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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
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: 0-28150
NEUROCRINE BIOSCIENCES, INC.
(Exact name of registrant as specified in its charter)
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Delaware 33-0525145
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
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10555 Science Center Drive, San Diego, CA 92121
(Address of principal executive office) (Zip Code)
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Registrant's telephone number, including area code: (619) 658-7600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
The aggregate market value of the voting stock of the issuer held by
non-affiliates of the issuer on March 15, 1999 was approximately $88,054,931,
based upon the closing price of such stock of $6.31 on March 15, 1999. As of
March 15, 1999, 18,960,581 shares of Common Stock of the registrant were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required by Parts I and III of Form 10-K is
incorporated by reference from the Registrant's Proxy Statement for the Annual
Meeting of Stockholders to be held on May 21, 1999 (the "Proxy Statement"),
which will be filed with the Securities and Exchange Commission within 120 days
after the close of the Registrant's fiscal year ended December 31, 1998.
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<PAGE>
Page 4
PART I
ITEM 1. BUSINESS
BACKGROUND
Neurocrine Biosciences, Inc. is a leading neuroscience company focused on
the discovery and development of novel therapeutics for neuropsychiatric,
neuroinflammatory and neurodegenerative diseases and disorders. The Company's
neuroscience, endocrine and immunology disciplines provide a unique biological
understanding of the molecular interaction between central nervous, immune and
endocrine systems for the development of therapeutic interventions for anxiety,
depression, Alzheimer's disease, insomnia, stroke, glioblastoma, multiple
sclerosis, obesity and diabetes.
The following Business section contains forward-looking statements
concerning the continuation of the Company's strategic alliances and the receipt
of payments thereunder, the identification of drug targets and selection of lead
compounds for clinical development, the commencement and successful conclusion
of clinical trials, the receipt of regulatory approvals, and the potential
development of future commercial products. Such forward-looking statements
necessarily involve risks and uncertainties. The Company's actual results could
differ materially from those anticipated in these forward-looking statements as
a result of certain factors, including, without limitation, that research
funding and development will continue under the Company's collaborations, that
research and development candidates will successfully proceed through
pre-clinical and early stage clinical trials, that development candidates will
prove effective for treatment in humans in later stage clinical trials, the
timely receipt of regulatory clearances required for clinical testing,
manufacturing and marketing of products, the potential adverse impact of
competitive technologies, products, and intellectual property rights of third
parties, and the failure to achieve product development and commercialization
goals. Actual results and the timing of certain events could differ materially
from those indicated in the forward-looking statements as a result of these and
other factors. See "Risk Factors."
Neurocrine currently has five programs in clinical development. The
Company's CRF receptor antagonist project is currently in Phase II clinical
development with its partner, Janssen Pharmaceutica, for anxiety/depression.
Neurocrine and its partner, Novartis Pharmaceuticals, are conducting their
second Phase II clinical trial with Neurocrine's Altered Peptide Ligand (APL)
compound in patients with multiple sclerosis. Neurocrine is conducting a Phase
I/II trial with for its IL-4 Fusion Toxin for glioblastoma (malignant brain
tumors). The Company has also completed a Phase Ib clinical trial in insomnia
with a GABA receptor subtype agonist and recently announced that it commenced a
Phase I safety and dose escalating clinical study with an APL compound for Type
I Diabetic patients.
PRODUCTS UNDER DEVELOPMENT
The following table summarizes Neurocrine's most advanced products in
research and clinical development. This table is qualified in its entirety by
reference to the more detailed descriptions appearing elsewhere in this Form
10-K.
<TABLE>
<CAPTION>
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Program Indication Status Commercial Rights
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<S> <C> <C> <C>
CRF Receptor Antagonist Anxiety/Depression Phase II Janssen/Neurocrine
Altered Peptide Ligand Multiple Sclerosis Phase II Novartis/Neurocrine
IL-4 Fusion Toxin Glioblastoma Phase I/II Neurocrine
GABA Receptor Subtype Agonist Insomnia Phase I/II Neurocrine
Altered Peptide Ligand Type I diabetes Phase I Neurocrine
CRF Receptor Antagonist Stroke Development Neurocrine
CRF / Urocortin Agonist Alzheimer's/Obesity Research Lilly/Neurocrine
Excitatory Amino Acid Transporters Stroke Research Wyeth-Ayerst/Neurocrine
Melanocortin Receptor Antagonist Obesity Research Neurocrine
Chemokine Antagonist Inflammatory Disorders Research Neurocrine
GNRh Endometriosis Research Neurocrine
Neurogenomics Neurodegenerative Research NPI/Neurocrine
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<FN>
(1) "Research" indicates identification and evaluation of compounds in in
vitro and animal models.
"Development" indicates that lead compounds have been discovered that
meets certain in vitro and in vivo criteria. These compounds may undergo
structural modification and more extensive evaluation prior to selection for
preclinical development.
"Phase I" indicates that Neurocrine or its collaborative partner is
conducting clinical trials to determine safety, the maximally tolerated dose
and pharmacokinetics of the compound in human volunteers.
"Phase II" indicates that the Company has received FDA approval to
evaluate one of the Company's products in humans to determine safety and
efficacy in an expanded patient population.
</FN>
</TABLE>
Neurocrine's Research and Development Programs
Corticotropin Releasing Factor ("CRF")
Corticotropin releasing factor, the central regulator of the body's overall
response to stress, affects multiple systems by functioning both as an endocrine
factor and a neurotransmitter. CRF acts as a hormone at the pituitary gland
causing the secretion of the steroid cortisol from the adrenal glands resulting
in a number of metabolic effects, including suppression of the immune system.
CRF also functions as a neurotransmitter in the brain and plays a critical role
in coordinating psychological and behavioral responses to stress such as
increased heart rate, anxiety, arousal and reduced appetite. In addition to
neuroendocrine and neurotransmitter roles, accumulating evidence suggests that
CRF may also integrate actions between the immune and central nervous systems in
response to physiological and psychological stressors.
The body has several mechanisms to regulate the effects of CRF. The
Company's cloning of human CRF receptors and binding proteins suggests that the
diverse functions of CRF are mediated through distinct receptor subtypes which
are differentially distributed in specific brain areas and in tissues outside of
the central nervous system. These targets may offer a mechanism to modulate
specific actions of CRF without affecting the broad range of its activities.
There are several diseases and disorders such as anxiety, depression and
substance abuse in which CRF levels are increased. The deleterious effects of
high levels of CRF may be countered by the administration of selective CRF
receptor antagonists.
Anxiety
Anxiety is among the most commonly observed group of CNS disorders, which
includes phobias or irrational fears, panic attacks, obsessive-compulsive
disorders and other fear and tension syndromes. Estimates by the National
Institute of Mental Health suggest that the most commonly diagnosed forms of
anxiety disorders may affect 10% of the United States population. Of the
pharmaceutical agents that are currently marketed for the treatment of anxiety
disorders, a class of compounds known as the benzodiazepines, which includes
Valium, is the most frequently prescribed. In spite of their therapeutic
efficacy, several side effects limit the utility of these anti-anxiety drugs.
Most problematic among these are drowsiness, ataxia (the inability to stand up),
amnesia, drug dependency and withdrawal reactions following the cessation of
therapy.
Neurocrine is developing a new class of therapeutics that targets
stress-induced anxiety. In view of the evidence implicating CRF in
anxiety-related disorders, Neurocrine is developing small molecule CRF receptor
antagonists as anti-anxiety agents that block the effects of overproduction of
CRF. The Company believes that these compounds represent a class of molecules
based on a novel mechanism of action that may offer the advantage of being more
selective, thereby providing increased efficacy with reduced side effects. In
animal studies used to evaluate anti-anxiety drugs, Neurocrine scientists have
demonstrated the efficacy of its clinical compound candidates following oral
administration without evidence of apparent side effects. Neurocrine's corporate
partner, Janssen, selected a CRF-1 receptor antagonist drug candidate for
preclinical testing in 1996 and commenced and completed Phase I clinical trials
on the compound in late 1998. Results in animal models of anxiety are not
necessary predictive of efficacy in human clinical trials and there can be no
assurance that these compounds will demonstrate clinical efficacy in humans. In
addition, no assurance can be given that Janssen will successfully initiate and
complete Phase II clinical testing or progress to later clinical trials in a
timely manner.
Depression
Depression is one of a group of neuropsychiatric disorders that includes
extreme feelings of elation and despair, loss of body weight, decreased
aggressiveness and sexual behavior, and loss of sleep. This condition is
believed to result from a combination of environmental factors, including
stress, as well as an individual's biochemical vulnerability, which is
genetically predetermined. The biochemical basis of depression is thought to
involve elevated secretion of CRF and abnormally low levels of other
neurotransmitters in the brain such as serotonin. Clinical depression was
reported to affect 6% of the population or approximately 25 million individuals
in the United States in 1998. Current antidepressant therapies, including
Prozac, increase the levels of serotonin and several other chemicals in the
brain. Because these drugs affect a wide range of neurotransmitters, they have
been associated with a number of side effects. While newer, more selective drugs
offer some safety improvement, side effects remain problematic. Another
limitation to most existing antidepressant therapies is slow onset of action.
Neurocrine and its corporate partner are developing small molecule
therapeutics to block the effects of overproduction of CRF for the treatment of
depression. The Company has developed several distinct chemical series of CRF
receptor antagonists. Janssen selected a drug candidate in 1996 for preclinical
testing and commenced Phase I clinical trials on the compound in late 1997 and
completed these in 1998. In late 1998 a Phase II open label trial was initiated
in patients with major depression. Results from this trial are expected to be
available in second half of 1999. No assurance can be given that Janssen will
successfully complete Phase II clinical testing of this candidate or that the
Phase II data will support continuation of the program and additional clinical
trials.
Stroke
Stroke is an acute neurologic event caused by blockage or rupture of
vessels, which supply blood to the brain leading to nerve cell death. Neuronal
damage progresses over a period of four to six hours. According to the National
Institutes of Health ("NIH") estimates, approximately 500,000 patients
experience a stroke in the United States each year, with an approximately equal
incidence in the rest of the world. Stroke results in an estimated 150,000
fatalities each year, making it the leading cause of death behind heart disease
and cancer, and an estimated additional 150,000 stroke victims suffer permanent
neurological damage. Survivors of stroke are at significantly increased risk of
suffering another episode. Current treatments for stroke consist of surgery,
steroid therapy and anti-platelet therapy. These treatments may help increase
blood flow but do not affect the secondary mechanisms which cause nerve cell
death.
Neurocrine believes its CRF receptor antagonist program may have utility in
the treatment of stroke. Preliminary experiments in animal models of stroke show
enhancement of neuronal survival following treatment with a CRF receptor
antagonist. Results obtained in animals are not necessarily predictive of
results obtained in humans, and no assurance can be given that the Company will
successfully complete pre-clinical development of CRF antagonist drug candidates
appropriate for stroke and enter into or complete clinical trials in a timely
manner, if at all.
Altered Peptide Ligands
In North America, five percent of adults, more than two-thirds of them
women, suffer from autoimmune diseases (including multiple sclerosis, rheumatoid
arthritis, Type I diabetes, systemic lupus erythematosus, and thyroiditis). The
body's immune system employs highly specific T cells that recognize and attack
foreign antigens that invade the body. Occasionally, certain T cells arise that
inappropriately recognize the body's own tissues as foreign. While virtually
every individual possesses these self-reactive T cells, in only a fraction of
these people do the immune cells actually attack healthy tissue and cause an
autoimmune disease. In a healthy individual, the activity of these self-reactive
T cells is held in check by other T cells that regulate their function
(regulatory T cells). If a defect in regulatory T cell function occurs, or the
environment favors the activity of self-reactive T cells, an autoimmune disease
results. While it is not clear what triggers the immune attack, a current
hypothesis suggests that people who are genetically predisposed to autoimmune
diseases come in contact with certain infectious viruses or bacteria. In the
process of controlling the infection, the immune system targets an antigen on
the infectious agent that resembles a self-antigen. These cells then begin to
attack self-tissue, resulting in autoimmune disease. Thus, a failure in
regulation of the immune system at the level of dysfunctional regulatory T cells
predisposes an individual to autoimmune disease. Current reasoning suggests that
the development of immune specific drugs that suppress the action of
self-reactive T cells and/or restore the function of regulatory T cells might
prove advantageous for the prevention/cure or treatment of an autoimmune
disease.
The T cells involved in the autoimmune disease achieve specificity in their
various functions via their cell surface molecules known as T cell antigen
receptors ("TCR"). Each T cell expresses its own specific TCR on its surface. T
cells recognize antigens, whether foreign or self-derived in the context of a
MHC molecule. This then represents the ligand that hooks up and binds to such a
TCR. In this manner, a peptide fragment can send a signal to the T cell via an
antigen-specific TCR that binds specifically to this antigen. After receiving
this signal through its TCR, the T cell will divide, proliferate, secrete
cytokines and/or destroy healthy cells.
If the structure of such a peptide fragment is altered, such that it binds
to its specific TCR with much less affinity, this altered peptide ligand ("APL")
sends an incomplete signal to the T cell. This incomplete or altered signal can
trick a T cell and prevent it from dividing, proliferating, secreting cytokines
and/or destroying normal cells. Indeed, if such an APL can be designed to
prevent "killer" T cells from destroying healthy cells, it would represent a
very useful antigen-specific therapy to prevent the onset of an autoimmune
disease.
Multiple Sclerosis ("MS")
Multiple sclerosis is a chronic immune mediated disease characterized by
recurrent attacks of neurologic dysfunction due to damage in the central nervous
system ("CNS"). The classic clinical features of MS include impaired vision and
weakness or paralysis of one or more limbs. Patients develop a slow, steady
deterioration of neurologic function over an average duration of approximately
30 years. The cause of MS is unknown but immunologic or infectious factors have
been implicated. According to the National Multiple Sclerosis Society, there are
an estimated 350,000 cases of multiple sclerosis in the United States and an
equal number of patients in Europe with approximately 20,000 new cases diagnosed
worldwide each year. Currently available treatments for MS offer only limited
efficacy. Steroids have been used to reduce the severity of acute flare-ups and
speed recovery. Experimental therapy with other immunosuppressive agents has
shown limited success. Betaseron (a form of beta-interferon) has been shown to
delay the onset of flare-ups of the symptoms in patients and has been approved
for marketing by the FDA. In addition, Avonex, a similar form of
beta-interferon, and Copaxone, a random peptide polymer, have received FDA
approval for relapsing remitting MS. In clinical trial with the beta-interferon
products, these therapies slowed progression of disease in MS patients, yet lead
to a variety of side effects including "flu-like" symptoms.
Neurocrine's cofounder, Dr. Lawrence Steinman, identified the dominant
invading T cell in the brains of patients who had died of MS. Dr. Steinman
further identified the dominant target or recognition site on the myelin sheath
to which invading T cells bind. Neurocrine has exclusively licensed this
technology and has designed altered peptide ligands, which resemble native
disease-causing molecules of the myelin sheath. These molecules have been
altered to attract and bind to disease-causing T cells and inhibit their
destructive capabilities. Neurocrine's altered peptide ligand for the treatment
of MS has been shown to reverse disease in animal models of MS and decrease the
production of cytokines such as gamma interferon and tumor necrosis factor-alpha
which contribute to the disease. These same molecules demonstrate the ability to
silence pathogenic T cells from MS patients in vitro. Together with Novartis,
the Company's collaborative partner for this program, Neurocrine filed an IND
and received approval in 1996 to commence clinical trials. The Company and
Novartis subsequently completed Phase I clinical trials, and two Phase II
clinical trials currently underway in North America and Europe and are scheduled
to complete by the fourth quarter of 1999 or the first quarter 2000. Results
obtained in animal models of MS are not necessarily predictive of results
obtained in man, and Phase I trials are not designed to predict efficacy. No
assurance, therefore, can be given that Novartis will successfully complete the
current Phase II clinical studies or that results of these studies will warrant
additional clinical development of potential product.
Type I Diabetes
Utilizing its experience in the development of APL for Multiple Sclerosis,
Neurocrine has extended this approach to Type I or juvenile-onset diabetes. Like
MS, in Type I diabetes the immune system has erroneously targeted healthy
tissue, in this case the pancreatic cells responsible for the production of
insulin. Type I diabetes is one of the most prevalent chronic conditions in the
North America, afflicting approximately 890,000 patients in 1997. Diabetics
suffer from a number of complications of the disease including heart disease,
circulatory problems, kidney failure, neurologic disorders and blindness.
Current therapy for Type I diabetes consists of daily insulin injections to
regulate blood glucose levels.
The Company believes that an altered peptide ligand specific for autoimmune
T cells involved in diabetes may stop the destruction of the insulin secreting
cells in pre-diabetic patients, thus allowing them to delay or avoid chronic
insulin therapy. Working with a leading Diabetologist at the Barbara Davis
Center for Childhood Diabetes at the University of Colorado, Neurocrine
scientists have engineered one of the dominant pancreatic antigens which is no
longer recognized by the pathogenic immune cell. In preclinical models this APL
was capable of eliciting a protective immune response by generating cells that
secrete factors capable of regulating the destructive cells reducing the
incidence of diabetes. In addition, experiments using immune cells derived from
the blood of Type 1 diabetes patients indicate that APL are recognized by immune
cells response to insulin, suggesting that the APL may have the potential to
intervene in the disease process in humans. Neurocrine is currently conducting a
Phase I safety and dose escalating clinical program in diabetic patients in
Europe. The results of the Company's preclinical studies in animals and cells
derived from Type I diabetes patients are not necessarily predictive of the
results the Company will see treating Type I diabetes patients. There can be no
assurance that the APL will prove safe in Phase I studies or that the Company
will conduct additional clinical trials.
IL-4 Fusion Toxin
IL-4 receptors are highly expressed in malignant brain tumors as well as in
cancers of the breast, kidney, lung, colon, stomach, ovary, prostate, and in
melanoma and mesothelioma. Immunotoxins are a novel form of anticancer therapy
under investigation in a variety of clinical situations. The immunotoxin is
designed to carry a cellular toxin, such as Pseudomonas exotoxin, to a target
antigen, expressed on cancer cells. Targeted toxins have several theoretical
advantages over conventional chemotherapy in that they may be extremely potent
and effective in chemotherapy-resistant T cells.
Malignant brain tumors, both primary and metastatic, are a major cause of
cancer death. Despite current therapeutic options such as surgery, radiation,
and chemotherapy, the median survival rate for malignant brain cancer is only in
the range of 9-12 months. Approximately 17,400 new cases of primary brain cancer
and 75,000 cases of metastatic brain tumor are diagnosed in the United States
each year, with comparable incidence numbers in Europe. According to the
American Cancer Society, the incidence of malignant brain tumors is rising.
Glioblastoma (grade 4 astrocytoma) is the most common primary malignant brain
tumor. These tumors arise within the brain and generally remain confined to the
brain. The clinical course of glioblastoma is characterized by relentless loss
of vital neurological functions and death within approximately twelve months.
In 1998, the Company exclusively licensed from the National Institutes of
Health an anti-cancer compound, referred to as IL-4 Fusion Toxin. NBI-3001, or
IL-4 Fusion Toxin is an immunotoxin which fuses interleukin-4 ("IL-4"), a
cytokine, to Pseudomonas exotoxin. This molecule was designed as a result of a
collaboration between the FDA and the National Cancer Institute. IL-4 receptors
Fusion Toxin is a chimeric protein in which a cytokine (blood cell growth
factor) known as interleukin 4 (IL-4) has been joined together with another
molecule, an exotoxin that can destroy cancer cells. The IL-4 portion of the
Fusion Toxin preferentially binds to human cancer cells, which express elevated
levels of high affinity receptors for IL-4 on their surface. The advantage of
targeting the IL-4 receptor is that expression of the receptor is absent or
undetectable in normal brain tissue.
In the preclinical setting, NBI-3001 has been found to be highly cytotoxic
to brain tumor cell lines in vitro, and exhibits anti-tumor activity in in vivo
models of brain tumor. NBI-3001 has completed a Phase I safety trial under an
Investigator sponsored IND in which (9) patients with recurrent malignant
glioblastoma were treated. Results were presented at The Society for
Neuro-Oncology Meeting in an abstract entitled "A Circularly Permuted
Interleukin-4 Pseudomonas Exotoxin for Treatment of Malignant Gliomas." In this
study, NBI-3001 produced no evident systemic or neurological toxicities as
documented by serum chemistry, hematology screen including liver panels and
neurological examinations. A physician-IND clinical trial does not replace the
need for Company-sponsored clinical trials, but can provide a preliminary
indication as to whether further clinical trials are warranted. However, results
from the Physician IND sponsored clinical study may not be repeated in a larger
study. NBI-3001 is currently undergoing a Phase I/II trial targeting enrollment
of thirty (30) subjects with recurrent glioblastoma in which the primary
endpoints are safety, tumor regression, and progression free survival. The
Company intends to complete enrollment of this trial in 1999, and if results
warrant, commence an efficacy trial for NBI-3001 in early 2000. No assurance can
be given that the Company will successfully complete clinical testing or
progress to later clinical trials in a timely manner, or at all.
GABA Subtype Receptor Agonists
Insomnia
The term "insomnia" is used to describe all conditions related to the
perception of inadequate or non-restful sleep by the patient. According to a
Gallup Survey conducted on behalf of the National Sleep Foundation, 49% of all
Americans say that they have trouble sleeping. Often undiagnosed or dismissed,
insomniacs have trouble falling asleep, remaining asleep or staying awake.
Insomnia was also shown to be related to the age and sex of the individuals, the
prevalence of which is higher in older individuals and females. While insomnia
is reported to be a major problem in the adult population worldwide, only
approximately 10% of such patients seek prescription sleeping medications for
their condition. This fact may result from the perceived side effect profile of
currently marketed sedative-hypnotics.
In the recent past, the majority of patients treated for insomnia have
utilized non-benzodiazepine compounds, which show an improved side effect
profile over the benzodiazepine class of sedative-hypnotics utilized during the
1980's. However, currently marketed products continue to exhibit certain
unfavorable side effects, including synergy with other CNS depressants
(especially alcohol), the development of tolerance upon repeat dosing, rebound
insomnia following discontinuation of dosing, hangover effects the next day, and
impairment of psychomotor performance and memory. Memory impairment, which can
include amnesia for events occurring prior to and after drug administration, is
of particular concern in the elderly whose cognitive function may already be
impaired by the aging process. The elderly population, which represent a large
portion of the insomnia market, would especially benefit from a novel
therapeutic with an improved safety profile, rapidity of onset, and decrease in
memory impairment.
In 1998 the Company signed an exclusive worldwide licensing agreement with
DOV Pharmaceuticals, Inc. for a compound in clinical development for the
treatment of insomnia. The compound, NBI-34060, works through the activation of
the benzodiazepine site on a GABA receptor subtype. It is through this mechanism
that the currently marketed therapeutics produces their sleep-promoting effects.
However, NBI-34060, a next generation compound, is chemically distinct from the
benzodiazepines with a potentially improved pharmacokinetic profile and receptor
subtype selectivity, which may reduce the side effects characteristic of the
currently marketed products.
Receptor binding studies and preclinical animal studies on NBI-34060
indicate that it is a highly potent GABAA receptor agonist specific for the Type
1 site. In animal studies, NBI-34060 shows a reduced tolerance to sedation,
suggesting a lower potential for abuse, and a reduced tendency to potentiate the
deleterious effects of alcohol. In addition, in animal models NBI-34060 appears
to be devoid of next day hangover effects and is expected to have a considerably
reduced amnestic potential.
Prior to licensure by the Company, a Phase I clinical trial was conducted
in forty-two (42) subjects. The study was designed to determine the safety and
tolerance of NBI-34060, and provide a preliminary evaluation of the
sedative-hypnotic potential in normal volunteers as reflected in self-ratings of
drowsiness, disruption of memory, and impairment of psychomotor performance.
NBI-34060 was well tolerated, with no serious or unexpected adverse events
("AEs") reported. The only consistently reported side effect was drowsiness,
indicating strong potential for the sedative-hypnotic properties of the
compound.
Based on results from this Phase I study, in the first quarter of 1999,
Neurocrine completed a Phase Ib clinical trial in thirty (30) healthy volunteers
to further explore the safety and kinetic profile of NBI-34060. As demonstrated
in the first Phase I trail, NBI-34060 demonstrated an adequate safety profile.
The Company currently intends to conduct a Phase II clinical program in 1999 to
evaluate the efficacy of NBI-34060 in subjects with chronic insomnia, and if
results warrant, initiate a pivotal Phase III trial in 2000. There can be no
assurance that the side effects and efficacy profile of NBI-34060 seen in the
Company's animal models and Phase I trials will be confirmed in the Phase II
trial or that the results of the Phase II trial will warrant further study.
CRF / Urocortin Agonist
The body has several mechanisms to regulate the effects of CRF. CRF-binding
protein ("CRF-BP") binds to CRF and holds it in an inactive state, tightly
regulating levels of CRF in certain brain regions. CRF-BP may provide a novel
target to selectively increase levels of CRF in diseases that are associated
with decreased levels of CRF, such as Alzheimer's disease and obesity. In
addition, agonists of the CRF-2 receptor may represent a therapeutic strategy to
elevate CRF and a related neuropeptide urocortin for the treatment of these
disorders.
Alzheimer's Disease
Alzheimer's disease is a neurodegenerative brain disorder that leads to
progressive memory loss and dementia. Alzheimer's disease generally follows a
predictable course of deterioration over eight years or more, with the earliest
symptom being impairment of short-term memory. Gradually, memory loss increases,
reasoning abilities deteriorate, and individuals become depressed, agitated,
irritable and restless. In the final stages of the disease, patients become
unable to care for themselves. According to the National Alzheimer's
Association, in 1994 over four million individuals in the United States suffered
from Alzheimer's disease. Alzheimer's disease is the fourth leading cause of
death for adults, responsible for over 100,000 deaths in 1994. Marketed
therapies currently available for the treatment of Alzheimer's disease are
severely limited. Tacrine and Aricept have been recently approved for this
indication, but, show limited memory improvement in Alzheimer's patients;
concerns regarding drug-induced elevations in liver enzymes and other side
effects have limited the widespread use of these products.
Neurocrine scientists have found that there are significant decreases in
CRF levels in the brain areas that are affected in Alzheimer's disease. In spite
of reduced CRF concentrations, CRF-BP levels are not decreased in areas of the
brain affected by Alzheimer's disease, thereby providing the Company with a
novel target for drug intervention. Consequently, Neurocrine is developing
CRF-BP antagonists to displace CRF from the binding protein and effectively
increase the amount of "free CRF" available to interact with the CRF receptors.
This strategy is expected to selectively raise the concentration of CRF in brain
areas involved in learning and memory processes. Because the therapeutic is
designed to restore normal levels of CRF only in these areas, the Company
believes that the drug will not induce the side effects associated with
administering CRF directly, such as anxiety. Current efforts are underway to
identify and optimize molecules through high-throughput screening of small
molecule libraries. However, no assurance can be given that the Company and its
corporate partner, Eli Lilly, will successfully identify suitable candidate
compounds for development in a timely manner, or at all.
Obesity
Obesity is the most common nutritional disorder in Western societies. As
many as three in ten adult Americans weigh at least 20% in excess of their ideal
body weight, and 35 million people in the United States are characterized as
clinically obese. Increased body weight is a significant public health problem
because it is associated with a number of serious diseases, including Type II
diabetes, hypertension, hyperlipidemia and several cancers. Although obesity has
been commonly considered to be a behavioral problem, there is now evidence that
body weight is physiologically regulated. The regulation of body weight is
complex and appears to consist of both centrally and peripherally acting
mechanisms.
Preliminary data indicates that CRF and a related neuropeptide, urocortin,
may act as central regulators of both appetite and metabolism. Neurocrine has
evaluated CRF-BP antagonists and CRF receptor agonists in various animal models
of obesity and have shown effects of reduced food intake and weight loss.
Neurocrine and its corporate partner Eli Lilly are screening and optimizing
small molecule compounds for evaluation in confirmatory preclinical studies.
However, no assurance can be given that the Company and its corporate partner
will successfully identify CRF and urocortin agonists suitable as anti-obesity
therapeutics in a timely manner, or at all. Further, even if the Company and
Lilly are successful in identifying drug candidates, the results obtained in
animals are not necessarily predictive of results obtained in humans, and no
assurance can be given that the Company will progress to clinical trials or
successfully complete clinical trials in a timely manner, if at all.
Excitatory Amino Acid Transporters ("EAATs")
EAATs serve as novel targets for the development of drugs, which modulate
toxic levels of glutamate in the brain. Neurotransmitter transporters play an
important role in regulating the levels of neurotransmitters, and some of the
most successful CNS drugs are ones that selectively target these transporters.
For example, the Selective Serotonin Reuptake Inhibitors ("SSRIs") such as
Prozac selectively inhibit the serotonin transporter modulating the serotonin
levels for therapeutic benefit. Similarly, Neurocrine is targeting the EAATs to
selectively modulate the levels of the excitatory neurotransmitter glutamate to
produce a therapeutic benefit in disorders where glutamate levels are abnormal
such as in stroke, head trauma, retinal ischemia, schizophrenia and other
neurodegenerative and psychiatric disorders. Neurocrine has entered into
collaboration with Wyeth-Ayerst focusing on modulating glutamate transporter
function as a novel strategy for the treatment of neurodegenerative disorders.
Neurocrine and Wyeth-Ayerst will target the EAATs to selectively modulate the
levels of the excitatory neurotransmitter glutamate to produce a therapeutic
benefit in disorders where glutamate levels are abnormal. These activities will
include basic research to understand the function and regulation of the
transporters, the identification of suitable chemical hits, along with the
identification and characterization of chemical and biological leads. There can
be no assurance that the Company and Wyeth-Ayerst will be successful in
demonstrating EAATs as therapeutic targets or that they will identify any
product candidates for pre-clinical or subsequent clinical development.
<PAGE>
Melanocortin Receptor Antagonists
Melanocortin receptors are involved in the control of endocrine, autonomic
and central nervous system function. To date, a family of five melanocortin
receptor subtypes has been identified; several of which have been cloned by the
Company's consultants and scientists. One of the melanocortin receptor subtypes,
MC4, has recently been identified as an important regulating mechanism for
appetite, body weight and insulin secretion which represents a novel target for
the treatment of obesity and diabetes. This technology combined with
Neurocrine's expertise in obesity, anorexia nervosa and diabetes provides
additional avenues for the discovery of effective therapies for the treatment of
other endocrine functions and brain disorders.
Chemokines
Chemokines are immune / inflammatory mediators considered central to the
trafficking of leukocytes. Restricted and sub-type specific expression of their
receptors in different pathologies and on T lymphocytes, dendritic cells and CNS
tissue, suggests a role for these mediators in diseases characterized by CNS
inflammation and leukocyte invasion. All ligand-receptor interactions lead to
migration of the cell types expressing the receptor, hinting at a central role
for these molecules in the recruitment / invasion of the diseased tissue by
these cells and their potential role in the ensuing destruction. Antagonism of
this effect may, therefore, be of benefit. In addition to an in-depth program of
discovery research, the Company has decided to screen our library against these
receptor systems in order to identify small molecule antagonists. Since
chemokines are large proteins and have multiple interaction sites with their
receptors, the design of specific, high-affinity competitive antagonists will be
required. Antagonists are being tested in inflammatory animal models including
experimental autoimmune encephalomyelitis (EAE, for MS), arthritis, and
diabetes.
Given the complexity of the chemokine area, Neurocrine has focused on the
more recently discovered receptors in an attempt to generate small molecule
antagonists. To that end, numerous chemokine receptors have been expressed,
screened against our small molecule library, and structure activity studies
undertaken. There can be no assurance that the Company's research in this area
will lead to product candidates.
Gonadotrophin-Releasing Hormone (GnRH) Receptor
Gonadotrophin-releasing hormone is a hypothalamic decapeptide that
stimulates the secretion of the pituitary gonadotropins, luteinizing hormone
(LH) and follicle-stimulating hormone (FSH). The gonadotropins, in turn, are
necessary for gonadal steroid production and normal reproductive function.
Chronic administration of GnRH superagonist peptides has been found to cause
down regulation of the GnRH receptor resulting in a paradoxical reduction in
circulating levels of testosterone or estrogen, equivalent to surgical
castration or oophorectomy, respectively. This reversible shutdown of the
reproductive endocrine axis has proven clinically useful in treating hormone
dependent proliferative diseases such as endometriosis, prostate carcinoma, and
breast cancer, and resulted in several peptide drugs such as Lupron and Zoladex,
with an estimated market in excess of $1 billion. However, current peptide
agonist based drugs have several drawbacks. They require 3-4 weeks before the
regulatory activities are observed, and during this period their stimulatory
effects can result in a worsening of the disease. Being peptides they also
require subcutaneous injection or nasal administration and are expensive to
manufacture.
The Company has screened its small molecule library and has conducted
structure activity studies aimed at producing a small molecule GnRH antagonist.
Several series of small molecule compounds have been identified and are being
evaluated as candidates for further development.
Neurogenomics
The brain and spinal cord are comprised of two major cell types - glial
cells and neurons. Glial cells are the most prevalent cell types in the central
nervous system, comprising over 75% of all brain cells. The gene products from
these cells are crucial for the survival and development of neurons. Neurons are
CNS cells that transmit and receive complex electrical and chemical messages
from other neurons to control all cognitive processes. In certain pathological
states, excessive glial activity results in the activation of cytosine and
related genes. The proteins encoded by these genes may be implicated in the
degenerative cascade leading to neurological disorders such as Alzheimer's
disease, stroke, multiple sclerosis, Parkinson's disease, epilepsy and AIDS
dementia. For example, in AIDS, the HIV virus does not attack neurons but does
infect glial cells which in turn release inflammatory cytokines and other
factors which are toxic to neurons. Similarly, in Alzheimer's disease,
accumulating evidence suggests complex interactions between neurons, glia and a
protein fragment known as beta amyloid leading to formation of senile plaques
and neurodegeneration. Currently, it is estimated that only a small fraction of
genes involved in neurodegeneration or regeneration has been identified. The
identification of novel CNS genes involved in the neurodegenerative process may
yield new therapeutic opportunities.
Neurodegenerative Diseases and Disorders
Neurodegenerative diseases and disorders involve damage to the cellular
structure of the brain either acutely, as in stroke or trauma, or chronically,
as in epilepsy and Alzheimer's disease. To date, only a limited number of
effective therapeutics exists to treat neurological disorders, resulting in
significant economic and social costs. In 1998, over 26 million people are
estimated in the United States to be affected by neurological disorders.
Activation of glial cells is a common feature of many neurodegenerative
diseases. The primary goal of Neurocrine's Neurogenomics program is to identify
and characterize novel genes that are induced in glial cells under conditions
that lead to neurodegeneration or regeneration. The Company is focusing on
stroke, multiple sclerosis, AIDS dementia, epilepsy, Parkinson's disease and
Alzheimer's disease. The unique conditions leading to neurodegeneration in each
of the disorders have been established in both animal and cellular models of the
disease. Neurocrine is actively isolating and analyzing genes associated with
neuronal cell death utilizing state of the art molecular biology, gene
sequencing and bioinformatics. In addition, activated genes that are
neuroprotective or allow for the regeneration of neurons may also be identified.
Novel neurodegenerative genes that are discovered may include proteins,
enzymes or receptors. Protein signaling molecules or the genes encoding such
molecules may be utilized as therapeutics, while enzymes and receptors may serve
as new targets for drug discovery. Neurocrine currently intends to place the
receptors and enzymes encoded by these genes in high-throughput screens in an
attempt to discover small molecule therapeutics to treat neurodegenerative
disorders. To date, the Company has identified novel genes of which a number are
undergoing biological evaluation in in vitro and animal models. The Company
currently intends to identify candidate genes as drugs or drug targets for one
or more neurological diseases. However, there can be no assurance that the
Company will successfully identify suitable gene candidates for development in a
timely manner, or at all.
BUSINESS STRATEGY
The Company's strategy is to utilize its understanding of the biology of
the central nervous, immune and endocrine systems to identify and develop novel
therapeutics. There are five key elements to the Company's business strategy:
Target Multiple Product Platforms. The Company believes certain central
nervous system drug targets, such as CRF, EAATs and MCH represent significant
market opportunities in psychiatric, neurologic and metabolic disorders.
Immunological targets, such as altered peptide ligands, offer therapeutic
strategies related to autoimmune diseases. Neurogenomics and chemokines allow
the Company to combine its neuroscience and immunology expertise with new drug
discovery technologies to identify novel gene-related product or gene therapy
opportunities.
Identify Novel Neuroscience and Immunology Drug Targets for the Development
of Therapeutics Which Address Large Unmet Market Opportunities. Neurocrine
employs molecular biology as an enabling discipline to identify novel drug
targets such as receptors, genes and gene-related products. The Company uses
advanced technologies, including combinatorial chemistry, high-throughput
screening, gene sequencing and bioinformatics, to discover and develop novel
small molecule therapeutics for diseases and disorders of the central nervous
and immune systems including anxiety, depression, Alzheimer's disease, multiple
sclerosis, neurodegeneration, diabetes, obesity and insomnia.
Leverage Strategic Alliances to Enhance Development and Commercialization
Capabilities. Neurocrine intends to leverage the development, regulatory and
commercialization expertise of its corporate partners to accelerate the
development of its potential products, while retaining commercial or
co-promotion rights in North America. The Company intends to further leverage
its resources by continuing to enter into strategic alliances and novel
financing mechanisms to enhance its internal development and commercialization
capabilities.
To date, Neurocrine has entered into strategic alliances with Janssen
focusing on CRF receptor antagonists to treat anxiety, depression, and substance
abuse; with Novartis to develop altered peptide ligands for the treatment of MS;
and with Lilly to collaborate in the discovery, development and
commercialization of CRF-BP antagonists and CRF agonists for the treatment of
central nervous system disorders including obesity and dementias such as
Alzheimer's disease. More recently, the Company entered into a collaboration
with Wyeth-Ayerst Laboratories for the research; development and
commercialization of compounds with modulate excitatory amino acid transporters.
The Company has also formed NPI, a research and development subsidiary, to
finance its Neurosteroid clinical development program, which has been
discontinued and its Neurogenomics programs. In 1999 the Company entered into a
collaboration agreement with Wyeth-Ayerst to research, develop and commercialize
compounds which modulate excitatory amino acid transporters ("EAATs") for the
treatment of neurodegenerative and psychiatric diseases.
In addition, in 1998 Neurocrine entered into two alliances with other
companies to enhance its drug discovery and development capabilities. The first
alliance is with Medtronic Inc. to study the stability and compatibility of IL-4
Fusion Toxin in Medtronic's implantable drug pump and catheter system. The
second alliance is with Caliper Technologies. Neurocrine and Caliper are
collaborating to apply Caliper's microfluidics technology to the ultra-high
throughput screening of Neurocrine's proprietary targets.
Outsource Capital Intensive and Non-Strategic Activities. Neurocrine
intends to focus its resources on research and development activities by
outsourcing its requirements for manufacturing, preclinical testing and clinical
monitoring activities. The Company utilizes contract current Good Manufacturing
Processes ("cGMP") manufacturing for clinical programs including the IL-4 Fusion
Toxin program, insomnia and diabetes. Neurocrine believes that availability of
skilled contract manufacturers and contractors will allow the Company to focus
on its core discovery and development programs to generate additional product
opportunities.
Acquire Complementary Research and Development Drug Candidates. Neurocrine
plans to continue to selectively acquire rights to products in various stages of
research and clinical development in the fields of neurology and immunology to
take advantage of the development and future commercialization capabilities it
is developing in cooperation with its strategic partners. In 1998 the Company
licensed from the National Institutes of Health an IL-4 Fusion Toxin which is
currently in Phase I/II clinical trials for recurrent glioblastoma. In May 1998
the Company completed the acquisition of Northwest NeuroLogic, Inc. (NNL),
acquiring the intellectual property surrounding the Excitatory Amino Acid
Transporters (EAATs) 1 through 5 and Melanocortin receptors. In addition, the
scientific founders of NNL, Drs. Roger Cone and Susan Amara, of the Vollum
Institute became exclusive consultants to the Company. Also in June 1998, the
Company exclusively licensed worldwide commercial rights from DOV
Pharmaceuticals, Inc. for a compound which has completed Phase I clinical
development for the treatment of insomnia.
TECHNOLOGY
Neurocrine utilizes advanced technologies to enhance its drug discovery
capabilities and to accelerate the drug development process. These technologies
include:
High-Throughput Screening ("HTS"). Neurocrine has assembled a chemical
library of diverse, low molecular weight organic molecules for lead compound
identification. The Company has implemented robotics screening capabilities
linked to its library of compounds that facilitate the rapid identification of
new drug candidates for multiple drug targets. The Company believes that the
utilization of high-throughput screening and medicinal and peptide chemistry
will enable the rapid identification and optimization of lead molecules.
Combinatorial Chemistry. Recent developments in both computational and
combinatorial chemistry have shown that it is now possible to design small
libraries focused around hits emerging from HTS both to evaluate rapidly the
quality of such hits and also subsequently optimize the selected hits into
advanced lead candidates. The approach involves learning from the set of hits as
a whole and using this information to design libraries of compounds that may be
structurally independent of the original hits. Neurocrine is acquiring the
necessary technologies to facilitate the process of library design, parallel
synthesis and rapid purification and characterization of compounds. Neurocrine
will use the same process to supplement the corporate compound library with
structures relevant for internal projects and hence improve the likelihood that
HTS will discover a meaningful array of useful hits.
Molecular Biology. Neurocrine scientists have utilized novel techniques for
examination of gene expression in a variety of cellular systems. The company has
developed a sophisticated technique to evaluate the type and quantity of genes
in various cellular systems prior to the isolation of genes. Neurocrine has also
developed unique expression vectors and cell lines that allow for the highly
efficient protein expression of specific genes.
Gene Sequencing. Neurocrine applies integrated automated DNA sequencing and
gene identification technology in its Neurogenomics program. The systems
utilized by Neurocrine allow for extended gene analysis in a rapid,
high-throughput format with independent linkage into a sequence identification
database. Neurocrine has optimized gene sequencing instrumentation for
"differential display," a technique that may facilitate the rapid identification
of novel genes.
Bioinformatics. Neurocrine's Neurogenomics program creates a significant
amount of genetic sequence information. Applied genomics relies on information
management systems to collect, store and rapidly analyze thousands of gene
sequences. Neurocrine has developed a bioinformatics system, which the Company
believes will allow it to identify novel genes, which are involved in
neurodegeneration. Data are collected by automated instruments and stored and
analyzed by Neurocrine using customized computational tools. To date,
Neurocrine's molecular biologists have identified over 4,500 novel genes.
STRATEGIC ALLIANCES
The Company's business strategy is to utilize strategic alliances and novel
financing mechanisms to enhance its development and commercialization
capabilities. To date, Neurocrine has completed the following alliances:
JANSSEN PHARMACEUTICA, N.V.
On January 1, 1995, Neurocrine entered into a research and development
agreement with Janssen to collaborate in the discovery, development and
commercialization of CRF receptor antagonists focusing on the treatment of
anxiety, depression and substance abuse (the "Janssen Agreement"). The
collaboration utilizes Neurocrine's expertise in cloning and characterizing CRF
receptor subtypes, CRF pharmacology and medicinal chemistry. Pursuant to the
Janssen Agreement, the Company has received $2.0 million in license payments. In
connection with the Janssen Agreement, Johnson & Johnson Development Corporation
("JJDC") purchased $5 million of the Company's Common Stock. The collaborative
research portion of the Janssen Agreement was completed as scheduled in 1997.
In 1996 Janssen selected a clinical candidate and commenced clinical trials
in Europe. Under the Janssen Agreement, Neurocrine is entitled to receive up to
$10.0 million in milestone payments for the indications of anxiety, depression,
and substance abuse, and up to $9.0 million in milestone payments for other
indications, in each case upon achievement of certain development and regulatory
goals. As of December 31, 1998 the Company has received $3.5 million in
milestone payments from Janssen. Janssen is responsible for funding all clinical
development and marketing activities, including reimbursement to Neurocrine for
its promotional efforts, if any. The Company has granted Janssen an exclusive
worldwide license to manufacture and market products developed under the Janssen
Agreement. The Company is entitled to receive royalties on Janssen product sales
throughout the world. The Company has certain rights to co-promote such products
in North America. There can be no assurance that the Company and its corporate
partner will be successful in developing, receiving regulatory approvals or
commercializing any potential products discovered under the Janssen Agreement.
As a result, there can be no assurance that any product development milestone or
royalty payments will be made.
NOVARTIS
In January 1996, the Company entered into a binding letter agreement with
Ciba-Geigy (which subsequently became Novartis) to develop altered peptide
ligand therapeutics for the treatment of MS based upon the Company's drug
development candidates and expertise in immunology and protein chemistry. In
December 1996, the Company and Novartis entered into a definitive agreement (the
"Novartis Agreement") incorporating the terms and conditions set forth in the
letter agreement and certain other terms and conditions agreed to by the Company
and Novartis. Novartis paid the Company a $5.0 million non-refundable fee prior
to executing the Novartis Agreement. In connection with the Novartis Agreement,
Novartis purchased $10.0 million of the Company's Common Stock. Pursuant to the
Novartis Agreement, Novartis is obligated to provide the Company with $3.5
million in research and development funding, plus certain other program
expenses, each year for five years ending on December 31, 2000. In event that no
biological license application ("BLA") has been filed as a result of the
collaboration by December 31, 2000, then Novartis may be obligated to provide
the Company with an additional $2.5 million per year thereafter until a Product
License Application is filed, except in certain circumstances. As of December
31, 1998 the Company has received a total of $20.2 million in license fees and
research funding under the Novartis Agreement (including the $5.0 million
non-refundable fee). Neurocrine is also entitled to receive milestone payments
if certain research, development and regulatory milestones are achieved.
Milestone payments were $3.8 million and $2.3 million in 1997 and 1998,
respectively. Novartis has the right to terminate the Novartis Agreement on six
months' notice, which may be given at any time after December 30, 1997.
The Company has granted Novartis an exclusive license outside of the United
States and Canada to market altered peptide ligand products developed under the
Novartis Agreement for multiple sclerosis. Neurocrine is entitled to receive
royalties on product sales in these territories. The Novartis Agreement provides
that the Company and Novartis will collaborate in the marketing of products
developed under the Novartis Agreement in the United States and Canada.
Neurocrine is entitled to receive a share of the profits resulting from sales of
altered peptide ligand products in the United States and Canada subject to the
recoupment of a portion of Novartis's development costs. Neurocrine retains the
right to convert its profit share to the right to receive royalty payments at
its sole discretion in which case no repayment of development costs are due to
Novartis and Novartis will have exclusive marketing rights. Neurocrine is
obligated to repay a portion of the development costs of any potential product
developed pursuant to the collaboration unless the Company elects to convert to
the right to receive royalty payments. There can be no assurance that the
Company and Novartis will be successful in developing or commercializing any
potential products. As a result, there can be no assurance that any product
development milestone, royalty, or profit sharing payments will be made.
ELI LILLY AND CO.
On October 15, 1996, Neurocrine entered into a research and license
agreement (the "Lilly Agreement") with Lilly to collaborate in the discovery,
development and commercialization of CRF binding protein ligand inhibitors for
the treatment of central nervous system disorders including obesity and
dementias such as Alzheimer's disease and CRF-2 agonists for CNS mediated
diseases and disorders. Neurocrine has received $14.5 million in research
payments under the Lilly Agreement, of which $4.0 million was received in 1998.
Neurocrine expects to receive an additional $3.0 million in research payments
through October 31, 1999, as well as additional sponsored research payments over
the subsequent two-year period if certain milestones are met, and up to an
additional $49.0 million in milestone payments for the first two products for
dementia or obesity if certain development and regulatory milestones are
achieved. The Company has granted Lilly an exclusive worldwide license to
manufacture and market CRF binding protein ligand antagonists and CRF-2 agonist
products. Lilly is obligated to fund clinical development and marketing expenses
(except as set forth below) and is responsible for clinical development,
regulatory compliance, and manufacturing of products. Neurocrine is entitled to
royalties on product sales. At its option, Neurocrine is entitled to receive a
portion of the profits resulting from sales of products for the treatment of
dementia in the United States (subject to the Company's obligation to pay a
portion of the development costs for such product). Lilly has agreed to provide
the Company with access to a portion of its chemical compound library for
screening against targets outside of the field of the Lilly Agreement and other
Lilly program areas, subject to the Company's obligation to pay Lilly royalties
on sales of products developed based on compounds in such library and milestone
payments based upon certain development and regulatory milestones for such
products. There can be no assurance that the Company's research under the Lilly
Agreement will be successful in discovering any potential products or that Lilly
will be successful in developing, receiving regulatory approvals, or
commercializing any potential products that may be discovered. As a result there
can be no assurance that any product development milestone, royalty, or profit
sharing payments will be made.
WYETH-AYERST
Effective January 1, 1999, the Company entered into a Collaboration and
License Agreement relating to the research, development and commercialization of
compounds which modulate excitatory amino acid transporters ("EAATs") for the
treatment of neurodegenerative and psychiatric diseases. Pursuant to the
agreement, Wyeth-Ayerst will provide the Company with up to $13 million in
research and development funding. The initial term of the funded research will
be three years, subject to earlier termination or extension upon achievement of
certain benchmarks upon mutual agreement of the parties. The Company is also
entitled to receive up to $69.2 million in milestones upon achievement of
certain research, development and regulatory events.
In addition, under certain circumstances the Company may have the
opportunity to co-promote products with Wyeth-Ayerst in the United States and
Canada. There can be no assurance that the Company and Wyeth-Ayerst will be
successful in research and drug discovery based on this technology, that any
pre-clinical and clinical drug candidates arising from the collaboration will
generate commercial product candidates that have viable clinical, regulatory and
intellectual property profiles or that any commercial products arising from the
collaboration will enjoy market acceptance. Therefore, there can be no assurance
that any milestones or royalty income will be payable to the Company under its
agreement with Wyeth-Ayerst.
NEUROSCIENCE PHARMA INC.
In March 1996, Neurocrine formed Neuroscience Pharma, Inc. ("NPI"), a
research and development company. Neurocrine licensed to NPI certain technology
and Canadian marketing rights to the Company's Neurosteroid and Neurogenomics
programs in exchange for 49% of the outstanding Common Stock of NPI. A group of
Canadian institutional investors invested approximately $9.5 million in NPI in
exchange for Preferred Stock of NPI, which could be exchanged for shares of
Neurocrine's Common Stock. During 1997 and 1998 these investors redeemed the
Preferred Stock for an aggregate of 1,279,758 shares of Common Stock of the
Company. Pursuant to a Research and Development Agreement with a wholly owned
subsidiary of the Company, NPI committed to expend an aggregate amount of $9.5
million for clinical development of DHEA, a neurosteroid for Alzheimer's
Disease. The DHEA Neurosteroid Program was discontinued in March 1999 following
results from the Phase II/III trial. Despite suggestion of efficacy from a
previously completed 60 patient Phase II trial, the results of its Phase II/III
trial did not demonstrate a difference in efficacy between patients treated with
DHEA versus placebo. Based on these results, NPI has discontinued further
development of DHEA. NPI will continue its research activities in the area of
neurogenomics. Pursuant to such Research and Development Agreement, NPI is
entitled to receive royalties on sales of products developed in these programs
as well as exclusive Canadian marketing rights for such products in the event
that the Company has not terminated the technology license and the marketing
rights. In connection with their initial investment in NPI, such investors also
received warrants exercisable for 383,875 shares of the Company's Common Stock
and are eligible to receive additional warrants in the future in the event that
NPI receives certain Canadian government incentives for research activities.
RISK FACTORS
DEPENDENCE ON STRATEGIC ALLIANCES
The Company is dependent upon its corporate partners to provide adequate
funding for certain of its programs. Under these arrangements, the Company's
corporate partners are responsible for (i) selecting compounds for subsequent
development as drug candidates, (ii) conducting preclinical testing and clinical
trials and obtaining required regulatory approvals for such drug candidates,
and/or (iii) manufacturing and commercializing any resulting drugs. Failure of
these partners to select a compound discovered by the Company for subsequent
development into marketable products, gain the requisite regulatory approvals or
successfully commercialize products would have a material adverse effect on the
Company's business, financial condition and results of operations. The Company's
strategy for development and commercialization of certain of its products is
dependent upon entering into additional arrangements with research
collaborators, corporate partners and others, and upon the subsequent success of
these third parties in performing their obligations. There can be no assurance
that the Company will be able to enter into additional strategic alliances on
terms favorable to the Company, or at all. Failure of the Company to enter into
additional strategic alliances would have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company cannot control the amount and timing of resources that its
corporate partners devote to the Company's programs or potential products. If
any of the Company's corporate partners breach or terminate their agreements
with the Company or otherwise fail to conduct their collaborative activities in
a timely manner, the preclinical testing, clinical development or
commercialization of product candidates will be delayed, and the Company will be
required to devote additional resources to product development and
commercialization, or terminate certain development programs. The Company's
strategic alliances with Janssen, Novartis, Lilly, and Wyeth-Ayerst are subject
to termination by Janssen, Novartis, Lilly, or Wyeth-Ayerst, respectively. There
can be no assurance that Janssen, Novartis, Lilly, or Wyeth-Ayerst will not
elect to terminate its strategic alliance with the Company prior to its
scheduled expiration. In addition, if the Company's corporate partners effect a
merger with a third party, there can be no assurance that the strategic
alliances will not be terminated or otherwise materially adversely affected. The
termination of any current or future strategic alliances could have a material
adverse effect on the Company's business, financial condition and results of
operations. Neurocrine's corporate partners may develop, either alone or with
others, products that compete with the development and marketing of the
Company's products. Competing products, either developed by the corporate
partners or to which the corporate partners have rights, may result in their
withdrawal of support with respect to all or a portion of the Company's
technology, which would have a material adverse effect on the Company's
business, financial condition and results of operations. There can be no
assurance that disputes will not arise in the future with respect to the
ownership of rights to any products or technology developed with corporate
partners. These and other possible disagreements between corporate partners and
the Company could lead to delays in the collaborative research, development or
commercialization of certain product candidates or could require or result in
litigation or arbitration, which would be time-consuming and expensive, and
would have a material adverse effect on the Company's business, financial
condition and results of operations.
MANUFACTURING
The Company has in the past utilized, and intends to continue to utilize,
third party manufacturing for the production of material for use in clinical
trials and for the potential commercialization of future products. The Company
has no experience in manufacturing products for commercial purposes and does not
have any manufacturing facilities. Consequently, the Company is solely dependent
on contract manufacturers for all production of products for development and
commercial purposes. In the event that the Company is unable to obtain or retain
third-party manufacturing, it will not be able to commercialize its products as
planned. The manufacture of the Company's products for clinical trials and
commercial purposes is subject to cGMP regulations promulgated by the FDA. No
assurance can be given that the Company's third-party manufacturers will comply
with cGMP regulations or other regulatory requirements now or in the future. The
Company's current dependence upon third parties for the manufacture of its
products may adversely affect its profit margin, if any, on the sale of future
products and the Company's ability to develop and deliver products on a timely
and competitive basis.
MARKETING, SALES, AND PHARMACEUTICAL PRICING ISSUES
Neurocrine has retained certain marketing or co-promotion rights in North
America to its products under development, and plans to establish its own North
American marketing and sales organization. The Company currently has no
experience in marketing or selling pharmaceutical products and does not have a
marketing and sales staff. In order to achieve commercial success for any
product candidate approved by the FDA, Neurocrine must either develop a
marketing and sales force or enter into arrangements with third parties to
market and sell its products. There can be no assurance that Neurocrine will
successfully develop such experience or that it will be able to enter into
marketing and sales agreements with others on acceptable terms, if at all. If
the Company develops its own marketing and sales capabilities, it will compete
with other companies that currently have experienced and well funded marketing
and sales operations. To the extent that the Company enters into co-promotion or
other marketing and sales arrangements with other companies, any revenues to be
received by Neurocrine will be dependent on the efforts of others, and there can
be no assurance that such efforts will be successful.
The Company's business may be materially adversely affected by the
continuing efforts of government and third party payers to contain or reduce the
costs of health care through various means. For example, in certain foreign
markets, pricing or profitability of prescription pharmaceuticals is subject to
government control. In the United States, there have been, and the Company
expects that there will continue to be, a number of federal and state proposals
to implement similar government control in such jurisdictions. In addition, an
increasing emphasis on managed care in the United States has put, and will
continue to put, pressure on pharmaceutical pricing. Such initiatives and
proposals, if adopted, could decrease the price that the Company receives for
any products it may develop and sell in the future, and thereby have a material
adverse effect on the Company's business, financial condition and results of
operations. Further, to the extent that such proposals or initiatives have a
material adverse effect on other pharmaceutical companies that corporate
partners or prospective corporate partners for certain of the Company's
potential products, the Company's ability to commercialize its potential
products may be materially adversely affected.
The Company's ability to commercialize pharmaceutical products may depend
in part on the extent to which reimbursement for the costs of such products and
related treatments will be available from government health administration
authorities, private health insurers and other third-party payers. Significant
uncertainty exists as to the reimbursement status of newly approved health care
products, and third-party payers are increasingly challenging the prices charged
for medical products and services. There can be no assurance that any
third-party insurance coverage will be available to patients for any products
developed by the Company. Government and other third-party payors are
increasingly attempting to contain health care costs by limiting both coverage
and the level of reimbursement for new therapeutic products, and by refusing, in
some cases, to provide coverage for uses of approved products for disease
indications for which the FDA has not granted marketing approval. If adequate
coverage and reimbursement levels are not provided by government and third party
payors for the Company's products, the market acceptance of these products would
be materially adversely affected.
COMPETITION
The biotechnology and pharmaceutical industries are subject to rapid and
intense technological change. The Company faces, and will continue to face,
competition in the development and marketing of its product candidates from
academic institutions, government agencies, research institutions and
biotechnology and pharmaceutical companies. Competition may arise from other
drug development technologies, methods of preventing or reducing the incidence
of disease, including vaccines, and new small molecule or other classes of
therapeutic agents. There can be no assurance that developments by others will
not render the Company's product candidates or technologies obsolete or
noncompetitive.
Betaseron and Avonex, similar forms of beta-interferon marketed by Berlex
BioSciences and Biogen, Inc., respectively, and Copaxone a peptide polymer
marketed by Teva, have been approved for the marketing in the United States and
certain other countries for the treatment of relapsing remitting multiple
sclerosis. Tacrine, marketed by Warner-Lambert Co., and Aricept, marketed by
Pfizer Inc, have been approved for the treatment of Alzheimer's dementia. Sales
of these drugs may reduce the available market for any product developed by the
Company for these indications. The Company is developing products for the
treatment of anxiety disorders, which will compete with well-established
products in the benzodiazepine class, including Valium, marketed by Hoffman-La
Roche, Inc., and depression, which will compete with well-established products
in the anti-depressant class, including Prozac, marketed by Eli Lilly & Co.
Certain technologies under development by other pharmaceutical companies could
result in treatments for these and other diseases and disorders being pursued by
the Company. For example, a number of companies are conducting research on
molecules to block CRF to treat anxiety and depression. Other biotechnology and
pharmaceutical companies are developing compounds to treat obesity. In the event
that one or more of these products and/or programs are successful, the market
for the Company's products may be reduced or eliminated.
In addition, if Neurocrine receives regulatory approvals for its products,
manufacturing efficiency and marketing capabilities are likely to be significant
competitive factors. At the present time, Neurocrine has no commercial
manufacturing capability, sales force or marketing experience. In addition, many
of the Company's competitors and potential competitors have substantially
greater capital resources, research and development resources, manufacturing and
marketing experience and production facilities than does Neurocrine. Many of
these competitors also have significantly greater experience than does
Neurocrine in undertaking preclinical testing and clinical trials of new
pharmaceutical products and obtaining FDA and other regulatory approvals.
PATENTS AND PROPRIETARY RIGHTS
The Company files patent applications both in the United States and in
foreign countries, as it deems appropriate, for protection of its proprietary
technology and products. As of December 31, 1998, 4 patents have been issued to
the Company; and the Company has received licenses to 5 issued patents. The
Company owns or has exclusive rights to a total of approximately 122 patent
applications pursuant to license agreements with academic and research
institutions, including the Beckman Research Institute of the City of Hope, the
Salk Institute for Biological Studies, and Leland Stanford Junior University.
The Company intends to file additional United States and foreign applications
and license additional technologies from third parties in the future as
appropriate. However, there can be no assurances that licenses to third party
technologies that may be required by or advantageous to the Company will be
obtained on commercially reasonable terms or at all.
The Company's success will depend on its ability to obtain patent
protection for its products, preserve its trade secrets, prevent third parties
from infringing upon its proprietary rights, and operate without infringing upon
the proprietary rights of others, both in the United States and internationally.
Because of the substantial length of time and expense associated with
bringing new products through the development and regulatory approval processes
in order to reach the marketplace, the pharmaceutical industry places
considerable importance on obtaining patent and trade secret protection for new
technologies, products and processes. Accordingly, the Company intends to seek
patent protection for its proprietary technology and compounds. There can be no
assurance as to the success or timeliness in obtaining any such patents, that
the breadth of claims obtained, if any, will provide adequate protection of the
Company's proprietary technology or compounds, or that the Company will be able
to adequately enforce any such claims to protect its proprietary technology and
compounds. Since patent applications in the United States are confidential until
the patents issue, and publication of discoveries in the scientific or patent
literature tend to lag behind actual discoveries by several months, the Company
cannot be certain that it was the first creator of inventions covered by pending
patent applications or that it was the first to file patent applications for
such inventions. Litigation, which could result in substantial cost to the
Company, may be necessary to enforce the Company's patent and license rights.
The degree of patent protection afforded to pharmaceutical inventions is
uncertain and any patents that may issue with regard to the Company's potential
products will be subject to this uncertainty. There can be no assurance that
competitors will not develop competitive products outside the protection that
may be afforded by the claims of the Company's patents. Other potential products
that the Company may develop may not consist of novel compounds and therefore
would not be covered by composition of matter patent claims. In addition, the
Company is aware of a number of patent applications, both domestic and European,
relating to neurological compounds, and in particular CRF receptor antagonist
potential therapeutics, that have been filed by or are controlled by other
entities, including competitors and potential competitors of the Company. There
can be no assurance that the Company's potential products can be commercialized
without a license to any patents which may issue from such applications.
The Company may be required to obtain licenses to patents or proprietary
rights of others. As the biotechnology industry expands and more patents are
issued, the risk increases that the Company's potential products may give rise
to claims that such products infringe the patent rights of others. At least one
patent containing claims covering compositions of matter consisting of certain
altered peptide ligand therapeutics for use in modulating the immune response
has issued in Europe, and the Company believes that this patent has been
licensed to a competitor of the Company. There can be no assurance that a patent
containing corresponding claims will not issue in the United States. Although
the Company is engaged in an opposition proceeding with respect to the European
patent, there can be no guarantee that the Company will be successful in this
opposition. Further, there can be no assurance that the claims of the European
patent or any corresponding claims of any future United States patents or other
foreign patents which may issue will not be infringed by the manufacture, use or
sale of any potential altered peptide ligand therapeutics developed by the
Company or Novartis. Although the Company has been granted claims to a European
patent covering altered peptide ligand therapeutics, there can be no assurance
that the Company or Novartis would prevail in any legal action seeking damages
or injunctive relief for infringement of any such claims or any patent that
might issue under such applications or that any license required under any such
patent would be made available or, if available, would be available on
acceptable terms. Failure to obtain a required license could prevent the Company
and Novartis from commercializing any altered peptide ligand products that they
may develop.
The Company is aware of an issued U.S. patent directed toward an excitatory
amino acid transporter included within the subject matter of its corporate
collaboration with Wyeth-Ayerst. Although the Company believes that it will be
found to have superior rights to this transporter through an anticipated
interference proceeding, there can be no assurance that the Company will be
successful in such an interference.
In 1998 a patent application filed by a third party outside of the United
States pursuant to the Patent Cooperation Treaty was published claiming priority
from a United States patent application and came to the attention of the Company
and Janssen, the Company's corporate partner in the field of
corticotropin-releasing factor antagonists. This application claims a genus of
chemical compounds that includes the lead product candidate currently under
development by Janssen. This application appears to predate the filing by the
Company and Janssen with respect to such compound. The Company and Janssen are
engaged in discussions with the third party with regard to a licensing
arrangement. There can be no assurance that such discussions will be successful
or that such a license will be available on commercially reasonable terms. If
the third party's patent application was determined to predate the filing by the
Company and Janssen and were to issue in its current form, Janssen may be unable
to commercialize the current lead compound in the countries which the third
party patent issues and may elect to select a new lead clinical candidate. While
the Company and Janssen have filed patent applications directed to chemical
compounds not covered by the third party's application, selection of a new lead
clinical candidate may delay the Company's realization of milestone and royalty
income under its agreement with Janssen. As noted above, the patent positions of
pharmaceutical and biotechnology companies, including the Company, involve
complex legal and factual issues. It is not certain that, with respect to the
United States, the third party's date of invention will pre-date that of the
Company, that outside of the United States the third party's patent application
will be determined to predate filing by the Company and Janssen or that the
third party application will issue as a patent. In addition, if the third
party's patent does eventually issue, it is not certain that the form in which
it issues will present an impediment to Janssen's CRF antagonist development and
commercialization program or lead to delays in the Company's realization of
milestone and royalty income derived therefrom. The Company's independent CRF
antagonist program is not impacted and will continue without regard to this
application.
No assurance can be given that any licenses required under any patents or
proprietary rights of third parties would be made available on terms acceptable
to the Company, or at all. If the Company does not obtain such licenses, it
could encounter delays in product introductions while it attempts to design
around such patents, or could find that the development, manufacture or sale of
products requiring such licenses could be foreclosed. Litigation may be
necessary to defend against or assert such claims of infringement to enforce
patents issued to the Company to protect trade secrets or know-how owned by the
Company, or to determine the scope and validity of the proprietary rights of
others. In addition, interference proceedings declared by the United States
Patent and Trademark Office may be necessary to determine the priority of
inventions with respect to patent applications of the Company or its licensors.
Litigation or interference proceedings could result in substantial costs to and
diversion of effort by, and may have a material adverse impact on, the Company.
In addition, there can be no assurance that these efforts by the Company would
be successful.
The Company also relies upon unpatented trade secrets and improvements,
unpatented know-how and continuing technological innovation to develop and
maintain its competitive position, which it seeks to protect, in part, by
confidentiality agreements with its commercial partners, collaborators,
employees and consultants. The Company also has invention or patent assignment
agreements with its employees and certain, but not all, commercial partners and
consultants. There can be no assurance that a person not bound by an invention
assignment agreement will not develop relevant inventions. There can be no
assurance that binding agreements will not be breached, that the Company would
have adequate remedies for any breach, or that the Company's trade secrets will
not otherwise become known or be independently discovered by competitors.
As is commonplace in the biotechnology industry, the Company employs
individuals who were previously employed at other biotechnology or
pharmaceutical companies, including competitors or potential competitors of the
Company. To the extent such Company employees are involved in research areas at
the Company which are similar to those areas in which they were involved at
their former employer, the Company may be subject to claims that such employees
and/or the Company have inadvertently or otherwise used or disclosed the alleged
trade secrets or other proprietary information of the former employers.
Litigation may be necessary to defend against such claims, which could result in
substantial costs and be a distraction to management, and which may have a
material adverse effect on the Company, even if the Company was successful in
defending such claims.
GOVERNMENT REGULATION
Regulation by government authorities in the United States and foreign
countries is a significant factor in the development, manufacture and marketing
of the Company's proposed products and in its ongoing research and product
development activities. All of the Company's products will require regulatory
approval by government agencies prior to commercialization. In particular, human
therapeutic products are subject to rigorous preclinical testing and clinical
trials and other approval procedures of the FDA and similar regulatory
authorities in foreign countries. Various federal and state statutes and
regulations also govern or influence testing, manufacturing, safety, labeling,
storage and record-keeping related to such products and their marketing. The
process of obtaining these approvals and the subsequent substantial compliance
with appropriate federal and state statutes and regulations require the
expenditure of substantial time and financial resources. Any failure by the
Company or its collaborators or licensees to obtain, or any delay in obtaining
or maintaining, regulatory approval could adversely affect the marketing of any
products developed by the Company, its ability to receive product or royalty
revenues and its liquidity and capital resources.
Preclinical testing is generally conducted in laboratory animals to
evaluate the potential safety and the efficacy of a product. The results of
these studies are submitted to the FDA as a part of an IND, which must be
approved before clinical trials in humans can begin. Typically, clinical
evaluation involves a time consuming and costly three-phase process. In Phase I,
clinical trials are conducted with a small number of subjects to determine the
early safety profile, the pattern of drug distribution and metabolism. In Phase
II, clinical trials are conducted with groups of patients afflicted with a
specific disease in order to determine preliminary efficacy, optimal dosages and
expanded evidence of safety. In Phase III, large-scale, multi-center,
comparative trials are conducted with patients afflicted with a target disease
in order to provide enough data to demonstrate with substantial evidence the
efficacy and safety required by the FDA. The FDA closely monitors the progress
of each of the three phases of clinical trials and may, at its discretion,
re-evaluate, alter, suspend or terminate the testing based upon the data which
have been accumulated to that point and its assessment of the risk/benefit ratio
to the patient.
The results of preclinical testing and clinical trials are submitted to the
FDA in the form of an NDA or BLA for approval to commence commercial sales. In
responding to an NDA or BLA, the FDA may grant marketing approval, request
additional information or deny the application if the FDA determines that the
application does not satisfy its regulatory approval criteria. There can be no
assurance that approvals will be granted on a timely basis (or at all). If
approved, there can be no assurance that such approval will include acceptable
labeling to adequately commercialize the product. Similar regulatory procedures
must also be complied with in countries outside the United States.
To date, the Company or its collaborators have submitted five IND or
equivalent applications in the United States, Canada and/or Europe with regard
to its product candidates and has commenced clinical trials. Even if Canadian or
European regulatory authorities approve the product, the Company will be
required to undertake additional clinical testing to obtain FDA regulatory
approval in the United States. No assurance can be given that the Company will
be able to obtain FDA or other governmental regulatory approval for any
products.
Neurocrine currently has five programs in clinical development. The
Company's CRF receptor antagonist project is currently in Phase II clinical
development with its partner, Janssen Pharmaceutica, for anxiety/depression.
Neurocrine and its partner, Novartis Pharmaceuticals, are conducting their
second Phase II clinical trial with Neurocrine's APL compound in patients with
multiple sclerosis. Neurocrine is conducting a Phase I/II trial with an IL-4
Fusion Toxin for glioblastoma (malignant brain tumors). The Company has also
completed a Phase Ib clinical trial for insomnia and recently announced that it
commenced a Phase I safety and dose escalating clinical study for and APL
compound for Type I diabetics.
The results from preclinical testing and early clinical trials may not be
predictive of results obtained in later clinical trials. As a result, there can
be no assurance that clinical trials conducted by the Company or its corporate
partners will demonstrate sufficient safety and efficacy to obtain the requisite
regulatory approvals or will result in marketable products or marketable
indications. In addition, late stage clinical trials are often conducted with
patients having the most advanced stages of disease. During the course of
treatment, these patients can die or suffer other adverse medical effects for
reasons that may not be related to the pharmaceutical agent being tested but
which can nevertheless adversely affect clinical trial results. A number of
companies in the biotechnology and pharmaceutical industries have suffered
significant setbacks in advanced clinical trials, even after promising results
in earlier trials. If the Company's drug candidates are not shown to be safe and
effective in clinical trials, the resulting delays in developing other compounds
and conducting related preclinical testing and clinical trials, as well as the
potential need for additional financing, would have a material adverse effect on
the Company's business, financial condition and results of operations.
The rate of completion of clinical trials conducted by the Company or its
corporate partners may be delayed by many factors, including slower than
expected patient recruitment or unforeseen safety issues. Any delays in, or
termination of, the Company's clinical trials would have a material adverse
effect on the Company's business, financial condition and results of operations.
There can be no assurance that Neurocrine or its corporate partners will be
permitted by regulatory authorities to undertake clinical trials for its
products or, if such trials are conducted, that any of the Company's product
candidates will prove to be safe and efficacious or will receive regulatory
approvals.
The Company is required to conduct its research activities in compliance
with good laboratory practice regulations enforced by FDA. The Company is also
subject to various Federal, state and local laws, regulations and
recommendations relating to safe working conditions, laboratory manufacturing
practices, and the use and disposal of hazardous or potentially hazardous
substances, including radioactive compounds and infectious disease agents, used
in connection with the Company's research. The extent of government regulation
that might result from future legislation or administrative action cannot be
predicted accurately.
SCIENTIFIC ADVISORY BOARD
Neurocrine has assembled a Scientific Advisory Board that currently
consists of 16 individuals. Members of the Scientific Advisory Board are leaders
in the fields of neurobiology, immunology, endocrinology, psychiatry and
medicinal chemistry. Scientific Advisory Board members meet at least yearly to
advise the Company in the selection, implementation and prioritization of its
research programs. Certain members meet more frequently to advise the Company
with regard to its specific programs.
The Scientific Advisory Board presently consists of the following
individuals:
Susan G. Amara, Ph.D. a Senior Scientist and Professor, Vollum Institute
for Advanced Biomedical Research is an expert on the cellular and molecular
biology of neurotransmitter transporters, excitatory amino acid transporter
structure and regulation and signaling roles of neurotransmitter transporters.
Floyd E. Bloom, M.D., is Chairman of the Department of Neuropharmacology at
The Scripps Research Institute. Dr. Bloom is an internationally recognized
expert in the fields of neuropharmacology and neurobiology. He is the current
editor of the journal, Science.
Michael Brownstein, M.D., Ph.D., is Chief of the Laboratory of Cell Biology
at the National Institute of Mental Health. He is a recognized expert in
molecular pharmacology as it applies to the field of neuroendocrinology, where
he has defined many of the pharmaceutically important neurotransmitter receptors
and transporter systems.
Iain Campbell, Ph.D., is an Associate Member of the Department of
Neuropharmacology at The Scripps Research Institute. Dr. Campbell is an expert
in cytosine activation in autoimmune diseases and neuronal degeneration.
Roger D. Cone, Ph.D., a senior scientist at the Vollum Institute for
Advanced Biomedical Research, is an international expert on the neuroendocrine
system, with particular expertise on the melanocortin system and the
hypothalamic control of energy homeostasis.
Dr. Cone is an editor of the journal, Endocrinology.
George P. Chrousos, M.D., Sc.D., is Chief of the Pediatric Endocrinology
Section at the National Institute of Child Health and Human Development. He has
investigated the role of stress hormones in pathological conditions such as
Cushing's disease, anxiety-related disorders and rheumatoid arthritis.
Caleb E. Finch, Ph.D., is the Arco and William F. Kieschnick Professor of
Neurobiology of Aging at the University of Southern California. He is an
internationally recognized expert in the field of molecular gerontology and the
genomic control of mammalian development and aging. His recent work has focused
on the role of cytokines in neuronal protection and aging.
Stephen M. Hedrick, Ph.D., is Professor and Chairman of Cell Biology at the
University of California, San Diego. Dr. Hedrick is an expert in T cell
immunology and co-discovered the first T cell receptor genes and identified the
regions responsible for antigen binding. He is an editor for the Journal of
Immunology.
Florian Holsboer, M.D., Ph.D., is Director at the Max Planck Institute fur
Psychiatrie. Dr. Holsboer is an international expert on the role of
glucocorticoids and neuropeptides, particularly CRF, in neuropsychiatric
disorders. He coordinates the efforts of several hundred scientists and
clinicians at the Max Planck Institute, a major European neuropsychiatric
institute.
George F. Koob, Ph.D., is a Member of the Department of Neuropharmacology
at The Scripps Research Institute and an Adjunct Professor in the Departments of
Psychology and Psychiatry at the University of California, San Diego. Dr. Koob
is an internationally recognized behavioral pharmacology expert on the role of
peptides in the central nervous system, the neurochemical basis of addiction and
in the development of preclinical behavioral procedures for the screening of
anxiolytic and antidepressant drugs and memory enhancers.
Phillip J. Lowry, Ph.D., is Professor and Head of the Department of
Biochemistry and Physiology at the University of Reading in Great Britain. Dr.
Lowry is an internationally recognized biochemical endocrinologist whose work
has focused on the purification and characterization of some of the key hormonal
mediators of the endocrine response to stress. Dr. Lowry is a member of the
European Neuroscience Steering Committee, the European Neuroendocrine
Association and the Committee of British Endocrinology
Bruce S. McEwen, Ph.D., is Professor and Head of the Harold and Margaret
Milliken Hatch Laboratory of Neuroendocrinology at The Rockefeller University.
Dr. McEwen has identified and studied the function of intracellular receptors
for neuroactive steroid hormones in the brain and immune system, in relation to
stress and sex differences. Dr. McEwen is also President of the Society for
Neuroscience.
Charles B. Nemeroff, M.D., Ph.D., is Chairman and Professor of the
Department of Psychiatry and Behavioral Sciences at Emory University School of
Medicine. Dr. Nemeroff is an internationally recognized expert on the effects of
neuropeptides on behavior and their relevance in clinically important conditions
such as depression, anxiety and schizophrenia, and has published over 400
articles on this subject.
Thomas Roth, Ph.D., is the Head of the Division of Sleep Disorder Research
at the Henry Ford Hospital Research Institute. Dr. Roth is an internationally
recognized expert in the field of sleep research. His areas of specialization
are sleep homeostasis and neuropharmacology of sleep.
Lawrence J. Steinman, M.D., is Chief Scientific Advisor, Neuroimmunology of
the Company and a member of Neurocrine's Founding Board of Scientific and
Medical Advisors and its Executive Committee.
Wylie W. Vale, Ph.D., is Chief Scientific Advisor, Neuroendocrinology of
the Company and a member of Neurocrine's Founding Board of Scientific and
Medical Advisors and its Executive Committee. See "Item 10 -- Executive Officers
and Directors of the Registrant."
Stanley J. Watson, Jr., M.D., Ph.D., is Professor and Associate Chair for
Research in the Department of Psychiatry and Co-Director of the Mental Health
Research Institute at the University of Michigan. Dr. Watson is a recognized
expert in neuropeptides and their receptors and their role in psychiatric
diseases and behavior. Dr. Watson is also a member of the Institute of Medicine
of the National Academy of Sciences.
Each of the members of the Scientific Advisory Board have signed consulting
agreements that contain confidentiality provisions and restrict the members of
the Scientific Advisory Board from competing with the Company for the term of
the agreement. Each member of the Scientific Advisory Board receives either a
per diem consulting fee or a retainer fee. Each member also has received stock
or stock options in the Company, which vest over time. All members of the
Scientific Advisory Board are full-time employees of a university or research
institute that has regulations and policies which limit the ability of such
personnel to act as part-time consultants or in other capacities for any
commercial enterprise, including the Company. A change in these regulations or
policies could adversely affect the relationship of the Scientific Advisory
Board member with the Company.
INSURANCE
The Company maintains product liability insurance for clinical trials. The
Company intends to expand its insurance coverage to include the sale of
commercial products if marketing approval is obtained for products in
development. However, insurance coverage is becoming increasingly expensive, and
no assurance can be given that the Company will be able to maintain insurance
coverage at a reasonable cost or in sufficient amounts to protect the Company
against losses due to liability. There can also be no assurance that the Company
will be able to obtain commercially reasonable product liability insurance for
any products approved for marketing. A successful product liability claim or
series of claims brought against the Company could have a material adverse
effect on its business, financial condition and results of operations.
EMPLOYEES
As of December 31, 1998, the Company had 149 employees, consisting of 135
full-time and 14 part-time employees. Of the full-time employees, 46 hold Ph.D.,
M.D., or equivalent degrees. None of the Company's employees are represented by
a collective bargaining arrangement, and the Company believes its relationship
with its employees is good. The Company is highly dependent on the principal
members of its management and scientific staff. The loss of services of any of
these personnel could impede the achievement of the Company's development
objectives. Furthermore, recruiting and retaining qualified scientific personnel
to perform research and development work in the future will also be critical to
the Company's success. There can be no assurance that the Company will be able
to attract and retain personnel on acceptable terms given the competition among
biotechnology, pharmaceutical and health care companies, universities and
non-profit research institutions for experienced scientists. In addition, the
Company relies on members of its Scientific Advisory Board and a significant
number of consultants to assist the Company in formulating its research and
development strategy.
ITEM 2. PROPERTIES
The Company leases approximately 93,000 square feet of space at its
headquarters facility, of which approximately 80% is laboratory facilities
dedicated to research and development. The facility was constructed in 1998 and
is under lease through August 2013. The Company has sublet approximately 13,000
square feet of this facility through August 2000. In addition, the Company
leases approximately 19,000 square feet of laboratory and office space, which
has been sublet to a third party. The lease and sublease on this property expire
in June 2000. The Company's facilities are located in San Diego, California.
The Company believes that its property and equipment are generally well
maintained, in good operating condition and adequate for its current needs.
ITEM 3. LEGAL PROCEEDINGS
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock has been traded on the Nasdaq National Market
System under the symbol NBIX since the Company's initial public offering on May
23, 1996. Prior to that time there was no established public trading market for
the Company's Common Stock. The following table sets forth for the periods
indicated the high and low sale price for the Common Stock as reported by the
Nasdaq National Market. These prices do not include retail markups, markdowns or
commissions.
1998 1997
------------------------- -------------------------
High Low High Low
------------------------- -------------------------
1st Quarter ........$ 10.13 $ 7.56 $ 13.25 $ 8.63
2nd Quarter ........ 9.06 7.38 10.50 7.00
3rd Quarter ........ 8.13 4.00 10.75 7.88
4th Quarter ........ 8.00 4.13 11.88 7.50
As of March 15, 1999, there were approximately 211 stockholders of record
of the Company's Common Stock. The Company has not paid any cash dividends on
its Common Stock since its inception and does not anticipate paying cash
dividends in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data have been derived from the Financial
Statements of the Company, which have been audited by Ernst & Young LLP, whose
reports appear elsewhere herein. The information presented below should be read
in conjunction with the Company's Financial Statements and Notes thereto
included elsewhere in this Form 10-K. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
The following tables set forth certain financial data with respect to the
Company (in thousands, except per share data). The selected financial data
should be read in conjunction with the consolidated financial statements and
notes thereto.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------
1998(1) 1997 1996 1995 1994
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues
Sponsored research and development ........... $ 8,751 $ 14,985 $ 9,092 $ 3,000 $ --
Sponsored research and development from
related party ............................ 3,610 -- -- -- --
Milestones and license fees .................. 2,500 10,250 9,000 2,750 --
Grant income and other revenues .............. 1,176 909 1,124 356 162
---------------------------------------------------------
Total revenues ............................... 16,037 26,144 19,216 6,106 162
Operating expenses
Research and development ..................... 21,803 18,758 12,569 7,740 6,231
General and administrative ................... 6,594 5,664 3,697 2,728 2,223
Write-off of acquired in-process research
and development and licenses ............. 4,910 -- -- -- --
--------------------------------------------------------
Total operating expenses ..................... 33,307 24,422 16,266 10,468 8,454
Income (loss) from operations ...................... (17,270) 1,722 2,950 (4,362) (8,292)
Interest income, net ......................... 4,000 3,931 2,598 839 627
Other income (expense) ....................... 504 818 574 177 (41)
Equity in NPI net losses and other adjustments (7,188) (1,130) -- -- --
--------------------------------------------------------
Net income (loss) before income taxes .............. (19,954) 5,341 6,122 (3,346) (7,706)
Income taxes ................................. 1 214 248 -- --
--------------------------------------------------------
Net income (loss) .................................. $(19,955) $ 5,127 $ 5,874 $ (3,346) $ (7,706)
========================================================
Earnings per shares
Basic ........................................ $ (1.10) $ 0.30 $ 0.39 $ (0.29) $ (0.70)
Diluted ...................................... $ (1.10) $ 0.28 $ 0.36 $ (0.29) $ (0.70)
Shares used in calculation of earnings per share
Basic ........................................ 18,141 16,930 14,971 11,684 10,933
Diluted ...................................... 18,141 18,184 16,127 11,684 10,933
BALANCE SHEET DATA
Cash, cash equivalents and short-term investments(2) 62,670 75,092 69,920 18,696 18,228
Total assets ....................................... 80,529 91,903 77,957 24,012 22,344
Long-term debt and capital lease obligations ....... 2,247 722 847 1,631 1,733
Accumulated deficit ................................ (24,850) (4,895) (10,022) (15,895) (12,549)
Total stockholders' equity ......................... 71,958 83,152 72,767 19,225 18,743
- ----------------------------------------------------------------------------------------------------------------
<FN>
(1) Includes results of operations and financial position of Northwest
NeuroLogic, Inc. from May 28, 1998, the date of acquisition (See Note 2 of
the Notes to the Consolidated Financial Statements).
(2) Excludes funds held by NPI, which is available to fund certain of the
Company's research and development activities.
</FN>
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations of Neurocrine Biosciences, Inc. ("Neurocrine" or the
"Company"), as well as the preceding sections of this Annual Report on Form
10-K, contain forward-looking statements which involve risks and uncertainties,
pertaining generally to the expected continuation of the Company's collaborative
agreements, the receipt of research payments thereunder, the future achievement
of various milestones in product development and the receipt of payments related
thereto, the potential receipt of royalty and profit-sharing payments, the
anticipated dates of commencement of selection of development candidates and the
commencement of clinical trials, the successful continuation of the Company's
research and development programs and the potential development of future
products, the period of time the Company's existing capital resources will meet
its funding requirements, and the Company's financial results of operations.
Actual results could differ materially from those anticipated in such
forward-looking statements as a result of various factors, including those set
forth below, and those outlined in the Business section of Item 1.
Overview
Since the founding of the Company in January 1992, Neurocrine has been
engaged in the discovery and development of novel pharmaceutical products for
diseases and disorders of the central nervous and immune systems. To date,
Neurocrine has not generated any revenues from the sale of products, and does
not expect to generate any product revenues for the foreseeable future. The
Company's revenues are expected to come from its strategic alliances. Neurocrine
has incurred a cumulative deficit of approximately $25 million as of December
31, 1998 and expects to incur additional operating losses in the future, which
are potentially greater than losses in prior years.
Results of Operations
The Company's revenue from collaborative research and development
agreements was $16.0 million for the year ended December 31, 1998 compared with
$26.1 million in 1997, and $19.2 million in 1996. The decline in 1998 revenues
compared to 1997 revenues resulted primarily from non-recurring 1997 revenues
related to the completion of the sponsored research portion of the Janssen
collaboration, a one-time research support payment received under the Eli Lilly
collaboration, sponsored development payments received under the Novartis
collaboration and the timing of milestone achievements received under all three
collaborations. Revenues in 1998 included $3.6 million of sponsored development
received from the Company's Canadian affiliate, NPI. The increase in 1997
revenues compared to 1996 revenues resulted primarily to increased sponsored
research, license fees and milestone revenues recognized under the Janssen,
Novartis and Eli Lilly collaborations.
Research and development expenses increased to $21.8 million during 1998
compared with $18.8 million in 1997 and $12.6 million in 1996. These increases
reflect higher costs associated with the addition of scientific personnel and
costs to advance compounds into preclinical and clinical trials. The Company
expects to incur significant increases in future periods as compounds are
advanced through the clinical development process.
General and administrative expenses increased to $6.6 million during 1998
compared with $5.7 million in 1997 and $3.7 million in 1996. These increases
resulted primarily from additional administrative personnel, business
development and professional service expenses to support the expanded clinical
development efforts. The Company anticipates slight increases in general and
administrative expenses over the next few years as the Company's clinical
efforts continue to expand.
During 1998, the Company wrote-off acquired in-process research and
development costs of $4.9 million. In May 1998, the Company acquired the assets,
liabilities and the in-process research and development programs of Northwest
NeuroLogic, Inc. ("NNL") in exchange for Company's Common Stock and stock
options valued at $4.2 million. The acquired in-process research and development
consisted of Melanocortin ("MCR"), a brain receptor technology relating to
obesity and Excitatory Amino Acid Transporters ("EAATs"), a technology relating
to neurodegeneration and stroke. In June 1998, the Company purchased licenses
for the use of technology in programs relating to insomnia ("NBI-34060") from
DOV Pharmaceuticals and brain cancer ("IL-4 Fusion Toxin") from the National
Institute of Health for $710,000. The acquired in-process research and
development projects and the licensed technologies are in the early stages of
development, have not reached technological feasibility and have no known
alternative uses.
The nature and efforts required to develop the acquired in-process research
and development into commercially viable products include completion of the
development stages of a compound, pre-clinical development, clinical trial
testing, FDA approval and commercialization. Due to the nature of the
pharmaceutical development process, the Company anticipates incurring
substantial costs to develop the compounds into products. However, there is no
certainty that any of these development efforts will result in commercially
viable products. During the upcoming fiscal year, the Company anticipates
research and development expenditures of $2.8 million for EAATs, $1.7 million
for MCR, $6.1 million for IL-4 Fusion Toxin and $5.0 million for NBI-34060.
The value of the acquired in-process research and development was
determined by estimating the projected net cash flows related to such products,
including costs to complete the development, and future revenues to be earned
upon commercialization of the products. These cash flows were discounted back to
their net present value using a discount factor of 35%. The resulting projected
net cash flows from such projects were based on management's estimates of
revenues and operating profits related to such projects. Management also
reviewed the probability of product success, which were estimated using certain
probability factors for each stage of development.
Interest income increased to $4.2 million during 1998 compared with $4.1
million for 1997 and $2.9 million in 1996. The increase over 1997 primarily
resulted from higher effective interest yields on the Company's investment
portfolio during 1998. The increase over 1996 primarily resulted from higher
effective interest yields in addition to higher average cash balances throughout
the year. Management anticipates lower interest income in future periods as
clinical efforts increase operating requirements and cash available for
investment declines.
Equity in NPI losses recorded in 1998 were $3.4 million compared with $1.1
million in 1997. In addition to the equity in NPI losses during 1998, the
Company recorded a write-down in the value of its investment in NPI, totaling
$3.8 million.
Net loss for 1998 was $20.0 million or $1.10 per share compared to net
income of $5.1 million or $0.30 per share for 1997 and $5.9 million or $0.39 per
share in 1996. Management expects to incur substantial operating losses in
future periods as its clinical development efforts continue to grow.
To date, the Company's revenues have come principally from funded research
and achievements of milestones under corporate collaborations. The nature and
amount of these revenues from period to period may lead to substantial
fluctuations in the results of year-to-date revenues and earnings. Accordingly,
results and earnings of one period are not predictive of future periods.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, the Company had cash, cash equivalents and
short-term investments of $62.7 million. The Company invests its excess cash
primarily in investment grade debt instruments, marketable debt securities of
U.S. government agencies and high-grade commercial paper. Management has
established guidelines relative to diversification and maturities that maintain
safety and liquidity. The primary market risk associated with such investments
is vulnerability to changes in short-term and long-term U.S. prime interest
rates. For further information regarding the Company's investments, see Notes 1
and 3 of the Notes to the Consolidated Financial Statements.
Net cash used by operating activities during 1998 was $10.7 million
compared with net cash provided of $11.0 million in 1997 and $6.7 million in
1996. The increase in cash used in operations during 1998 compared with 1997,
resulted primarily from increased sponsored research and milestone revenues
received under the Company's collaborations during 1997 and an increase in 1998
operating expenses as the Company expands its clinical development activities.
The increase in cash provided during 1997 compared with 1996, resulted primarily
from increased sponsored research and milestone revenues received under the
Company's collaborations during 1997.
Net cash provided by investing activities during 1998 was $4.7 million
compared with net cash used of $7.2 million and $48.6 million in 1997 and 1996,
respectively. The cash provided by investing activities during 1998 resulted
primarily from sales of short-term investments. The cash used in investing
activities during 1997 and 1996 resulted from the purchase of short-term
investments with proceeds from the Company's prior financings and the sale of
Common Stock to corporate collaborators.
Net cash provided by financing activities during 1998 was $1.9 million
compared with $659,000 and $46.8 million during 1997 and 1996, respectively.
Cash provided during 1998 resulted from proceeds received under capital lease
financing of equipment purchases. Cash provided during 1997 resulted from the
issuance of the Company's Common Stock upon the exercises of stock options and
warrants and proceeds received from a note payable used to finance the purchase
of land. Cash provided during 1996 resulted from proceeds received from the
Company's initial public offering and sale of the Company's Common Stock to
corporate collaborators in May 1996.
Neurocrine has primarily financed its operations through proceeds received
from the sale of its Common Stock in various private and public offerings, as
well as revenues received under corporate collaborations.
In February 1995, the Company entered into a three year collaborative
research and development agreement with Janssen for the development of CRF
receptor antagonists for the treatment of anxiety, depression and substance
abuse. Janssen paid the Company $3.7 million and $3.0 million for sponsored
research during 1997 and 1996, respectively. Milestone payments totaled
$250,000, $1.5 million and $1.0 million during 1998, 1997 and 1996,
respectively. The collaborative research portion of the agreement was completed
as scheduled in 1997 with the selection of a clinical candidate and the
commencement of clinical trials in Europe. The Company may continue to receive
milestone payments and royalties upon the successful continuation of the
development portion of the agreement.
In January 1996, the Company entered into an agreement with Novartis to
develop altered peptide ligands for the treatment of multiple sclerosis.
Novartis paid the Company for license fees and research funding totaling $4.5
million, $7.2 million and $8.5 during 1998, 1997 and 1996, respectively.
Milestone payments were $2.3 million, $3.8 million and $3.0 million during 1998,
1997 and 1996, respectively.
In March 1996, the Company participated in the formation of a research and
development company, Neuroscience Pharma, Inc. ("NPI"), with a group of Canadian
investors. At the same time, the Company entered into a sponsored research
agreement with NPI. The terms of the agreement called for NPI to fund additional
research efforts on technologies licensed to NPI by the Company. During 1998,
the Company recognized $3.6 million in revenues associated with costs of
research on the Neurogenomics and DHEA programs.
In May 1997, the Company purchased two adjacent parcels of land in San
Diego for approximately $5.0 million in cash. One parcel was sold to Science
Park Center, LLC. ("LLC"), of which the Company owns a minority interest, in
exchange for a note receivable of $3.5 million plus interest. However, for
accounting purposes, this transaction does not qualify as a sale under SFAS No.
98 and therefore, the entire amount of the note receivable is included in land.
The amount included in land at December 31, 1998 and 1997 was $3.8 million and
$3.5 million, respectively. During 1998, the LLC constructed an expanded
laboratory and office complex on the property and leased the facility to the
Company under a 15 year operating lease. The Company has the option to purchase
the facility at any time during the lease at a predetermined price. The Company
will hold the remaining parcel until such time as the Company's growth requires
additional expansion.
The Company believes that its existing capital resources, together with
interest income and future payments due under the strategic alliances, will be
sufficient to satisfy its current and projected funding requirements at least
through the year 2000. However, no assurance can be given that such capital
resources and payments will be sufficient to conduct its research and
development programs as planned. The amount and timing of expenditures will vary
depending upon a number of factors, including progress of the Company's research
and development programs.
INTEREST RATE RISK
The Company is exposed to changes in interest rates primarily from its
investments in certain available-for-sale securities and secondarily from its
long-term debt. Under its current policies, the Company does not use interest
rate derivative instruments to manage exposure to interest rate changes.
The Company's investments are primarily in fixed income, investment-grade
securities and are not restricted. The investment policy emphasizes return on
principal and liquidity and is focused on fixed returns, which limit volatility
and risk of principal. At December 31, 1998, the Company had available-for-sale
securities of $51.0 million. Interest risk exposure on long-term debt relates to
the Company's note payable which bears of floating interest rate of prime plus
one quarter percent (8.00% at December 31, 1998). At December 31, 1998, the note
balance was approximately $610,000, payable in equal monthly installments
through January 2003. The Company believes that a hypothetical 100 basis point
adverse move in interest rates along the entire interest rate yield curve would
not materially effect the fair value of interest sensitive financial instruments
nor the costs associated with the long-term debt.
IMPACT OF YEAR 2000
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs or hardware that have date-sensitive software or embedded
chips may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
Based on recent assessments, the Company determined that it will not be
required to modify or replace significant portions of hardware and software so
that those systems will properly utilize dates beyond December 31, 1999. The
Company presently believes that with modifications and replacement of existing
hardware and software, the Year 2000 Issue can be mitigated. However, if such
modifications and replacements are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the Company.
The Company's plan to resolve the Year 2000 Issue involves the following
four phases: assessment, remediation, testing, and implementation. To date the
Company has fully completed its assessment of all systems that could be
significantly affected by the Year 2000. The completed assessment indicated that
most of the Company's significant information technology systems are Year 2000
compliant. That assessment did, however, indicated that software and hardware
(embedded chips) used in some scientific equipment were at risk. Affected
systems include several robotics systems used for high through-put screening.
The Company is currently assessing cost comparisons on whether to remediate or
replace this equipment and expects to have the equipment corrected and re-tested
by May 1, 1999. The Company has gathered information about the Year 2000
compliance status of its significant suppliers and contractors and continues to
monitor their compliance.
For its information technology exposures, to date the Company is 99%
complete on the remediation phase and expects to complete software reprogramming
and replacement no later than April 15, 1999. To date, the Company has completed
100% of its testing and has implemented 90% of its remediated systems for its
scientific equipment. The remediation phase for all significant systems is
expected to be complete by May 1, 1999, with all remediated systems fully tested
by June 1, 1999.
The Company has queried its important suppliers and contractors that do not
share information systems with the Company (external agents). To date, the
Company is not aware of any external agent Year 2000 issue that would materially
impact the company's results of operations, liquidity, or capital resources.
However, the Company has no means of ensuring that external agents will be Year
2000 ready. The inability of external agents to complete their Year 2000
resolution process in a timely fashion could materially impact the Company. The
effect of non-compliance by external agents is not determinable.
The Company will utilize both internal and external resources to reprogram,
or replace, test and implement the software and scientific equipment for Year
2000 modifications. The total cost of the Year 2000 project is estimated at
approximately $175,000 and is being funded through operating cash flows and
capital equipment financing. To date, the Company has incurred approximately
$100,000 related to all phases of the Year 2000 project. Of the total remaining
project costs, approximately $40,000 is attributable to the purchase of new
software, $25,000 for new scientific equipment, which will be capitalized, and
$10,000 for the repair of hardware and software.
The Company plans to complete the Year 2000 modifications are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events including continued availability of certain resources, and
other factors. Estimates on the status of completion and the expected completion
dates are based on costs incurred to date compared to total expected costs.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those plans. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties.
The Company has not completed a formal contingency plan for non-compliance,
but it is developing a plan based on the information obtained from third parties
and an on-going evaluation of the Company's own systems. The Company anticipates
having a contingency plan in place by mid-1999, which will include development
of backup procedures, identification of alternate suppliers and possible
increases in supplies inventory levels. The Company has not identified its most
reasonably likely worst case scenario with respect to possible losses in
connection with Year 2000 related problems. The Company plans on completing this
analysis in mid-1999.
The information above contains forward-looking statements including,
without limitation, statements relating to the Company's plans, strategies,
objectives, expectations, intentions, and adequate resources that are made
pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. Readers are cautioned that forward-looking statements about
the Year 2000 should be read in conjunction with the Company's disclosures under
the heading: "Caution on forward-looking statements".
CAUTION ON FORWARD-LOOKING STATEMENTS
The Company's business is subject to significant risks, including but not
limited to, the risks inherent in its research and development activities,
including the successful continuation of the Company's strategic collaborations,
the successful completion of clinical trials, the lengthy, expensive and
uncertain process of seeking regulatory approvals, uncertainties associated both
with the potential infringement of patents and other intellectual property
rights of third parties, and with obtaining and enforcing its own patents and
patent rights, uncertainties regarding government reforms and of product pricing
and reimbursement levels, technological change and competition, manufacturing
uncertainties and dependence on third parties. Even if the Company's product
candidates appear promising at an early stage of development, they may not reach
the market for numerous reasons. Such reasons include the possibilities that the
product will be ineffective or unsafe during clinical trials, will fail to
receive necessary regulatory approvals, will be difficult to manufacture on a
large scale, will be uneconomical to market or will be precluded from
commercialization by proprietary rights of third parties.
Neurocrine will require additional funding for the continuation of its
research and product development programs, for progress with preclinical testing
and clinical trials, for operating expenses, for the pursuit of regulatory
approvals for its product candidates, for the costs involved in filing and
prosecuting patent applications and enforcing or defending patent claims, if
any, the cost of product in-licensing and any possible acquisitions, and may
require additional funding for establishing manufacturing and marketing
capabilities in the future. The Company may seek to access the public or private
equity markets whenever conditions are favorable. The Company may also seek
additional funding through strategic alliances and other financing mechanisms,
potentially including off-balance sheet financing. There can be no assurance
that adequate funding will be available on terms acceptable to the Company, if
at all. If adequate funds are not available, the Company may be required to
curtail significantly one or more of its research or development programs or
obtain funds through arrangements with collaborative partners or others. This
may require the Company to relinquish rights to certain of its technologies or
product candidates.
Continued profitability is not expected as the Company's operating expenses
are anticipated to rise significantly in future periods as products are advanced
through the various development and clinical stages. Neurocrine expects to incur
additional operating expenses over the next several years as its research,
development, preclinical testing and clinical trial activities increase. To the
extent that the Company is unable to obtain third party funding for such
expenses, the Company expects that increased expenses will result in increased
losses from operations. There can be no assurance that the Company's products
under development will be successfully developed or that its products, if
successfully developed, will generate revenues sufficient to enable the Company
to earn a profit.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosures about Market Risk is contained in
Item 7. Management Discussion and Analysis--Interest Rate Risk, on page 26 of
this report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
See the list of the Company's Financial Statements filed with this Form
10-K under Item 14 below.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT
Information required by this item will be contained in the Company's Notice
of 1999 Annual Meeting of Stockholders and Proxy Statement, pursuant to
Regulation 14A, to be filed with the Securities and Exchange Commission within
120 days after December 31, 1998. Such information is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item will be contained in the Company's Notice
of 1999 Annual Meeting of Stockholders and Proxy Statement, pursuant to
Regulation 14A, to be filed with the Securities and Exchange Commission within
120 days after December 31, 1998. Such information is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item will be contained in the Company's Notice
of 1999 Annual Meeting of Stockholders and Proxy Statement, pursuant to
Regulation 14A, to be filed with the Securities and Exchange Commission within
120 days after December 31, 1998. Such information is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item will be contained in the Company's Notice
of 1999 Annual Meeting of Stockholders and Proxy Statement, pursuant to
Regulation 14A, to be filed with the Securities and Exchange Commission within
120 days after December 31, 1998. Such information is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report
1. List of Financial Statements. The following financial statements
of Neurocrine Biosciences, Inc. and Report of Ernst & Young LLP,
Independent Auditors, are included in this report:
Report of Ernst & Young LLP, Independent Auditors Consolidated
Balance Sheet as of December 31, 1998 and 1997
Consolidated Statement of Operations for the years ended
December 31, 1998, 1997 and 1996 Consolidated Statement of
Stockholders' Equity for the years ended December 31, 1998, 1997
and 1996 Consolidated Statement of Cash Flows for the years
ended December 31, 1998, 1997 and 1996 Notes to the Consolidated
Financial Statements
2. List of all Financial Statement schedules. All schedules are
omitted because they are not applicable or the required
information is shown in the Consolidated Financial Statements or
notes thereto.
3. List of Exhibits required by Item 601 of Regulation S-K. See part
(c) below.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter
ended December 31, 1998.
(c) Exhibits. The following exhibits are filed as part of, or incorporated
by reference into, this report:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Reorganization dated May 1, 1998, between Northwest NeuroLogic, Inc. NBI
Acquisition Corporation and the Registrant (7)
2.2* Registration Rights Agreement dated May 28, 1998, between certain investors and the Registrant (7)
2.3 Form of Warrant pursuant to the Agreement and Plan of Reorganization dated May 1, 1998. (7)
3.1 Restated Certificate of Incorporation (1)
3.2 Bylaws (1)
3.3 Certificate of Amendment of Bylaws (1)
4.1 Form of Lock-Up Agreement (1)
4.2 Form of Common Stock Certificate (1)
4.3 Form of warrant issued in existing warrant holders (1)
4.4 Form of Series A warrant issued in connection with the execution by the Company of the Unit Purchase
Agreement (see below) (1)
4.5 New Registration Rights Agreement dated March 29, 1996 among the Company and the investors signatory
thereto (1)
4.6 Letter of Intent between Northwest NeuroLogic, Inc. and the Company dated February 27, 1998 (2)
10.1 Purchase and Sale Agreement and Escrow Instructions between MS Vickers II, LLC and the Company dated
February 13, 1997 (3)
10.2 1992 Incentive Stock Plan, as amended
10.3 1996 Employee Stock Purchase Plan (1)
10.4 1996 Director Stock Option Plan and form of stock option agreement (1)
10.5 Form of Director and Officer Indemnification Agreement (1)
10.6 Employment Agreement dated March 1, 1997, between the Registrant and Gary A. Lyons, as amended (4)
10.7 Employment Agreement dated March 1, 1997, between the Registrant and Errol B. De Souza, as amended (4)
10.8 Employment Agreement dated March 1, 1997, between the Registrant and Paul W. Hawran (4)
10.9 Employment Agreement dated March 1, 1997, between the Registrant and Stephen Marcus, MD (4)
10.10 Consulting Agreement dated September 25, 1992, between the Registrant and Wylie A. Vale, Ph.D. (1)
10.11 Consulting Agreement effective January 1, 1992, between the Registrant and Lawrence J. Steinman, MD (1)
10.12 Lease Agreement dated June 1, 1993, between the Registrant and Hartford Accident and Indemnity Company,
as amended (1)
10.13 Exclusive License Agreement dated as of July 1, 1993, by and between the Beckman Research Institute of
the City of Hope and the Registrant covering the treatment of nervous system degeneration and
Alzheimer's disease (1)
10.14 Exclusive License Agreement dated as of July 1, 1993, by and between the Beckman Research Institute
of the City of Hope and the Registrant covering the use of Pregnenolone for the enhancement of memory (1)
10.15 License Agreement dated May 20, 1992, by and between The Salk Institute for Biological Studies and the
Registrant (1)
10.16 License Agreement dated July 17, 1992, by and between The Salk Institute for Biological Studies and
the Registrant (1)
10.17 License Agreement dated November 16, 1993, by and between The Salk Institute for Biological Studies
and the Registrant (1)
10.18 License Agreement dated October 19, 1992, by and between the Board of Trustees of the Leland Stanford
Junior University and the Registrant (1)
10.19 Agreement dated January 1, 1995, by and between the Registrant and Janssen Pharmaceutica, N.V. (1)
10.20 Letter Agreement dated January 19, 1996, by and between the Registrant and Ciba-Geigy Limited (1)
10.21* Unit Purchase Agreement dated March 29, 1996, by and between Neuroscience Pharma, Inc. the Registrant
and the investors signatory thereto (1)
10.22* Exchange Agreement dated March 29, 1996, by and between Neurocrine Biosciences (Canada), Inc., the
Registrant and the investors signatory thereto (1)
10.23* Research and Development Agreement dated March 29, 1996, by and between Neurocrine Biosciences
(Canada), Inc. and Neuroscience Pharma, Inc. (1)
10.24* Intellectual Property and License Grants Agreement dated March 29, 1996, by and between the Registrant
and Neurocrine Biosciences (Canada), Inc. (1)
10.25* Development and Commercialization Agreement dated December 20, 1996, by and between Ciba-Geigy Ltd.
And the Registrant (5)
10.26* Letter and Purchase Order dated June 7, 1996, by and between Ciba-Geigy and the Registrant (5)
10.27 Third Lease Amendment dated June 6, 1996, by and between Talcott Realty I Limited Partnership and the
Registrant (5)
10.28* Research and License Agreement dated October 15, 1996, between the Registrant and Eli Lilly and
Company (5)
10.29* Lease between Science Park Center LLC and the Company (6)
10.30* Option Agreement between Science Park Center LLC (Optionor) and the Company (Optionee) (6)
10.31* Construction Loan Agreement (6)
10.32 Secured Promissory Note (6)
10.33* Operating Agreement for Science Park Center LLC (6)
10.34 Information and Registration Rights Agreement dated September 15, 1992, as amended to date (1)
10.35 Form of incentive stock option agreement and nonstatutory stock option agreement for use in connection
with 1992 Incentive Stock Plan (1)
10.36* Patent License Agreement dated May 7, 1998, between the US Public Health Service and the Registrant (7)
10.37* Patent License Agreement dated April 28, 1998, between and among Ira Pastan, David Fitzgerald and the
Registrant (7)
10.38* Sub-License and Development Agreement dated June 30, 1998, by and between DOV Pharmaceutical, Inc. and
the Registrant (7)
10.39* Warrant Agreement dated June 30, 1998, between DOV Pharmaceutical, Inc. and the Registrant (7)
10.40* Warrant Agreement dated June 30, 1998, between Jeff Margolis and the Registrant (7)
10.41* Warrant Agreement dated June 30, 1998, between Stephen Ross and the Registrant (7)
10.42+ Collaboration and License Agreement dated January 1, 999, by and between American Home Products
Corporation acting through its Wyeth-Ayerst Laboratories Division and the Registrant
10.43+ Employment Agreement dated January 1, 1999, between the Registrant and Margaret Valeur-Jensen
10.44+ Employment Agreement dated February 9, 1998, between the Registrant and Bruce Campbell
21 Subsidiaries of the Company
23 Consent of Ernst & Young LLP, Independent Auditors
24 Power of Attorney (see page 33)
27 Financial Data Schedule
- ------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Incorporated by reference to the Company's Registration Statement on Form S-1 (Registration No.
333-03172)
(2) Incorporated by reference to the Company's Report on Form 8-K filed
on March 13, 1998.
(3) Incorporated by reference to the Company's amended
Quarterly Report on Form 10-Q filed on August 15, 1997
(4) Incorporated by reference to the Company's Quarterly Report on Form
10-Q filed on August 14, 1997
(5) Incorporated by reference to the Company's Report on Form 10-K for the fiscal year ended December 31, 1996
(6) Incorporated by reference to the Company's Quarterly Report on Form 10-Q filed on November 14, 1997
(7) Incorporated by reference to the Company's Quarterly Report on Form 10-Q filed on November 16, 1998.
* Confidential treatment has been granted with respect to certain portions of the exhibit.
+ Confidential treatment has been requested with respect to certain portions of the exhibit.
</FN>
</TABLE>
(d) Financial Statement Schedules
See Item 14(a) (2) above.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NEUROCRINE BIOSCIENCES, INC.
A Delaware Corporation
By: /s/ Gary A. Lyons
Gary A. Lyons
President and Chief Executive Officer
Date: March 31, 1999
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Gary A. Lyons and Paul Hawran, jointly
and severally his attorneys-in-fact, each with the power of substitution, for
him in any and all capacities, to sign any amendment to this Report on Form
10-K, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
- --------------------------------------------------------------------------------
/s/ Gary A. Lyons President, Chief Executive Officer and March 31, 1999
- ----------------------- Director (Principal Executive Officer)
Gary A. Lyons
/s/ Paul W. Hawran Chief Financial Officer March 31, 1999
- ----------------------- (Principal Financial and Accounting Officer)
Paul W. Hawran
/s/ Joseph A. Mollica Chairman of the Board of Directors March 31, 1999
- -----------------------
Joseph A. Mollica.
/s/ Richard F. Pops Director March 31, 1999
- -----------------------
Richard F. Pops
/s/ Harry F. Hixson, Jr. Director March 31, 1999
- -----------------------
Harry F. Hixson, Jr.
/s/ Wylie W. Vale Director March 31, 1999
- -----------------------
Wylie W. Vale
<PAGE>
NEUROCRINE BIOSCIENCES, INC.
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Ernst & Young LLP, Independent Auditors ........................ 35
Consolidated Balance Sheet ................................................ 36
Consolidated Statement of Operations ...................................... 37
Consolidated Statement of Stockholders' Equity ............................ 38
Consolidated Statement of Cash Flows ...................................... 39
Notes to the Consolidated Financial Statements ............................ 40
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Neurocrine Biosciences, Inc.
We have audited the accompanying consolidated balance sheet of Neurocrine
Biosciences, Inc. as of December 31, 1998 and 1997, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Neurocrine
Biosciences, Inc. at December 31, 1998 and 1997, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
San Diego, California
January 26, 1999,
except for Note 13, as to which the date is
March 2, 1999
<PAGE>
NEUROCRINE BIOSCIENCES, INC.
Consolidated Balance Sheet
(in thousands)
December 31,
--------------------
1998 1997
--------- --------
ASSETS
Current assets:
Cash and cash equivalents ........................... $ 11,708 $ 15,771
Short-term investments, available-for-sale .......... 50,962 59,321
Receivables under collaborative agreements .......... 863 194
Receivables from related parties .................... 544 156
Other current assets ................................ 1,556 936
-------- --------
Total current assets ............................. 65,633 76,378
Property and equipment, net ......................... 10,899 8,846
Licensed technology and patent applications costs, net 967 1,185
Investment in Neuroscience Pharma, Inc. ............. 1,411 3,343
Other assets ........................................ 1,619 2,151
======== ========
Total assets ..................................... $ 80,529 $ 91,903
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ..................................... $ 2,481 $ 1,822
Accrued liabilities .................................. 2,077 2,402
Deferred revenues .................................... 169 1,919
Current portion of long-term debt .................... 149 149
Current portion of capital lease obligations ......... 693 724
-------- --------
Total current liabilities ......................... 5,569 7,016
Long-term debt, net of current portion ............... 461 597
Capital lease obligations, net of current portion .... 1,786 125
Deferred rent ........................................ 257 659
Other liabilities .................................... 498 354
-------- --------
Total liabilities ................................. 8,571 8,751
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $0.001 par value; 5,000,000 shares
authorized; no shares issued and outstanding ...... -- --
Common Stock, $0.001 par value; 100,000,000 shares
authorized; issued and outstanding shares were
18,930,865 in 1998 and 17,686,802 in 1997 ......... 19 18
Additional paid in capital ........................... 97,064 88,586
Deferred compensation ................................ (187) (439)
Stockholder notes .................................... (119) (120)
Accumulated other comprehensive income ............... 31 2
Accumulated deficit .................................. (24,850) (4,895)
-------- --------
Total stockholders' equity ........................ 71,958 83,152
-------- --------
Total liabilities and stockholders' equity ........ $ 80,529 $ 91,903
======== ========
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
NEUROCRINE BIOSCIENCES, INC.
Consolidated Statement of Operations
(in thousands)
Year-ended December 31,
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Sponsored research and development ............................ $ 8,751 $ 14,985 $ 9,092
Sponsored research and development from related party ......... 3,610 -- --
Milestones and license fees ................................... 2,500 10,250 9,000
Grant income and other revenues ............................... 1,176 909 1,124
-------- -------- --------
Total revenues ............................................. 16,037 26,144 19,216
Operating expenses:
Research and development ...................................... 21,803 18,758 12,569
General and administrative .................................... 6,594 5,664 3,697
Write-off of acquired in-process research and
development and licenses ...................................... 4,910 -- --
-------- -------- --------
Total operating expenses ................................... 33,307 24,422 16,266
Income (loss) from operations ..................................... (17,270) 1,722 2,950
Other income and expenses:
Interest income ............................................... 4,151 4,084 2,870
Interest expense .............................................. (151) (153) (272)
Equity in NPI losses and other adjustments .................... (7,188) (1,130) --
Other income .................................................. 504 818 574
-------- -------- --------
Income (loss) before taxes ........................................ (19,954) 5,341 6,122
Income taxes ...................................................... 1 214 248
-------- -------- --------
Net income (loss) ................................................. $(19,955) $ 5,127 $ 5,874
======== ======== ========
Earnings (loss) per common share:
Basic ......................................................... $ (1.10) $ 0.30 $ 0.39
Diluted ....................................................... $ (1.10) $ 0.28 $ 0.36
Shares used in the calculation of earnings (loss) per common share:
Basic ......................................................... 18,141 16,930 14,971
Diluted ....................................................... 18,141 18,184 16,127
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
NEUROCRINE BIOSCIENCES, INC.
Consolidated Statement of Stockholders' Equity
(in thousands)
Notes Accumulated
Common Stock Additional Unearned Receivable Other Accumu- Total
-------------- Paid In Compen- from Comprehensive lated Stockholders
Shares Amount Capital sation Stockholders Income (Loss) Deficit Equity
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 .............. 11,723 $12 $ 35,586 $(342) $(138) $ 3 $(15,896) $ 19,225
Net income ..................................... -- -- -- -- -- -- 5,874 5,874
Unrealized gain on short-term investments ...... -- -- -- -- -- 39 -- 39
--------
Comprehensive income ........................... -- -- -- -- -- -- -- 5,913
Issuance of common stock for cash .............. 5,054 5 47,535 -- -- -- -- 47,540
Payments received on stockholder notes ......... -- -- -- -- 10 -- -- 10
Deferred compensation and related
amortization, net -- -- 113 (34) -- -- -- 79
---------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 .............. 16,777 17 83,234 (376) (128) 42 (10,022) 72,767
Net income ..................................... -- -- -- -- -- -- 5,127 5,127
Unrealized loss on short-term investments ...... -- -- -- -- -- (40) -- (40)
--------
Comprehensive income ........................... -- -- -- -- -- -- -- 5,087
Issuance of common stock for warrants .......... 182 -- 59 -- -- -- -- 59
Issuance of common stock for option exercises .. 106 -- 453 -- -- -- -- 453
Issuance of common stock pursuant to the
Employee Stock Purchase Plan ................. 22 -- 175 -- -- -- -- 175
Issuance of common stock in exchange for
NPI Preferred Stock .......................... 600 1 4,473 -- -- -- -- 4,474
Payments received on stockholder notes ......... -- -- -- -- 8 -- -- 8
Deferred compensation and related
amortization, net ............................ -- -- 192 (63) -- -- -- 129
---------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 .............. 17,687 18 88,586 (439) (120) 2 (4,895) 83,152
Net loss ....................................... -- -- -- -- -- -- (19,955) (19,955)
Unrealized gain on short-term investments ...... -- -- -- -- -- 29 -- 29
--------
Comprehensive loss ............................. -- -- -- -- -- -- -- (19,926)
Issuance of common stock for warrants .......... 60 -- 142 -- -- -- -- 142
Issuance of common stock for option exercises .. 81 -- 286 -- -- -- -- 286
Issuance of common stock pursuant to the
Employee Stock Purchase Plan ................. 30 -- 205 -- -- -- -- 205
Issuance of common stock in exchange for
NPI Preferred Stock .......................... 679 1 3,854 -- -- -- -- 3,855
Issuance of common stock for NNL Acquisition ... 392 -- 4,032 -- -- -- -- 4,032
Issuance of common stock for milestone achievement 2 -- 17 -- -- -- -- 17
Payments received on stockholder notes ......... -- -- -- -- 1 -- -- 1
Amortization of deferred compensation, net ..... -- -- (58) 252 -- -- -- 194
-------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998 .............. 18,931 $19 $ 97,064 $(187) $(119) $ 31 $(24,850) $ 71,958
===============================================================================
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
NEUROCRINE BIOSCIENCES, INC.
Consolidated Statement of Cash Flows
(in thousands)
Twelve Months Ended December 31,
---------------------------------
1998 1997 1996
-------- --------- --------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net (loss) income ............................................. $(19,955) $ 5,127 $ 5,874
Adjustments to reconcile net income (loss) to net cash
Provided by (used in) operating activities:
Acquisition of Northwest NeuroLogic for Common Stock .... 4,200 -- --
Equity in NPI losses and other adjustments .............. 7,188 1,130 --
Depreciation and amortization ........................... 1,720 1,322 981
Loss on abandonment of assets ........................... 460 76 25
Gain on sale of equipment ............................... (15) -- --
Deferred revenues ....................................... (1,750) 1,000 419
Deferred rent ........................................... (402) 384 61
Compensation expenses recognized for stock options ...... 194 129 79
Change in operating assets and liabilities,
net of acquired business:
Accounts receivable and other current assets ........ (2,898) 885 (936)
Other non-current assets ............................ 291 (1,274) (486)
Accounts payable and accrued liabilities ............ 271 2,213 665
-------- --------- --------
Net cash flows (used in) provided by operating activities ..... (10,696) 10,992 6,682
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of short-term investments ........................... (41,618) (113,080) (85,171)
Sales/maturities of short-term investments .................... 50,006 112,315 38,918
Proceeds from sale of equipment ............................... 72 -- --
Purchases of property and equipment ........................... (3,755) (6,440) (2,304)
-------- --------- --------
Net cash flows provided by (used in) investing activities ..... 4,705 (7,205) (48,557)
CASH FLOW FROM FINANCING ACTIVITIES
Issuance of Common Stock ...................................... 433 687 47,540
Proceeds received from long-term obligations .................. 2,500 747 --
Principal payments on long-term obligations ................... (1,006) (783) (742)
Payments received on notes receivable from stockholders ....... 1 8 10
-------- --------- --------
Net cash flows provided by financing activities ............... 1,928 659 46,808
-------- --------- --------
Net decrease in cash and cash equivalents ..................... (4,063) 4,446 4,933
Cash and cash equivalents at beginning of the period .......... 15,771 11,325 6,392
-------- --------- --------
Cash and cash equivalents at end of the period ................ $ 11,708 $ 15,771 $ 11,325
======== ========= ========
SUPPLEMENTAL DISCLOSURES
Supplemental disclosures of cash flow information:
Interest paid ........................................... $ 150 $ 153 $ 272
Taxes paid .............................................. 1 250 40
Schedule of noncash investing and financing activities in 1998:
Conversion of note receivable to investment in NPI ...... $ 1,401 -- --
Conversion of NPI Preferred Stock to investment in NPI .. 3,855 4,474 --
</TABLE>
See accompanying notes.
<PAGE>
NEUROCRINE BIOSCIENCES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITIES: Neurocrine Biosciences, Inc. (the "Company") was
incorporated in California on January 17, 1992 and was reincorporated in
Delaware in March 1996. The Company is engaged in the discovery and development
of therapeutics for the treatment of diseases and disorders of the central
nervous and immune systems which includes anxiety, depression, Alzheimer's
disease, obesity, stroke and multiple sclerosis.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of Neurocrine Biosciences, Inc. (the "Company") and its wholly
owned subsidiary, Northwest NeuroLogic, Inc. ("NNL"). Significant intercompany
accounts and transactions have been eliminated in consolidation.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and the accompanying notes.
Actual results could differ from those estimates.
CASH EQUIVALENTS: The Company considers all highly liquid investments with
a maturity of three months or less when purchased, to be cash equivalents.
SHORT-TERM INVESTMENTS AVAILABLE-FOR-SALe: In accordance with Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Debt
and Equity Securities," short-term investments are classified as
available-for-sale. Available-for-sale securities are carried at fair value,
with the unrealized gains and losses reported in a separate component of
stockholders' equity. The amortized cost of debt securities in this category is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization is included in investment income. Realized gains and losses
and declines in value judged to be other-than-temporary, if any, on
available-for-sale securities are included in investment income. The cost of
securities sold is based on the specific identification method. Interest and
dividends on securities classified as available-for-sale are included in
interest income.
The Company invests its excess cash primarily in investment grade debt
instruments, marketable debt securities of U.S. government agencies, and
high-grade commercial paper. Management has established guidelines relative to
diversification and maturities that maintain safety and liquidity.
PROPERTY AND EQUIPMENT: Property and equipment are carried at cost.
Depreciation and amortization are provided over the estimated useful lives of
the assets, ranging from three to ten years, using the straight-line method.
LICENSED TECHNOLOGY AND PATENT APPLICATION COSTS: Licensed technology
consists of exclusive, worldwide, perpetual licenses to patents related to the
Company's platform technology which are capitalized at cost and amortized over
periods of 7 to 11 years. These costs are regularly reviewed to determine that
they include costs for patent applications the Company is pursuing. Costs
related to applications that are not being actively pursued are evaluated under
Accounting Principles Board Statement 17 "Intangible Assets" and are adjusted to
an appropriate amortization period which generally results in immediate
write-off. Accumulated amortization at December 31, 1998 and 1997 was $679,000
and $461,000, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS: The Company routinely assesses the
recoverability of long-lived assets by determining whether the carrying value of
such assets can be recovered through undiscounted future operating cash flows.
If impairment is indicated, the Company will measure the amount of such
impairment by comparing the carrying value of the asset to the present value of
the expected future cash flows associated with the use of the asset.
INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION: The Company operates in a
single industry segment - the discovery and development of therapeutics for the
treatment of diseases and disorders of the central nervous and immune. The
Company has no foreign operations.
RESEARCH AND DEVELOPMENT REVENUE AND EXPENSES: Revenues under collaborative
research agreements are recognized over the period specified in the related
agreement. Advance payments received in excess of amounts earned are classified
as deferred revenue and recognized as income in the period earned. Revenues from
government grants are recognized based on the performance requirements of the
grant or as the grant expenditures are incurred. Research and development costs
are expensed as incurred. Such costs include proprietary research and
development activities and expenses associated with collaborative research
agreements. Research and development expenses relating to collaborative
agreements and grants were approximately $12.0 million, $9.4 million and $8.3
million during 1998, 1997 and 1996, respectively.
STOCK-BASED COMPENSATION: The Company accounts for stock option grants to
employees in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
because the Company believes the alternative fair value accounting provided for
under SFAS No. 123, "Accounting for Stock-Based Compensation," requires the use
of option valuation models that were not developed for use in valuing employee
stock options. Deferred compensation is recorded only in the event that the fair
market value of the stock on the date of the option grant exceeds the exercise
price of the options. Such deferred compensation is amortized over the vesting
period of the options. Compensation expense recognized during the years ended
December 31, 1998, 1997 and 1996 was $194,000, $129,000 and $79,000,
respectively.
EARNINGS PER SHARE: Basic and diluted earnings per share is calculated in
accordance with FASB Statement No. 128, "Earnings per Share". All earnings per
share amounts for all periods have been presented, and where appropriate,
were restated to conform to the requirements of Statement No. 128.
COMPREHENSIVE INCOME: Comprehensive income is calculated in accordance with
FASB Statement No. 130, "Comprehensive Income". The Statement requires the
disclosure of all components of comprehensive income, including net income and
changes in equity during a period from transactions and other events and
circumstances generated from non-owner sources. The Company's other
comprehensive income consisted of gains and losses on short-term investments and
is reported in the consolidated statement of stockholders' equity.
RECLASSIFICATIONS: Certain reclassifications have been made to prior year
amounts to conform to the presentation for the year ended December 31, 1998.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS: In June 1998, the FASB
issued Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The Company expects to adopt the new Statement effective January 1,
2000. The Statement will require the Company to recognize all derivatives on the
balance sheet at fair value. The Company does not anticipate that the adoption
of the Statement will have a significant effect on its results of operations or
financial position.
2. ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT AND LICENSES
NORTHWEST NEUROLOGIC, INC: In May 1998, the Company acquired the assets and
liabilities of Northwest NeuroLogic, Inc. ("NNL"), a neurodegenerative research
and development company, in exchange for 392,608 shares of Company's Common
Stock and 105,414 of stock options valued at $4.2 million. The operations of NNL
are included in the consolidated statement of operations from the date of
acquisition.
The acquisition was accounted for as a purchase and, accordingly, the
purchase price has been allocated to the assets acquired and the liabilities
assumed based on the estimated fair market value at the date of the acquisition.
The amount allocated to in-process research and development was charged to
expense because the technology has not reached technological feasibility and has
no future alternative uses. The purchase price was allocated as follows (in
thousands):
Current assets .............................. $ 180
Furniture and equipment ..................... 49
Liabilities assumed ......................... (207)
In-process research and development ......... 4,200
-------
Total purchase price ........................ $ 4,222
=======
The acquired in-process research and development consisted of Melanocortin
("MCR"), a brain receptor technology relating obesity and Excitatory Amino Acid
Transporters ("EAATs"), a technology relating to neurodegeneration and stroke.
Both in-process research and development are in early developmental stages.
The nature and efforts required to develop the acquired in-process research
and development into commercially viable products include completion of the
development stages of a compound, pre-clinical development, clinical trial
testing, FDA approval and commercialization. Due to the nature of the
pharmaceutical development process, the Company anticipates substantial further
research and clinical expenditures to develop the products. There is, however,
no certainty that either of these programs will result in viable products.
The following are the pro forma unaudited results of operations for the
years ended December 31, 1998 and 1997, had the purchase of NNL been consummated
as of January 1, of the respective years:
1998 1997
------------------------------------
(in thousands, except per share data)
Revenues .................. $ 16,325 $ 26,783
Net income (loss) ......... (20,013) 975
Earnings (loss) per share:
Basic ..................... $ (1.09) $ 0.06
Diluted ................... (1.09) 0.05
This pro forma information is not necessarily indicative of the actual
results that would have been achieved had NNL been acquired on January 1, 1997,
nor is it necessarily indicative of future results.
OTHER: During 1998, the Company purchased licenses for technologies
relating to insomnia in the amount of $440,000 and brain cancer in the amount of
$270,000. These projects are in the early stages of development, have not
reached technological feasibility and have no known alternative uses.
Consequently, the costs of these licenses were expensed.
3. SHORT-TERM INVESTMENTS
The following is a summary of short-term investments classified as
available-for-sale securities (in thousands):
<TABLE>
<CAPTION>
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-----------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1998
US Government securities $ 6,000 $ 17 $ -- $ 6,017
Certificates of deposit . 260 -- -- 260
Commercial paper ........ 5,420 -- -- 5,420
Corporate debt securities 39,141 61 (87) 39,115
Other ................... 110 40 -- 150
----------------------------------------------------
Total securities $ 50,931 $ 118 $ (87) $ 50,962
======== ======== ======== ========
December 31, 1997
US Government securities $ 11,975 $ 54 $ -- $ 12,029
Certificates of deposit . 247 -- -- 247
Commercial paper ........ 9,850 -- -- 9,850
Corporate debt securities 37,143 4 (60) 37,087
Other ................... 104 4 -- 108
----------------------------------------------------
Total securities $ 59,319 $ 62 $ (60) $ 59,321
======== ======== ======== ========
</TABLE>
Gross realized gains and losses were not material for any of the reported
periods. The amortized cost and estimated fair value of debt securities by
contractual maturity at December 31, 1998, are shown below (in thousands).
Amortized Estimated
Cost Fair Value
------- --------
Due in one year or less ..................... $22,883 $23,002
Due after one year through five years ....... 28,048 27,960
------ ------
$50,931 $50,962
======= =======
4. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1998 and 1997, consist of the
following (in thousands):
1998 1997
------- ------
Land .......................................... $5,299 $4,985
Furniture and fixtures ........................ 1,856 1,204
Equipment ..................................... 7,356 4,956
Leasehold improvements ........................ 562 717
------ -------
15,073 11,862
Less accumulated depreciation and amortization (4,174) (3,016)
-------- -------
Net property and equipment .................... $ 10,899 $ 8,846
======== ========
Furniture and equipment under capital leases were $5.8 million and $3.3
million at December 31, 1998 and 1997, respectively. Accumulated depreciation of
furniture and equipment under capital leases totaled $3.1 million and $2.2
million at December 31, 1998 and 1997, respectively. The Company received
proceeds of $2.5 million for equipment that it sold and subsequently leased back
under capital lease obligations in 1998. No similar transactions were conducted
in 1997.
5. ACCRUED LIABILITIES
Accrued liabilities at December 31, 1998 and 1997 consist of the following
(in thousands):
1998 1997
------- -------
Accrued employee benefits ......... $ 1,120 $ 1,162
Accrued professional fees ......... 438 470
Accrued development costs ......... 333 300
Taxes payable ..................... 15 195
Other accrued liabilities ......... 171 275
------- -------
$2,077 $2,402
======= =======
6. LONG-TERM DEBT
During 1997, the Company partially financed the purchase of land under a 5
year note payable for approximately $747,000, which bears interest at a floating
rate of prime plus one quarter percent (8.00% at December 31, 1998). The note is
repayable in equal monthly installments beginning February 1998.
At December 31, 1998, the repayment schedule for the note was $149,000 for
each year 1999 through 2002 and $13,000 in the year 2003.
7. COMMITMENTS AND CONTINGENCIES
CAPITAL LEASE OBLIGATIONS: The Company has financed certain equipment under
capital lease obligations which expire on various dates through the year 2002
and bear interest at rates between 7.6% and 11.6%. The lease commitments are
repayable in monthly installments.
OPERATING Leases: In May 1997, the Company purchased two adjacent parcels
of land in San Diego for $5.0 million. In August 1997, the Company sold one
parcel to Science Park Center LLC, a California limited liability company (the
"LLC"), of which the Company owns a minority interest, in exchange for a note
receivable in the amount of $3.5 million plus interest of 8.25%. However, for
accounting purposes, this transaction does not qualify as a sale under SFAS No.
98 and therefore, the entire amount of the note receivable is included in land.
The amount included in land at December 31, 1998 and 1997 was $3.8 million and
$3.5 million, respectively.
During 1998, the LLC constructed an expanded laboratory and office complex
which was leased by the Company under a 15 year operating lease, commencing
September 1998. The Company has the option to purchase the facility at any time
during the term of the lease at a predetermined price. The lease contains a 4%
per year escalation in base rent fees, effective with each anniversary. In
November 1998, the Company subleased a portion of this facility to an unrelated
third party for a term of 20 months. The Company will hold the second parcel of
land until such a time as additional facilities are required.
In November 1998, the lease obligation relating to the Company's former
operating facility was amended to reduce the amount of square footage leased and
to shorten the lease term to conclude in June 2000. The Company currently
subleases this space to an unrelated third party and is obligated to continue
this arrangement through June 2000.
Repayment schedules for the capital lease obligations and operating lease
commitments at December 31, 1998 are as follows (in thousands):
Capital Operating
Fiscal Year: Leases Leases
-------- --------
1999 ........................................ $863 $2,924
2000 ........................................ 733 2,731
2001 ........................................ 900 2,525
2002 ........................................ 350 2,626
2003 ........................................ -- 2,731
Thereafter .................................. -- 32,721
-------- --------
Total minimum payments ...................... 2,846 $46,258
========
Less: amounts representing interest ........ (367)
--------
Future minimum payments ..................... 2,479
Less: current portion ...................... (693)
--------
Future payments on capital lease obligations . $1,786
========
Rent expense was $2,379,000, $2,139,000, and $1,298,00 for the years ended
December 31, 1998, 1997 and 1996, respectively. Sublease income was $837,000,
$917,000 and $598,000, for the years ended December 31, 1998, 1997 and 1996,
respectively.
Future minimum sublease income to be received under non-cancelable
subleases at December 31, 1998 will be $985,000 and $506,000 for the years
ending December 31, 1999 and 2000, respectively.
Licensing and Research Agreements: The Company has entered into licensing
agreements with various universities and research organizations. Under the terms
of these agreements, the Company has received licenses to technology, or
technology claimed, in certain patents or patent applications. The Company is
required to pay royalties on future sales of products employing the technology
or falling under claims of a patent, and, certain agreements require minimum
royalty payments. Certain agreements also require the Company to make payments
upon the achievement of specified milestones.
8. STOCKHOLDERS' EQUITY
Common Stock Issuances: From inception through 1996, the Company has issued
Common Stock in various private and public offerings, as well as to corporate
collaborators, at prices between $5.00 and $10.50 per share resulting in
aggregate net proceeds of approximately $72.1 million.
Options: The Company has authorized 5,005,414 shares of its Common Stock
for issuance upon exercise of options or stock purchase rights granted under the
1992 Incentive Stock Option Plan, 1996 Director Option Plan and the 1997 NNL
Stock Option Plan (collectively "the Plan"). These plans provide for the grant
of stock options and stock purchase rights to officers, directors, and employees
of, and consultants and advisors to, the Company. Options under these plans have
terms of up to 10 years from the date of grant and may be designated as
incentive stock options or nonstatutory stock options under the Plan.
A summary of the Company's stock option activity, and related information
for the years ended December 31 follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------- --------------------------- --------------------------
Weighted Weighted Weighted
Average Average Average
Options Exercise Options Exercise Options Exercise
(in thousands) Price (in thousands) Price (in thousands) Price
--------------------------- -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1, ..... 2,653 $5.84 1,739 $4.48 1,415 $3.61
Granted ....................... 677 $6.26 1,072 $7.86 378 $7.92
Exercised ..................... (81) $3.64 (100) $4.10 (11) $3.60
Canceled ...................... (456) $5.76 (58) $5.88 (43) $4.41
---------------------------- -------------------------- ------------------------
Outstanding at December 31, ... 2,793 $6.02 2,653 $5.85 1,739 $4.48
============================ ========================== ========================
</TABLE>
A summary of options outstanding as of December 31, 1998 follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ------------------------------------------------------------------ --------------------------------------
Weighted
Average
Outstanding Remaining Weighted Exercisable Weighted
Range of as of Contractual Average As of Average
Exercise Prices 12/31/98 Life Exercise Price 12/31/98 Exercise Price
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$0.02 to $2.50 492 5.4 years $2.24 427 $2.40
$4.25 553 6.2 years $4.25 474 $4.25
$5.00 to $7.01 486 8.6 years $6.36 104 $5.64
$7.38 to $7.86 678 8.5 years $7.62 228 $7.58
$8.00 to $10.25 584 8.2 years $8.73 294 $8.73
-------------------------------------------------------------------------------------------
2,793 7.5 years $6.02 1,527 $5.19
</TABLE>
The weighted average fair values of the options granted during 1998, 1997
and 1996 were $5.59, $5.01 and $5.79, respectively.
Pro forma information regarding net income (loss) is required by SFAS No.
123, and has been determined as if the Company had accounted for its employee
stock options under the fair value method of that Statement. The fair value for
these options was estimated at the date of grant using a Black-Scholes option
pricing model using the following weighted-average assumptions for 1998, 1997
and 1996, respectively: risk-free interest rates of 5.5%, 5.8% and 6.1%; a
dividend yield of 0.0% (for all years), volatility factors of the expected
market price of the Company's common stock of .88, .43 and .41; and a weighted
average expected life of the option of 5 years (for all years presented).
For purposes of pro forma disclosures, the estimated fair value of the
options granted is amortized to expense over the options' vesting period. The
pro forma effect on net income loss for 1998 and net income in 1997 and 1996, is
not likely to be representative of the effects on reported income or loss in
future years because these amounts reflect less than full vesting for options
granted during these periods. The Company's pro forma information for the years
ended December 31, 1998, 1997 and 1996 follows (in thousands, except for per
share data):
1998 1997 1996
---------------------------------
Pro forma net income (loss) ................. $(20,758) $4,364 $5,375
Pro forma income (loss) per share (diluted) . $(1.14) $0.24 $0.33
EMPLOYEE STOCK PURCHASE PLAN: The Company has reserved 125,000 shares of
Common Stock for issuance under the 1996 Employee Stock Purchase Plan (the
"Purchase Plan"). The Purchase Plan permits eligible employees to purchase
Common Stock through payroll deductions at a purchase price equal to 85% of the
lesser of the fair market value per share of Common Stock on the start date of
an offering period or on the date on which the shares are purchased. Through
December 31, 1998, 51,082 shares had been issued pursuant to the Purchase Plan.
WARRANTS: The Company has outstanding warrants to purchase 388,185 shares
of Common Stock at exercise prices of $5.00 and $10.50 per share. The warrants
generally expire between 1998 and 2007. At December 31, 1998, all outstanding
warrants were exercisable.
The following shares of Common Stock are reserved for future issuance at
December 31, 1998:
Stock option plans ..................... 3,465,465
Employee stock purchase plan ........... 73,918
Warrants ............................... 388,185
----------
Total .................................. 3,927,568
==========
Of the shares available for future issuance under the Plan, 2,792,987 are
outstanding grants and 672,478 remain available for future grant.
9. COLLABORATIVE RESEARCH AND DEVELOPMENT AGREEMENTS
JANSSEN: In January 1995, the Company entered into a research and
development agreement (the "Janssen Agreement") with Janssen, under which
Janssen paid the Company $2.0 million in up-front license fees and $9.7 million
in sponsored research payments during the three-year term of the collaborative
research portion of the agreement. The research portion of the agreement was
completed in 1997.
Under the Janssen Agreement, the Company is entitled to receive up to $10.0
million in milestone payments for the indications of anxiety, depression and
substance abuse, and up to $9.0 million in additional milestone payments for
other indications. Milestone payments of $3.5 million have been received through
December 31, 1998. The Company has granted Janssen an exclusive worldwide
license to manufacture and market products developed under the Janssen
Agreement. The Company is entitled to receive royalties on worldwide product
sales and has certain rights to co-promote such products in North America.
Janssen is responsible for funding all clinical development and marketing
activities, including reimbursement to Neurocrine for its promotional efforts,
if any.
The collaborative research portion of the agreement was completed as
scheduled in 1997 with the selection of a clinical candidate and the
commencement of clinical trials in Europe. The Company will continue to receive
milestone payments and royalties upon the successful continuation of the
development portion of the agreement.
Janssen has the right to terminate the Agreement upon six months notice.
However, in the event of termination, other than termination by Janssen for
cause or as a result of the acquisition of Neurocrine, all product and
technology rights become the exclusive property of Neurocrine.
NOVARTIS: In January 1996, the Company entered into an agreement with
Novartis under which Novartis paid the Company $5.0 million in up-front license
fees and is obligated to provide Neurocrine with $7.0 million in research and
development funding during the first two years of the agreement and up to $15.5
million in further research and development funding thereafter. As of December
31, 1998, the Company has received $15.2 million in sponsored research and
development payments. In addition, the Company is also entitled to receive
milestone payments for certain development and regulatory achievements. The
Company has received $9.1 million of milestone payments through December 31,
1998 of which $2.3 million was received in 1998.
In return, Novartis received manufacturing and marketing rights outside of
North America and will receive a percentage of profits on sales in North
America. The Company will receive royalties for all sales outside North America
and a percentage of profits on sales in North America, which the Company may at
its option convert to a right to receive royalties on product sales. Neurocrine
is obligated to repay a portion of the development costs for potential products
developed in such collaboration unless the Company elects to convert to the
right to receive royalty payments. Novartis has the right to terminate the
agreement upon six months notice.
ELI LILLY: In October 1996, the Company entered into an agreement with Eli
Lilly and Company under which the Company expects to receive $22.0 million in
research payments of which $14.5 million have been received as of December 31,
1998. The Company is also entitled to milestone payments for certain development
and regulatory accomplishments. The Company will have the option to receive
co-promotion rights and share profits from commercial sales of select products,
which result from the collaboration in the U.S. or receive royalties on U.S.
product sales. The Company will receive royalties on product sales for the rest
of the world.
10. RELATED PARTY TRANSACTIONS
Neuroscience Pharma, Inc: In March 1996, the Company along with a group of
Canadian institutional investors (the "Canadian Investors") established
Neuroscience Pharma Inc. ("NPI"). The Company's contribution was to license
certain technology and Canadian marketing rights to NPI. The Canadian Investors
contributed approximately $9.5 million in cash in exchange for Preferred Stock
of NPI, which could be converted into 1,279,758 shares of the Company's Common
Stock at the option of the investors. Upon conversion of the Preferred Shares,
ownership of the shares transfer to the Company and is redeemable for
approximately $9.5 million in cash at the option of the Company.
NPI has committed to use these funds for research and clinical development
of certain of the Company's programs in exchange for royalties on sales of
products developed, as well as, exclusive Canadian marketing rights for such
products in certain situations. The Company has the right to terminate this
agreement upon the conversion of the Preferred Shares. In connection with their
investment in NPI, the Canadian Investors also received warrants exercisable for
383,875 shares of the Company's Common Stock at an exercise price of $10.50 per
share and are also eligible to receive additional warrants in the future upon
attainment of certain additional funding.
During December 1997 and October 1998, the Canadian Investors converted
their Preferred Shares to Neurocrine Common Stock. As a result, the Company
recorded an investment in NPI equal to the market value of Common Stock issued
in exchange for the Preferred Shares and has recognized its proportionate share
of NPI net losses in accordance with the equity method of accounting.
The Preferred Shares are redeemable for approximately $9.5 million in cash
at the Company's option. The redemption feature of the Preferred Shares limits
their value to the balance of cash and cash equivalents maintained by NPI.
Consequently, the Company reduced the value of its NPI investment by $3.8
million during 1998. Equity in NPI losses was $3.4 million and $1.1 million in
1998 and 1997, respectively. The balance of the Company's investment in NPI was
$1.4 million and $3.3 million at December 31, 1998 and 1997, respectively.
During 1996, the Company entered into a sponsored research agreement with
NPI. The terms of the agreement called for NPI to fund additional research
efforts on technologies licensed to NPI by the Company. During 1998, the Company
recognized $3.6 million in revenues associated with costs of research on the
Neurogenomics and DHEA programs.
11. INCOME TAXES
At December 31, 1998, the Company had federal and California income tax net
operating loss carryforwards of approximately $9.3 million and $8.3 million,
respectively. The federal and California tax loss carryforwards will begin to
expire in 2009 and 2003, respectively, unless previously utilized. The Company
also has federal and California research tax credit carryforwards of
approximately $1.6 million and $271,000, respectively, which will begin to
expire in 2007 and 2012, respectively, unless previously utilized. The Company
has federal Alternative Minimum Tax credit carryforwards of approximately
$257,000, which will carryforward indefinitely.
Pursuant to Internal Revenue Code Sections 382 and 383, annual use of the
Company's net operating loss and credit carryforwards may be limited because of
cumulative changes in ownership of more than 50% which occurred during 1992 and
1993. However, the Company does not believe such change will have a material
impact upon the utilization of these carryforwards.
Significant components of the Company's deferred tax assets as of December
31, 1998 and 1997 are shown below. A valuation allowance of $6,470,000 and
$3,474,000 at December 31, 1998 and 1997, respectively, have been recognized to
offset the net deferred tax assets as realization of such assets is uncertain.
Amounts are shown in thousands as of December 31, of the respective years:
1998 1997
-------- --------
Deferred tax assets:
Net operating loss carryforwards ....... $ 3,744 $ 993
Tax credit carryforwards ............... 2,069 1,176
Capitalized research and development ... 453 525
Other, net ............................. 204 780
-------- --------
Total deferred tax assets .............. 6,470 3,474
Valuation allowance .................... (6,470) (3,474)
-------- --------
Net deferred tax assets ................ $ -- $ --
======== ========
The provision for income taxes on earnings subject to income taxes differs
from the statutory federal rate at December 31, 1998, 1997 and 1996, due to the
following:
1998 1997 1996
-------- -------- --------
Federal income taxes at 34% ............. $(6,785) $ 1,816 $2,081
State income tax, net of federal benefit 1 87 --
Tax effect on non-deductible expenses ... 4,213 21 17
Increase in valuation allowance and other 2,572 (1,837) (2,098)
Alternative minimum taxes ............... -- 127 248
-------- -------- --------
$ 1 $ 214 $ 248
======== ========= ========
The provision for taxes based on income at December 31, 1998, 1997 and 1996
consist of the following:
1998 1997 1996
------ ------ ------
Current:
Federal ..... $ -- $127 $248
State ....... 1 87 --
Deferred:
Federal ..... -- -- --
State ....... -- -- --
------ ------ ------
Total ....... $ 1 $214 $248
====== ====== ======
12. Earnings per Share
The following data show the amounts used in computing earnings per share
and the effect on income and the weighted-average number of shares of dilutive
potential common stock (in thousands except for earning per share data):
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Numerator:
Net income (loss) ................................. $(19,955) $5,127 $5,874
Effect of dilutive securities ..................... -- -- --
--------- --------- ---------
Numerator for earnings (loss) per share ........... $(19,955) $5,127 $5,874
========= ========= =========
Denominator:
Denominator for basic earnings (loss) per share ... 18,141 16,930 14,971
Effect of dilutive securities:
Employee stock options ........................ Antidilutive 909 796
Convertible preferred stock ................... Antidilutive 204 183
Warrants ...................................... Antidilutive 141 177
------------ --------- ---------
Dilutive potential of common shares ............... - 1,254 1,156
--------- --------- ---------
Denominator for diluted earnings (loss) per share . 18,141 18,184 16,127
========= ========= =========
Basic earnings (loss) per share ................... $ (1.10) $ 0.30 $ 0.39
Diluted earnings (loss) per share ................. $ (1.10) $ 0.28 $ 0.36
</TABLE>
13. SUBSEQUENT EVENT
On March 2, 1999, the Company entered into a collaboration agreement with
Wyeth-Ayerst Laboratories, the pharmaceutical division of American Home Products
Corporation on the research, development and commercialization of compounds
which modulate excitatory amino acid transporters ("EAATs") for the treatment of
neurodegenerative and psychiatric diseases. The agreement, valued up to $78
million, provided that marketable products for these disorders result from the
collaboration, includes sharing proprietary technologies between the two
companies; funding for research and milestone achievements and potential
royalties on world-wide sales of products resulting from the collaboration. The
Company expects to receive three to five years of funding for research and
development activities, in addition to access to Wyeth's chemical libraries for
screening within the collaborative field.
COLLABORATION AND LICENSE AGREEMENT
DATED JANUARY 1, 1999
BETWEEN
AMERICAN HOME PRODUCTS CORPORATION
acting through its
WYETH-AYERST LABORATORIES DIVISION
AND
NEUROCRINE BIOSCIENCES, INC.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
ARTICLE ONE - DEFINITIONS................................................................................1
1.1 "ACQUISITION".................................................................................1
1.2 "AFFILIATE"...................................................................................1
1.3 "COLLABORATION PRODUCTS"......................................................................2
1.4 "COLLABORATION TECHNOLOGY"....................................................................2
1.5 "COMBINATION PRODUCT".........................................................................2
1.6 "COMMERCIALLY REASONABLE EFFORTS".............................................................2
1.7 "COMPETITION".................................................................................3
1.8 "COMPETITIVE PRODUCTS"........................................................................3
1.9 "COMPOUND"....................................................................................3
1.10 "CONFIDENTIALINFORMATION".....................................................................3
1.11 "CONTROLS" OR "CONTROLLED".....................................................................4
1.12 "DEFAULT".....................................................................................4
1.13 [***}.........................................................................................4
1.14 "EFFECTIVE DATE"..............................................................................4
1.15 "EUROPEAN UNION"..............................................................................4
1.16 "FDA".........................................................................................4
1.17 "FIELD OF USE"................................................................................4
1.18 "FTE".........................................................................................4
1.19 "FIRST COMMERCIAL SALE".......................................................................4
1.20 "FORCE MAJEURE"...............................................................................4
1.21 "HIT(S)"......................................................................................5
1.22 "INTERIM CLINICAL EVALUATION POINT" OR "ICE"...................................................5
1.23 "IND".........................................................................................5
1.24 "JOINT CONFIDENTIAL INFORMATION"..............................................................5
1.25 "JOINT INVENTIONS"............................................................................5
1.26 "JOINT TECHNOLOGY"............................................................................5
1.27 "LEAD COMPOUND(S)"............................................................................6
1.28 "LICENSE FEES"................................................................................6
1.29 "MAJOR EUROPEAN COUNTRY"......................................................................6
1.30 "NDA".........................................................................................6
1.31 "NET SALES"...................................................................................6
1.32 "NEUROCRINE ANCILLARY TRANSPORTERS"...........................................................9
1.33 "NEUROCRINE COMPOUND".........................................................................9
1.34 "NEUROCRINE CONFIDENTIAL INFORMATION".........................................................9
1.35 "NEUROCRINE INVENTION"........................................................................9
1.36 "NEUROCRINE MATERIALS"........................................................................9
1.37 "NEUROCRINE PROPRIETARY CHEMICAL LIBRARY".....................................................9
1.38 "NEUROCRINE RESEARCHER".......................................................................9
1.39 "NEUROCRINE TECHNOLOGY"......................................................................10
(a) "Neurocrine Compound Technology".............................................................10
(b) "Neurocrine Ancillary Transporter Technology"................................................10
(c) "Neurocrine Transporter Technology"..........................................................10
1.40 "NEUROCRINE TRANSPORTERS"....................................................................10
1.41 "OHSU AGREEMENT".............................................................................10
1.42 "PARTY"......................................................................................10
1.43 "PATENT RIGHTS"..............................................................................11
1.44 "PERSON".....................................................................................11
1.45 "PIVOTAL TRIAL"..............................................................................11
1.46 "PRIOR AGREEMENT"............................................................................11
1.47 "PROOF OF CONCEPT"...........................................................................11
1.48 "REGULATORY APPROVAL"........................................................................11
1.49 "REGULATORY AUTHORITY".......................................................................11
1.50 "REGULATORY FILINGS".........................................................................12
1.51 "RESEARCH PLAN"..............................................................................12
1.52 "RESEARCH PROGRAM"...........................................................................12
1.53 "RESEARCH PROGRAMFUNDING"....................................................................12
1.54 "RESEARCH PROGRAM MATERIALS".................................................................12
1.55 "ROYALTIES"..................................................................................12
1.56 "STEERING COMMITTEE".........................................................................12
1.57 "TECHNOLOGY".................................................................................12
1.58 "THIRD PARTY(IES)"...........................................................................12
1.59 "THIRD PARTY ROYALTIES"......................................................................12
1.60 "UNPATENTED PRODUCT".........................................................................12
1.61 "VALID CLAIM"................................................................................13
1.62 "WYETH-AYERST COMPOUND"......................................................................13
1.63 "WYETH-AYERST CONFIDENTIAL INFORMATION"......................................................13
1.64 "WYETH-AYERST INVENTION".....................................................................13
1.65 "WYETH-AYERSTMATERIALS"......................................................................13
1.66 "WYETH-AYERST PROPRIETARY CHEMICAL LIBRARY"..................................................13
1.67 "WYETH-AYERST TECHNOLOGY"....................................................................13
ARTICLE TWO -- REPRESENTATIONS AND WARRANTIES...........................................................14
2.1 MUTUAL REPRESENTATIONS AND WARRANTIES........................................................14
2.2 ADDITIONAL NEUROCRINE REPRESENTATIONS, WARRANTIES AND COVENANTS..............................15
2.3 REPRESENTATION BY LEGAL COUNSEL..............................................................17
2.4 NEUROCRINE DISCLAIMER........................................................................17
2.5 WYETH-AYERST DISCLAIMER......................................................................17
ARTICLE THREE -- LICENSES...............................................................................18
3.1 LICENSE GRANT TO WYETH-AYERST................................................................18
3.2 LICENSE GRANT TO NEUROCRINE..................................................................19
3.3 NEUROCRINE RETAINED RIGHTS...................................................................19
3.4 PRIOR AGREEMENT..............................................................................20
3.5 OHSU AGREEMENT...............................................................................20
ARTICLE FOUR -- STEERING COMMITTEE......................................................................21
4.1 CREATION; AUTHORITY..........................................................................21
4.2 CHAIRPERSON..................................................................................21
4.3 MEETINGS.....................................................................................21
4.4 DECISIONS OF THE COMMITTEE...................................................................22
ARTICLE FIVE -- COLLABORATIVE RESEARCH PROGRAM AND RESEARCH FUNDING.....................................22
5.1 RESEARCH PROGRAM.............................................................................22
5.2 TERM.........................................................................................22
5.3 RESEARCH PLAN................................................................................23
5.4 CONDUCT OF THE RESEARCH PROGRAM..............................................................23
5.5 FUNDING OF THE RESEARCH PROGRAM..............................................................23
(a) Funding by Wyeth-Ayerst......................................................................24
(b) Reporting and Reconciliation..............................................................24
(c) Records and Audits...........................................................................25
5.6 INVENTION ASSIGNMENT AGREEMENTS..............................................................26
5.7 REPORTING AND DISCLOSURE.....................................................................26
(a) Reports......................................................................................26
(b) Quarterly Meetings........................................................................26
(c) Disclosure...................................................................................26
5.8 DATA.........................................................................................26
(a) Neurocrine Data..............................................................................26
(b) Wyeth-Ayerst Data............................................................................27
(c) Other Research Program Data..................................................................27
(d) Wyeth-Ayerst Research, Clinical Development and Commercialization Data....................27
5.9 MATERIALS....................................................................................27
(a) Research Program Materials...................................................................27
(b) Neurocrine Materials.........................................................................27
(c) Wyeth-Ayerst Materials.......................................................................28
ARTICLE SIX -- SELECTION OF LEAD COMPOUNDS AND COLLABORATION PRODUCTS...................................28
6.1 SELECTION OF LEAD COMPOUNDS DURING TERM RESEARCH PROGRAM.....................................28
6.2 SELECTION OF LEAD COMPOUNDS AFTER TERM RESEARCH PROGRAM......................................29
6.3 SELECTION OF COLLABORATION PRODUCTS..........................................................29
6.4 DESIGNATION OF LEAD COMPOUNDS AND COLLABORATION PRODUCTS.....................................29
ARTICLE SEVEN - DEVELOPMENT, MANUFACTURING AND COMMERCIALIZATION........................................30
7.1 WYETH-AYERST DEVELOPMENT.....................................................................30
7.2 PROGRESS REPORTS.............................................................................30
7.3 MANUFACTURING................................................................................30
7.4 COMMERCIALIZATION OF COLLABORATION PRODUCTS..................................................30
7.5 CO-PROMOTION.................................................................................31
ARTICLE EIGHT - LICENSE FEES............................................................................31
8.1 LICENSE FEES.................................................................................31
8.2 ADDITIONAL LICENSE FEES......................................................................33
ARTICLE NINE - ROYALTIES................................................................................37
9.1 ROYALTY RATES................................................................................37
9.2 ROYALTY ADJUSTMENTS..........................................................................39
(a) Royalty Adjustment for Unpatented Products...................................................39
(b) Competition..................................................................................39
9.3 TERM OF ROYALTY..............................................................................40
9.4 REPORTS AND PAYMENTS.........................................................................40
(a) Cumulative Royalties.........................................................................40
(b) Statements and Payments...................................................................40
(c) Taxes and Withholding........................................................................41
(d) Currency..................................................................................41
(e) Maintenance of Records; Audit................................................................41
9.5 THIRD PARTY PAYMENTS.........................................................................42
(a) OHSU Agreement...............................................................................42
(b) Neurocrine Technology........................................................................43
(c) Collaboration Products.......................................................................43
(d) Third Party Licenses........................................................................44
ARTICLE TEN -- CONFIDENTIALITY, PUBLICATION AND PUBLIC ANNOUNCEMENTS....................................44
10.1 CONFIDENTIALITY..............................................................................44
10.2 AUTHORIZED DISCLOSURE........................................................................45
(a) Each Party...................................................................................45
(b) Use.......................................................................................46
10.3 SEC FILINGS..................................................................................46
10.4 PUBLICATIONS.................................................................................46
10.5 PUBLIC ANNOUNCEMENTS.........................................................................46
(a) Coordination.................................................................................46
(b) Announcements................................................................................47
ARTICLE ELEVEN - INDEMNIFICATION........................................................................47
11.1 INDEMNIFICATION BY WYETH-AYERST..............................................................47
11.2 INDEMNIFICATION BY NEUROCRINE................................................................47
11.3 PROCEDURE....................................................................................48
11.4 INSURANCE....................................................................................49
ARTICLE TWELVE - TERM AND TERMINATION...................................................................49
12.1 GOVERNMENT APPROVALS.........................................................................49
(a) Government Approvals.........................................................................49
(b) Co-operation..............................................................................49
12.2 TERM.........................................................................................49
12.3 EARLY TERMINATION FOR FAILURE TO DEMONSTRATE PROOF OF CONCEPT...............................49
12.4 TERMINATION OF COLLABORATION PRODUCT DEVELOPMENT AND COMMERCIALIZATION.......................50
12.5 DEFAULT......................................................................................54
(a) Wyeth-Ayerst.................................................................................54
(b) Neurocrine...................................................................................57
12.6 BANKRUPTCY...................................................................................58
(a) Neurocrine...................................................................................59
(b) Wyeth-Ayerst.................................................................................59
12.7 ACQUISITION..................................................................................60
12.8 LIABILITIES..................................................................................61
12.9 DISCLAIMER...................................................................................61
ARTICLE THIRTEEN - INTELLECTUAL PROPERTY................................................................61
13.1 INVENTIONS...................................................................................61
13.2 PATENT PROSECUTION...........................................................................62
(a) Wyeth-Ayerst Inventions and Collaboration Products..........................................62
(b) OHSU Licensed Patent Rights..................................................................62
(c) Neurocrine Inventions.......................................................................62
(d) Joint Inventions............................................................................62
13.3 ENFORCEMENT OF PATENT RIGHTS.................................................................62
(a) Wyeth-Ayerst Inventions......................................................................62
(b) Neurocrine Inventions and Joint Inventions................................................63
(c) OHSU Licensed Patent Rights..................................................................63
(d) Neurocrine Technology.....................................................................64
</TABLE>
EXHIBITS
Exhibit A -- TRANSPORTERS
Exhibit B -- LEAD COMPOUND AND PROOF OF CONCEPT
Exhibit C -- PATENT RIGHTS
Exhibit D -- OHSU AGREEMENT
Exhibit E -- THIRD PARTY PATENTS
Exhibit F -- OTHER NEUROCRINE OBLIGATIONS
<PAGE>
COLLABORATION AND LICENSE AGREEMENT
THIS COLLABORATION AND LICENSE AGREEMENT (the "Agreement"), dated as of
January 1, 1999, is made by and between Neurocrine Biosciences, Inc., a Delaware
corporation with its principal place of business at 10555 Science Park Road, San
Diego, California 92121-1102 ("Neurocrine") and American Home Products
Corporation, acting through its Wyeth-Ayerst Laboratories Division, a Delaware
corporation, with a place of business at 555 East Lancaster Avenue St. Davids
Pennsylvania 19087 ("Wyeth-Ayerst").
WHEREAS, Wyeth-Ayerst is engaged in the research, development and
commercialization of human pharmaceutical products;
WHEREAS, Neurocrine is the owner or licensee of certain patent rights
relating to [***] which may be useful in the discovery and development of human
pharmaceutical products;
WHEREAS, Wyeth-Ayerst and Neurocrine have agreed to collaborate, on the
terms and conditions set forth herein, in the research, development and
commercialization of compounds [***] (each as defined below);
NOW, THEREFORE, in consideration of the mutual representations,
warranties and covenants contained herein and other good and valuable
consideration, the Parties agree as follows:
ARTICLE ONE
DEFINITIONS
When used in this Agreement, each of the following capitalized terms
shall have the meanings set forth in this Article One. Any terms defined
elsewhere in this Agreement shall be given equal weight and importance as though
set forth in this Article One.
1.1 "Acquisition" shall mean with respect to Neurocrine, the acquisition,
directly or indirectly, by any Third Party of (i) securities authorized
to cast fifty percent (50%) or more of the votes in any election of
directors and/or (ii) the sale or other transfer of all or
substantially all of its assets. Notwithstanding the foregoing, the
sale or other transfer of substantially all of the assets of Neurocrine
to another direct or indirect wholly-owned subsidiary of Neurocrine
shall not constitute an Acquisition.
1.2 "Affiliate" shall mean a Person that, directly or indirectly, through
one or more intermediates, controls, is controlled by, or is under
common control with the Person specified. For the purposes of this
definition, control shall mean the direct or indirect ownership of, (a)
in the case of corporate entities, securities authorized to cast more
than fifty percent (50%) of the votes in any election for directors or
(b) in the case of non-corporate entities, more than fifty percent
(50%) ownership interest with the power to direct the management and
policies of such non-corporate entity. Notwithstanding the foregoing,
the term "Affiliate" shall not include subsidiaries in which a Party or
its Affiliates owns a majority of the ordinary voting power to elect a
majority of the board of directors, but is restricted from electing
such majority by contract or otherwise, until such time as such
restrictions are no longer in effect.
1.3 "Collaboration Products" shall mean products containing one or more
Lead Compounds as an active ingredient(s), provided, however, that if
(i) none of the Compounds contained in a product are encompassed within
the Collaboration Technology and (ii) such product is not developed by
Wyeth-Ayerst, its Affiliates or sublicensees for any indication in
which the [***] and (iii) identification, development and
commercialization of such product does not utilize Collaboration
Technology, then such product shall not be a Collaboration Product for
purposes of this Agreement. For the purposes of License Fees under
Article Eight below and Royalty payments under Article Nine below, all
formulations (e.g., tablets, gel caps, topical formulations, parenteral
formulations, sustained release formulations, etc.) of a Collaboration
Product will be considered to be the same Collaboration Product,
regardless of the indications for which such Collaboration Product may
be used.
1.4 "Collaboration Technology" shall mean all Technology encompassed by the
Neurocrine Technology, Wyeth-Ayerst Technology and Joint Technology.
1.5 "Combination Product" shall mean a product that contains, as active
ingredients one or more Lead Compounds (or Collaboration Products) and
one or more other Compounds that are not Lead Compounds (or
Collaboration Products).
1.6 "Commercially Reasonable Efforts" shall mean efforts and resources
commonly used by a Party (which efforts will be no less than those used
by such Party in the research and development of its products, as
described below, in the one year period preceding the Effective Date)
for a product owned by it or to which it has rights, which product is
at a similar stage in its development or product life and is of similar
market potential taking into account efficacy, safety, Regulatory
Authority approved labeling, the competitiveness of alternative
products in the marketplace, the patent and other proprietary position
of the product, the likelihood of Regulatory Approval given the
regulatory structure involved, the profitability of the product
including the royalties payable to licensors of patent rights,
alternative products and other relevant factors. Commercially
Reasonable Efforts shall be determined on a market-by-market basis for
a particular product, and it is anticipated that the level of effort
will change over time, reflecting changes in the status of the
Collaboration Product and the market involved.
1.7 "Competition" shall exist during a given calendar quarter with respect
to a Collaboration Product in a county if, during such calendar
quarter, one or more Competitive Products shall be commercially
available in such country and shall have in the aggregate a [***] or
greater share of the total market (based on data provided by IMS
International, or if such data are not available, based on such other
data mutually agreed to by Wyeth-Ayerst and Neurocrine) in that country
as measured by unit sales. For purposes of this agreement, the "total
market" in a country shall be the sum of (x) the number of units of the
affected Collaboration Product sold during such calendar quarter in
such country by Wyeth-Ayerst, its Affiliates and sublicensees and (y)
the number of units of Competitive Products sold in such country during
such calendar quarter.
1.8 "Competitive Products" shall mean and include products (other than
Collaboration Products developed and commercialized by Wyeth-Ayerst
pursuant to this Agreement) that contain principally the same active
chemical entity(ies) as a Collaboration Product and which (a) act
through the same mechanism as a Collaboration Product and (b) can
reasonably be or are reasonably used for the same indication as a
Collaboration Product. Without limitation of the foregoing, compounds
that are of the same general formulation type (i.e., oral vs.
parenteral vs. topical) as a Collaboration Product would generally be
considered Competitive Products while compounds of a different general
formulation type from a Collaboration Product would generally not be
considered Competitive Products unless the compound and Collaboration
Product are reasonably used (other than de minimis usage) for the
treatment of the same indication.
1.9 "Compound" shall mean a chemical compound or substance together with
all complexes, mixtures and other combinations, prodrugs, metabolites,
enantiomers, salt forms, racemates, and isomers thereof.
1.10 "Confidential Information" shall mean with respect to each Party,
non-public proprietary data or information which belong in whole or in
part to such Party and/or information designated as Confidential
Information of such Party hereunder.
1.11 "Controls" or "Controlled" shall mean with respect to Technology, the
possession of the ability to grant licenses or sublicenses without
violating the terms of any agreement or other arrangement with, or the
rights of, any Third Party.
1.12 "Default" shall mean with respect to a Party that (i) any
representation or warranty of such Party set forth herein shall have
been untrue in any material respect when made or (ii) such Party shall
have failed to perform any material obligation set forth in this
Agreement.
1.13 [***] shall be as defined in Exhibit A.
1.14 "Effective Date" shall mean January 1, 1999.
1.15 "European Union" shall mean, from time to time, those countries that
are members of the European Union.
1.16 "FDA" shall mean the Federal Food and Drug Administration of the United
States Department of Health and Human Services or any successor agency
thereof.
1.17 "Field of Use" shall mean all therapeutic, prophylactic and diagnostic
uses.
1.18 "FTE" shall mean full time equivalent scientific person year consisting
of a minimum of a total [***] per year of scientific work on or
directly related to the Research Program. Work on or directly related
to the Research Program can include, but is not limited to,
experimental laboratory work, recording and writing up results,
reviewing literature and references, holding scientific discussions,
managing and leading scientific staff, carrying out management duties
related to the Research Program, and to the extent specifically
approved by Wyeth-Ayerst, writing up results for publications or
presentation and attending or presenting appropriate seminars and
symposia.
1.19 "First Commercial Sale" shall mean with respect to any Collaboration
Product approved for commercial sale, the first transfer by
Wyeth-Ayerst, its Affiliates and/or its sublicensees of the
Collaboration Product to a non-Affiliate Third Party in exchange for
cash or some equivalent to which value can be assigned.
1.20 "Force Majeure" shall mean any occurrence beyond the reasonable control
of a Party that prevents or substantially interferes with the
performance by the Party of any of its obligations hereunder, if such
occurs by reason of any act of God, flood, fire, explosion, earthquake,
strike, lockout, labor dispute, casualty or accident; or war,
revolution, civil commotion, acts of public enemies, blockage or
embargo; or any injunction, law, order, proclamation, regulation,
ordinance, demand or requirement of any government or of any
subdivision, authority or representative of any such government; or
breakdown of plant, inability to procure or use materials, labor,
equipment, transportation, or energy sufficient to meet manufacturing
needs without the necessity of allocation; or any other cause
whatsoever, whether similar or dissimilar to those above enumerated,
beyond the reasonable control of such Party, if and only if the Party
affected shall have used reasonable efforts to avoid such occurrence
and to remedy it promptly if it shall have occurred.
1.21 "Hit(s)" shall mean Compounds derived from the Neurocrine Proprietary
Chemical Library, the Wyeth-Ayerst Proprietary Chemical Library or any
other library selected by the Parties, which are screened in the
conduct of the Research Program and test positive in screening assays
[***]. For the purposes of this definition, the Steering Committee will
determine what shall constitute a positive test with respect to any
screening assays selected for the Research Program and it is
anticipated that, depending on results obtained in the course of the
Research Program, what constitutes a positive test may change from time
to time.
1.22 "Interim Clinical Evaluation Point" or "ICE" shall mean, with respect
to any Collaboration Product, the development milestone indicating
[***], as decided by Wyeth-Ayerst's Development Operating Committee.
[***]. In addition, [***]. Notwithstanding the foregoing, in the event
Wyeth-Ayerst shall make the decision [***], ICE shall be deemed to have
been met.
1.23 "IND" shall mean an Investigational New Drug Application covering a
Collaboration Product filed with the FDA pursuant to 21 CFR 312.20 or
an equivalent foreign filing required for the clinical testing of a
pharmaceutical product.
1.24 "Joint Confidential Information" shall mean Confidential Information
owned jointly by Wyeth-Ayerst and Neurocrine or otherwise designated as
Joint Confidential Information hereunder.
1.25 "Joint Inventions" shall be as defined in Section 13.1 hereof.
1.26 "Joint Technology" shall mean Technology, which is discovered or
invented jointly by Neurocrine personnel and Wyeth-Ayerst personnel
during the term of this Agreement.
1.27 "Lead Compound(s)" shall mean those Compounds (i) [***], (ii) that meet
the criteria set forth on Exhibit B hereto and (iii) that are selected
by the Steering Committee or Wyeth-Ayerst in accordance with Article
Six, provided, however, that Lead Compounds shall specifically exclude
any Compounds [***]. Notwithstanding the foregoing, for purposes of
calculating Net Sales and determining License Fees and Royalty payments
under this Agreement, a Lead Compound together with all complexes,
mixtures and other combinations, prodrugs, metabolites, enantiomers,
salt forms, racemates, isomers, and derivatives thereof, shall be
considered to be a single Lead Compound.
1.28 "License Fees" shall mean the payments to be made by Wyeth-Ayerst to
Neurocrine upon occurrence of certain events as set forth in Article
Eight.
1.29 "Major European Country" shall mean France, Germany, Italy or the
United Kingdom.
1.30 "NDA" shall mean a New Drug Application (or Biologics License
Application, if applicable) covering a Collaboration Product filed with
the FDA pursuant to 21 CFR 314 or an equivalent foreign filing required
for marketing approval of a pharmaceutical product.
1.31 "Net Sales" shall mean, with respect to a Collaboration Product, all
proceeds actually received from the sale or other disposition of a
Collaboration Product by Wyeth-Ayerst, its Affiliates or sublicensees
to unrelated Third Parties, less the reasonable and customary
deductions from such gross amounts actually paid by or charged to the
account of Wyeth-Ayerst, including, without limitation,
(a) trade, cash and quantity discounts actually allowed
and taken directly with respect to such sales;
(b) amounts repaid, credits or allowances actually
granted for damaged goods, defects, recalls, returns
or rejections of Collaboration Product and
retroactive price reductions;
(c) sales or similar taxes actually paid by or charged to
the account of Wyeth-Ayerst, its Affiliates or
sublicensees without offset (including, without
limitation, duties or other governmental charges
levied on, absorbed or otherwise imposed on the sale
of Collaboration Product, value added taxes or other
governmental charges otherwise measured by the
billing amount, when included in billing, but not
including national, state or local taxes based on
income);
(d) charge back payments and rebates granted to (i)
managed health care organizations, (ii) federal,
state and/or local governments or their agencies,
(iii) purchasers and reimbursers, or (iv) trade
customers, including, without limitation, wholesalers
and chain and pharmacy buying groups; and
(e) freight, postage, shipping, customs duties and
insurance charges to the extent included in the
proceeds actually received from the customer.
For the purposes of determining Net Sales hereunder, a sublicensee
shall include a Third Party who, pursuant to an agreement with
Wyeth-Ayerst, distributes Collaboration Products, provided, such Third
Party also, as required by such agreement, conducts promotion and/or
marketing activities in the applicable territory. Net Sales shall be
determined in accordance with United States generally accepted
accounting principles consistently applied. A "sale" shall also include
the transfer or other disposition of a Collaboration Product for
consideration other than cash, in which case such consideration will be
valued at the fair market value thereof. In the event that a
Collaboration Product is sold either for consideration other than cash
or as part of a bundled product, the Net Sales of such Collaboration
Product will be calculated based on the average unit price of such
Collaboration Product when sold (other than as part of a bundle) in
cash transactions in such country. In the event that, on a
country-by-country basis, a Collaboration Product is sold in the form
of a Combination Product, the Net Sales for such Combination Product
will be calculated as follows:
(i) If Wyeth-Ayerst, its Affiliates and/or sublicensees
separately sells, in such country, (x) Collaboration
Products containing as their sole active
ingredient(s) the same Lead Compound(s) as are
contained in such Combination Product and (y) other
products containing as their sole active
ingredient(s) the other active component or
components in such Combination Product, the Net
Sales attributable to such Combination Product shall
be calculated by multiplying actual Net Sales of the
Combination Product by the [***], which
Collaboration Product contains, as the sole active
ingredient(s), the same Lead Compound(s) as are in
such Combination Product and [***], which product(s)
contain, as their sole active ingredient(s) any
other active component or components in the
Combination Product.
(ii) If Wyeth-Ayerst, its Affiliates and/or sublicensees
separately sells, in such country, Collaboration
Products containing as their sole active
ingredient(s) the same Lead Compound(s) as are
contained in such Combination Product but do not
separately sell, in such country, other products
containing as their sole active ingredient(s) the
other active component or components in such
Combination Product, the Net Sales attributable to
such Combination Product shall be calculated by
multiplying the Net Sales of such Combination
Product by the [***], which Collaboration Product
contains, as the sole active ingredient(s), the same
Lead Compound(s) as are in such Combination Product,
[***].
(iii) If Wyeth-Ayerst, its Affiliates and/or sublicensees
do not separately sell, in such country,
Collaboration Products containing as their sole
active ingredient(s) the same Lead Compound(s) as are
contained in such Combination Product, the Net Sales
attributable to such Combination Product shall be
calculated by multiplying the Net Sales of such
Combination Product by the [***].
Notwithstanding the foregoing, Net Sales shall not include any
consideration received by Wyeth-Ayerst, its Affiliates or sublicensees
in respect of the sale, use or other disposition of a Collaboration
Product in a country as part of a clinical trial prior to the receipt
of all Regulatory Approvals required to commence full commercial sales
of such Collaboration Product in such country.
1.32 "Neurocrine Ancillary Transporters" shall mean [***] as defined on
Exhibit A.
1.33 "Neurocrine Compound" shall mean any Compound, which is (a) within the
Neurocrine Proprietary Chemical Library, and (b) is screened under the
Research Program for activity against the Neurocrine Transporters
together with all complexes, mixtures and other combinations, prodrugs,
metabolites, enantiomers, salt forms, racemates, and isomers thereof.
1.34 "Neurocrine Confidential Information" shall mean Confidential
Information owned by Neurocrine or otherwise designated as Neurocrine
Confidential Information hereunder but shall not include Joint
Confidential Information.
1.35 "Neurocrine Invention" shall have the meaning set forth in Section 13.1
hereof.
1.36 "Neurocrine Materials" shall mean Neurocrine proprietary research
materials including, but not limited to, Neurocrine Compounds, the
Neurocrine Proprietary Chemical Library, assays, physical databases of
chemical structures of Compounds in the Neurocrine Proprietary Chemical
Library, reagents and materials derived therefrom. Neurocrine Materials
will not include Research Program Materials. Neurocrine will own
Neurocrine Materials supplied by Neurocrine to Wyeth-Ayerst hereunder.
1.37 "Neurocrine Proprietary Chemical Library" shall mean those Compounds
that Neurocrine, as of the Effective Date owns or Controls, or that
come into Neurocrine's Control during the term of the Research Program.
1.38 "Neurocrine Researcher" shall mean professional researchers and
scientists employed by Neurocrine and having at least a Bachelors
Degree in science and other academic and/or professional credentials
demonstrating reasonably appropriate expertise for the task to be
performed by such Neurocrine Researcher in carrying out the Research
Plan.
1.39 "Neurocrine Technology" shall mean the Neurocrine Compound Technology,
Neurocrine Ancillary Transporter Technology and the Neurocrine
Transporter Technology, each as defined below.
(a) "Neurocrine Compound Technology" shall mean all
Technology (other than Joint Technology) owned or
Controlled by Neurocrine on the Effective Date and/or
during the term of this Agreement, which (i) claims
or describes Lead Compounds and/or Collaboration
Products and/or (ii) is developed, discovered or
invented by Neurocrine in the conduct of the Research
Program and/or (iii) is necessary or useful to
develop, make, use or sell Lead Compounds and/or
Collaboration Products.
(b) "Neurocrine Ancillary Transporter Technology" shall
mean all Technology (other than Joint Technology)
owned or Controlled by Neurocrine on the Effective
Date or during the term of the Research Program that
claims, describes or relates to the use of the
Neurocrine Ancillary Transporters.
(c) "Neurocrine Transporter Technology" shall mean all
Technology (other than Joint Technology) owned or
Controlled by Neurocrine on the Effective Date or
during the term of the Research Program that claims,
describes or relates to the use of the Neurocrine
Transporters. Neurocrine Transporter Technology will
specifically include, without limitation, the Patent
Rights set forth on Exhibit C hereto.
1.40 "Neurocrine Transporters" shall mean [***] as defined on Exhibit A.
1.41 "OHSU Agreement" shall mean the Amended and Restated License Agreement
dated January 1, 1999 by and between Oregon Health Sciences University
("OHSU") and Neurocrine (a complete copy of which has been provided to
and approved by Wyeth-Ayerst prior to the date this Agreement was
signed by the Parties and which is attached hereto as Exhibit D), as
such agreement may be amended from time to time (subject to the consent
of Wyeth-Ayerst to the extent required under the Agreement dated
January 1, 1999 by and among OHSU, Wyeth-Ayerst and Neurocrine.)
1.42 "Party" shall mean Wyeth-Ayerst or Neurocrine, as the case may be, and
"Parties" shall mean Wyeth-Ayerst and Neurocrine.
1.43 "Patent Rights" shall mean the rights and interests in and to all
issued patents and pending patent applications in any country,
including, without limitation, all provisional applications,
substitutions, continuations, continuations-in-part, divisions, and
renewals, all letters patent granted thereon, and all
patents-of-addition, reissues, reexaminations and extensions or
restorations by existing or future extension or restoration mechanisms,
including, without limitation Supplementary Protection Certificates or
the equivalent thereof.
1.44 "Person" shall mean any individual, firm, corporation, partnership,
limited liability company, trust, unincorporated organization or other
entity or a government agency or political subdivision thereto, and
shall include any successor (by merger or otherwise) of such Person.
1.45 "Pivotal Trial" shall mean clinical trial which, if the pre-defined
endpoints are met, is intended to be submitted as part of an
application for marketing approval as statistically significant data in
support of the product's safety and efficacy for the intended
indication.
1.46 "Prior Agreement" shall mean the agreement dated August 15, 1996 by and
between Northwest NeuroLogic, Inc. and Wyeth-Ayerst, as amended.
1.47 "Proof of Concept" shall mean, with respect to either of the Neurocrine
Transporters, the successful achievement of both the in vitro Proof of
Concept and the in vivo Proof of Concept criteria for such Neurocrine
Transporter, as set forth in Exhibit B.
1.48 "Regulatory Approval" shall mean the technical, medical and scientific
licenses, registrations, authorizations and approvals (including,
without limitation, approvals of NDAs, supplements and amendments, pre-
and post- approvals, pricing and third party reimbursement approvals,
and labeling approvals) of any national, supra-national, regional,
state or local regulatory agency, department, bureau, commission,
council or other governmental entity, necessary for the development,
manufacture, distribution, marketing, promotion, offer for sale, use,
import, export or sale of Lead Compounds or Collaboration Product(s) in
a regulatory jurisdiction.
1.49 "Regulatory Authority" shall mean any national (e.g., the FDA),
supra-national (e.g., the European Commission, the Council of the
European Union, or the European Agency for the Evaluation of Medicinal
Products), regional, state or local regulatory agency, department,
bureau, commission, council or other governmental entity in each
country of the Territory involved in the granting of Regulatory
Approval for a Lead Compound or a Collaboration Product.
1.50 "Regulatory Filings" shall mean, collectively, INDs, Biologics License
Applications, Drug Master Files, NDAs and/or any other comparable
filings as may be required by Regulatory Authorities to obtain
Regulatory Approvals.
1.51 "Research Plan" will be as defined in Section 5.3 below.
1.52 "Research Program" shall mean the collaborative research program
conducted by Neurocrine and Wyeth-Ayerst and funded, in part, by
Wyeth-Ayerst in accordance with the provisions of Article Five below.
1.53 "Research Program Funding" will be as defined in Section 5.5 below.
1.54 "Research Program Materials" shall mean and include clones, cell lines,
Compounds, assays, databases, electronic and physical databases of
chemical structures which, in each case, are developed by Neurocrine
and/or Wyeth-Ayerst during the course of conduct of the Research
Program. Research Program Materials also will include the Neurocrine
Transporters and Neurocrine Ancillary Transporters and clones, cell
lines and other materials encompassing, expressing, and/or containing
the Neurocrine Transporters and/or Neurocrine Ancillary Transporters.
1.55 "Royalties" shall mean those royalties payable by Wyeth-Ayerst to
Neurocrine pursuant to Article Nine of this Agreement.
1.56 "Steering Committee" shall have the meaning set forth in Section 4.1
hereof.
1.57 "Technology" shall mean proprietary data, information and all
intellectual property, including but not limited to, trade secrets,
know-how, inventions and technology, whether patentable or not, and
Patent Rights directed to products, processes, formulations and/or
methods.
1.58 "Third Party(ies)" shall mean any Person other than Neurocrine,
Wyeth-Ayerst and their respective Affiliates.
1.59 "Third Party Royalties" shall mean royalties payable by Neurocrine,
Wyeth-Ayerst, its Affiliates or sublicensees to a non-Affiliate Third
Party (or multiple non-Affiliate Third Parties) to make, have made,
use, sell, offer for sale or import Collaboration Products where the
royalty payable to such non-Affiliate Third Party is based on Patent
Rights owned or Controlled by such Third Party.
1.60 "Unpatented Product" shall mean a Collaboration Product the making,
using or sale of which is not claimed or described in at least one
Valid Claim included in the Collaboration Technology.
1.61 "Valid Claim" shall mean a claim of an issued and unexpired patent or a
claim of a pending patent application which has not been held invalid
or unenforceable by a court or other government agency of competent
jurisdiction from which no appeal can be or has been taken and has not
been admitted to be invalid or unenforceable through re-examination or
disclaimer or otherwise, provided, however, that if a claim of a
pending patent application shall not have issued within [***] after the
filing date from which such claim takes priority such claim shall not
constitute a Valid Claim for the purposes of this Agreement.
1.62 "Wyeth-Ayerst Compound" shall mean any Compound (a) which is within the
Wyeth-Ayerst Proprietary Chemical Library and (b) which is screened
under the Research Program or by Wyeth-Ayerst under this Agreement for
activity against a Neurocrine Transporter together with all complexes,
mixtures and other combinations, prodrugs, metabolites, enantiomers,
salt forms, racemates, and isomers thereof.
1.63 "Wyeth-Ayerst Confidential Information" shall mean Confidential
Information owned by Wyeth-Ayerst or otherwise designated as
Wyeth-Ayerst Confidential Information hereunder but shall not include
Joint Confidential Information.
1.64 "Wyeth-Ayerst Invention" shall have the meaning set forth in Section
13.1 hereof.
1.65 "Wyeth-Ayerst Materials" shall mean Wyeth-Ayerst proprietary research
materials including, but not limited to, Wyeth-Ayerst Compounds, the
Wyeth-Ayerst Proprietary Chemical Library, assays, physical databases
of chemical structures of Compounds in the Wyeth-Ayerst Proprietary
Chemical Library, reagents and materials derived therefrom.
Wyeth-Ayerst Materials will not include Research Program Materials.
Wyeth-Ayerst will own Wyeth-Ayerst Materials provided to Neurocrine
hereunder.
1.66 "Wyeth-Ayerst Proprietary Chemical Library" shall mean those Compounds
that Wyeth-Ayerst, as of the Effective Date, owns or Controls, or that
come into Wyeth-Ayerst's Control during the term of this Agreement, and
any other Compounds not Controlled by Wyeth-Ayerst, but which
Wyeth-Ayerst has the right to develop and commercialize, including,
without limitation, the right to screen such Compounds for activity
against the Neurocrine Transporters without violating the terms of any
agreement between Wyeth-Ayerst and a Third Party.
1.67 "Wyeth-Ayerst Technology" shall mean all Technology (other than Joint
Technology) owned or Controlled by Wyeth-Ayerst on the Effective Date
and/or during the term of this Agreement (a) which relates specifically
to, claims or describes Lead Compounds and/or Collaboration Products
and/or (b) is developed, discovered or invented by Wyeth-Ayerst in the
conduct of the Research Program, (c) is developed, discovered or
invented by Wyeth-Ayerst personnel directly resulting from the use of
Neurocrine Technology or Joint Technology and/or (d) is necessary or
useful to make, use or sell Lead Compounds and/or Collaboration
Products.
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES
2.1 Mutual Representations and Warranties. Each Party hereby represents,
warrants and covenants to the other Party that:
(a) the execution, delivery to the other Party and performance by
it of this Agreement and its compliance with the terms and
provisions of this Agreement does not and will not conflict,
in any material respect, with or result in a breach of any of
the terms or provisions of (x) any other contractual
obligations of such Party, (y) the provisions of its charter,
operating documents or bylaws, or (z) any order, writ,
injunction or decree of any court or governmental authority
entered against it or by which it or any of its property is
bound except where such breach or conflict would not
materially impact the Party's ability to meet its obligations
hereunder, and (ii) it has not granted to any Third Party any
right which would conflict in any material respect with the
rights granted by it to the other Party hereunder;
(b) this Agreement is a legal and valid obligation binding upon
such Party and enforceable in accordance with its terms except
as (i) enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights and (ii)
equitable principles of general applicability;
(c) such Party is a corporation duly organized, validly existing
and in good standing under the laws of the state or other
jurisdiction of incorporation or formation and has full
corporate power and authority to enter into this Agreement and
to carry out the provisions hereof except where failure to be
in good standing would not materially impact the Party's
ability to meet its obligations hereunder;
(d) such Party is duly authorized, by all requisite corporate
action, to execute and deliver this Agreement and the
execution, delivery and performance of this Agreement by such
Party does not require any shareholder action or approval, and
the Person executing this Agreement on behalf of such Party is
duly authorized to so by all requisite corporate action; and
(e) no consent, approval, order or authorization of, or
registration, qualification, designation, declaration or
filing with, any federal, state or local governmental
authority is required on the part of such Party in connection
with the valid execution, delivery and performance of this
Agreement, except for any filings under any applicable
securities laws and except where the failure to obtain any of
the foregoing would not have a material adverse impact on the
ability of such Party to meets its obligations hereunder.
2.2 Additional Neurocrine Representations, Warranties and Covenants.
Neurocrine represents, warrants and covenants to Wyeth-Ayerst that:
(a) it has the full right, power and authority to grant the
licenses granted to Wyeth-Ayerst under Article Three hereof;
(b) all Patent Rights included within the Neurocrine Transporter
Technology and/or the Neurocrine Ancillary Transporter
Technology which are existing as of the Effective Date are
listed on Exhibit C attached hereto and, as of the Effective
Date, the Patent Rights included within the Neurocrine
Technology are existing and, to its knowledge, are not invalid
or unenforceable, in whole or in part;
(c) except as disclosed to Wyeth-Ayerst in writing and except for
the nonexclusive licenses granted to Neurocrine pursuant to
Article Three of the OHSU Agreement or retained by OHSU,
Howard Hughes Medical Institute and the United States
Government pursuant to Article Five of the OHSU License
Agreement, to its knowledge (i) it is the sole and exclusive
owner or the exclusive licensee of the Neurocrine Technology,
including, without limitation, all Patent Rights included
therein, and (ii) no Person (except OHSU, the Howard Hughes
Medical Institute and the United States Government with
respect to those Patent Rights licensed to Neurocrine under
the OHSU Agreement), has any right, title or interest in or to
the Neurocrine Technology;
(d) except as disclosed to Wyeth-Ayerst in writing, to its
knowledge (i) all inventors (who are known as of the date this
Agreement is signed by each of the Parties) of any inventions
included within the Neurocrine Technology have assigned their
entire right, title and interest in and to such inventions and
the corresponding Patent Rights to Neurocrine or, in the case
of inventions and Patent Rights licensed by Oregon Health
Sciences University to Neurocrine, to Oregon Health Sciences
University, and (ii) no Person, other than those Persons named
as inventors on any patent or patent application included
within the Neurocrine Technology, is an inventor of the
invention(s) claimed in such patent or patent application;
(e) except as disclosed to Wyeth-Ayerst in writing, to
Neurocrine's knowledge, OHSU has (i) complied with all of its
obligations under applicable United States Government laws and
regulations with respect to any inventions included within the
Neurocrine Technology which inventions are subject inventions
of a funding agreement between OHSU and the United States
Government or any agency thereof and (ii) elected to retain
title to any such invention as provided in 37 CFR Part 401;
(f) as of the date this Agreement is signed by each of the
Parties, there are no claims, judgments or settlements against
or owed by Neurocrine or, to its knowledge, pending or
threatened claims or litigation relating to the Neurocrine
Technology and during the term of this Agreement Neurocrine
shall promptly notify Wyeth-Ayerst in writing, upon learning
of any such actual or threatened claim, judgment or
settlement;
(g) during the term of this Agreement Neurocrine will use
Commercially Reasonable Efforts not to diminish the rights
under the Neurocrine Technology provided, however, that
termination of the OHSU Agreement (i) by reason of the failure
by Wyeth-Ayerst, as a sublicensee thereunder, to meet
obligations set forth in Articles Nine and Ten thereof or any
other obligations of a sublicensee thereunder or (ii) by
reason of any default by Wyeth-Ayerst hereunder, shall not, in
either instance, constitute a breach of this subparagraph (g);
(h) except as set forth on Exhibit E, as of the date this
Agreement is signed by each of the Parties, it is not aware of
any patent, patent application or other intellectual property
right of any Third Party which could materially adversely
affect the ability of either Party to carry out its respective
obligations hereunder or the ability of Wyeth-Ayerst to
exercise or exploit any of the rights or licenses granted to
it under this Agreement;
(i) except as set forth on Exhibit F hereof, the terms of this
Agreement do not conflict in any material respect with the
terms of any other Neurocrine obligations; and
(j) it has no knowledge of any material information, other than
information provided to Wyeth-Ayerst in writing prior to the
signing of this Agreement, which would negatively affect the
ability of Wyeth-Ayerst to use the Neurocrine Transporters or
the Neurocrine Ancillary Transporters.
2.3 Representation by Legal Counsel. Each Party hereto represents that it
has been represented by legal counsel in connection with this Agreement
and acknowledges that it has participated in the drafting hereof. In
interpreting and applying the terms and provisions of this Agreement,
the Parties agree that no presumption shall exist or be implied against
the Party which drafted such terms and provisions.
2.4 Neurocrine Disclaimer. EXCEPT AS EXPRESSLY PROVIDED IN SECTIONS 2.1 AND
2.2 HEREOF, NEUROCRINE MAKES NO OTHER REPRESENTATION OR WARRANTY,
EITHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO ANY NEUROCRINE MATERIALS, INCLUDING WITHOUT LIMITATION, THE
NEUROCRINE TRANSPORTERS AND NEUROCRINE ANCILLARY TRANSPORTERS.
ADDITIONALLY, NEUROCRINE MAKES NO REPRESENTATION OR WARRANTY, EITHER
EXPRESS OR IMPLIED, THAT THE MANUFACTURE, USE OR SALE OF ANY LEAD
COMPOUND OR COLLABORATION PRODUCT WILL NOT INFRINGE THE INTELLECTUAL
PROPERTY RIGHTS OF ANY THIRD PARTY.
2.5 Wyeth-Ayerst Disclaimer. EXCEPT AS EXPRESSLY PROVIDED IN SECTION 2.1
HEREOF, WYETH-AYERST MAKES NO OTHER REPRESENTATION OR WARRANTY, EITHER
EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO ANY
WYETH-AYERST MATERIALS, ANY LEAD COMPOUND OR ANY COLLABORATION PRODUCT.
ADDITIONALLY, WYETH-AYERST MAKES NO REPRESENTATION OR WARRANTY, EITHER
EXPRESS OR IMPLIED THAT THE DISCOVERY, DEVELOPMENT, MANUFACTURE, USE OR
SALE OF ANY LEAD COMPOUND OR COLLABORATION PRODUCT WILL NOT INFRINGE
THE INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY.
ARTICLE THREE
LICENSES
3.1 License Grant to Wyeth-Ayerst. Except as set forth in Section 3.3
below, Neurocrine hereby grants to Wyeth-Ayerst:
(a) the sole and exclusive worldwide right and license, with no
right to sublicense (except (i) to Wyeth-Ayerst's Affiliates
and (ii) to any sublicensee of a Lead Compound and/or
Collaboration Product in so far as reasonably necessary for
such sublicensee to develop such Lead Compound and/or
Collaboration Product), under both the Neurocrine Technology
and Neurocrine's interest in any Joint Technology, to use the
Neurocrine Transporters for the identification and/or
development of Lead Compounds and Collaboration Products in
the Field of Use;
(b) the sole and exclusive worldwide right and license, with the
right to sublicense to Affiliates of Wyeth-Ayerst and/or one
or more Third Parties, under both the Neurocrine Technology
and Neurocrine's interest in any Joint Technology, to make,
have made, use, import, market, offer for sale and sell Lead
Compounds and Collaboration Products in the Field of Use;
(c) during the term of the Research Program, the sole and
exclusive right and license, with no right to sublicense
(except to Wyeth-Ayerst's Affiliates), under both the
Neurocrine Ancillary Transporter Technology and Neurocrine's
interest in any Joint Technology, to use the Neurocrine
Ancillary Transporters for the [***] of Lead Compounds and
Collaboration Products;
(d) after the term of the Research Program, a non-exclusive right
and license, with no right to sublicense (except to
Wyeth-Ayerst's Affiliates), under the Neurocrine Ancillary
Transporter Technology to use the Neurocrine Ancillary
Transporters for the [***] of Lead Compounds and Collaboration
Products;
(e) during the term of this Agreement, a nonexclusive right and
license, with no right to sublicense (except (i) to
Wyeth-Ayerst Affiliates and (ii) to any sublicensee of a Lead
Compound and/or Collaboration Product in so far as reasonably
necessary for such sublicensee to develop such Lead Compound
and/or Collaboration Product), to use all data and information
generated by or on behalf of Neurocrine in the conduct of the
Research Program, including data relating to Hits in the
Neurocrine Proprietary Chemical Library, but only as shall be
reasonably necessary for Wyeth-Ayerst to conduct research to
identify and develop Lead Compounds and Collaboration
Products, provided, however, that such license shall become
sole and exclusive when a Compound is designated a Lead
Compound in accordance with Article Six and shall revert to a
non-exclusive license upon determination of the Steering
Committee or Wyeth-Ayerst that such Lead Compound will not
become a Collaboration Product;
(f) during the term of this Agreement, an exclusive right and
license, with the right to sublicense, to use all data and
information generated by or on behalf of Neurocrine in the
conduct of the Research Program relating to Lead Compounds
and/or Collaboration Products in the Neurocrine Proprietary
Chemical Library, but only as shall be reasonably necessary
for Wyeth-Ayerst to conduct research to identify and develop
Lead Compounds and Collaboration Products; and
(g) during the term of this Agreement, a non-exclusive right and
license, with no right to sublicense (except (i) to
Wyeth-Ayerst's Affiliates and (ii) to any sublicensee of a
Lead Compound and/or Collaboration Product in so far as
reasonably necessary for such sublicensee to develop such Lead
Compound and/or Collaboration Product), to use the Neurocrine
Materials but only to the extent that such right and license
shall be necessary for Wyeth-Ayerst to identify and develop
Lead Compounds and Collaboration Products.
3.2 License Grant to Neurocrine. Wyeth-Ayerst hereby grants to Neurocrine
for the term of the Research Program (i) a non-exclusive right and
license, with no right to sublicense, under the Wyeth-Ayerst Technology
to the extent that such right and license shall be necessary for
Neurocrine to perform its obligations under the Research Program, and
(ii) a non-exclusive right and license, with no right to sublicense, to
use the Wyeth-Ayerst Materials but only to the extent that such right
and license shall be necessary for Neurocrine to perform its
obligations under the Research Program and (iii) a nonexclusive right
and license to use all data and information generated in the conduct of
the Research Program, including data relating to Hits in the
Wyeth-Ayerst Proprietary Chemical Library, but only as shall be
reasonably necessary for Neurocrine to perform its obligations under
the Research Program.
3.3 Neurocrine Retained Rights. The exclusive licenses granted to
Wyeth-Ayerst in Section 3.1 above, shall be subject to the retention by
Neurocrine of a nonexclusive right and license, with no right to
sublicense, in each case, to the extent necessary for Neurocrine to
perform its obligations under the Research Program hereunder. Subject
to the licenses granted to Wyeth-Ayerst in Section 3.1 above, nothing
herein shall be deemed to restrict Neurocrine's right to otherwise
exploit the Neurocrine Technology to develop products other than Lead
Compounds and Collaboration Products including, without limitation,
Neurocrine's right to use and sublicense the use of the Neurocrine
Transporters to conduct selectivity testing with respect to products
(other than Lead Compounds and Collaboration Products) being developed
by Neurocrine or is corporate partners or sublicensees.
3.4 Prior Agreement. This Agreement supersedes the Prior Agreement and all
Compounds which may have been identified under the Prior Agreement will
be governed solely by the terms and conditions of this Agreement.
3.5 OHSU Agreement. Patent Rights licensed to Neurocrine pursuant to the
OHSU Agreement (the "Sublicensed Rights") are included in the
Neurocrine Technology licensed to Wyeth-Ayerst hereunder. Wyeth-Ayerst
has approved the terms of the OHSU Agreement and the Parties agree that
the terms of the OHSU Agreement are consistent with the terms of this
Agreement and no conflict exist with respect to Neurocrine's
obligations under this Agreement and Neurocrine's obligations under the
OHSU Agreement. Wyeth-Ayerst will have all of the rights set forth in
that agreement to be afforded to Neurocrine's sublicensee of any
technology licensed thereunder including, without limitation, in the
event of a termination of the OHSU Agreement, the right under Section
4.03 thereof, to enter into a license, with respect to the Sublicensed
Rights, directly with OHSU which license would be on the same terms and
conditions as the OHSU Agreement. In the event that Wyeth-Ayerst enters
into such a license with OHSU, (i) [***] of any payments made by
Wyeth-Ayerst to OHSU under Paragraph 6.02 thereof (including payments
creditable against payments owed under Section 6.02 thereof) and (ii)
[***] of other payments thereunder shall in each case be deducted from
any payments that Wyeth-Ayerst remains obligated or thereafter becomes
obligated to make to Neurocrine under this Agreement. Neurocrine agrees
that it will not modify or amend the OHSU Agreement, insofar as any
such amendment or modification will have any impact on any of the
rights or obligations of Wyeth-Ayerst under this Agreement or any
agreement entered into between Wyeth-Ayerst and OHSU in accordance with
this Section 3.5, without Wyeth-Ayerst's prior written consent which
consent (i) may be provided or withheld by Wyeth-Ayerst in
Wyeth-Ayerst's sole discretion in the case of any modification that
would negatively impact any such rights or obligations of Wyeth-Ayerst,
including, without limitation, any increase in payments to be made by
Wyeth-Ayerst, any increase in diligence obligations, or any
modification of the exclusivity of the Sublicensed Rights, or (ii) will
not be unreasonably withheld by Wyeth-Ayerst in the case of any
modification that would not negatively impact any such rights or
obligations of Wyeth-Ayerst. Neurocrine further agrees that it will
promptly provide Wyeth-Ayerst with copies of any notices it receives
from or gives to OHSU pertaining to any termination or threatened
termination of the OHSU Agreement.
ARTICLE FOUR
STEERING COMMITTEE
4.1 Creation; Authority. Immediately following the signing of this
Agreement, Wyeth-Ayerst and Neurocrine will establish a steering
committee (the "Steering Committee") consisting of at least three (3)
members from each of Wyeth-Ayerst and Neurocrine with Wyeth-Ayerst and
Neurocrine having equal representation at all times. The Steering
Committee will be responsible for monitoring and reviewing the
implementation of the Research Plan by the Parties and for determining
the mechanisms for exchange of information and materials between the
Parties. From time to time, the Steering Committee may establish
subcommittees to oversee specific projects or activities and such
subcommittees shall be constituted as the Steering Committee shall
determine. The Steering Committee will exist until the termination of
the Research Program unless the Parties otherwise agree in writing.
4.2 Chairperson. The chairperson of the Steering Committee shall be
designated by Wyeth-Ayerst. The chairperson will be responsible for
scheduling meetings of the Steering Committee, preparing agendas for
meetings, sending to all Steering Committee members notices of all
regular meetings and agendas for such meetings. The chairperson shall
appoint a secretary for each meeting who will record the minutes of the
meeting, circulate copies of meeting minutes to the Parties and each
Steering Committee member promptly following the meeting for review,
comment and approval and finalize approved meeting minutes.
4.3 Meetings. The Steering Committee shall meet at least once each calendar
quarter and may meet at additional times as the Parties shall agree.
Either Party may call a special meeting of the Steering Committee two
(2) times per year, on fifteen(15) days written notice to the other
Party. The Party convening a special meeting shall send notices and
agenda for such meetings to the other Party and to each Steering
Committee member. Meetings will alternate between the offices of the
Parties, unless otherwise agreed, or may be held telephonically or by
video-conference. Members of the Committee shall have the right to
participate in and vote at meetings by telephone and to vote at
meetings by proxy. Each Party shall be responsible for expenses
incurred by its employees and its members of the Steering Committee
incurred in attending or otherwise participating in Steering Committee
meetings.
4.4 Decisions of the Committee. The goal of the Parties' collaboration
shall be the timely identification and development of Lead Compounds
and Collaboration Products for commercialization in the Field of Use.
All decisions of the Steering Committee shall be made by majority vote,
with at least one (1) member from each Party voting with the majority,
in the exercise of good faith to further the goal of the Collaboration.
In the event that a decision cannot be reached by the Steering
Committee, the matter shall be referred to further review and
resolution by the Chief Executive Officer of Neurocrine and President
of Wyeth-Ayerst Research as set forth in Section 14.1.
ARTICLE FIVE
COLLABORATIVE RESEARCH PROGRAM AND RESEARCH FUNDING
5.1 Research Program. Under the terms and conditions set forth herein,
Wyeth-Ayerst and Neurocrine will exclusively collaborate in the conduct
of a collaborative pre-clinical research program (the "Research
Program") to discover, identify and develop modulators of the
Neurocrine Transporters for the treatment of central nervous system
disorders, [***]. The Research Program will be focused on the screening
of the Wyeth-Ayerst Proprietary Chemical Library and Neurocrine
Proprietary Chemical Library and any other library selected by mutual
agreement of the Parties for the identification of Hits, a medicinal
chemistry program for the development of Lead Compound candidates,
screening and testing of Lead Compound candidates to identify Lead
Compounds and further preclinical research and screening of Lead
Compounds to select Collaboration Products for development and
commercialization by Wyeth-Ayerst.
5.2 Term. The initial term of the Research Program will be three (3) years
unless earlier terminated in accordance with Article Twelve hereof. The
initial term of the Research Program will begin on January 1, 1999.
Upon the expiration of the initial three (3) year term, the term of the
Research Program may, upon mutual written agreement of the Parties, be
extended for [***] extension terms on substantially the same terms as
those set forth herein. Notwithstanding the foregoing, in the event
that at the end of the initial term of the Research Program, [***] and
the Steering Committee or Wyeth-Ayerst has determined that significant
additional [***] should be conducted and the Steering Committee
determines that such additional [***] justifies extending the Research
Program by an additional [***], the Parties will extend the term of the
Research Program [***], provided, however, that in no event will
Wyeth-Ayerst be obligated to fund more than [***] Neurocrine Researcher
FTEs (at a rate of [***]) during [***].
5.3 Research Plan. Within thirty (30) days following the date this
Agreement is signed by each of the Parties and on an annual basis on or
before October 31 of each year thereafter, the Steering Committee shall
develop and approve, a research plan and budget for the collaborative
Research Program (the "Research Plan"). The Research Plan will be
updated on an annual basis and shall specifically include both detailed
plans for the following year including staffing levels, activities and
estimated expenditures as well as more general plans for the remaining
term of the Research Program. The Research Plan may only be modified or
amended upon the written approval of the Steering Committee. Except as
expressly set forth in Section 5.5 below, each Party shall be
responsible for its own costs and expenses incurred in their conduct of
the Research Program.
5.4 Conduct of the Research Program. Neurocrine and Wyeth-Ayerst shall each
use Commercially Reasonable Efforts to perform its obligations under
the Research Program in accordance with the Research Plan.
Notwithstanding, the foregoing, during the term of the Research
Program, Neurocrine shall apply an average of at least [***] Neurocrine
Researcher FTEs per year in performing its obligations under the
Research Program, which minimum number of Neurocrine Researcher FTEs
shall be increased to [***] upon the successful completion of the first
[***] (according to the criteria set forth in Exhibit B, Part 2(a))
[***] Lead Compound (as defined in Exhibit B attached hereto) and to
[***] upon the successful completion of the first [***] (according to
the criteria set forth in Exhibit B, Part 2(b)) of [***] Lead Compound,
provided, however, that neither increase shall become effective prior
to the beginning of the [***] of the Research Program. While it is
anticipated that Neurocrine and Wyeth-Ayerst will each devote to the
Research Program efforts consistent with the goals set forth in the
Research Plan, in no event will Neurocrine's failure to devote to the
Research Program more than the number of Neurocrine Researcher FTEs
funded by Wyeth-Ayerst pursuant to Section 5.5 below, in and of itself,
constitute a failure by Neurocrine to use Commercially Reasonable
Efforts to conduct the Research Program. In addition, the Parties have
agreed that the Research Plan will at all times allocate to Neurocrine
sufficient responsibilities to allow Neurocrine to devote to the
Research Program, the number of Neurocrine Researcher FTEs funded by
Wyeth-Ayerst hereunder.
5.5 Funding of the Research Program.
(a) Funding by Wyeth-Ayerst. During the initial term of the
Research Program, Wyeth-Ayerst will provide to Neurocrine the
funds in the amount of [***] per calendar quarter, which funds
are to be used by Neurocrine solely to fund the conduct of the
Research Program by [***] Neurocrine Researcher FTEs. The
funding amount set forth in the preceding sentence shall be
increased to [***] per calendar quarter upon the successful
completion of the first [***] (according to the criteria set
forth in Exhibit B, Part 2(a)) [***] Lead Compound which funds
are to be used by Neurocrine solely to fund the conduct of the
Research Program by [***] Neurocrine Researcher FTEs and to
[***] per calendar quarter upon the successful completion of
the [***] (according to the criteria set forth in Exhibit B,
Part 2(b)) of [***] Lead Compound [***] which funds are to be
used by Neurocrine solely to fund the conduct of the Research
Program by [***] Neurocrine Researcher FTEs, provided,
however, that (i) neither increase shall become effective
prior to [***] of the Research Program and (ii) subject to
clause (i) above, each such increase shall become effective on
the first day of the calendar quarter following the calendar
quarter in which the event resulting in such increase occurs.
Wyeth-Ayerst will provide the funding set forth in this
Section 5.5(a) to Neurocrine [***] during the term of the
Research Program, provided however, that the first payment
will be due on [***] business day following the date the
Parties shall have both signed this Agreement.
(b) Reporting and Reconciliation. Within thirty (30) days after
the end of each calendar quarter during the term of the
Research Program, Neurocrine will provide to Wyeth-Ayerst a
report setting forth the number of Neurocrine Researcher FTEs
devoted to the Research Program in such calendar quarter along
with their names and titles. In the event that Neurocrine
shall, in any calendar quarter, devote to the conduct of the
Research Program fewer than the number of Neurocrine
Researcher FTEs funded by Wyeth-Ayerst for the such calendar
quarter as required under Section 5.4 hereof, Neurocrine shall
in good faith endeavor to devote, at its own expense,
additional Neurocrine Researcher FTEs to the conduct of the
Research Program in subsequent calendar quarters to make up
for the shortfall. If, despite Neurocrine's good faith efforts
to make up any shortfall in number of Neurocrine Researcher
FTEs devoted to the Research Program versus the funded number
of Neurocrine Researcher FTEs set forth in Section 5.5, it is
determined at the end of the term of the Research Program that
Neurocrine has, over the life of the Research Program,
utilized less than the number of Neurocrine Researcher FTEs
funded by Wyeth-Ayerst hereunder, Neurocrine shall within
thirty (30) days after such determination refund to
Wyeth-Ayerst the excess Research Program funding provided to
Neurocrine under Section 5.5(a) above, which refund shall be
equal to [***] multiplied by the difference between (x) the
number (in the aggregate) of Neurocrine Researcher FTEs that
were funded by Wyeth-Ayerst [***] Research Program in
accordance with Section 5.5 and (y) the actual number of
Neurocrine Researcher FTEs, in the aggregate, that were
devoted to the Research Program [***] Research Program. For
example, if the number of Neurocrine Researcher FTEs funded by
Wyeth-Ayerst [***] of the Research Program was [***] and
Neurocrine, in fact, only utilized [***] Neurocrine Researcher
FTEs [***] of the Research Program, Neurocrine would refund
[***] to Wyeth-Ayerst.
(c) Records and Audits. During the term of the Research Program
and for a period of three (3) years thereafter, Neurocrine
shall keep and maintain accurate and complete records showing
the time devoted and activities performed by each Neurocrine
Researcher in performing Neurocrine's obligations under the
Research Program in sufficient detail such that the number of
Neurocrine Researcher FTEs applied to the Research Program
during each calendar quarter thereof can be accurately
determined. Upon fifteen (15) days prior written notice from
Wyeth-Ayerst, Neurocrine shall permit an independent certified
public accounting firm of nationally recognized standing
selected by Wyeth-Ayerst and reasonably acceptable to
Neurocrine, to examine the relevant books and records of
Neurocrine and its Affiliates as may be reasonably necessary
to verify the accuracy of the reports submitted to
Wyeth-Ayerst under Section 5.5(b) hereof and the number of
Neurocrine Researcher FTEs applied to the performance of
Neurocrine's obligations under the Research Program. An
examination under this Section 5.5(c) shall not occur more
than once in any calendar year and no such examination may be
conducted more than eighteen (18) months after the expiration
or earlier termination of the Research Program. The accounting
firm shall provide both Neurocrine and Wyeth-Ayerst a written
report disclosing whether the reports submitted by Neurocrine
are correct or incorrect and the specific details concerning
any discrepancies. No other information shall be provided to
Wyeth-Ayerst.
5.6 Invention Assignment Agreements. Each Neurocrine Researcher and each
scientist of Wyeth-Ayerst conducting the Research Program will have
executed Neurocrine's or Wyeth-Ayerst's, as the case may be, standard
non-disclosure and invention assignment agreement.
5.7 Reporting and Disclosure.
(a) Reports. Prior to each quarterly meeting of the Steering
Committee, Neurocrine and Wyeth-Ayerst will each provide the
other with written copies of all materials they intend to
present at the Steering Committee meeting plus, to the extent
not set forth in the Steering Committee materials, a written
report summarizing any other material data and information
arising out of the conduct of the Research Program. In the
event that after receipt of any such report, either Party
shall request additional data or information relating to
Research Program data or Collaboration Technology licensed
hereunder, the Party to whom such request is made shall
promptly provide to the other Party such data or information
that such Party reasonably believes is necessary for the
continued conduct of the Research Program.
(b) Quarterly Meetings. At the quarterly meetings of the Steering
Committee, Wyeth-Ayerst and Neurocrine will review in
reasonable detail (i) all data and information generated in
the conduct of the Research Program by each Party, and (ii)
all Collaboration Technology licensed hereunder developed by
the Parties.
(c) Disclosure. During the term of the Research Program, the
Parties will promptly disclose to one another all data,
information, inventions, techniques and discoveries (whether
patentable or not) arising out of the conduct of the Research
Program and all inventions, techniques and discoveries
(whether patentable or not) included in Collaboration
Technology licensed hereunder.
5.8 Data.
(a) Neurocrine Data. All data and information arising out of the
Research Program which relates specifically to Compounds from
the Neurocrine Proprietary Chemical Library will be owned by
Neurocrine, will be Neurocrine Confidential Information and,
subject to the licenses granted to Wyeth-Ayerst, if any, as
set forth herein, may be used by Neurocrine for any purpose.
(b) Wyeth-Ayerst Data. All data and information arising out of the
Research Program which relates specifically to Compounds from
the Wyeth-Ayerst Proprietary Chemical Library will be owned by
Wyeth-Ayerst, will be Wyeth-Ayerst Confidential Information
and, subject to the licenses granted to Neurocrine, if any, as
set forth herein, may be used by Wyeth-Ayerst for any purpose.
(c) Other Research Program Data. All data and information arising
out of the Research Program which is not Neurocrine Data or
Wyeth-Ayerst Data as set forth in (a) and (b) above, will be
jointly owned by the Parties and will be Joint Confidential
Information and, subject to the licenses granted or to be
granted by one Party to the other, if any, as set forth
herein, may be used by the Parties for any purpose.
(d) Wyeth-Ayerst Research, Clinical Development and
Commercialization Data. All data and information arising out
of Wyeth-Ayerst's research and preclinical development of Lead
Compounds and/or Collaboration Products after the term of the
Research Program and all data and information arising out of
the clinical development and commercialization of
Collaboration Products by Wyeth-Ayerst will belong to
Wyeth-Ayerst and shall be Wyeth-Ayerst Confidential
Information.
5.9 Materials.
(a) Research Program Materials. During the term of this Agreement,
upon request by either Party, the Party to whom the request is
made will promptly provide to the other Party such quantities
of Research Program Materials as shall be reasonably available
in excess of its own needs for such other Party to carry out
its respective responsibilities under this Agreement. Subject
to the licenses set forth in Article Three, each Party may use
the Research Program Materials created or developed by such
Party for any purpose.
(b) Neurocrine Materials. During the term of this Agreement,
Neurocrine will supply to Wyeth-Ayerst Neurocrine Materials
reasonably (both in quantity and identity) requested by
Wyeth-Ayerst provided (i) such Neurocrine Materials are
reasonably and readily available to Neurocrine in excess of
Neurocrine's own requirements, and (ii) supply of such
Neurocrine Materials will not, in Neurocrine's sole judgment,
(A) conflict with Neurocrine's internal or collaborative
research programs, (B) conflict with Neurocrine's internal
policies regarding such materials or (C) violate any agreement
to which Neurocrine is a party. Any Neurocrine Materials
provided to Wyeth-Ayerst hereunder together with materials
derived therefrom thereof (i) may only be used by Wyeth-Ayerst
and Wyeth-Ayerst's permitted sublicensees in the conduct of
the Research Program and/or in the discovery and/or
development of Lead Compounds and/or Collaboration Products,
(ii) may not be supplied to Third Parties, other than Third
Parties that, with the approval of the Steering Committee, are
under contract with one of the Parties to perform services in
support of the Research Program, without Neurocrine's prior
written consent which can be withheld for any reason in
Neurocrine's sole discretion and (iii) will, at Neurocrine's
option and at Neurocrine's request be returned to Neurocrine
or destroyed. The provision of Neurocrine Materials hereunder
will not constitute any grant, option or license under any
Neurocrine Patent Rights, except as expressly set forth
herein.
(c) Wyeth-Ayerst Materials. During the term of the Research
Program, Wyeth-Ayerst will supply to Neurocrine Wyeth-Ayerst
Materials reasonably (both in quantity and identity) requested
by Neurocrine, provided that (i) such Wyeth-Ayerst Materials
are reasonably and readily available in excess of
Wyeth-Ayerst's own requirement and (ii) supply of such
Wyeth-Ayerst owned Materials will not, in Wyeth-Ayerst's sole
judgment, (A) conflict with Wyeth-Ayerst's internal or
collaborative research programs, (B) conflict with
Wyeth-Ayerst's internal policies regarding such materials or
(C) violate any agreement to which Wyeth-Ayerst is a party.
Any Wyeth-Ayerst Materials provided to Neurocrine hereunder
together with any materials derived therefrom (i) may only be
used by Neurocrine in the conduct of the Research Program,
(ii) may not be supplied to Third Parties without
Wyeth-Ayerst's prior written consent which can be withheld for
any reason in Wyeth-Ayerst's sole discretion and (iii) will,
at Wyeth-Ayerst's option and at Wyeth-Ayerst's request, be
returned to Wyeth-Ayerst or destroyed. The provision of
Wyeth-Ayerst Materials hereunder will not constitute any
grant, option or license under any Wyeth-Ayerst Patent Rights,
except as expressly set forth herein.
ARTICLE SIX
SELECTION OF LEAD COMPOUNDS
AND COLLABORATION PRODUCTS
6.1 Selection of Lead Compounds During Term of Research Program. Lead
Compounds may be selected by the Steering Committee during the term of
the Research Program from Hits in the Neurocrine Proprietary Chemical
Library, Wyeth-Ayerst Proprietary Chemical Library or any other library
the Parties shall agree to screen in connection with the Research
Program. Additionally, if any Compound in the Neurocrine Proprietary
Chemical Library is identified as a Hit during the term of the Research
Program, Wyeth-Ayerst may, upon written notice to Neurocrine, select
such Compound as a Lead Compound at any time during [***].
6.2 Selection of Lead Compounds After Term of Research Program. Lead
Compounds may be selected by Wyeth-Ayerst after the term of the
Research Program from Compounds in the Wyeth-Ayerst Proprietary
Chemical Library or any other library Wyeth-Ayerst shall elect to
screen in connection with the development of Lead Compounds and
Collaboration Products using the Collaboration Technology.
Notwithstanding the foregoing, except as expressly provided in Section
6.1 above, in no event will Wyeth-Ayerst be entitled after the term of
the Research Program to select Compounds from Compounds in the
Neurocrine Proprietary Chemical Library as Lead Compounds or
Collaboration Products.
6.3 Selection of Collaboration Products. Lead Compounds will become
Collaboration Products upon Wyeth-Ayerst's decision that the Lead
Compound is a suitable clinical candidate or Wyeth-Ayerst shall elect
to file an IND with respect to such Lead Compound. Wyeth-Ayerst's
determination that a Lead Compound is a suitable clinical candidate
will be based on its preclinical profile and competitive and other
commercial considerations.
6.4 Designation of Lead Compounds and Collaboration Products. It is the
Parties' intention that the licenses set forth in Articles Three and
Twelve and all rights granted by either Party hereunder be limited to
Lead Compounds and Collaboration Products and neither Party grants to
the other any right or license in or to Patent Rights or any other
rights a Party may have in its Proprietary Chemical Library or any
Compounds included therein that are not Lead Compounds or Collaboration
Products. The Parties agree that during the term of the Research
Program (a) a compound may only be designated a Lead Compound upon the
determination of the Steering Committee, as recorded in the minutes of
a Steering Committee meeting or by written consent of the Steering
Committee, that such compound meets the criteria set forth herein for a
Lead Compound and (b) a Lead Compound may only be designated a
Collaboration Product upon Wyeth-Ayerst's written notice to the
Steering Committee that Wyeth-Ayerst has elected to initiate clinical
development with respect to the Lead Compound. After the term of the
Research Program, a compound will only be designated a Lead Compound or
a Collaboration Product hereunder upon timely written notice (within
sixty (60) days after the determination or election set forth below)
from Wyeth-Ayerst to Neurocrine describing the compound and setting
forth Wyeth-Ayerst's determination that such compound meets the
criteria set forth herein for a Lead Compound or Wyeth-Ayerst's
election to initiate clinical development of a Lead Compound elevating
the Lead Compound to Collaboration Product status hereunder.
ARTICLE SEVEN
DEVELOPMENT, MANUFACTURING AND COMMERCIALIZATION
7.1 Wyeth-Ayerst Development. Wyeth-Ayerst will, directly and/or through
Third Parties, use Commercially Reasonable Efforts to complete the
preclinical development, conduct, fund and make all decisions regarding
the clinical development of Collaboration Products. Wyeth-Ayerst will
have complete control, authority and responsibility for the regulatory
strategies adopted for the clinical development of all Collaboration
Products and will own all Regulatory Filings and Regulatory Approvals
relating to any Lead Compound or Collaboration Product.
7.2 Progress Reports. After the end of the Research Program, Wyeth-Ayerst,
within sixty (60) days after each June 30 and December 31, will provide
Neurocrine with a report summarizing the status of Wyeth-Ayerst's
clinical development activities during the six (6) month period ending
on such June 30 or December 31, as applicable, for Collaboration
Products then in active development by Wyeth-Ayerst and summarize the
development plans for Collaboration Products for the following six (6)
month period, provided, however, that Wyeth-Ayerst's failure to achieve
any of the goals or plans set forth in any such summary shall not, in
and of itself, constitute a failure by Wyeth-Ayerst to use Commercially
Reasonable Efforts to develop Collaboration Products hereunder.
7.3 Manufacturing. Wyeth-Ayerst shall use Commercially Reasonable Efforts
to manufacture Collaboration Products, directly and/or through
contracted Third Parties for sale in those countries of the Territory
where such Collaboration Products have received Regulatory Approval.
7.4 Commercialization of Collaboration Products. Wyeth-Ayerst in its sole
discretion will make all decisions regarding the commercialization and
sales and marketing of Collaboration Products and will use Commercially
Reasonable Efforts to commercialize Collaboration Products in those
countries of the world where such Collaboration Products have received
Regulatory Approval. The use of Commercially Reasonable Efforts by any
Affiliate or sublicensee of Wyeth-Ayerst to commercialize Collaboration
Products in a country shall satisfy Wyeth-Ayerst's obligation to use
Commercially Reasonable Efforts to commercialize such Collaboration
Product in such country.
7.5 Co-Promotion. On a Collaboration Product by Collaboration Product basis
at the time of NDA filing, if Neurocrine can demonstrate to
Wyeth-Ayerst's reasonable satisfaction that Neurocrine has commercial
presence in a United States or Canadian market segment not covered by
Wyeth-Ayerst or, in Wyeth-Ayerst's view, not sufficiently covered and
capability to promote such Collaboration Product in such market
segment, Wyeth-Ayerst and Neurocrine will discuss[***] co-promote such
Collaboration Product in the United States and Canada. If the Parties
agree that it would be in the commercial best interests of the Parties
for Wyeth-Ayerst and Neurocrine to so co-promote such Collaboration
Product, the Parties will, [***], use good faith efforts to negotiate a
co-promotion agreement setting forth the rights and obligations of each
Party, including, without limitation, payments to be made by either
Party to the other Party and responsibility for marketing and
promotional expenses. If, (i) [***], Neurocrine either fails to notify
Wyeth-Ayerst of its desire to co-promote such Collaboration Product or
fails to demonstrate to Wyeth-Ayerst's reasonable satisfaction that
Neurocrine has the required commercial presence and capability to
promote such Collaboration Product, or (ii) the Parties fail to enter
into a co-promotion agreement by the end of the [***] period described
above in this Section 7.5, Wyeth-Ayerst shall thereafter be free, at
its sole election, to enter into a co-promotion agreement with any
Third Party with respect to such Collaboration Product.
ARTICLE EIGHT
LICENSE FEES
8.1 License Fees. Each of the following License Fees will be payable to
Neurocrine one-time only within thirty (30) days following confirmation
by the Steering Committee that the specified event has occurred.
<TABLE>
<CAPTION>
Event Payment
<S> <C>
Validation of [***] model of Neurodegeneration [***] (such model [***]
and criteria for validation to be selected and agreed upon by the
Steering Committee as soon as practicable after the first Steering
Committee meeting)
Completion of screening of [***] compounds selected by the Steering [***]
Committee from the Neurocrine Proprietary Chemical Library,
Wyeth-Ayerst Proprietary Chemical Library and/or some other
library(ies) selected by the Steering Committee for the first to
complete of [***] using Neurocrine's novel High Throughput
Screening ("HTS") technology, provided, however, that the [***]
compounds selected by the Steering Committee must all be readily
available to Neurocrine in 96 well plates suitable for screening
and within a timeframe that will not materially or unreasonably
delay Neurocrine's screening efforts
The later to occur of (i) completion of screening of [***] [***]
compounds selected by the Steering Committee from the Neurocrine
Proprietary Chemical Library, Wyeth-Ayerst Proprietary Chemical
Library and/or some other library(ies) selected by the Steering
Committee for the second to complete of [***] using Neurocrine's
HTS technology and (ii) the [***] anniversary of the Effective Date
[***] target validation of [***] in a model [***] (such mode and [***]
criteria for validation to be selected and agreed upon by the
Steering Committee as soon as practicable after the first Steering
Committee meeting)
[***] validation of [***] in a model (such model and criteria for [***]
validation to be selected and agreed upon by the Steering Committee
as soon as practicable after the first Steering Committee meeting)
[***] target validation of [***] in an appropriate model for [***] [***]
(such model and criteria for validation to be selected and agreed
upon by the Steering Committee as soon as practicable after the
first Steering Committee meeting)
[***] validation of the [***] in an appropriate model for [***], [***]
(such model and criteria for validation and disease category to be
selected and agreed upon by the Steering Committee as soon as
practicable after the first Steering Committee meeting)
</TABLE>
For the purposes of the foregoing, Neurocrine's HTS for activity
against [***] will be deemed `complete' when [***]compounds selected by
the Steering Committee have been screened for activity against [***]
and Neurocrine has prepared and delivered to Wyeth-Ayerst a final
report setting forth the results. Upon the achievement of a Licensee
Fee triggering event for [***], any License Fees relating to prior
triggering events for [***] which have not been paid, shall be deemed
payable.
8.2 Additional License Fees. The following additional License Fees will be
payable to Neurocrine [***] only regardless of the number of
Collaboration Products and the number of indications for each
Collaboration Product developed and commercialized.
<TABLE>
<CAPTION>
Additional
Event License Fee
<S> <C>
Filing, by Wyeth-Ayerst, of an IND in the United States [***]
permitting the clinical study of [***]
Filing, by Wyeth-Ayerst, of an IND in the United States [***]
permitting the clinical study of [***]
Filing, by Wyeth-Ayerst, of an IND in the United States [***]
permitting the clinical study of [***]
Filing, by Wyeth-Ayerst, of an IND in the United States [***]
permitting the clinical study of [***]
Achievement, by Wyeth-Ayerst, of ICE for the [***] [***]
Achievement, by Wyeth-Ayerst, of ICE for the [***] [***]
Achievement, by Wyeth-Ayerst, of ICE for the [***] [***]
Achievement, by Wyeth-Ayerst, of ICE for the [***] [***]
Initiation, by Wyeth-Ayerst, of a Pivotal Trial to study [***]
the [***]
Initiation, by Wyeth-Ayerst, of a Pivotal Trial to study [***]
the [***]
Initiation, by Wyeth-Ayerst, of a Pivotal Trial to study [***]
the [***]
Initiation, by Wyeth-Ayerst, of a Pivotal Trial to study [***]
the [***]
Filing, by Wyeth-Ayerst, of an NDA in the United States, [***]
and acceptance, by the FDA, of such NDA for filing
seeking Regulatory Approval in the United States of the
[***]
Filing, by Wyeth-Ayerst, of an NDA in the United States, [***]
and acceptance, by the FDA, of such NDA for filing,
seeking Regulatory Approval in the United States of the
[***]
Filing, by Wyeth-Ayerst, of an NDA in the United States, [***]
and acceptance, by the FDA, of such NDA for filing,
seeking Regulatory Approval in the United States of the
[***]
Filing, by Wyeth-Ayerst, of an NDA in the United States [***]
and acceptance, by the FDA, of such NDA for filing,
seeking Regulatory Approval in the United States of the
[***]
Filing, by Wyeth-Ayerst, of an NDA in Europe (either a [***]
centralized filing or filing in at least one (1) of the
European Major Market Countries), and acceptance, by the
applicable European Regulatory Authorities, of such NDA
for filing, seeking Regulatory Approval in Europe (or
such European country) of the [***]
Filing, by Wyeth-Ayerst, of an NDA in Europe (either a [***]
centralized filing or filing in at least one (1) of the
European Major Market Countries), and acceptance, by the
appropriate European Regulatory Authorities, of such NDA
for filing seeking Regulatory Approval in Europe (or such
European country) of the [***]
Filing, by Wyeth-Ayerst, of an NDA in Europe (either a [***]
centralized filing or filing in at least one (1) of the
European Major Market Countries), and acceptance, by the
applicable European Regulatory Authorities, of such NDA
for filing seeking Regulatory Approval in Europe (or such
European country) of the [***]
<PAGE>
Filing, by Wyeth-Ayerst, of an NDA in Europe (either a [***]
centralized filing or filing in at least one (1) of the
European Major Market Countries), and acceptance, by the
applicable European Regulatory Authorities, of such NDA
for filing seeking Regulatory Approval in Europe (or such
European country) of the [***]
United States Regulatory Approval granted to Wyeth-Ayerst [***]
for the [***]
United States Regulatory Approval granted to Wyeth-Ayerst [***]
for the [***]
United States Regulatory Approval granted to Wyeth-Ayerst [***]
for the [***]
United States Regulatory Approval granted to Wyeth-Ayerst [***]
for the [***]
European (either centralized or in at least one (1) [***]
European Major Market Country) Regulatory Approval
granted to Wyeth-Ayerst for the [***]
European (either centralized or in at least one (1) [***]
European Major Market Country) Regulatory Approval
granted to Wyeth-Ayerst for the [***]
European (either centralized or in at least one (1) [***]
European Major Market Country) Regulatory Approval
granted to Wyeth-Ayerst for the [***]
European (either centralized or in at least one (1) [***]
European Major Market Country) Regulatory Approval
granted to Wyeth-Ayerst for the [***]
</TABLE>
Any additional License Fees paid for a Collaboration Product which does
not achieve Regulatory Approval shall be fully creditable against
Additional License Fees that may be payable for Collaboration Products
subsequently developed [***]. No additional License Fee shall be
payable for the third or any subsequent Collaboration Product to
achieve the specified event.
ARTICLE NINE
ROYALTIES
9.1 Royalty Rates. Wyeth-Ayerst will pay to Neurocrine, Royalties, on a
Collaboration Product by Collaboration Product basis, which Royalties
shall be calculated using the following formula:
[***]
where,
A equals [***] of Wyeth-Ayerst's worldwide Net Sales
of such Collaboration Product, which, during the
calendar year in question, are [***]
B equals [***] of Wyeth-Ayerst's worldwide Net Sales
of such Collaboration Product, which, during the
calendar year in question, [***]; and
C equals [***] of Wyeth-Ayerst's worldwide Net Sales
of such Collaboration Product, which, during the
calendar year in question, are [***].
By way of example only, if, during a given year, Wyeth-Ayerst, its
Affiliates and sublicensees [***] the royalty payable by Wyeth-Ayerst
to Neurocrine during such year would be calculated as follows:
[***]
Neurocrine acknowledges and agrees that nothing in this Agreement shall
be construed as representing an estimate or projection of either (i)
the number of Collaboration Products that will or may be successfully
developed and/or commercialized estimate or (ii) anticipated sales or
the actual value of the Neurocrine Technology, any Lead Compound or any
Collaboration Product and that the figures set forth in this Section
9.1 or elsewhere in this Agreement or that have otherwise been
discussed by the Parties are merely intended to define Wyeth-Ayerst's
royalty obligations to Neurocrine in the event such sales performance
is achieved. WYETH-AYERST MAKES NO REPRESENTATION OR WARRANTY, EITHER
EXPRESS OR IMPLIED, THAT IT WILL BE ABLE TO SUCCESSFULLY DEVELOP AND/OR
COMMERCIALIZE ANY COLLABORATION PRODUCTS OR, IF COMMERCIALIZED, THAT IT
WILL ACHIEVE ANY PARTICULAR SALES LEVEL OF SUCH COLLABORATION
PRODUCT(S).
9.2 Royalty Adjustments. Royalties on a Collaboration Product are subject
to reductions and adjustments as a result of certain events as set
forth below; provided, however, in no event will Royalties on a
Collaboration Product in any country be [***] by reason of the
adjustments set forth below.
(a) Royalty Adjustment for Unpatented Products. If, during a given
calendar quarter, a Collaboration Product is an Unpatented
Product in one or more countries, the Royalties will be
payable to Neurocrine for the Net Sales of such Collaboration
Product in such country(ies) during such calendar quarter at
[***] of the royalty rate(s) set forth in Section 9.1 above.
To calculate the Unpatented Product Royalties, [***]. The fact
that a Collaboration Product is an Unpatented Product in one
country during any calendar quarter shall not result in a
reduction of the royalty rate used to calculate the Royalty
payable for sales of Collaboration Products in any other
country during such calendar quarter.
(b) Competition. If Competition exists, during a given calendar
quarter with respect to a Collaboration Product in a country,
the royalty rate(s) used to calculate the Royalties payable to
Neurocrine for the sale of such Collaboration Product in such
country during such calendar quarter will [***] of the royalty
rate(s) set forth in Section 9.1 above. To calculate the
Royalties when Competition exists in one or more countries,
[***]. The existence of Competition in one country during any
calendar quarter shall not result in a reduction of the
royalty rate used to calculate the Royalty payable for sales
of Collaboration Products in any other country during such
calendar quarter. If at the time of determining any
Competition adjustments, applicable IMS International data (or
such other data as may be mutually agreed by the Parties) for
such time period is unavailable, Wyeth-Ayerst may make a
reasonable estimate thereof based on prior available IMS
International data (or such other data as may be mutually
agreed by the Parties) and calculate the applicable Royalty
based on such estimate, and any difference in Royalty payments
made by Wyeth-Ayerst based on such estimate and Royalty
payments based on actual data, once available, will be
accounted for by an adjustment payment by Wyeth-Ayerst at the
time the next quarter Royalty payment is made or an adjustment
credit against Wyeth-Ayerst's future Royalty obligations, as
the case may be.
9.3 Term of Royalty. Royalties will be payable on a country by country and
Collaboration Product by Collaboration Product basis until the later of
(i) the last to expire, in such country, of the Patent Rights included
within the Collaboration Technology, [***] or (ii) with respect to the
sale of such Collaboration Product in countries of the European Union,
[***] from First Commercial Sale of such Collaboration Product in the
European Union and, with respect to the sale of such Collaboration
Product in any country outside of the European Union, [***] from First
Commercial Sale of such Collaboration Product in such country. Upon the
expiration of Wyeth-Ayerst's obligation to pay Royalties to Neurocrine
hereunder with respect to a Collaboration Product, Wyeth-Ayerst shall
have a fully paid, irrevocable, exclusive and unrestricted license
under the Collaboration Technology to make, have made, use, sell, offer
to sell and import such Collaboration Product.
9.4 Reports and Payments.
(a) Cumulative Royalties. The obligation to pay Royalties under
this Article Nine shall be imposed only once (i) with respect
to any sale of the same unit of Collaboration Product and (ii)
with respect to a single unit of Collaboration Product
regardless of how many Valid Claims of Patent Rights included
in the Collaboration Technology would, but for this Agreement,
be infringed by the making, using or selling of such
Collaboration Product.
(b) Statements and Payments. Wyeth-Ayerst shall deliver to
Neurocrine within sixty (60) days after the end of each
calendar quarter, a report certified by Wyeth-Ayerst as
accurate to the best of its ability based on information then
available to Wyeth-Ayerst, setting forth for such calendar
quarter the following information on a country-by-country and
Collaboration Product by Collaboration Product basis: (i) Net
Sales of such Collaboration Product in such country, (ii) the
basis for any adjustments to the Royalty payable for the sale
of such Collaboration Product in such country and (iii) the
Royalty due hereunder for the sale of such Collaboration
Product in such country. The total Royalty due for the sale of
Collaboration Products during such calendar quarter shall be
remitted at the time such report is made.
(c) Taxes and Withholding. All payments under this Agreement will
be made without any deduction or withholding for or on account
of any tax unless such deduction or withholding is required by
applicable law or regulations. If the paying Party is so
required to deduct or withhold such Party will (i) promptly
notify the other Party of such requirement, (ii) pay to the
relevant authorities the full amount required to be deducted
or withheld promptly upon the earlier of determining that such
deduction or withholding is required or receiving notice that
such amount has been assessed against the other Party, (iii)
promptly forward to the other Party an official receipt (or
certified copy) or other documentation reasonably acceptable
to the other Party evidencing such payment to the authorities.
In case the other Party can not take a full credit against its
tax liability for the withholding tax deducted or withheld by
the paying Party, then such other Party may propose a change
to the then current arrangement with respect to the flow of
moneys under this Agreement in order to reduce or eliminate
the extra cost for any Party and the Parties, with no
obligation as to outcome, shall discuss such proposal in good
faith.
(d) Currency. All amounts payable and calculations hereunder shall
be in United States dollars. As applicable, Net Sales shall be
translated into United States dollars in accordance with
Wyeth-Ayerst's customary and usual translation procedures,
consistently applied.
(e) Maintenance of Records; Audit. For a period of three (3)
years, Wyeth-Ayerst shall maintain and shall cause its
Affiliates and sublicensees to maintain complete and accurate
books and records in connection with the sale of Collaboration
Products hereunder, as necessary to allow the accurate
calculation of Royalties due hereunder including any records
required to calculate any Royalty adjustments hereunder. Once
per calendar year Neurocrine shall have the right to engage an
independent accounting firm acceptable to Wyeth-Ayerst, at
Neurocrine's expense, which shall have the right to examine in
confidence the relevant Wyeth-Ayerst records as may be
reasonably necessary to determine and/or verify the amount of
Royalty payments due hereunder. Such examination shall be
conducted during Wyeth-Ayerst's normal business hours, after
at least fifteen (15) days prior written notice to
Wyeth-Ayerst and shall take place at the Wyeth-Ayerst
facility(ies) where such records are maintained. Each such
examination shall be limited to pertinent books and records
for any year ending not more than thirty-six (36) months prior
to the date of request. Before permitting such independent
accounting firm to have access to such books and records,
Wyeth-Ayerst may require such independent accounting firm and
its personnel involved in such audit, to sign a
confidentiality agreement (in form and substance reasonably
acceptable to Wyeth-Ayerst) as to any of Wyeth-Ayerst's, its
Affiliates or sublicensees' confidential information which is
to be provided to such accounting firm or to which such
accounting firm will have access, while conducting the audit
under this Section 9.5 (e). The Neurocrine independent
accounting firm will prepare and provide to both Neurocrine
and Wyeth-Ayerst a written report disclosing only whether the
Royalty reports submitted and Royalties paid by Wyeth-Ayerst
are correct or incorrect and the specific details concerning
any discrepancies. No other information shall be provided to
Neurocrine. In the event there was an under-payment by
Wyeth-Ayerst hereunder, Wyeth-Ayerst shall promptly (but in no
event later than thirty (30) days after Wyeth-Ayerst's receipt
of the independent auditor's report so correctly concluding)
make payment to Neurocrine of any short-fall. In the event
that there was an over-payment by Wyeth-Ayerst hereunder,
Neurocrine shall promptly (but in no event later than thirty
(30) days after Neurocrine's receipt of the independent
auditor's report so correctly concluding) refund to
Wyeth-Ayerst the excess amount. In the event any payment by
Wyeth-Ayerst shall prove to have been incorrect by more than
seven and one-half percent (7.5%) to Neurocrine's detriment,
Wyeth-Ayerst will pay the reasonable fees and costs of
Neurocrine's independent auditor for conducting such audit.
9.5 Third Party Payments.
(a) OHSU Agreement. The Parties have agreed to share equally the
royalty payments to OHSU required under paragraph 6.02 of the
OHSU Agreement (the "Shared Obligation"). All other payments
under the OHSU Agreement shall be the responsibility of
Neurocrine. Neurocrine shall be responsible for making all
payments due under the OHSU License Agreement and, within ten
(10) days of making any payment required under paragraph 6.02
of the OHSU Agreement, Neurocrine shall provide to
Wyeth-Ayerst documentary evidence that such payment has been
made. Within thirty (30) days after Wyeth-Ayerst receives from
Neurocrine such documentary evidence, Wyeth-Ayerst shall pay
to Neurocrine an amount equal to [***] of the payments due to
the Oregon Health Sciences University pursuant to [***] for
Licensed Patent Rights (as defined in the OHSU Agreement)
included in the Neurocrine Technology licensed to Wyeth-Ayerst
hereunder, provided, however, that any credits that may accrue
to Neurocrine by reason of payments by Neurocrine to OHSU
pursuant to [***] will be considered a credit against
Neurocrine's portion of Shared Obligation, and any credits
that may accrue pursuant to [***] or Wyeth-Ayerst, as the case
may be, will be considered a credit against Neurocrine's or
Wyeth-Ayerst's, respectively, portion of the Shared
Obligation.
(b) Neurocrine Technology. [***] from any Third Party owning or
Controlling Patent Rights which would be infringed by [***]
under this Agreement, a license under such Patent Rights,
which license would permit [***] will be solely responsible
for paying [***] of the license fees and royalties that may be
payable to any such Third Party for such license(s). In the
event [***] fails or in unable to negotiate an agreement with
such Third Party within [***] may negotiate such license on
terms reasonably agreed to by [***] and in the event [***] in
obtaining such license on terms agreed to by [***] in its good
faith business judgment [***] amounts payable thereunder. If
[***] is unable to agree as to whether it is necessary to
obtain such a license from a Third Party, the issue shall be
referred to [***].
(c) Collaboration Products. Except as set forth in (a) and (b)
above, [***] determining whether to negotiate an agreement
with any Third Party that owns or Controls a Patent Right
claiming the manufacture or use of any Collaboration Product.
[***] from any Third Party owning or Controlling Patent Rights
which would be infringed by the development and sale of Lead
Compounds and Collaboration Products, a license under such
Patent Rights, and in the event [***] obtains such a license,
[***] shall pay [***] that may be payable to such Third Party
for such license(s).
(d) Third Party Licenses. Any rights to Third Party Patent Rights
licensed by Neurocrine or Wyeth-Ayerst, as the case may be,
under paragraphs (b) and (c) above, shall be considered
Neurocrine Technology or Wyeth-Ayerst Technology,
respectively. In each case, Wyeth-Ayerst and Neurocrine shall
use their Commercially Reasonable Efforts to ensure that such
licenses provide for the right to sublicense of the Third
Party Patent Rights in connection with the license of the
Neurocrine Technology and Wyeth-Ayerst Technology upon
termination of this Agreement pursuant to Article Twelve. Any
sublicenses of Third Party Patent Rights pursuant to Article
Twelve shall be subject to the assumption by the Party to whom
the rights are sublicensed of all payment and performance
obligations in connection with the exercise of the sublicensed
rights by such Party.
ARTICLE TEN
CONFIDENTIALITY, PUBLICATION AND
PUBLIC ANNOUNCEMENTS
10.1 Confidentiality. Except to the extent expressly authorized by this
Agreement or otherwise agreed in writing, the Parties agree that, for
the term of this Agreement and for [***], each Party (the "Receiving
Party"), receiving hereunder any information designated hereunder as
Confidential Information of the other Party or information of the other
Party marked "Confidential" (in either case, the "Disclosing Party"),
shall keep such information confidential and shall not publish or
otherwise disclose or use for any purpose other than as provided for in
this Agreement except, to the extent that it can be established:
(a) by the Receiving Party that the Confidential Information was
already known to the Receiving Party (other than under an
obligation of confidentiality), at the time of disclosure by
the Disclosing Party and such Receiving Party has documentary
evidence to that effect;
(b) by the Receiving Party that the Confidential Information was
generally available to the public or otherwise part of the
public domain at the time of its disclosure to the Receiving
Party;
(c) by the Receiving Party that the Confidential Information
became generally available to the public or otherwise part of
the public domain after its disclosure or development, as the
case may be, and other than through any act or omission of a
party in breach of this confidentiality obligation;
(d) by the Receiving Party that the Confidential Information was
disclosed to that Party, other than under an obligation of
confidentiality, by a Third Party who had no obligation to the
Disclosing Party not to disclose such information to others;
(e) by the Receiving Party that the Confidential Information was
independently discovered or developed by the Receiving Party
without the use of the Confidential Information belonging to
the other Party and the Receiving Party has documentary
evidence to that effect
10.2 Authorized Disclosure.
(a) Each Party. Each Party may disclose Confidential Information
belonging to the other Party to the extent such disclosure is
reasonably necessary to:
(i) file or prosecute patent applications
claiming inventions included within the
Collaboration Technology,
(ii) prosecute or defend litigation,
(iii) exercise rights hereunder provided such
disclosure is covered by terms of
confidentiality similar to those set forth
herein, and
(iv) comply with applicable governmental laws and
regulations.
In the event a Party shall deem it necessary to disclose
pursuant to this Section 10.2 (a), Confidential Information
belonging to the other Party, the Disclosing Party shall to
the extent possible give reasonable advance notice of such
disclosure to the other Party and take reasonable measures to
ensure confidential treatment of such information.
(b) Use. Wyeth-Ayerst shall have the right to use Neurocrine
Confidential Information in the conduct of the Research
Program and in developing and commercializing Lead Compounds
and Collaboration Products. Neurocrine shall have the right to
use Wyeth-Ayerst Confidential Information in the conduct of
the Research Program and, in the event this Agreement shall be
terminated in accordance with Sections 12.3, 12.4, 12.5(a) or
12.6, in the development and commercialization of Lead
Compounds and Collaboration Products and Compounds [***].
Neurocrine shall also have the right to use that portion of
the Wyeth-Ayerst Confidential Information that relates [***].
Subject to the license granted in Article Three hereof and the
terms of this Article Ten, each Party shall have the right to
use the Joint Confidential Information for any purpose.
10.3 SEC Filings. The Parties will consult with one another on the terms of
this Agreement to be redacted in SEC filings.
10.4 Publications. During the term of the Research Program, each Party will
submit to the other Party for review and approval all proposed
academic, scientific and medical publications relating to the Research
Program, Lead Compounds, Collaboration Products and/or Collaboration
Technology for review in connection with preservation of exclusive
Patent Rights and/or to determine whether Confidential Information
should be modified or deleted. The nonpublishing Party shall have no
less than thirty (30) days to review each proposed publication. The
review period may be extended for an additional thirty (30) days in the
event the nonpublishing Party can demonstrate a reasonable need for
such extension including, but not limited to, the preparation and
filing of patent applications. By mutual agreement, this period may be
further extended. Wyeth-Ayerst and Neurocrine will each comply with
standard academic practice regarding authorship of scientific
publications and recognition of contribution of other parties in any
publications relating to Research Program, Lead Compounds,
Collaboration Products and/or Collaboration Technology.
10.5 Public Announcements.
(a) Coordination. The Parties agree on the importance of
coordinating their public announcements respecting this
Agreement and the subject matter thereof (other than academic,
scientific or medical publications that are subject to the
publication provision set forth above). Neurocrine and
Wyeth-Ayerst will, from time to time, and at the request of
the other Party discuss and agree on the general information
content relating to this Agreement, the Research Program, Lead
Compounds, Collaboration Products and/or Collaboration
Technology which may be publicly disclosed.
(b) Announcements. Neither Party will make any public announcement
(whether required by law or otherwise) regarding this
Agreement, the Research Program, Lead Compounds, Collaboration
Products and/or Collaboration Technology (other than academic,
scientific or medical publications which are subject to the
publication provision set forth above) without giving the
other Party the opportunity to review and comment prior to
release.
ARTICLE ELEVEN
INDEMNIFICATION
11.1 Indemnification by Wyeth-Ayerst. Wyeth-Ayerst will indemnify, defend
and hold harmless Neurocrine, its Affiliates, and each of its and their
respective employees, officers, directors and agents (each, a
"Neurocrine Indemnified Party") from and against any and all liability,
loss, damage, expense (including reasonable attorneys' fees and
expenses) and cost (collectively, a "Liability") which the Neurocrine
Indemnified Party may be required to pay to one or more Third Parties
resulting from or arising out of (i) any claims of any nature (other
than claims by Third Parties relating to patent infringement) arising
out (y) the conduct of the Research Program or use of Collaboration
Technology of by, on behalf of or under authority of, Wyeth-Ayerst
(other than by Neurocrine) or (z) research, development and/or
commercialization of Lead Compounds and/or Collaboration Products by,
on behalf of or under authority of, Wyeth-Ayerst (other than by
Neurocrine) and/or (ii) any Wyeth-Ayerst representation or warranty set
forth herein being untrue in any material respect when made, except in
each case, to the extent caused by the negligence or willful misconduct
of Neurocrine or any Neurocrine Indemnified Party. Notwithstanding the
foregoing, Wyeth-Ayerst shall have no obligation to defend, indemnify
or hold harmless any Neurocrine Indemnified Party from and against any
Liability arising out of or resulting from the infringement of a Third
Party Patent Right.
11.2 Indemnification by Neurocrine. Neurocrine will indemnify, defend and
hold harmless Wyeth-Ayerst, its Affiliates, and each of its and their
respective employees, officers, directors and agents (each, a
"Wyeth-Ayerst Indemnified Party") from and against and all Liability
which the Wyeth-Ayerst Indemnified Party may be required to pay to one
or more Third Parties arising out of (i) any claims of any nature
(other than claims by Third Parties relating to patent infringement)
arising out of the conduct of the Research Program by, on behalf of, or
under the authority of Neurocrine (other than by Wyeth-Ayerst) and/or
(ii) any Neurocrine representation or warranty set forth herein having
been untrue in any material respect when made, except in each case, to
the extent caused by the negligence or willful misconduct of
Wyeth-Ayerst or any Wyeth-Ayerst Indemnified Party. Notwithstanding the
foregoing, Neurocrine shall have no obligation to defend, indemnify or
hold harmless any Wyeth-Ayerst Indemnified Party from and against any
Liability arising out of or resulting from the infringement of a Third
Party Patent Right.
11.3 Procedure. Each Party will notify the other in the event it becomes
aware of a claim for which indemnification may be sought hereunder. In
case any proceeding (including any governmental investigation) shall be
instituted involving any Party in respect of which indemnity may be
sought pursuant to this Article Eleven, such Party (the "Indemnified
Party") shall promptly notify the other Party (the "Indemnifying
Party") in writing and the Indemnifying Party and Indemnified Party
shall meet to discuss how to respond to any claims that are the subject
matter of such proceeding. The Indemnifying Party, upon request of the
Indemnified Party, shall retain counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party and shall pay the
fees and expenses of such counsel related to such proceeding. In any
such proceeding, the Indemnified Party shall have the right to retain
its own counsel, but the fees and expenses of such counsel shall be at
the expense of the Indemnified Party unless (i) the Indemnifying Party
and the Indemnified Party shall have mutually agreed to the retention
of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the Indemnifying Party
and the Indemnified Party and representation of both parties by the
same counsel would be inappropriate due to actual or potential
differing interests between them. All such fees and expenses shall be
reimbursed as they are incurred. The Indemnifying Party shall not be
liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a
final judgment for the plaintiff, the Indemnifying Party agrees to
indemnify the Indemnified Party from and against any loss or liability
by reason of such settlement or judgment. The Indemnifying Party shall
not, without the written consent of the Indemnified Party, effect any
settlement of any pending or threatened proceeding in respect of which
the Indemnified Party is, or arising out of the same set of facts could
have been, a party and indemnity could have been sought hereunder by
the Indemnified Party, unless such settlement includes an unconditional
release of the Indemnified Party from all liability on claims that are
the subject matter of such proceeding.
11.4 Insurance. Each Party further agrees to use its Commercially Reasonable
Efforts to obtain and maintain, during the term of this Agreement,
Commercial General Liability Insurance, including Products Liability
Insurance, with reputable and financially secure insurance carriers to
cover its indemnification obligations under Sections 11.1 or 11.2, as
applicable, or self-insurance, with limits of not less than [***] per
occurrence and in the aggregate.
ARTICLE TWELVE
TERM AND TERMINATION
12.1 Government Approvals.
(a) Government Approvals. Each of Neurocrine and Wyeth-Ayerst
shall use its good faith efforts to eliminate any concern on
the part of any court or government authority regarding the
legality of the proposed transaction, including, if required
by federal or state antitrust authorities, promptly taking all
steps to secure government antitrust clearance, including,
without limitation, cooperating in good faith with any
government investigation including the prompt production of
documents and information demanded by a second request for
documents and of witnesses if requested.
(b) Co-operation. Neurocrine and Wyeth-Ayerst will cooperate and
use respectively all reasonable efforts to make all other
registrations, filings and applications, to give all notices
and to obtain as soon as practicable all governmental or other
consents, transfers, approvals, orders, qualifications
authorizations, permits and waivers, if any, and to do all
other things necessary or desirable for the consummation of
the transactions as contemplated hereby. Neither Party shall
be required, however, to divest products or assets or
materially change its business if doing so is a condition of
the transactions contemplated by this Agreement.
12.2 Term. Unless earlier terminated by mutual agreement of the Parties or
pursuant to the provisions of this Article Twelve, this Agreement will
continue in full force and effect on a country-by country and
Collaboration Product by Collaboration Product basis until the
obligation to pay Royalties with respect to the sale of such
Collaboration Product in such country expires as provided in Section
9.3 hereof.
12.3 Early Termination for [***]. In the event that at any time after the
[***] anniversary of the Effective Date, the Steering Committee shall
determine that [***] as set forth in Exhibit B Parts 1(a), 1(b), 2(a)
and 2(b), has been demonstrated for [***] (or, if this Agreement has
already been terminated with respect to [***] pursuant to Section 12.4,
the [***] subject to this Agreement), Wyeth-Ayerst may elect to
terminate this Agreement upon [***] months prior written notice to
Neurocrine. Upon such termination, Wyeth-Ayerst will have no further
funding obligation for the Research Program. In the event this
Agreement shall be terminated pursuant to this Section 12.3, all
licenses granted by Neurocrine to Wyeth-Ayerst hereunder will revert to
Neurocrine and:
(i) Wyeth-Ayerst will disclose to Neurocrine all material
Research Program research and pre-clinical data on
Hits generated prior to the date of termination
provided such data are reasonably available to
Wyeth-Ayerst and Neurocrine shall have the right to
use such data, at its own risk and expense, in its
development of Compounds (other than Wyeth-Ayerst
Compounds) which [***]
(ii) Wyeth-Ayerst will grant to Neurocrine a perpetual,
irrevocable, exclusive, royalty-free, fully-paid,
worldwide license under the Wyeth-Ayerst Technology
and Wyeth-Ayerst's interest in the Joint Technology
to make, have made, use, import, market, offer for
sale and sell in the Field of Use, Compounds (other
than Wyeth-Ayerst Compounds) which [***]
(iii) Wyeth-Ayerst shall remain free to develop and
commercialize any Wyeth-Ayerst Compound, provided,
however, that such Compound is not developed for any
indication in [***] and the continued identification,
development and commercialization of such Compound
does not utilize Neurocrine Technology.
12.4 Termination of Collaboration Product Development and Commercialization.
Subject to satisfaction of Wyeth-Ayerst's minimum Research Program
Funding commitment (i.e., [***] of Research Program Funding), in the
event that Wyeth-Ayerst shall elect at any time to discontinue all
activities relating to the development and commercialization of all
Collaboration Products which [***] or shall elect to discontinue use of
Commercially Reasonable Efforts in the development and
commercialization of all Collaboration Products which [***]
Wyeth-Ayerst shall provide written notice to Neurocrine setting forth
Wyeth-Ayerst's election to terminate this Agreement with respect to
[***] and upon Neurocrine's receipt of such notice this Agreement with
respect to [***], will terminate. In the event this Agreement shall be
terminated with respect to a Neurocrine Transporter pursuant to this
Section 12.4:
(i) Wyeth-Ayerst will disclose to Neurocrine all material
Research Program research, pre-clinical and clinical
data generated prior to the date of termination on
Hits, Lead Compounds and Collaboration Products
relating to the terminated Neurocrine Transporter(s),
provided such data are reasonably available to
Wyeth-Ayerst and Neurocrine shall have the right to
use such data, at its own risk and expense, in its
development of Compounds [***] which [***]
(ii) Wyeth-Ayerst will assign (or, if the filing [***]
grant a right of cross reference) to Neurocrine all
Regulatory Filings relating to Compounds designated
as Lead Compounds and/or Collaboration Products prior
to the date of termination of this Agreement (other
than Lead Compounds and/or Collaboration Products
which are [***] in so far as such Regulatory Filings
relate to [***];
(iii) Wyeth-Ayerst will grant to Neurocrine a perpetual,
irrevocable, exclusive, royalty-free, fully-paid,
worldwide license under the [***] to make, have made,
use, sell and import in the Field of Use, Compounds
including Compounds designated as Lead Compounds and
Collaboration Products prior to the date of
termination of this Agreement (but excluding [***]
only [***] in which [***]
(iv) Wyeth-Ayerst will enter into good faith negotiations
with Neurocrine regarding the grant to Neurocrine of
the licenses as set forth in (A), (B) and (C) below,
to allow Neurocrine to continue to develop and
commercialize, [***] designated as Lead Compounds or
Collaboration Products prior to the date of
termination of this Agreement:
(A) an exclusive, worldwide license under the
[***] to make, have made, use, import,
offer for sale and sell in the Field of Use
[***] which are [***], such license to be
on commercially reasonable terms and
conditions mutually agreed by the Parties
including, without limitation, provision of
payments intended to reflect both Parties'
investment and opportunity in such
Compounds and royalties on net sales of
such [***] the Royalties payable by
Wyeth-Ayerst to Neurocrine hereunder and
other terms and conditions which
Wyeth-Ayerst believes are reasonable
necessary or desirable to protect
Wyeth-Ayerst's research, development and
commercialization activities for [***];
(B) an exclusive, worldwide license under the
[***] to make, have made, use, import,
offer for sale and sell in the Field of Use
only [***] in which [***], such licenses to
be on commercially reasonable terms and
conditions mutually agreed by the Parties
including, without limitation, provision of
payments intended to reflect both Parties'
investment and opportunity in such
Compounds and royalties on net sales of
such [***] the Royalties payable by
Wyeth-Ayerst to Neurocrine hereunder and
other terms and conditions which
Wyeth-Ayerst believes are reasonable
necessary or desirable to protect
Wyeth-Ayerst's research, development and
commercialization activities for [***];
(C) an exclusive, worldwide license under the
[***] to make, have made, use, import,
offer for sale and sell in the Field of Use
only [***] in which [***], such licenses to
be on commercially reasonable terms and
conditions mutually agreed by the Parties
including, without limitation, provision of
payments intended to reflect both Parties'
investment and opportunity in such
Compounds and royalties on net sales of
such [***] Royalties payable by
Wyeth-Ayerst to Neurocrine hereunder and
other terms and conditions which
Wyeth-Ayerst believes are reasonable
necessary or desirable to protect
Wyeth-Ayerst's research, development and
commercialization activities [***]
(D) upon the grant of the licenses set forth in
(A), (B) and/or (C) above, Wyeth-Ayerst will
assign (or, if the filing [***] grant a
right of cross reference) to Neurocrine all
Regulatory Filings on [***] that are the
subject of the license in so far as such
Regulatory Filings relate [***] which [***]
and
(v) Wyeth-Ayerst shall remain free to develop and/or
sublicense any [***] to Third Parties, provided,
however, in no event will Wyeth-Ayerst commercialize
or sublicense Third Parties to commercialize [***]
designated as Lead Compounds or Collaboration
Products prior to the date of termination of this
Agreement (a) for [***] and (b) if the identification
or continued development and commercialization of
such Compound utilizes Neurocrine Technology.
Notwithstanding the foregoing, Wyeth-Ayerst shall have no obligation to
negotiate or grant any of the licenses set forth in (iv) (A), (B), or
(C) above with respect to [***].
12.5 Default.
(a) Wyeth-Ayerst. Upon the Default by Wyeth-Ayerst under this
Agreement, Neurocrine may notify Wyeth-Ayerst of such Default
and require that Wyeth-Ayerst cure such Default within [***],
provided, however, that if such Default is not susceptible of
cure within [***] period and Wyeth-Ayerst uses its
Commercially Reasonable Efforts to cure such default, such
[***] period shall be extended to [***]. In the event
Wyeth-Ayerst shall not have cured the Default at the end of
the period specified in the preceding sentence, Neurocrine may
upon written notice to Wyeth-Ayerst terminate this Agreement
and upon such termination:
(i) all licenses granted by Neurocrine to Wyeth-
Ayerst herein will revert to Neurocrine:
(ii) Wyeth-Ayerst will satisfy its minimum
Research Funding commitment hereunder [***]
to the extent not previously satisfied;
(iii) Wyeth-Ayerst will disclose to Neurocrine all
material Research Program research,
pre-clinical and clinical data on Hits, Lead
Compounds and Collaboration Products
generated prior to the date of termination
of this Agreement, provided such data are
reasonably available to Wyeth-Ayerst and
Neurocrine thereafter shall have the right
to use such data, at its own risk and
expense, to develop Compounds [***] which
[***];
(iv) Wyeth-Ayerst will assign (or, if the filing
[***] grant a right of cross reference) to
Neurocrine all Regulatory Filings relating
to Compounds designated as Lead Compounds
and/or Collaboration Products prior to the
date of termination of the Agreement (other
than Lead Compounds and/or Collaboration
Products that are [***] in so far as such
Regulatory Filings relate [***] in which
[***];
(v) Wyeth-Ayerst will grant to Neurocrine a
perpetual, irrevocable, exclusive,
royalty-free, fully-paid, worldwide license
under [***] to make, have made, use, import,
market, offer for sale and sell in the Field
of Use, Compounds including Compounds
designated as Lead Compounds and/or
Collaboration Products prior to the date of
termination of this Agreement [***] only
[***] in which [***];
(vi) Wyeth-Ayerst will grant to Neurocrine an
exclusive, worldwide license under [***] to
make, have made, use, import, market, offer
for sale and sell in the Field of Use only
[***] in which [***] which have been
designated as Lead Compounds and/or
Collaboration Products prior to the date of
termination of this Agreement, such license
to be on commercially reasonable terms and
conditions to be mutually agreed by the
Parties including provision of payments
intended to reflect both Parties'
investment and opportunity in such
Compounds and royalties on net sales of
[***] Royalties payable by Wyeth-Ayerst to
Neurocrine hereunder provided, however,
that Wyeth-Ayerst shall have no obligation
to negotiate or grant any license with
respect to any [***]
(vii) upon the grant of the licenses set forth in
(vi) above, Wyeth-Ayerst will assign (or, if
the filing is not [***] in which [***] grant
a right of cross reference) to Neurocrine
all Regulatory Filings on the Wyeth-Ayerst
Compounds that are the subject of the
license in so far as such Regulatory Filings
relates [***] in which [***]; and
(viii) Wyeth-Ayerst shall remain free to develop
and/or sublicense [***] provided, however,
in no event will Wyeth-Ayerst commercialize
or sublicense Third Parties to commercialize
any [***] designated as Lead Compounds or
Collaboration Products prior to the date of
termination of this Agreement (a) for [***]
in which [***] and (b) if the
identification, continued development and
commercialization of such Compound utilizes
Neurocrine Technology.
(b) Neurocrine. Upon the Default by Neurocrine under this
Agreement, Wyeth-Ayerst may notify Neurocrine of such Default
and require that Neurocrine cure such Default within [***],
provided, however, that if such Default is not susceptible of
cure within such [***] period and Neurocrine uses its
Commercially Reasonable Efforts to cure such default, such
[***] period shall be extended to [***]. In the event
Neurocrine shall not have cured the Default within the period
specified in the preceding sentence, Wyeth-Ayerst may upon
written notice to Neurocrine elect to terminate this Agreement
and upon such termination:
(i) Neurocrine will grant to Wyeth-Ayerst a
perpetual, irrevocable, non-exclusive,
royalty-free, fully paid, worldwide license
under the Neurocrine Transporter Technology
to make, have made, use, import, market,
offer for sale and sell in the Field of Use,
Compounds (other than Neurocrine Compounds)
which [***]
(ii) Neurocrine will grant to Wyeth-Ayerst a
perpetual, irrevocable, exclusive,
royalty-free, fully paid, worldwide license
under the Neurocrine Technology and
Neurocrine's interest in the Joint
Technology to make, have made, use, import,
market, offer for sale and sell in the Field
of Use, Compounds (other than Neurocrine
Compounds), only [***] in which [***]
(iii) Neurocrine will grant to Wyeth-Ayerst an
exclusive, royalty-free, worldwide license
under the Neurocrine Technology and
Neurocrine's interest in the Joint
Technology to develop, make, have made, use,
import, market, offer for sale and sell in
the Field of Use, Neurocrine Compounds which
have been designated as Lead Compounds
and/or Collaboration Products prior to the
date of termination of this Agreement only
[***].
12.6 Bankruptcy. Each party may, in addition to any other remedies available
to it by law or in equity, exercise the rights set forth below by
written notice to the other Party (the "Insolvent Party"), in the event
the Insolvent Party shall have become insolvent or bankrupt, or shall
have made an assignment for the benefit of its creditors, or there
shall have been appointed a trustee or receiver of the Insolvent Party
or for all or a substantial part of its property, or any case or
proceeding shall have been commenced or other action taken by or
against the Insolvent Party in bankruptcy or seeking reorganization,
liquidation, dissolution, winding-up arrangement, composition or
readjustment of its debts or any other relief under any bankruptcy,
insolvency, reorganization or other similar act or law of any
jurisdiction now or hereafter in effect, or there shall have been
issued a warrant of attachment, execution, distraint or similar process
against any substantial part of the property of the Insolvent Party,
and any such event shall have continued for sixty (60) days
undismissed, unbonded and undischarged. All rights and licenses granted
under or pursuant to this Agreement by Neurocrine and Wyeth-Ayerst are,
and shall otherwise be deemed to be, for purposes of Section 365 (n) of
the U.S. Bankruptcy Code, licenses of rights to "intellectual property"
as defined under Section 101 of the U.S. Bankruptcy Code. The Parties
agree that the Parties as licensees of such rights under this
Agreement, shall retain and may fully exercise all of their rights and
elections under the U.S. Bankruptcy Code. The Parties further agree
that, in the event of the commencement of a bankruptcy proceeding by or
against either Party under the U.S. Bankruptcy Code, the other Party
shall be entitled to a complete duplicate of (or complete access to, as
appropriate) any such intellectual property and all embodiments of such
intellectual property, and same, if not already in the their
possession, shall be promptly delivered to them (i) upon any such
commencement of a bankruptcy proceeding upon its written request
therefor, unless the Party subject to such proceeding elects to
continue to perform all of their obligations under this Agreement or
(ii) if not delivered under (i) above, upon the rejection of this
Agreement by or on behalf of the Party subject to such proceeding upon
written request therefor by the other Party.
(a) Neurocrine. In the event Neurocrine shall be an Insolvent
Party, Wyeth-Ayerst:
(i) may terminate the Research Program; and/or
(ii) keep this Agreement in full force and effect and
retain all licenses granted by Neurocrine to
Wyeth-Ayerst herein to make, have made, use, import,
market, offer for sale and sell Lead Compounds and
Collaboration Products in the Field of Use, subject
to the payment to Neurocrine of the License Fees and
Royalties set forth above.
(b) Wyeth-Ayerst. In the event Wyeth-Ayerst shall be an Insolvent
Party, Neurocrine may, to the extent permitted by applicable
law, terminate this Agreement and all licenses granted by
Neurocrine to Wyeth-Ayerst herein will revert to Neurocrine
and:
(i) Wyeth-Ayerst will disclose to Neurocrine all material
Research Program research, pre-clinical and clinical
data on Hits, Lead Compounds and Collaboration
Products generated prior to the date of termination
provided such data are reasonably available to
Wyeth-Ayerst and Neurocrine thereafter shall have the
right to use such data, at its own risk and expense,
to develop Compounds [***] which [***]
(ii) Wyeth-Ayerst will assign (or, if the filing is not
[***] in which [***] grant a right of cross
reference) to Neurocrine all Regulatory Filings
relating to Lead Compounds and/or Collaboration
Products (other than Lead Compounds and/or
Collaboration Products [***]) in so far as such
Regulatory Filings relate [***] in which [***];
(iii) Wyeth-Ayerst will grant to Neurocrine a perpetual,
irrevocable, exclusive, royalty-free, fully-paid,
worldwide license [***] to make, have made, use,
import, market, offer for sale and sell in the Field
of Use, Compounds ([***]) which [***];
(iv) Wyeth-Ayerst will grant to Neurocrine, a perpetual,
irrevocable, exclusive, royalty free, fully-paid,
worldwide license [***] to make, have made, use,
import, market, offer for sale and sell in the Field
of Use, Neurocrine Compounds designated as Lead
Compounds and/or Collaboration Products prior to the
date of termination of this Agreement for [***] in
which [***];
(v) Wyeth-Ayerst will grant to Neurocrine an exclusive,
worldwide license under [***] to make, have made,
use, import, market, offer for sale and sell in the
Field of Use, [***] which have been designated as
Lead Compounds and/or Collaboration Products prior to
the date of termination of this Agreement for [***]
in which [***], such license to be on commercially
reasonable terms and conditions mutually agreed by
the Parties including provision of payments intended
to reflect both Parties' investment and opportunity
in such Compounds and royalties on net sales of such
[***] Royalties and License Fees payable by
Wyeth-Ayerst to Neurocrine hereunder and upon the
grant of such license, Wyeth-Ayerst will assign to
Neurocrine all Regulatory Filings on [***] which have
been designated as Lead Compounds and/or
Collaboration Products prior to the date of
termination of this Agreement.
12.7 Acquisition. Upon the Acquisition of Neurocrine by a Third Party (a)
such that Neurocrine [***], (b) such that Neurocrine [***], or (c) who
is [***], Wyeth-Ayerst shall have the right at any time on or before
[***] following such the completion of such Acquisition to elect one or
more of the following:
(a) terminate the Research Program;
(b) terminate this Agreement; or
(c) keep this Agreement in full force and effect and
retain all licenses granted by Neurocrine to
Wyeth-Ayerst herein to make, have made, use, sell and
import Lead Compounds and Collaboration Products, in
the Field of Use, subject to the payment to
Neurocrine of the License Fees and Royalties set
forth above.
12.8 Liabilities. Termination of this Agreement shall not release either
Party from any obligation or liability which shall have accrued at the
time of termination, or preclude either Party from pursuing all rights
at law and in equity with respect to any Default under this Agreement.
Notwithstanding the foregoing, neither Party will be liable for
punitive, exemplary or consequential damages incurred by the other
Party arising out of any Default under this Agreement.
12.9 Disclaimer. WITH RESPECT TO ANY DATA, INFORMATION OR INTELLECTUAL
PROPERTY THAT EITHER PARTY BECOMES OBLIGATED TO TRANSFER TO THE OTHER
UNDER THIS ARTICLE TWELVE, THE TRANSFERING PARTY MAKES NO
REPRESENTATIONS AND EXPRESSLY DISCLAIMS AND MAKES NO WARRANTIES OF ANY
KIND, WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, OR THAT ANY SUCH INFORMATION, DATA OR INTELLECTUAL
PROPERTY IS ACCURATE OR COMPLETE OR CAN BE USED BY THE RECEIVING PARTY
WITHOUT INFRINGING THE INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY.
ARTICLE THIRTEEN
INTELLECTUAL PROPERTY
13.1 Inventions. Each Party shall own Patent Rights claiming inventions made
by its employees or agents in the performance of such Party's
obligations under this Agreement (respectively, "Neurocrine Inventions"
and "Wyeth-Ayerst Inventions") and both Parties shall jointly own
inventions made jointly by employees or agents of both Parties in the
performance of their obligations hereunder ("Joint Inventions").
Inventorship shall be determined in accordance with United States laws
of inventorship.
13.2 Patent Prosecution.
(a) Wyeth-Ayerst Inventions and Collaboration Products.
Wyeth-Ayerst, at its expense, shall use Commercially
Reasonable Efforts to prepare, file, prosecute, and maintain
worldwide (i) Patent Rights relating to Wyeth-Ayerst
Inventions and (ii) Patent Rights claiming Lead Compounds
and/or Collaboration Products exclusively licensed to
Wyeth-Ayerst hereunder.
(b) OHSU Licensed Patent Rights. Consistent with the terms and
conditions of the OHSU Agreement, OHSU shall be responsible
for preparation, filing, prosecution and maintenance of Patent
Rights relating to the Licensed Patent Rights (as defined in
the OSHU Agreement) included in the Collaboration Technology.
Wyeth-Ayerst and Neurocrine will [***] after the Effective
Date in connection with the preparation, filing, prosecution
and maintenance of such Patent Rights. Wyeth-Ayerst shall pay
to Neurocrine its share of such expenses within thirty (30)
days after Wyeth-Ayerst's receipt from Neurocrine of an
invoice therefor, which invoice shall be accompanied by
supporting documentation showing, in reasonable detail, the
expenses so incurred.
(c) Neurocrine Inventions. Neurocrine, [***], will use
Commercially Reasonable Efforts to prepare, file, prosecute,
and maintain worldwide Patent Rights relating to Neurocrine
Inventions.
(d) Joint Inventions. Wyeth-Ayerst, [***], shall use Commercially
Reasonable Efforts to prepare, file, prosecute, and maintain
worldwide Patent Rights relating to Joint Inventions.
13.3 Enforcement of Patent Rights.
(a) Wyeth-Ayerst Inventions. Wyeth-Ayerst shall have the sole
right but not the obligation, in its own name and at its own
expense, to enforce Patent Rights relating to Wyeth-Ayerst
Inventions or Wyeth-Ayerst Technology against any Third Party
suspected of infringing a claim of such a Patent Right.
(b) Neurocrine Inventions and Joint Inventions. Wyeth-Ayerst shall
have the first right, but not the obligation, in its own name,
to enforce Patent Rights relating to Neurocrine Inventions and
Joint Inventions, against any Third Party suspected of
infringing a claim of such a Patent Right. In the event
Wyeth-Ayerst shall not elect to enforce any Patent Right
relating to a Neurocrine Invention or Joint Invention,
Neurocrine shall have the right to do so. The Party electing
to enforce such Patent Rights (the "Enforcing Party") shall
have exclusive control over the conduct of any such
proceedings, including the right to settle or compromise such
proceedings consistent with Wyeth-Ayerst's licenses hereunder,
provided, however, that the Enforcing Party may not settle or
compromise any such action in a manner which diminishes the
Patent Rights relating to any Neurocrine Inventions without
Neurocrine's consent or Joint Inventions without the consent
of both Parties or which would impose any financial obligation
on the other Party without such other Party's consent. The
expenses of any proceeding the Enforcing Party initiates,
including lawyers' fees and costs, shall be borne by the
Enforcing Party, provided, however, that the other Party (the
"Non-enforcing Party") may elect to pay [***] of all such
expenses. The Non-enforcing Party will cooperate fully with
the Enforcing Party in such action upon request by the
Enforcing Party. In the event the Non-enforcing Party has not
elected [***], any award or recovery paid to the Enforcing
Party by a Third Party as a result of such patent infringement
proceedings (whether by way of settlement or otherwise) shall
first be applied toward reimbursement of legal fees, costs and
expenses incurred by the Enforcing Party, and from the
remainder, if any, Wyeth-Ayerst in the event Wyeth-Ayerst
shall be the Enforcing Party shall pay to Neurocrine (or
Neurocrine shall retain in the event Neurocrine shall be the
Enforcing Party) an amount equal to the applicable Royalty
rate set forth in Article Nine as applied to the remainder as
though such remainder were added to Net Sales in the year in
which the recovery is made. In the event the Non-enforcing
Party [***], such award or recovery paid to the Enforcing
Party shall first be applied toward reimbursement of legal
fees, costs and expenses incurred by the Parties (in
proportion to expenses incurred), and the remainder, if any,
shall be divided equally between the Parties.
(c) OHSU Licensed Patent Rights. Wyeth-Ayerst, as Neurocrine's
exclusive sublicensee of certain Patent Rights included in the
OHSU Licensed Patent Rights (as defined in the OHSU
Agreement), shall have with respect to patent enforcement of
Patent Rights exclusively licensed to Wyeth-Ayerst hereunder,
the rights of an exclusive sublicensee under Article Eleven of
the OHSU Agreement.
(d) Neurocrine Technology. Neurocrine shall have the sole right
but not the obligation, in its own name and at its own
expense, to enforce Patent Rights relating to Neurocrine
Technology (other than Neurocrine Inventions and OHSU Licensed
Patent Rights (as defined in the OHSU Agreement)) against any
Third Party suspected of infringing a claim of such a Patent
Right.
13.4 Infringement Defense.
(a) Wyeth-Ayerst. Wyeth-Ayerst shall have the right, but not the
obligation, to defend and control any suit against any of
Wyeth-Ayerst, Wyeth-Ayerst's Affiliates or sublicensees,
alleging infringement of any patent or other intellectual
property right of a Third Party arising out of the
manufacture, use, sale, offer to sell or importation of a
Collaboration Product by Wyeth-Ayerst, Wyeth-Ayerst's
Affiliates or sublicensees. Wyeth-Ayerst shall be responsible
for the costs and expenses, including lawyer's fees and costs,
associated with any suit or action, Wyeth-Ayerst and
Neurocrine will consult with one another and cooperate in the
defense of any such action. If Wyeth-Ayerst finds it necessary
or desirable to join Neurocrine as a party to any such action,
Neurocrine will execute all papers and perform such acts as
shall be reasonably required, at Wyeth-Ayerst expense. In the
event the patent claim of any Third Party is held in a final
and unappealable order of a court to be valid and infringed,
or if Wyeth-Ayerst enters into a settlement of such
proceedings, Wyeth-Ayerst shall pay the full amount of any
damages and/or settlement amounts due to such Third Party,
provided, however, [***].
(b) OHSU Licensed Patent Rights. Wyeth-Ayerst, as Neurocrine's
exclusive sublicensee of certain Patent Rights included in the
OHSU Licensed Patent Rights (as defined in the OHSU
Agreement), shall have with respect to infringement defense
relating to Licensed Patent Rights (as defined in the OHSU
Agreement) exclusively licensed to Wyeth-Ayerst hereunder, the
rights of an exclusive sublicensee under Article Eleven of the
OHSU Agreement.
13.5 Cooperation Between the Parties. The Parties recognize that the
designation of a Compound as a Lead Compound or Collaboration Product
may impact the designation of the Party responsible for such invention
under this Article Thirteen. The Parties anticipate that patent
applications may be filed on Compounds prior to designation of the
Compound as Lead Compound or Collaboration Product, and agree to
co-operate in deciding how to allocate responsibilities and expenses in
the event designation of a Compound as a Lead Compound or Collaboration
Product impacts responsibilities under this Article Thirteen. In
addition, the Parties agree to cooperate with each other in the
preparation, filing, prosecuting, maintenance, defense and enforcement
of Patent Rights included in Collaboration Technology licensed
hereunder. In any action taken in the prosecution of, or in the defense
of an action by a Third Party related to patent invalidity or
non-patentability of any patent application or patent claiming
Collaboration Technology licensed hereunder, neither Party shall admit
the invalidity or non-patentability of any Patent Right or take any
other action that may diminish Patent Rights within Collaboration
Technology licensed hereunder without the other Party's prior written
consent. Wyeth-Ayerst agrees to provide Neurocrine with sufficient time
to review, comment and consult on all patent applications and patents
and all correspondence to and from the various patent offices,
including, but not limited to, proposed responses, interferences and
oppositions, claiming Neurocrine Inventions, Joint Inventions and
Wyeth-Ayerst Inventions. The Parties agree to cooperate with each other
and to use best efforts to ensure the cooperation of any of their
respective personnel and licensee(s) or licensor(s) as might reasonably
be requested in any such matters, and shall sign any necessary legal
papers and provide the prosecuting party with data or other information
in support thereof. The Parties will confer on what action to take with
respect to the defense of infringement proceedings naming both
Wyeth-Ayerst and Neurocrine or in proceedings to enforce patents
claiming Collaboration Technology licensed hereunder against a Third
Party. If the Parties cannot agree on the course of action to be taken
in the filing, prosecution, maintenance, or enforcement of any Joint
Invention or Wyeth-Ayerst Invention, Wyeth-Ayerst's decisions shall
control. If the Parties cannot agree on the course of action to be
taken in the filing, prosecution, maintenance, or enforcement of
Neurocrine Invention, Neurocrine's decisions shall control.
ARTICLE FOURTEEN
MISCELLANEOUS
14.1 Disputes. If the Parties are unable to resolve a dispute among them
informally, Wyeth-Ayerst and Neurocrine, by written notice to the
other, may have such dispute referred to their respective executive
officers designated for attempted resolution by good faith
negotiations:
For Wyeth-Ayerst: President of Wyeth-Ayerst
Research for development issues
President Wyeth-Ayerst Global Pharmaceuticals
for commercialization issues
For Neurocrine: President and Chief Executive Officer
Any such dispute shall be submitted to the above-designated executive
officers no later than thirty (30) days following such request by
either Wyeth-Ayerst or Neurocrine. In the event the designated
executive officers are not able to resolve any such dispute within
[***] after submission of the dispute to such executive officers,
Wyeth-Ayerst or Neurocrine, as the case may be, may pursue what ever
measures are legally available to them to resolve such dispute. All
negotiations pursuant to this Section 14.1 shall be treated as
compromise and settlement negotiations. Nothing said or disclosed, nor
any document produced, in the course of such negotiations which is not
otherwise independently discoverable shall be offered or received as
evidence or used for impeachment or for any other purpose in any
current or future arbitration or litigation.
14.2 Assignment. Neither this Agreement nor any interest hereunder shall be
assignable by either Party without the prior written consent of the
other Party, except for assignment by operation of law in connection
with a merger of a Party with or into another Person. This Agreement
shall be binding upon the successors and permitted assigns of the
Parties and the name of a Party appearing herein shall be deemed to
include the names of such Party's successors and permitted assigns to
the extent necessary to carry out the intent of this Agreement. Any
assignment not in accordance with this Section 14.2 shall be void.
14.3 Further Actions. Each Party agrees to execute, acknowledge and deliver
such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent
of the Agreement.
14.4 Force Majeure. No Party shall be liable to the other Party for loss or
damages or shall have any right to terminate this Agreement for any
default or delay attributable to any Force Majeure, if the Party
affected shall give prompt notice of any such cause to the other Party.
The Party giving such notice shall thereupon be excused from such of
its obligations hereunder as it is thereby disabled from performing for
so long as it is so disabled, provided, however, that such affected
Party commences and continues to use its Commercially Reasonable
Efforts to cure such cause.
14.5 Correspondence and Notices.
(a) Ordinary Notices. Correspondence, reports, documentation, and
any other communication in writing between the Parties in the
course of ordinary implementation of this Agreement shall be
delivered by hand, sent by facsimile transmission (receipt
verified), or by airmail to the employee or representative of
the other Party who is designated by such other Party to
receive such written communication.
(b) Extraordinary Notices. Extraordinary notices and other
communications hereunder (including, without limitation, any
notice of force majeure, breach, termination, change of
address, exercise of rights to negotiate additional
agreements, etc.) shall be in writing and shall be deemed
given if delivered personally or by facsimile transmission
(receipt verified), mailed by registered or certified mail
(return receipt requested), postage prepaid, or sent by
nationally recognized express courier service, to the Parties
at the following addresses (or at such other address for a
Party as shall be specified by like notice, provided, however,
that notices of a change of address shall be effective only
upon receipt thereof):
All correspondence to Wyeth-Ayerst shall be addressed as
follows:
Wyeth-Ayerst Laboratories
555 East Lancaster Avenue
St. Davids, Pennsylvania 19087
Attn: Senior Vice President, Global Business Development
Fax: (610) 688-9498
with a copy to:
American Home Products Corporation
5 Giralda Farms
Madison, New Jersey 07940
Attn: Senior Vice President and General Counsel
Fax: (973) 660-7156
All correspondence to Neurocrine shall be addressed as
follows:
Neurocrine Biosciences, Inc.
10555 Science Park Road
San Diego, California 9211-1102
Attn: Director Product Licensing
Fax: 619-658-7602
with a copy to:
Neurocrine Biosciences, Inc.
10555 Science Park Road
San Diego, California 9211-1102
Attn: Corporate Secretary
Fax: 619-658-7605
14.6 Amendment. No amendment, modification or supplement of any provision of
this Agreement shall be valid or effective unless made in writing and
signed by a duly authorized officer of each Party.
14.7 Waiver. No provision of the Agreement shall be waived by any act,
omission or knowledge of a Party or its agents or employees except by
an instrument in writing expressly waiving such provision and signed by
a duly authorized officer of the waiving Party.
14.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which need not contain the signature of more than
one Party but all such counterparts taken together shall constitute one
and the same agreement.
14.9 Descriptive Headings. The descriptive headings of this Agreement are
for convenience only, and shall be of no force or effect in construing
or interpreting any of the provisions of this Agreement.
14.10 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the substantive laws of the State of Delaware (without
regard to conflict of law principles) and the Parties hereby submit to
the exclusive jurisdiction of the federal courts of the state of
California.
14.11 Severability. In the event that any clause or portion thereof in this
Agreement is for any reason held to be invalid, illegal or
unenforceable, the same shall not affect any other portion of this
Agreement, as it is the intent of the Parties that this Agreement shall
be construed in such fashion as to maintain its existence, validity and
enforceability to the greatest extent possible. In any such event, this
Agreement shall be construed as if such clause of portion thereof had
never been contained in this Agreement, and there shall be deemed
substituted therefor such provision as will most nearly carry out the
intent of the Parties as expressed in this Agreement to the fullest
extent permitted by applicable law unless doing so would have the
effect of materially altering the right and obligations of the Parties
in which event this Agreement shall terminate and all the rights and
obligations granted to the Parties hereunder shall cease and be of no
further force and effect.
14.12 Entire Agreement of the Parties. This Agreement constitutes and
contains the complete, final and exclusive understanding and agreement
of the Parties and cancels and supersedes any and all prior
negotiations, correspondence, understandings and agreements including,
without limitation, the Prior Agreement, whether oral or written, among
the Parties respecting the subject matter hereof and thereof.
14.13 Independent Contractors. The relationship between Wyeth-Ayerst and
Neurocrine created by this Agreement is one of independent contractors
and neither Party shall have the power or authority to bind or obligate
the other except as expressly set forth in this Agreement.
14.14 No Trademark Rights. Expect as otherwise provided herein, no right,
express or implied, is granted by this Agreement to use in any manner
the name "Neurocrine Biosciences" "Wyeth-Ayerst," or any other trade
name or trademark of the other Party or its Affiliates in connection
with the performance of this Agreement.
14.15 Accrued Rights; Surviving Obligations. Unless explicitly provided
otherwise in this Agreement, termination, relinquishment or expiration
of the Agreement for any reason shall be without prejudice to any
rights which shall have accrued to the benefit to any Party prior to
such termination, relinquishment or expiration, including damages
arising from any breach hereunder. Such termination, relinquishment or
expiration shall not relieve any Party from obligations which are
expressly indicated to survive termination or expiration of the
Agreement, including, without limitation, those obligations set forth
in Articles Ten, Eleven and Twelve and Sections 5.8, 5.9, 9.4, 14.1 and
14.5 hereof.
14.16 Export. Notwithstanding anything to the contrary set forth herein, all
obligations of Neurocrine and Wyeth-Ayerst are subject to prior
compliance with United States and foreign export regulations and such
other United States and foreign laws and regulations as may be
applicable and to obtaining all necessary approvals required by
applicable agencies of the governments of the United States and foreign
jurisdictions. Neurocrine and Wyeth-Ayerst will co-operate with one
another and provide assistance to one another as reasonably necessary
to obtain any required approvals.
IN WITNESS WHEREOF, duly authorized representatives of the Parties have
duly executed this Agreement to be effective as of the Effective Date.
AMERICAN HOME PRODUCTS CORPORATION, NEUROCRINE BIOSCIENCES, INC.
acting through its
WYETH-AYERST LABORATORIES DIVISION
By /s/ Egon Berg By: /s/ Gary Lyons
Name: Egon Berg Name: Gary Lyons
Title: Vice President & Title: President &
Associate General Counsel Chief Executive Officer
Date: 03/02/98 Date: 03/02/98
<PAGE>
EXHIBIT A
TRANSPORTERS
[***]
EXHIBIT B
LEAD COMPOUND
[***]
EXHIBIT C
PATENT RIGHTS
[***]
EXHIBIT D
OHSU AGREEMENT
[***]
EXHIBIT E
THIRD PARTY PATENTS
[***]
EXHIBIT F
OTHER NEUROCRINE OBLIGATIONS
[***]
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of October 1, 1998, is made by and between NEUROCRINE
BIOSCIENCES. INC., a Delaware corporation (hereinafter the "Company"), and
Margaret Valeur-Jensen (hereinafter "Executive").
R E C I T A L S
WHEREAS, the Company and Executive wish to set forth in this Agreement
the terms and conditions under which Executive is to be employed by the Company
on and after the date hereof; and
NOW, THEREFORE, the Company and Executive, in consideration of the
mutual promises set forth herein, agree as follows:
ARTICLE 1
TERM OF AGREEMENT
1.1 Commencement Date. Executive's fulltime employment with the Company
under this Agreement shall commence as of January 4, 1999 ("Commencement Date")
and this Agreement shall expire after a period of three (3) years from the
Commencement Date, unless terminated earlier pursuant to Article 6. It is
understood the Executive shall be available to the Company on a part-time basis
during the period October 1, 1998 to December 31, 1998.
1.2 Renewal. The term of this Agreement shall be automatically renewed
for successive, additional three (3) year terms unless either party delivers
written notice to the other at least ninety (90) days prior to the expiration
date of this Agreement of an intention to terminate this Agreement or to renew
it for a term of less than three (3) years but not less than (1) year. If the
term of this Agreement is renewed for a term of less than three (3) years, then
thereafter the term of this Agreement shall be automatically renewed for
successive, additional identical terms unless either party delivers a written
notice to the other at least ninety (90) days prior to a terminate date of this
Agreement of an intention to terminate this Agreement or to renew it for a
different term of not less than one (1) year.
ARTICLE 2
EMPLOYMENT DUTIES
2.1 Title/Responsibilities. Executive hereby accepts employment with
the Company pursuant to the terms and conditions hereof. Executive agrees to
serve the Company in the position of Vice President - General Counsel and
Corporate Secretary. Executive shall have the powers and duties commensurate
with such position, including but not limited to hiring personnel necessary to
carry out the responsibilities for such position as set forth in the annual
business plan approved by the Board of Directors.
2.2 Full Time Attention. Executive shall devote her best efforts and
her full business time and attention to the performance of the services
customarily incident to such office and to such other services as the President
or Board may reasonably request.
2.3 Other Activities. Except upon the prior written consent of the
President & Chief Executive Officer, Executive shall not during the period of
employment engage, directly or indirectly, in any other business activity
(whether or not pursued for pecuniary advantage) that is or may be competitive
with, or that might place her in a competing position to that of the Company or
any other corporation or entity that directly or indirectly controls, is
controlled by, or is under common control with the Company (an "Affiliated
Company"), provided that Executive may own less than two percent of the
outstanding securities of any such publicly traded competing corporation. It is
understood Executive will enter into a Consulting Agreement with the Executive's
former employer, Amgen, Inc. Prior to execution of such Agreement, the Executive
must receive approval from the President & Chief Executive Officer, approval
which will not be unreasonably withheld.
ARTICLE 3
COMPENSATION
3.1 Base Salary. Executive shall receive a Base Salary at an annual
rate of two hundred twelve thousand dollars ($212,000), payable semi-monthly in
equal installments in accordance with the Company's normal payroll practices.
The Company's Board of Directors shall provide Executive with annual performance
reviews, and, thereafter, Executive shall be entitled to such increase in Base
Salary as the Board of Directors may from time to time establish in its sole
discretion. During the period October 1, 1998 to December 31, 1998, Executive
shall receive a Salary of $5,000 for services performed for or on behalf of the
Company on the Company's premises.
3.2 Incentive Bonus. In addition to any other bonus Executive shall be
awarded by the Company's Board of Directors, the Company shall pay Executive a
bonus payment of up to fifty thousand dollars ($50,000) annually based upon
achievement by the Company against six to eight impact goals approved by the
Board of Directors annually. Such goals shall be set forth in writing by the
Board within ninety (90) days after the start of the Company's fiscal year and a
copy shall be delivered to Executive within fifteen (15) days thereafter. The
Board of Directors shall, in their sole discretion, determine whether such
impact goals have been obtained.
3.3 Equity. The Executive will receive a nonqualified stock option to
purchase one hundred fifteen thousand (115,000) shares of the Company's common
stock with an exercise price of $5.0625 per share, representing the Company's
market price at the time of Board approval. Such option shall vest over a
four-year period with 25% of such vesting occurring on December 31, 1999 and
1/48 per month thereafter in accordance with the terms of the Company's 1992
Incentive Stock Incentive Plan, as amended.
3.3 Withholdings. All compensation and benefits payable to Executive
hereunder and the Agreement shall be subject to all federal, state, local and
other withholdings and similar taxes and payments required by applicable law.
ARTICLE 4
EXPENSE ALLOWANCES AND FRINGE BENEFITS
4.1 Vacation. Executive shall be entitled to the greater of three (3)
weeks of annual paid vacation or the amount of annual paid vacation to which
Executive may become entitled under the terms of Company's vacation policy for
employees during the term of this Agreement.
4.2 Benefits. During the term of this Agreement, the Company shall also
provide Executive with the usual health insurance benefits it generally provides
to its other senior management employees. As Executive becomes eligible in
accordance with criteria to be adopted by the Company, the Company shall provide
Executive with the right to participate in and to receive benefit from life,
accident, disability, medical, pension, bonus, stock, profit-sharing and savings
plans and similar benefits made available generally to employees of the Company
as such plans and benefits may be adopted by the Company. The amount and extent
of benefits to which Executive is entitled shall be governed by the specific
benefit plan as it may be amended from time to time.
4.3 Relocation. The Company will pay for reasonable relocation expenses
consisting of (i) out of pocket expenses directly related to selling your
existing home, including customary real estate commissions and associated costs;
(ii) reasonable house hunting expenses, temporary living expenses through March
1999 and duplicate mortgage payments, if required, through June 1999; (iii)
customary closing costs and fees, including up to one and one half points (1.5%)
of the mortgage financing amount related to the purchase of a new home; (iv)
reasonable and customary moving expenses of household goods and personal
property (including temporary storage) to San Diego, CA; (v) up to $10,000 in
other miscellaneous documented expenses. Relocation costs associated with items
(i) through (iv) above will be tax equalized.
4.4 Loss on Sale: In the event that you sell your home to a bona fide
purchaser in good faith at a gross price before deducting direct selling
expenses or commissions (the "Sales Price"), less than your purchase price plus
the cost of improvements (the "Purchase Price"), the Company will lend you the
lesser of the difference between the Sales Price and Purchase Price or $50,000,
with such loan to be evidenced by a promissory note due and payable in the event
of (a) the sale of stock options by the Employee (to the extent of the proceeds
received by Employee in such sale), or (b) ninety (90) days following
termination of your employment with the Company or (c) sale of your San Diego
house. Fifty percent (50%) of the total amount of such loan shall be forgiven by
the Company over a four (4) year period in four (4) equal installments on each
of the first through fourth anniversary dates of the commencement of your
full-time employment with the Company, provided that you are still employed by
the Company on such date.
ARTICLE 5
CONFIDENTIALITY
5.1 Proprietary Information. Executive represents and warrants that he
has previously executed and delivered to the Company the Company's standard
Proprietary Information and Inventions Agreement in form acceptable to the
Company's counsel.
5.2 Return of Property. All documents, records, apparatus, equipment
and other physical property which is furnished to or obtained by Executive in
the course of her employment with the Company shall be and remain the sole
property of the Company. Executive agrees that, upon the termination of her
employment, he shall return all such property (whether or not it pertains to
Proprietary Information as defined in the Proprietary Information and Inventions
Agreement), and agrees not to make or retain copies, reproductions or summaries
of any such property.
ARTICLE 6
TERMINATION
6.1 By Death. The period of employment shall terminate automatically
upon the death of Executive. In such event, the Company shall pay to Executive's
beneficiaries or her estate, as the case may be, any accrued Base Salary, any
bonus compensation to the extent earned, any vested deferred compensation (other
than pension plan or profit-sharing plan benefits which will be paid in
accordance with the applicable plan), any benefits under any plans of the
Company in which Executive is a participant to the full extent of Executive's
rights under such plans, any accrued vacation pay and any appropriate business
expenses incurred by Executive in connection with her duties hereunder, all to
the date of termination (collectively Accrued Compensation), but no other
compensation or reimbursement of any kind, including, without limitation,
severance compensation, and thereafter, the Company's obligations hereunder
shall terminate.
6.2 By Disability. If Executive is prevented from properly performing
her duties hereunder by reason of any physical or mental incapacity for a period
of 120 consecutive days, or for 180 days in the aggregate in any 365-day period,
then, to the extent permitted by law, the Company may terminate the employment
of Executive at such time. In such event, the Company shall pay to Executive all
Accrued Compensation, and shall continue to pay to Executive the Base Salary
until such time (but not more than 90 days following termination), as Executive
shall become entitled to receive disability insurance payments under the
disability insurance policy maintained by the Company, but no other compensation
or reimbursement of any kind, including without limitation, severance
compensation, and thereafter the Company's obligations hereunder shall
terminate. Nothing in this Section shall affect Executive's rights under any
disability plan in which he is a participant.
6.3 By Company for Cause. The Company may terminate the Executive's
employment for Cause (as defined below) without liability at any time with or
without advance notice to Executive. The Company shall pay Executive all Accrued
Compensation, but no other compensation or reimbursement of any kind, including
without limitation, severance compensation, and thereafter the Company's
obligations hereunder shall terminate. Termination shall be for "Cause" in the
event of the occurrence of any of the following: (a) any intentional action or
intentional failure to act by Executive which was performed in bad faith and to
the material detriment of the Company; (b) Executive intentionally refuses or
intentionally fails to act in accordance with any lawful and proper direction or
order of the Board; (c) Executive willfully and habitually neglects the duties
of employment; or (d) Executive is convicted of a felony crime involving moral
turpitude, provided that in the event that an of the foregoing events is capable
of being cured, the Company shall provide written notice to Executive describing
the nature of such event and Executive shall thereafter have ten (10) business
days to cure such event.
6.4 Termination Without Cause. At any time, the Company may terminate
the employment of Executive without liability other than as set forth below, for
any reason not specified in Section 6.3 above, by giving thirty (30) days
advance written notice to Executive. If the Company elects to terminate
Executive pursuant to this Section 6.4, (a) the Company shall pay to Executive
all Accrued Compensation (b) the Company shall continue to pay to Executive as
provided herein Executive's Base Salary over the period equal to nine (9) months
from the date of such termination as severance compensation, (c) if Executive's
employment terminates in the second half of the Company's fiscal year, the
Company shall make a lump sum payment to Executive in an amount equal to a pro
rata portion of the Executive's annual actual cash incentive bonus for Company's
fiscal year preceding the year of termination based on the number of completed
months of Executive's employment in the fiscal year divided by nine (9); (d) the
vesting of all outstanding stock options held by Executive shall be accelerated
so that the amount of shares vested under such option shall equal that number of
shares which would have been vested if the Executive had continued to render
services to the Company for nine (9) continuous months after the date of her
termination of employment; and (e) the Company shall pay all costs which the
Company would otherwise have incurred to maintain all of Executive's health and
welfare, and retirement benefits (either on the same or substantially equivalent
terms and conditions) if the Executive had continued to render services to the
Company for nine (9) continuous months after the date of her termination of
employment. The Company shall have no further obligations to Executive other
than those set forth in the preceding sentence. During the period when such Base
Salary severance compensation is being paid to Executive, Executive shall not
(i) engage, directly or indirectly, in providing services to any other business
program or project that is competitive to a program or project being conducted
by the Company or any Affiliated Company at the time of such employment
termination (provided that Executive may own less than two percent (2%) of the
outstanding securities of any publicly traded corporation), or (ii) hire,
solicit, or attempt to solicit on behalf of himself or any other party or any
employee or exclusive consultant of the Company. If the Company terminates this
Agreement or the employment of Executive with the Company other than pursuant to
Section 6.1, 6.2 or 6.3, then this section 6.4 shall apply.
6.5 Constructive Termination A Constructive Termination shall be deemed
to be a termination of employment of Executive without cause pursuant to Section
6.4 For Purposes of this Agreement, a "Constructive Termination" means that the
Executive voluntarily terminates her employment after any of the following are
undertaken without Executive's express written consent:
(a) the assignment to Executive of any duties or
responsibilities which result in any diminution or adverse change of
Executive's position, status or circumstances of employment; or any
removal of Executive from or any failure to re-elect Executive to any
of such positions, except in connection with the termination of her
employment for death, disability, retirement, fraud, misappropriation,
embezzlement (or any other occurrence which constitutes "Cause" under
section 6.3) or any other voluntary termination of employment by
Executive other than a Constructive Termination;
(b) a reduction by the Company in Executive's annual Base
Salary by greater than five percent (5%);
(c) a relocation of Executive or the Company's principal
executive offices if Executive's principal office is at such offices,
to a location more than forty (40) miles from the location at which
Executive is then performing her duties, except for an opportunity to
relocate which is accepted by Executive in writing;
(d) any material breach by the Company of any provision of
this Agreement; or
(e) any failure by the Company to obtain the assumption of
this Agreement by any successor or assign of the Company.
6.6 Termination Following Change in Control In the event of a
non-renewal of this Agreement, a termination without Cause or a Constructive
Termination within eighteen (18) months following a Change in Control, Executive
shall receive the same benefits package as Executive would have received upon a
termination without Cause (except that the payment of Base Salary shall be made
in the form of a lump sum) and in addition, the vesting of all outstanding stock
options held by Executive shall be accelerated so that the options are
immediately exercisable in full.
6.7 Change in Control. For purposes of this Agreement, a "Change in
Control" shall have occurred if at any time during the term of Executive's
employment hereunder, any of the following events shall occur:
(a) The Company is merged, or consolidated. or reorganized
into or with another corporation or other legal person, and as a result
of such merger, consolidation or reorganization less than 50% of the
combined voting power of the then-outstanding securities of such
corporation or person immediately after such transaction are held in
the aggregate by the holders of voting securities of the Company
immediately prior to such transaction;
(b) The Company sells all or substantially all of its assets
or any other corporation or other legal person and thereafter, less
than 50% of the combined voting power of the then-outstanding voting
securities of the acquiring or consolidated entity are held in the
aggregate by the holders of voting securities of the Company
immediately prior to such sale;
(c) There is a report filed after the date of this Agreement
on Schedule 13 D or schedule 14 D-1 (or any successor schedule, form or
report), each as promulgated pursuant to the Securities Exchange Act of
l934 (the "Exchange Act") disclosing that any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of the
exchange Act) has become the beneficial owner (as the term beneficial
owner is defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) representing 50% or more of the
combined voting power of the then-outstanding voting securities of the
Company;
(d) The Company shall file a report or proxy statement with
the Securities and Exchange Commission pursuant to the Exchange Act
disclosing in response to item 1 of Form 8-X thereunder or Item 5(f) of
Schedule 14 A thereunder (or any successor schedule, form or report or
item therein) that the change in control of the Company has or may have
occurred or will or may occur in the future pursuant to any
then-existing contract or transaction; or
(e) During any period of two consecutive years, individuals
who at the beginning of any such period constitute the directors of the
Company cease for any reason to constitute at least a majority thereof
unless the election to the nomination for election by the Company's
shareholders of each director of the Company first elected during such
period was approved by a vote of at least two-thirds of the directors
of the Company then still in office who were directors of the Company
at the beginning of such period.
6.8 Termination by Executive. At any time, Executive may terminate her
employment by giving thirty (30) days advance written notice to the Company. The
Company shall pay Executive all Accrued Compensation, but no other compensation
or reimbursement of any kind, including without limitation, severance
compensation, and thereafter the Company's obligations hereunder shall
terminate.
6.9 Mitigation Except as otherwise specifically provided herein,
Executive shall not be required to mitigate the amount of any payment provided
under this Agreement by seeking other employment or self-employment, nor shall
the amount of any payment provided for under this Agreement be reduced by any
compensation earned by Executive as a result of employment by another employer
or through self-employment or by retirement benefits after the date of
Executive's termination of employment from the Company.
6.10 Coordination If upon termination of employment, Executive becomes
entitled to rights under other plans, contracts or arrangements entered into by
the Company, this Agreement shall be coordinated with such other arrangements so
that Executive's rights under this Agreement are not reduced, and that any
payments under this Agreement offset the same types of payments otherwise
provided under such other arrangements, but do not otherwise reduce any payments
or benefits under such other arrangements to which Executive becomes entitled.
ARTICLE 7
GENERAL PROVISIONS
7.1 Governing law. The validity, interpretation, construction and
performance of this Agreement and the rights of the parties thereunder shall be
interpreted and enforced under California law without reference to principles of
conflicts of laws. The parties expressly agree that inasmuch as the Company's
headquarters and principal place of business are located in California, it is
appropriate that California law govern this Agreement.
7.2 Assignment; Successors Binding Agreement.
7.2.1 Executive may not assign, pledge or encumber her
interest in this Agreement or any part thereof.
7.2.2 The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by
operation of law or by agreement in form and substance reasonably
satisfactory to Executive, to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company
would be required to perform it if no such succession had taken place.
7.2.3 This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributee, devisees and
legatees. If Executive should die while any amount is at such time
payable to her hereunder, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to
Executive's devisee, legates or other designee or, if there be no such
designee, to her estate.
7.3 Certain Reduction of Payments In the event that any payment or
benefit received or to be received by Executive under this Agreement would
result in all or a portion of such payment to be subject to the excise tax on
"golden parachute payments" under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), then Executive's payment shall be either (a) the
full payment or (b) such lesser amount which would result in no portion of the
payment being subject to excise tax under Section 4999 of the Code, whichever of
the foregoing amounts, taking into account the applicable Federal, state and
local employment taxes, income taxes, and the excise tax imposed by Section 4999
of the Code, results in the receipt by Executive on an after-tax basis, of the
greatest amount of the payment notwithstanding that all or some portion of the
payment may be taxable under Section 4999 of the Code.
7.4 Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
To the Company:
Neurocrine Biosciences, Inc.
10555 Science Center Drive
San Diego, CA 92121
Attn.: President & Chief Executive Officer
To Executive:
Ms. Margaret Valeur-Jensen
4507 South Lane
Del Mar, CA 92014
7.5 Modification; Waiver; Entire Agreement. No provisions of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing signed by Executive and such officer as may
be specifically designated by the Board of the Company. No waiver by either
party hereto at any time of any breach by the other party of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.
7.6 Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
7.7 Controlling Document. Except to the extent described in Section
6.l0, in case of conflict between any of the terms and condition of this
Agreement and the document herein referred to, the terms and conditions of this
Agreement shall control.
7.8 Executive Acknowledgment. Executive acknowledges (a) that he has
consulted with or has had the opportunity to consult with independent counsel of
her own choice concerning this Agreement, and has been advised to do so by the
Company, and (b) that he has read and understands the Agreement, is fully aware
of its legal effect, and has entered into it freely based on her own judgment.
7.9 Remedies
7.9.1 Injunctive Relief. The parties agree that the services
to be rendered by Executive hereunder are of a unique nature and that
in the event of any breach or threatened breach of any of the covenants
contained herein, the damage or imminent damage to the value and the
goodwill of the Company's business will be irreparable and extremely
difficult to estimate, making any remedy at law or in damages
inadequate. Accordingly, the parties agree that the Company shall be
entitled to injunctive relief against Executive in the event of any
breach or threatened breach of any such provisions by Executive, in
addition to any other relief (including damage) available to the
Company under this Agreement or under law.
7.9.2 Exclusive. Both parties agree that the remedy specified
in Section 7.9.1 above is not exclusive of any other remedy for the
breach by Executive of the terms hereof.
7.10 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
Agreement.
7.11 Prevailing Party Expenses. In the event that any action or
proceeding is commenced to enforce the provisions of the Agreement, the court
adjudicating such action or proceeding shall award to the prevailing party all
costs and expenses thereof, including, but not limited to, all reasonable
attorneys' fees, court costs, and all other related expenses.
Executed by the parties as of the day and year first above written.
EXECUTIVE NEUROCRINE BIOSCIENCES, INC
By: /s/Margaret Valeur-Jensen By: /s/Gary A. Lyons
Margaret Valeur-Jensen Gary A. Lyons
President & Chief Executive Officer
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of January 1, 1998, is made by and between NEUROCRINE
BIOSCIENCES. INC., a Delaware corporation (hereinafter the "Company"), and BRUCE
CAMPBELL, Ph.D. (hereinafter "Executive").
R E C I T A L S
WHEREAS, the Company and Executive wish to set forth in this Agreement
the terms and conditions under which Executive is to be employed by the Company
on and after the date hereof; and
NOW, THEREFORE, the Company and Executive, in consideration of the
mutual promises set forth herein, agree as follows:
ARTICLE 1
TERM OF AGREEMENT
1.1 Commencement Date. Executive's fulltime employment with the Company
under this Agreement shall commence as of January 1, 1998 ("Commencement Date")
and this Agreement shall expire after a period of three (3) years from the
Commencement Date, unless terminated earlier pursuant to Article 6.
1.2 Renewal. The term of this Agreement shall be automatically renewed
for successive, additional three (3) year terms unless either party delivers
written notice to the other at least ninety (90) days prior to the expiration
date of this Agreement of an intention to terminate this Agreement or to renew
it for a term of less than three (3) years but not less than (1) year. If the
term of this Agreement is renewed for a term of less than three (3) years, then
thereafter the term of this Agreement shall be automatically renewed for
successive, additional identical terms unless either party delivers a written
notice to the other at least ninety (90) days prior to a terminate date of this
Agreement of an intention to terminate this Agreement or to renew it for a
different term of not less than one (1) year.
ARTICLE 2
EMPLOYMENT DUTIES
2.1 Title/Responsibilities. Executive hereby accepts employment with
the Company pursuant to the terms and conditions hereof. Executive agrees to
serve the Company in the position of Vice President - Development. Executive
shall have the powers and duties commensurate with such position, including but
not limited to hiring personnel necessary to carry out the responsibilities for
such position as set forth in the annual business plan approved by the Board of
Directors.
2.2 Full Time Attention. Executive shall devote his best efforts and
his full business time and attention to the performance of the services
customarily incident to such office and to such other services as the President
or Board may reasonably request.
2.3 Other Activities. Except upon the prior written consent of the
President & Chief Executive Officer, Executive shall not during the period of
employment engage, directly or indirectly, in any other business activity
(whether or not pursued for pecuniary advantage) that is or may be competitive
with, or that might place him in a competing position to that of the Company or
any other corporation or entity that directly or indirectly controls, is
controlled by, or is under common control with the Company (an "Affiliated
Company"), provided that Executive may own less than two percent (2%) of the
outstanding securities of any such publicly traded competing corporation.
ARTICLE 3
COMPENSATION
3.1 Base Salary. Executive shall receive a Base Salary at an annual
rate of two hundred thousand dollars (200,000), payable semi-monthly in equal
installments in accordance with the Company's normal payroll practices. The
Company's Board of Directors shall provide Executive with annual performance
reviews, and, thereafter, Executive shall be entitled to such increase in Base
Salary as the Board of Directors may from time to time establish in its sole
discretion. In addition, upon signing this Agreement, Executive will receive an
initial bonus of twenty thousand dollars ($20,000).
3.2 Incentive Bonus. In addition to any other bonus Executive shall be
awarded by the Company's Board of Directors, the Company shall pay Executive a
bonus payment of up to fifty thousand dollars ($50,000) annually based upon
achievement by the Company against six to eight impact goals approved by the
Board of Directors annually. Such goals shall be set forth in writing by the
Board within ninety (90) days after the start of the Company's fiscal year and a
copy shall be delivered to Executive within fifteen (15) days thereafter. The
Board of Directors shall, in their sole discretion, determine whether such
impact goals have been obtained.
3.3 Equity. Executive has previously entered into a Consulting
Agreement ("Consulting Agreement") with the Company dated September 9, 1997.
Pursuant to the Consulting Agreement, Executive has received a stock option to
purchase one hundred twenty-five thousand (125,000) shares of the Company's
common stock with an exercise price of six dollars and ninety-one cents ($6.91)
per share, representing the Company's market price at the time of Board
approval. Such option shall continue to vest in accordance with the Consulting
Agreement and in accordance with the terms of the Company's 1992 Incentive Stock
Incentive Plan, as amended. Upon execution of this Agreement, the Consulting
Agreement will terminate.
3.3 Withholdings. All compensation and benefits payable to Executive
hereunder and the Agreement shall be subject to all federal, state, local and
other withholdings and similar taxes and payments required by applicable law.
ARTICLE 4
EXPENSE ALLOWANCES AND FRINGE BENEFITS
4.1 Vacation. Executive shall be entitled to the greater of three (3)
weeks of annual paid vacation or the amount of annual paid vacation to which
Executive may become entitled under the terms of Company's vacation policy for
employees during the term of this Agreement.
4.2 Benefits. During the term of this Agreement, the Company shall also
provide Executive with the usual health insurance benefits it generally provides
to its other senior management employees. As Executive becomes eligible in
accordance with criteria to be adopted by the Company, the Company shall provide
Executive with the right to participate in and to receive benefit from life,
accident, disability, medical, pension, bonus, stock, profit-sharing and savings
plans and similar benefits made available generally to employees of the Company
as such plans and benefits may be adopted by the Company. The amount and extent
of benefits to which Executive is entitled shall be governed by the specific
benefit plan as it may be amended from time to time.
4.3 Relocation to San Diego, CA. The Executive shall be reimbursed for
reasonable and customary relocation expenses as follows:
(a) out of pocket expenses related to selling Executive's existing home in
the United Kingdom, including customary real estate commissions not to
exceed one percent (1%) of selling price and associated costs;
(b) reasonable house hunting and up to sixty (60) days temporary living
expenses;
(c) customary closing costs associated with the purchase of a new home
including up to one and one-half points of the mortgage financing
amount related to the purchase of a new home;
(d) reasonable and customary moving expenses of household goods and
personal property (including temporary storage of up the three (3)
months) to San Diego, CA;
(e) up to twenty thousand dollars ($20,000) for miscellaneous documented
relocation expenses, payable upon the purchase or rental of a home in
San Diego, CA.
The Company will reimburse the Executive for the incremental increase in federal
and state income taxes associated with the payment of expenses associated with
items (a) through (d) above. In addition, the Company will retain at Company
expense, for the benefit of Executive, a tax specialist who will provide tax
guidance associated with the Executive's relocation to the United States for the
three tax periods immediately following Executive's relocation to the United
States.
4.4 Relocation Loan: In connection with the purchase of a home in the
San Diego area, the Company will provide to Executive a loan of up to two
hundred and fifty thousand dollars ($250,000) representing the excess over the
purchase price of a home in San Diego over five hundred thousand dollars
($500,000). Such loan will, at the option of the Company, be secured by a second
mortgage deed on the home purchased by Executive. The principal balance of the
loan will bear interest at a rate of one percent per annum (1.0% p.a.) and
principal and interest will be payable upon the first to occur of (i) sale of
the home, (ii) six (6) months following voluntary or involuntary termination of
Executive's employment with the Company, (iii) the exercise, pledge or sale of
all or part of the stock options granted by Company to Executive or (iv)
December 31, 1999.
4.5 Relocation to the Untied Kingdom: Upon termination of Executive's
employment with the Company, the Company will reimburse Executive for costs
associated with relocation back to the United Kingdom including (i) the lesser
of customary closing costs and fees (not to exceed six percent (6%) of the
selling price) related to the sale by Executive of the first home in San Diego
owned by Executive during the term of this Agreement or customary closing costs
and fees (not to exceed six percent (6%) of the selling price) related to the
sale of Executive's home in San Diego on the date of termination of this
Agreement, (ii) documented reasonable and customary moving expenses of household
goods and personal property not to exceed in the aggregate ten thousand dollars
($10,000). The foregoing provision shall not apply in the event (i) at the time
of relocation, Executive has accepted employment with another company or it is
Executive's intention to do so within a period of six (6) months, (ii) Executive
has not completed four (4) full years of employment at the Company (other than
by reason of the failure of the Company to renew the term of this Agreement) or
(iii) termination of Executive's employment with the Company is for Cause as
defined in paragraph 6.3 below.
4.6 Other Relocation Expenses. The Company will provide to the
Executive's wife, mother and mother-in-law, one round trip coach ticket to and
from San Diego and London. The Company will arrange for a Business Class upgrade
for these tickets.
4.7 Business Expense Reimbursement. During the term of this Agreement,
Executive shall be entitled to receive proper reimbursement for all reasonable
out-of-pocket expenses incurred by him (in accordance with the policies and
procedures established by the Company for its senior executive officers) in
performing services hereunder. Executive agrees to furnish to the Company
adequate records and other documentary evidence of such expense for which
Executive seeks reimbursement. Such expenses shall be reimbursed and accounted
for under the policies and procedure established by the Company and the Audit
Committee of the Board of Directors.
ARTICLE 5
CONFIDENTIALITY
5.1 Proprietary Information. Executive represents and warrants that he
has previously executed and delivered to the Company the Company's standard
Proprietary Information and Inventions Agreement in form acceptable to the
Company's counsel.
5.2 Return of Property. All documents, records, apparatus, equipment
and other physical property which is furnished to or obtained by Executive in
the course of his employment with the Company shall be and remain the sole
property of the Company. Executive agrees that, upon the termination of his
employment, he shall return all such property (whether or not it pertains to
Proprietary Information as defined in the Proprietary Information and Inventions
Agreement), and agrees not to make or retain copies, reproductions or summaries
of any such property.
ARTICLE 6
TERMINATION
6.1 By Death. The period of employment shall terminate automatically
upon the death of Executive. In such event, the Company shall pay to Executive's
beneficiaries or his estate, as the case may be, any accrued Base Salary, any
bonus compensation to the extent earned, any vested deferred compensation (other
than pension plan or profit-sharing plan benefits which will be paid in
accordance with the applicable plan), any benefits under any plans of the
Company in which Executive is a participant to the full extent of Executive's
rights under such plans, any accrued vacation pay and any appropriate business
expenses incurred by Executive in connection with his duties hereunder, all to
the date of termination (collectively Accrued Compensation), but no other
compensation or reimbursement of any kind, including, without limitation,
severance compensation, and thereafter, the Company's obligations hereunder
shall terminate.
6.2 By Disability. If Executive is prevented from properly performing
his duties hereunder by reason of any physical or mental incapacity for a period
of 120 consecutive days, or for 180 days in the aggregate in any 365-day period,
then, to the extent permitted by law, the Company may terminate the employment
of Executive at such time. In such event, the Company shall pay to Executive all
Accrued Compensation, and shall continue to pay to Executive the Base Salary
until such time (but not more than 90 days following termination), as Executive
shall become entitled to receive disability insurance payments under the
disability insurance policy maintained by the Company, but no other compensation
or reimbursement of any kind, including without limitation, severance
compensation, and thereafter the Company's obligations hereunder shall
terminate. Nothing in this Section shall affect Executive's rights under any
disability plan in which he is a participant.
6.3 By Company for Cause. The Company may terminate the Executive's
employment for Cause (as defined below) without liability at any time with or
without advance notice to Executive. The Company shall pay Executive all Accrued
Compensation, but no other compensation or reimbursement of any kind, including
without limitation, severance compensation, and thereafter the Company's
obligations hereunder shall terminate. Termination shall be for "Cause" in the
event of the occurrence of any of the following: (a) any intentional action or
intentional failure to act by Executive which was performed in bad faith and to
the material detriment of the Company; (b) Executive intentionally refuses or
intentionally fails to act in accordance with any lawful and proper direction or
order of the Board; (c) Executive willfully and habitually neglects the duties
of employment; or (d) Executive is convicted of a felony crime involving moral
turpitude, provided that in the event that an of the foregoing events is capable
of being cured, the Company shall provide written notice to Executive describing
the nature of such event and Executive shall thereafter have ten (10) business
days to cure such event.
6.4 Termination Without Cause. At any time, the Company may terminate
the employment of Executive without liability other than as set forth below, for
any reason not specified in Section 6.3 above, by giving thirty (30) days
advance written notice to Executive. If the Company elects to terminate
Executive pursuant to this Section 6.4, (a) the Company shall pay to Executive
all Accrued Compensation (b) the Company shall continue to pay to Executive as
provided herein Executive's Base Salary over the period equal to nine (9) months
from the date of such termination as severance compensation, (c) if Executive's
employment terminates in the second half of the Company's fiscal year, the
Company shall make a lump sum payment to Executive in an amount equal to a pro
rata portion of the Executive's annual actual cash incentive bonus for Company's
fiscal year preceding the year of termination based on the number of completed
months of Executive's employment in the fiscal year divided by nine (9); (d) the
vesting of all outstanding stock options held by Executive shall be accelerated
so that the amount of shares vested under such option shall equal that number of
shares which would have been vested if the Executive had continued to render
services to the Company for nine (9) continuous months after the date of his
termination of employment; and (e) the Company shall pay all costs which the
Company would otherwise have incurred to maintain all of Executive's health and
welfare, and retirement benefits (either on the same or substantially equivalent
terms and conditions) if the Executive had continued to render services to the
Company for nine (9) continuous months after the date of his termination of
employment. The Company shall have no further obligations to Executive other
than those set forth in the preceding sentence. During the period when such Base
Salary severance compensation is being paid to Executive, Executive shall not
(i) engage, directly or indirectly, in providing services to any other business
program or project that is competitive to a program or project being conducted
by the Company or any Affiliated Company at the time of such employment
termination (provided that Executive may own less than two percent (2%) of the
outstanding securities of any publicly traded corporation), or (ii) hire,
solicit, or attempt to solicit on behalf of himself or any other party or any
employee or exclusive consultant of the Company. If the Company terminates this
Agreement or the employment of Executive with the Company other than pursuant to
Section 6.1, 6.2 or 6.3, then this section 6.4 shall apply.
6.5 Constructive Termination A Constructive Termination shall be deemed
to be a termination of employment of Executive without cause pursuant to Section
6.4 For Purposes of this Agreement, a "Constructive Termination" means that the
Executive voluntarily terminates his employment after any of the following are
undertaken without Executive's express written consent:
(a) the assignment to Executive of any duties or responsibilities which
result in any diminution or adverse change of Executive's position,
status or circumstances of employment; or any removal of Executive
from or any failure to re-elect Executive to any of such positions,
except in connection with the termination of his employment for death,
disability, retirement, fraud, misappropriation, embezzlement (or any
other occurrence which constitutes "Cause" under section 6.3) or any
other voluntary termination of employment by Executive other than a
Constructive Termination;
(b) a reduction by the Company in Executive's annual Base Salary by
greater than five percent (5%);
(c) a relocation of Executive or the Company's principal executive offices
if Executive's principal office is at such offices, to a location more
than forty (40) miles from the location at which Executive is then
performing his duties, except for an opportunity to relocate which is
accepted by Executive in writing;
(d) any material breach by the Company of any provision of this Agreement;
or
(e) any failure by the Company to obtain the assumption of this Agreement
by any successor or assign of the Company.
6.6 Termination Following Change in Control In the event of a
non-renewal of this Agreement, a termination without Cause or a Constructive
Termination within eighteen (18) months following a Change in Control, Executive
shall receive the same benefits package as Executive would have received upon a
termination without Cause (except that the payment of Base Salary shall be made
in the form of a lump sum) and in addition, the vesting of all outstanding stock
options held by Executive shall be accelerated so that the options are
immediately exercisable in full.
6.7 Change in Control. For purposes of this Agreement, a "Change in
Control" shall have occurred if at any time during the term of Executive's
employment hereunder, any of the following events shall occur:
(a) The Company is merged, or consolidated. or reorganized into or with
another corporation or other legal person, and as a result of such
merger, consolidation or reorganization less than 50% of the combined
voting power of the then-outstanding securities of such corporation or
person immediately after such transaction are held in the aggregate by
the holders of voting securities of the Company immediately prior to
such transaction;
(b) The Company sells all or substantially all of its assets or any other
corporation or other legal person and thereafter, less than 50% of the
combined voting power of the then-outstanding voting securities of the
acquiring or consolidated entity are held in the aggregate by the
holders of voting securities of the Company immediately prior to such
sale;
(c) There is a report filed after the date of this Agreement on Schedule
13 D or schedule 14 D-1 (or any successor schedule, form or report),
each as promulgated pursuant to the Securities Exchange Act of l934
(the "Exchange Act") disclosing that any person (as the term "person"
is used in Section 13(d)(3) or Section 14(d)(2) of the exchange Act)
has become the beneficial owner (as the term beneficial owner is
defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) representing 50% or more of the
combined voting power of the then-outstanding voting securities of the
Company;
(d) The Company shall file a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in
response to item 1 of Form 8-X thereunder or Item 5(f) of Schedule 14
A thereunder (or any successor schedule, form or report or item
therein) that the change in control of the Company has or may have
occurred or will or may occur in the future pursuant to any
then-existing contract or transaction; or
(e) During any period of two consecutive years, individuals who at the
beginning of any such period constitute the directors of the Company
cease for any reason to constitute at least a majority thereof unless
the election to the nomination for election by the Company's
shareholders of each director of the Company first elected during such
period was approved by a vote of at least two-thirds of the directors
of the Company then still in office who were directors of the Company
at the beginning of such period.
6.8 Termination by Executive. At any time, Executive may terminate his
employment by giving thirty (30) days advance written notice to the Company. The
Company shall pay Executive all Accrued Compensation, but no other compensation
or reimbursement of any kind, including without limitation, severance
compensation, and thereafter the Company's obligations hereunder shall
terminate.
6.9 Mitigation Except as otherwise specifically provided herein,
Executive shall not be required to mitigate the amount of any payment provided
under this Agreement by seeking other employment or self-employment, nor shall
the amount of any payment provided for under this Agreement be reduced by any
compensation earned by Executive as a result of employment by another employer
or through self-employment or by retirement benefits after the date of
Executive's termination of employment from the Company.
6.10 Coordination If upon termination of employment, Executive becomes
entitled to rights under other plans, contracts or arrangements entered into by
the Company, this Agreement shall be coordinated with such other arrangements so
that Executive's rights under this Agreement are not reduced, and that any
payments under this Agreement offset the same types of payments otherwise
provided under such other arrangements, but do not otherwise reduce any payments
or benefits under such other arrangements to which Executive becomes entitled.
ARTICLE 7
GENERAL PROVISIONS
7.1 Governing law. The validity, interpretation, construction and
performance of this Agreement and the rights of the parties thereunder shall be
interpreted and enforced under California law without reference to principles of
conflicts of laws. The parties expressly agree that inasmuch as the Company's
headquarters and principal place of business are located in California, it is
appropriate that California law govern this Agreement.
7.2 Assignment; Successors Binding Agreement.
7.2.1 Executive may not assign, pledge or encumber his
interest in this Agreement or any part thereof.
7.2.2 The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by
operation of law or by agreement in form and substance reasonably
satisfactory to Executive, to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company
would be required to perform it if no such succession had taken place.
7.2.3 This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributee, devisees and
legatees. If Executive should die while any amount is at such time
payable to his hereunder, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to
Executive's devisee, legates or other designee or, if there be no such
designee, to his estate.
7.3 Certain Reduction of Payments In the event that any payment or
benefit received or to be received by Executive under this Agreement would
result in all or a portion of such payment to be subject to the excise tax on
"golden parachute payments" under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), then Executive's payment shall be either (a) the
full payment or (b) such lesser amount which would result in no portion of the
payment being subject to excise tax under Section 4999 of the Code, whichever of
the foregoing amounts, taking into account the applicable Federal, state and
local employment taxes, income taxes, and the excise tax imposed by Section 4999
of the Code, results in the receipt by Executive on an after-tax basis, of the
greatest amount of the payment notwithstanding that all or some portion of the
payment may be taxable under Section 4999 of the Code.
7.4 Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
To the Company:
Neurocrine Biosciences, Inc.
10555 Science Center Drive
San Diego, CA 92121
Attn.: President & Chief Executive Officer
To Executive:
Ms. Margaret Valeur-Jensen
4507 South Lane
Del Mar, CA 92014
7.5 Modification; Waiver; Entire Agreement. No provisions of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing signed by Executive and such officer as may
be specifically designated by the Board of the Company. No waiver by either
party hereto at any time of any breach by the other party of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.
7.6 Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
7.7 Controlling Document. Except to the extent described in Section
6.l0, in case of conflict between any of the terms and condition of this
Agreement and the document herein referred to, the terms and conditions of this
Agreement shall control.
7.8 Executive Acknowledgment. Executive acknowledges (a) that he has
consulted with or has had the opportunity to consult with independent counsel of
his own choice concerning this Agreement, and has been advised to do so by the
Company, and (b) that he has read and understands the Agreement, is fully aware
of its legal effect, and has entered into it freely based on his own judgment.
7.9 Remedies
7.9.1 Injunctive Relief. The parties agree that the services
to be rendered by Executive hereunder are of a unique nature and that
in the event of any breach or threatened breach of any of the covenants
contained herein, the damage or imminent damage to the value and the
goodwill of the Company's business will be irreparable and extremely
difficult to estimate, making any remedy at law or in damages
inadequate. Accordingly, the parties agree that the Company shall be
entitled to injunctive relief against Executive in the event of any
breach or threatened breach of any such provisions by Executive, in
addition to any other relief (including damage) available to the
Company under this Agreement or under law.
7.9.2 Exclusive. Both parties agree that the remedy specified
in Section 7.9.1 above is not exclusive of any other remedy for the
breach by Executive of the terms hereof.
7.10 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
Agreement.
7.11 Prevailing Party Expenses. In the event that any action or
proceeding is commenced to enforce the provisions of the Agreement, the court
adjudicating such action or proceeding shall award to the prevailing party all
costs and expenses thereof, including, but not limited to, all reasonable
attorneys' fees, court costs, and all other related expenses.
Executed by the parties as of the day and year first above written.
EXECUTIVE NEUROCRINE BIOSCIENCES, INC
By: /s/Bruce Campbell, Ph.D. By: /s/Gary A. Lyons
Bruce Campbell, Ph.D. Gary A. Lyons
President & Chief Executive Officer
NEUROCRINE BIOSCIENCES, INC.
State of
Incorporation
Subsidiary or Formation Ownership
- -------------------------- ------------- ---------
Northwest NeuroLogic, Inc. Oregon 100%
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-5787) pertaining to the Neurocrine Biosciences, Inc. Amended
1992 Incentive Stock Plan, the Neurocrine Biosciences, Inc. Amended 1996
Director Option Plan and the Northwest NeuroLogic, Inc. Restated 1997 Incentive
Stock Plan of our report dated January 26, 1999, except for Note 13 for which
the date is March 2, 1999, with respect to the consolidated financial statements
of Neurocrine Biosciences, Inc. included in its Annual Report on Form 10-K for
the year ended December 31, 1998.
ERNST & YOUNG LLP
San Diego, California
January 26, 1999,
except for Note 13, as to which the date is
March 2, 1999
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