict with or result in a
breach of any agreement, instrument or understanding, oral or
written, to which Distributor is a party or by which Distributor
may be bound, nor violate any law or regulation of any court or
Governmental Authority having jurisdiction over Distributor;
(e) Distributor will maintain at all times during this Agreement all
necessary Approvals, according to Clause 4.2; and
(f) all Affiliates of Distributor are duly organized, validly
existing and in good standing under the laws of the country in
which they operate and have the power to perform all obligations
under this Agreement that they are assigned by Distributor.
15.2 Indemnity: Distributor shall indemnify and hold Ligand and its
shareholders, managers, officers, directors, agents and employees
harmless against any and all losses, damages, claims, liabilities, costs
and expenses (including reasonable attorneys' fees) resulting from any
breach by Distributor of this Agreement so declared by a court of
competent jurisdiction or as agreed between the parties, or resulting
from any claim that may be made by reason of any damage caused by an act
or omission of Distributor or any of its shareholders, managers,
officers, directors, agents or employees whenever such act or omission
is in connection with this Agreement, contrary to the law and is so
declared by
20
<PAGE> 21
a court of competent jurisdiction or as agreed between the parties.
15.3 LIMITATION. IN NO EVENT WILL DISTRIBUTOR BE LIABLE FOR CONSEQUENTIAL,
INCIDENTAL OR SPECIAL DAMAGES, INCLUDING ANY LOSS OF PROFITS, EVEN IF
DISTRIBUTOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
16. TERMINATION
16.1 Termination by Ligand: Ligand may terminate this Agreement, at its sole
discretion: (1) in its entirety; or (2) in respect of any specified part
of the Territory and/or any one or more of the Products only, by giving
Distributor thirty (30) days written notice of termination, effective on
the date such notice is received, in the event that:
(a) Distributor breaches any of its material obligations under this
Agreement, and fails to cure such breach within thirty (30) days
of receiving a written notice from Ligand specifying such breach
and requiring it to be cured;
(b) Distributor takes any act or step impairing the Intellectual
Property Rights or does anything that may otherwise adversely
affect the Intellectual Property Rights of Ligand, provided,
however, that Ligand may exercise its rights of termination
pursuant to this Clause 16.1(b) whether or not the Distributor's
legal challenge of Ligand's rights is in good faith;
(c) Distributor enters into insolvency or bankruptcy or is unable to
pay its debts as they fall due, or a trustee or receiver or the
equivalent is appointed to Distributor, or proceedings are
instituted against Distributor in the Territory relating to
dissolution, liquidation, winding up, bankruptcy, insolvency or
the relief of creditors, if such proceedings are not terminated
or discharged within thirty days;
(d) there is a change of control of Distributor, beyond its corporate
structure and owners on the Effective Date, or a sale or
disposition by Distributor to a third party other than its owners
and companies in its corporate structure on the Effective Date of
substantially all of its assets, without the prior written
approval of Ligand, which approval may be given or withheld in
Ligand's sole discretion. For the purposes of this Clause
16.1(d), the transfer (whether direct or indirect) of all or a
majority of the capital stock of Distributor or the merger,
consolidation or reorganization of Distributor beyond its
corporate structure and owners on the Effective Date shall be
considered a "change in control" of Distributor;
(e) any event of Force Majeure, as defined in Clause 19.6 hereof,
occurs and prevents Distributor from performing its obligations
under this Agreement for a period of 90 days or more, provided
there is no commercially reasonable alternative;
21
<PAGE> 22
(f) Distributor ceases to carry on business in the marketing of
pharmaceutical products in the Territory;
(g) any law, decree, or regulation is enacted within the Territory
which would substantially impair or restrict (1) Ligand's right
to terminate or elect not to renew this Agreement as herein
provided; (2) Ligand's right, title or interest in the Products
or the Intellectual Property Rights therein; or (3) Ligand's
right to collect the purchase prices for the Products as set
forth in this Agreement; or
(h) an adverse event occurs which has substantially impaired the
ability of Distributor to continue to perform its obligations
hereunder and Distributor is unable to provide Ligand with
adequate assurance of future performance.
16.2 Termination by Distributor: Distributor may terminate this Agreement, at
its sole discretion: (1) in its entirety; or (2) in respect of any
specified part of the Territory and/or one or more of the Products only,
by giving Ligand thirty (30) days written notice of termination,
effective on the date such notice is received, in the event that:
(a) Ligand breaches any of its material obligations under this
Agreement, and fails to cure such breach within thirty (30) days
of receiving a written notice from Distributor specifying such
breach and requiring it to be cured;
(b) any event of Force Majeure, as defined in Clause 19.6 hereof,
occurs and prevents Ligand from performing its obligations under
this Agreement for a period of 90 days or more, provided there is
no commercially reasonable alternative;
(c) the Governmental Authorities have not issued the requisite
Product Authorization or Approval for any Product for any country
in the Territory;
(d) any law, decree, or regulation is enacted within the Territory
which would substantially impair or restrict (1) Distributor's
right to terminate or elect not to renew this Agreement as herein
provided; (2) Ligand's right, title or interest in the Products
or the Intellectual Property Rights therein; or (3) Distributor's
right to market and distribute the Products in accordance with
this Agreement; or
(e) an adverse event occurs which has substantially impaired Ligand's
ability to continue to perform its obligations hereunder and
Ligand is unable to provide Distributor with adequate assurance
of future performance.
17. RIGHTS AND OBLIGATIONS UPON TERMINATION/NONRENEWAL
17.1 Cessation of Rights: Upon expiration or termination (collectively, the
"Termination") of this Agreement for any reason whatsoever as provided
herein all rights and obligations of the parties hereunder shall cease,
except as provided in Clauses 19.5 of this Agreement; provided, however,
that Termination of this Agreement shall not relieve the parties hereto
22
<PAGE> 23
of any obligations accrued prior to said Termination. Distributor,
following notice of Termination by Ligand, shall be entitled to purchase
under the terms and conditions of this Agreement, any Products the
orders for which were accompanied by payment and which were accepted by
Ligand prior to the effective date of Termination, even though shipment
of the Products may be made subsequent to the date of Termination,
provided that Distributor has paid all outstanding obligations to
Ligand. Upon Termination by Ligand pursuant to Clauses 16.1, Distributor
shall immediately cease to use any advertising or promotional materials
relating to the Products and discontinue any previously authorized use
of the Trademarks and Confidential Information (except for activities
permitted by the last sentence of Clause 17.3), and shall cease all
conduct that might cause any Person to believe that Distributor is a
distributor of the Products or otherwise connected with Ligand.
17.2 Return of Materials and Customer List: Upon Termination, Distributor
shall promptly return to Ligand, or deliver to a third party designated
by Ligand, and shall cause its Dealers and employees to return or
deliver, all sales materials, Confidential Information in written,
recorded or other tangible form and other items in Distributor's
possession, which Ligand has furnished or supplied to Distributor, or
which Distributor has furnished to its Dealers and employees, and all
customer lists for Ligand Products. If Distributor purchased any such
materials or other items, Distributor shall be reimbursed in an amount
equal to the net price paid by Distributor for the same.
17.3 Repurchase of Inventory: Ligand shall have the option, exercisable at
its sole discretion by written notice to Distributor within thirty (30)
days after Termination, to repurchase all or part of Distributor's
remaining inventory of Products. The price payable by Ligand upon the
exercise of the option shall be the net price paid by Distributor to
Ligand for the Products, plus the costs of re-shipment to San Diego,
California, or to such other destination within the Territory as Ligand
may designate. Upon receipt of Ligand's notice of exercise of its option
pursuant to this clause, Distributor shall ship its inventory of
Products on hand to such location as Ligand may designate. If Ligand
does not exercise its rights under this clause, Distributor shall have
the right to sell its existing inventory for a period of six (6) months
following the date of Termination.
17.4 Product Authorizations, Trademarks and other Product rights: Upon
Termination of this Agreement as provided herein for any reason
whatsoever, Distributor shall immediately take all steps necessary to
transfer to Ligand, or to Ligand's designee, any and all rights
Distributor may have to Product Authorizations, Trademarks and any other
rights associated with the Products, to the extent permitted by
applicable law and at Distributor's cost. Distributor shall, at the time
for application for Product Authorizations, take all reasonable steps to
ensure that such transfers may later be completed. If such transfer is
not possible, Distributor shall use its best efforts to arrange for
Ligand or its designee to rely upon such Product Authorizations and
shall permit Ligand or its designee to use and reference such Product
Authorizations in its own applications.
17.5 Survival of Non-Disclosure Obligation: Notwithstanding the Termination
of this Agreement, both Parties shall continue to abide by the terms of
its non-disclosure
23
<PAGE> 24
obligations with respect to Confidential Information under Clause 12
of this Agreement.
17.6 Waiver of Termination Compensation: Neither Party shall be liable for,
and each Party hereby waives, all right to compensation and all claims
of any kind whether on account of the loss by the other of present or
prospective profits, or anticipated orders, or expenditures,
investments, or commitments made in connection with this Agreement,
goodwill created, or on account of any other cause whatsoever.
18. CERTAIN PAYMENTS
18.1 No Payments: Distributor shall not make, offer or agree to offer
anything of value to any government official, political party or
candidate for government office. Distributor undertakes that there is
not now nor will there be any employment of or beneficial ownership of
Distributor by governmental or political officials in the Territory.
Distributor will indemnify and hold harmless Ligand against any and all
losses, costs, expenses or liabilities resulting from any breach by
Distributor of its obligations under this Clause 18.
19. GENERAL PROVISIONS
19.1 Waivers: The waiver by either party of a breach or default in any of the
provisions of this Agreement by the other party shall not be construed
as a waiver of any succeeding breach of the same or other provisions.
19.2 Entire Agreement and Amendments: This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements between the parties, whether written
or oral, relating to the same subject matter. No modification,
amendments or supplements to this Agreement shall be effective for any
purpose unless in writing, signed by each party.
19.3 Governing Language: This Agreement has been prepared and executed in the
English language. No authorized translation has been prepared or
executed. In the event that any translation is prepared, the English
language version of this Agreement shall govern. All written
correspondence between the parties shall be in the English language.
19.4 Further Assurances: Each party agrees to do such acts and execute such
further documents as may be necessary or desirable to enable the
performance of and to fulfill the provisions and intent of this
Agreement.
19.5 Assignments: This Agreement is entered into by Ligand in reliance upon
the facilities, personnel and technical expertise of Distributor, and
Distributor may only transfer or delegate the performance of the
Agreement or any part thereof to a Dealer pursuant to the terms and
conditions of Clause 2.1. Nothing herein contained, however, shall
prevent Ligand or Distributor from assigning this Agreement in whole or
in part to, or causing any order or orders to be filled in whole or in
part by, any Affiliate of Ligand or the Distributor, respectively.
Ligand shall also have the right to assign this agreement in amerger or
24
<PAGE> 25
acquisition in which Ligand is not the surviving entity, or as part of a
transfer of all or substantially all of the assets of its business to
which this Agreement pertains.
19.6 Force Majeure: Neither party shall be liable to the other party for any
delay or omission in the performance of any obligation under this
Agreement, other than the obligation to pay monies, where the delay or
omission is due to any cause or condition beyond the reasonable control
of the party obliged to perform, including, but not limited to, strikes
or other labor difficulties, acts of God, acts of government (in
particular with respect to the refusal to issue necessary import or
export licenses), war, riots, embargoes, or inability to obtain supplies
("Force Majeure"). If Force Majeure prevents or delays the performance
by a party of any obligation under this Agreement, then the party
claiming Force Majeure shall promptly notify the other party thereof in
writing.
19.7 Notices: Unless otherwise specifically provided, all notices required or
permitted by this Agreement shall be in writing and in English,
effective upon receipt, and may be delivered personally, or may be sent
by facsimile, commercial express courier, or first class air mail,
postage prepaid, addressed as follows:
If to Ligand: Ligand Pharmaceuticals Incorporated
10275 Science Center Drive
San Diego, California 92121
Attention: General Counsel
Facsimile: (+) (1) (619) 550-1825
If to Distributor: Ferrer Internacional, S.A.
Gran Via Carlos III, 94,
08028 Barcelona, Spain
Attention: Licensing Department (cc. Legal Department)
Facsimile: (+) (34) (3) 330 80 57
20. CHOICE OF LAW AND DISPUTE RESOLUTION
20.1 Choice of Law: This Agreement is governed by, and shall be construed in
accordance with, the laws of the State of California, United States of
America, excluding (a) conflicts of laws rules, and (b) the United
Nations' Convention on Contracts for the International Sale of Goods.
The parties shall endeavor to resolve amicably any and all disputes
arising under or in connection with this Agreement, including but not
limited to the interpretation of this Agreement, its validity and the
performance hereunder.
25
<PAGE> 26
20.2 Disputes: Any dispute between the parties relating to the validity,
performance, interpretation or construction of this Agreement that
cannot be resolved amicably between the parties shall be submitted to
the exclusive jurisdiction of the courts, including the United States
District Courts, in the State of California. Each party hereto
irrevocably submits to the personal jurisdiction of the courts in
California, for the resolution of all disputes hereunder.
20.3 Right to Judicial Remedies: Nothing in this Clause 20 shall be construed
to impair or restrict either Party's right to judicial remedies,
including preliminary and permanent injunctions from any court of
competent jurisdiction to prevent any infringement of the Intellectual
Property Rights, representation of competitive products, and/or
disclosure of the Confidential Information.
IN WITNESS WHEREOF, each party has caused its duly authorized representative to
execute and deliver this Agreement in reliance on the due authority of the
representative of the other party, to be effective as of March 26, 1999.
DISTRIBUTOR: LIGAND PHARMACEUTICALS, INC:
By: /s/ R. FOGUET By: /s/ David E. Robinson
--------------------------- ------------------------------
Title: CEO Title: Chairman, President and OEO
------------------------- ----------------------------
SERAGEN, INC.:
By: /s/ Paul V. Maier
-------------------------
Title: CEO
------------------------
26
<PAGE> 27
APPENDIX A
PRODUCTS
<TABLE>
<CAPTION>
PRODUCT COVERED INDICATIONS
<S> <C>
Panretin(TM) Gel (alitretinoin) All indicatioNS
Panretin(TM) Capsules (alitretinoin) All indicatioNS
Ontak(TM) (denileukin diftitox) All indicatioNS
Targretin(TM) Gel (bexarotene) The treatment, palliation, prevention
and/or remission of cancer and
dermatological diseases
Targretin(TM) Capsules (bexarotene) The treatment, palliation, prevention
and/or remission of cancer and
dermatological diseases
</TABLE>
App. 1
<PAGE> 28
APPENDIX B
BASE PRICE SCHEDULE
<TABLE>
<S> <C>
1. Targretin(TM) products: ***% of Resale PricE.
2. Ontak(TM) products: ***% of Resale PricE.
3. Panretin(TM) products: ***% of Resale PricE.
</TABLE>
- ----------
*** Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the Commission.
App. 2
<PAGE> 29
APPENDIX C
LIGAND TRADEMARKS
<TABLE>
<CAPTION>
Trademark Generic Product Name Country Trademark Status
- --------- -------------------- ------- ----------------
<S> <C> <C> <C>
Panretin(TM) alitretinoin US Registered
Brazil Pending
Chile Pending
Colombia Pending
Venezuela Pending
Targretin(TM) bexarotene US Registered
Argentina Pending
Brazil Pending
Chile Pending
Colombia Pending
Venezuela Pending
Ontak(TM) denileukin diftitox US Pending
Onact(TM) denileukin diftitox Brazil Pending
</TABLE>
App. 3
<PAGE> 30
APPENDIX D
COUNTRIES INCLUDED IN TERRITORY
* Argentina
* Chile
* Uruguay
* Paraguay
* Bolivia
* Brazil
* Peru
* Ecuador
* Colombia
* Venezuela
* Guyana
* Surinam
* French Guyana
* Panama
* Costa Rica
* Nicaragua
* Honduras
* El Salvador
* Guatemala
* Belize
* Dominican Republic
App. 4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS. (IN THOUSANDS EXCEPT EARNINGS PER
SHARE)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 11,010
<SECURITIES> 35,694<F4>
<RECEIVABLES> 4,536
<ALLOWANCES> (209)
<INVENTORY> 6,167
<CURRENT-ASSETS> 58,333
<PP&E> 42,021
<DEPRECIATION> 19,090
<TOTAL-ASSETS> 135,326
<CURRENT-LIABILITIES> 20,035
<BONDS> 131,051<F1>
0
0
<COMMON> 47
<OTHER-SE> (15,287)<F2>
<TOTAL-LIABILITY-AND-EQUITY> 135,326
<SALES> 4,663
<TOTAL-REVENUES> 10,281
<CGS> 2,027
<TOTAL-COSTS> 5,309<F3>
<OTHER-EXPENSES> 17,618
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,663
<INCOME-PRETAX> (14,559)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,559)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,559)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> (.32)
<FN>
<F1>INCLUDES BONDS, MORTGAGES AND OTHER LONG-TERM DEBT, INCLUDING CAPITALIZED
LEASES.
<F2>INCLUDES ADDITIONAL PAID IN CAPITAL, OTHER ADDITIONAL CAPITAL AND RETAINED
EARNINGS, APPROPRIATED AND UNAPPROPRIATED.
<F3>PER CHIEF ACCOUNTANT AT THE SEC, THIS AMOUNT EXCLUDES SALES AND G&A EXPENSES,
INCLUDES COSTS AND EXPENSES APPLICABLE TO SALES AND REVENUES, AND TANGIBLE
COSTS OF GOODS SOLD.
<F4>INCLUDES RESTRICTED CASH.
</FN>
</TABLE>
