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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD __________ TO __________ .
COMMISSION FILE NUMBER: 0-20815
AVIRON
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 77-0309686
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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297 NORTH BERNARDO AVENUE, MOUNTAIN VIEW, CALIFORNIA 94043
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)
(650) 919-6500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT
COMMON STOCK, $.001 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Based on the closing sale price of $20.4375 on March 17, 1999, the
aggregate market value of the voting stock held by non-affiliates of the
Registrant was $256,162,196.
On March 17, 1999, there were outstanding 15,763,300 shares of the
Registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
(TO THE EXTENT INDICATED HEREIN)
Part III -- Portions of the Registrant's definitive proxy Statement for the
Registrant's Annual meeting of Stockholders to be held June 3, 1999, which will
be filed with the Securities and Exchange Commission, are incorporated by
reference to the extent stated here.
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TABLE OF CONTENTS
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PART I.................................................................. 1
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 35
Item 3. Legal Proceedings........................................... 35
Item 4. Submission of Matters to a Vote of Security Holders......... 36
PART II................................................................. 37
Item 5. Market for the Registrant's Common Stock and Related Stock
Matters..................................................... 37
Item 6. Selected Financial Data..................................... 38
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 38
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 43
Item 8. Financial Statements and Supplementary Data................. 44
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 44
PART III................................................................ 45
Item 10. Directors and Executive Officers of the Registrant.......... 45
Item 11. Executive Compensation...................................... 45
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 45
Item 13. Certain Relationships and Related Transactions.............. 45
PART IV................................................................. 46
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K......................................................... 46
INDEX TO FINANCIAL STATEMENTS........................................... 46
SIGNATURES.............................................................. 49
POWER OF ATTORNEY....................................................... 49
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PART I.
ITEM 1. BUSINESS
The following section contains forward-looking statements that 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 those set forth under "Business Risks" and elsewhere
in this Form 10-K.
OVERVIEW
Aviron is a biopharmaceutical company whose focus is the prevention of
disease through innovative vaccine technology. The Company's goal is to become a
leader in the discovery, development, manufacture and marketing of vaccines
which are sufficiently cost effective to justify their use in immunization
programs targeting the general population. Aviron's vaccine programs are based
on both classical live virus vaccine attenuation techniques and the Company's
proprietary genetic engineering technologies. Live virus vaccines, such as those
for smallpox, polio, measles, mumps, rubella and chicken pox, have had a long
record of success in preventing, and in some cases eliminating, disease.
FLUMIST(TM), the Company's lead product candidate, is an investigational
cold adapted influenza vaccine delivered as an intranasal spray which has been
tested in over 11,000 children and adults. It has been shown to provide a high
protection rate against influenza with minimal adverse effects in a pivotal
Phase 3 clinical trial in children. Aviron is developing this live virus vaccine
for widespread annual use in children, healthy adults and high-risk adults and
expects to submit a marketing application to the U.S. Food and Drug
Administration ("FDA") in 1999.
The Company has completed Phase 2 clinical trials for a live intranasal
vaccine for Parainfluenza Virus Type 3 ("PIV-3") to protect against croup and
intends to continue preparation for further clinical trials for PIV-3 in 1999.
The Company also is developing a subunit vaccine for Epstein-Barr Virus ("EBV")
to protect against infectious mononucleosis in collaboration with SmithKline
Beecham Biologicals, S.A. ("SmithKline Beecham"). A Phase 1 clinical trial of
this vaccine is being completed. In addition, Aviron expects to begin clinical
trials in 1999 for a vaccine candidate for Cytomegalovirus ("CMV") with the
National Institute of Allergy and Infectious Diseases ("NIAID") of the National
Institute of Health ("NIH"). Aviron is also using its proprietary Rational
Vaccine Design technologies to discover new live virus vaccines. Rational
Vaccine Design involves the addition of antigenic information to enhance the
virus' stimulation of the immune system, the deletion or modification of
virulence proteins, or the alteration of the virus' genetic control signals to
slow down its replication. The Company is applying these technologies to develop
vaccine candidates for diseases caused by Herpes Simplex Virus Type 2 ("HSV-2")
and Respiratory Syncytial Virus ("RSV").
BACKGROUND
Prevention Technology in the Era of Managed Care and Cost Containment
Market-based changes already underway in the United States health care
system are dramatically altering prospects for technologies which can be used to
manage disease or lower the cost of health care for patients in managed health
plans. Medical cost-containment efforts and the reorganization of United States
health care delivery into managed care systems are changing the basis of
competition for producers of health care products. Health maintenance
organization ("HMO") enrollment was approximately 67 million in the United
States in 1997 and is growing rapidly. Decision-makers in the United States,
such as HMO medical directors, clinical practice committees, and government
health authorities, are increasingly evaluating whether preventive technologies
are more cost effective than treating disease once it is present. For example,
vaccinations are widely used by managed care organizations and in government
programs. In determining whether to use a vaccine approved by the FDA, decision
makers consider whether it has been recommended by the Advisory Committee on
Immunization Practices ("ACIP") and by medical specialty societies and whether
it is cost effective.
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Health care cost containment efforts are also evident in many of the
developed economies outside the United States. These efforts include physician
budgets in Germany and general practice schemes in the United Kingdom, where
doctors are given responsibility for the cost of their patients' overall care.
The Immune System and Vaccines
Infections occur when a pathogenic microorganism, such as a virus or
bacterium, invades body tissues and begins to replicate. The human immune system
responds with a battery of resources to contain and eliminate this threat. The
process begins when specialized cells recognize that molecules on the surface of
invading pathogens are foreign (antigens). Immune responses to contain and
eliminate the threat include:
- Antibodies: Antigens stimulate the immune system to produce specific
molecules (antibodies) which bind to and neutralize the virus or
bacterium.
- Cell-mediated response: An effective immune response typically also leads
to the multiplication of specific types of white blood cells (a
cell-mediated response) which have the ability to inactivate the pathogen
or to destroy infected cells, thereby limiting replication of the virus
or bacterium.
- Mucosal immunity: In addition to circulating antibodies and the
cell-mediated response, antibodies are produced in the mucous membranes,
such as those which line the nose and throat. Mucosal immunity is
important in protecting against pathogens which cause disease in the
respiratory, gastrointestinal and genitourinary systems, or which enter
the body through these portals.
Vaccines are designed to stimulate a person's immune system through one or
more of the above mechanisms to induce memory of specific antigens prior to the
invasion of a pathogen. This memory primes the immune system so that it can
inactivate the specific pathogen if encountered again. This memory may be
achieved through one of several techniques, including introduction of a live
attenuated (weakened) virus or bacterium, administration of an antigen fragment
(a subunit), or administration of an inactivated (killed) virus or bacterium.
History of Vaccines
The first successful vaccine against an infectious disease was created by
Edward Jenner who, in 1796, demonstrated that introduction of infected material
from a diseased cow could be used to protect humans from the deadly smallpox
virus. Smallpox vaccination programs based on this live virus vaccine were
gradually adopted by industrialized countries, and a concerted global effort by
public health authorities in this century succeeded in eradicating smallpox from
the human population in the 1970s.
Vaccines against two life-threatening bacterial diseases, diphtheria and
tetanus, came into use early in this century. These vaccines consist of
bacterial toxins which have been chemically inactivated. These are often
administered in combination with an inactivated pertussis bacterium vaccine to
prevent whooping cough. This combination is known as the "DTP" vaccine. Just
prior to World War II, a live attenuated virus vaccine was developed against
yellow fever, used primarily in protecting military personnel and those
traveling to areas where this disease is endemic. In the years after the war
following several widespread polio epidemics, Jonas Salk created the first
successful polio vaccine by growing the wild-type virus and inactivating it
before injection. Salk's vaccine was introduced into widespread use in the early
1950s, but was supplanted in the United States and many other countries by the
orally administered live attenuated polio virus vaccine developed by Albert
Sabin and first introduced in 1961. In the 1960s and 1970s, live attenuated
virus vaccines against measles, mumps and rubella (German measles) were
successfully developed and these vaccines are now recommended by the ACIP to be
included in childhood immunization programs.
After a period of almost two decades during which no new vaccines came into
widespread use, genetically-engineered subunit vaccines for hepatitis B were
introduced in the mid-1980s and are now part of the ACIP-recommended childhood
immunization program. In 1990, a vaccine for bacterial meningitis was also added
to this program. Two inactivated vaccines against the hepatitis A virus were
approved in the United States in 1995 and 1996. In 1995, the ACIP also
recommended that children be vaccinated against chicken pox, a virus belonging
to the herpes virus family, using an FDA-approved live virus vaccine.
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Current challenges for vaccine innovation include providing effective
protection against the major infectious diseases for which no vaccines are
currently available and improving on current vaccines to achieve higher efficacy
or greater ease of administration.
TYPES OF VACCINES
Live Virus Vaccines
Live virus vaccines expose the immune system to an attenuated form of the
virus which is sufficiently infectious to stimulate a lasting immune response to
the wild-type virus. All of the live virus vaccines in use today are strains
derived from natural infections of humans. Attenuation of live viruses,
including polio, yellow fever, measles, mumps and rubella, and chicken pox
vaccines was accomplished by "passaging," or propagating, these viruses
repeatedly in non-human cells. As a result of this process, these viruses may
acquire mutations that decrease the ability of the virus to cause disease in
humans. After an arbitrary number of passages, the mutated strain is tested for
attenuation in animal models, if available, or directly in human subjects.
Following assessment of safety and immunogenicity (stimulation of an immune
response) in a limited number of human subjects, larger-scale trials are used to
demonstrate efficacy in preventing naturally acquired infections.
The principal advantage of live virus vaccines is their ability to mimic
the natural disease-causing infection and therefore activate the same protective
mechanisms of the human immune system as the disease itself. This process
results in a balanced immune response activating all parts of the immune system,
including systemic and local antibodies as well as cell-mediated immunity. As a
result, live viruses are often considered to be more effective than other types
of vaccines in providing immunity to natural variations in the wild-type viruses
which cause disease. For example, the live polio vaccine is believed to be more
effective in eliminating wild-type polio virus than inactivated polio vaccines.
The basis of these advantages is that live vaccines typically present all of the
surface and internal antigens associated with the natural pathogen. Live virus
vaccines may also be easier to administer through their natural route of
infection, intranasally or orally, as in the case of the oral polio vaccine.
However, an attenuated live vaccine could cause disease resembling natural
infection, as might occur in people with an immune system impaired by a
congenital disease, HIV infection or drug treatment for cancer or organ
transplantation. To date, the live virus vaccines in widespread use rarely have
been associated with significant adverse events. For example, the 19 million
doses of live attenuated polio vaccine administered annually in the United
States are thought to be responsible for only eight to 10 cases of clinical
polio per year. To further reduce the number of these cases, the ACIP is
recommending a return to using the inactivated polio vaccine now that wild-type
polio has been virtually eradicated in the United States.
Live virus strains can change as they replicate in human hosts, and it is
possible that a vaccine virus could revert to the wild-type characteristics.
This reversion potential is a small but recognized problem for some of the
current live vaccines, including polio. Finally, there are two theoretical
concerns regarding live attenuated viruses. First, an attenuated vaccine virus
may exchange genetic information with wild-type strains after immunization, with
the resulting strain being more dangerous than either alone. Second, the DNA of
a live virus vaccine could integrate into the genome of the host and cause
cancer or other problems in the future.
Inactivated and Subunit Virus Vaccines
Inactivated virus vaccines are produced by killing a virus using chemicals.
Some vaccines, such as the hepatitis A vaccine, are based on the whole,
inactivated virus. Other vaccines are the result of various degrees of
purification to concentrate certain surface glycoproteins (subunits) most
responsible for producing immunity. A different approach is used to make the
current hepatitis B vaccine, the first successful recombinant subunit vaccine.
For this vaccine, the tools of molecular biology were applied to clone and
express the dominant hepatitis surface glycoprotein in a yeast production
system. Inactivated and subunit vaccines offer the advantage of little or no
risk of infection from the vaccine itself, assuming the virus has been
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adequately inactivated. Good manufacturing techniques also minimize the
possibility of contamination with other viruses or fragments of DNA which could
integrate into the recipient's genes.
The principal disadvantage of inactivated and subunit vaccines for many
viruses has been a lack of success in creating protective immunity. A successful
subunit vaccine requires knowledge of which specific antigens are responsible
for providing protection. Subunit and inactivated vaccines may produce
reasonable levels of circulating antibodies, but are less able to stimulate
antibodies in the mucosal sites of viral entry, such as the lining of the
respiratory, gastrointestinal or genitourinary tracts. To improve stimulation of
the cellular components of the immune system, adjuvants (non-specific immune
stimulants) are typically added to inactivated or subunit vaccines. Only alum
(an aluminum salt preparation) is approved for use as an adjuvant in the United
States. Several new adjuvants are in clinical testing and show promise for
boosting the immune response to subunit antigens. The mechanism by which
adjuvants work is still poorly understood, so each vaccine-adjuvant combination
must be evaluated in a trial and error process in animal models and clinical
trials. Finally, certain inactivated vaccines in clinical trials left recipients
more vulnerable to disease after vaccination, due to an unbalanced immune
response. For example, in trials of experimental inactivated vaccines against
RSV and measles, some children were shown to experience more severe, atypical
disease when they acquired the natural viral infection following vaccination.
Emerging Vaccine Technologies
Several companies and academic scientists have reported that direct
injection of DNA encoding viral antigens can be used to stimulate an immune
response. Although at an early stage, this approach shows promise. However, it
is not clear whether the sustained expression of viral antigens obtainable by
this approach is advantageous in eliciting a better immune response. In
addition, it is possible that the administered DNA may integrate into the genes
of the recipient and cause potential unwanted effects.
Another new technology for vaccination is based on genetic engineering to
modify one virus so that it carries antigens which may stimulate an immune
response to protect against other pathogens. For example, pox virus vector
strains, related to the virus used successfully to eradicate smallpox, have
shown usefulness in protecting dogs and cats against rabies. Other pox virus
vectors are being evaluated in experimental models of human malaria and, in a
hybrid regimen combining doses of a modified live virus, with a subunit HIV
vaccine to protect high-risk individuals.
BUSINESS STRATEGY
Aviron's objective is to become a leader in the discovery, development,
manufacture and marketing of vaccines which are sufficiently cost effective to
justify their use in immunization programs targeting the general population. The
Company's strategy is to:
Develop Vaccines to Prevent Diseases That Merit Widespread
Immunization. The concept of universal immunization is well established for
certain infectious diseases where safe and effective vaccines are already
available, including immunization against pathogens such as polio, measles,
mumps, rubella and hepatitis B. For each of its potential products, the
Company's objective is to produce vaccine strains which are sufficiently safe
and cost effective to obtain official recommendations for universal use in
childhood vaccine regimens or, in the case of influenza, annual use in the
general population.
Apply Rational Vaccine Design Technologies to a Range of Viral
Targets. Aviron believes that its proprietary genetic engineering technologies
may be used to create live attenuated vaccines for a wide range of viral
targets, such as respiratory viruses related to influenza and chronic virus
infections related to herpes simplex virus, and potentially to the creation of
vectors used in gene therapy and the treatment of cancer. One potential
advantage of Rational Vaccine Design technology is that the design of engineered
viruses makes them less likely to revert to naturally occurring ("wild-type")
characteristics than classically derived vaccines.
Acquire Promising Products and Technologies. Aviron evaluates opportunities
to in-license or otherwise acquire rights to promising products and technologies
and intends to add programs that complement the Company's core technologies and
capabilities. For example, the Company obtained exclusive rights to the cold
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adapted influenza vaccine technology from the University of Michigan and the
NIH, and to the PIV-3 vaccine from the NIH.
Select Programs and Market Vaccines Based on Pharmacoeconomic Data. Public
health agencies and managed care systems are increasingly concerned with the
economic impact of potential new mandates for vaccines. In setting its internal
product development priorities, the Company considers the costs of implementing
widespread vaccine programs based on its products in relation to potential cost
savings to governments and managed health care systems and intends to collect
data on effectiveness endpoints which allows rigorous cost-effectiveness
analyses on its products.
Establish Collaborative Arrangements to Enhance Product Development
Efforts. Aviron intends to continue to enter into collaborative arrangements to
gain access to specific technologies and skills which may accelerate product
development and provide additional financial resources to support its research
and development and commercialization efforts, particularly outside of the
United States. The Company has entered into a worldwide collaboration for the
marketing of FLUMIST(TM) with Wyeth Lederle Vaccines, a business unit of
Wyeth-Ayerst Laboratories, the pharmaceutical division of American Home Products
Corporation ("Wyeth Lederle"). The collaboration excludes Australia, New Zealand
and certain South Pacific countries, where FLUMIST(TM) is licensed to CSL
Limited of Victoria, Australia ("CSL Limited'), and Korea, where it is licensed
to Sang-A Pharm. Co. Ltd. ("Sang-A"). Aviron also has an agreement with
SmithKline Beecham for development of an EBV vaccine. See "Collaborative
Agreements."
Establish Commercialization Capabilities. The Company has established
worldwide marketing collaborations for FLUMIST(TM) and will co-promote the
vaccine in the United States with its own dedicated sales force. Additionally,
the Company has retained the right to co-market a monovalent formulation of EBV
vaccine in the United States in its collaboration with SmithKline Beecham. See
"Collaborative Agreements."
AVIRON'S TECHNOLOGY
Aviron's vaccine programs are based on both classical live virus vaccine
attenuation techniques and the Company's proprietary genetic engineering
technologies.
Cold Adapted Influenza Technology
The Company is applying its expertise in the molecular biology of influenza
to develop a live virus vaccine discovered using classical cold-adaptation
techniques. This cold adapted influenza vaccine technology was first developed
by Dr. H. F. Maassab at the University of Michigan in 1967. Dr. Maassab created
weakened influenza strains by propagating the virus in progressively colder
conditions until these strains had lost the ability to grow well at human body
temperature. The Company has obtained worldwide exclusive rights to this cold
adapted influenza vaccine technology.
The cold adapted influenza vaccine technology includes the master donor
strains for influenza A and B, as well as techniques useful for updating the
vaccine each year according to recommendations of the United States Centers for
Disease Control and Prevention ("CDC") and the FDA. Updated strains are made by
mating the master donor strains with recent strains to obtain viruses with the
attenuated properties of the cold adapted master donor strain and the antigenic
properties of the current wild-type strain. This process is called reassortment.
After cultured cells are infected with two different strains of virus, the eight
RNA genes of influenza mix at random in the cells and it is possible to select
the two genes for the antigens of the expected epidemic strain and the six
remaining genes from the cold adapted master donor strain. The Company has
received the technology for updating the cold adapted master strains from the
University of Michigan and has extended this approach by the introduction of
Aviron's proprietary techniques. One such technique is reverse genetics, which
allows the direct introduction of genes from the expected epidemic strain into
the cold adapted master donor strains.
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Rational Vaccine Design
Since the Company's founding, its core vaccine discovery strategy has been
to apply genetic engineering techniques to create live attenuated virus vaccine
candidates for targets where traditional discovery techniques have been
inadequate. The Company believes that this Rational Vaccine Design approach is
more flexible and systematic than traditional methods of live vaccine discovery
and is a platform that can be applied to many viral targets and, potentially, to
the creation of vectors used in gene therapy and the treatment of cancer.
Furthermore, Aviron believes that a particular advantage of Rational Vaccine
Design is that engineered viruses can be designed so that they are less likely
to revert to wild-type characteristics than classically derived vaccines. Three
ways of implementing this approach are:
- Adding antigenic information displayed by the vaccine virus. An example
of this strategy is the Company's approach to the creation of a live
attenuated CMV vaccine, which begins with a vaccine candidate thought to
be over-attenuated and thus insufficiently immunogenic. Aviron discovered
genes for certain antigen structures present in wild-type CMV viruses.
These genes are being engineered into an over-attenuated vaccine
candidate to create a potentially more immunogenic vaccine. The Company
has identified several vaccine candidates using this approach. The
Company believes this technique of adding antigen structures may enable
the Company to create combination vaccines expressing antigens of more
than one virus in a single vaccine strain. The Company plans to file an
Investigational New Drug application ("IND") for the testing of its
vaccine candidates.
- Deleting or modifying specific viral genes which encode virulence
proteins. Virulence proteins are viral components thought to be
particularly important in the mechanism of disease, but which are not
required for the virus to replicate and stimulate a strong immune
response. An example of this strategy is the Company's program to create
a live attenuated vaccine against the HSV-2 virus which causes genital
herpes. One of the Company's founders, Dr. Bernard Roizman, discovered a
particular protein important in the ability of HSV-2 to grow in nerve
cells. Since nerve ganglia are the reservoir from which HSV-2 reseeds
itself to cause painful skin lesions, deletion of the gene encoding this
protein is the basis of the Company's Rational Vaccine Design program for
development of a vaccine for this target.
- Altering the genetic information used by the virus in controlling its
replication. An example of this strategy is work by Company scientists to
create live attenuated vaccine candidates for RSV, and a
second-generation vaccine for influenza in the elderly. Until recently,
it was impossible to genetically engineer vaccine strains of influenza
because influenza genes are composed of negative strand RNA rather than
DNA or positive strand RNA. Dr. Peter Palese, one of the Company's
founders, discovered how to create recombinant negative strand RNA
viruses using reverse genetics. Company scientists have employed this
reverse genetics technology to engineer mutations into a gene used by the
influenza virus to make copies of itself. The resulting strains are
attenuated in animal models and at least one strain has been identified
as a potential candidate for clinical trials.
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VACCINE PRODUCTS UNDER DEVELOPMENT
The following table summarizes Aviron's most advanced potential products
under research and development. This table is qualified in its entirety by
reference to the more detailed descriptions appearing elsewhere in this Form
10-K.
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PROGRAM VACCINE TYPE STATUS(1) COMMERCIAL RIGHTS
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Influenza
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Children Cold adapted live virus Pivotal Phase 3 clinical Wyeth Lederle/Aviron(2)
trial completed, BLA
planned
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Adults Cold adapted live virus Challenge efficacy study Wyeth Lederle/Aviron(2)
completed
Phase 3 safety and
effectiveness trial
completed, BLA planned
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Elderly and High-risk Cold adapted live virus Clinical trials in Wyeth Lederle/Aviron(2)
Adults (co-administered with progress
inactivated vaccine)
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Parainfluenza Virus Bovine live virus Phase 2 clinical trial Aviron
Type 3 in progress
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Epstein-Barr Virus Recombinant subunit Phase 1 clinical trial SmithKline Beecham(3)
Glycoprotein in progress
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Cytomegalovirus Genetically engineered Clinical trials planned Aviron
live virus
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Herpes Simplex Virus Genetically engineered Preclinical Aviron
Type 2 live virus
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Respiratory Syncytial Genetically engineered Preclinical Aviron
Virus live virus
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(1) "Pivotal Phase 3 clinical trial completed, BLA planned" means Aviron has
completed a multi-center, double-blind, placebo-controlled clinical trial
for safety and efficacy. The Company's goal is to submit a Biologic License
Application ("BLA") in the summer or fall of 1999.
"Challenge efficacy study completed" means Aviron completed vaccination of
patients in a multi-center, double-blind, placebo-controlled clinical trial
for safety, immunogenicity and efficacy.
"Phase 3 safety and effectiveness trial completed, BLA Planned" means
Aviron has completed a multi-center, double-blind, placebo-controlled
clinical trial in healthy working adults for effectiveness endpoints such as
days of respiratory illness, absence from work and medication use.
"Clinical trials in progress" indicates that clinical trials are currently
being conducted.
"Phase 2 clinical trial in progress" means that Aviron is analyzing data
from a double-blind placebo-controlled clinical trial for safety and
efficacy in infants.
"Phase 1 clinical trial in progress" indicates that a Phase 1 clinical
trial in healthy adults is being completed by SmithKline Beecham.
"Clinical trials planned" indicates that the Company has or is preparing
final regulatory filings prior to initiation of clinical trials.
"Preclinical" includes assessment of specific vaccine candidates for growth
properties in cell culture and for attenuation or immunogenicity in animal
models.
(2) Global commercial rights are licensed to Wyeth Lederle except for rights in
Australia, New Zealand and certain South Pacific countries, which are
licensed to CSL Limited, and rights in Korea, which are
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licensed to Sang-A. Aviron retains certain United States co-promotion
rights. See "-- Collaborative Agreements."
(3) Worldwide rights (except Korea) are licensed to SmithKline Beecham; Aviron
retains certain United States co-promotion rights. See "-- Collaborative
Agreements."
Influenza
Every year in mid- to late-winter, influenza spreads across the globe,
infecting an average of approximately 10 percent to 20 percent of the United
States population. In the United States, 35 to 50 million cases of influenza
occur annually. Influenza cases are associated with symptoms lasting for at
least three to five days, an average of approximately three days of lost work or
missed school, and approximately 20,000 deaths each year. Field studies indicate
the attack rate ranges from a low of 10 percent in persons over age 65 to a high
of 36 percent in children aged one to 18. Children are also a major factor in
spreading influenza to other population segments, including those at high risk
of developing serious complications from the disease. At the peak of a typical
epidemic, reportedly 9 percent to 22 percent of all physician office visits are
for flu-like symptoms. Over 90 percent of influenza-related deaths occur in
people over age 65, but children under age five and women in the third trimester
of pregnancy are also at higher risk for serious complications. Several times
during this century, influenza has appeared as a much more serious pandemic.
These major pandemics occur when the influenza virus undergoes "antigenic shift"
in which one influenza subtype is replaced by a different strain for which the
population has not developed antibodies and, therefore, for which it is
extremely susceptible to infection. The appearance of an avian influenza strain
in Hong Kong during the 1997-1998 flu season represents such a potential threat.
The variability of certain components of the influenza virus requires that
the influenza vaccine be modified annually. The CDC and the World Health
Organization ("WHO") maintain a global network which generates data required to
select strains for the coming influenza season's vaccine and monitor the
occurrence of especially severe epidemics. Based on these data, the FDA and the
CDC discuss circulating influenza strains which are candidates for inclusion in
the following season's influenza vaccine in the United States. A similar process
is undertaken in Europe by the WHO and various national authorities. Currently
available inactivated influenza vaccines contain three strains of influenza
virus (two strains of influenza A and one strain of influenza B) and are
therefore called trivalent vaccines. Typically one or sometimes two of the
strains in these trivalent vaccines are recommended for updating annually.
Current vaccines have been variously reported to be 60 percent to 90 percent
effective in preventing illness, pneumonia, hospitalization and death due to
complications from influenza.
The ACIP has identified the principal target groups for the current
influenza vaccine as those at increased risk for influenza-related
complications, including persons age 65 or older, residents of chronic-care
facilities, adults and children with chronic disorders of the pulmonary or
cardiovascular system, adults and children who have required regular medical
follow-up or hospitalization during the preceding year because of chronic
metabolic diseases or immunosuppression, children and teenagers receiving
long-term aspirin therapy and therefore at risk of developing Reye's syndrome,
and pregnant women. The next level of priority for vaccination identified by the
ACIP includes certain groups, such as health care personnel and household
members (including children), that may transmit influenza to high-risk persons.
Furthermore, the ACIP recommends that physicians administer influenza vaccine to
any person who wishes to reduce the chance of becoming ill with influenza.
The FDA estimates that approximately 80 million influenza vaccine doses
were manufactured for use in the United States in 1997. According to the CDC, 65
percent of the 34 million Americans over age 65 received the annual influenza
vaccine during the 1997 calendar year, up from less than approximately 25
percent a few years earlier. The Company believes that a lower percentage of
high-risk individuals under age 65 are vaccinated annually, and that the
majority of influenza doses used in the United States are being administered to
healthy adults under age 65, many of whom participate in voluntary work place
immunization programs. Experts suggest that very few of the 70 million children
in the United States under age 18 receive the annual influenza vaccine.
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In addition to the currently available vaccines, two oral drugs are
currently approved for use in the prevention and treatment of influenza A:
amantadine, which has been on the market for many years, and rimantidine, a
closely related compound which produces fewer side effects. Both drugs have been
shown to be effective in reducing the severity of influenza A disease and the
number of days of disability, but are not effective against influenza B. Both
drugs are also recommended for daily use during the influenza season by certain
high-risk persons for whom the influenza vaccine is contra-indicated. However,
there is a concern that widespread prophylactic use could lead to emergence of
drug-resistant strains.
Aviron's Cold Adapted Influenza Vaccine. The Company's most advanced
program is based on the live cold adapted influenza vaccine technology
discovered by Dr. H. F. Maassab, licensed from the University of Michigan and
subject to a Cooperative Research and Development Agreement ("CRADA") with the
NIH. This cold adapted influenza vaccine, FLUMIST(TM), has undergone and is
currently undergoing extensive clinical trials by Aviron, many of which are
coordinated with NIH-sponsored investigators. Prior to Company-initiated trials,
at least 90 clinical trials of the cold adapted influenza vaccine technology
were performed since 1977, involving more than 15,000 volunteers, of whom over
7,000 received the cold adapted influenza vaccine. See "-- Influenza Clinical
Trials."
The Company is developing FLUMIST(TM) for widespread annual use in children
and adults and for co-administration with the inactivated vaccine for improved
protection in high-risk adults, including the elderly. The quality of the immune
response induced by cold adapted influenza vaccine differs from that induced by
inactivated influenza vaccines. FLUMIST(TM) elicits an immune response to
multiple viral proteins mimicking the natural immunobiology of influenza,
whereas the response to the classical inactivated vaccine is directed primarily
to two components of the virus. Because FLUMIST(TM) is delivered as a nasal
spray, rather than an injection, the Company believes it would provide a more
attractive way to immunize children on an annual basis. Children are an
important target because, while the elderly experience the greatest mortality
from the annual influenza epidemic, much of the illness occurs in young
children. Children are also thought to be an important factor in the spread of
influenza in the population. Aviron expects that initially FLUMIST(TM) will be
delivered in physicians' offices and other locations where the current
injectable influenza vaccine is given.
Aviron is also targeting healthy adults, many of whom are being offered
influenza prophylaxis by their employer and who may prefer Aviron's intranasal
administration to injection. The Company believes that many adults who regularly
receive the inactivated influenza vaccine will select the intranasal vaccine if
given the choice, and that people who have avoided "flu shots" in the past may
receive a vaccination if the intranasal alternative is available. The Company
believes that immunization programs based on its intranasal cold adapted
influenza vaccine may also decrease the health professional's time per
vaccination compared to the current influenza injection and therefore allow
improved flexibility and efficiency in the operation of workplace programs. In
addition, the Company is developing its vaccine for co-administration by nasal
spray with the inactivated influenza vaccine injection for high-risk adults,
including the elderly. While efficacy in the elderly has not been conclusively
demonstrated, nursing home studies suggest that simultaneous administration of
the intranasal cold adapted influenza vaccine with an injection of the
inactivated vaccine offers added protection compared to administration of the
inactivated vaccine alone. Aviron intends to seek recommendations from the ACIP
and the American Association of Pediatrics ("AAP") and other medical advisory
bodies for use of the cold adapted influenza vaccine in the appropriate
population.
Parainfluenza Virus Type 3
PIV-3 is a common respiratory virus of childhood which causes croup, cough,
fever and pneumonia. Every year, primarily during the spring and summer months,
PIV-3 infects infants, children and adults. In the United States, at least 60
percent of children are infected by the time they reach two years of age, and 80
percent by four years of age. These cases are associated with symptoms lasting
from three to eight days and result in approximately 17,000 hospitalizations per
year. Children are also a major factor in introducing PIV-3 infection into the
family setting. PIV-3 frequently reoccurs and children typically experience two
to three infections of decreasing severity. Unlike influenza, PIV-3 undergoes
only a very minor degree of variation in the surface proteins from year to year;
therefore, a PIV-3 vaccine will not require annual updates.
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Both serum and nasal antibodies directed to PIV-3 surface proteins play a
role in protection against PIV-3 disease. It is thought that protection of the
lower respiratory tract from PIV-3 replication and disease requires high serum
antibody levels, whereas resistance to infection and protection against disease
in the upper respiratory tract requires mucosal antibodies in the nose. There is
currently no available vaccine to protect against PIV-3 infection, and no drug
for treatment of PIV-3 disease.
Aviron's Live Parainfluenza Virus Type 3 Vaccine. The Company's live
intranasal vaccine program for PIV-3 utilizes bovine PIV-3 ("bPIV-3") vaccine
technology licensed from the NIH. Use of bPIV-3 as a vaccine to protect humans
against human PIV-3 strains is based on the successful strategy first used by
Jenner for smallpox vaccination, in which an animal virus is used to protect
humans from the analogous human virus. It is thought that the attenuation of
bPIV-3 seen in primates is due to mutations sustained throughout its genome
during its long evolutionary adaptation to the bovine host.
Prior to the Company's in-licensing of the bPIV-3 vaccine, it had been
tested in Phase 1 clinical trials in almost 100 adults, children and infants. In
all age groups, the bPIV-3 vaccine appeared satisfactorily attenuated, safe and
genetically stable. Eighty-five percent of seronegative infants and children
(six to 60 months of age) were infected by the tested dose, and 61 percent of
bPIV-3 recipients developed a rise in antibody to the human PIV-3 virus. The
vaccine strain infected 92 percent of infants younger than six months of age,
even in the presence of maternal PIV-3 antibodies. Infection with the bPIV-3
vaccine stimulated an immune response to human PIV-3 in 42 percent of these
young infants. A preliminary review of a Phase 2 clinical trial announced in
December 1998 found that after three doses, 79 percent of the vaccine recipients
showed evidence of immunization compared to seven percent of placebo recipients.
The trial met Aviron's pre-determined objectives for safety and immunogenicity.
Aviron intends to move forward with additional clinical development.
Epstein-Barr Virus
Epstein-Barr virus, a herpes virus that causes infectious mononucleosis,
infects most people at some point in their lifetime. Infection at a young age
may cause mild symptoms, but the debilitating syndrome of infectious
mononucleosis is most common when infection first occurs in adolescence or young
adulthood via exchange of saliva. Sore throat and swollen neck glands are
followed by a period of fatigue and lethargy which can last for weeks or even
months. Approximately 10 percent of high school and college students become
infected with EBV each year in the United States, of which half or more may
develop infectious mononucleosis. The disease usually runs its course without
significant medical intervention; however, the long duration of infectious
mononucleosis can be a serious problem for high school and college students and
workers.
Enlargement of the liver and spleen are also common, so doctors typically
prohibit participation in athletic activities to prevent serious injuries. EBV
is one of the viruses implicated as a contributing cause of cancer in humans,
including Hodgkin's disease, post-transplant and other lymphomas, nasopharyngeal
carcinoma (the most common head and neck cancer in large regions of Asia) and
Burkitt's lymphoma (a significant disease in Africa).
The Company is developing a subunit vaccine for EBV based on the single
surface antigen responsible for most of the neutralizing antibodies stimulated
by EBV infection. Quantities of this antigen have been expressed, purified and
evaluated in a rabbit model, where preliminary results indicate that the antigen
is immunogenic when combined with an adjuvant. In 1995, the Company entered into
a worldwide collaboration with SmithKline Beecham, excluding Korea, whereby
SmithKline Beecham will fund the development of Aviron's EBV vaccine in exchange
for certain marketing rights. SmithKline Beecham is completing a Phase 1
clinical trial in Europe of the subunit vaccine in healthy adults to evaluate
safety and immunogenicity. There can be no assurance that this trial will not
need to be repeated in the United States or that FDA approval will be obtained
for any future clinical trial or vaccine candidate. See "-- Collaborative
Agreements."
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Cytomegalovirus
Most people become infected with CMV, another member of the herpes virus
family, at some time in their life, and in the United States 40 percent to 60
percent of infections occur in childhood. These infections are typically
asymptomatic or result in mild illness with sore throat, headache, fatigue and
swollen glands. CMV also can cause an infectious mononucleosis syndrome
clinically indistinguishable from that associated with EBV infection. More
serious CMV disease is also often associated with a weakened immune system, as
is often found in AIDS, cancer and transplant patients, which may be due to
reactivation of CMV acquired early in life or a primary infection. In addition,
if a woman is first exposed to this virus early in pregnancy, the resulting
infection can cause serious fetal abnormalities. Approximately 40,000 infants in
the United States are infected each year, resulting in varying levels of brain
damage or deafness in over 10 percent of these infants. Congenital CMV syndrome
results in significant expenditures for neonatal intensive care and potentially
lifelong custodial care.
No vaccine currently is available for CMV. Antibodies from persons with
high levels of immunity are available in the form of hyperimmune globulins for
certain high-risk patients, but use of these products can be costly and of
limited efficacy. The Company believes that widespread vaccination of children
with a safe and effective CMV vaccine is justified for the same reason that
children in the United States are vaccinated against rubella: to protect unborn
children from birth defects by reducing the risk that mothers are exposed to
infected children.
A live attenuated CMV vaccine candidate, known as the Towne strain, has
been tested by third parties in several hundred people. This strain was reported
to be well tolerated, but did not provide sufficient protection in mothers of
children in day care who were at risk for congenital CMV, or in transplant
recipients at risk of acquiring CMV from the donor organs. Aviron scientists
have discovered differences between the genome of the Towne strain and that of
wild-type CMV. Based on this knowledge, the Company has used its Rational
Vaccine Design approach to create new recombinant CMV vaccine candidates in an
attempt to strike the appropriate balance between attenuation and protection.
The NIAID filed an IND for a Phase 1 clinical trial of several of Aviron's CMV
vaccine candidates in December 1998. The proposed trial under this IND has been
placed on clinical hold by the FDA, and the Company and the NIAID believe that
the questions raised by the FDA can be resolved in order to begin a Phase 1
clinical trial in 1999. The Company expects to enter clinical trials in 1999 for
a CMV vaccine in conjunction with NIAID. However, no assurance can be given that
clinical trials will be commenced or, if commenced, will be successful, or that
the Company will develop successfully and receive FDA approval of its CMV
vaccine candidate.
Herpes Simplex Virus Type 2
It is estimated that HSV-2, the cause of genital herpes, infects one out of
five persons in the United States. Only one-third of those infected experience
symptoms, but a significant portion of new infections are caused by transmission
from asymptomatic individuals. Genital herpes is a non-lethal but incurable
disease that invades the body once and settles in for a lifetime, often
manifesting its presence several times a year with painful sores in the genital
area. It is estimated that there are over 700,000 new cases of genital herpes
per year in the United States, and that the disease is responsible for over
500,000 physician visits per year.
Genital herpes also can be acquired by newborn babies as they pass through
the birth canal of infected mothers. Neonatal herpes simplex infection can
result in serious damage to the brain and many other organs. Even with therapy,
over 20 percent of the 1,500 infants infected each year in the United States
die, and many of the survivors are seriously impaired. In addition, efforts to
prevent neonatal herpes contribute significantly to the cost of the disease.
Thousands of women in the United States with a history of genital herpes are
advised to undergo a Cesarean section when prenatal cultures or examinations
suggest a recurrence near the time of delivery. HSV-2 infection can also lead to
serious and fatal complications in adults with impaired immune systems due to
AIDS or drug therapy for organ transplants.
The most widely used drug therapy for HSV-2 disease is acyclovir, which has
been shown to reduce the severity and duration of herpetic lesions, although
most patients treated still experience symptoms for several days. When taken
several times a day as a prophylaxis for HSV-2, acyclovir also has been shown to
reduce the
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<PAGE> 14
frequency of recurrences. Several additional therapeutics are available or are
in the late stages of clinical trials, and several prophylactic vaccines are in
clinical trials; however, no vaccine currently is available to prevent genital
herpes. One company recently reported a lack of efficacy in Phase 3 clinical
trials of a subunit vaccine. A second company is conducting a Phase 3 clinical
trial of a different subunit vaccine, and a third company has announced
completion of a Phase 1 clinical trial of a disabled virus which can undergo
only a single cycle of replication after injection.
Aviron has used its Rational Vaccine Design approach to create injectable
live attenuated vaccine candidates intended to prevent HSV-2 disease in
uninfected children and young adults. Two of the Company's founders, Dr. Bernard
Roizman and Dr. Richard Whitley, in collaboration with Pasteur Merieux Serums et
Vaccins, developed a prototype live herpes vaccine based on an oral herpes virus
(HSV-1) backbone. After extensive preclinical testing, the virus was tested in
humans; however, the immune response following vaccination was deemed
insufficient. This insufficiency was attributed to the use of the HSV-1 backbone
from which too many important genes had been deleted, thus rendering the virus
over-attenuated. Aviron has licensed this technology, along with patents
covering strategies for more specific deletions, from ARCH Development
Corporation. Aviron has used this technology to create proprietary live vaccine
candidates using an HSV-2 backbone, which it has evaluated in preclinical
models. Several candidates have shown attenuation in various rodent models, as
well as efficacy in protecting guinea pigs and primates from challenge with a
lethal dose of wild-type HSV-2. The Company is developing additional vaccine
candidates and intends to use the results of further animal studies to select
one or more candidates for evaluation in clinical trials. There can be no
assurance, however, that the Company will commence or successfully complete
clinical trials on a timely basis, if at all.
In July 1996, Aviron licensed certain of its patent rights covering or
related to the use of HSV-2 for treatment of cancer and for gene therapy, but
excluding use for vaccines, to NeuroVir Research, Inc., a private Canadian
corporation ("NeuroVir"). In exchange, Aviron received shares of capital stock
and warrants to purchase shares of capital stock, representing a minority
interest in the outstanding equity securities of NeuroVir on a fully diluted
basis. Aviron is under no obligation to fund development of this technology by
NeuroVir.
Respiratory Syncytial Virus
RSV is the major cause of lower respiratory tract illness in the very
young, responsible for over 90,000 hospitalizations and more than 4,000 deaths a
year in the United States. Infection is manifested as cough and fever and, in
some cases, pneumonia. While RSV infection can occur at any time of year,
epidemics generally occur in the winter. Most cases are in children under age
four, with the peak of severe illness under six months of age, particularly in
infants with pre-existing heart and lung disease. The only prevention for RSV
currently available is passive administration of antibodies, although one
company is testing a cold adapted live attenuated RSV vaccine in infants.
Available drug therapy is reserved for the most serious cases as it has
significant side effects. Aviron is developing a genetically engineered live
attenuated virus vaccine for RSV using its proprietary reverse genetics
technology. Aviron's objective is to use this technology to create a number of
live virus vaccine candidates that can be tested in animal models before
selecting a candidate for testing in humans. However, no assurance can be given
that the Company will be successful in identifying a vaccine candidate.
INFLUENZA CLINICAL TRIALS
The Company has conducted and continues to conduct clinical trials to
evaluate safety and efficacy of its live cold adapted influenza vaccine,
FLUMIST(TM), a trivalent vaccine. To date, the Company has tested FLUMIST(TM) in
over 11,000 children and adults. While the Company believes that it can use
previous trial data from others, including NIH and Wyeth-Ayerst Laboratories, a
division of American Home Products ("Wyeth"), to support its regulatory filings,
the Company's use of the previous data to establish safety and efficacy of its
proposed vaccine is limited because very few of the clinical trials involved a
trivalent vaccine delivered through a nasal spray device. The Company's clinical
trials relate to the safety and efficacy of the trivalent formulation as well as
the safety of its intranasal spray delivery method. The Company enrolled a
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total of 647 patients in Phase 1/2 clinical trials, 92 patients in a challenge
efficacy study in adults, in collaboration with the NIH, and 1,602 children in
year 1 of the Phase 3 pediatric protective efficacy trial, approximately 85
percent of whom have returned for year 2 of the trial, and 5,758 adults and
children in five additional safety and in the healthy working adult
effectiveness trial. The Company has received limited data on the efficacy of
FLUMIST(TM) against culture-confirmed influenza from clinical trials in healthy
adults. There can be no assurance that data from such trials, in addition to
prior trials, will be sufficient to support the FDA approval in healthy adults.
The Company's clinical trials are being designed to support a planned Biologic
License Application ("BLA") submission in the summer or fall of 1999 seeking
approval of FLUMIST(TM) in several target populations. The estimated timing of
submission of this BLA and potential commercialization of FLUMIST(TM) are
forward-looking statements subject to risks and uncertainties, and there can be
no assurance that such filing or such approval will not be delayed materially or
that such commercialization will occur as a result of certain factors, including
those set forth in "Business Risks -- Uncertainties Related to Clinical Trials,"
"-- Uncertainties Related to Early Stage of Development; Technological
Uncertainty."
Phase 1 and 2 Clinical Trials and Challenge Efficacy Trial
Aviron conducted a safety and immunogenicity study in 1996 involving 239
healthy adults at three university research centers. Patients were randomly
assigned to receive either FLUMIST(TM) by nasal spray or nose drops, or placebo
by nasal spray or nose drops. No serious adverse events attributable to
FLUMIST(TM) were seen in any subjects, and there were no statistically
significant differences in the occurrence of fever, sore throat, runny nose,
cough, headache or any other potential reaction assessed in the study between
the vaccine or placebo or between the different types of administration.
Statistically significant serum antibody responses to all three strains in the
vaccine were observed in the subjects receiving FLUMIST(TM) compared to placebo.
The magnitude of these antibody responses was within the range of responses seen
in previous trials by others of the live cold adapted influenza vaccine, which
are lower than the serum responses typically observed following immunizations
with the inactivated influenza vaccine.
In 1996, 238 children between the ages of 18 months and five years were
enrolled at four Vaccine Treatment Evaluation Units ("VTEUs") and 118 children
were enrolled at the Center for Vaccine Development in Santiago, Chile, in a
Phase 1/2 double-blind, placebo-controlled safety, immunogenicity and
dose-escalation study. The study design and endpoints were similar to the adult
study, except that the initial phases used a dose lower than that given to
adults. No serious adverse events were seen in any subjects in any of the three
phases of the dose escalation, and there were no statistically significant
differences in the occurrences of fever, sore throat, runny nose, cough,
wheezing, or irritability assessed in the study between the vaccine or placebo
or between the different types of administration. Statistically significant
serum antibody responses to all of the three strains were observed in the
subjects receiving the higher dose of FLUMIST(TM) compared to placebo. The
magnitude of these antibody responses was within the range of responses seen in
previous trials by others of the trivalent cold adapted influenza vaccine, which
are lower than the serum responses typically observed following immunizations
with the inactivated influenza vaccine.
FLUMIST(TM) has also been tested in a double-blind, placebo-controlled
challenge efficacy study at two VTEUs involving 92 healthy young adults.
Subjects were randomized to receive either FLUMIST(TM), the inactivated
injectable vaccine or placebo. There were no serious adverse events attributable
to FLUMIST(TM) seen in any subjects, and there were no statistically significant
differences in the occurrence of any potential reactions assessed in the study
between either vaccine or placebo. Following vaccination and subsequent
intranasal administration of the wild-type challenge virus, the incidence of
laboratory-documented influenza, a prospectively defined primary endpoint of the
trial, was 7 percent in subjects vaccinated with FLUMIST(TM), 13 percent in
subjects vaccinated with the inactivated injectable influenza vaccine and 45
percent in subjects who received placebo. The reduction in laboratory-documented
influenza compared to placebo was statistically significant for FLUMIST(TM) and
the inactivated vaccine. The other prospectively defined primary endpoint of the
study was the proportion of subjects shedding the challenge virus after its
administration. No significant differences were seen between the two vaccines
and placebo in viral shedding.
Of the recipients of FLUMIST(TM), 10 percent experienced moderate or severe
respiratory symptoms following administration of the wild-type influenza
challenge virus, a statistically significant reduction
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<PAGE> 16
compared to 39 percent of placebo recipients. The rate of moderate or severe
respiratory symptoms observed following challenge virus in the inactivated
injectable vaccine was 22 percent which was not statistically significant
compared to placebo. While the rate of respiratory illness seen in the placebo
group was consistent with previous influenza challenge efficacy trials by
others, the rate of febrile or systemic illness following challenge was lower
than in previous trials. These data have not been peer reviewed, however, no
assurance can be given that the conclusions drawn from this analysis will not
change as a result of further study by the Company or during the peer review
process.
Phase 3 Clinical Trials in Children
Based on trials by others which showed that a modest immune response in
young children to one or two of the strains after a single dose could be boosted
significantly by a second dose approximately two months later, the Company
initiated a two-year pivotal Phase 3 clinical trial to evaluate one-and two-dose
regimens in children. The Company's clinical trial data suggest that a repeat or
booster dose may be required in young children without previous exposure to
influenza or influenza vaccines. Two doses of the inactivated injectable
influenza vaccine are recommended annually for young children receiving
influenza prophylaxis for the first time. The Company enrolled 1,602 children at
10 clinical sites in the pivotal Phase 3 clinical trial, of which 1,314 were
vaccinated with a second dose 46 to 74 days after initial vaccination. The
primary endpoint of the first stage of the study was defined as protection of
children from culture-confirmed influenza during naturally occurring epidemics
of influenza.
The data were unblinded in July 1997 following a single year of patient
accrual due to the adequate incidence of influenza in the study population. The
Company and NIAID announced that, based on an initial analysis of the first
stage of the Phase 3 trial, FLUMIST(TM) demonstrated a 93 percent protection
rate against culture confirmed influenza in those children receiving two doses,
the primary endpoint of the study. Only 1 percent of children receiving two
doses experienced culture-confirmed influenza, compared to 18 percent of those
receiving the placebo. These results were statistically significant. No serious
adverse events attributable to FLUMIST(TM) were seen in any subjects to whom
FLUMIST(TM) was administered. There were no statistically significant
differences in other side effects between FLUMIST(TM) and placebo recipients,
except for a somewhat increased incidence of transient runny nose, mild fever
and decreased activity following immunization in children receiving FLUMIST(TM).
The investigators described these transient side effects as comparable to or
milder than those observed following many other childhood immunizations.
The clinical investigators presented the initial findings of this trial at
a scientific conference in the fall of 1997 and, in May 1998, data from the
first year of a Phase 3 clinical trial of FLUMIST(TM) were published in The New
England Journal of Medicine. In the randomized, placebo-controlled study,
results show that only 14 of the 1,070 children vaccinated with FLUMIST(TM)
experienced culture-confirmed influenza, while 95 of the 532 placebo recipients
experienced culture-confirmed influenza. Of the children who received
FLUMIST(TM), only one child developed influenza-associated ear infection, while
20 of the placebo recipients developed influenza-associated ear infections.
Throughout the entire cough, cold and flu season, 1,070 children vaccinated with
FLUMIST(TM) experienced 30 percent fewer ear infections with fever than children
who received placebo, and a 35 percent reduction in related antibiotic use for
ear infections with fever.
The children who participated in the first year of this study were invited
back to participate for a second flu season in the 1997-98 follow-on trial and
they were either vaccinated with a single dose of FLUMIST(TM), or a placebo
spray. In September 1998, the results of year 2 of the Phase 3 efficacy trial of
FLUMIST(TM) in children, conducted in collaboration with NIAID, were presented
at the Interscience Conference on Antimicrobial Agents and Chemotherapy (ICAAC).
The study showed that FLUMIST(TM) provided 100 percent protection against
culture-confirmed influenza strains included in the 1997 - 98 flu vaccine, and
86 percent protection against A/Sydney, an unexpected variant which was the
predominant strain of influenza circulating during the 1997-98 flu season.
Overall, FLUMIST(TM) provided 87 percent protection against all
culture-confirmed influenza. In the 1,358 participants, there were five cases of
influenza due to influenza strains included in the vaccine and 66 cases caused
by A/Sydney. Only two percent of children vaccinated with FLUMIST(TM) (15 out of
917) experienced culture-confirmed influenza, all of which was attributable to
the A/Sydney strain, while
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13 percent of the placebo recipients (56 out of 441) experienced
culture-confirmed influenza. The difference between these two influenza attack
rates is used to calculate the overall protection rate of 87 percent.
The incidence of pneumonia and other lower respiratory diseases was also
reduced in those children vaccinated with FLUMIST(TM), compared to placebo.
Eight children in the placebo group developed influenza-related wheezing,
bronchitis or pneumonia, all of which were due to the A/Sydney strain. No
children who received FLUMIST(TM) experienced lower respiratory complications.
In the 15 of the 917 children in the FLUMIST(TM) group who did contract
influenza, the illness appeared to be milder than in the control group, based on
frequency of complications and duration of fever.
The Company began a large scale clinical trial in August 1998 to access the
impact of community-wide influenza immunization. The three-year trial, taking
place in Temple, Texas, is expected to enroll up to 15,000 children and is
funded by a $3 million grant from the NIAID awarded to the Baylor College of
Medicine. The trial will evaluate the impact of vaccinating pre-school and
school-age children with FLUMIST(TM) on the incidence of doctor visits for
flu-related illness.
On December 10, 1998, the Company reported on a meeting with the U.S. Food
and Drug Administration Center for Biologics Evaluation and Research (CBER)
regarding plans for submission of the Company's license applications for
FLUMIST(TM). Requirements for completion of the submission include data on
manufacturing, validation and stability. In addition, The Company is conducting
a bridging study in children designed to evaluate clinical comparability of
vaccine blended and filled at the Company's new Pennsylvania facility as
compared to vaccine used in earlier clinical trials. This 225-person trial is
fully enrolled and underway in Australia in collaboration with CSL Limited, the
Company's Australian marketing partner for FLUMIST(TM). The Company will include
safety and immunogenicity data from this clinical study in its licensing
applications for FLUMIST(TM). The Company's goal is to submit its application in
the summer or fall of 1999.
Clinical Trials in Healthy Adults
On December 5, 1998, preliminary results reported from a Phase 3 trial in
4,561 healthy working adults showed that those receiving FLUMIST(TM) experienced
reductions in illness-associated missed work days and health care provider
visits, as well as prescription and over-the-counter medication use associated
with illness. The study was conducted to assess the impact of immunization on
the frequency of influenza-like illness, utilization of health care services,
and absenteeism from work. These data are intended to support models of the
cost-effectiveness of immunization programs based on FLUMIST(TM).
Data from this trial were presented at the International Symposium on
Influenza and Other Respiratory Viruses. Those receiving FLUMIST(TM) missed 28.8
percent fewer days of work due to febrile upper respiratory illness and had 40.9
percent fewer days of health care provider visits. Participants also experienced
a 45.5 percent reduction in days of prescription antibiotic use, a 17.0 percent
reduction in days of non-antibiotic prescription drug use and 28 percent fewer
days of OTC medicine use.
Study results show FLUMIST(TM) recipients had reductions in the occurrence
of illness by multiple definitions measured in the study including severe
influenza-like illness (18 percent less) and febrile upper respiratory tract
illness (23 percent less). The number of days of illness was also reduced in
FLUMIST(TM) recipients by 23 to 28 percent, depending on the specific illness
definitions. The prospectively determined primary endpoint was occurrence of
illness using the broadest definition, which was reduced in FLUMIST(TM)
recipients by 9.8 percent, a trend which did not reach statistical significance.
The trial was a double-blind, placebo-controlled study conducted in 13
clinical sites nationwide during the 1997 - 98 flu season. Most study subjects
self-administered FLUMIST(TM) under the supervision of investigators at their
worksite or nearby clinic. Study participants reported their symptoms and health
events monthly. Because laboratory tests were not performed to diagnose
influenza, several pre-specified illness definitions were used to identify
health events that could have been due to influenza virus infection. These
included a very broad definition of influenza-like illness, which did not
necessarily include respiratory tract symptoms, as well as more severe
influenza-like illness and febrile upper respiratory tract illness (upper
respiratory illness with fever).
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Clinical Trials in High-risk Adults
The Company has completed a clinical trial for safety in 200 elderly
high-risk adults for the use of FLUMIST(TM) for co-administration with the
currently available injectable vaccine. Many of the participants in this trial
self-administered FLUMIST(TM). The Company intends to use this data to support a
label claim for safety for such co-administration in high-risk adults, including
the elderly. As this trial is not designed to generate efficacy data on use of
FLUMIST(TM) in high-risk adults, there can be no assurance that data from this
trial, combined with data from the Company's other clinical trials and prior
trials, will be sufficient to support FDA approval of an indication for use of
FLUMIST(TM) in high-risk adults even if the FDA were satisfied with the safety
data submitted. Early in the fourth quarter of 1998, the Cooperative Studies
program of the Department of Veterans Affairs Office of Research and Development
began a one-year trial to evaluate the potential additional benefit of
co-administration of FLUMIST(TM) with the flu shot, compared to the flu shot
alone, in high-risk patients with chronic lung disease, or chronic obstructive
pulmonary disease and emphysema. This study involves over 2,000 volunteers at 20
participating VA Medical Centers in the United States.
Clinical Trials for Manufacturing Consistency and Process
In February 1998, the Company reported positive results from a
manufacturing consistency lot trial of bulk vaccine manufactured, blended, and
filled into sprayers at Medeva Pharma Limited ("Medeva Pharma"), formerly Evans
Medical Limited, a subsidiary of Medeva PLC. The Company conducted a randomized,
double-blind, placebo-controlled trial in 500 children, designed to evaluate the
safety and immunogenicity of three new manufacturing lots of FLUMIST(TM). The
children were vaccinated between April and September 1997. Analysis of patient
diary cards and antibody responses following two doses of FLUMIST(TM) showed
consistent safety and immunogenicity for the different lots according to the
pre-defined endpoints. Evidence that different lots of vaccine can be
manufactured at a consistent quality level is generally required by the FDA
prior to approval of such products for commercial sale.
On June 30, 1998, the Company submitted a Product License
Application/Establishment License Application (PLA/ELA) for FLUMIST(TM) to the
FDA. On August 31, 1998, Aviron reported that it had received notice that its
license applications were not accepted for filing. Requirements for resubmission
include additional data in the areas of manufacturing, validation and stability.
The Company is conducting a bridging study designed to evaluate clinical
equivalence of vaccine blended and filled at the Company's facility at Packaging
Coordinators, Inc., a division of Cardinal Health, Inc. ("PCI") compared to
vaccine used in earlier clinical trials. This 225-person trial has been
initiated in Australia in collaboration with CSL Limited, the Company's
Australian marketing partner for FLUMIST(TM). The Company will include safety
and immunogenicity data from this clinical study in its licensing applications
for FLUMIST(TM). The Company intends to resubmit its application in the summer
or fall of 1999. The resubmission will be in the form of a BLA, rather than a
PLA/ELA, in keeping with current FDA requirements. There can be no assurance
that the FDA will find these data sufficient to demonstrate consistency of
manufacture.
ADDITIONAL RESEARCH PROGRAM -- LIVE VIRUSES AS VECTORS
Aviron believes that its virus engineering technology may be used to create
strains which carry "foreign" genes and are able to deliver genetic or antigenic
information to specific tissues in the host. For example, it is possible to
engineer antigens from other viruses into influenza, as has already been
demonstrated for small antigenic regions from agents such as HIV and malaria.
RSV and PIV-3 are two other important causes of childhood infections which may
be targeted by using the influenza virus as a vector to deliver antigens.
PRODUCTION AND MANUFACTURING
Cold Adapted Influenza Vaccine
Production of the cold adapted influenza vaccine requires the following
steps:
Master Virus Seed Production. After the FDA and the CDC select the
influenza strains to be included in the vaccine, Aviron creates the respective
master virus seeds for use in large-scale production. These
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contain the hemagglutinin (HA) and neuraminidase (NA) genes of the expected
epidemic strain and six genes conferring the cold adapted, attenuated properties
of the master donor strain. Two processes are available for Aviron to make the
master virus seeds: classical reassortment and reverse genetics. In the
classical reassortment process, laboratory virus cells are simultaneously
infected with the expected epidemic strain and the cold adapted master donor
strain, which results in random genetic reassortments between the two strains.
The specific reassortment desired is isolated using monoclonal antibodies. This
process takes approximately four to six weeks and has been used by scientists at
the University of Michigan and Aviron to create over 20 different vaccine
strains that have been tested in human clinical trials. In the reverse genetics
approach, HA and NA genes are isolated from the expected epidemic strain and
introduced into the cold adapted master donor strain using Aviron's proprietary
reverse genetics technology. Potential advantages of this process are that it
may be somewhat faster and may offer lower risk of contamination than classical
reassortment. Aviron has conducted a clinical trial to evaluate safety of the
reverse genetics process compared to the classical reassortment process. There
can be no assurance that the FDA will find this data sufficient to demonstrate
the acceptability of a particular approach to master virus seed production.
Bulk Monovalent Formulation Production. Under the Company's current
arrangement with Medeva Pharma, the master virus seeds for each vaccine strain
are transferred to Medeva Pharma in the United Kingdom for large scale
production of the bulk monovalent formulations of the three vaccine strains,
which involves infection, incubation and harvesting from hen's eggs. The eggs
used in this process are supplied by a third party that maintains flocks
certified to be free of specific pathogenic agents.
Trivalent Formulation Production. The bulk formulation is frozen and
transferred to PCI in Pennsylvania where the monovalent vaccine material is
blended into the trivalent formulation for filling into nasal spray devices,
packaged and labeled. In 1998, the Company opened a 34,000-square-foot
manufacturing suite in PCI's site. If regulatory approval is received, the PCI
facility will be used for blending, filling, packaging, labeling and storage of
FLUMIST(TM).
The Company currently does not have licensed facilities to manufacture
FLUMIST(TM) and has no direct experience with large scale manufacture of this
potential product. All of the cold adapted vaccine material used in the
Company's early stage clinical trials has been supplied solely by Medeva Pharma
pursuant to an agreement between the Company and Medeva Pharma entered into in
November 1995 (the "Medeva Pharma Clinical Agreement"). Pursuant to this
agreement, the Company has received timely and sufficient supplies for its
clinical trials of FLUMIST(TM) through four influenza seasons. Medeva Pharma is
one of four companies licensed by the FDA to produce influenza vaccine for sale
in the United States and produces its own injectable inactivated influenza
vaccine. Under the Medeva Pharma Clinical Agreement, Medeva Pharma is producing
and supplying the Company with sufficient quantities of FLUMIST(TM) to conduct
its current clinical trials, subject to certain limitations. Under the Medeva
Pharma Clinical Agreement, Medeva Pharma has been performing work for Aviron
intended to result in a liquid formulation of FLUMIST(TM) requiring only
refrigeration rather than frozen storage. The Company believes that a liquid
formulation will be required to address markets outside the United States and
Canada. The Company is also conducting development work on the liquid
formulation at its facilities in California.
The Company initially plans to obtain commercial quantities of bulk vaccine
of FLUMIST(TM) from Medeva Pharma. Under an agreement between the Company and
Medeva Pharma entered into in April 1997 (the "Medeva Pharma Commercial
Agreement"), Medeva Pharma has agreed to manufacture FLUMIST(TM) in bulk until
December 31, 2001, so as to meet the Company's needs for bulk product through
the 2001 - 2002 influenza season. In October 1997, the Company entered into a
nonexclusive arrangement with PCI for the blending, filling, packaging, and
labeling of FLUMIST(TM) for commercial sale in the United States until October
2004 (the "PCI Agreement"). In the event of a better than expected market
acceptance, the Company may be capacity constrained on its supply of vaccine
through at least the 2000 - 2001 influenza season. In order to secure future
production capacity, the Company may extend and expand its existing
arrangements, collaborate with other third parties, or establish its own
manufacturing facilities. Using an alternative supplier or building a
proprietary facility would require a substantial amount of funds and additional
clinical trials and testing. There can be no assurance that an alternative
source of supply will be established on a timely basis, or that the Company will
have or be able to obtain funds sufficient for building or equipping a new
facility. In early 1999, the Company entered into a lease
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agreement for approximately 69,000 square feet of office, laboratory and
manufacturing space in Santa Clara, California. The Company has leased this
facility through January 2019, with an option to renew for seven years. The
Santa Clara facility, as well as the subsequent establishment of alternative or
proprietary sources for supply or manufacturing, would require FDA approval for
each such facility.
The production of FLUMIST(TM) is subject to the availability of a large
number of specific pathogen-free hen eggs, for which there are currently a
limited number of suppliers. The Company has been purchasing its egg
requirements from a single supplier on a purchase order basis, rather than
pursuant to any long term contractual arrangement. Contamination or disruption
of this source of supply would adversely affect the ability to manufacture
FLUMIST(TM). The production FLUMIST(TM) is also subject to the availability of
the device for delivery of the vaccine intranasally. In August 1998, the Company
and Becton Dickinson and Company ("Becton Dickinson") entered into a worldwide
exclusive supply agreement under which Becton Dickinson will supply the Company
with its AccuSpray(TM) non-invasive nasal spray delivery system for the
administration of FLUMIST(TM) through the 2001 - 2002 flu season. There can be
no assurance that these suppliers will provide timely and adequate supply of
these product components and raw materials. In addition, the Company depends on
the submission by the delivery device manufacturer of a Device Master File
application ("DMF") for separate review by regulatory authorities; the Company
will reference the DMF as part of the BLA submission for FLUMIST(TM).
The Company's current frozen formulation of FLUMIST(TM) is being designed
to meet an acceptable level of stability for the U.S. market initially targeted
by the Company. There can be no assurances that the Company will succeed in
achieving adequate product stability for FLUMIST(TM). In addition to its current
frozen formulation, the Company is exploring alternative formulations and
presentations for FLUMIST(TM) which may enable improved distribution and longer
shelf life. There can be no assurance that the Company will succeed in achieving
adequate product stability for the current frozen formulation of FLUMIST(TM),
that the Company's efforts to produce such alternative formulations will be
successful, or that such alternative formulations will actually enable improved
distribution and longer shelf life.
The production and marketing of influenza vaccine is highly seasonal.
Because most cases of influenza occur in winter, the majority of influenza
vaccinations in the Northern Hemisphere occur between September and December of
a given year. Influenza viruses have a high mutation rate and the surface
antigens of influenza viruses that induce protective immunity are variable from
year to year. Each spring, the FDA and the CDC determine circulating influenza
strains that will be included in the season's influenza vaccines. As a result,
manufacturers of vaccines must modify their influenza vaccines each year to
include the selected strains in a form that meets FDA guidelines, within an
approximately six-month period, in order to make it available before the
influenza season. As such, the Company must establish a dependable process by
which FLUMIST(TM) may be modified and manufactured on a timely basis to include
different strains each year. If the Company were unable to develop an influenza
vaccine for a particular year that meets FDA and CDC guidelines, the Company
would receive no revenues from an influenza vaccine for that influenza season,
which would materially adversely affect the Company's business, financial
condition and results of operation, given the relatively fixed nature of its
operating expenses over the short term. Failure of one of the Company's
suppliers to deliver timely and sufficient supplies to the Company, if it caused
the Company to be unable to deliver vaccines during the peak demand period for
the influenza season, would have a disproportionately adverse effect on the
Company's financial results.
Other Products
In 1996, the Company completed construction of a pilot manufacturing
facility for its potential vaccine products other than FLUMIST(TM). The Company
currently does not have facilities to manufacture any of its other potential
products in commercial quantities and has no experience with commercial
manufacture of vaccine products. To manufacture its other potential products for
large-scale clinical trials or on a commercial scale, the Company may be
required to build a large-scale manufacturing facility, which would require a
significant amount of funds. The scale-up of manufacturing for commercial
production would require the Company to develop advanced manufacturing
techniques and rigorous process controls. No assurance can be given as to the
ability of the Company to produce commercial quantities of its potential
products in compliance with applicable regulations or at an acceptable cost, or
at all.
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The Company is alternatively considering the use of contract manufacturers
for the commercial production of its other potential products. The Company is
aware of only a limited number of manufacturers which it believes have the
ability and capacity to manufacture its other potential products in a timely
manner. There can be no assurance that the Company would be able to contract
with any of these companies for the manufacture of its products on acceptable
terms, if at all. If the Company enters into an agreement with a third-party
manufacturer, it may be required to relinquish control of the manufacturing
process, which could adversely affect the Company's results of operations.
Furthermore, a third-party manufacturer also would be required to manufacture
the Company's products in compliance with state and federal regulations. Failure
of any such third-party manufacturer to comply with state and federal
regulations and to deliver the required quantities on a timely basis and at
commercially reasonable prices would materially adversely affect the Company's
business, financial condition and results of operations. No assurance can be
given that the Company, alone or with a third party, will be able to make the
transition to commercial production of its potential products successfully, if
at all, or that if successful, the Company will be able to maintain such
production.
MARKETING AND SALES
The current purchasers of vaccines are principally physicians, large HMOs
and state and federal government agencies. However, the United States health
care system is undergoing significant changes and the relative proportion of
purchasers that each group will represent in the future will depend on factors
such as legislative changes and the economy. The Company intends to participate
in the selling of its products to HMOs, large employers and state and federal
health care agencies, either directly or through a collaboration with another
company. Outside the United States, the Company plans to sell its products
through collaborative agreements with strategic partners. Aviron intends to use
rigorous cost-effectiveness analysis as a guide for its pricing strategy and in
support of its marketing plans.
Clinical trials of FLUMIST(TM) have been conducted to provide information
regarding its use in three market segments: children, healthy adults, and adults
at high-risk of influenza complications due to age or to the presence of chronic
medical conditions such as heart or lung disease or diabetes. Use of influenza
vaccines in these three segments is subject to somewhat different market forces,
and customers are accessed by different channels of distribution.
Children
The current injectable influenza vaccine is often used in children at
high-risk of influenza complications due to conditions such as asthma and
congenital heart disease, but public health authorities are concerned that
coverage rates are below optimal. There are approximately 70 million children
under age 18 in the United States. The current injectable vaccine is rarely used
in healthy children, although children have the highest attack rate of influenza
and play a major role in the spread of the influenza epidemic. The Company's
objective is to develop a new market for influenza prophylaxis in healthy and
high-risk children by offering an alternative to the injectable vaccine. Because
FLUMIST(TM) is delivered as a nasal spray, rather than an injection, the Company
believes it would provide a more attractive way to immunize children on an
annual basis.
Healthy Adults
Aviron believes that a large proportion of the current injectable influenza
vaccine used in the United States is being administered to healthy adults,
either via workplace-sponsored immunization programs or in programs offered
through clinics, pharmacies or other retail outlets. The Company estimates that
there are approximately 120 million adults in the United States who are not at
high-risk for influenza complications. Aviron's objective is to expand the
current market for influenza prophylaxis by offering an alternative for
individuals who are deterred by the injectable route of delivery of the current
product. The Company believes that immunization programs using FLUMIST(TM) may
also decrease the health professional time per vaccination compared to the
current influenza injection and therefore allow improved flexibility and
efficiency in the operation of such programs. A majority of the participants in
the Company's clinical trials for adults self-administered FLUMIST(TM).
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High-risk Adults
The Company is currently conducting a clinical trial in elderly high-risk
adults to evaluate the effectiveness of FLUMIST(TM) when co-administered with
the injectable influenza vaccine, compared to the injectable influenza vaccine
alone. See "Influenza Clinical Trials" section. If this trial is successful, and
regulatory approval is received, the Company intends to market FLUMIST(TM) to be
used in conjunction with the injectable influenza vaccine for adults over age 65
(approximately 34 million Americans) and for adults under age 65 with conditions
which put them at higher risk of influenza complications (approximately 20
million Americans).
COLLABORATIVE AGREEMENTS
The Company's strategy for the development, clinical trials, manufacturing
and commercialization of certain of its products includes maintaining and
entering into various collaborations with corporate partners, licensors,
licensees and others. There can be no assurance that the Company will be able to
maintain existing collaborative agreements, negotiate collaborative arrangements
in the future on acceptable terms, if at all, or that any such collaborative
arrangements will be successful. To date the Company has entered into the
following collaborative agreements.
Wyeth Lederle Vaccines
On January 12, 1999, Wyeth Lederle Vaccines, a business unit of
Wyeth-Ayerst Laboratories, the pharmaceutical division of American Home Products
Corporation ("Wyeth Lederle"), and Aviron announced a worldwide collaboration
for the marketing of FLUMIST(TM). This agreement became effective in March 1999
following the termination of Hart-Scott-Rodino review.
Under this agreement, the Company granted Wyeth Lederle exclusive worldwide
rights to market FLUMIST(TM), excluding Korea, Australia, New Zealand and
certain South Pacific countries. Aviron and Wyeth Lederle will co-promote
FLUMIST(TM) in the United States, while Wyeth Lederle will have the exclusive
right to market the product outside the United States. In each case, Wyeth
Lederle will hold the marketing rights for up to 11 years. Aviron and Wyeth
Lederle will also collaborate on the regulatory, clinical, and marketing
programs for FLUMIST(TM).
The Company received a cash payment of $15 million upon execution of the
collaboration, and will receive $15 million upon acceptance by the FDA of a BLA
filing and $20 million upon FDA marketing approval for FLUMIST(TM). Compensation
for achieving additional development and regulatory milestones is included in
the agreement terms. The granting of certain other rights under the license
would trigger additional payments by Wyeth Lederle in excess of $140 million to
Aviron.
Wyeth Lederle is committed to provide up to $40 million in future financing
to Aviron, a portion of which is contingent upon FDA approval of FLUMIST(TM),
with the remaining amount to come from participation in future Aviron securities
offerings. The total potential value for the license fees, milestones and
financing support that Aviron could receive exceeds $400 million. No assurance
can be given, however, that the Company will receive any future payments from
Wyeth Lederle. Sales of FLUMIST(TM) and future payments to the Company are
dependent on the successful development, manufacturing, supply, sale and
distribution of FLUMIST(TM) by the Company, its third party suppliers and Wyeth
Lederle.
Wyeth Lederle will distribute FLUMIST(TM) and record all revenues. In
addition to the payments mentioned above, Aviron anticipates that it will
receive in the range of 40 percent of FLUMIST(TM) revenues from Wyeth Lederle,
in the form of product transfer payments and royalties, which increase at higher
sales levels. Aviron will incur expenses to supply and co-promote FLUMIST(TM).
CSL Limited
On June 22, 1998, the Company and CSL Limited of Victoria, Australia ("CSL
Limited"), announced that they will collaborate on the development, sale and
distribution of FLUMIST(TM), in Australia, New Zealand and certain countries in
the South Pacific (the "Territory"). CSL Limited and the Company will jointly
carry
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out additional clinical trials in Australia for FLUMIST(TM). Under the
agreement, CSL Limited will sponsor the marketing application with the
Therapeutic Goods Administration, Australia's equivalent to the FDA. CSL Limited
will have exclusive rights to sell and distribute FLUMIST(TM) in the Territory.
Aviron and CSL Limited will share profits of FLUMIST(TM) in the Territory. The
Company will also benefit from expansion of CSL Limited's current flu vaccine in
pediatric and healthy adult market segments following the approval to market
FLUMIST(TM) in the Territory. In addition, CSL Limited has agreed, under an
option agreement, to grant warrants to the Company to purchase CSL Limited
common stock upon CSL Limited's attainment of certain milestones.
National Institute of Allergy and Infectious Diseases -- Parainfluenza Virus
Type 3
In May 1996, the Company obtained exclusive rights from the NIAID of the
NIH to certain biological materials and clinical trial data for its PIV-3
program. The NIH granted to the Company exclusive rights in specific strains of
bovine parainfluenza virus (the "Licensed Materials") to develop, test,
manufacture, use and sell products for vaccination against human parainfluenza
virus and other human and animal diseases ("Licensed Products"). In addition,
the Company obtained from the NIAID the right to reference an existing IND and
certain data relating to the Licensed Materials. The NIH retained certain rights
to the Licensed Materials on behalf of the United States Government to conduct
research and to grant research licenses to third parties under certain
circumstances. In return for the rights granted by NIH, the Company will make
payments to NIH on the achievement of specified milestones and will make certain
royalty payments to NIH. Unless otherwise terminated, the Agreement will
terminate on cessation of commercial sales of Licensed Products by the Company
or its sublicensee. The Company has the unilateral right to terminate the
Agreement in any country upon providing 60 days notice to NIH.
SmithKline Beecham Biologicals S.A.
In October 1995, the Company signed an agreement with SmithKline Beecham
Biologicals, S.A. ("SmithKline Beecham") defining a collaboration on the
Company's EBV vaccine technology (the "SB Agreement"). Under the terms of the SB
Agreement, the Company granted SmithKline Beecham an exclusive license to
produce, use and sell non-live EBV vaccines incorporating the Company's
technology for prophylactic and therapeutic uses on a worldwide basis, except in
Korea. In addition, SmithKline Beecham obtained a right of first refusal to an
exclusive, worldwide (except Korea) license under any intellectual property
rights relating to any live EBV vaccine technology developed or controlled by
the Company during the term of the SB Agreement. The Company has retained the
right to co-market a monovalent formulation of the EBV vaccine in the United
States and to have SmithKline Beecham supply such vaccine.
SmithKline Beecham agreed to fund research and development at the Company
related to the EBV vaccine, in specified minimum amounts, during the first two
years of the SB Agreement. SmithKline Beecham made an initial up-front payment
to the Company and agreed to make additional payments upon the achievement of
certain product development milestones; the first such milestone payment was
made in 1997. The Company is entitled to royalties from SmithKline Beecham based
on net sales of the vaccine. Unless otherwise terminated, the SmithKline Beecham
Agreement will expire on a country-by-country basis upon the expiration or
invalidation of the last remaining patent covered by the SB Agreement or 10
years from the date of first commercial sale of the vaccine, whichever is later.
The SB Agreement may be terminated by SmithKline Beecham with respect to any
country at any time.
Sang-A Pharm. Co., Ltd.
In May 1995, the Company entered into a Development and License Agreement
with Sang-A Pharm. Co., Ltd. ("Sang-A"). The Company granted to Sang-A exclusive
clinical development, manufacturing and marketing rights in Korea for specified
products developed by Aviron, including vaccines for influenza (cold adapted and
recombinant), EBV, CMV, HSV-2 and RSV. However, the Company is under no
obligation to develop any product. Sang-A also will make payments to the Company
upon Sang-A's meeting certain regulatory milestones for each product in Korea
and will pay a royalty to the Company on net sales of such products in South and
North Korea ("Korea").
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Sang-A also is obligated to establish a manufacturing facility with at
least enough capacity to meet demand for all Korean product requirements for
each product that reaches commercialization, if any. In the event that Sang-A's
manufacturing capabilities satisfy certain objective criteria and, subject to an
obligation to cooperate with the Company's future corporate partners for any
given products, Sang-A has a right of first refusal to manufacture a portion of
the total requirements of the Company, its affiliates and sublicensees for the
specified products, with the exception of the EBV vaccine, in specified
countries, including the United States, provided that it can do so at a
competitive price, quality and timeline. Sang-A's right of first refusal has
expired with respect to FLUMIST(TM) and PIV.
The term of this agreement extends, on a product-by-product basis, until 10
years from the date of first commercial sale of each product in Korea. At the
conclusion of the term, Sang-A has an option to extend the agreement on a
product-by-product basis, for the longer of an additional 10 years or the
expiration of the patents covering such product. During any such extension,
Sang-A will have either no royalty obligation to the Company or a reduced
royalty obligation, depending on the product.
In return for the rights granted to Sang-A, Sang-A made an equity
investment in the Company in May 1995 of approximately $4.0 million. Sang-A
subsequently made additional equity investments of approximately $1.6 million in
the Company's private placement of Series C Preferred Stock and $1.9 million in
connection with the Company's initial public offering of Common Stock.
In January 1997, Sang-A declared bankruptcy. In March 1998, the Company
entered into a Stock Repurchase Agreement with Sang-A under which the Company
repurchased 530,831 shares from Sang-A at a price of $25.13 per share. The
Company is unable to predict what, if any, long-term effect the bankruptcy will
have on Sang-A and on the Company's agreement with Sang-A.
National Institute of Allergy and Infectious Diseases -- Cold Adapted
Influenza Vaccine
Following a competitive application process, the Company entered into a
CRADA in March 1995 with the NIAID of the NIH to conduct clinical trials of the
Company's cold adapted influenza vaccine. Wyeth-Ayerst licensed certain rights
to the vaccine from the NIH in 1991 and was developing it for sale in
collaboration with the NIH until relinquishing its rights in 1993. Aviron has
obtained from the NIH and the University of Michigan exclusive rights to trial
results and data from the work at the VTEUs and Wyeth-Ayerst. The NIH has agreed
to support the trials by enrolling subjects in its network of VTEUs. In
addition, the Company acquired exclusive commercial rights to data generated
from all previous clinical trials conducted by the NIH and Wyeth-Ayerst using
the vaccine. The term of the CRADA will not exceed five years without a written
amendment by the parties. The Company and NIAID are discussing a possible
extension of the CRADA. Either party may terminate the CRADA for material
breach.
University of Michigan
In February 1995, the Company entered into a materials transfer and
intellectual property agreement (the "Michigan Agreement") with the University
of Michigan. Pursuant to the Michigan Agreement, the University of Michigan
granted the Company exclusive worldwide rights to certain intellectual property
and technology relating to the cold adapted influenza vaccine and proprietary
master donor strains of influenza viruses useful in the production of products
for vaccination against influenza and potentially for gene therapy and other
uses. Specifically, the Company obtained the exclusive right to develop,
manufacture, use, market and sell products incorporating any such intellectual
property or utilizing the master strains worldwide. In consideration for the
rights granted to the Company, the Company: (i) made an initial cash payment to
the University of Michigan; (ii) agreed to pay a royalty to the University of
Michigan on net sales of products subject to the license; (iii) entered into a
sponsored research agreement with the University of Michigan for a period of at
least two years; and (iv) issued to the University of Michigan 1,323,734 shares
of Series B Preferred Stock, which automatically converted into 264,746 shares
of the Company's Common Stock at the time of the Company's initial public
offering. In addition, in the event that Aviron receives approval to
commercially market a product based on the University of Michigan technology,
the Company has agreed to issue a warrant to the University of Michigan to
purchase shares of the Company's Common Stock at a price
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of $10.00 per share, for a number of shares to be based on 1.25 percent of the
Common Stock outstanding on the date of the first commercial sale of the product
incorporating the University of Michigan technology.
Pursuant to the Michigan Agreement, the Company is required to grant to the
University of Michigan an irrevocable, royalty-free license for research
purposes, or for transfer to a subsequent licensee should the Michigan Agreement
be terminated, to (i) all improvements developed by the Company, its affiliates
or sublicensees, whether or not patentable; relating to delivery mechanisms and
processes for administration and manufacturing of products, as well as
packaging, storage and preservation processes for the master strains, and (ii)
all new technical information acquired by the Company, its affiliates or
sublicensees relating to the Master Strains and products.
The term of the Michigan Agreement is until the later of the last to expire
of the University of Michigan patents licensed to the Company or 20 years from
the date of first commercial sale of a product incorporating the Michigan
technology. The Company has the further right to terminate for any reason upon
12 months notice to the University of Michigan.
The Mount Sinai School of Medicine
In February 1993, the Company entered into a technology transfer agreement
with The Mount Sinai School of Medicine ("Mount Sinai"). Under this agreement,
Mount Sinai assigned to the Company all of its rights, title and interest in and
to certain patents and patent applications, as well as all associated know-how
and other technical information relating to recombinant negative strand RNA
virus expression systems and vaccines, attenuated influenza viruses and certain
other technology. Mount Sinai also granted the Company (i) an option to acquire
any improvements to the inventions disclosed in the assigned patents and patent
applications thereafter developed by Mount Sinai and (ii) a right of first
negotiation for a license or assignment to certain additional related
technology. In consideration for the rights granted to the Company, the Company
issued to Mount Sinai 35,000 shares of the Company's Common Stock. The Company
also issued to Mount Sinai four warrants to purchase up to a total of 45,000
shares of the Company's Common Stock, each exercisable for a term of five years
commencing upon the occurrence of certain milestone events. As of December 31,
1998, warrants to purchase 6,224 shares were exercisable at a per share exercise
price of $4.50. Warrants to purchase 29,750 shares became exercisable at the
effective date of the Company's initial public offering at a per share exercise
price of $10.00. Warrants to purchase the remaining 6,250 shares were terminated
on the effective date of the Company's initial public offering according to
their terms. In 1996, warrants to purchase 3,124 shares were distributed by
Mount Sinai to certain inventors of the relevant technology, of which 1,874 were
exercised in 1997 and 902 were exercised in 1998.
ARCH Development Corporation
In July 1992, the Company entered into a license agreement with ARCH
Development Corporation ("ARCH"), pursuant to which the Company obtained an
exclusive, worldwide commercialization license, with the right to sublicense, to
certain patent rights and related intellectual property and materials pertaining
to the herpes simplex viruses, EBV and various recombinant methods and
materials. In return for the rights granted to the Company under this agreement,
the Company will make payments to ARCH upon the achievement of certain
milestones in the development of products covered by the license and will pay
royalties to ARCH on net sales of such products. ARCH also granted the Company
certain rights to improvements and additional related technology. The term of
this agreement extends until the expiration of the last-to-expire patent rights
covered under the license. In connection with this agreement, ARCH purchased
40,000 shares of the Company's Common Stock. Subsequent to this agreement,
affiliates of ARCH made equity investments in Aviron, purchasing shares of the
Company's Series A, B and C Preferred Stock, which automatically converted into
a total of 222,799 shares of the Company's Common Stock upon the closing of the
Company's initial public offering. ARCH has asserted an interpretation of the
financial terms of this agreement with the Company, relating to the license by
Aviron of its EBV technology to SmithKline Beecham, which would require the
Company to pay ARCH one-half of any future or past payments (including
sub-license fees and milestone payments) received by Aviron under the SB
Agreement. The Company disputes ARCH's interpretation of the financial terms of
the agreement. No assurance can be given, however, that the
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Company's interpretation will prevail. Failure of the Company to prevail could
have a material adverse effect on the Company's business, financial condition
and results of operations.
BUSINESS RISKS
This Form 10-K contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. When used
herein, the words "expects," "anticipates," "estimates," "intends," "plans" and
similar expressions are intended to identify such forward-looking statements.
The Company's actual results could differ materially from the results discussed
in the forward-looking statements. Factors that could cause or contribute to
such differences include those discussed below, as well as those discussed
elsewhere in this Form 10-K.
UNCERTAINTIES RELATED TO CLINICAL TRIALS
In order to commercialize any of its products under development, the
Company must demonstrate with substantial evidence through clinical trials and
to the FDA's satisfaction that the product is safe and effective for use in the
indications for which approval is requested. The results from preclinical
testing and early clinical trials may not be predictive of results obtained in
large clinical trials. Companies in the pharmaceutical, biopharmaceutical and
biotechnology industries have suffered significant setbacks in various stages of
clinical trials, even in advanced clinical trials after promising results had
been obtained in earlier trials. The Company's vaccines are intended for use
primarily in healthy individuals. To obtain regulatory approval, the Company
must demonstrate safety and efficacy in healthy people, which likely will
require a lengthier process and involve a larger number of trials and people
than would be customary for clinical trials of therapeutics for disease
management. There can be no assurance that the Company's clinical trials will
demonstrate sufficient safety and efficacy to obtain the requisite regulatory
approvals or will result in marketable products. If FLUMIST(TM) is not shown to
be safe and effective in Aviron's future clinical trials, the resulting delays
in obtaining regulatory approvals for FLUMIST(TM), as well as the need for
additional financing, would have a material adverse effect on the Company's
business, financial condition and results of operations. A material incidence of
adverse side effects during Aviron's clinical trials could have a negative
impact on the marketing of the product.
FLUMIST(TM) is a trivalent vaccine delivered as a nasal spray that is based
on technology licensed from the NIH and the University of Michigan. Wyeth-Ayerst
licensed certain rights to the vaccine in 1991 and was developing it for sale in
collaboration with the NIH until relinquishing its rights in 1993. Formulations
of the vaccine have been the subject of a number of clinical trials performed by
the NIAID and others. The Company has reviewed the data from these trials and
believes that it can submit such data in partial support of its application for
regulatory approval of FLUMIST(TM) from the FDA. The Company did not participate
in these trials and cannot be confident in the accuracy of the data collected.
Very few of the trials involved a trivalent vaccine delivered as a nasal spray,
but instead typically used formulations of monovalent or bivalent vaccine
delivered as nasal drops. The Company has performed and is in the process of
performing additional trials of FLUMIST(TM) to support its application to the
FDA. There can be no assurance that the data from these third-party trials are
accurate, that the Company will be able to obtain favorable results from its own
trials, or that the Company can complete these trials on a timely basis, or at
all.
In the case of FLUMIST(TM), the Company is seeking FDA approval for
indications in children, healthy adults, and for co-administration with the
inactivated injectable vaccine in high-risk adults, including the elderly. As a
result, the Company's clinical trials will need to demonstrate to the FDA's
satisfaction safety and efficacy of the vaccine in each of these target
populations. In addition, the Company currently plans to submit safety data to
support labeling claims for use of the vaccine in healthy adults; however, the
Company plans to submit efficacy data on only a limited number of people for
these populations in its BLA filing. There can be no assurance that the FDA will
consider this data to be sufficient to support indications for use of the
vaccine in healthy or high-risk adults. To the extent that the FDA does not find
such data submitted by the Company sufficient to support product approval for
one or more indications, the Company's commercialization of the vaccine may be
substantially delayed for one or more of its target populations. In this
connection, the
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Company could be required to commence and complete additional clinical trials to
generate additional safety and efficacy data to support product approval for one
or more of its target populations. See "Business -- Influenza Clinical Trials."
The completion of the Company's clinical trials may be delayed by many
factors. For example, delays may be encountered in enrolling a sufficient number
of people fitting the appropriate trial profile, preparing the modified vaccine
strain for certain influenza seasons, or manufacturing clinical trial materials.
The Company's late-stage clinical trials FLUMIST(TM) must be conducted during
the influenza season and must be commenced early enough in the approximately
five-month season so that subjects may be vaccinated well in advance of a
challenge by the wild-type virus. Were the influenza season to commence earlier
than anticipated, the number of subjects that could participate in a particular
study might be reduced in that season due to the subjects' possible exposure to
wild-type influenza virus. Additionally, there is a risk that there will not be
enough natural influenza in the community in a given influenza season to achieve
statistically significant results from clinical trials. There can be no
assurance that delays in, or termination of, clinical trials will not occur. Any
delays in, or termination of, the Company's clinical trial efforts could have a
material adverse effect on the Company's business, financial condition and
results of operations.
There can be no assurance that the Company's development efforts will be
successful, that required regulatory approvals, including those with respect to
IND or BLA applications, will be obtained or that any products, if introduced,
will be successfully marketed. See "Business -- Vaccine Products Under
Development."
NEED FOR ANNUAL REASSORTMENT; LACK OF MANUFACTURING EXPERIENCE; RELIANCE ON
CONTRACT MANUFACTURERS
Influenza viruses have a high mutation rate and the surface antigens of
influenza viruses that induce protective immunity are variable from year to
year. Each spring, the FDA and CDC determine circulating influenza strains that
will be included in the following season's influenza vaccines. As a result,
manufacturers of vaccines, including Aviron, must modify their influenza
vaccines each year to include the selected strains in a form that meets FDA
guidelines, within an approximately six-month period, in order to make them
available before the influenza season. If the Company were unable to develop an
influenza vaccine for a particular year that meets FDA and CDC guidelines and
establish a manufacturing process for the vaccine, its business, financial
condition and results of operations would be materially adversely affected. No
assurance can be given that delays in preparing vaccines for use in clinical
trials for commercial sales will not be encountered.
The Company currently does not have licensed facilities to manufacture
FLUMIST(TM) and has no direct experience with large scale manufacture of this
potential product. All of the cold adapted vaccine material used in the
Company's early stage clinical trials has been supplied solely by Medeva Pharma
pursuant to the Medeva Pharma Clinical Agreement. Medeva Pharma is one of four
companies licensed by the FDA to produce influenza vaccine for sale in the
United States, and produces its own injectable inactivated influenza vaccine
that could compete with FLUMIST(TM). Under the Medeva Pharma Clinical Agreement,
Medeva Pharma has been performing work for Aviron intended to result in a liquid
formulation of FLUMIST(TM) requiring only refrigeration rather than frozen
storage. The Company believes that a liquid formulation will be required to
address markets outside the United States and Canada. The Company is also
conducting development work on the liquid formulation at its facilities in
California.
The Company initially plans to obtain any commercial quantities of bulk
vaccine of FLUMIST(TM) from Medeva Pharma. Pursuant to the Medeva Pharma
Commercial Agreement, Medeva has agreed to manufacture the Company's needs for
bulk product through the 2001 - 2002 influenza season. The Company and Medeva
Pharma are discussing a potential agreement that would provide for commercial
supplies of bulk vaccine beyond 2001; however, there can be no assurance that
such an agreement will be reached. In October 1997, the Company entered into a
nonexclusive arrangement with PCI for blending, filling, packaging and labeling
of FLUMIST(TM) in the United States until October 2004. In the event of better
than expected market acceptance, the Company may be capacity-constrained on its
supply of vaccine through at least the 2001 - 2002 influenza season. In order to
secure future production capacity, Aviron may extend and expand its existing
arrangements, collaborate with other third parties, or establish its own
manufacturing facilities. Using
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an alternative supplier or building a proprietary facility would require a
substantial amount of funds and additional clinical trials and testing. There
can be no assurance that an alternative source of supply will be established on
a timely basis, or that the Company will have or be able to obtain funds
sufficient for building or equipping a new facility. In early 1999, the Company
entered into a lease agreement for approximately 69,000 square feet of office,
laboratory and manufacturing space in Santa Clara, California. The Company has
leased this facility through January 2019, with an option to renew for seven
years. In addition, as part of the regulatory approval process, before
commercial launch of FLUMIST(TM), the Company will need to obtain FDA approval
of its own facility, the PCI facility, and Medeva Pharma. Subsequent
establishment of alternative sources of supply or manufacturing would require
FDA approval for each such facility.
The production of FLUMIST(TM) is subject to the availability of a large
number of specific pathogen-free hen eggs, for which there are currently a
limited number of suppliers. The Company has been purchasing its egg requirement
from a single supplier. Contamination or disruption of this source of supply
would adversely affect the ability to manufacture FLUMIST(TM). The production of
FLUMIST(TM) is also subject to the availability of the device for delivery of
the vaccine intranasally. In August 1998, the Company and Becton Dickinson
entered into a worldwide exclusive supply agreement under which Becton Dickinson
will supply the Company with its AccuSpray(TM) non-invasive nasal spray delivery
system for the administration of FLUMIST(TM) through the 2001 - 2002 flu season.
There can be no assurance that these suppliers will provide timely and adequate
supplies of these product components and raw materials. In addition, the Company
depends on the submission by the delivery device manufacturer of a DMF for
separate review by regulatory authorities. The Company will reference the DMF as
part of the BLA submission for FLUMIST(TM).
The production and marketing of influenza vaccine is highly seasonal.
Because most cases of influenza occur in winter, the majority of influenza
vaccinations in the Northern Hemisphere occur between September and December of
a given year. If the Company were unable to develop an influenza vaccine for a
particular year that meets FDA and CDC guidelines, the Company would receive no
revenues from an influenza vaccine for that influenza season, which would
materially adversely affect the Company's business, financial condition and
results of operation, given the relatively fixed nature of its operating
expenses over the short term. Failure of one of the Company's suppliers to
deliver timely and sufficient supplies to the Company, if it caused the Company
to be unable to deliver vaccines during the peak demand period for the influenza
season, would have a disproportionately adverse effect on the Company's
financial results.
The Company currently does not have facilities to manufacture any of its
other potential products in commercial quantities and has no experience with
large-scale commercial manufacture of vaccine products. To manufacture its other
potential products for large-scale clinical trials or on a commercial scale, the
Company may be required to build a large-scale manufacturing facility, which
would require a significant amount of funds. The scale-up of manufacturing for
commercial production would require the Company to develop advanced
manufacturing techniques and rigorous process controls. However, no assurance
can be given as to the ability of the Company to produce commercial quantities
of its potential products in compliance with applicable regulations or at an
acceptable cost, or at all.
The Company is alternatively considering the use of contract manufacturers
for the commercial production of its other potential products. The Company is
aware of only a limited number of manufacturers which it believes have the
ability and capacity to manufacture its other potential products in a timely
manner. There can be no assurance that the Company would be able to contract
with any of these companies for the manufacture of its products on acceptable
terms, if at all. If the Company enters into an agreement with a third-party
manufacturer, it may be required to relinquish control of the manufacturing
process, which could adversely affect the Company's results of operations.
Furthermore, a third-party manufacturer also will be required to manufacture the
Company's products in compliance with state and federal regulations. Failure of
any such third-party manufacturer to comply with state and federal regulations
and to deliver the required quantities on a timely basis and at commercially
reasonable prices would materially adversely affect the Company's business,
financial condition and results of operations. No assurance can be given that
the Company, alone or with a third party, will be able to make the transition to
commercial production of its potential products successfully, if at all, or that
if successful, the Company will be able to maintain such production. See
"Business -- Production and Manufacturing."
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STABILITY OF FLUMIST(TM)
The Company's current frozen formulation of FLUMIST(TM) is being designed
to meet an acceptable level of stability for the U.S. market initially targeted
by the Company. In addition to its current frozen formulation, the Company is
exploring alternative formulations and presentations for the vaccine which may
enable improved distribution and longer shelf life. There can be no assurance
that the Company will succeed in achieving adequate product stability for the
current frozen formulation FLUMIST(TM), that the Company's efforts to produce
such alternative formulations will be successful, or that such alternative
formulations will actually enable improved distribution and longer shelf life.
UNCERTAINTY OF MARKET ACCEPTANCE
Even if the requisite regulatory approvals are obtained for the Company's
potential products, uncertainty exists as to whether such products will be
accepted in United States or foreign markets. The Company believes, for example,
that widespread use of the Company's proposed vaccines in the United States is
unlikely without positive recommendations from the ACIP, the AAP or the American
College of Physicians. There can be no assurance that such authorities will
recommend the use of the Company's proposed products. The lack of such
recommendations would have a material adverse effect on the Company's business,
financial condition and results of operations.
A number of additional factors may affect the rate and overall market
acceptance of FLUMIST(TM) and any other products which may be developed by the
Company, including the safety and efficacy results in the Company's clinical
trials, the rate of adoption of Aviron's vaccines by health care practitioners,
the rate of vaccine acceptance by the target population, the success of the CDC
in selecting proper strains to be included in each season's vaccine and the
perceived effectiveness of influenza vaccines generally, the timing of market
entry relative to competitive products, the availability of alternative
technologies, the price of the Company's products relative to alternative
technologies, the means and frequency of administration of such products, the
availability of third-party reimbursement and the extent of marketing and sales
efforts by the Company, collaborative partners and third-party distributors or
agents retained by the Company. Side effects, such as the runny nose, sore
throat or fever seen in a minority of clinical trial participants, or
unfavorable publicity concerning Aviron's products or any product incorporating
live virus vaccines could have an adverse effect on the Company's ability to
obtain physician, patient or third-party payor acceptance and efforts to sell
the Company's products. The Company's current formulation of FLUMIST(TM)
requires frozen storage, which may adversely affect market acceptance in certain
foreign countries where adequate freezer capacity is not commonly available.
There can be no assurance that physicians, patients or third-party payors will
accept new live virus vaccine products or any of the Company's products as
readily as other types of vaccines, or at all. See "Business -- Vaccine Products
Under Development."
LACK OF MARKETING EXPERIENCE; DEPENDENCE ON THIRD PARTIES
Primary care physicians, including pediatricians, family practitioners,
general practitioners, and internists, are expected to play a major role in
influencing decisions by individuals to obtain influenza prophylaxis for
themselves or their children and the choice of type of immunization. For
FLUMIST(TM) to be widely adopted, it will likely be necessary to engage the
efforts of an experienced pharmaceutical sales force, in addition to obtaining
recommendations for FLUMIST(TM)'s use from advisory bodies such as the ACIP and
AAP. Aviron currently has no direct sales or distribution capability nor does it
intend to build a large pharmaceutical sales force itself. Rather, the Company
intends to obtain these services through collaboration with major pharmaceutical
companies in the United States and elsewhere and currently has such agreements
covering FLUMIST(TM) with Wyeth Lederle and CSL Limited. See "Business
Collaborations."
The successful commercialization of the Company's products is dependent in
part upon the ability of the Company to maintain existing and enter into
additional collaborative agreements with corporate partners for the development,
testing and marketing of certain of its vaccines and upon the ability of these
third parties to perform their responsibilities. The amount and timing of
resources devoted to these activities is not within the control of the Company.
There can be no assurance that any such agreements or arrangements will be
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available on terms acceptable to the Company, if at all, that such third parties
would perform their obligations as expected, or that any revenue would be
derived from such arrangements. If Aviron is not able to enter into such
agreements or arrangements, it could encounter delays in introducing its
products into the market or be forced to limit the scope of its
commercialization activities. If the Company were to market products directly,
significantly additional expenditures, management resources and time would be
required to develop a sales and marketing staff within the Company. In addition,
the Company would also be competing with other companies that currently have
experienced and well funded marketing and sales operations. There can be no
assurance that the Company will be able to establish its own sales and marketing
force or that any such force, if established, would be successful in gaining
market acceptance for any products that may be developed by the Company. See
"Business -- Marketing and Sales" and "-- Collaborative Agreements."
NEED FOR FUTURE FUNDING; UNCERTAINTY OF ACCESS TO CAPITAL
The Company's operations to date have consumed substantial and increasing
amounts of cash. The negative cash flow from operations is expected to continue
and to accelerate in the foreseeable future. The development of the Company's
technology and proposed products will require a commitment of substantial funds
to conduct the costly and time-consuming research, preclinical testing and
clinical trials necessary to develop and optimize such technology and proposed
products, to establish manufacturing, marketing and sales capabilities and to
bring any such products to market. The Company's future capital requirements
will depend upon many factors, including continued scientific progress in the
research and development of the Company's technology and vaccine programs, the
size and complexity of these programs, the ability of the Company to establish
and maintain collaborative arrangements, progress with preclinical testing and
clinical trials, the time and costs involved in obtaining regulatory approvals,
the cost involved in preparing, filing, prosecuting, maintaining and enforcing
patent claims or trade secrets and product commercialization activities.
The Company anticipates that revenues from existing collaborations and
current balances of cash, cash equivalents and marketable securities, will
enable it to maintain its current and planned operations into 2000. The estimate
of the time period in which these capital resources will be sufficient to meet
the Company's capital requirements is a forward-looking statement that is
subject to risks and uncertainties and the amounts and timing of the
expenditures by the Company may vary materially depending on numerous factors,
such as the status of the Company's research and development efforts, the
regulatory approval process, technological advances, determinations as to
commercial potential, the terms of collaborative agreements entered into by the
Company, the status of competitive products and the possibility of the Company's
construction of a commercial manufacturing facility for its potential products..
If additional funds are raised by issuing equity securities, further dilution to
stockholders may result. If adequate funds are not available, the Company may be
required to delay, reduce the scope of, or eliminate one or more of its research
or development programs or to obtain funds through collaborative arrangements
with others that may require the Company to relinquish rights to certain of its
technologies, product candidates or products that the Company would otherwise
seek to develop or commercialize itself, which could materially adversely affect
the Company's business, financial condition and results of operations.
UNCERTAINTIES RELATED TO EARLY STAGE OF DEVELOPMENT; TECHNOLOGICAL UNCERTAINTY
Aviron commenced its operations in April 1992 and is in an early stage of
development. Three Company products are in clinical trials. To date, the Company
has had no revenue from product sales and all of its resources have been
dedicated to the development of vaccines. There can be no assurance that product
revenues will be realized on a timely basis, if ever.
The development of safe and effective live vaccines for the prevention of
viral diseases such as influenza, parainfluenza and other target diseases is
highly uncertain and subject to numerous risks. Potential products that appear
to be promising at early stages of development may not reach the market for a
number of reasons. Potential products may be found ineffective or cause harmful
side effects during preclinical testing or clinical trials, fail to receive
necessary regulatory approvals, be difficult to manufacture on a large scale, be
uneconomical, fail to achieve market acceptance or be precluded from
commercialization by proprietary rights of third parties. Aviron has not yet
requested or received the regulatory approvals that are required to market
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its products. The Company's estimate of the potential timing of
commercialization of its proposed products is a forward-looking statement that
is subject to risks and uncertainties and actual results may vary materially as
a result of a number of factors. Such factors include those described under
"-- Uncertainties Related to Clinical Trials," "-- Lack of Manufacturing
Experience; Reliance on Contract Manufacturers," and "-- Stability of
FLUMIST(TM)." To achieve profitability, the Company, alone or with others, must
successfully identify, develop, test, manufacture and market its products. There
can be no assurance that Aviron will succeed in the development and marketing of
any product. Any potential product requires significant additional investment,
development, preclinical testing and clinical trials prior to potential
regulatory approval and commercialization.
UNCERTAINTY OF FUTURE PROFITABILITY; ACCUMULATED DEFICIT
The Company has experienced significant and increasing operating losses
since its inception in April 1992. As of December 31, 1998, the Company had an
accumulated deficit of approximately $121.3 million. Aviron has not received any
product revenue to date and does not expect to generate revenues from the sale
of products until 2000 at the earliest, if at all. The Company expects to incur
significant and increasing operating losses over at least the next several years
as the Company's research and development efforts, preclinical testing and
clinical trial activities expand. The Company's ability to achieve
profitability, or to refinance its obligations with respect to its indebtedness,
depends in part upon its ability, alone or with others, to complete development
of its proposed products, to obtain required regulatory approvals and to
successfully manufacture and market such products. To the extent that the
Company is unable to obtain third-party funding for expenses, the Company
expects that its increased expenses will result in increased losses from
operations. There can be no assurance that Aviron will obtain required
regulatory approvals or successfully identify, develop, test, manufacture and
market any product candidates, or that the Company will ever achieve product
revenues or profitability. There can be no assurance that the Company's
revenues, operating results, cash flow and capital resources if and once
generated will be sufficient for payment of its indebtedness in the future. In
the absence of such revenues, operating results, cash flow and capital resources
or in the event of any such delays or other problems, the Company could face
substantial liquidity problems and might be required to dispose of material
assets or operations to meet its debt service and other obligations, and there
can be no assurance as to the timing of such sales or the proceeds that the
Company could realize therefrom. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
UNCERTAINTY OF PROTECTION OF PATENTS AND PROPRIETARY RIGHTS; DEPENDENCE ON TRADE
SECRETS
The Company's success will depend in part on its ability to maintain its
technology licenses, maintain trade secrets, obtain patents and operate without
infringing the proprietary rights of others, both in the United States and in
other countries. Since patent applications in the United States are maintained
in secrecy until patents issue and since publication of discoveries in the
scientific or patent literature often lag behind actual discoveries, the Company
cannot be certain that it was the first to make the inventions covered by each
of its pending patent applications or that it was the first to file patent
applications for such inventions. The patent positions of biotechnology and
pharmaceutical companies can be highly uncertain and involve complex legal and
factual questions, and therefore the breadth of claims allowed in biotechnology
and pharmaceutical patents, or their enforceability, cannot be predicted. There
can be no assurance that any of the Company's or its licensors' patents or
patent applications will issue or, if issued, will not be reexamined, reissued,
opposed, challenged, invalidated or circumvented, or that the rights granted
thereunder will provide proprietary protection or competitive advantages to the
Company.
In May 1996, American Cyanamid Company filed an opposition to the grant of
the Company's European patent with claims directed to chimeric negative strand
RNA viruses and to methods of engineering these viruses to express foreign
proteins and antigens. American Cyanamid Company primarily challenges the
breadth of the claims that the Company was granted. Although the Company is
responding to the opposition, no assurance can be given as to the scope of the
claims, if any, which the European Patent Office ultimately
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will find patentable. Failure of the Company to prevail in the opposition would
impede the Company's ability to prevent competitors from using this technology
in Europe.
The commercial success of Aviron additionally will depend, in part, upon
the Company not infringing patents issued to others. A number of pharmaceutical
companies, biotechnology companies, universities and research institutions have
filed patent applications or received patents in the areas of the Company's
programs. Some of these patent applications or patents may limit the scope of
claims issuing from the Company's patent applications, prevent certain claims
from being issued, or conflict in certain respects with claims made under the
Company's applications.
The Company is aware of patent applications that have been filed by others
that may pertain to certain aspects of the Company's programs or to its patents
or patent applications, including the patents related to the Company's RSV
vaccine under development. The Company is aware of a claim by a third party,
regarding inventorship of subject matter claimed in a United States patent
which, along with its related foreign counterpart patents and applications, is
licensed to the Company and which is directed to certain aspects of technology
relating to herpes viruses. This claim may also relate to a pending United
States patent application which is a continuation of the licensed patent. It is
presently unclear whether this claim of inventorship is valid, and, if valid, it
could affect ownership of the subject United States patent and patent
application as well as their foreign counterparts.
If patents have been or are issued to others containing preclusive or
conflicting claims and such claims are ultimately determined to be valid, the
Company may be required to obtain licenses to these patents or to develop or
obtain alternative technology. No assurance can be given that patents have not
been issued, or will not be issued, to third parties that contain preclusive or
conflicting claims with respect to the cold adapted influenza vaccine or any of
the Company's other programs. The Company's breach of an existing license or
failure to obtain a license to technology required to commercialize its products
may have a material adverse effect on the Company's business, financial
condition and results of operations. Litigation, which could result in
substantial costs to the Company, may also be necessary to enforce any patents
issued to the Company or to determine the scope and validity of third-party
proprietary rights. If competitors of the Company prepare and file patent
applications in the United States that claim technology also claimed by the
Company, the Company may have to participate in interference proceedings
declared by the United States Patent and Trademark Office to determine priority
of invention, which could result in substantial cost to the Company, even if the
eventual outcome is favorable to the Company. An adverse outcome could subject
the Company to significant liabilities to third parties and require the Company
to license disputed rights from third parties or to cease using such technology.
The patent laws of European and certain other foreign countries generally
do not allow for the issuance of patents for methods of treatment of the human
body. To the extent the Company's patent portfolio includes claims for methods
of treating humans, these methods may not be protectable in Europe and certain
other foreign countries.
The Company also relies on trade secrets to protect its technology,
especially where patent protection is not believed to be appropriate or
obtainable. Certain of the Company's licensors also rely on trade secrets to
protect technology which has been licensed to Aviron, and as a result, the
Company is dependent on the efforts of such licensors to protect such trade
secrets. For example, the University of Michigan relies, in part, on trade
secrets to protect the master strains of the cold adapted influenza virus used
by the Company and the NIH relies in part on trade secrets to protect the master
strains of the bPIV-3 virus. Aviron protects its proprietary technology and
processes, in part, by confidentiality agreements or material transfer
agreements with its employees, consultants, collaborators and certain
contractors. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach, or that
the Company's trade secrets or those of its licensors will not otherwise become
known or be independently discovered by competitors. To the extent that Aviron
or its consultants or research collaborators use intellectual property owned by
others in their work for the Company, disputes may also arise as to the rights
in related or resulting know-how and inventions. See "-- Lack of Patent
Protection of Cold Adapted Influenza Master Donor Strains."
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LACK OF PATENT PROTECTION OF COLD ADAPTED INFLUENZA MASTER DONOR STRAINS
The Company has no issued patents covering the cold adapted influenza
master donor strains. The Company's rights to the master donor strains are
substantially based on an exclusive worldwide license of materials and know-how
from the University of Michigan, which owns the master donor strains from which
the Company's vaccine is derived, and on an exclusive license of know-how and
clinical trial data from the NIH. Neither the University of Michigan nor the NIH
has been issued any patents covering the cold adapted influenza vaccine. There
can be no assurance that a third party will not gain access by some means to
University of Michigan master donor strains, reproduce the Company's cold
adapted influenza vaccine or develop another live virus influenza vaccine which
might be comparable to Aviron's in terms of safety and effectiveness. See
"-- Uncertainty of Protection of Patents and Proprietary Rights; Dependence on
Trade Secrets."
GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVALS
The production and marketing of the Company's products and its ongoing
research and development activities are subject to extensive regulation by
numerous government authorities in the United States and other countries. Prior
to marketing in the United States, any product developed by the Company must
undergo rigorous preclinical testing and clinical trials and an extensive
regulatory approval process implemented by the FDA under the Food, Drug and
Cosmetic Act. Satisfaction of such regulatory requirements, which includes
demonstrating that the product is both safe and effective, typically takes
several years or more depending upon the type, complexity and novelty of the
product and requires the expenditure of substantial resources. This process may
be more demanding for vaccines intended for use in healthy people compared to
therapeutics used for treatment of people with diseases. Preclinical studies
must be conducted in compliance with the FDA's Good Laboratory Practice
regulations. Clinical testing must meet requirements for Institutional Review
Board oversight and informed consent, as well as FDA prior review, oversight and
Good Clinical Practice regulations. The Company has limited experience in
conducting and managing the clinical trials necessary to obtain regulatory
approval. Furthermore, the Company or the FDA may suspend clinical trials at any
time if either believes that the subjects participating in such trials are being
exposed to unacceptable health risks.
The Company understands that its vaccine products will be classified by the
FDA as "biologic products," as opposed to "drug products." The steps ordinarily
required before a biologic product may be marketed in the United States include
(a) preclinical testing and clinical trials; (b) the submission to the FDA of an
IND, which must become effective before clinical trials may commence; (c)
adequate and well-controlled clinical trials to establish the safety and
efficacy of the drug; (d) the submission to the FDA of a BLA; and (e) FDA
approval of the applications, including approval of all product labeling.
Preclinical testing includes laboratory evaluation of product chemistry,
formulation and stability, as well as animal studies to assess the potential
safety and efficacy of each product. The results of the preclinical tests are
submitted to the FDA as part of an IND and are reviewed by the FDA before the
commencement of clinical trials. Unless the FDA objects to an IND, the IND will
become effective 30 days following its receipt by the FDA. There can be no
assurance that submission of an IND will result in FDA authorization to commence
clinical trials or that the lack of an objection means that the FDA will
ultimately approve an application for marketing approval.
Before receiving FDA approval to market a product in accordance with the
above procedures, the Company will have to demonstrate that the product is safe
and effective. Data obtained from preclinical testing and clinical trials are
susceptible to varying interpretations which could delay, limit or prevent
regulatory approvals. In addition, delays or rejections may be encountered based
upon additional government regulation from future legislation or administrative
action or changes in FDA policy during the period of product development,
clinical trials and FDA regulatory review. Similar delays may also be
encountered in foreign countries. There can be no assurance that even after such
time and expenditures, regulatory approval will be obtained for any products
developed by the Company. If regulatory approval of a product is granted, such
approval and related labeling claims will be limited to those specific segments
of the population for which
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<PAGE> 34
the product is safe and effective, as demonstrated through clinical trials.
Furthermore, approval may entail ongoing requirements for post-marketing
studies. Even if such regulatory approval is obtained, a marketed product, its
manufacturer and its manufacturing facilities are subject to continual review
and periodic inspections. The regulatory standards for manufacturing are
currently being applied stringently by the FDA. Discovery of previously unknown
problems with a product, manufacturer or facility may result in restrictions on
such product or manufacturer, including costly recalls or even withdrawal of the
product from the market. There can be no assurance that any product developed by
the Company alone or in conjunction with others will prove to be safe and
efficacious in clinical trials and will meet all of the applicable regulatory
requirements needed to receive or maintain marketing approval.
The Company believes that the approval process for vaccines may be longer
than for therapeutic products, since vaccines are administered to healthy
individuals. In addition, regulatory scrutiny may be particularly intense for
products, such as FLUMIST(TM), which are designed to be given to healthy
children.
Outside the United States, the Company's ability to market a product is
contingent upon receiving marketing authorization from the appropriate
regulatory authorities. The requirements governing the conduct of clinical
trials, marketing authorization, pricing and reimbursement vary widely from
country to country. At present, foreign marketing authorizations are applied for
at a national level, although within the European Union (the "EU"), procedures
are available to companies wishing to market a product in more than one EU
member state. If the regulatory authorities are satisfied that adequate evidence
of safety, quality and efficacy has been presented, a marketing authorization
will be granted. This foreign regulatory approval process includes all of the
risks associated with FDA approval set forth above.
COMPETITION AND RISK OF TECHNOLOGICAL OBSOLESCENCE
The Company operates in a rapidly evolving field. Any product developed by
the Company would compete with existing and new drugs and vaccines being created
by pharmaceutical, biopharmaceutical and biotechnology companies. If the Company
were able to successfully develop its vaccines, it would be competing with
larger companies that have already introduced vaccines and have significantly
greater marketing, sales, manufacturing, financial and managerial resources. For
example, with respect to FLUMIST(TM), the Company will be competing against
larger companies which sell the injectable inactivated influenza vaccine in the
United States, have significantly greater financial and market resources than
Aviron and have established marketing and distribution channels for such
products. In addition, the Company is aware of efforts to develop improved
inactivated injectable influenza vaccines. Further, the Company is aware of
several large pharmaceutical companies that alone or with partners are
developing new drug therapies designed to relieve the symptoms of influenza. The
Company is also aware of several companies that are marketing or are in
late-stage development of products to prevent CMV or HSV disease.
New developments are expected to continue in the pharmaceutical,
biopharmaceutical and biotechnology industries and in academia, government
agencies and other research organizations. Other companies may succeed in
developing products that are safer, more effective or less costly than any that
may be developed by the Company. Such companies may also be more effective than
the Company in the production and marketing of their products. Furthermore,
rapid technological development by competitors may result in the Company's
products becoming obsolete before the Company is able to recover its research,
development or commercialization expenses incurred in connection with any such
product. Many potential competitors have substantially greater financial,
technical, marketing and sales resources than the Company. Some of these
companies also have considerable experience in preclinical testing, clinical
trials and other regulatory approval procedures. Moreover, certain academic
institutions, government agencies and other research organizations are
conducting research in areas in which the Company is working. These institutions
are becoming increasingly aware of the commercial value of their findings and
are becoming more active in seeking patent protection and licensing arrangements
to collect royalties for the use of technology that they have developed. These
institutions may also market competitive commercial products on their own or
through joint ventures.
Aviron believes that competition in the markets it is addressing will
continue to be intense. The vaccine industry is characterized by intense price
competition, and the Company anticipates that it will face this and
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<PAGE> 35
other forms of competition. There can be no assurance that pharmaceutical,
biopharmaceutical and biotechnology companies will not develop more effective
products than those of the Company or will not market and sell their products
more effectively than the Company, which would have a material adverse effect on
the Company's business, financial condition and results of operations.
DEPENDENCE ON COLLABORATIVE AGREEMENTS
The Company's strategy for the development, clinical trials, manufacturing
and commercialization of certain of its products includes maintaining and
entering into various collaborations with corporate partners, licensors,
licensees and others. The Company in-licensed its cold adapted influenza vaccine
from the NIAID and the University of Michigan. It has obtained rights to certain
recombinant negative strand RNA technology from Mount Sinai, and rights to the
herpes simplex viruses, EBV and various recombinant methods and materials from
ARCH. The Company has entered into agreements with Wyeth Lederle and CSL Limited
for FLUMIST(TM), and SmithKline Beecham for the development of its EBV vaccine,
with Sang-A for clinical development, manufacturing and development rights for
certain products in Korea and certain Asian countries (not including Japan), and
has licensed from the NIAID rights covering its PIV-3 vaccine. There can be no
assurance that the Company will be able to maintain existing collaborative
agreements, negotiate collaborative arrangements in the future on acceptable
terms, if at all, or that any such collaborative arrangements will be
successful. To the extent that the Company is not able to maintain or establish
such arrangements, the Company would be required to undertake product
development and commercialization activities at its own expense, which would
increase the Company's capital requirements or require the Company to limit the
scope of its development and commercialization activities. In addition, the
Company may encounter significant delays in introducing its products into
certain markets or find that the development, manufacture or sale of its
products in such markets is adversely affected by the absence of such
collaborative agreements. ARCH has recently asserted an interpretation of the
financial terms of this agreement with the Company, relating to the license by
Aviron of its EBV technology to SmithKline Beecham, which would require the
Company to pay ARCH one-half of any future or past payments (including
sub-license fees and milestone payments) received by Aviron under the SB
Agreement. The Company disputes ARCH's interpretation of the financial terms of
the agreement. No assurance can be given, however, that the Company's
interpretation will prevail. Failure of the Company to prevail in this matter
could 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
collaborative partners devote to the Company's programs or potential products,
which may vary, because of factors unrelated to the potential products. If any
of the Company's collaborative partners breach or terminate their agreements
with the Company or otherwise fail to conduct their collaborative activities in
a timely manner, the preclinical or clinical development or commercialization of
product candidates or research programs will be delayed and the Company would be
required to devote additional resources to product development and
commercialization, or terminate certain development programs. These
relationships generally may be terminated at the discretion of the Company's
collaborative partners, in some cases with only limited notice to the Company.
The termination of collaborative arrangements could have a material adverse
effect on the Company's business, financial condition and results of operations.
There also can be no assurance that disputes will not arise in the future with
respect to the ownership of rights to any technology developed with third
parties. These and other possible disagreements between collaborators and the
Company could lead to delays in the collaborative research, development or
commercialization of certain product candidates, or could 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.
In addition, Aviron's collaborative partners may develop, either alone or
with others, products that compete with the development and marketing of the
Company's products. Competing products of the Company's collaborative partners
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.
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<PAGE> 36
EXECUTIVE OFFICERS, SENIOR MANAGEMENT AND CONSULTANTS
The executive officers and senior management of the Company are set forth
below:
<TABLE>
<CAPTION>
AGE POSITION
--- --------
<S> <C> <C>
EXECUTIVE OFFICERS
J. Leighton Read, M.D. .......... 48 Chairman and Chief Executive Officer
Fred Kurland..................... 49 Senior Vice President and Chief Financial Officer
Carol A. Olson................... 41 Senior Vice President, Commercial Development
SENIOR MANAGEMENT
Victor Jegede, Ph.D. ............ 54 Vice President, Technical Affairs
Paul M. Mendelman, M.D. ......... 51 Vice President, Clinical Research
Louis F. Mocca................... 48 Vice President, Regulatory Affairs
Eric J. Patzer, Ph.D. ........... 49 Vice President, Development
Kurt Vorheis..................... 48 Vice President, Operations
CONSULTANTS
Ann M. Arvin, M.D. .............. 52 Principal Research Consultant
</TABLE>
J. Leighton Read, M.D., a founder of the Company, has been Chairman and
Chief Executive Officer of the Company since 1992 and was Chief Financial
Officer of the Company from 1992 until 1996. In 1989, he co-founded Affymax N.V.
with Dr. Alejandro Zaffaroni, serving initially as its Executive Vice President
and Chief Operating Officer and later, from 1990 to 1991, as President of the
Pharma Division and as a Managing Director of the parent company. From 1991 to
1993, Dr. Read was a principal with Interhealth Limited, an investment
partnership. He has served on the boards of a number of private biotechnology
companies and is currently on the board of CV Therapeutics, Inc. and AxyS
Pharmaceuticals, Inc., both of which are biotechnology companies, and is a
member of the Biotechnology Industry Organization (BIO) Board of Directors and
Emerging Companies Section Governing Body. Dr. Read holds a B.S. in Biology and
Psychology from Rice University and an M.D. from the University of Texas Health
Science Center at San Antonio.
Fred Kurland has been Senior Vice President and Chief Financial Officer of
the Company since 1998. Prior to joining the Company, Mr. Kurland was Vice
President and Chief Financial Officer of Protein Design Labs, Inc., a
biotechnology company, from 1996 to 1998. From 1995 to 1996, Mr. Kurland was
Vice President and Chief Financial Officer at Applied Immune Sciences, a
biotechnology company, and from 1981 to 1995, he held a number of positions at
Syntex Corporation, a pharmaceutical company, most recently as Vice President
and Controller. Mr. Kurland, a Certified Public Accountant, holds a B.S. in
Business and Economics from Lehigh University, and an M.B.A. and a J.D. from the
University of Chicago.
Carol A. Olson has been Senior Vice President, Commercial Development of
the Company since 1998. Prior to joining the Company, Ms. Olson served as
managing director of the Churchill Madison Group, a management-consulting group
she founded to develop and expand new businesses in medical and high technology
industries. From 1984 to 1993, Ms. Olson was with Hewlett-Packard Company's
Commercial Systems Division. Ms. Olson holds a B.A. in Economics from Yale
University and an M.B.A. from Stanford University.
Victor Jegede, Ph.D., has been Vice President, Technical Affairs of the
Company since 1995. From 1992 to 1994, Dr. Jegede was Vice President, Regulatory
Affairs and Quality for Creative BioMolecules, Inc., a biopharmaceuticals
company, and from 1989 to 1992, he was Director, Regulatory Affairs and Quality
for WelGen Manufacturing Partnership (BW Manufacturing, Inc.), a division of
Burroughs Wellcome Manufacturing, Inc., a pharmaceutical manufacturer. Dr.
Jegede holds a B.S. and an M.S. in Biology and a Ph.D. in Bacteriology from
Boston College.
Paul M. Mendelman, M.D., has been Vice President, Clinical Research of the
Company since 1996. Dr. Mendelman also is currently consulting professor in the
Department of Pediatrics at the Stanford University School of Medicine. Prior to
joining the Company, Dr. Mendelman was Director, Clinical
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<PAGE> 37
Research, Infectious Diseases for Merck Research Laboratories, a pharmaceutical
company, since 1991. From 1983 to 1991, Dr. Mendelman was Clinical Instructor,
Assistant Professor and then Associate Professor of Pediatrics at the University
of Washington. Dr. Mendelman holds a B.S. and an M.D. from Ohio State University
and is a fellow of the American Academy of Pediatrics.
Louis F. Mocca has been Vice President, Regulatory Affairs of the Company
since March 1999. Mr. Mocca joined the Company from North American Vaccine,
Inc., where he served as Senior Director, Regulatory Affairs since March 1998.
From 1996 to 1998, Mr. Mocca was Director, Worldwide Regulatory Affairs at
Bristol-Myers Squibb. Prior to joining Bristol-Myers Squibb, he served for
twenty years as a researcher and reviewer at the FDA Center for Biologics
Evaluation and Research. Mr. Mocca holds a B.S. in Epidemiology and
Environmental Health and an M.S. in Medical Mycology (microbiology), both from
George Washington University.
Eric J. Patzer, Ph.D., has been Vice President, Development of the Company
since 1996. Prior to joining the Company, Dr. Patzer held various positions with
Genentech, Inc, a pharmaceutical company, since 1981, most recently as Vice
President, Development. Dr. Patzer holds a B.S. in Mechanical Engineering from
The Pennsylvania State University and a Ph.D. in Microbiology from the
University of Virginia.
Kurt Vorheis has been Vice President, Operations of the Company since 1998.
Mr. Vorheis joined the Company from Chiron Corporation, a biotechnology company,
where he served as Senior Director, global manufacturing -- information and
planning since 1996. He also served as Senior Director of Chiron Biocine with
responsibility for worldwide vaccine production planning and logistics. Mr.
Vorheis joined Chiron Corporation in 1992 as Director of Corporate Engineering.
Mr. Vorheis attended the University of California, Berkeley and Purdue
University, and has a lifetime California Community College teaching credential.
Ann M. Arvin, Ph.D., is a member of Aviron's Scientific Advisory Board. Dr.
Arvin is leading the Company's early-stage research programs as Principal
Research Consultant during 1999 while on sabbatical from Stanford University
School of Medicine, where Dr. Arvin is the Lucile Salter Packard Professor of
Pediatrics, Microbiology and Immunology. Dr. Arvin joined the faculty in 1978 as
Assistant Professor of Pediatrics, Infectious Diseases, and was appointed to her
current position in 1989. Dr. Arvin served her residency at the University of
California-San Francisco ("UCSF") and performed postdoctoral work in pediatric
infectious diseases at UCSF and Stanford University.
ITEM 2. PROPERTIES
The Company leases approximately 52,800 square feet of office and
laboratory space in Mountain View, California. The Company has leased this
facility through October 2005 and has two options to extend the lease for
successive five-year periods. In addition, the Company is leasing space pursuant
to the PCI Agreement. In February 1999, the Company entered into a lease
agreement for approximately 69,000 square feet of office, laboratory and
manufacturing space in Santa Clara, California. The Company has leased this
facility through January 2019, with an option to renew for seven years. The
Company also has a right of first notice to lease an additional 80,000 square
feet of space in buildings adjacent to its current Mountain View facility
beginning in 1999. The Company expects that, assuming it is able to lease all or
a significant portion of this space, it will be able to meet its facility needs
for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
In May 1996, American Cyanamid Company filed an opposition to the grant of
the Company's European patent with claims directed to chimeric negative strand
RNA viruses and to methods of engineering these viruses to express foreign
proteins and antigens. American Cyanamid Company primarily challenges the
breadth of the claims which the Company was granted. Although the Company is
responding to the opposition, no assurance can be given as to the scope of the
claims, if any, which the European Patent Office ultimately will find
patentable. Failure of the Company to prevail in the opposition would impede the
Company's ability to prevent competitors from using this technology in Europe.
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<PAGE> 38
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to vote of the Company's security holders during
the fourth quarter of the fiscal year ended December 31, 1998.
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<PAGE> 39
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCK MATTERS
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "AVIR." Public trading of the Common Stock commenced on November 5,
1996. Prior to that, there was no public market for the Common Stock. The
following table set forth for the periods indicated the high and low price per
share of the common stock on the Nasdaq National Market. These prices represent
quotations among dealers without adjustments for retail mark-ups, mark-downs or
commission, and may not represent actual transactions.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1997
First Quarter ended March 31, 1997....................... $12.75 $ 6.75
Second Quarter ended June 30, 1997....................... 15.25 8.00
Third Quarter ended September 30, 1997................... 32.75 11.00
Fourth Quarter ended December 31, 1997................... 28.50 18.75
1998
First Quarter ended March 31, 1998....................... 28.00 22.88
Second Quarter ended June 30, 1998....................... 33.00 22.00
Third Quarter ended September 30, 1998................... 33.00 11.50
Fourth Quarter ended December 31, 1998................... 26.63 11.50
</TABLE>
On March 17, 1999, there were 439 holders of record of the Company's common
stock.
The Company has never paid cash dividends on its common stock. The Company
presently intends to retain earnings for use in the operation and expansion of
its business and therefore does not anticipate paying any cash dividends in the
foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
None.
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<PAGE> 40
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operation" and the Financial Statements and Notes thereto included elsewhere in
this Form 10-K.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues........................... $ -- $ 1,707 $ 1,625 $ 1,477 $ 745
Operating Expenses:
Research and development............... 4,216 10,220 14,997 24,254 46,583
General, administrative and
marketing........................... 2,493 3,252 4,595 5,978 10,085
------- -------- -------- -------- --------
Total operating expenses....... 6,709 13,472 19,592 30,232 56,668
------- -------- -------- -------- --------
Loss from operations..................... (6,709) (11,765) (17,967) (28,755) (55,923)
------- -------- -------- -------- --------
Interest income, net of interest
expense................................ 207 362 466 2,253 1,121
------- -------- -------- -------- --------
Net loss................................. $(6,502) $(11,403) (17,501) $(26,502) $(54,802)
======= ======== ======== ======== ========
Basic and diluted net loss per share..... $ (20.79) $ (7.27) $ (1.94) $ (3.49)
======== ======== ======== ========
Shares used in computing basic and
diluted net loss per share............. 546 2,406 13,684 15,724
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------
1994 1995 1996 1997 1998
------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and investments... $ 6,449 $ 17,819 $ 17,872 $ 75,111 $ 94,858
Working capital.......................... 5,877 16,775 16,411 54,580 79,369
Total assets............................. 7,789 19,878 21,592 85,325 120,985
Capital lease obligations, non-current... 750 618 871 521 113
Convertible debt......................... -- -- -- -- 100,000
Deferred compensation.................... -- 180 1,099 588 237
Accumulated deficit...................... (11,060) (22,444) (39,935) (66,411) (121,254)
Total stockholders' equity............... 6,362 17,537 17,947 75,742 8,966
</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 contains forward-looking statements that 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 those set forth under "Business -- Business Risks" elsewhere
in this Form 10-K.
OVERVIEW
Since its inception in April 1992, Aviron has devoted substantially all of
its resources to its research and development programs. To date, Aviron has not
generated any revenues from the sale of products and does not expect to generate
any such revenues until 2000 at the earliest. Aviron has incurred cumulative net
losses of approximately $121.3 million as of December 31, 1998, and it expects
to incur substantial operating losses over at least the next several years.
Aviron has financed its operations through proceeds from private placements of
preferred stock, two public offerings and a private placement of Common Stock, a
private placement of convertible subordinated notes ("Notes"), revenue from its
collaborative agreements, equipment lease financings and investment income
earned on cash, cash equivalent balances and marketable securities.
On June 30, 1998 Aviron submitted its first PLA/ELA to the FDA for
FLUMIST(TM). On August 31, 1998 Aviron announced that it had received notice
from the FDA that its submission was not accepted for filing due
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<PAGE> 41
to lack of data on manufacturing, validation and stability. Aviron intends to
resubmit applications for U.S. licensure for FLUMIST(TM) to prevent influenza
and its complications in children and adults in the summer or fall of 1999.
The Company expects its research and development expenditures to increase
substantially over the next several years as the Company expands its research
and development efforts, preclinical testing and clinical trials with respect to
certain of its programs, and early-stage manufacturing activities principally in
regard to FLUMIST(TM). In addition, general, administrative and marketing
expenses are expected to continue to increase as the Company expands its
operations and prepares for the potential commercial launch of FLUMIST(TM).
Partnering Agreements
The Company has entered into several development and marketing agreements
with respect to its products. In June 1998, the Company announced the signing of
an agreement with CSL Limited to develop, sell and distribute FLUMIST(TM) in
Australia, New Zealand and certain countries in the south Pacific region. Under
the agreement, CSL Limited and Aviron will jointly carry out additional trials
in Australia for FLUMIST(TM). In January 1999, the Company announced a worldwide
collaboration for the marketing of FLUMIST(TM) with Wyeth Lederle, under which
Wyeth Lederle and the Company will co-promote FLUMIST(TM) in the United States,
while Wyeth Lederle will have the exclusive right to market the product outside
the United States, except for Korea, Australia, New Zealand and certain
countries in the South Pacific region. Wyeth Lederle and the Company will
collaborate on the regulatory, clinical and marketing programs for FLUMIST(TM).
Expenses associated with these agreements are expected to increase as the
Company continues preclinical testing and clinical trials and prepares for the
potential commercial launch of FLUMIST(TM). No assurance can be given, however,
that the Company will receive any future payments from CSL Limited or Wyeth
Lederle.
In October 1995, the Company signed an agreement with SmithKline Beecham
defining a collaboration on the Company's EBV vaccine technology. Under the
terms of this agreement, the Company granted SmithKline Beecham an exclusive
license to produce, use and sell non-live EBV vaccines incorporating the
Company's technology for prophylactic and therapeutic uses on a worldwide basis,
except in Korea. The Company retained the right to co-market a monovalent
formulation of the EBV vaccine in the United States and to have SmithKline
Beecham supply such vaccine. SmithKline Beecham agreed to fund research and
development at the Company related to the EBV vaccine, in specified minimum
amounts, during the first two years of the agreement. SmithKline Beecham made an
initial upfront payment to the Company and agreed to make additional payments
upon the achievement of certain product development milestones; the first such
milestone payment was made in 1997. The Company is entitled to royalties from
SmithKline Beecham based on net sales of the vaccine. No assurance can be given,
however, that the Company will receive any future payments from SmithKline
Beecham or that SmithKline Beecham will not terminate this agreement.
In May 1995, the Company entered into a Development and License Agreement
with Sang-A. The Company granted to Sang-A exclusive clinical development,
manufacturing and marketing rights in Korea for specified products developed by
Aviron, including vaccines for influenza (cold adapted and recombinant), EBV,
CMV, HSV-2 and RSV. However, the Company is under no obligation to develop any
product. Sang-A also will make payments to the Company upon Sang-A's meeting
certain regulatory milestones for each product in Korea and will pay a royalty
to the Company on net sales of such products in South and North Korea. No
assurance can be given, however, that the Company will receive any future
payments from Sang-A or that Sang-A will not terminate its agreement with the
Company.
In January 1997, Sang-A declared bankruptcy. The Company is unable to
predict what, if any, long-term effect the bankruptcy will have on Sang-A and on
the Company's agreement with Sang-A. In March 1998, the Company entered into a
Stock Repurchase Agreement with Sang-A under which the Company repurchased
530,831 shares of its Common Stock from Sang-A at a price of $25.13 per share.
Manufacturing Facilities
In April 1997, the Company entered into an agreement with Medeva Pharma for
the commercial manufacture of FLUMIST(TM) through December 2001. The Company and
Medeva Pharma are discussing a
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<PAGE> 42
potential agreement that would provide for commercial supplies of bulk vaccine
beyond 2001; however, there can be no assurance that such an agreement will be
reached. In October 1997, the Company entered into an agreement with PCI for the
blending, filling, packaging and labeling of FLUMIST(TM) in the United States
until October 2004. In 1998, Aviron and PCI opened a 34,000-square-foot
manufacturing suite in Philadelphia, Pennsylvania at PCI's site, in which PCI
has blended, filled and packaged doses of FLUMIST(TM) for use in 1998 - 99
clinical trials. If regulatory approval is received, the PCI facility is
expected to be used for blending, filling, packaging, labeling and storage of
FLUMIST(TM). The agreements with Medeva Pharma and PCI have required the Company
to fund the construction of facilities, improvements, and equipment and will
continue to require the Company to incur expenses for the duration of the
agreements for facility space, utilities and insurance. In the event of a better
than expected market acceptance, the Company may be capacity constrained in its
supply of vaccine through at least the 2000 - 2001 influenza season. In order to
secure future production capacity, the Company may extend and expand its
existing arrangements, collaborate with other third parties, or establish its
own manufacturing facilities. Using an alternative supplier or building a
proprietary facility would require a substantial amount of funds and additional
clinical trials and testing. There can be no assurance that an alternative
source of supply will be established on a timely basis, or that the Company will
have or be able to obtain funds sufficient for building or equipping a new
facility.
In addition, in February 1999, the Company announced that it has leased a
69,000 square-foot building in Santa Clara, California. The facility will
provide additional manufacturing, laboratory, pilot plant and office space to
accommodate growth. This additional space will require the commitment of
significant additional funds during 1999 and 2000 for renovation, equipment and
furnishings.
The Company is currently evaluating the costs and benefits of developing
internal manufacturing capabilities or contracting for expanded or alternative
sources of supply from third-party manufacturers for products other than
FLUMIST(TM).
Research Grants
In July 1998, the Company received notice from the NIAID of a Small
Business Innovation Research ("SBIR") grant to support development of its live
attenuated vaccine for the prevention of disease caused by CMV. The $750,000
grant is the second that Aviron has received for research on CMV. In September
1998, the total grant amount was increased by an additional $200,000 to
$950,000. A portion of the award has been used to produce recombinant CMV
vaccine candidates for human testing. The remainder of the award will be used to
determine the safety and immunogenicity of these vaccine candidates in a Phase 1
clinical trial in collaboration with the NIAID Vaccine Treatment and Evaluation
Unit network. No assurance can be given, however, that the Company will receive
any future grants to support its research or that such research will result in
commercially viable products.
In July 1998, the Company received notice from the NIAID of an SBIR grant
in the amount of $99,700 for the rational design of a live, attenuated vaccine
for the prevention of disease caused by HSV-2.
Business Risks
The Company's business is subject to significant risks, including but not
limited to the risks inherent in its research and development efforts, including
preclinical testing and clinical trials; uncertainties associated both with
obtaining and enforcing its patents and with the patent rights of others; the
lengthy, expensive and uncertain process of seeking regulatory approvals;
uncertainties regarding government reforms and 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 products will
be found unsafe or ineffective 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. See "Business Risks"
in Part I of this Form 10-K.
40
<PAGE> 43
RESULTS OF OPERATIONS
Years Ended December 31, 1998 and 1997
Revenues. Total revenues for the year ended December 31, 1998 were $0.7
million, compared to $1.5 million for the year ended December 31, 1997. Revenues
for 1998 comprised of payments under governmental research grants and contract
revenue for services provided for others by the Company's animal research
facility. Revenues for 1997 were principally payments for research support and
milestones due to the Company under its license and development agreement with
SmithKline Beecham for Aviron's Epstein-Barr virus vaccine.
Operating Expenses. Research and development costs rose to $46.6 million in
1998 from $24.3 million in 1997. These increases were primarily due to increases
in research and development activities and clinical trials of FLUMIST(TM) and
the Company's Parainfluenza Virus Type 3 (PIV-3) vaccine, preclinical testing
associated with other programs, and depreciation and other expenses associated
with the documentation, validation, and test production at manufacturing
facilities. The Company expects these expenses to increase in 1999 as clinical
trials continue, and as development and pre-manufacturing activities expand in
preparation for potential commercialization.
General, administrative and marketing costs rose to $10.1 million in 1998
from $6.0 million in 1997. This increase was due to increase in staffing and
infrastructure costs and market research activities principally associated with
the proposed commercial launch of FLUMIST(TM). The Company expects these
expenses to increase in 1999 due to pre-marketing and other
pre-commercialization activities and growth of the Company's administrative
infrastructure.
Net Interest Income. The Company's net interest income decreased to $1.1
million in the year ended December 31, 1998, from $2.3 million in the year ended
December 31, 1997. Net interest income is the result of increased interest
income on the Company's increase in average cash, cash equivalent and investment
balances, due to the Company's public offering of Common Stock in August 1997
and the private offering of Notes in March 1998, offset by the increase in
interest expense related to the Notes.
Years Ended December 31, 1997 and 1996
Revenues. Total revenues for the year ended December 31, 1997 were $1.5
million, compared to $1.6 million for the year ended December 31, 1996. Revenues
resulted from reimbursement for contract research from SmithKline Beecham in
1996 and 1997, and a milestone payment of $1.0 million from SmithKline Beecham
in 1997 for commencement of clinical trials for the EBV vaccine.
Operating Expenses. Research and development expenses increased to $24.3
million in the year ended December 31, 1997 from $15.0 million for the year
ended December 31, 1996. This increase was primarily due to increases in
research and development staffing, expenses associated with clinical trials of
FLUMIST(TM) and the Company's PIV-3 vaccines and preclinical testing associated
with other programs.
General, administrative and marketing expenses increased to $6.0 million in
the year ended December 31, 1997 from $4.6 million for the year ended December
31, 1996. These increases were incurred to support the Company's expanded
research and development functions, patent and legal expenses, activities
associated with becoming a public company and corporate development activities.
Net Interest Income. The Company's net interest income increased to $2.3
million in the year ended December 31, 1997, from $0.5 million in the year ended
December 31, 1996. Net interest income is the result of increased interest
income on the Company's increase in average cash, cash equivalent and investment
balances, due to the Company's public offering of Common Stock in August 1997.
LIQUIDITY AND CAPITAL RESOURCES
Aviron had cash, cash equivalents and marketable securities at December 31,
1998 of approximately $94.9 million. In order to preserve principal and maintain
liquidity, the Company's funds are invested
41
<PAGE> 44
primarily in United States Treasury obligations, highly rated corporate
obligations and other liquid investments.
The Company has financed its operations since inception primarily through
private placements of Preferred Stock from 1992 to 1995, an initial public
offering of its Common Stock in November 1996, a private sale of Common Stock in
March 1997, a second public offering of Common Stock in August 1997, and a
private placement of convertible subordinated notes in March 1998. Through
December 31, 1998, the Company had raised approximately $236.3 million from such
sales, net of offering expenses. Cash used in operations was $49.5 million and
$19.8 million for 1998 and 1997, respectively. Net cash used in operating
activities increased primarily due to increased research and development
expenditures. The Company expects expenditures for research and development,
clinical trials and marketing, general and administrative expenses to continue
to increase in 1999 as the Company develops its products, expands its clinical
trials and prepares for the potential commercial launch of FLUMIST(TM). Cash
expended for capital additions and to repay lease financing arrangements
amounted to approximately $14.4 million and $6.4 million for 1998 and 1997,
respectively. Capital expenditures increased in 1998 primarily due to
expenditures for facilities and equipment at the Medeva Pharma and PCI
manufacturing plants.
The Company anticipates that its existing cash, cash equivalents and
short-term investments, and revenues from existing collaborations will enable it
to maintain its current and planned operations into 2000. The Company's future
cash requirements will depend on numerous factors, including continued
scientific progress in the research and development of the Company's technology
and vaccine programs; the size and complexity of these programs; the ability of
the Company to establish and maintain collaborative arrangements; progress with
preclinical testing and clinical trials; the time and costs involved in
obtaining regulatory approvals; the cost involved in preparing, filing,
prosecuting, maintaining and enforcing patent claims; the cost of constructing
manufacturing facilities, should they be deemed necessary; and product
commercialization activities. In particular, if the Company were to construct
and equip such a manufacturing facility during this period, the Company
anticipates that it would likely begin to make substantial additional capital
expenditures in 1999 and beyond, which may require the Company to seek
additional funding. In addition, there can be no assurance that, should the
Company require outside funding through additional debt or equity financings,
such funds will be available on favorable terms, if at all. If adequate funds
are not available, the Company may be required to delay, reduce the scope of, or
eliminate one or more of its research or development programs or to obtain funds
through collaborative agreements with others that may require the Company to
relinquish rights to certain of its technologies, product candidates or products
that the Company would otherwise seek to develop or commercialize itself, which
could materially adversely affect the Company's business, financial condition
and results of operations.
INCOME TAXES
At December 31, 1998, the Company had a federal net operating loss
carryforward of approximately $118.9 million and research tax credits of
approximately $3.3 million that will expire at various dates between 2007 and
2018 if not utilized. Utilization of the net operating losses and credits may be
subject to a substantial annual limitation due to the "ownership change"
provisions of the Internal Revenue Code of 1986. See Note 10 of Notes to
Financial Statements.
IMPACT OF "YEAR 2000"
Many older computer software programs refer to years in terms of their
final two digits only. Such programs may interpret the year 2000 to mean the
year 1900 instead, the so-called "Year 2000" problem ("Y2K"). If not corrected,
those programs could cause date-related transaction failures.
The Company has begun a process of assessing exposure for Y2K related
problems focusing on four potentials areas of exposure -- internal information
systems, facility support systems, scientific equipment, and the readiness of
significant third parties with whom we have material business relationships.
42
<PAGE> 45
INTERNAL INFORMATION SYSTEMS
The Company is using a number of computers and computer programs across its
entire operations. An inventory has been performed of computer equipment and
computer programs. During 1998, the Company began the process of upgrading its
older financial and accounting programs to Y2K compliant systems and to improve
functionality. To date, no other significant internal information systems have
been identified as non-Y2K compliant and procedures have been enacted to assure
that all purchases of new systems are believed to be Y2K compliant.
SCIENTIFIC EQUIPMENT
An inventory has been taken of the major pieces of scientific equipment.
The Company is currently making inquiries of its internal staff and third-party
vendors, including its suppliers of scientific equipment, to determine if Y2K
problems exist which may affect the Company's research and development
operations
FACILITY SUPPORT SYSTEMS
The Company is currently making inquiries of its internal staff and
third-party vendors of utilities, communication and other facility support
systems, to determine if Y2K problems exist which may affect communications,
administrative or support functions.
THIRD PARTIES WITH MAJOR BUSINESS RELATIONSHIPS
The Company currently has no products available for commercial sale, and
does not anticipate FDA clearance for its lead product, FLUMIST(TM), until
mid-2000 at the earliest. In preparation for the potential commercial launch of
FLUMIST(TM), the Company has contacted its third party manufacturers and its
marketing and distribution partners to determine their level of Y2K readiness.
These parties are in the process of conducting their own evaluations of the
potential impact of Y2K issues on their businesses. The failure of any of these
parties to successfully identify and remedy the impact of Y2K upon their
businesses could have a material adverse effect on the Company's business,
including delaying or adversely affecting the potential commercial launch of
FLUMIST(TM).
The Company's assessment of Y2K exposure areas is expected to be completed
during the second quarter of 1999.
External and internal costs specifically associated with modifying internal
use software for Y2K compliance are expensed as incurred. To this point, these
costs have not been material, and the Company does not expect such costs to be
material in the future. There can be no assurance, however, that our assessment
of Y2K's potential impact on the Company will not change as we complete our
assessment, or that Y2K will not ultimately cause a material disruption in the
business of the Company.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk, including changes to interest rates
and foreign currency exchange rates.
INTEREST RATES -- The Company's investment and interest income is sensitive
to changes in the general level of interest rates, primarily U.S. interest
rates. In this regard, changes in U.S. interest rates affect the interest earned
on the Company's cash equivalents and investments. To mitigate the impact of
fluctuations in U.S. interest rates, the Company places its investments that
meet high credit standards, as specified in the Company's investment policy
guidelines; the policy also limits the amount of credit exposure to any one
issue, issuer, or type of investment and does not permit derivative financial
instruments in its investment portfolio. As a result, the Company does not
expect any material loss with respect to its investment portfolio.
FOREIGN CURRENCY EXCHANGE RATES -- The Company pays for the costs of
manufacturing and development activities, equipment, and facilities
modifications at Medeva Pharma, which is located in the United Kingdom (U.K.) in
British Pounds Sterling. As a result, the Company's financial results could be
affected by
43
<PAGE> 46
factors such as changes in foreign currency exchange rates or weak economic
conditions in the U.K. The Company is exposed to changes in exchange rates in
the United Kingdom. When the U.S. dollar strengthens against the British Pounds
Sterling, the U.S. dollar value of British Pounds Sterling-based expenses
decreases; when the U.S. dollar weakens, the U.S. dollar value of British Pounds
Sterling-based expenses increases. Accordingly, changes in exchange rates, and
in particular a weakening of the U.S. dollar, may adversely affect the Company's
financial position as expressed in U.S. dollars.
The following table provides information about the Company's financial
instruments that are sensitive to changes in interest rates. For investment
securities, the table presents principal cash flows and related weighted-average
interest rates by expected maturity dates.
<TABLE>
<CAPTION>
FAIR VALUE AT
1999 2000 2001 2002 2003 THEREAFTER TOTAL DECEMBER 31, 1998
----- ----- ---- ---- ---- ---------- ----- -----------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and Cash Equivalent...... $28.2 -- -- -- -- -- $28.2 $28.2
Weighted average interest
rate........................ 5.35% -- -- -- -- --
Investments................... $60.9 $ 6.0 -- -- -- -- $66.9 $66.7
Weighted average interest
rate........................ 5.65% 5.70% -- -- -- --
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's financial statements and notes thereto appear on pages 50
through 66 in this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
44
<PAGE> 47
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item will be contained in the Company's
definitive Proxy Statement with respect to the Company's Annual Meeting of
Stockholders, to be held on June 3, 1999, under the captions "Election of
Directions -- Nominees," and "Security Ownership of Certain Beneficial Owners
and Management -- Compliance with the Reporting Requirement of Section 16(a),"
and is hereby incorporated by reference herein. The information relating to
executive officers of the Company is contained in Part I, Item 1 of this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be contained in the Company's
definitive Proxy Statement with respect to the Company's Annual Meeting of
Stockholders, to be held June 3, 1999, under the caption "Executive
Compensation," and is hereby incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item will be contained in the Company's
definitive Proxy Statement with respect to the Company's Annual Meeting of
Stockholders, to be held June 3, 1999, under the captain "Security Ownership of
Certain Beneficial Owners and Management," and is hereby incorporated by
reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item will be contained in the Company's
definitive Proxy Statement with respect to the Company's Annual Meeting of
Stockholders, to be held June 3, 1999, under the caption "Certain Transactions,"
and is hereby incorporated by reference herein.
45
<PAGE> 48
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) INDEX TO FINANCIAL STATEMENTS
The Financial Statements required by this item are submitted in a separate
section beginning on page 50 of this report.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... 50
Balance Sheets at December 31, 1997 and 1998................ 51
Statements of Operations for each of the three years in the
period ended December 31, 1998............................ 52
Statement of Stockholders' Equity for the three years in the
period ended December 31, 1998............................ 53
Statements of Cash Flows for each of the three years in the
period ended December 31, 1998............................ 54
Notes to Financial Statements............................... 55
</TABLE>
(2) INDEX TO FINANCIAL STATEMENTS SCHEDULES
All schedules are omitted because they are not applicable or the required
information is shown in the Financial Statements or in the notes thereto.
(3) EXHIBITS
<TABLE>
<CAPTION>
ITEM DESCRIPTION
------- -----------
<C> <S>
3.1 Bylaws of the Registrant(2).
3.2 Restated Certificate of Incorporation of the Registrant.(2)
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2 Specimen Stock Certificate(1).
4.3 Warrant for Series A Preferred Stock, issued to The Mount
Sinai School of Medicine of the City of New York(1).
4.4 Warrant for Series A Preferred Stock, issued to The Mount
Sinai School of Medicine of the City of New York(1).
4.5 Warrant for Series A Preferred Stock, issued to The Mount
Sinai School of Medicine of the City of New York(1).
4.6 Warrant or Series A Preferred Stock, issued to The Mount
Sinai School of Medicine of the City of New York(1).
4.7 Warrant for Series C Preferred Stock, issued to Raymond,
James & Associates(1).
4.8 Investors Rights Agreement, dated July 18, 1995, among the
Registrant and the investors named therein(1).
4.9 Common Stock Purchase Agreement between the Registrant and
Biotech Target, S.A., dated as of March 27, 1997(3).
4.10 Rights Agreement between the Registrant and BankBoston,
N.A., dated as of October 8, 1997(5).
+10.1 License Agreement between the Registrant and ARCH
Development Corporation, dated July 1, 1992(1).
+10.2 Technology Transfer Agreement between the Registrant and The
Mount Sinai School of Medicine of the City University of New
York, dated February 9, 1993(1).
</TABLE>
46
<PAGE> 49
<TABLE>
<CAPTION>
ITEM DESCRIPTION
------- -----------
<C> <S>
+10.3 Materials Transfer and Intellectual Property Agreement
between the Registrant and the Regents of the University of
Michigan, dated February 24, 1995(1).
10.4 Stock Transfer Agreement between the Registrant and the
Regents of the University of Michigan, dated February 24,
1995(1).
+10.5 Development and License Agreement between the Registrant and
Sang-A Pharm. Co., Ltd., dated May 3, 1995(1).
+10.6 Cooperative Research and Development Agreement between the
Registrant and the National Institutes of Health, dated May
30, 1995(1).
+10.7 Heads of Agreement between the Registrant and SmithKline
Beecham Biologicals S.A., dated October 8, 1995(1).
+10.8 Manufacturing and Development Agreement between the
Registrant and Evans Medical Limited, dated November 7,
1995(1).
*10.9 1996 Equity Incentive Plan(1).
*10.10 1996 Non-Employee Directors' Stock Option Plan(1).
*10.11 1996 Employee Stock Purchase Plan(1).
10.12 Industrial lease between the Registrant and the Vanni
Business Park General Partnership, dated August 29, 1995(1).
+10.13 First Amendment to License Agreement between the Registrant
and ARCH Development Corporation dated March 15, 1996(1).
+10.14 Biological Materials License Agreement between the
Registrant and the National Institutes of Health, dated May
31, 1996(1).
+10.15 Contract Manufacture Agreement between the Registrant and
Evans Medical Limited, dated as of April 16, 1997(4).
+10.16 Production Agreement between the Registrant and Packaging
Coordinators, Inc., dated as of October 31, 1997(6).
10.17 Facility Reservation Agreement between the Registrant and
Packaging Coordinators, Inc., dated as of October 31,
1997(6).
+10.18 Influenza Vaccine Collaboration and License Distributor
Agreement between the Registrant and CSL Limited, dated June
19, 1998(7).
+10.19 Supply Agreement between the Registrant and Becton Dickinson
and the Company dated July 1, 1998(8).
++10.20 United States License and Co-Promotion Agreement between the
Registrant and Wyeth Lederle Vaccines dated January 11,
1999.
++10.21 International FLUMIST(TM) License Agreement between the
Registrant and Wyeth Lederle Vaccines dated January 11,
1999.
++10.22 FLUMIST(TM) Supply Agreement between the Registrant and
Wyeth Lederle Vaccines dated January 11, 1999.
++10.23 Credit Agreement between the Registrant and American Home
Products Corporation dated January 11, 1999.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney. See Signature Page.
27.1 Financial Data Schedule.
</TABLE>
- ---------------
+ Confidential treatment has been granted for portions of this exhibit.
++ Confidential treatment has been requested for portions of this exhibit.
47
<PAGE> 50
* Compensatory Plan or Agreement
(1) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Registration Statement on Form S-1, File No. 333-05209, filed June
5, 1996, as amended.
(2) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Quarterly Report on Form 10-Q, File No. 0-20815, for the quarter
ended September 30, 1996, filed December 20, 1996.
(3) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997, File No. 0-20815, filed May 15, 1997.
(4) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Current Report on Form 8-K, File No. 0-20815, dated April 16, 1997
and filed July 21, 1997.
(5) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Current Report on Form 8-K, File No. 0-20815, dated October 8,
1997 and filed October 10, 1997.
(6) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Registration Statement on Form S-3, File No. 333-41649, filed
December 10, 1997.
(7) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998,
File No. 0-20815, filed August 14, 1998.
(8) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1998, File No. 0-20815, filed November 16, 1998.
(b) REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during the quarter ended December
31, 1998.
48
<PAGE> 51
SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this Amendment
to its Form 10-K to be signed on its behalf by the undersigned, thereunto duly
organized, on the 31st day March 1999.
AVIRON
By /s/ J. LEIGHTON READ, M.D.
------------------------------------
J. Leighton Read, M.D.
Chairman and Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints J. Leighton Read, M.D. and Fred Kurland,
or either of them, his or her attorney-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any amendments
to this Report, and to file the same, with exhibits thereto and other documents
in connections therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his or her
substitute or substitutes, may do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. LEIGHTON READ, M.D. Chairman and Chief Executive March 31, 1999
- ----------------------------------------------------- Officer (Principal Executive
J. Leighton Read, M.D. Officer)
/s/ FRED KURLAND Senior Vice President and Chief March 31, 1999
- ----------------------------------------------------- Financial Officer (Principal
Fred Kurland Financial and Accounting
Officer)
/s/ REID W. DENNIS Director March 31, 1999
- -----------------------------------------------------
Reid W. Dennis
/s/ PAUL H. KLINGENSTEIN Director March 31, 1999
- -----------------------------------------------------
Paul H. Klingenstein
/s/ BERNARD ROIZMAN, SC.D. Director March 31, 1999
- -----------------------------------------------------
Bernard Roizman, Sc.D
/s/ JANE E. SHAW, PH.D. Director March 31, 1999
- -----------------------------------------------------
Jane E. Shaw, Ph.D.
</TABLE>
49
<PAGE> 52
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Aviron
We have audited the accompanying balance sheets of Aviron as of December
31, 1997 and 1998, and the related 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 financial position of Aviron at December 31, 1997
and 1998, and the 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.
ERNST & YOUNG LLP
Palo Alto, California
February 17, 1999
50
<PAGE> 53
AVIRON
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1998
-------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 15,239 $ 28,164
Short-term investments.................................... 47,285 60,692
Accounts receivable....................................... 29 --
Prepaid expenses and other current assets................. 1,001 1,303
-------- ---------
Total current assets.............................. 63,554 90,159
Long-term investments..................................... 12,587 6,002
Property and equipment, net............................... 7,582 18,521
Deposits and other assets................................. 1,602 6,303
-------- ---------
TOTAL ASSETS................................................ $ 85,325 $ 120,985
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 3,636 $ 2,792
Accrued compensation...................................... 756 804
Accrued clinical trial costs.............................. 3,592 757
Accrued expenses and other liabilities.................... 513 6,029
Current portion of capital lease obligations.............. 477 408
-------- ---------
Total current liabilities......................... 8,974 10,790
Deferred rent............................................. 88 1,116
Capital lease obligations, noncurrent..................... 521 113
Convertible debt.......................................... -- 100,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $0.001 par value; 5,000,000 shares
authorized; issuable in series; none outstanding at
December 31, 1997 and 1998............................. -- --
Common stock, $0.001 par value; 30,000,000 shares
authorized; 16,082,476 and 15,723,343 shares issued and
outstanding at December 31, 1997 and 1998,
respectively........................................... 16 16
Additional paid-in capital................................ 142,840 130,524
Notes receivable from stockholders........................ (115) (83)
Deferred compensation..................................... (588) (237)
Accumulated deficit....................................... (66,411) (121,254)
-------- ---------
TOTAL STOCKHOLDERS' EQUITY.................................. 75,742 8,966
-------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $ 85,325 $ 120,985
======== =========
</TABLE>
See accompanying notes.
51
<PAGE> 54
AVIRON
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Contract revenue and grants.............................. $ 1,625 $ 1,477 $ 745
-------- -------- --------
OPERATING EXPENSES:
Research and development................................. 14,997 24,254 46,583
General, administrative and marketing.................... 4,595 5,978 10,085
-------- -------- --------
TOTAL OPERATING EXPENSES................................... 19,592 30,232 56,668
-------- -------- --------
LOSS FROM OPERATIONS....................................... (17,967) (28,755) (55,923)
OTHER INCOME/EXPENSE:
Interest income.......................................... 658 2,433 6,003
Interest expense......................................... (192) (180) (4,882)
-------- -------- --------
TOTAL OTHER INCOME, NET.................................... 466 2,253 1,121
-------- -------- --------
NET LOSS................................................... $(17,501) $(26,502) $(54,802)
======== ======== ========
BASIC AND DILUTED NET LOSS PER SHARE....................... $ (7.27) $ (1.94) $ (3.49)
======== ======== ========
Shares used in computing basic and diluted net loss per
share.................................................... 2,406 13,684 15,724
======== ======== ========
</TABLE>
See accompanying notes.
52
<PAGE> 55
AVIRON
STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
PREFERRED COMMON PAID-IN NOTES DEFERRED ACCUMULATED STOCKHOLDERS'
STOCK STOCK CAPITAL RECEIVABLE COMPENSATION DEFICIT EQUITY
--------- ------ ---------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995.......... $ 39,844 $ 317 -- -- (180) $ (22,444) $ 17,537
-------- ----- -------- ----- ------- --------- --------
Issuance of 136,326 Series C
convertible preferred stock at $1.35
per share........................... 184 -- -- -- -- -- 184
Conversion of 39,168,297 shares of
preferred stock to 7,833,633 shares
of common stock in conjunction with
Initial Public Offering and
reincorporation in Delaware......... (40,028) (309) 40,337 -- -- -- --
Issuance of 2,152,800 shares of common
stock in initial public offering net
of offering costs of $2,319......... -- 2 14,902 -- -- -- 14,904
Issuance of 239,200 shares of common
stock in private placement.......... -- -- 1,914 -- -- -- 1,914
Issuance of 468,094 shares of common
stock upon exercise of stock options
and warrants, net of
cancellations....................... -- 1 335 (262) 48 -- 122
Forgiveness of notes receivable from
stockholders........................ -- -- -- 105 -- -- 105
Deferred compensation related to the
grant of certain stock options...... -- -- 1,639 -- (1,639) -- --
Amortization of deferred
compensation........................ -- -- -- -- 672 -- 672
Change in net unrealized loss on
available-for-sale investments...... -- -- -- -- -- 10 10
Net loss.............................. -- -- -- -- -- (17,501) (17,501)
-------- ----- -------- ----- ------- --------- --------
BALANCE AT DECEMBER 31, 1996.......... -- $ 11 $ 59,127 $(157) $(1,099) $ (39,935) $ 17,947
-------- ----- -------- ----- ------- --------- --------
Issuance of 1,714,286 shares of common
stock in private placement, net of
offering costs of $59............... -- 2 14,939 -- -- -- 14,941
Issuance of 2,690,000 shares of common
stock in secondary public offering
net of offering costs of $4,766..... -- 3 67,979 -- -- -- 67,982
Issuance of 226,157 shares of common
stock upon exercise of stock
options, warrants and purchase of
shares through employee stock
purchase plan, net of repurchases... -- -- 477 -- -- -- 477
Deferred compensation recorded
relating to grant of certain stock
options............................. -- -- 218 -- (218) -- --
Issuance of warrants in lieu of a cash
payment for services rendered....... -- -- 100 -- -- -- 100
Amortization of deferred
compensation........................ -- -- -- -- 729 -- 729
Change in net unrealized loss on
available-for-sale investments...... -- -- -- -- -- 26 26
Payment of notes receivable........... -- -- -- 42 -- -- 42
Net loss.............................. -- -- -- -- -- (26,502) (26,502)
-------- ----- -------- ----- ------- --------- --------
BALANCE AT DECEMBER 31, 1997.......... $ -- $ 16 $142,840 $(115) $ (588) $ (66,411) $ 75,742
-------- ----- -------- ----- ------- --------- --------
Issuance of 181,578 shares of common
stock upon exercise of stock
options, warrants and purchase of
shares through employee stock
purchase plan, net of repurchase.... -- -- 1,019 -- -- -- 1,019
Deferred compensation recorded
relating to grant of certain stock
options............................. -- -- 14 -- (14) -- --
Amortization of deferred
compensation........................ -- -- -- -- 365 -- 365
Repurchase of 540,711 shares of common
stock............................... -- -- (13,349) -- -- -- (13,349)
Change in net unrealized loss on
available-for-sale investments...... -- -- -- -- -- (41) (41)
Payment of notes receivable........... -- -- -- 32 -- -- 32
Net loss.............................. -- -- -- -- -- (54,802) (54,802)
-------- ----- -------- ----- ------- --------- --------
BALANCE AT DECEMBER 31, 1998.......... $ -- $ 16 $130,524 $ (83) $ (237) $(121,254) $ 8,966
======== ===== ======== ===== ======= ========= ========
</TABLE>
See accompanying notes
53
<PAGE> 56
AVIRON
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1997 1998
-------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(17,501) $(26,502) $ (54,802)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 541 657 3,019
Amortization of convertible debt offering costs......... -- -- 423
Amortization of deferred compensation................... 672 729 365
Changes in assets and liabilities:
Accounts receivable.................................. (500) 471 29
Prepaid expenses and other current assets............ (134) (188) (302)
Deposits and other assets............................ 17 (1,514) (1,179)
Accounts payable..................................... 383 2,963 (844)
Accrued expenses and other liabilities............... 724 3,542 3,757
Deferred revenue..................................... (208) -- --
-------- -------- ---------
Net cash used in operating activities..................... (16,006) (19,842) (49,534)
Cash flows from investing activities:
Purchases of investments................................ (10,342) (74,028) (105,990)
Maturities of investments............................... 10,933 19,888 99,127
Expenditures for property and equipment................. (651) (5,767) (13,958)
Net cash used in investing activities..................... (60) (59,907) (20,821)
Cash flow from financing activities:
Principal payments on capital lease obligation and
other................................................ (528) (578) (445)
Proceeds from issuance of:
Convertible debt..................................... -- -- 96,055
Series C convertible preferred stock................. 184 -- --
Common stock......................................... 17,044 83,400 1,019
Repurchase of common stock.............................. -- -- (13,349)
-------- -------- ---------
Net cash provided by financing activities................. 16,700 82,822 83,280
Net increase in cash and cash equivalents................. 634 3,073 12,925
Cash and cash equivalents at beginning of year............ 11,532 12,166 15,239
-------- -------- ---------
Cash and cash equivalents at end of year.................. $ 12,166 $ 15,239 $ 28,164
======== ======== =========
Supplemental schedule of non-cash financing and investing
activities:
Equipment acquired under lease line of credit........ 933 153 --
Deferred compensation related to grant of certain
stock options, less cancellations.................. 1,591 218 14
Common stock issued in exchange for notes receivable,
less cancellations................................. 262 -- --
Warrant issued in lieu of payment of legal fees...... -- 100 --
Supplemental disclosures of cash flow information:
Cash paid for interest............................... 192 179 2,999
</TABLE>
See accompanying notes.
54
<PAGE> 57
AVIRON
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Aviron (the "Company") was incorporated in the State of California in April
1992 and was reincorporated in the State of Delaware in November 1996. The
Company was organized to develop and commercialize cost-effective forms of
disease prevention and treatment based on live virus vaccines.
The Company anticipates working on a number of long-term development
projects which involve experimental and unproven technology. The projects may
require many years and substantial expenditures to complete, and may ultimately
be unsuccessful. Therefore, the Company will need to obtain additional funds
from outside sources to continue its research and development activities, fund
operating expenses, pursue regulatory approvals and build production, sales and
marketing capabilities, as necessary.
Use of Estimates
The preparation of the 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
accompanying notes. Actual results could differ from those estimates.
Concentration of Credit Risk
Cash, cash equivalents and investments are financial instruments that
potentially subject the Company to concentrations of credit risk. The Company
primarily invests in U.S. government obligations, notes of U.S. corporations,
certificates of deposit, commercial paper and foreign government securities. By
policy, the Company limits the amount of credit exposure to any one entity or
financial institution and to any one type of investment other than securities
issued by the U.S. government.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of 90 days or less to be cash equivalents. Cash equivalents include
approximately $4,642,000 and $4,295,000 in money market funds at December 31,
1997 and 1998, respectively.
Investments
The Company's entire investment portfolio is currently classified as
available-for-sale and is carried at fair value based on quoted market prices
with the unrealized gains and losses included in stockholders' equity. The
amortized cost of debt securities classified as available-for-sale is adjusted
for amortization of premiums and accretion of discounts to maturity. Such
amortization is included in interest income. Realized gains or losses and
declines in value judged to be other-than-temporary, if any, are included in
other income. The cost of securities sold is based on the specific
identification method. The Company has not experienced any significant realized
gains or losses on its investments.
Property and Equipment
Property and equipment is stated at cost. Depreciation is provided on a
straight-line basis over the estimated useful lives of the respective assets
which range from three to seven years. Property and equipment at December 31,
1998 includes approximately $1,334,000 of construction in progress. No
depreciation has been charged for these assets during 1998 because such assets
have not been placed in service. Leasehold improvements are amortized on a
straight-line basis over the shorter of their useful lives or the term of the
lease.
55
<PAGE> 58
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
Revenue Recognition
Collaborative research revenue and grant revenue are earned based on
research expenses incurred. Amounts received in advance of services to be
performed are recorded as deferred revenue until the related expenses are
incurred. Milestone payments are recognized as revenue in the period earned.
Contract revenue for services provided by the Company's animal research facility
is earned when services are provided per the contract.
Stock Compensation
The Company accounts for stock options granted to employees using the
intrinsic-value method and thus recognizes no compensation expense for options
granted with exercise prices equal to the fair value of the Company's common
stock on the date of the grant.
Net Loss per Share
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128"). SFAS 128
requires the presentation of basic earnings (loss) per share and diluted
earnings (loss) per share, if more dilutive, for all periods presented. In
accordance with SFAS 128, basic net loss per share has been computed using the
weighted-average number of shares of common stock outstanding during the period.
Diluted net loss per share has not been presented separately as, given the
Company's net loss position, the result would be anti-dilutive.
Had the convertible preferred stock that automatically converted upon
completion of the Company's initial public offering (using the as-if converted
method) been included in the calculation of net loss per share from the original
date of issuance, net loss per share in 1996 would have been ($1.94).
A reconciliation of shares used in the calculation of basic and pro forma
basic net loss per share follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1996 1997 1998
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net loss................................... $(17,501) $(26,502) $(54,802)
======== ======== ========
Basic
Weighted average shares of common stock
outstanding.............................. 2,406 13,684 15,724
-------- -------- --------
Basic net loss per share................... $ (7.27) $ (1.94) $ (3.49)
======== ======== ========
Pro Forma Basic
Weighted average shares of common stock
outstanding.............................. 2,406
Adjusted to reflect the effect of the
conversion of Preferred Stock............ 6,637
--------
Shares used in computing pro forma basic
net loss per share....................... 9,043
--------
Pro forma basic net loss per share......... $ (1.94)
========
</TABLE>
Had the Company been in a net income position, diluted earnings per share
would have been presented and would have included, the shares used in the
computation of basic net loss per share, as well as the effect of an additional
503,986, 427,613 and 3,159,451 shares for the years ended December 31, 1996,
1997 and 1998, respectively, related to the exercise of outstanding options and
warrants and the conversion of the Notes into
56
<PAGE> 59
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
common stock, which shares are not included above. The number of additional
shares has been determined using the treasury stock method.
Reporting Comprehensive Income (Loss)
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standard No. 130, ("SFAS 130"). SFAS 130 establishes rules for
reporting and display of comprehensive income (loss) and its components. SFAS
130 requires unrealized gains or losses on the Company's available-for-sale
securities, which prior to adoption were reported in the stockholders' equity,
to be included in the comprehensive income (loss). As such items have not been
material, separate presentation has not been included in the Statement of
Stockholders' Equity. However, the amounts of the change in net unrealized loss
in available-for-sale investments for the years ended December 31, 1996, 1997
and 1998 approximate $10,000, $26,000, and ($41,000), respectively. There was no
impact from the adoption on the Company's financial position or results of
operations.
Segment Reporting
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS 131"). SFAS 131 establishes standards for the way
that public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. SFAS 131 also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. As the Company has only one segment and
operates solely within the United States, the adoption of SFAS 131 had no impact
on the Company.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"), which is required to be adopted for the year ending December 31, 2000.
Management does not anticipate that the adoption of SFAS 133 will have a
significant effect on the results of operations or the financial position of the
Company.
2. LICENSE AGREEMENTS
ARCH Development Corporation
In July 1992, the Company entered into an exclusive license agreement with
ARCH Development Corporation ("ARCH") to acquire the rights to use or sublicense
certain technology and make, use or sell certain licensed products. The
agreement calls for the Company to make certain payments to ARCH totaling as
much as $2.6 million as certain milestones are met. No benchmark payments were
made or were due through 1998. If commercialization is achieved, the Company
will be required to pay ARCH royalties based on net sales of the licensed
products. Further, if the Company were to sublicense the technology, it would be
required to pay ARCH royalties on net sales of the sublicensee and, under
certain circumstances, up to 50% of the license fee paid by the sublicensee.
During 1997, ARCH asserted an interpretation of the financial terms of the
agreement with the Company relating to the license for Epstein-Barr virus
technology. The assertion would require the Company to pay ARCH one-half of any
future or past payments (including sublicense fees and milestone payments)
received by the Company under its agreement with SmithKline Beecham (see Note
3). As of December 31, 1998, the Company had received $3,352,000 from SmithKline
Beecham. The Company disputes ARCH's interpretation of the financial terms of
the agreement. No assurance can be given, however, that the Company's
interpretation will prevail. Failure of the Company to prevail could have a
material adverse effect on the Company's business, financial condition or
results of operations.
57
<PAGE> 60
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
The Mount Sinai School of Medicine
In 1993, the Company entered into a technology transfer agreement with The
Mount Sinai School of Medicine of the City University of New York ("Mount
Sinai") to acquire certain patent rights and technical information. Pursuant to
the agreement, the Company issued to Mount Sinai 35,000 shares of common stock
which resulted in a charge to research and development expense of approximately
$8,750, and warrants to purchase, in the aggregate, 225,000 shares of Series A
preferred stock. Upon the closing of the Company's initial public offering,
warrants previously exercisable for 45,000 shares of Series A preferred stock
became exercisable for 9,000 shares of common stock at $4.50 per share; warrants
covering an additional 148,750 shares of Series A preferred stock became
exercisable for 29,750 shares of common stock at $10.00 per share; and the
remaining warrants were canceled. Warrants expire in 1999, 2000 and 2001,
respectively. As of December 31, 1998 warrants covering 2,776 shares at $4.50 a
share had been exercised. The Company is also required to reimburse Mount Sinai
for costs incurred in connection with the maintenance and protection of certain
patents.
University of Michigan
In February 1995, the Company signed a license agreement with the
University of Michigan which gives the Company a worldwide license to the
University of Michigan's inventions and discoveries related to a cold adapted
influenza vaccine, including the ability to develop, use, sublicense,
manufacture and sell products and processes claimed in the patent rights. Under
the arrangement, the Company paid the University of Michigan and expensed a
$100,000 fee and issued shares of Series B preferred stock (which converted into
264,746 shares of common stock upon the closing of the Company's initial public
offering), resulting in a charge to research and development expense of
approximately $1,588,000. Upon commercialization of the vaccine product, the
license agreement provides that the Company will pay royalties based on net
revenues and will issue a warrant to purchase 1.25% of the Company's then total
outstanding common stock at an exercise price equal to $10.00 per share. The
warrant will be exercisable for five years after its issuance date. As of
December 31, 1998, the Company had funded $779,000 of research at the University
of Michigan related to this agreement and has no further obligations to fund
research.
NeuroVir Research, Inc.
In July 1996, the Company licensed certain of its patent rights covering or
relating to the use of HSV-2 for treatment of cancer and for gene therapy, but
excluding use in vaccines, to NeuroVir Research Inc. ("NeuroVir"), a private
Canadian corporation. In exchange, the Company received 458,334 shares of common
stock, 3,208,332 shares of preferred stock and a warrant to purchase 1,000,000
shares of common stock. At December 31, 1998, the Company owned approximately
15% of NeuroVir's outstanding capital stock. The Company's investment has a
carrying value of zero and Aviron is under no obligation to provide any funding
to NeuroVir. As no market exists for NeuroVir's capital stock, it is not
practicable to determine the fair value of shares held by the Company.
3. DEVELOPMENT AGREEMENTS
SmithKline Beecham Biologicals S.A.
In October 1995, the Company signed an agreement with SmithKline Beecham
Biologicals S.A. ("SmithKline Beecham") which grants SmithKline Beecham
exclusive worldwide (excluding Korea) rights to produce and market any
prophylactic and therapeutic Epstein-Barr Virus ("EBV") vaccines under the
Company's patents. Under the Agreement, SmithKline Beecham paid the Company a
$1,500,000 nonrefundable licensing fee and is required to make additional
benchmark payments as certain milestones are met. Upon
58
<PAGE> 61
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
commercialization, SmithKline Beecham will pay the Company a royalty based on
net sales (by country). In conjunction with the licensing rights, SmithKline
Beecham funded the Company's development of the EBV vaccine through the third
quarter of 1997. For the years ended December 31, 1996 and 1997, the Company
recognized approximately $1,625,000 and $1,477,000 respectively of development
revenue pursuant to the agreement. No additional expense was incurred for the
year ended December 31, 1998. The revenue received and recognized in 1997
includes a $1,000,000 milestone payment related to the initiation of clinical
trials by SmithKline Beecham. Development costs incurred in 1996 and 1997 under
this arrangement approximated development revenue recognized.
Sang-A Pharm. Co., Ltd.
In May 1995, the Company signed a development and licensing agreement with
Sang-A Pharm. Co., Ltd. ("Sang-A"), a Korean pharmaceutical company. The
agreement covers a wide range of vaccine products and grants Sang-A the
exclusive rights and licenses to such products in South and North Korea
("Korea"). Under the terms of the agreement, Sang-A will conduct all clinical
development work necessary for approval in Korea at its expense, and is required
to make payments based on certain milestones and, upon commercialization of each
product, to pay royalties based on net revenues. The agreement also gives Sang-A
the first right of refusal to supply a percentage of Aviron's products in
selected countries. In January 1997, Sang-A declared bankruptcy. In March 1998,
the Company repurchased 530,831 shares of common stock from Sang-A for
$13,337,000. The Company is unable to predict what, if any, long-term effect the
bankruptcy will have on Sang-A and on the Company's agreement with Sang-A.
4. INVESTMENTS
Investments consist of the following (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
------- ---------- ---------- -------
<S> <C> <C> <C> <C>
As of December 31, 1997:
Certificates of deposit................. $ 8,129 $ 1 $ (1) $ 8,129
Corporate commercial paper.............. 11,586 -- (5) 11,581
U.S. Corporate obligations.............. 42,471 38 (10) 42,499
U.S. government agency obligations...... 2,050 -- -- 2,050
Municipal bonds......................... 2,018 2 -- 2,020
Foreign government securities........... 4,190 1 (1) 4,190
------- ---- ----- -------
$70,444 $ 42 $ (17) $70,469
======= ==== ===== =======
As of December 31, 1998:
Certificates of deposit................. $ 5,663 $ 30 $ -- $ 5,693
Corporate commercial paper.............. 28,415 -- (12) 28,403
U.S. Corporate obligations.............. 36,688 125 (175) 36,638
U.S. government agency obligations...... 11,960 21 (8) 11,973
Municipal bonds......................... 2,153 1 -- 2,154
Foreign government securities........... 5,702 4 (4) 5,702
------- ---- ----- -------
$90,581 $181 $(199) $90,563
======= ==== ===== =======
</TABLE>
Included in the above table as of December 31, 1998 are U.S. corporate
obligations, commercial paper and U.S. government agency obligations with fair
values of $10,597,000 and $23,869,000 at December 31, 1997 and 1998,
respectively, which have been classified as cash equivalents in the accompanying
balance
59
<PAGE> 62
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
sheet. All securities had maturities of one year or less except for $12,587,000
and $6,002,000 in 1997 and 1998, respectively, which had maturities no greater
than two years.
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Manufacturing equipment..................................... $ 91 $ 4,288
Laboratory equipment........................................ 2,315 2,790
Computer equipment.......................................... 631 1,488
Office equipment............................................ 330 776
Leasehold improvements...................................... 1,085 12,773
Construction in progress.................................... 5,039 1,334
------- -------
9,491 23,449
Less accumulated depreciation and amortization.............. (1,909) (4,928)
------- -------
$ 7,582 $18,521
======= =======
</TABLE>
Included in property and equipment at December 31, 1997 and 1998, are
assets with costs of $2,874,000 and accumulated depreciation of approximately
$1,679,000 and $2,253,800, respectively, which have been financed pursuant to
the lease line of credit
6. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consisted of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1998
---- ------
<S> <C> <C>
Accrued interest............................................ $ -- $1,445
Accrued manufacturing....................................... 309 3,219
Accrued legal expenses...................................... 94 477
Accrued testing services.................................... -- 433
Accrued expense other....................................... 110 455
---- ------
Total............................................. $513 $6,029
==== ======
</TABLE>
7. LEASE ARRANGEMENTS
The Company has a lease line of credit that bears interest based on an
average of the three-year and five-year indices of U.S. Treasury notes (13.9 %
at December 31, 1998). Outstanding balances under the line are secured by the
related equipment purchased.
The Company has entered into an operating lease agreement for office and
research facilities which expires in 2005 and includes an option allowing the
Company to extend the lease for two additional five-year terms. The agreement
requires the Company to pay operating costs, including property taxes,
utilities, insurance and maintenance. Rent expense for the years ended December
31, 1996, 1997 and 1998 was $728,000, $904,000 and $919,000 respectively.
The Company entered into an operating lease agreement for a portion of
facilities owned by the Company's contract manufacturer for cold adapted
influenza vaccine. The agreement expires upon the earlier
60
<PAGE> 63
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
of December 31, 2001 or three years following initial product commercial sales.
Net expense for the years ended December 31, 1997 and 1998 was $830,000 and
$1,248,000 respectively.
In October 1997, the Company entered into a 7 year operating lease
agreement for a facility to be used in the manufacturing, packaging and storage
of its products. The facility is owned by a contract manufacturer who will
provide services to the Company. The lease includes an option allowing the
Company to extend the lease beyond the initial term. The agreement requires the
Company to pay certain operating costs including a portion of utilities and
insurance. The agreement provides for the deferral of 40% of the base monthly
rental for a 2-year period. The Company is required to deposit and maintain the
deferred amount in an escrow account. The agreement also requires the lessor to
provide a $1,000,000 improvement allowance for construction and improvements to
the facility. The Company will repay $500,000 of the improvement allowance to
the lessor through an additional charge per unit of production. The $500,000 is
presently deposited in an escrow account. Rent expense for the years ended
December 31, 1997 and 1998, was $220,000 and $1,160,000 respectively. Included
in the rent expense at December 31, 1997 and 1998 are deferred rents in the
amount of $88,000 and $528,000 respectively.
At December 31, 1998, the Company's aggregate commitments under such
arrangements are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL LEASE OPERATING
OBLIGATIONS LEASE
------------- ---------
<S> <C> <C>
Years ending December 31,
1999............................................... $ 456 $ 2,929
2000............................................... 111 2,987
2001............................................... 9 4,054
2002............................................... -- 2,334
2003............................................... -- 2,339
Thereafter......................................... -- 3,017
----- -------
576 $17,660
=======
Less amounts representing interest................... (55)
-----
521
Less current portion................................. (408)
-----
$ 113
=====
</TABLE>
8. CONVERTIBLE DEBT
On March 30, 1998, the Company sold unsecured convertible subordinated
notes in the aggregate principal amount of $100,000,000 at an interest rate of
5 3/4% due 2005 (the "Notes"). Net proceeds to the Company, after deducting
legal and other expenses, were approximately $96,055,000.
The Notes are convertible into common stock at any time after 90 days
following the original issuance through maturity, unless previously redeemed at
a conversion price of $30.904 per share (equivalent to a conversion rate of
approximately 32.3583 shares per $1,000 principal amount of Notes), which is
subject to adjustment in certain events. Interest on the notes is paid
semi-annually on April 1 and October 1.
The fair market value of the Notes as of December 31, 1998 approximated
$100,250,000, based on quoted market prices.
61
<PAGE> 64
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
9. STOCKHOLDERS' EQUITY
Common Stock
Certain shares of common stock issued to members of management in 1996
through exercises of stock options are subject to repurchase by the Company at
$0.50 - $2.50 per share. The above shares vest over periods specified by the
Board of Directors. At December 31, 1997 and 1998, 92,100 and 37,920 shares
remain subject to the Company's right of repurchase, respectively.
Warrants
Outstanding warrants to purchase common stock are as follows at December
31, 1998:
<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE PRICE EXPIRATION
- ---------------- -------------- ----------
<S> <C> <C>
16,666..... $ 2.00 January 2000
3,458...... $ 4.50 June 1999
2,766...... $ 4.50 May 2000
29,750..... $10.00 November 2001
</TABLE>
Employee Stock Purchase Plan
The Company has adopted an Employee Stock Purchase Plan under which
employees can purchase shares of the Company's common stock based on a
percentage of their compensation but not greater than 15 percent of their
earnings. The purchase price per share must be equal to the lower of 85% of the
market value at the beginning or end of the applicable offering period. A total
of 350,000 shares of common stock are reserved for issuance under the plan. As
of December 31, 1998, 71,513 shares had been issued under the Plan.
Stock Options
On September 15, 1992, the Board of Directors adopted the 1992 Stock Option
Plan (the "1992 Plan"). In March 1996, the Company amended and restated the 1992
Plan as the 1996 Equity Incentive Plan (the "1996 Plan"). Total shares of common
stock reserved for future issuance under the 1996 Plan were increased to
3,250,000. The 1996 Plan provides for the grant of incentive and nonstatutory
stock options to employees and consultants of the Company and became effective
in November 1996 upon the closing of the initial public offering.
In March 1996, the Company adopted the 1996 Non-Employee Directors' Stock
Option Plan (the "Directors' Plan") under which 200,000 shares of common stock
are reserved for issuance pursuant to nonstatutory stock options. The Directors'
Plan became effective upon the closing of the initial public offering.
The Company's Plans had 1,248,793 shares available to grant options to
employees and directors at December 31, 1998. Most of the options granted have
10 year terms and vest ratably over 50 months of continued employment.
In addition, the Company has issued non-qualified stock options outside of
the 1992 Plan.
62
<PAGE> 65
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
A summary of the Company's stock option activity, and related information
for the years ended December 31 follows:
<TABLE>
<CAPTION>
1996 1997 1998
-------------------- -------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- -------- --------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding -- beginning of
year............................ 613,038 $0.50 611,936 $ 1.60 885,819 $ 8.87
Granted........................... 640,080 $2.73 441,780 $16.08 1,068,717 $24.69
Exercised......................... (452,781) $1.13 (141,032) $ 0.70 (155,553) $ 2.80
Forfeited......................... (188,401) $2.97 (26,865) $ 2.70 (84,448) $13.25
--------- --------- ----------
Outstanding -- end of year........ 611,936 $1.60 885,819 $ 8.86 1,714,535 $19.08
========= ========= ==========
Weighted-average fair value of
options granted during year..... $ 1.38 $ 11.07 $ 19.23
</TABLE>
During 1995, officers of the Company exercised options granted outside the
Plan for 168,000 shares by signing promissory notes amounting to $310,000 which
bear interest at 5.73% subject to the Company's right of repurchase which lapses
over fifty months. As of December 31, 1998, $82,500 of the promissory notes were
still outstanding and 37,920 shares were subject to repurchase.
In August 1996, as a result of uncertainty about the Company's ability to
complete its initial public offering as anticipated, the Board of Directors
agreed to cancel all outstanding options which had been granted previously with
exercise prices of $2.50 per share, and issue new options to these option
holders with exercise prices of $1.25 per share in exchange for a three month
delay in the vesting of such options. As a result of this transaction, the
Company recognized an additional $311,000 of deferred compensation for financial
reporting purposes. For those employees who had early exercised their options at
$2.50 per share in exchange for notes receivable, the Board of Directors agreed
to forgive one-half of the notes receivable amount such that the effective
exercise prices for these options was $1.25 per share, and to reimburse such
employees for any tax resulting from such forgiveness.
The Company has recognized deferred compensation for certain options
granted in 1996, 1997 and 1998. Total deferred compensation of approximately
$2,094,000 recorded through December 31, 1998 is being amortized over the
vesting period of such options on an accelerated basis. A portion of these
options vested immediately upon grant.
The options outstanding at December 31, 1998 have been segregated for
additional disclosure as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------- --------------------------
WEIGHTED- OPTIONS WEIGHTED-
OPTIONS AVERAGE WEIGHTED- CURRENTLY AVERAGE
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT EXERCISE
RANGE OF EXERCISE PRICES DEC. 31, 1998 CONTRACTUAL LIFE EXERCISE PRICE DEC. 31, 1998 PRICE
------------------------ -------------- ---------------- -------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
$ 0.25 - $1.00................... 70,478 6.0 $ 0.51 65,996 $ 0.50
$ 1.01 - $5.00................... 177,006 7.5 $ 1.25 100,638 $ 1.25
$ 5.01 - $10.00.................. 178,905 8.0 $ 8.84 92,945 $ 8.58
$ 8.01 - $20.00.................. 224,229 9.4 $14.87 25,034 $11.44
$20.01 - $30.38.................. 1,063,917 9.1 $25.84 139,159 $24.65
</TABLE>
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123")
requires use of option valuation
63
<PAGE> 66
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
models that were not developed for use in valuing employee stock options. Under
APB 25, if the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
Pro forma information regarding net loss and net loss per share is required
by SFAS 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted subsequent to
December 31, 1994 under the fair market 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 with the following weighted-average assumptions for 1996,
1997 and 1998: risk free interest rate of 5.94%, 6.80% and 4.85% respectively;
volatility factors of the expected market price of the Company's common stock of
0.73 for 1996, 0.80 for 1997 and 0.80 for 1998; no expected dividends; and a
weighted-average expected life of the option of 5 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options and employee stock
purchase plans have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair market value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of
its employee stock options and shares issued pursuant to the employee stock
purchase plan.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (in thousands except for net loss per share
information):
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Pro forma net loss................. $(17,595) $(27,733) $(64,883)
Pro forma net loss per share
(basic).......................... $ (1.95) $ (2.03) $ (4.13)
</TABLE>
Since SFAS 123 is applicable only to options granted subsequent to December
31, 1994, its pro forma effect will not be fully reflected until 1999.
Share Purchase Rights
In October 1997, the Company's Board of Directors adopted a Share Purchase
Rights Plan. The Share Purchase Rights Plan provides for the distribution of
certain rights to acquire shares of the Company's Series A Junior Participating
Preferred Stock, par value $0.001 (the "Rights") as a dividend for each share of
Common Stock held of record as of October 23, 1997. The Rights are triggered and
become exercisable upon the occurrence of either the (i) date of a public
announcement of the acquisition of 20% or more beneficial ownership of the
Company's Common Stock by a person or group (an "Acquiring Person"), or (ii) ten
business days (or such later time as may be set by the Board of Directors) after
a public announcement of a tender or exchange offer for 20% or more beneficial
ownership of the Company's Common Stock by an Acquiring Person. If the Rights
are triggered, each Right effectively provides its holder, the right to purchase
shares of Common Stock at a 50% discount from the market price at that time,
upon payment of an exercise price of $150 per Right.
64
<PAGE> 67
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
Reserved Shares
As of December 31, 1998, the Company has reserved shares of common stock
for future issuance as follows:
<TABLE>
<S> <C>
Options:
Outstanding............................................. 1,714,535
Available for grant..................................... 1,248,793
Employee Stock Purchase Plan.............................. 278,487
Warrants.................................................. 52,640
---------
3,294,455
=========
</TABLE>
10. INCOME TAXES
As of December 31, 1998, the Company had a federal net operating loss
carryforward of approximately $118,900,000. The Company also had federal
research and development tax credit carryforwards of approximately $3,300,000.
The net operating loss and credit carryforwards will expire at various dates
beginning in 2007 through 2018, if not utilized.
Utilization of net operating losses and credits may be subject to a
substantial annual limitation due to "ownership change" provisions of the
Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.
Significant components of the Company's deferred tax assets as of December
31 are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Net operating loss carryforwards....................... $ 23,000 $ 41,200
Capitalized research and development expenses.......... 2,700 3,300
Research tax credits (expire 2007-2018)................ 2,000 5,500
Other -- Net........................................... 500 600
-------- --------
Net deferred tax assets................................ 28,200 50,600
Valuation allowance.................................... (28,200) (50,600)
-------- --------
$ -- $ --
======== ========
</TABLE>
Because of the Company's lack of earnings history, the net deferred tax
asset has been fully offset by a valuation allowance. The valuation allowance
increased by approximately $7,050,000, $12,300,000 and $22,400,000 in 1996, 1997
and 1998 respectively.
Approximately $1,300,000 of the valuation allowance for deferred tax assets
relates to benefits of stock option deductions which, when recognized, will be
allocated directly to contributed capital.
11. COMMITMENTS
In August 1998, the Company announced the signing of a worldwide multiyear
supply agreement with Becton Dickinson and Company ("Becton Dickinson"), in
which Becton Dickinson will supply its AccuSpray(TM) non-invasive nasal spray
delivery system for administration of FLUMIST(TM). The agreement requires the
Company to advance a total of $2,000,000 to Becton Dickinson for facility
expansion of plant capacity. As of December 31, 1998, $550,000 of this amount
remained to be paid.
65
<PAGE> 68
AVIRON
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
12. RELATED PARTY TRANSACTIONS
In 1995, the Company made unsecured loans to members of senior management
totaling $100,000 which bear interest at 7.75% and are due in April 2000. In
1997, the Company made two additional unsecured loans to members of senior
management totaling $200,000, which bear interest at 7.75% and are due in
February and July 2001, respectively. As of December 31, 1998, the unpaid
balance was $141,000.
A former officer of the Company is a shareholder in an investment advisory
business which was paid a commission by the Company of approximately $115,000
and $11,000 during 1996 and 1997, respectively, all in connection with the
Sang-A transaction. The former officer received no direct compensation from the
transaction.
13. SUBSEQUENT EVENTS
On January 12, 1999, the Company announced a worldwide collaboration for
the marketing of FLUMIST(TM) with Wyeth Lederle Vaccines, a business unit of
Wyeth-Ayerst Laboratories, the pharmaceutical division of American Home Products
Corporation ("Wyeth Lederle"). On March 15, 1999, the Federal Trade Commission
granted early termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvement Act of 1996 regarding this collaboration.
Under the agreement, Aviron is granting Wyeth Lederle exclusive worldwide
rights to market FLUMIST(TM). Wyeth Lederle and Aviron will co-promote
FLUMIST(TM) in the United States, while Wyeth Lederle will have the exclusive
right to market the product outside the United States. In each case, Wyeth
Lederle will hold the marketing rights for up to eleven years. The collaboration
excludes Korea, Australia, New Zealand and certain South Pacific countries. The
companies will collaborate on the regulatory, clinical, and marketing programs
for the product.
As consideration under the agreement, the Company received a cash payment
of $15 million for the initial license, and will receive $15 million upon
acceptance for filing with the U.S. Food and Drug Administration (FDA), and $20
million upon FDA marketing approval for FLUMIST(TM). Compensation for achieving
additional development and regulatory milestones is included in the agreement
terms. The granting of certain rights under the license would trigger additional
payments in excess of $40 million to the Company. Consideration for the license
also includes a commitment to provide up to $40 million in future financing to
the Company from Wyeth-Ayerst Laboratories, a portion of which is contingent
upon regulatory approval of the product, with the remaining amount to come from
participation in the Company's future securities offerings. The potential value
for the license fees, milestones and financing support that the Company could
receive under the collaboration exceeds $400 million. In addition to the
payments mentioned above, the Company anticipates that it will earn product
revenues from Wyeth Lederle, in the form of product transfer payments and
royalties, which increase at higher sales levels. The Company will incur
expenses to supply and co-promote the product.
On February 5, 1999, the Company leased a 69,000 square foot building in
Santa Clara, California. The lease will terminate in the year 2019. Monthly rent
is approximately $161,800. The facility will provide additional manufacturing,
laboratory, pilot plant and office space.
66
<PAGE> 69
EXHIBIT INDEX
<TABLE>
<CAPTION>
ITEM DESCRIPTION
- ------- -----------
<C> <S>
3.1 Bylaws of the Registrant(2).
3.2 Restated Certificate of Incorporation of the Registrant.(2)
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2 Specimen Stock Certificate(1).
4.3 Warrant for Series A Preferred Stock, issued to The Mount
Sinai School of Medicine of the City of New York(1).
4.4 Warrant for Series A Preferred Stock, issued to The Mount
Sinai School of Medicine of the City of New York(1).
4.5 Warrant for Series A Preferred Stock, issued to The Mount
Sinai School of Medicine of the City of New York(1).
4.6 Warrant or Series A Preferred Stock, issued to The Mount
Sinai School of Medicine of the City of New York(1).
4.7 Warrant for Series C Preferred Stock, issued to Raymond,
James & Associates(1).
4.8 Investors Rights Agreement, dated July 18, 1995, among the
Registrant and the investors named therein(1).
4.9 Common Stock Purchase Agreement between the Registrant and
Biotech Target, S.A., dated as of March 27, 1997(3).
4.10 Rights Agreement between the Registrant and BankBoston,
N.A., dated as of October 8, 1997(5).
+10.1 License Agreement between the Registrant and ARCH
Development Corporation, dated July 1, 1992(1).
+10.2 Technology Transfer Agreement between the Registrant and The
Mount Sinai School of Medicine of the City University of New
York, dated February 9, 1993(1).
+10.3 Materials Transfer and Intellectual Property Agreement
between the Registrant and the Regents of the University of
Michigan, dated February 24, 1995(1).
10.4 Stock Transfer Agreement between the Registrant and the
Regents of the University of Michigan, dated February 24,
1995(1).
+10.5 Development and License Agreement between the Registrant and
Sang-A Pharm. Co., Ltd., dated May 3, 1995(1).
+10.6 Cooperative Research and Development Agreement between the
Registrant and the National Institutes of Health, dated May
30, 1995(1).
+10.7 Heads of Agreement between the Registrant and SmithKline
Beecham Biologicals S.A., dated October 8, 1995(1).
+10.8 Manufacturing and Development Agreement between the
Registrant and Evans Medical Limited, dated November 7,
1995(1).
*10.9 1996 Equity Incentive Plan(1).
*10.10 1996 Non-Employee Directors' Stock Option Plan(1).
*10.11 1996 Employee Stock Purchase Plan(1).
10.12 Industrial lease between the Registrant and the Vanni
Business Park General Partnership, dated August 29, 1995(1).
+10.13 First Amendment to License Agreement between the Registrant
and ARCH Development Corporation dated March 15, 1996(1).
</TABLE>
67
<PAGE> 70
<TABLE>
<CAPTION>
ITEM DESCRIPTION
- ------- -----------
<C> <S>
+10.14 Biological Materials License Agreement between the
Registrant and the National Institutes of Health, dated May
31, 1996(1).
+10.15 Contract Manufacture Agreement between the Registrant and
Evans Medical Limited, dated as of April 16, 1997(4).
+10.16 Production Agreement between the Registrant and Packaging
Coordinators, Inc., dated as of October 31, 1997(6).
10.17 Facility Reservation Agreement between the Registrant and
Packaging Coordinators, Inc., dated as of October 31,
1997(6).
+10.18 Influenza Vaccine Collaboration and License Distributor
Agreement between the Registrant and CSL Limited, dated June
19, 1998(7).
+10.19 Supply Agreement between the Registrant and Becton Dickinson
and Company dated July 1, 1998(8).
++10.20 United States License and Co-Promotion Agreement between the
Registrant and Wyeth Lederle Vaccines dated January 11,
1999.
++10.21 International FLUMIST(TM) License Agreement between the
Registrant and Wyeth Lederle Vaccines dated January 11,
1999.
++10.22 FLUMIST(TM) Supply Agreement between the Registrant and
Wyeth Lederle Vaccines dated January 11, 1999.
++10.23 Credit Agreement between the Registrant and American Home
Products Corporation dated January 11, 1999.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney. See Signature Page.
27.1 Financial Data Schedule.
</TABLE>
- ---------------
+ Confidential treatment has been granted for portions of this exhibit.
++ Confidential treatment has been requested for portions of this exhibit.
* Compensatory Plan or Agreement
(1) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Registration Statement on Form S-1, File No. 333-05209, filed June
5, 1996, as amended.
(2) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Quarterly Report on Form 10-Q, File No. 0-20815, for the quarter
ended September 30, 1996, filed December 20, 1996.
(3) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997, File No. 0-20815, filed May 15, 1997.
(4) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Current Report on Form 8-K, File No. 0-20815, dated April 16, 1997
and filed July 21, 1997.
(5) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Current Report on Form 8-K, File No. 0-20815, dated October 8,
1997 and filed October 10, 1997.
(6) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Registration Statement on Form S-3, File No. 333-41649, filed
December 10, 1997.
(7) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998,
File No. 0-20815, filed August 14, 1998.
(8) Incorporated by reference to the correspondingly numbered exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1998, File No. 0-20815, filed November 16, 1998.
68
<PAGE> 1
EXHIBIT 10.20
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
UNITED STATES LICENSE AND CO-PROMOTION AGREEMENT
AVIRON
AND
AMERICAN HOME PRODUCTS CORPORATION
ACTING THROUGH ITS
WYETH-AYERST LABORATORIES DIVISION
JANUARY 11, 1999
<PAGE> 2
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
UNITED STATES LICENSE AND CO-PROMOTION AGREEMENT
THIS UNITED STATES LICENSE AND CO-PROMOTION AGREEMENT (the "Agreement"),
signed on January 11, 1999 (the "Signing Date"), is by and between AVIRON, a
Delaware corporation with its principal place of business at 297 North Bernardo
Avenue, Mountain View, California 94043 ("Aviron"), and AMERICAN HOME PRODUCTS
CORPORATION ("AHPC"), acting through its WYETH-AYERST LABORATORIES DIVISION, a
Delaware corporation with its principal place of business at 555 Lancaster
Avenue, St. Davids, Pennsylvania, 19087 ("Wyeth-Ayerst"). Aviron and
Wyeth-Ayerst are sometimes referred to herein individually as a "Party" and
collectively as the "Parties."
WITNESSETH:
WHEREAS, Aviron has been licensed exclusive rights to, and has developed
substantial additional proprietary rights regarding, an intranasally delivered
cold adapted vaccine formulation against influenza and influenza-associated
illnesses, [***], known as FluMist(TM);
WHEREAS, Aviron is engaged in the development, and when developed, the
manufacture or contract manufacture, marketing and sale, of FluMist, in [***];
WHEREAS, Wyeth-Ayerst is not currently engaged in the development of any
intranasally delivered influenza vaccine product;
WHEREAS, the Parties intend to establish a collaboration for the
development and commercialization of FluMist in the United States and its
territories and possessions, with the purpose of obtaining the rapid and
competitive release of FluMist, and under which Wyeth-Ayerst and Aviron will
collaborate in the marketing and promotion of the FluMist vaccine;
WHEREAS, in connection with establishing the collaboration described
herein, Aviron desires to grant to Wyeth-Ayerst, and Wyeth-Ayerst desires to
obtain, certain license rights to FluMist on the terms and conditions set forth
in this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, the parties hereby agree as
follows:
ARTICLE 1
DEFINITIONS
The following terms, when capitalized, shall have the following meanings
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined) as used in this Agreement:
1.1 "AFFILIATE" means, with respect to a Party, any Person that,
directly or indirectly, is controlled by, controls or is under common control
with such Party, but only for so long as such relationship exists. "Control," as
used in this Section 1.1, means having the power to direct,
- --------
[***] = CONFIDENTIAL TREATMENT REQUESTED.
1.
<PAGE> 3
or cause the direction of, the management and policies of any entity, whether
through ownership of voting securities, by contract, or otherwise. For purposes
of this Agreement the term "Affiliate" shall not, however, include subsidiaries
in which a Person 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.
1.2 "ANNUAL NET SALES" means the Net Sales per Flu Season.
1.3 "AVIRON KNOW-HOW" means any Information owned or Controlled by
Aviron either (a) as of the Effective Date, or (b) during the term of this
Agreement, that is useful or necessary in the clinical development, Regulatory
Approval, commercialization, marketing or manufacture of the Product for use in
the Field in the Territory. "Aviron Know-How" shall not include any Information
in the Joint Technology.
1.4 "AVIRON PATENTS" means (a) those Patents owned or Controlled by
Aviron which cover the manufacture, use, sale, offer for sale or importation of
the Product in the Field and in the Territory (which as of the Signing Date
consist of those listed on Schedule 1.4 hereto, as may be amended from time to
time); and (b) any Patents claiming any Invention owned solely by Aviron
pursuant to Section 15.1(b) that covers the manufacture, use, sale, offer for
sale or importation of the Product. "Aviron Patents" shall not include any Joint
Patents.
1.5 "AVIRON PRODUCT MATERIALS" means any [***] or any [***] or any other
biological materials transferred to Wyeth-Ayerst by Aviron under this Agreement;
and [***] to the extent that [***] other than [***] as permitted pursuant to
Section [***].
1.6 "AVIRON RESULTS" shall have the meaning ascribed in Section 15.1.
1.7 "CALENDAR YEAR" means the period of time commencing on January 1 of
a given year, and ending on December 31 of such year.
1.8 "COLLABORATION" means the collaborative activities undertaken by the
Parties in accordance with this Agreement to develop and commercialize the
Product in the Field in the Territory.
1.9 "COMMERCIALIZATION EXPENSES" means those costs, excluding [***] but
including [***] incurred by a Party or for its account which are specifically
identifiable to the advertising, promotion and marketing (including market
preparation and other pre-launch activities) of the Product and related
professional promotion and education (to the extent not performed by sales
representatives), including, without limitation, television and electronic
advertisements, advertorials and infomercials, print advertisements, direct
mail, exhibitions at seminars and conferences, samples packages, promotional
literature and market research.
1.10 "COMMERCIALIZATION PLAN" shall have the meaning set forth in
Section 7.2.
- --------
[***] = CONFIDENTIAL TREATMENT REQUESTED.
2
<PAGE> 4
1.11 "COMMERCIALLY REASONABLE EFFORTS" means efforts and resources
normally used by a Party for a vaccine owned by it or to which it has rights,
which is of similar market potential at a similar stage in its product life,
taking into account the competitiveness of the marketplace, the proprietary
position of the vaccine, the regulatory structure involved, the potential or
actual profitability of the vaccine, and other relevant commercial factors. A
Party shall not be determined to have failed to use Commercially Reasonable
Efforts to the extent any failure or delay in such Party's efforts is
attributable to the action or failure to act of the other Party, or material
breach by the other Party of any provision of this Agreement.
1.12 [***]means a [***] other than [***] as of the Effective Date or as
[***] pursuant to Section [***] the [***] or any [***] described in Schedule
1.12, which is either [***] for the [***] including [***] in the Territory.
1.13 "CONFIDENTIAL INFORMATION" shall have the meaning set forth in
Section 14.1.
1.14 "CONTROL" OR "CONTROLLED" means the right to grant a license or
sublicense to intangible property rights (including patent rights, know-how
and/or trade secret information), and the right to provide access to or
cross-reference to regulatory filings, in each case to the extent not in
violation of the terms of any agreement or other arrangement with any Third
Party in existence as of the Effective Date.
1.15 "CO-PROMOTE" OR "CO-PROMOTION" means to Promote the Product jointly
under the Primary Brand Trademark in the Territory, through Aviron,
Wyeth-Ayerst, and their respective sales forces. "Promote" or "Promotion" means,
with respect to the Product, those activities and obligations undertaken by a
Party to encourage sales of the Product, including without limitation detailing,
journal advertising, direct mail programs, direct-to-consumer advertising, and
other forms of advertising and promotion specified in the Commercialization
Plan.
1.16 "CO-PROMOTION TERM" means the period commencing on the Launch Date,
extending through the Flu Season in which such Launch Date occurred ("Launch
Date Flu Season"), and terminating upon the earlier of (a) May 1 of the sixth
Flu Season following the Launch Date Flu Season or as extended pursuant to
Section 19.8, or (b) termination of this Agreement pursuant to Section 19.2,
19.3, 19.4 or 19.5, or as otherwise agreed by the Parties in writing.
1.17 "DEVELOPMENT PLAN" means the plan for development of the Product in
the Field in the Territory created by the JDC to be carried out by the Parties,
including the budget of R&D Expenses associated with such development, as
further described in Section 6.3.
1.18 "EFFECTIVE DATE" shall have the meaning set forth in Section 21.16
hereof.
1.19 "FDA" means the United States Food and Drug Administration, or any
successor agency.
- --------
[***] = CONFIDENTIAL TREATMENT REQUESTED.
3
<PAGE> 5
1.20 "FD&C ACT" means the United States Federal Food, Drug and Cosmetics
Act, as amended from time to time.
1.21 "FIELD" means the use of the Product pursuant to [***]] (a) to
prevent influenza and influenza-associated illnesses, [***] in a Target
Population, or other population, for which the Product is approved by the FDA;
or (b) for any [***] which are [***] the Collaboration pursuant to Section [***]
The "Field" specifically excludes use or sale of the Product in [***].
1.22 "FINISHED PRODUCT" means the Product in finished, packaged form.
1.23 "FLU SEASON" means the influenza vaccine selling season, which
shall be deemed to begin upon the date of the first commercial sale of trivalent
Finished Product comprising the set of influenza strains designated by the
relevant governmental organization for inclusion in influenza vaccines in the
Territory for that influenza season, and to end upon the first commercial sale
of Finished Product comprising the subsequent set of influenza strains
designated by such organization for the subsequent influenza season; provided
that a "Flu Season" shall not in any event extend for more than twelve (12)
months from the first commercial sale of a given Finished Product.
1.24 [***] means a [***] of the Product which, during the dating period
established by the FDA, [***] and may [***] but does not [***] or at [***] as
further described in the PLA.
1.25 "GOOD CLINICAL PRACTICE" OR "GCP" shall mean the then current
standards for clinical trials for biologicals, as set forth in the FD&C Act and
applicable regulations and guidances promulgated thereunder.
1.26 "GOOD LABORATORY PRACTICE" OR "GLP" shall mean the then current
standards for laboratory activities for biologicals, as set forth in the FD&C
Act and applicable regulations and guidances promulgated thereunder.
1.27 "GOOD MANUFACTURING PRACTICE" OR "GMP" shall mean the current
standards for the manufacture of biologicals, as set forth in the FD&C Act and
applicable regulations and guidances promulgated hereunder.
1.28 "INFORMATION" means techniques and data relating to the Product and
including (but not limited to) practices, methods, knowledge, know-how, skill,
experience, test data including pharmacological, toxicological, preclinical and
clinical test data, analytical and quality control data, marketing, pricing,
distribution, cost, sales and manufacturing data or descriptions. Information
shall include any Invention for which a patent application has not been filed,
or if filed, has not been published.
1.29 "INJECTABLE PRODUCT" means Wyeth-Ayerst's injectable, inactivated
influenza vaccine product, based on the commercial technology used by
Wyeth-Ayerst as of the Signing Date.
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1.30 "INTERNATIONAL AGREEMENT" means that certain International
FluMist(TM) License Agreement entered into by and between the Parties as of the
Signing Date.
1.31 "INVENTION" means any patentable invention or discovery.
1.32 "JCC FORECAST" shall have the meaning ascribed in Section 3.1 of
the Supply Agreement.
1.33 "JOINT COMMERCIALIZATION COMMITTEE" OR "JCC" means the committee
formed by the Parties to develop commercial strategies, marketing plans and
budgets for the Product and to co-ordinate the Product marketing and sales
activities, as further described in Article 3.
1.34 "JOINT DEVELOPMENT COMMITTEE" OR "JDC" means the committee formed
by the Parties to oversee the clinical development, regulatory strategy and
manufacture of the Product as further described in Article 4.
1.35 "JOINT PATENT" means a Patent claiming an Invention in the Joint
Technology.
1.36 "JOINT TECHNOLOGY" means all Information and Inventions discovered
or developed jointly by one or more employees or consultants of one Party and by
one or more employees or consultants of the other Party during the term of and
pursuant to the Agreement, as determined under the United States laws of
inventorship.
1.37 "LAUNCH" OR "LAUNCH DATE" means the date of the first commercial
sale of the Product in the Territory for use in the Field following Regulatory
Approval.
1.38 [***] means a [***] of the Product which, during the dating period
established by the FDA, [***] and does not [***] provided that if the [***] the
Product which exists as of the Effective Date is determined to [***] during the
dating period, then such [***] shall be included in [***].
1.39 [***] means the influenza strains [***] and designated [***] and
any structural equivalents thereto, including any and all progeny, derivatives,
replications, variants, recombinants, and reassortants thereof, whether
generated by viral replication or by recombinant genetic engineering methods.
"Structural equivalents" include any influenza virus: (a) that comprises [***]
genome segments having a cumulative nucleotide sequence identity of at least
[***] to the corresponding genome segments of [***] or (b) that comprises at
least one characteristic nucleotide sequence feature or encoded amino acid
sequence feature of any gene segment selected from the list of such features
shown in Schedule 1.39; or (c) for which Wyeth-Ayerst cannot provide reasonable
evidence to a mutually agreed upon independent Third Party laboratory, under an
agreement that restricts such Third Party from disclosing Wyeth-Ayerst's
confidential information to Aviron, that the virus is not derived from [***].
1.40 "MICHIGAN" means the Regents of the University of Michigan, a
constitutional corporation of the State of Michigan with offices located at
Wolverine Tower, Room 2071, 3003 South State Street, Ann Arbor, Michigan,
48109-1280, USA.
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1.41 "MICHIGAN AGREEMENT" means the Materials Transfer and Intellectual
Property Agreement between Aviron and Michigan dated February 24, 1995, as
amended and attached hereto as Schedule 1.41.
1.42 "NET SALES" means the sum of all amounts actually received and all
other consideration actually received (or, when in a form other than cash or its
equivalent, the fair market value thereof when received) by Wyeth-Ayerst and its
Affiliates from persons or entities due to or by reason of the sale,
distribution or use of Finished Product in the Territory, less the following
deductions and offsets, but only to the extent such sums are otherwise included
in the computation of Net Sales, or are paid or credited by Wyeth-Ayerst and its
Affiliates and not otherwise reimbursed:
(a) [***] in such amounts as [***];
(b) any tax, excise, or other governmental charges upon or
measured by the production, sales, transportation, delivery or use of said
Finished Product contained therein;
(c) [***] other than those described above;
(d) [***] (to the extent that the foregoing [***] do not exceed
[***] of the sum of all amounts actually received and all other consideration
actually received for the Product (or, when in a form other than cash or its
equivalent, the fair market value thereof when received));
(e) amounts [***] and
(f) taxes paid by Wyeth-Ayerst or its Affiliates to the United
States Government or an instrumentality thereof under 42 U.S.C. 300 aa-1 et seq.
or other similar legislation, or to a State of the United States, insuring
against liability arising out of the manufacture, use or sale of Finished
Product by Wyeth-Ayerst or its Affiliates.
Sales of Finished Product intended for resale to Third Parties, and made
internally amongst Wyeth-Ayerst and its Affiliates or sublicensees shall not be
deemed sales for purposes of calculating "Net Sales" (however the resale by the
recipient shall be included in the calculation of "Net Sales" and subject to
royalties).
1.43 [***] means the sale or distribution of [***] in the Territory for
use in [***] other than pursuant to a [***].
1.44 [***] means either (a) a [***] (which may include, e.g., a [***]),
(b) a [***] or (c) any other [***] determined by Aviron to be useful in [***].
1.45 [***] means [***] other than the [***] for which Aviron intends to
[***] in the Territory and to [***] during the Co-Promotion Term, e.g., [***].
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1.46 "PATENT" means patents, applications for patent, provisional
applications for patent, and any patents issuing therefrom (including any
divisions, continuations, continued prosecution applications and
continuations-in-part thereof), and reexamination certificates, reissue patents,
patent extensions and patent term restorations.
1.47 "PERSON" means an individual, corporation, partnership trust or
unincorporated organization.
1.48 "PLA" means the Product Licensing Application/Establishment
Licensing Application or Biologics License Application for the Product in the
Field, and any supplements thereto.
1.49 "PRIMARY BRAND TRADEMARK" means FluMist(TM) and FluEnz(TM), as well
as any brand names combining FluMist or FluEnz with other words, e.g. "Pediatric
FluMist."
1.50 "PRODUCT" means Aviron's live, attenuated, intranasally delivered,
cold adapted influenza vaccine [***] including, but not limited to, the [***]
provided, however, that "Product" specifically excludes any [***] unless and
until [***] pursuant to Section [***] "Product" also specifically excludes: (a)
any influenza vaccine Controlled by Aviron which is solely based upon or derived
from [***] or other technologies of Aviron; (b) any product comprising Aviron's
live, attenuated, intranasally delivered, cold adapted influenza vaccine [***]
in combination with any other vaccine or vaccines; and (c) any product in which
a viral vector [***] is used to deliver a vaccine or other heterologous gene
sequence for use in the prevention, mitigation or cure of influenza.
1.51 "PRODUCT LABELING" means (a) the FDA full prescribing information
for the Product, including any required patient information, and (b) all labels
and other written, printed or graphic matter upon any container, wrapper or any
package insert or outsert utilized with or for the Product.
1.52 "PRODUCT PROMOTIONAL MATERIALS" means all sales representative
training materials and all written, printed, graphic, electronic, audio or video
matter, including but not limited to journal advertisements, sales visual aids,
leave items, formulary binders, reprints, direct mail, direct-to-consumer
advertising, internet postings, broadcast advertisements, and sales reminder
aids (for example, scratch pads, pens and other such items) intended for use or
used by a Party in connection with any Promotion of the Product, but excluding
Product Labeling.
1.53 "R&D EXPENSES" means the fully-loaded costs, but excluding
general corporate overhead, incurred by a Party or for its account, [***] by
either Party during the term of the Agreement [***], and ongoing Product support
[***] which are consistent with the Development Plan and budget and are
specifically attributable to the Product in the Field. "R&D Expenses" shall
include the out-of-pocket payments to Third Parties incurred by a Party in
carrying out the functions described in the previous sentence.
1.54 "REGULATORY APPROVALS" means any approvals (including, but
not limited to, PLA approval, labeling, pricing and reimbursement approvals),
product, biologic and/or
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establishment licenses, registrations or authorizations of any federal, state or
local regulatory agency, department, bureau or other governmental entity,
necessary for the commercial manufacture, use, storage, importation, export,
transport or sale of the Product in the Field in the Territory.
1.55 "SALES AND MARKETING EXPENSES" means the costs incurred by a Party
in the market development and/or Promotion of the Product consistent with its
activities under the Commercialization Plan. Sales and Marketing Expenses shall
consist of (a) the following costs of the field sales force and marketing
personnel: salaries, bonus, benefits, sales force automation, and basic overhead
and personnel expenses (telephone, supplies, postage, meetings, travel, and
voice mail), including all information technology; (b) the costs of establishing
and maintaining an electronic commerce infrastructure to Promote and or sell the
Product under this Agreement; and (c) out-of-pocket payments to Third Parties
incurred by such Party and specifically attributable to such Party's performance
under the Commercialization Plan.
1.56 "SIGNING DATE" shall be the date first set forth on page 1 of this
Agreement.
1.57 "SUPPLY AGREEMENT" means that certain FluMist Supply Agreement
entered into between the Parties as of the Signing Date.
1.58 "TARGET POPULATION" means the target populations for which the
Parties anticipate that the Product may receive Regulatory Approval, consisting
of (a) the healthy pediatric population (children aged 1-17 or any subset
thereof), (b) the at-risk pediatric population (children aged 1-17 or any subset
thereof), (c) the healthy adult population (persons from 18-64 years of age),
(d) any at-risk adult population (persons from 18-64 years of age), and (e) the
elderly population (all persons from 65 years of age and up).
1.59 "TERRITORY" means the United States and its territories and
possessions, and the Commonwealth of Puerto Rico.
1.60 "THIRD PARTY" means any entity other than Aviron or Wyeth-Ayerst
and their respective Affiliates.
1.61 "TRADEMARKS" means those trademarks and trade names, whether or not
registered in the Territory (including the Primary Brand Trademark), trade dress
and packaging which (a) are owned by either Party, and which (other than trade
dress and packaging), and (b) are applied to or used in connection with the
Product or any Product Promotional Materials.
1.62 "WYETH-AYERST KNOW-HOW" means any Information owned or Controlled
by Wyeth-Ayerst either (a) as of the Effective Date, or (b) during the term of
this Agreement, that is useful or necessary in the clinical development,
Regulatory Approval, commercialization, marketing or manufacture of the Product
for use in the Field in the Territory. "Wyeth-Ayerst Know-How" shall not include
any Information in the Joint Technology.
1.63 "WYETH-AYERST PATENTS" means (a) those Patents owned or Controlled,
as of the Effective Date or thereafter, by Wyeth-Ayerst or its Affiliates that
cover the manufacture, making of, use, sale, offer for sale or importation of
the Product in the Field and in the Territory (which as of the Signing Date
consist of those Patents listed on Schedule 1.63 hereto, as may be
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amended from time to time); and (b) any Patents claiming any Invention owned
solely by Wyeth-Ayerst pursuant to Section 15.1(b) that cover the manufacture,
making of, use, sale, offer for sale or importation of the Product.
"Wyeth-Ayerst Patents" shall not include any Joint Patents.
1.64 "WYETH-AYERST RESULTS" shall have the meaning ascribed in Section
15.1.
ARTICLE 2
SCOPE; MANAGEMENT
2.1 SCOPE. The purpose of this Collaboration is to establish a vehicle
through which the Parties shall collaboratively market and Co-Promote the
Product in the Field during the Co-Promotion Term, so as to maximize sales of
the Product in the Territory through Wyeth-Ayerst's existing sales force and
through a sales and marketing organization to be developed at Aviron.
Furthermore, the Parties shall collaborate on manufacturing and regulatory
strategies and procedures in order to maximize supply and obtain requisite
Regulatory Approval for the Product in an expeditious manner. The Parties will
also collaborate with respect to the clinical trials necessary or useful to
increase the populations to which the Product may be administered, and to expand
the label claims of the Product, in the Field.
2.2 MANAGEMENT OF THE COLLABORATION. The Parties intend to manage the
Collaboration primarily through two committees: The Joint Commercialization
Committee (the "JCC"), which will generally oversee the Collaboration and will
specifically oversee the promotional, marketing and sales activities of the
Parties in the Territory pursuant to the Commercialization Plan (as further
described in Article 3), and the Joint Development Committee (the "JDC"), which
will oversee the management of the clinical development, regulatory strategy and
manufacture of Product in the Territory, pursuant to the Development Plan (as
further described in Article 4) (collectively, the "Committees"). It is the
intent of the Parties, in working together to develop and commercialize the
Product, to assign responsibilities for the various operational aspects of the
Collaboration to those portions of their respective organizations which have the
appropriate resources, expertise and responsibility for such functions. The
Parties will use Commercially Reasonable Efforts and cooperate with one another
in carrying out their respective obligations hereunder and as set forth further
in the Development Plan and the Commercialization Plan.
2.3 COMPOSITION AND CONDUCT OF THE COMMITTEES. The Parties shall
designate their representatives to the Committees within ten (10) days after the
Effective Date. Each Party shall designate three (3) representatives to the JCC,
and two (2) representatives to the JDC. Each member of each Committee shall have
one vote. Wyeth-Ayerst shall also appoint an employee of AHPC's Whitehall-Robins
Healthcare Division as a non-voting representative to the JCC. The Parties will
endeavor to designate representatives with the appropriate skills necessary to
deal with the issues before them. The membership of the JCC and the JDC may
overlap. An alternate such member designated by a Party may serve temporarily in
the absence of a permanent member designated by such Party. Each Party shall
designate one of its representatives to each Committee as a Co-Chair of such
Committee. Each Co-Chair of a
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Committee will be responsible for the agenda and the minutes of alternating
meetings of such Committee. Each Party shall bear its own costs of participation
in each Committee.
2.4 MEETINGS OF THE COMMITTEES. Each Committee:
(a) shall hold meetings at such times and places as shall be
determined by a majority of the entire membership of such Committee (it being
expected that meetings will alternate between the Mountain View, CA office of
Aviron and the Radnor/St. Davids, PA office of Wyeth-Ayerst) but in no event
shall such meetings be held in person less frequently than once every three (3)
months;
(b) may conduct meetings in person or by telephone or video
conference or other means, provided that: (i) except by mutual consent of the
Co-Chairs, meetings by telephone conference shall not reduce the number of
meetings in person specified in paragraph (a) above; and (ii) any decision made
during a telephone conference meeting is evidenced in writing signed by one of
the members of such Committee from each of the Parties;
(c) by mutual consent of the representatives of each Party, such
consent not to be unreasonably withheld, either Party may invite other personnel
of their organization to attend appropriate meetings of the Committee;
(d) shall keep minutes reflecting actions taken at meetings;
(e) may act without a meeting if prior to such action the
Committee members agree regarding such action and a written consent thereto is
signed by the Co-Chairs of the Committee; and
(f) may amend or expand upon the foregoing procedures for its
internal operation by unanimous written consent.
2.5 LIMITATIONS OF COMMITTEE POWERS. Neither Committee shall have any
power to amend this Agreement and shall have only such powers as are
specifically delegated to them hereunder.
2.6 AUTHORITY TO CALL MEETINGS. Notwithstanding the regular meeting
schedule of the respective Committees, a meeting of either Committee may be
called by either Party on ten (10) days written notice to the other, unless such
notice is waived by the other Party. In the event of any meeting called pursuant
to a notice under this Section 2.6, the Party calling the meeting shall provide
an agenda for the meeting together with the information that such Party believes
is relevant for the items to be discussed. Neither Party shall call more than
four (4) additional meetings per Calendar Year for each Committee under this
Section 2.6 without the other Party's consent. The Party not calling the meeting
under this Section 2.6 shall select the location for the meeting.
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ARTICLE 3
JOINT COMMERCIALIZATION COMMITTEE
3.1 FUNCTIONS AND POWERS OF THE JOINT COMMERCIALIZATION COMMITTEE. The
Joint Commercialization Committee shall perform the following functions:
(a) determine the overall commercialization strategy for the
Product in the Territory;
(b) coordinate the Parties' activities hereunder;
(c) communicate at least twice per each Calendar Year with the
International Commercialization Committee (as defined in the International
Agreement) in order to coordinate the Parties' activities under this Agreement
and under the International Agreement so as to optimize sales of the Product
globally.
(d) approve plans and budgets for the Collaboration, all based
on the principles of prompt and diligent development of the Product consistent
with good biological practices and the maximization sales of the Product in the
Field and in the Territory.
(e) prepare, and update and amend as necessary, the
Commercialization Plan, as described in Section 7.2;
(f) review the financial performance of the Product in the
Territory;
(g) review and approve material agreements with Third Parties to
be made by either or both Parties that cover the marketing or sales of the
Product in the Field and in the Territory;
(h) review and comment on the Development Plan, as modified from
time to time;
(i) at its discretion, form and subsequently disband
subcommittees with appropriate representation from each Party; and
(j) perform such other functions as appropriate to further the
purposes of this Agreement as mutually determined by the Parties.
Any subcommittee established by the JCC shall have appropriate
representation of each Party and may include representatives of a Party who are
not members of the JCC. Any such subcommittee shall be subject to the provisions
of paragraphs (b) through (e) of Section 2.4 and shall report its actions
promptly to the JCC. At the request of either Party at any time, any such
subcommittee shall be dissolved and its powers and functions returned to the
JCC.
3.2 JOINT COMMERCIALIZATION COMMITTEE ACTIONS. No business shall be
transacted at any meeting of the JCC unless a quorum of members is present at
the time when the meeting proceeds to business. A quorum shall be at least four
(4) members present in person or by their
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alternate, two (2) of whom must be representatives appointed by Wyeth-Ayerst and
two (2) representatives appointed by Aviron. Actions by the JCC pursuant to this
Agreement shall be taken only with [***] of the representatives of both Parties
on such committee. If the JCC fails to reach agreement on any matter before it
for decision within ten (10) days, the matter shall be referred for resolution
in accordance with Article 20 hereof.
ARTICLE 4
JOINT DEVELOPMENT COMMITTEE
4.1 FUNCTIONS AND POWERS OF THE JOINT DEVELOPMENT COMMITTEE. The Joint
Development Committee shall perform the following functions:
(a) Oversee and coordinate the clinical development of the
Product in the Territory (including without limitation, review of proposals to
commence or stop a clinical trial) pursuant to the Development Plan;
(b) Prepare the Development Plan (as described in Section 6.3),
and any necessary amendments thereto, for the JCC's review and approval; and
(c) Oversee and provide input to Aviron's efforts in the
regulatory affairs regarding and the manufacture and supply of Product for sale
in the Territory.
4.2 JOINT DEVELOPMENT COMMITTEE ACTIONS. No business shall be transacted
at any meeting of the JDC unless all members are present at the time when the
meeting proceeds to business. Actions by the JDC pursuant to this Agreement
shall be taken only with the [***] of the representatives of both Parties on
such committee. If the JDC fails to reach agreement on a matter before it for
decision within ten (10) days, the matter shall be referred for resolution to
the JCC, subject to Section 3.2.
ARTICLE 5
LICENSES
5.1 LICENSE GRANT WITHIN THE TERRITORY. Subject to the conditions and
limitations set forth in this Agreement, Aviron hereby grants to Wyeth-Ayerst
(a) the exclusive license, under the Aviron Patents, the Aviron Know-How and
Aviron's interest in any Joint Technology; and (b) the exclusive sublicense,
under Aviron's rights under the Michigan Agreement, in each case solely to
manufacture, to the extent set forth in the Supply Agreement, develop,
distribute, use, import, offer for sale and sell the Product in the Territory
for use in the Field during the Co-Promotion Term. Aviron shall retain all
rights under the Aviron Patents, the Aviron Know-How and Aviron's interest in
any Joint Technology, and under the Michigan Agreement, that are necessary or
useful to Aviron's performance of its rights and obligations under this
Agreement and the Supply Agreement, or that relate to the manufacture of the
Product within the Territory
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that is to be used or sold in territories for which Wyeth-Ayerst or its
Affiliates do not have a license to use or sell the Product.
5.2 LICENSE GRANT TO AVIRON. Subject to the conditions and limitations
set forth in this Agreement, Wyeth-Ayerst hereby grants to Aviron the exclusive,
paid-up license, under the Wyeth-Ayerst Know-How, the Wyeth-Ayerst Patents, and
Wyeth-Ayerst's interest in any Joint Technology, solely to manufacture, to the
extent set forth in the Supply Agreement, develop, distribute, make, have made,
use, offer for sale and sell the Product in the Territory for use in the Field
during the Co-Promotion Term. Wyeth-Ayerst shall retain all rights under the
Wyeth-Ayerst Patents, the Wyeth-Ayerst Know-How and Wyeth-Ayerst's interest in
any Joint Technology that are necessary or useful to Wyeth-Ayerst's performance
of its rights and obligations under this Agreement and the Supply Agreement.
5.3 DISTRIBUTION THROUGH OTHERS. Aviron grants Wyeth-Ayerst the right to
distribute Product through its Affiliates or Third Party distributors in the
Territory (but in any event only through distributors performing usual and
customary distribution activities for Wyeth-Ayerst) to the extent that
Wyeth-Ayerst itself otherwise has the right to so distribute such Product in the
Territory for use in the Field during the Co-Promotion Term, provided that
Wyeth-Ayerst may not grant any such distributor a sublicense hereunder to offer
for sale or sell, or repackage, re-import or export the Product.
5.4 JOINT TECHNOLOGY. Wyeth-Ayerst hereby grants to Aviron the exclusive
license, during the Co-Promotion Term, under Wyeth-Ayerst's interest in the
Joint Technology to use, make, have made, import, offer for sale and sell the
Product (i) within and outside of the Field, but outside of the Territory, and
(ii) outside of the Field but within the Territory, with the right to
sublicense. Such license shall be [***] in the event that Aviron [***] the
Parties shall [***] to be [***] of the Product under such [***] as the Parties
may agree upon, [***] of the [***] of such [***] to the manufacture, use or sale
of the Product.
5.5 MICHIGAN RETAINED RIGHTS. Wyeth-Ayerst acknowledges and agrees that
the license granted under Section 5.1 is subject at all times to the Michigan
Agreement, as further set forth in Article 10. Pursuant to the Michigan
Agreement, Wyeth-Ayerst hereby grants to Michigan an irrevocable, royalty-free
license to utilize any "Improvements" (as defined in Section 2.3 of the Michigan
Agreement) to the Product generated by Wyeth-Ayerst in the manufacture, use,
marketing or sale of Products, as set forth in Section 9.4 of the Michigan
Agreement, and subject to the restrictions placed upon Michigan under Section
3.4 of the Michigan Agreement.
5.6 WYETH-AYERST [***]
(a) In order to induce Aviron to grant the exclusive rights
granted under Section 5.1 above, Wyeth-Ayerst hereby agrees that during the
Co-Promotion Term, it shall [***] in the Territory, subject to subsection (b)
below.
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(b) If Wyeth-Ayerst [***] pursuant to [***] and sales of such
[***] do not comprise more than [***] of the overall [***] of such [***] for the
most recent Calendar Year, subsection 5.6 (a) shall not apply to such [***]
provided that Wyeth-Ayerst shall give Aviron written notice that it is [***]
such [***] in the Territory as promptly as possible following such [***].
(c) In the event Wyeth-Ayerst does promote, market and/or sell
[***] as permitted in subsection (b) above, all [***] in the Territory during
the Co-Promotion Term shall be [***] of the Product under this Agreement in
[***] on the [***] the Product under, and as further described in, Section [***]
As used in this subsection (c), [***] of such [***] shall have an equivalent
definition to [***] as defined in Section [***] hereof.
5.7 AVIRON [***]. Aviron shall have the right during the Co-Promotion
Term to undertake the development of and market and sell any [***] subject to
the terms of this Section 5.7. In the event that Aviron does undertake such
development, Aviron shall be solely responsible for the development of such
[***] unless otherwise agreed to in writing by the Parties.
(a) Prior to the first commercial sale of such [***] in the
Territory, Aviron will notify Wyeth-Ayerst in writing. Upon receipt of such
notice, Wyeth-Ayerst shall have a period of thirty (30) days to notify Aviron in
writing whether it desires that such [***] If Wyeth-Ayerst so notifies Aviron
that it does desire that such [***] then:
(i) Such [***] will thereafter be [***] including
without limitation, by [***];
(ii) The Parties shall agree in good faith upon
appropriate [***] to be [***] it for its [***] with respect to such [***] the
[***] under Section [***] and [***] of such [***] in the Territory shall be
[***] Product in [***] under Section [***] and
(iii) Aviron shall retain the exclusive right to [***]
such [***] provided that, if at such time [***] of the [***] (i.e., the [***] as
it [***] prior to the [***] pursuant to subsection (ii) above), and the JDC
confirms that the [***] of such [***] essentially the [***] as, or a [***] to,
that used for the [***] of the [***] of the [***] then [***] of such [***] under
the conditions set forth in [***].
(c) If Wyeth-Ayerst notifies Aviron that it does not desire
that such [***] then Aviron will have no further obligation thereafter to
Wyeth-Ayerst with respect to the [***] which was the subject of the Aviron's
notice to Wyeth-Ayerst, and shall have the right to market and sell the same
outside of the Collaboration, either alone, or with or through a Third Party.
5.8 [***] In the event that, prior to the expiration of the Co-Promotion
Term, Aviron determines that it wishes to grant a Third Party the right to [***]
within the Territory, regardless of whether Aviron intends to solicit such Third
Party or has been solicited by such Third Party, Aviron shall so notify
Wyeth-Ayerst in writing. Upon receipt of such notice, Wyeth-Ayerst shall have a
period of [***] days to deliver to Aviron a written notice of its interest. For
[***] days
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following receipt of Wyeth-Ayerst's notice, the Parties shall engage in
exclusive, good-faith negotiations for the reasonable commercial terms upon
which the [***] would be [***]. The Parties anticipate that such commercially
reasonable terms would include [***] in the [***] relevant [***] regarding [***]
for such [***] and the duration of such collaboration in the [***]. If
Wyeth-Ayerst does not exercise the option granted in this Section 5.8, or if the
Parties have failed to reach agreement on such terms by the end of such [***].
period, then Aviron shall thereafter be free to grant a Third Party such rights
to [***] within the Territory, on terms and conditions which, taken as a whole,
are no less favorable to Aviron than Wyeth-Ayerst's last written offer to Aviron
for such rights. Notwithstanding any other provision of this Section 5.8, Aviron
shall not, nor shall Aviron grant any Third Party the right to, [***] in the
Territory during the Co-Promotion Term, as it may be extended hereunder.
5.9 DEVELOPMENT OF [***] BY AVIRON.
(a) Aviron shall have the right, but not the obligation, to
undertake development of (i) any [***] (ii) any [***] other than [***] or (iii)
any [***] and Aviron shall be solely responsible for the development of such
[***] unless otherwise agreed to in writing by the Parties.
(b) Prior to the [***] in the Territory of [***] any such [***]
or [***] or [***] Aviron will notify Wyeth-Ayerst in writing. Upon receipt of
such notice, Wyeth-Ayerst shall have a period of [***] days to notify Aviron in
writing whether it desires that such [***] be included under the Collaboration.
If Wyeth-Ayerst so notifies Aviron that it does desire that such [***] be
included under the Collaboration hereunder, then:
(i) Such [***] will thereafter be included under this
Agreement, including without limitation, by [***] (for an [***]) or [***] (for
an [***]);
(ii) The [***] set forth in Section [***] shall apply to
such new [***] provided that Wyeth-Ayerst shall not [***] Aviron for the [***]
of any particular [***] (as defined in Section [***]), regardless of the number
of times such [***] the [***] shall apply to such [***] as applied to the [***]
and [***] of such [***] in the Territory shall be [***] with those of any [***]
in calculating [***] under Section [***] and
(iii) Aviron shall retain the exclusive right to [***]
such [***] provided that, if at such time [***] of the [***] (i.e., the [***] as
it [***] prior to the [***] of such [***] pursuant to subsection (ii) above),
and the JDC confirms that the [***] of such [***] essentially the [***] as or
[***] to that used for the [***] of the [***] of the [***] then [***] of such
[***] under the conditions set forth in [***].
(iv) In the event that [***] at such time, in the [***]
of the [***] the Parties shall in good faith amend [***] with respect to an
amended [***] for such [***] so as to reflect the [***] of the Parties in the
[***] provided that the amended [***] shall in no event be [***] set forth in
the unamended [***].
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<PAGE> 17
(c) If Wyeth-Ayerst notifies Aviron that it does not desire
that such [***] be included in the Collaboration hereunder, then Aviron will
have no further obligation thereafter to Wyeth-Ayerst with respect to the [***]
which was the subject of the Aviron's notice to Wyeth-Ayerst, and shall have the
right to pursue the same outside of the Collaboration, either alone or with a
Third Party.
5.10 RESERVATION OF RIGHTS. Aviron hereby reserves all rights under the
Aviron Patents and the Aviron Know-How, and all rights to the Product including
without limitation all intellectual property and trademark rights relating
thereto, not specifically granted to Wyeth-Ayerst hereunder, including without
limitation all rights to the Product outside of the Field and outside of the
Territory, subject to Sections 5.8 and 5.9, and the right to manufacture, or
have manufactured, the Product in the Territory for use in the Territory outside
of the Field and outside of the Territory inside or outside the Field, subject
to the International Agreement.
5.11 WYETH-AYERST PRIOR AGREEMENT WITH MICHIGAN.
(a) PRIOR AGREEMENT. The Parties acknowledge (i) that
Wyeth-Ayerst, prior to the Signing Date, had obtained certain rights to [***]
pursuant to that certain [***] Agreement with Michigan (the "Prior Agreement"),
(ii) that on November 18, 1993, Wyeth-Ayerst terminated the Prior Agreement, and
(iii) that Wyeth-Ayerst retains no rights to [***] except as expressly granted
herein, other than as may be granted to Wyeth-Ayerst by Michigan following
termination of the Michigan Agreement.
(b) WYETH-AYERST REPRESENTATIONS AND WARRANTIES. Wyeth-Ayerst
hereby represents and warrants to Aviron that: (i) Wyeth-Ayerst [***]; and (ii)
Wyeth-Ayerst is otherwise in compliance with all obligations arising under the
Prior Agreement with respect to Wyeth-Ayerst's termination thereof, including
without limitation those arising under Article 14 of the Prior Agreement.
5.12 WYETH-AYERST COVENANT. During the term of this Agreement,
Wyeth-Ayerst shall not promote, manufacture for commercial sale or use, sell,
resell, or otherwise commercialize, nor shall Wyeth-Ayerst assist any Third
Party or engage any Third Party to promote, manufacture for commercial sale or
use, sell, resell, or otherwise commercialize, any live, cold-adapted influenza
vaccine, other than the Product, [***] in any country within or outside of the
Territory; provided that [***] shall have the burden of (a) [***] and (b)
providing [***]. Aviron shall [***] under this provision only to the extent that
such [***] prior to [***] of the [***] described in [***].
ARTICLE 6
PRODUCT DEVELOPMENT
6.1 CURRENT STATUS. Prior to the Effective Date, Aviron has (a)
independently developed the Product for use in the Field, including conducting
Phase III trials and data review; and (b) intends to file the PLA for use of the
Product for immunization against influenza and its
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<PAGE> 18
associated complications in individuals 12 months to 64 years of age, [***], and
for the prevention of [***] febrile illness associated with influenza.
6.2 PRODUCT DEVELOPMENT. Commencing as of the Effective Date, and during
the Co-Promotion Term of this Agreement, the Parties shall collaborate with
respect to the clinical, commercial, regulatory and manufacturing development
the Product in the Field and in the Territory in accordance with the Development
Plan, and as directed by the JDC. Aviron (or its agents or contractors approved
in advance by the JDC) shall be responsible for undertaking and implementing all
clinical development activities with respect to the Product. Wyeth-Ayerst (or
its agents or contractors approved in advance by the JDC) shall be responsible
for undertaking and implementing all development activities assigned to it
pursuant to the Development Plan. Each Party shall comply with all GLP, GCP and
GMP in the development of the Product hereunder. Aviron shall have the right to
undertake any development activities it deems necessary to develop the Product
outside of the Field, at its own expense.
6.3 DEVELOPMENT PLAN. The clinical development of the Product in the
Territory shall be governed by a comprehensive development plan and budget ("the
Development Plan"). The Development Plan shall contain a detailed and specific
plan and budget for all clinical development proposed for the Product in the
Territory during the Co-Promotion Term. Promptly after the Effective Date, the
JDC shall complete the initial Development Plan, and submit it to the JCC for
its review and approval. During the term of the Agreement, the JDC shall
periodically update the Development Plan as necessary, including any necessary
updates to the budget, subject to the approval of the JCC. In preparing and, if
necessary, revising the budget, the JDC shall be responsive to the regulatory
requirements to achieve approval of, or to support any approved, label claims.
6.4 SHARING OF R&D EXPENSES. A preliminary budget of the projected R&D
Expenses for the development activities to be conducted under the Development
Plan following the Effective Date is set forth in Schedule 6.4 hereto. The
Parties shall [***] all R&D Expenses expended in accordance with the Development
Plan and budget, as follows: Following the first calendar quarter of 1999, and
following each calendar quarter thereafter during the Co-Promotion Term, [***]
R&D Expenses for such calendar quarter. Such invoices shall be paid within
thirty (30) days of receipt.
6.5 REGULATORY APPLICATIONS.
(a) Aviron and its contractors will be responsible for preparing
and filing and shall own all applications for Regulatory Approval of the Product
in the Territory, including the PLA. Aviron or its contractor will file all such
applications in its own name and shall be responsible for prosecuting such
applications.
(b) Aviron shall have the right to use all data and reports
generated in the conduct of the Development Plan for the filing of applications
for regulatory approval of the Product outside the Field and/or the Territory,
without payment to Wyeth-Ayerst, and with the right to allow a Third Party
licensee the right to so use such data and reports. However, where
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<PAGE> 19
Aviron wishes to allow a Third Party such right of use, the Parties shall in
good faith agree upon a [***] to allow it to [***].
6.6 SUPPLEMENTS. Prior to supplementing the Regulatory Approvals or
filing additional and supplemental applications for Regulatory Approvals, Aviron
shall provide such proposed supplemental application to the JDC [***]. The JDC
shall notify Aviron within [***] days of its receipt of such application [***]
such application. If the JDC [***] Aviron shall then be free to file such
application. If the JDC [***] and if it [***] such supplemental application
within [***] days of its receipt of such application, Aviron shall thereafter be
free to file the originally proposed supplemental application.
6.7 NOTIFICATION OF WYETH-AYERST AS DISTRIBUTOR. Aviron shall comply
with all applicable FDA regulations and guidelines that require the
identification of Wyeth-Ayerst as the distributor of the Product in the
Territory, and shall take those actions that are necessary to update the
Regulatory Approvals to reflect such fact.
6.8 REGULATORY MEETINGS AND CORRESPONDENCE.
(a) At least one (1) representative of each Party shall be given
the opportunity to participate in any meetings or substantive discussions with
the FDA or any other regulatory authority which relate to the Product in the
Territory, including, but not limited to, any discussions regarding Product
Promotional Materials. To the extent Aviron receives any communications from the
FDA or such other regulatory authority relating to the Product in the Field in
the Territory, Aviron shall notify Wyeth-Ayerst in a timely manner.
(b) Subject to Sections 6.8(a) and (c) hereof, each Party shall
promptly notify the other Party of, and provide such other Party with, a copy of
any correspondence or other reports or complaints submitted to or received by
the first Party from the FDA, any other regulatory authority, or other Third
Party claiming that any Product Promotional Materials are inconsistent with the
Product Labeling or are otherwise in violation of the FD&C Act or the PHS Act.
(c) Notwithstanding anything herein to the contrary, Aviron or
its agent shall have exclusive responsibility for correspondence and for any
official communications with the FDA or any other regulatory authority regarding
the Product in the Field in the Territory.
(d) Aviron shall provide Wyeth-Ayerst with a copy of any
documents or reports filed with the FDA or any other regulatory authority during
the Co-Promotion Term under this Section 6.8 with respect to the Product in the
Field in the Territory.
6.9 RECORDS. Each Party shall keep complete, accurate and authentic
accounts, notes, data and records, in good scientific manner, of all activities
performed by it under the Development Plan.
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<PAGE> 20
ARTICLE 7
CO-PROMOTION AND MARKETING
7.1 PRINCIPLES OF CO-PROMOTION. Wyeth-Ayerst shall have the exclusive right to
commercialize the Product in the Field in the Territory during the Co-Promotion
Term, subject to Aviron's right to Co-Promote the Product with Wyeth-Ayerst in
the Territory during the Co-Promotion Term, as further detailed in the
Commercialization Plan. Aviron and Wyeth-Ayerst shall each use Commercially
Reasonable Efforts to Co-Promote and commercialize the Product in the Territory
at all times during the Co-Promotion Term. As appropriate, [***] for the Product
in various [***] and be [***] with respect to [***] for the Product, provided
that [***] of the Product in the Territory.
7.2 COMMERCIALIZATION PLAN.
(a) The JCC shall develop and approve a rolling multi-year plan
and budget for commercializing the Product (the "Commercialization Plan"). The
Commercialization Plan shall include a comprehensive market development,
marketing, sales, supply and distribution strategy, including an overall budget
for anticipated marketing, promotion and sales efforts in the calendar year. The
Commercialization Plan will specify which Target Populations and distribution
channels each Party shall devote its Co-Promotion efforts towards, the personnel
and other resources to be devoted by each Party to such efforts, the number and
positioning of details to be performed by each Party, as well as market and
sales forecasts and related operating expenses, for the Product in the
Territory, and budgets for projected Commercialization Expenses and Sales and
Marketing Expenses. In preparing the Commercialization Plan, the JCC will take
into consideration factors such as market conditions, regulatory issues and
competition. The Commercialization Plan will include the general strategy and
operating guidelines for the commercialization of the Product.
(b) It is the intention of the Parties that Aviron's sales and
marketing organization shall concentrate on a specific market segment or
segments, to be agreed upon by the JCC, and that Aviron's marketing efforts
shall include the development of an electronic-based selling infrastructure to
support sales of the Product. It is also the intention of the Parties that,
assuming regulatory approval therefor, Wyeth-Ayerst shall focus its initial
sales and marketing efforts of the Product to the healthy pediatric Target
Population, giving the Product first detail position for the Flu Season in which
occurs the Launch Date. Further, the Parties intend that, if the Product is
approved in the Field in the Territory for the adult Target Population, then
Wyeth-Ayerst shall provide (including hiring, if necessary) sufficient personnel
in its sales and marketing organization to market and sell the Product to such
adult Target Population.
(c) The first Commercialization Plan shall be prepared and
approved as promptly as possible after the Effective Date and shall thereafter
be immediately in effect. Annually thereafter, the JCC shall update and amend
the Commercialization Plan with such process as the JCC shall determine.
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7.3 SALES AND DISTRIBUTION; RECALLS. During the Co-Promotion Term,
Wyeth-Ayerst shall be responsible for:
(a) Booking sales and distribution of all of the Product
hereunder and performance of related services. If Aviron receives any orders for
the Product in the Territory during the Co-Promotion Term, it shall promptly
refer such orders to Wyeth-Ayerst.
(b) Handling and implementing all voluntary recalls and market
withdrawals of the Product. Aviron will make available to Wyeth-Ayerst, upon
request, all of Aviron's pertinent records which Wyeth-Ayerst may reasonably
request to assist it in effecting any recall or market withdrawals. Any and all
costs and expenses incurred by Wyeth-Ayerst in the conduct of any such recall or
market withdrawal of the Product shall be [***] except that if such recall or
market withdrawal: (i) was the result of the failure of [***] to comply with (1)
its obligations under this Agreement, or (2) its obligations under the Supply
Agreement, to the extent such obligations apply to [***] under this Agreement;
or (ii) was [***] and [***] to be [***] then [***] of such recall or market
withdrawal.
(c) Handling all aspects of order processing, invoicing and
collection, inventory and receivables; provided, however, that Aviron shall have
the right to a copy (in electronic form), of all such ordering and invoicing
information.
(d) Providing customer support, including handling medical
queries, and performing other functions consistent with consumer practice for
vaccines and consistent with the Commercialization Plan.
7.4 COMMERCIALIZATION EXPENSES. [***] shall be responsible for all
Commercialization Expenses in such amounts as are set forth in the
Commercialization Plan. [***] for any Commercialization Expenses incurred by
[***] or its agents and Affiliates hereunder, as [***] within thirty (30) days
of receiving such invoice commencing as early as the first quarter of 1999. The
Parties anticipate that the Commercialization Expenses for 1999 shall be
approximately [***] or more.
7.5 COMMERCIALIZATION EXPENSE COMMITMENT. The Parties anticipate that
[***] shall expend between [***] in Commercialization Expenses with respect to
pre-Launch activities and post-Launch activities through the third anniversary
of the Launch Date, except as otherwise determined by the JCC in light of market
conditions at such time, taking into account such factors as market awareness
and Finished Product supply levels. Such amounts may be [***]
7.6 SALES AND MARKETING EXPENSES.
(a) [***] shall be responsible for all of its own Sales and
Marketing Expenses incurred hereunder in such amounts as are set forth in the
Commercialization Plan.
(b) [***] for its reasonable Sales and Marketing Expenses
incurred hereunder as follows: [***] following the end of each calendar quarter
for [***] during such calendar
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<PAGE> 22
quarter. At the time [***] due for each quarter, as set forth in Section [***]
amount equal to [***] during such quarter, provided that [***] shall not be
obligated [***] for more than [***] per Calendar Year under this subsection (b).
All [***] under this subsection (b) shall be used exclusively for the
establishment, maintenance and expansion of [***] marketing and sales
infrastructure for the Co-Promotion of Product.
7.7 [***] In the event that [***] (as defined [***] of the [***] shall
have the right to [***] under Section [***] and its own [***] under the
Commercialization Plan with the agreement of the JCC.
7.8 PROMOTIONAL AND ADVERTISING MATERIALS.
(a) Consistent with applicable law, the JCC shall have the right
to approve any and all Product Promotional Materials, pursuant to mutually
agreed upon procedures and timelines, which, to the extent practicable, shall be
coordinated with both Wyeth-Ayerst's clearance procedures (i.e., Wyeth-Ayerst's
Copy Clearance Committee) and Aviron's clearance procedures. The Parties shall
establish a tracking system or utilize Wyeth-Ayerst's tracking system (if
appropriate and mutually agreed), for Product Promotional Materials to ensure
that all such Product Promotional Materials are accurately tracked and submitted
to the FDA.
(b) Aviron will file all Product Promotional Materials with the
FDA.
(c) All Product Promotional Materials used by either Party in
the Co-Promotion of the Product in the Territory shall contain (i) the Primary
Brand Trademark, and the Aviron corporate name and logo, and (ii) the
Wyeth-Ayerst Trademarks, corporate name and logo, in positions of equivalent
prominence and frequency, subject to Section 7.8(d) below, subject to applicable
law.
(d) Aviron shall own all right, title and interest in and to the
Product Promotional Materials, including all copyrights appurtenant thereto,
except for any Trademarks owned by Wyeth-Ayerst that are used by Wyeth-Ayerst
prior to or during the Co-Promotion Term in connection with products other than
the Product, which shall remain the property of Wyeth-Ayerst. Aviron hereby
grants to Wyeth-Ayerst the right, during the Co-Promotion Term, to use all
Product Promotional Materials in connection with its Co-Promotion of the
Product.
7.9 VOLUNTARY PRODUCT RECALLS. If either Party believes that a voluntary
recall or market withdrawal of the Product is necessary, such Party shall notify
the other Party within forty-eight (48) hours of its determination and both
Parties shall cooperate to allow such recall or market withdrawal to occur under
the direction of Wyeth-Ayerst (as set forth in Section 7.3(b)). In the event of
a dispute about whether to recall a Product, Wyeth-Ayerst shall, after
consultation with Aviron, have the final authority with respect to such matters,
which authority shall be exercised reasonably and in good faith and subject to
Section 7.3(b).
7.10 REGULATORY OBLIGATIONS. Aviron shall be solely responsible for all
activities in connection with the Regulatory Approvals for the Product in the
Territory, including without limitation communicating and preparing and filing
all reports (including without limitation
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<PAGE> 23
adverse drug experience reports) with the FDA. Wyeth-Ayerst agrees to cooperate
with Aviron as requested in preparing and filing all such reports. Each Party
agrees to comply with the provisions of Section 17.3 hereof. [***] with
obtaining and maintaining the Regulatory Approvals including, without
limitation, any [***] which must be [***] used in the [***] Product by or on
behalf of [***] provided that [***] shall be solely responsible for, and shall
[***] obtaining and maintaining any [***] used in the [***] Product by or on
behalf of [***]
7.11 CO-PROMOTION RESPONSIBILITIES. During the Co-Promotion Term, each
Party shall, as part of its duties hereunder, have responsibility for performing
the following activities:
(a) Aviron and Wyeth-Ayerst shall each supervise, train and
maintain such competent and qualified sales representatives as may be required
to Promote and detail the Product as provided in the Commercialization Plan,
such training to include a reasonable proficiency examination for all sales
representatives who will be engaged in detailing.
(b) Each Party shall in all material respects conform its
practices and procedures relating to the marketing, detailing and Co-Promotion
of the Product in the Territory to all applicable laws, regulations and
guidelines, including the FD&C Act, the Prescription Drug Marketing Act, the
Federal Health Care Programs Anti-Kickback Law, 42 U.S.C. 1320a-7b(b), the
Pharmaceutical Research and Manufacturers of America ("PhRMA") Code of
Pharmaceutical Marketing Practices (the "PhRMA Code") and the American Medical
Association ("AMA") Guidelines on Gifts to Physicians from Industry (the "AMA
Guidelines"), as the same may be amended from time to time, and shall promptly
notify the other Party of and provide the other Party with a copy of any
correspondence or other reports with respect to the marketing, detailing and
Co-Promotion of the Product submitted to or received from the U.S. Department of
Health and Human Services or its components (including the FDA and the Office of
the Inspector General), PhRMA or the AMA relating to such laws, regulations and
guidelines.
(c) Each Party shall in all material respects conform its
practices and procedures relating to educating the medical community in the
United States with respect to the Product to the Accreditation Council for
Continuing Medical Education ("ACCME") Standards for Commercial Support of
Continuing Medical Education (the "ACCME Standards") and any applicable FDA
regulations or guidelines, as the same may be amended from time to time, and
promptly notify the other Party of and provide the other Party with a copy of
any correspondence or other reports submitted to or received from the ACCME with
respect to the Product relating to the ACCME Standards or such FDA regulations.
(d) On or before the forty-fifth (45th) day of each calendar
quarter, commencing with the second calendar quarter after the Launch Date, each
Party shall furnish to the other Party a summary of information coming to such
Party's attention in the Territory concerning introductions and promotional
activities of products competitive with the Product, and of any serious
complaints regarding the Product (other than those described in Section 17.2),
it being understood that there is no obligation on either Party to solicit such
information.
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(e) Each Party shall provide the other Party with copies of any
communications, including communications sent electronically or by voice mail,
disseminated by such Party generally to its sales representatives Co-Promoting
the Product in the Territory relating to marketing strategy for the Product or
the terms or subject matter of this Agreement.
(f) In connection with the Co-Promotion and detailing of the
Product hereunder, Wyeth-Ayerst and Aviron shall each make no statement,
representation or warranty, oral or written, to Third Parties, concerning the
Product for any approved indication for the Product inconsistent with, or
contrary to, the Product Labeling or Product Promotional Materials.
(g) If applicable, and if product sampling is approved by the
JCC, Wyeth-Ayerst and Aviron each shall in all material respects conform its
practices and procedures relating to sampling in the Territory to sampling
practices and procedures in compliance with the Prescription Drug Marketing Act
of 1987, as the same may be amended from time to time.
(h) Each Party shall give prompt written notice to the other
Party of the date on which its sales representatives commence Co-Promoting the
Product in the Territory.
(i) The target and minimum number of details to be conducted by
Wyeth-Ayerst hereunder, and set forth in the Commercialization Plan, are subject
to a downward adjustment as agreed from time to time by the JCC to reflect (1)
any allocation of details by the JCC to an Aviron sales force, or (2) the impact
of FDA imposed suspension of details, withdrawal of Product Promotional
Materials, or similar FDA action.
ARTICLE 8
MANUFACTURE AND SUPPLY
8.1 SUPPLY OF [***] During the Co-Promotion Term, Aviron shall
manufacture and supply, or have manufactured and supplied, Finished Product
[***] to Wyeth-Ayerst for sale in the Field in the Territory hereunder. The
terms of such manufacture and supply shall be governed by the Supply Agreement.
8.2 SUPPLY OF [***] During the Co-Promotion Term, [***] to manufacture
and supply [***] as set forth in the Supply Agreement. Aviron shall (a)
manufacture and supply, or have manufactured, or supplied, [***] for the [***],
(b) manufacture and supply, or have manufactured and supplied [***] and (c)
[***] Finished Product [***] all as set forth in the Supply Agreement.
8.3 SUPPLY GOAL PAYMENTS. Wyeth-Ayerst shall pay the following amounts
to Aviron within fifteen (15) days of receiving written notice that Aviron has
supplied the indicated quantity of Finished Product [***] to Wyeth-Ayerst during
the Flu Season specified below:
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<PAGE> 25
<TABLE>
<CAPTION>
YEAR QUANTITY SUPPLIED AMOUNT
- ---------------------------------- ---------------- -------
<S> <C> <C>
2nd Flu Season of Co-Promotion Term Lesser of [***] [***]
3rd Flu Season Lesser of [***] [***]
</TABLE>
ARTICLE 9
TRADEMARK MATTERS
9.1 LICENSES.
(a) In order to enable each Party to perform its obligations
hereunder, each Party hereby grants to the other Party a non-assignable,
non-sublicenseable, non-exclusive, royalty-free right and license to use
Aviron's Trademarks and Wyeth-Ayerst's Trademarks, as applicable, in the
Territory solely in connection with the Product Promotional Materials and
Product Labeling during the Co-Promotion Term. Such license shall expire
immediately upon the earlier of (i) termination or cancellation of this
Agreement, or (ii) expiration of Co-Promotion Term; provided, however, that each
Party to the extent applicable hereunder shall thereafter have a reasonable
period, not to exceed [***] months following such termination or cancellation,
within which to use the existing inventory of Product Promotional Materials and
Product Labeling containing any Trademarks of the other Party, consistent with
Section 19.6(b) in the case of Wyeth-Ayerst; and provided further, that upon
such termination or cancellation, Aviron shall thereafter be relieved of its
obligations to display the Wyeth-Ayerst Trademarks on Product Promotional
Materials and Product Labeling printed following such termination or
cancellation.
9.2 VALIDITY OF TRADEMARKS. Each Party acknowledges the validity of the
other Party's right, title and interest in and to its Trademarks and shall not
have, assert or acquire any right, title or interest in or to any of such other
Party's Trademarks, except as otherwise explicitly provided in this Agreement.
9.3 FORM OF USE. Each Party shall use those Trademarks owned by the
other Party only in the forms approved in writing by the other Party, and shall
include where appropriate the designations (R) or (TM) and a statement that the
Trademark is the trademark of the other Party, and other proprietary notices as
are reasonably required by the other Party from time to time. The JCC shall
approve all Product Promotional Materials and Product Labeling, including
without limitation the use of each Party's Trademarks therein. Each Party shall
permit one (1) or more authorized representatives of the other Party, on
reasonable prior notice, at reasonable intervals, during normal business hours
and subject to normal safety and security procedures, to inspect and examine
from time to time, Product Promotional Materials and Product Labeling and the
records of such Party that are related to use of the other Party's Trademarks,
or to use of Product Promotional Materials or Product Labeling.
9.4 NO CONTEST. Wyeth-Ayerst agrees that it will not contest, oppose or
challenge Aviron's ownership of the Primary Brand Trademark. In particular,
Wyeth-Ayerst will not register or attempt to register, or maintain registration
of, the Primary Brand Trademark in any
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<PAGE> 26
jurisdiction nor oppose Aviron's registration of the Primary Brand Trademark,
alone or with other words or designs, in any jurisdiction. If Wyeth-Ayerst uses,
registers, applies to register, or maintains registration of, a licensed mark
that violates its obligations under this Section 9.4, Wyeth-Ayerst agrees, at
Aviron's request, to abandon the use of any such mark and any application or
registration for such mark.
9.5 CONFUSINGLY SIMILAR AND/OR COMBINATION MARKS. Each Party agrees not
to adopt or use any other trademarks, words, symbols, letters, designs or marks
(a) in combination with the other Party's Trademarks in a manner which would
create combination marks, or (b) that would be confusingly similar to the
Primary Brand Trademark, provided that Wyeth-Ayerst may use the Primary Brand
Trademark with other marks or names if such other marks or names are
sufficiently distinctive to avoid the consumer impression that such other marks
or their owners are associated with Aviron.
9.6 REGISTRATION COSTS. Aviron shall be responsible for the payment of
any and all costs relating to registration of the Primary Brand Trademark in the
Territory.
9.7 INFRINGEMENT.
(a) Each Party shall give the other Party notice of any
infringement or threatened infringement of any of such other Party's Trademarks
used in connection with the Product. Each Party shall determine in its sole
discretion what action, if any, to take in response to the infringement or
threatened infringement of that Party's Trademark, other than the Primary Brand
Trademark, which shall be subject to subsection (b) below. In the event that one
Party chooses to take enforcement action in response to the infringement or
threatened infringement of its Trademark, the other Party shall reasonably
cooperate in such enforcement; provided, however, the enforcing Party shall
reimburse the other Party for reasonable expenses incurred by the other Party
that are related to such enforcement.
(b) As to the Primary Brand Trademark only, Aviron shall have
the initial right to institute legal proceedings against such Third Party, which
proceedings shall be at [***] Wyeth-Ayerst shall reasonably coordinate with
Aviron in the prosecution of such proceedings. Should Aviron elect not to
institute proceedings against such Third Party within [***] following a notice
thereof in response to the infringement or threatened infringement of the
Primary Brand Trademark, Wyeth-Ayerst shall then be entitled to institute
proceedings in its own name [***]. Aviron shall reasonably cooperate with
Wyeth-Ayerst in the prosecution of such proceedings.
(c) The Parties shall cooperate in good faith with respect to
all Trademark enforcement actions hereunder, and each Party shall notify the
other Party promptly of all substantive developments with respect to such
Trademark enforcement actions, including, but not limited to, all material
filings, court papers and other related documents. Each Party shall consider the
timely given, reasonable comments and advice of the other Party with respect to
the strategy employed and submissions made relative to any Trademark enforcement
actions. [***] any damages or other monetary relief obtained in connection
therewith.
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9.8 TRADE DRESS, LOGOS, AND THE LIKE. The JCC shall approve all trade
dress, logos, slogans, designs and copyrights used on and in connection with the
Product in the Territory. Aviron shall be the sole owner of all trade dress,
logos, slogans, designs and copyrights specifically developed for or used on or
in connection with the Product.
ARTICLE 10
MICHIGAN AGREEMENT
10.1 SUBLICENSE LIMITATION. Wyeth-Ayerst acknowledges the existence of
Aviron's license under the Michigan Agreement, and acknowledges and agrees that
Aviron may only grant to Wyeth-Ayerst such rights as Aviron is permitted to
grant pursuant to the Michigan Agreement.
10.2 WYETH-AYERST OBLIGATIONS. Wyeth-Ayerst accepts that the following
provisions of the Michigan Agreement are hereby incorporated by reference and
shall be binding upon Wyeth-Ayerst as a "sublicensee" under the Michigan
Agreement (as defined in Section 2.6 of the Michigan Agreement), unless
otherwise agreed by Michigan in writing:
(a) Section 3.5 (U.S. government "march-in" rights);
(b) [***] (obligations and restrictions relating to [***] (as
defined in Section [***] of the Michigan Agreement), products and their
ownership and use);
(c) Section 6.2 (duties of use of a nomenclature system);
(d) Section 6.3 (duties to keep records and rights of
inspection);
(e) Section 8.5 (preference for U.S. manufacturers);
(f) Article 9 (obligations regarding the periodic reporting,
disclosure and grant of rights to certain intellectual property);
(g) Section 13.4 (duties to avoid improper representations or
responsibilities);
(h) Article 14 (obligations to defend, hold harmless and
indemnify Michigan);
(i) Section 14.3 (obligations to retain insurance), as further
specified in Section 10.7 of this Agreement;
(j) Section 15.2 (survival of certain obligations);
(k) Section 15.5 (obligations relating to the return and non-use
of [***] and certain intellectual property and prohibition on the manufacture of
products after termination of the Michigan Agreement);
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<PAGE> 28
(l) Section 15.6 (duties to provide rights to Michigan to
certain intellectual property upon termination of the Michigan Agreement);
(m) Articles 16 and 17 (duties relating to confidential
information and to pre-publication disclosure);
(n) Article 20 (duties to control export); and
(o) Article 22 (duty to restrict use of Michigan's name).
10.3 USE OF AVIRON PRODUCT MATERIALS. Wyeth-Ayerst acknowledges and
agrees that the Aviron Product Materials are proprietary and confidential
materials of Aviron and Michigan, and that access to the Aviron Product
Materials shall be limited to those of its employees reasonably requiring such
access for the purposes set forth in this Agreement, who further will be
required, in writing, to treat the Aviron Product Materials as confidential. In
addition, Wyeth-Ayerst agrees that in the event that [***] other than the Aviron
Product Materials come into its possession, it shall promptly notify Aviron in
writing; provided, however, that although it is not the Parties' intent as of
the Signing Date that [***] under this Agreement, in the event that [***]
Wyeth-Ayerst agrees [***] and shall not [***] upon expiration or termination of
this Agreement, except to the extent [***] pursuant to Section [***]
10.4 WARRANTY DISCLAIMER. Wyeth-Ayerst acknowledges Michigan's warranty
disclaimer and limitation of liability contained in the Michigan Agreement, and
will make no statements, representations or warranties inconsistent with such
warranty disclaimer or limitation of liability.
10.5 SUBLICENSE TERMINATION. The sublicense granted to Wyeth-Ayerst by
Aviron under the Michigan Agreement pursuant to Section 5.1(b) (the "Michigan
Sublicense") shall terminate upon the earlier of (i) termination of the Michigan
Agreement, unless [***] in writing by [***] or (ii) termination or expiration of
the Co-Promotion Term. In the event that the Michigan Sublicense is [***] is
required to [***] and the [***] under this Agreement, [***] shall not [***]
under this Agreement, [***] prior to such [***] the Michigan Sublicense.
10.6 INSURANCE. Prior to any distribution of Aviron Product by
Wyeth-Ayerst in the Territory, Wyeth-Ayerst shall obtain and maintain in effect
a product liability insurance policy providing reasonable coverage for all
claims with respect to such distribution, or, if permitted by Michigan, a
program of self-insurance. Wyeth-Ayerst shall furnish Aviron with a certificate
of currency of such insurance upon request, or, if Wyeth-Ayerst is permitted to
self-insure, Wyeth-Ayerst shall furnish Aviron with appropriate documentation of
such self-insurance as mutually agreed upon by the Parties.
10.7 COOPERATION. The Parties agree to cooperate reasonably with each
other in assisting each Party to comply with its obligations under the Michigan
Agreement as it pertains to such Party's performance of its rights and
obligations under this Agreement.
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10.8 SUBLICENSES. If Wyeth-Ayerst grants any sublicenses to the extent
permitted hereunder, this Article 10 shall be incorporated mutatis mutandis into
such sublicense agreement.
ARTICLE 11
PAYMENTS
11.1 LICENSE FEE. In consideration for the rights granted under this
Agreement, Wyeth-Ayerst shall pay to Aviron a license fee of five million
dollars ($5,000,000), which shall be due and payable upon the Effective Date.
Such payment shall be noncreditable and nonrefundable, and shall be borne solely
by Wyeth-Ayerst.
11.2 OTHER PAYMENTS.
(a) Wyeth-Ayerst shall pay Aviron the following payments within
fifteen (15) business days after Aviron provides written notice, with supporting
documentation, to Wyeth-Ayerst of the achievement of the relevant development
and/or commercialization event for the Product in the Territory (each, an
"Event"), subject to subsection (b) below:
<TABLE>
<CAPTION>
EVENT PAYMENT
------------------------------------------------------------ -------
<S> <C>
(i) FDA's acceptance for filing of the PLA pursuant to Section $10,000,000
351 of the Public Service Act and Part 601 of Title 21,
Code of Federal Regulations
(ii) FDA approval of Product for use in the Field for the first $15,000,000
Target Population
(iii) Determination by the American Academy of Pediatrics/ [***]
Redbook Committee allowing for use of the Product in any
pediatric Target Population
(iv) FDA approval of Product for use in the Field for the second [***]
Target Population
(v) Determination by the Advisory Committee on Immunization [***]
Practices allowing for use of the Product in the adult
or elderly Target Populations
(vi) American College of Physicians or American Academy of [***]
Family Physicians recommendation for use of the Product in
the Field in any Target Population
(vii) FDA approval of Product for use in the Field in third [***]
Target Population
</TABLE>
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<PAGE> 30
<TABLE>
<CAPTION>
EVENT PAYMENT
------------------------------------------------------------ -------
<S> <C>
(viii) FDA approval of labeling claims supporting the use of the [***]
Product for the reduction or prevention of influenza-related
otitis media infection
(ix) FDA approval of PLA for the [***] [***]
</TABLE>
All payments made pursuant to this Section 11.2 shall be noncreditable
and nonrefundable, and shall be borne solely by Wyeth-Ayerst.
(b) The total sum paid for both Event (iv) and Event (vii)
hereunder shall in no case exceed [***]. No payment shall be due for the
occurrence of Event (iv) prior to the second anniversary of the occurrence of
Event (ii), whereupon the payment for Event (iv) shall be made as follows:
(i) If, as of the second anniversary of the occurrence
of Event (ii), both Event (iv) and Event (vii) have occurred, then no payment
shall be due thereafter for the occurrence of Event (iv).
(ii) If, as of the second anniversary of the occurrence
of Event (ii), Event (iv) has occurred and Event (vii) has not occurred, then
the payment for the occurrence of Event (iv) shall be due in full within fifteen
(15) days of the second anniversary of the occurrence of Event (ii), and payment
for the occurrence of Event (vii), if and when it occurs, shall be in the amount
of [***] payable within fifteen (15) days of notification of such occurrence by
Aviron as set forth in subsection (a).
(iii) If, as of the second anniversary of the occurrence
of Event (ii), neither Event (iv) nor Event (vii) has occurred, then the amount
set forth in subsection (a)(iv) above for the occurrence of Event (iv), if and
when it occurs, shall be due and payable in full within fifteen (15) days of
notification by Aviron of such occurrence by Aviron as set forth in subsection
(a). Payment for the occurrence of Event (vii), if and when it occurs shall be
in the amount of [***] payable in full within fifteen (15) days of notification
by Aviron of such occurrence as set forth in subsection (a) above.
(c) With respect to Event (vi), Aviron shall use Commercially Reasonable
Efforts to obtain a recommendation from both the American College of Physicians
and the American Academy of Family Physicians.
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<PAGE> 31
ARTICLE 12
ROYALTIES
12.1 ROYALTY RATES DURING CO-PROMOTION TERM.
(a) SALES PRIOR TO END OF 2000-2001 FLU SEASON. Wyeth-Ayerst
shall pay to Aviron a royalty of [***] of all Net Sales of the Product in the
Territory occurring prior to the end of the 2000-2001 Flu Season.
(b) SALES DURING 2001-2002 FLU SEASON AND THEREAFTER. With
respect to Net Sales occurring during the 2001-2002 Flu Season and thereafter,
Wyeth-Ayerst shall pay royalties to Aviron on Annual Net Sales of all aggregated
Products in the Territory at the following marginal rates:
<TABLE>
<CAPTION>
<S> <C>
For Annual Net Sales up to [***] [***]
For the portion of Annual Net Sales [***]
in excess of [***]
and not exceeding [***]
For the portion of Annual Net Sales [***]
in excess of [***]
and not exceeding [***]
For the portion of Annual [***]
Net Sales in excess
of [***]
</TABLE>
If any [***] in the Territory pursuant to Section [***] during the
Co-Promotion Term, then the marginal royalty rate(s) to be paid upon Annual Net
Sales of the Product shall be calculated as though the Annual Net Sales
comprised [***] the actual Annual Net Sales of the Product [***] in the
Territory, provided that no royalty shall be paid pursuant to this Section 12.1
on any [***]. Solely for purposes of example, if for a given Calendar Year the
Annual Net Sales of the Product are [***] then the royalties due to Aviron
hereunder for such Calendar Year shall be [***].
(c) DURATION OF ROYALTY PAYMENTS. All royalties shall accrue
from the Launch Date until the end of the Co-Promotion Term, unless this
Agreement is terminated earlier pursuant to Article 19.
(d) THIRD PARTY ROYALTIES.
(i) [***] any royalty owed to any Third Party based on
Net Sales of Product, as "Product" is defined as of the Effective Date (the
"Base Product") in the Territory during the Co-Promotion Term, subject to
subsection (ii) below.
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(ii) If (1[***] under Section [***] or (2) the JDC
determines that a change should be made to the Base Product [***] in order to
improve its formulation, performance, delivery or any other aspect of such Base
Product (an "Improvement"), and in either case a royalty is owed thereafter to
any Third Party based on Net Sales of the Product in the Territory which would
not be owed on Net Sales of the Base Product before [***] such Improvement to
the Base Product, as applicable, then [***] of such Third Party royalty [***]
within thirty (30) days of invoice.
12.2 ROYALTY REPORTS AND PAYMENTS. Within thirty (30) days after the
first day of January, April, July and October of each year during the
Co-Promotion Term, Wyeth-Ayerst shall deliver to Aviron a true and accurate
report of Net Sales of Product sold by Wyeth-Ayerst, it Affiliates, and
sublicensees in the Territory during the preceding three (3) month period in the
Territory, accompanied by all royalties due under Section 12.1 and all payments
due to Aviron under Section 7.6 for the period covered by such report. Such
report shall also include the information necessary for Aviron to calculate "Net
Sales."
12.3 PAYMENTS. Any payments due under this Agreement shall be made in U.
S. dollars by wire transfer to a bank account designated by Aviron.
12.4 [***].
(a) For the Calendar Year following the end of the Calendar Year
in which the [***] pursuant to Section [***] and for the subsequent [***]
Calendar Years, [***] based upon [***] accruing during the [***] at the
following rates:
<TABLE>
<S> <C> <C>
[***] [***]
[***] [***]
[***] [***]
</TABLE>
(b) Such [***] shall be made in quarterly installments during
each relevant Calendar Year, each quarterly installment to be paid on January
31, March 31, June 30 or September 30 of such Calendar Year, as applicable.
Solely for purposes of example, if the [***] an amount equal to [***] in
quarterly installments beginning on [***] an amount equal to [***] in quarterly
installments beginning on [***] and an amount equal to [***] in quarterly
installments beginning on [***].
(c) Notwithstanding the foregoing, in the event that [***]
breaches the provisions of Section [***] hereof, as demonstrated by [***] as set
forth in Section [***] shall not be obligated to [***] under this Section 12.4,
in addition to any other remedy available to [***] at law or equity.
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ARTICLE 13
LINE OF CREDIT
13.1 CREDIT FACILITY. Wyeth-Ayerst shall extend a committed line of credit to
Aviron, pursuant to the terms and subject to the conditions of that certain
credit agreement executed by and between the Parties as of the Signing Date (the
"Credit Agreement").
13.2 SECURITY INTEREST. Obligations under the Credit Facility shall be secured
by a [***] security interest [***] in Aviron's personal property assets, except
for (i) leasehold improvements to Aviron's manufacturing facility and proceeds
thereof which are contemplated to secure the financing for such manufacturing
facility and (ii) Aviron's intellectual property assets. Subject to the [***]
the obligations of Aviron under the Credit Facility shall be [***] up to a
maximum aggregate amount of [***]
ARTICLE 14
CONFIDENTIALITY
14.1 CONFIDENTIAL INFORMATION. Except to the extent expressly authorized
by this Agreement or otherwise agreed in writing, the Parties agree that the
receiving Party shall keep confidential, and shall not publish or otherwise
disclose or use for any purpose other than as provided for in this Agreement,
any Information and other information and materials (including without
limitation the Aviron Product Materials) furnished to it by the other Party
pursuant to this Agreement or any Information developed during the course of the
collaboration hereunder, or any provisions of this Agreement that are the
subject of an effective order of the Securities Exchange Commission (the "SEC")
granting confidential treatment pursuant to the Securities Act of 1934, as
amended (collectively, "Confidential Information"), except to the extent that it
can be established by the receiving Party that such Confidential Information:
(a) was already known to the receiving Party, other than under
an obligation of confidentiality, at the time of disclosure by the other Party;
(b) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the receiving Party;
(c) became generally available to the public or otherwise part
of the public domain after its disclosure to the receiving Party, and other than
through any act or omission of the receiving Party in breach of this Agreement;
(d) was disclosed to the receiving 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; or
(e) was independently developed by employees of the receiving
Party who had no knowledge of or access to the Confidential Information of the
other Party.
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For Confidential Information other than the Aviron Product Materials and
information relating to the Aviron Product Materials or the manufacture of the
Product, the non-disclosure obligations under this Section 14.1 shall terminate
upon the later of: (i) [***] years following the expiration or termination of
this Agreement, or (ii) [***] years from the Effective Date.
14.2 AUTHORIZED DISCLOSURE.
(a) Each Party may disclose Confidential Information hereunder
to the extent such disclosure is allowed under Section 6.5, or is reasonably
necessary in sublicensing its rights, to the extent permitted under this
Agreement, or in prosecuting or defending litigation, or in complying with
applicable governmental regulations, provided, however, that if a Party is
required by law or regulation to make any such disclosures of the other Party's
Confidential Information it will, except where impracticable for necessary
disclosures (for example in the event of medical emergency) give reasonable
advance notice to the other Party of such disclosure requirement (e.g., filings
with the SEC and stock markets) and, will use its reasonable efforts to secure
confidential treatment of such Confidential Information required to be
disclosed, unless in the judgement of such disclosing Party's legal counsel such
Confidential Information is legally required to be fully disclosed.
(b) In addition, and with prior notice to the other Party of
each Third Party with whom a confidential disclosure agreement is being entered
into, each Party shall be entitled to disclose, under a binder of
confidentiality containing provisions at least as protective as those of this
Article 14, Confidential Information to any Third Party for the purpose of
carrying out the purposes of this Agreement. Nothing in this Article 14 shall
restrict any Party from using for any purpose in accordance with this Agreement
any Confidential Information independently developed by it during the course of
the Collaboration hereunder, or from using Confidential Information that is
specifically derived from pre-clinical or clinical trials to carry out
marketing, sales or professional services support functions as is customary in
the pharmaceutical industry.
14.3 PUBLICITY. The Parties agree that the public announcement of the
execution of this Agreement shall be substantially in the form of the press
release to be mutually agreed to by the Parties. Any other publication, news
release or other public announcement relating to this Agreement or to the
performance hereunder, shall first be reviewed and approved by both Parties,
which approval shall not be unreasonably withheld; provided, however, that any
disclosure which is required by law as advised by the disclosing Party's counsel
may be made without the prior consent of the other Party, although the other
Party shall be given prompt notice of any such legally required disclosure and
to the extent practicable shall provide the other Party an opportunity to
comment on the proposed disclosure. In this regard, the Parties recognize that
Aviron is a publicly-held biotechnology company, that the Product is Aviron's
first potential product and that Aviron will need to provide information
regarding the status of the Product to the investment community from time to
time, subject to the procedures set forth in the preceding sentence. The Parties
acknowledge that Aviron will be obligated to file a copy of this Agreement with
the U.S. Securities and Exchange Commission. Aviron will submit a copy of its
proposed filing to Wyeth-Ayerst for its input and comment and will redact, if
permissible
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<PAGE> 35
by law or regulation, or will otherwise make reasonable efforts to obtain
confidential treatment of, Wyeth-Ayerst's Confidential Information contained
therein.
ARTICLE 15
OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS
15.1 OWNERSHIP.
(a) PARTY'S INTELLECTUAL PROPERTY. Aviron shall solely own all
right, title and interest in the Aviron Know-How and Aviron Patents.
Wyeth-Ayerst shall solely own all right, title and interest in the Wyeth-Ayerst
Know-How and the Wyeth-Ayerst Patents.
(b) INVENTIONS AND INFORMATION ARISING DURING AGREEMENT. Aviron
shall own all Inventions and Information discovered, generated, conceived or
reduced to practice solely by one or more employees or consultants of Aviron
during the term of and pursuant to the Agreement (the "Aviron Results"); and
Wyeth-Ayerst shall own all Inventions discovered, generated, conceived, or
reduced to practice solely by one or more employees or consultants of
Wyeth-Ayerst during the term of and pursuant to the Agreement (the "Wyeth-Ayerst
Results"). All Joint Technology shall be owned jointly by Aviron and
Wyeth-Ayerst. Except as otherwise expressly provided in the Agreement, Aviron
shall own all intellectual property, including Patents, covering the Aviron
Results; Wyeth-Ayerst shall own all intellectual property, including Patents,
covering the Wyeth-Ayerst Results; and the Parties shall jointly own all
intellectual property covering the Joint Technology. All Joint Technology shall
be subject to the licenses set forth in Section 5.1 and 5.2 during the term of
this Agreement.
(c) CONSULTANTS. Each Party shall take reasonable steps to
ensure that its consultants are obligated to assign their rights in any
Inventions or Information relating to the Product to the appropriate Party, or
jointly to the Parties in accordance with subsection (b) above.
15.2 PATENT PROSECUTION.
(a) PARTY'S PATENTS. Aviron shall have the sole right, but not
the obligation, to file applications for, prosecute and maintain the Aviron
Patents. Wyeth-Ayerst shall have the sole right, but not the obligation, to file
applications for, prosecute and maintain the Wyeth-Ayerst Patents. Neither Party
shall be obligated to disclose to the other Party any prosecution information
relating to the Aviron Patents, in the case of Aviron, and the Wyeth-Ayerst
Patents in the case of Wyeth-Ayerst.
(b) JOINT PATENTS. Aviron shall have the right to file
applications for, and to determine which countries in which to file, prosecute
and maintain any Joint Patents, worldwide, in the name of Aviron and
Wyeth-Ayerst. Aviron will provide Wyeth-Ayerst with the opportunity to review
and comment upon any material document pertaining to a Joint Patent that is to
be filed with the patent office(s) in each filing jurisdiction reasonably in
advance of the filing date of such document. The Parties shall equally share all
expenses related to the filing, prosecution and maintenance of the Joint
Patents, and Wyeth-Ayerst shall pay all invoices for such amounts within thirty
(30) days of receipt of such invoice. At any time, Wyeth-Ayerst may
34
<PAGE> 36
give Aviron written notice that it will no longer share expenses related to any
particular Joint Patents, whereupon Wyeth-Ayerst shall promptly assign its
ownership interest in such Joint Patent to Aviron and Aviron's obligations under
this Section 15.2(b) shall terminate. In the event of a disagreement between
Aviron and Wyeth-Ayerst with respect to whether or in which countries to file a
Joint Patent application, or the manner in which such application is prosecuted,
or whether to abandon such application, Aviron shall consider in good faith all
comments and issues raised by Wyeth-Ayerst, but shall have the final authority
to make any such decisions. In the event Aviron determines not to file a
specific Joint Patent application in a given jurisdiction, or to abandon such an
application or any Joint Patent, it will notify Wyeth-Ayerst in writing,
whereupon Wyeth-Ayerst shall have the right to pursue such application or
maintain such Joint Patent, at its own expense, and Aviron shall promptly assign
its ownership interest therein to Wyeth-Ayerst.
(c) [***]. Wyeth-Ayerst agrees that, within sixty (60) days
following the Effective Date, it shall [***] provided that such [***] shall only
be [***] with respect to [***] all rights to [***] and nothing in this
subsection (c) shall [***]. Other than with respect to [***] Wyeth-Ayerst
reserves all rights to [***] and nothing in this subsection (c) shall [***].
15.3 ENFORCEMENT RIGHTS.
(a) NOTIFICATION OF INFRINGEMENT. If either Party learns of any
misappropriation of any Aviron Product Materials or Information (the "Product
Rights"), or any infringement or threatened infringement by a Third Party of the
Aviron Patents or Joint Patents, in each case, in the Field and in the
Territory, such Party shall promptly notify the other Party and shall provide
such other Party with all available evidence of such misappropriation or
infringement.
(b) ENFORCEMENT OF PATENTS AND PRODUCT RIGHTS IN THE TERRITORY.
Aviron shall have the right, but not the obligation, to institute, prosecute and
control at its own expense any action or proceeding with respect to infringement
of any Aviron Patents or Joint Patents or any misappropriation of the Product
Rights in the Field and in the Territory, by counsel of its own choice.
Wyeth-Ayerst shall have the right, at its own expense, to be represented in any
such action by counsel of its own choice. Subject to the rights of Michigan, if
Aviron fails to bring an action or proceeding or otherwise take appropriate
action in Aviron's discretion to abate such infringement or misappropriation in
the Field and in the Territory within a period of ninety (90) days of notice by
Wyeth-Ayerst to Aviron requesting such action, Wyeth-Ayerst will have the right,
but not the obligation, to bring and control any such infringement or
misappropriation action or proceeding relating to the Aviron Patents or the
Products Rights by counsel of its own choice. Aviron will cooperate with
Wyeth-Ayerst in any such action or proceeding brought by Wyeth-Ayerst against a
Third Party, and shall have the right to consult with Wyeth-Ayerst and to
participate in and be represented by independent counsel in such litigation at
its own expense. If one Party brings any such action or proceeding under this
Section 15.3(b), the other Party agrees to be joined as a party plaintiff to the
extent necessary to prosecute the action or proceeding and to give the first
Party reasonable assistance and authority to file and prosecute the suit. Any
amounts recovered by either Party pursuant to this subsection (b) shall first be
used to reimburse
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<PAGE> 37
the Parties for any legal expenses incurred pursuant to such enforcement, and
any remaining amounts shall be paid [***] to the enforcing Party and [***] to
the non-enforcing Party.
(c) SETTLEMENT WITH A THIRD PARTY. The Party that controls the
prosecution of a given action under this Section 15.3 shall also have the right
to control settlement of such action; provided, however, that no settlement
shall be entered into with respect to a Joint Patent without the written consent
of the other Party, such consent not to be unreasonably withheld.
15.4 DEFENSE AND SETTLEMENT OF THIRD PARTY CLAIMS.
(a) DEFENSE.
(i) If a Third Party asserts that a patent, trade
secret, or other intangible right owned by it is infringed or misappropriated by
the manufacture, use, sale, or offer for sale of the Product in the Territory,
the JCC shall establish a plan for a common defense and select the Party
responsible for managing such common defense plan, subject to subsection (ii)
below. The costs of any such defense to such action incurred by one or both of
the Parties at the direction of the JCC (including the costs of any judgment,
award, decree or settlement) will be [***] subject to the provisions of Section
[***]
(ii) If such Third Party asserts that a patent, trade
secret, or other intangible right owned by it is infringed or misappropriated by
the manufacture, use, sale, or offer for sale of the Base Product (as defined in
Section 12.1(d)) or the Product [***] in the Territory, then Aviron shall have
the right to control the defense to such action. Wyeth-Ayerst shall have the
right to participate in such defense with its own counsel at its own cost and
expense.
(b) SETTLEMENT WITH A THIRD PARTY. The entity that controls the
defense of a given claim under Subsection (a) with respect to the Product shall
also have the right to control settlement of such claim; provided, however, that
no settlement shall be entered into without the written consent of the other
Party. If there is no agreement between the Parties as to any proposed
settlement, then the dispute shall be decided by the JCC, and, if the JCC is
unable to decide the dispute, the matter will be resolved pursuant to Article
20.
15.5 ASSIGNMENT OF JOINT PATENTS. Neither Party may assign its rights
under any Joint Patent to a Third Party except with the prior written consent of
the other Party; provided, however, that either Party may assign such rights
without consent to an Affiliate or other permitted assignee under this Agreement
in connection with a merger, acquisition or similar reorganization or the sale
of all or substantially all of its assets, or in the case of Wyeth-Ayerst, the
sale or transfer of substantially the entire vaccine business of Wyeth-Ayerst,
as provided for in Section 21.1.
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ARTICLE 16
REPRESENTATIONS AND WARRANTIES
16.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Each of the Parties hereby
represents and warrants to the other Party as follows:
(a) such Party (i) is a corporation duly organized, validly
existing and in good standing under the laws of the state in which it is
incorporated, (ii) has the corporate power and authority and the legal right to
own and operate its property and assets, to lease the property and assets it
operates under lease, and to carry on its business as it is now being conducted,
and (iii) is in compliance with all requirements of applicable law, except to
the extent that any noncompliance would not have a material adverse effect on
the properties, business, financial or other condition of such Party and would
not materially adversely affect such Party's ability to perform its obligations
under this Agreement;
(b) this Agreement is a legal and valid obligation binding upon
such Party and enforceable in accordance with its terms, and the execution,
delivery and performance of the Agreement by such Party does not conflict with
any agreement, instrument or understanding, oral or written, to which it is a
Party or by which it is bound, nor violate any law or regulation of any court,
governmental body or administrative or other agency having jurisdiction over it.
Each Party expressly represents and warrants that it has the full power and
authority to enter into this Agreement and to carry out the obligations
contemplated hereby;
(c) such Party has not, and during the term of the Agreement
will not, grant any right to any Third Party relating to its respective Patents
and Know-How in the Field in the Territory which would conflict with the rights
granted to the other Party hereunder; and
(d) it has taken all necessary corporate action on its part to
authorize the execution and delivery of this Agreement. Each Party expressly
represents and warrants that it owns (in whole or in part) or Controls all
Patents that are the subject of the licenses granted to the other Party herein.
16.2 AVIRON REPRESENTATIONS AND WARRANTIES. Aviron represents and
warrants to Wyeth-Ayerst as follows:
(a) that to the best of its knowledge as of the Signing Date,
the manufacture, use, importation, offer for sale or sale of the Product [***]
as contemplated hereunder does not infringe any Third Party intellectual
property right in the Territory;
(b) that to the best of its knowledge as of the Signing Date,
all and only the true inventors of the subject matter claimed are named in the
Aviron Patents and all such inventors have irrevocably assigned all their rights
and interests therein to Aviron;
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(c) that as of the Signing Date, it is not aware of any
information material to the examination of the Aviron Patents listed in Schedule
1.4, within the meaning of 37 C.F.R. 1.56, that was not disclosed in writing to
the United States Patent and Trademark Office;
(d) that with respect to all regulatory filings to obtain
Regulatory Approvals, the data and information in Aviron's submissions are and
shall, to the best of Aviron's knowledge, be free from fraud or material
falsity, that the Regulatory Approvals have not been and will not be obtained
either through bribery or the payment of illegal gratuities, that the data and
information in Aviron's submissions are and shall be accurate and reliable for
purposes of supporting approval of the submissions, and that the Regulatory
Approvals shall be obtained without illegal or unethical behavior of any kind;
(e) that as of the Signing Date, Aviron is not in material
breach, and has no knowledge of any material breach by the other party thereto,
under the Michigan Agreement; that certain [***] Agreement by and between [***]
and Aviron, dated [***] that certain [***] Agreement by and between [***] and
Aviron dated [***] that certain [***] Agreement by and between Aviron and [***]
dated [***] and that certain [***] Agreement by and between Aviron and [***]
dated [***].
(f) that no federal funding was or is involved in the
performance of work resulting in [***] the Aviron Patents or the Aviron
Know-How, except as set forth in the disclosure schedule attached as Schedule
16.2(f) hereto.
16.3 PERFORMANCE BY AFFILIATES. The Parties recognize that each Party
may perform some or all of its obligations under this Agreement through
Affiliates, provided, however, that each Party shall remain responsible for the
performance by its Affiliates and shall cause its Affiliates to comply with the
provisions of this Agreement in connection with such performance. Each Party
hereby expressly waives any requirement that the other Party exhaust any right,
power or remedy, or proceed against an Affiliate, for any obligation or
performance hereunder prior to proceeding directly against such Party.
ARTICLE 17
INFORMATION AND REPORTS
17.1 INFORMATION AND REPORTS DURING CO-PROMOTION TERM.
(a) Each Party agrees to keep complete and accurate records of
its Co-Promotion efforts and other activities carried out pursuant to this
Agreement. Wyeth-Ayerst and Aviron will disclose and make available to each
other upon written request and without charge (other than reasonable
duplicating, postage and related out-of-pocket costs) all such records and all
commercial, marketing, promotion, and pricing information known by Wyeth-Ayerst
or Aviron directly concerning Product in the Field and in Territory at any time
during the Co-Promotion Term. Each Party will use Commercially Reasonable
Efforts to disclose to the other Party all significant information promptly
after it is learned or its significance is appreciated.
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(b) As promptly as possible following the end of each month or
calendar quarter in which Product is sold in the Territory hereunder,
Wyeth-Ayerst shall provide Aviron with a preliminary report of its sales figures
for the Product in the Territory during such month or quarter, as applicable.
Wyeth-Ayerst shall use Commercially Reasonable Efforts to deliver such
preliminary report within thirty (30) days following the end of such month or
calendar quarter, or more frequently as determined by the JCC. Aviron
acknowledges that such report may be unaudited, is only for Aviron's internal
planning use, and may be further revised prior to Wyeth-Ayerst's submission of
the royalty report described in Section 12.2 for such calendar quarter.
17.2 COMPLAINTS. Each Party shall maintain a record of all complaints it
receives with respect to the Product. Each Party shall notify the other Party of
any complaint with regulatory implications received by it in sufficient detail
and within two (2) business days after the event, and in any event in sufficient
time to allow the responsible Party to comply with any and all regulatory
requirements imposed upon it; provided, however, that notice of any complaint
involving a field alert report shall be transmitted within one (1) business day.
17.3 ADVERSE DRUG EXPERIENCES. In order for the Parties to comply with
their respective responsibilities under this Article 17 and otherwise relating
to the reporting of adverse drug experiences, to the extent either Party
receives any information regarding adverse drug experiences related to the use
of the Product, whether such use is within or outside of the Territory, such
Party shall promptly provide the other Party with such information in accordance
with the Adverse Event Reporting Procedures set forth in Schedule 17.3 (as may
be amended from time to time upon mutual agreement of the Parties).
17.4 RECORDS OF REVENUES AND EXPENSES.
(a) Each Party will maintain complete and accurate records which
are relevant to revenues, costs, expenses and payments under this Agreement, and
such records shall be open during reasonable business hours for a period of
[***] years from the creation of individual records for examination at the other
Party's expense, and not more often than [***] by an independent certified
public accountant selected by the other Party and reasonably acceptable to the
audited Party for the sole purpose of verifying for the inspecting Party the
correctness of calculations and classifications of such revenues, costs,
expenses or payments made under this Agreement. In the absence of material
shortfalls (in excess of [***] of the royalties or other amounts payable under
this Agreement) in any request for reimbursement resulting from such audit, the
accounting expense shall be paid by the Party requesting the audit. If material
shortfalls do result, the audited Party shall bear the accounting expense. In
any case, the audited Party shall pay the shortfall. Any records or accounting
information received from the other Party shall be Confidential Information for
purposes of Article 14. Results of any such audit shall be provided to both
Parties, subject to Article 14.
(b) If there is a dispute between the Parties following any
audit performed pursuant to Section 17.4(a), either Party may refer the issue
(an "Audit Disagreement") to an independent certified public accountant for
resolution. In the event an Audit Disagreement is submitted for resolution by
either Party, the Parties shall comply with the following procedures:
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(i) The Party submitting the Audit Disagreement for resolution
shall provide written notice to the other Party that it is invoking the
procedures of this Section 17.4(b).
(ii) Within thirty (30) business days of the giving of such
notice, the Parties shall jointly select a recognized international accounting
firm to act as an independent expert to resolve such Audit Disagreement.
(iii) The Audit Disagreement submitted for resolution shall be
described by the Parties to the independent expert in writing within ten (10)
business days of the selection of such independent expert.
(iv) The independent expert shall render a decision on the
matter as soon as practicable.
(v) The decision of the independent expert shall be final and
binding and shall not be subject to Article 20, unless such Audit Disagreement
involves alleged fraud, breach of this Agreement or construction or
interpretation of any of the terms and conditions hereof.
(vi) All fees and expenses of the independent expert, including
any Third Party support staff or other costs incurred with respect to carrying
out the procedures specified at the direction of the independent expert in
connection with such Audit Disagreement, shall be borne by the losing Party.
ARTICLE 18
INDEMNIFICATION
18.1 INDEMNIFICATION BY AVIRON. Except as set forth in Section 18.2
hereof, and except to the extent caused by Wyeth-Ayerst's, or its Affiliates' or
sublicensees', negligent, reckless or willful acts or omissions, Aviron shall
indemnify, defend and hold Wyeth-Ayerst and its directors, officers, employees,
agents and Affiliates harmless from and against any liabilities, damages, costs
or expenses, including reasonable attorneys' fees (collectively, "Liabilities"),
(a) which arise out of, relate to or result from the breach by Aviron of any of
its representations or warranties contained within this Agreement; (b) which
arise from any claim, lawsuit or other action by a Third Party caused by the
manufacture, use or sale of the Product in the Territory during the Co-Promotion
Term due to a defect caused by Aviron's manufacture of the Product, or due to a
defect in the [***], including, but not limited to, a claim, lawsuit, or other
action related to the death of or injury to a Third Party, but only to the
extent that such claim, lawsuit or other action does not arise out of [***]; (c)
are attributable to statements or representations by Aviron, its employees, or
its agents, that are inconsistent with, or contrary to, the Product Labeling or
Product Promotional Materials; or (d) in the case of any trademark infringement
claim, lawsuit or other action, result solely from Wyeth-Ayerst's proper use of
Aviron Trademarks in accordance with the terms of this Agreement.
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18.2 INDEMNIFICATION BY WYETH-AYERST. Except as set forth in Section
18.1 hereof, and except to the extent caused by Aviron's, or its Affiliates' or
sublicensees', negligent, reckless or willful acts or omissions, Wyeth-Ayerst
shall indemnify, defend and hold Aviron and its directors, officers, employees,
agents and Affiliates harmless from and against any Liabilities which arise from
any claim, lawsuit or other action to the extent such Liabilities (a) arise out
of, relate to or result from the breach by Wyeth-Ayerst of any of its
representations or warranties contained within this Agreement; (b) arise from
any claim, lawsuit or other action by a Third Party due to a [***] of the
Product, including, but not limited to, a claim, lawsuit or other action related
to the death of or injury to a Third Party, but only to the extent that such
claim, lawsuit or other action does not arise out of Aviron's manufacture of the
Product; (c) are attributable to statements or representations by Wyeth-Ayerst,
its employees, or its agents, that are inconsistent with, or contrary to, the
Product Labeling or Product Promotional Materials; or (d) in the case of any
trademark infringement claim, lawsuit or other action, result solely from
Aviron's proper use of Wyeth-Ayerst's Trademarks in connection with the Product
in accordance with the terms of this Agreement.
18.3 INDEMNIFICATION PROCEDURES. A Party which intends to claim
indemnification under Section 18.1 or 18.2 hereof (the "Indemnitee") shall
promptly notify the other Party (the "Indemnitor") in writing of any claim,
lawsuit or other action in respect of which the Indemnitee or any of its
directors, officers, employees, agents and Affiliates intend to claim such
indemnification. The Indemnitee shall permit, and shall cause its directors,
officers, employees, agents and Affiliates to permit, the Indemnitor, at its
discretion, to settle any such claim, lawsuit or other action and agrees to the
complete control of such defense or settlement by the Indemnitor; provided,
however, that such settlement does not adversely affect the Indemnitee's rights
hereunder or impose any obligations on the Indemnitee in addition to those set
forth herein in order for it to exercise such rights. No such claim, lawsuit or
other action shall be settled without the prior written consent of the
Indemnitor, and the Indemnitor shall not be responsible for any legal fees or
other costs incurred other than as provided herein. The Indemnitee, its
directors, officers, employees, agents and Affiliates shall cooperate fully with
the Indemnitor and its legal representatives in the investigation and defense of
any claim, lawsuit or other action covered by the provisions of this Article 18.
The Indemnitee shall have the right, but not the obligation, to be represented
by counsel of its own selection and expense.
18.4 INSURANCE. Each Party shall maintain comprehensive general
liability insurance coverage, including products liability, with a minimum limit
of not less than [***] and shall provide the other Party with a certificate of
such insurance as requested.
18.5 PAYMENT OF DAMAGES.
(a) Any Liability for which an Indemnitor is or may become
liable under Section 18.1 or 18.2 shall be paid first from any funds available
through vaccine injury protection compensation trust established pursuant to 42
U.S.C. 300 aa-1 et seq. or other similar legislation, or by a State of the
United States, if applicable.
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(b) Any Liabilities not subject to subsection (a) above shall be
the responsibility of the Indemnitor.
ARTICLE 19
TERM AND TERMINATION; AVIRON CHANGE OF CONTROL
19.1 TERM. This Agreement shall commence as of the Effective Date and,
unless sooner terminated as provided herein, shall continue in effect until the
end of the Co-Promotion Term.
19.2 TERMINATION FOR MATERIAL BREACH.
(a) Subject to the provisions of this Section 19.2, if either
Party (the "Breaching Party") shall have committed a material breach of this
Agreement and such material breach shall remain uncured and shall be continuing
for a period of [***] days following receipt of notice thereof by the other
Party (the "Non-Breaching Party"), or if such breach is incapable of cure during
the applicable notice period, the Breaching Party fails to make good faith
efforts to cure such breach, then the Non-Breaching Party shall have the right
to terminate this Agreement by written notice to the Breaching Party. Any such
notice of alleged material breach shall include a reasonably detailed
description of all relevant facts and circumstances demonstrating, supporting
and/or relating to each such alleged material breach by the other party.
(b) If [***] terminate this Agreement as provided in subsection
(a) above if such material breach is of Sections [***].
(c) If [***] is entitled to terminate this Agreement as provided
in subsection (a) above, [***] may elect not to terminate this Agreement as so
provided, and may instead [***] in accordance with Section [***]. Any [***]
pursuant to such [***] hereunder. The [***] in such [***] in connection with
such [***], which, if [***] against any [***] hereunder. If, upon expiration of
the Co-Promotion Term or earlier termination of this Agreement, any [***] and
there are no [***] hereunder, then [***] of such [***].
19.3 TERMINATION BY [***] may terminate this Agreement in whole or in
part:
(a) on [***] days written notice, in the event that [***];
(b) on [***] days written notice, in the event [***] which
result in [***] sufficient to cause [***]; or
(c) upon at least [***] prior written notice to [***] at any
time after [***].
19.4 TERMINATION [***]. This Agreement may be terminated by [***] after
the [***] upon at least [***] prior written notice to [***] after the occurrence
of both of the following events ("Termination Period"): (i) a [***] that the
[***]; and (ii) within the [***] period after the [***] cooperates in good faith
with [***] in its good faith efforts to [***] and such [***]
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during such [***] period. Commencing [***] days following [***] receipt of [***]
proper notice of termination under this Section 19.4, [***] for all [***] from
such [***] which are [***] of the Termination Period. Notwithstanding the
foregoing, this Section 19.4 shall not apply where [***] the Product [***] by
the Parties.
19.5 BANKRUPTCY. This Agreement may be terminated by either Party upon
at least [***] prior written notice thereof if the other Party becomes
insolvent, makes an assignment for the benefit of creditors, is the subject of
proceedings in voluntary or involuntary bankruptcy instituted on behalf of or
against such Party, or has a receiver or trustee appointed for all or
substantially all of its property, provided that in the case of an involuntary
bankruptcy proceeding such right to terminate shall only become effective if the
Party consents to the involuntary bankruptcy or such proceeding is not dismissed
within [***] days after the filing thereof.
19.6 EFFECT OF TERMINATION.
(a) GENERAL. Upon termination or expiration of the Agreement,
(i) the license granted by Aviron to Wyeth-Ayerst under Section 5.1 will
terminate; (ii) all rights in the Product shall revert to Aviron; (iii) any and
all claims and payment obligations that accrued prior to the date of such
termination or expiration shall survive such termination; (iv) each Party shall,
within sixty (60) days of such termination, return all of the other Party's
Confidential Information; and (v) Wyeth-Ayerst will return to Aviron all Aviron
Product Materials, including without limitation [***] in its control.
(b) PRODUCT RE-PURCHASE.
(i) Upon termination or expiration of this Agreement,
Wyeth-Ayerst shall provide Aviron with full particulars of all unsold Finished
Product (including quantities of Finished Product, and the dates on which the
Finished Product was manufactured) in its possession. Aviron shall be entitled,
at its discretion, to purchase from Wyeth-Ayerst any unsold Finished Product, at
a price equal to the average Transfer Price per dose of the immediately
preceding Flu Season. If so requested by Aviron, Wyeth-Ayerst shall arrange for
delivery of the Finished Product purchased by Aviron pursuant to this subsection
(i) to such destination or destinations as may be designated by Aviron. All
delivery arrangements shall be subject to the prior approval of Aviron. Freight
and insurance of such delivery shall be at the cost of Aviron.
(ii) Any Finished Product in respect of which Aviron has
notified Wyeth-Ayerst in writing that it does not wish to repurchase pursuant to
subsection (i) above may be sold by Wyeth-Ayerst within [***] after termination
or expiration of this Agreement, in which case the terms of this Agreement or
such of them as are relevant shall continue to operate until the remaining
Finished Product has been sold or the [***] period expires, whichever first
occurs.
(c) JOINT TECHNOLOGY. Upon termination (other than by
Wyeth-Ayerst pursuant to Section [***]) or upon expiration of the Agreement,
Wyeth-Ayerst shall be deemed
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to have granted to Aviron the exclusive, world-wide, perpetual, sublicenseable
license in the Territory under Wyeth-Ayerst's interest in the Joint Technology
to use, make, have made, import, offer for sale and sell the Product in the
Field. Such license shall be [***] in the event that Aviron wishes to [***] the
Parties shall agree upon [***] and as agreed by the Parties [***] of the [***]
in such [***] in the manufacture, use or sale of the Product.
(d) WYETH-AYERST KNOW-HOW AND WYETH-AYERST PATENTS. Upon
termination (other than by Wyeth-Ayerst pursuant to Section [***]) or upon
expiration of the Agreement, Wyeth-Ayerst shall be deemed to have granted to
Aviron a non-exclusive, perpetual, fully paid-up, royalty-free, sublicenseable
license in the Territory to utilize the Wyeth-Ayerst Know-How and to practice
the Wyeth-Ayerst Patents to use, make, have made, import, offer for sale and
sell the Product in the Field. Such license shall be [***]; in the event that
Aviron [***] the Parties shall agree upon [***] and as agreed by the Parties
[***] of the [***] of the [***] and the [***] the manufacture, use or sale of
the Product.
19.7 WYETH-AYERST COVENANT. For [***] following any expiration or
termination of this Agreement, Wyeth-Ayerst shall not promote, manufacture for
commercial sale or use, sell, resell, or otherwise commercialize, nor shall
Wyeth-Ayerst assist any Third Party or engage any Third Party to promote,
manufacture for commercial sale or use, sell, resell, or otherwise
commercialize, any [***] in any country within or outside of the Territory;
provided that [***] shall have the burden of (a) [***], and (b) providing [***].
Aviron shall [***] under this provision only to the extent that such [***] prior
to [***] described in [***].
19.8 OPTION TO EXTEND CO-PROMOTION TERM.
(a) GENERAL. Subject to the provisions of this Section 19.8,
Aviron hereby grants to Wyeth-Ayerst the option to extend the Co-Promotion Term
in one (1) year increments, but in no event by more than a total of four (4)
years, provided that Wyeth-Ayerst may not exercise such option if it is in
material breach of any provision of this Agreement, the International Agreement
or the Supply Agreement. The Co-Promotion Term shall not by extended by more
than one (1) year during any given twelve (12) month period. Wyeth-Ayerst shall
provide Aviron written notice that it is exercising such option no later than
[***] prior to the date of expiration of the then current Co-Promotion Term (the
"Extension Expiration Date"). If Wyeth-Ayerst does not provide such notice by
the Extension Expiration Date, such option shall lapse and Aviron shall
thereafter have no further obligation to Wyeth-Ayerst to allow it to extend the
Co-Promotion Term. If Wyeth-Ayerst does provide such notice to Aviron by the
Extension Expiration Date, then:
(i) Wyeth-Ayerst shall pay Aviron as set forth in
subsection (b) below;
(ii) The Co-Promotion Term shall be automatically
extended for one 1) year; and
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(iii) Aviron shall have the right, but not the
obligation, to require that up to [***] to be [***] under the [***] (as defined
in [***]) shall be [***] (as defined in [***]).
Upon the expiration or termination of the Co-Promotion Term as extended
under this Section 19.8, Wyeth-Ayerst's rights to sell the Product shall apply
as set forth in Section 19.6(b).
(b) OPTION PRICE. If Wyeth-Ayerst exercises its option to extend
the Co-Promotion Term, then Wyeth-Ayerst shall pay Aviron the "Option Price" (as
defined in the following sentence) for each one year extension of the
Co-Promotion Term as permitted in subsection (a) above. The "Option Price" shall
be the greater of [***] or the Designated Percentage (as defined in subsection
(c) below) of Annual Net Sales for the Flu Season [***] one year extension of
the Co-Promotion Term (the "Term Extension"). In no event shall Wyeth-Ayerst be
obligated to pay Aviron more than [***] in combined Option Price payments under
this Section 19.8(b) and Section 18.8(b) of the International Agreement for any
single Calendar Year.
(i) OPTION PRICE PAYMENT. Wyeth-Ayerst shall make an
advance payment to Aviron of [***] at the time that it provides Aviron with the
written notice that it is exercising its option for each twelve month extension
of the Co-Promotion Term, as set forth in subsection (a) above.
(ii) RECONCILIATION. During each Term Extension, and in
addition to any royalties and any other payments that are due to Aviron
hereunder, Wyeth-Ayerst shall pay to Aviron the applicable Designated Percentage
of Net Sales [***] such payment to be made with each royalty report delivered
under Section 12.2 that relates to Net Sales [***] provided that the [***] paid
by Wyeth-Ayerst pursuant to subsection (i) above for such Term Extension shall
be credited against any payments due from Wyeth-Ayerst under this subsection
(ii) for such Term Extension, but may not be credited against any other amounts
due hereunder, or under the International Agreement or the Supply Agreement,
including without limitation any amounts due for any Term Extension other than
the Term Extension to which the [***] payment relates.
(c) DESIGNATED PERCENTAGE. The "Designated Percentage" shall be
as follows:
(i) For the [***] of the Co-Promotion Term, the
"Designated Percentage" shall be deemed to be [***];
(ii) For the [***] of the Co-Promotion Term, the
"Designated Percentage" shall be deemed to be [***];
(iii) For the [***] of the Co-Promotion Term, the
"Designated Percentage" shall be deemed to be [***]; and
(iv) For the [***] of the Co-Promotion Term, the
"Designated Percentage" shall be deemed to be [***].
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19.9 [***]
(a) If, as of or following May 1 of the Calendar Year preceding
the Calendar Year in which the Co-Promotion Term will terminate, but in no event
after the end of the Co-Promotion Term, Aviron determines in its sole discretion
that it [***] in the [***] in the [***] following the [***] then Aviron shall
provide Wyeth-Ayerst with written notice that Aviron shall be [***]. Within
[***] days of its receipt of such notice, Wyeth-Ayerst shall notify Aviron in
writing whether Wyeth-Ayerst desires to [***]. If Wyeth-Ayerst either notifies
Aviron that Wyeth-Ayerst does not desire to [***], or if Wyeth-Ayerst fails to
notify Aviron in writing within such [***] day period, then Aviron shall have no
further obligation to Wyeth-Ayerst under this Section 19.9.
(b) If Wyeth-Ayerst notifies Aviron, pursuant to subsection (a)
that it wishes to [***] the Parties shall then [***] as to the [***] which the
Parties shall [***] provided that such [***] shall not extend for more than
[***] days from the date that Aviron received Wyeth-Ayerst's written
notification, or as otherwise agreed in writing by the Parties (the "Negotiation
Period"). If at the end of the Negotiation Period, the Parties have [***],
Aviron shall have no further obligation to Wyeth-Ayerst under this Section 19.9.
Notwithstanding anything else in this Section 19.9, Aviron shall have no
obligation to [***] nor, in Aviron's sole discretion, to [***]. Following
expiration of the Negotiation Period, Aviron may, in its sole discretion, [***]
regarding the [***] of the [***] in the [***] following [***] as may be
acceptable to Aviron, in its sole discretion, provided that Aviron shall [***]
for such [***] with such [***] as a [***] as those [***] for such [***].
19.10 SURVIVING RIGHTS. The following provisions will survive expiration
or termination of this Agreement: Sections 5.4, 5.5, 6.5, 10.2, 12.4, 15.1,
15.2, 15.5, 17.3, 17.4, 19.6 and 19.7, and Articles 14, 18 and 21.
ARTICLE 20
DISPUTE RESOLUTION
20.1 DISPUTES.
(a) The Parties recognize that disputes as to certain matters
may from time to time arise during the term of this Agreement that relate to
either Party's rights and/or obligations hereunder or thereunder. It is the
objective of the Parties to establish procedures to facilitate the resolution of
disputes arising under this Agreement in an expedient manner by mutual
cooperation and without resort to litigation. To accomplish this objective, the
Parties agree to follow the procedures set forth in this Article 20 if and when
a dispute arises under this Agreement.
(b) Unless otherwise specifically recited in this Agreement,
disputes between the Parties shall be first referred to the JCC by either Party
as soon as reasonably possible after such dispute has arisen. If the JCC is
unable to resolve such a dispute within ten (10) days of
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<PAGE> 48
being requested by a Party to resolve such dispute, either Party may, by written
notice to the other, have such dispute referred to their respective executive
officers designated below or their designees, for attempted resolution by
negotiations within fifteen (15) days after such notice is received. The
designated officers are as follows:
For Wyeth-Ayerst: President of Wyeth-Ayerst Global Pharmaceuticals
For Aviron: Aviron Chief Executive Officer
In the event such designated officers are unable to resolve such dispute, the
Parties shall then be permitted to pursue all available remedies at law or in
equity; provided, however, that no lawsuit may be commenced by one Party unless
it gives the other Party fifteen (15) days notice of its intent to initiate an
action.
ARTICLE 21
MISCELLANEOUS
21.1 ASSIGNMENT.
(a) Neither Party may assign its rights or obligations under
this Agreement without the prior written consent of the other Party, except in
connection with a merger, acquisition nor similar reorganization or the sale of
all or substantially all of its assets, or, in the case of Wyeth-Ayerst, the
sale or transfer of substantially all of the vaccine business of Wyeth-Ayerst.
Subject to [***], this Agreement shall survive any such merger or reorganization
of either Party with or into, or such sale of assets to, another party and no
consent for such merger, reorganization or sale shall be needed; provided, that
in the event of such merger, reorganization or sale, no intellectual property
rights of the acquiring corporation shall be included in the technology licensed
hereunder.
(b) This Agreement shall be binding upon and inure to the
benefit of the successors and permitted assigns of the Parties. Any assignment
not in accordance with this Agreement shall be void.
21.2 CONSENTS NOT UNREASONABLY WITHHELD OR DELAYED. Whenever provision
is made in this Agreement for either Party to secure the consent or approval of
the other, that consent or approval shall not unreasonably be withheld or
delayed, unless specifically otherwise provided.
21.3 FORCE MAJEURE. Neither Party shall lose any rights hereunder or be
liable to the other Party for damages or losses on account of failure of
performance by the defaulting Party if the failure is occasioned by government
action, war, fire, explosion, flood, strike, lockout, embargo, act of God, or
any other similar cause beyond the control of the defaulting Party, provided
that the Party claiming force majeure has exerted all reasonable efforts to
avoid or remedy such force majeure and has given the other Party prompt notice
describing such event,
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<PAGE> 49
the effect thereof and the actions being taken to avoid or remedy such force
majeure; provided, however, that in no event shall a Party be required to settle
any labor dispute or disturbance.
21.4 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
21.5 NOTICES. All notices hereunder shall be in writing and shall be
deemed given if delivered personally or by facsimile transmission (receipt
verified), telexed, mailed by registered or certified mail (return receipt
requested), postage prepaid, or sent by 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 that notices of a change of address shall be
effective only upon receipt thereof).
If to Aviron: Aviron
297 North Bernardo Avenue
Mountain View, California 94043
Attention: Chief Executive Officer
Telephone: (650) 919-6500
Facsimile: (650) 919-6612
With copies to: Cooley Godward LLP
5 Palo Alto Square
3000 El Camino Real
Palo Alto, California
Attention: Barbara A. Kosacz
Telephone: (650) 843-5000
Facsimile: (650) 857-0663
If to Wyeth-Ayerst: Wyeth-Ayerst Laboratories
555 Lancaster Avenue
St. Davids, Pennsylvania, 19087
Attention: Sr. Vice President,
Global Business Development
Telephone: (610) 688-5809
Facsimile: (610) 688-9498
With copies to: American Home Products Corporation
Five Giralda Drive
Madison, New Jersey 07940
Attention: Sr. Vice President and General Counsel
Telephone: (973) 660-6040
Facsimile: (973) 660-7155
21.6 WAIVER. Except as specifically provided for herein, the waiver from
time to time by either of the Parties of any of their rights or their failure to
exercise any remedy shall not operate or be construed as a continuing waiver of
same or any other of such Party's rights or remedies provided in this Agreement.
48
<PAGE> 50
21.7 SEVERABILITY. If any term, covenant or condition of this Agreement
or the application thereof to any Party or circumstances shall, to any extent,
be held to be invalid or unenforceable, then (i) the remainder of this
Agreement, or the application of such term, covenant or condition to Parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent permitted by law;
and (ii) the Parties hereto covenant and agree to renegotiate any such term,
covenant or application thereof in good faith in order to provide a reasonably
acceptable alternative to the term, covenant or condition of this Agreement or
the application thereof that is invalid or unenforceable, it being the intent of
the Parties that the basic purposes of this Agreement are to be effectuated.
21.8 AMBIGUITIES. Ambiguities, if any, in this Agreement shall not be
construed against any Party, irrespective of which Party may be deemed to have
authored the ambiguous provision.
21.9 GOVERNING LAW. This Agreement shall be governed by and interpreted
under the laws of the [***] without regard to conflicts of laws, except for
questions regarding patents, which shall be resolved in the United States courts
having jurisdiction over the matter.
21.10 HEADINGS. The Sections and paragraph headings contained herein are
for the purposes of convenience only and are not intended to define or limit the
contents of the Sections or paragraphs to which they apply.
21.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
21.12 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the Supply
Agreement, the International Agreement and the Credit Agreement (as defined in
Section 13.1 of this Agreement) (collectively, the "Agreements"), including all
Exhibits and Schedules attached thereto, set forth all the covenants, promises,
agreements, warranties, representations, conditions and understandings between
the Parties hereto with respect to the subject matter thereof, and supersede and
terminate all prior agreements and understandings between the Parties with
respect to such subject matter, except as provided in 11.3(e) of the
International Agreement. There are no covenants, promises, agreements,
warranties, representations, conditions or understandings, either oral or
written, between the Parties with respect to the subject matter thereof other
than as set forth therein. No subsequent alteration, amendment, change or
addition to the Agreements shall be binding upon the Parties hereto unless
reduced to writing and signed by the respective authorized officers of the
Parties. The Agreements, including without limitation the Exhibits, Schedules
and attachments thereto, are intended to define the full extent of the legally
enforceable undertakings of the Parties thereto with respect to the subject
matter thereof, and no promise or representation, written or oral, which is not
set forth explicitly is intended by either Party to be legally binding. Both
Parties acknowledge that in deciding to enter into the Agreements and to
consummate the transaction contemplated thereby neither Party
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<PAGE> 51
has relied upon any statement or representations, written or oral, other than
those explicitly set forth therein.
21.13 INDEPENDENT CONTRACTORS. The status of the Parties under this
Agreement shall be that of independent contractors. Neither Party shall have the
right to enter into any agreements on behalf of the other Party, nor shall it
represent to any person that it has any such right or authority. Nothing in this
Agreement shall be construed as establishing a partnership or joint venture
relationship between the Parties.
21.14 CURRENCY. The references in this Agreement to amounts expressed in
dollars ($) shall mean United States dollars.
21.15 BANKRUPTCY. All rights and licenses granted under or pursuant to
this Agreement are, and shall otherwise be deemed to be, for purposes of Section
365(n) of Title 11, U.S.C. (the "Bankruptcy Code"), licenses and rights to
"intellectual Property" as defined under Section 101(60) of the Bankruptcy Code.
The Parties agree that the other Party, as a licensee of such rights under this
Agreement, shall retain and may fully exercise all of its rights and elections
under the Bankruptcy Code. Each Party agrees during the term of this Agreement
to create and maintain current copies of or, if not amenable to copying,
detailed descriptions or other appropriate embodiments, of all such intellectual
property. The Parties further agree that, in the event of the commencement of a
bankruptcy proceeding by or against one Party under the 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 its possession, shall
be promptly delivered to the other Party (i) upon any such commencement of a
bankruptcy proceeding upon written request therefor by the other Party, unless
such Party elects to continue to perform all of its obligations under this
Agreement, or (ii) if not delivered under (i) above, upon the rejection of this
Agreement by or on behalf of such Party upon written request therefor by the
other Party. Any delivery of descriptions or embodiments of intellectual
property pursuant to this Section 21.15 shall not be deemed to effect a transfer
of title or other change in ownership or license rights, or to reduce in any
respect the payment obligations of the receiving Party under this Agreement.
21.16 CLOSING CONDITIONS. The "Effective Date" shall be deemed to be the
later of (a) the date that the waiting period provided by Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (16 C.F.R. 801.1 et. Seq.) (the "Act")
terminates or has expired, as further described in subsection (i) below, or (b)
the date that [***], as further described in subsection (ii) below, unless
otherwise agreed by the Parties in writing. In the event that the Effective Date
has not occurred within three (3) months after the Signing Date, the Parties
shall revert to their status prior to signing this Agreement; provided that
Aviron may extend such three month period in one (1) month increments upon
written notice to Wyeth-Ayerst, such extended period not to exceed three (3)
months. This Section 21.16 shall bind Aviron and Wyeth-Ayerst upon the Signing
Date, but the other provisions of the Agreement shall not become effective until
the Effective Date.
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(i) HART-SCOTT-RODINO. The Parties will, at their own expense
(other than any required filing fees which shall be paid by Wyeth-Ayerst),
prepare and make appropriate filings under the Act as soon as reasonably
practicable after the Signing Date. Each Party shall use its best efforts (not
including divestiture or out-license of any assets) in the antitrust clearance
process and the resolution of all issues or comments raised, and agrees to
furnish promptly to the Federal Trade Commission and the Antitrust Division of
the Department of Justice any additional information reasonably requested by
them in connection with such filings and the transaction contemplated by this
Agreement; provided, however, that such "best efforts" shall not require any
divestiture by either Party of any products or other assets. In addition, each
Party agrees to give the other Party prompt notice of any communication to or
from the Federal Trade Commission or the Department of Justice regarding this
transaction. Each Party will consult and cooperate with the other Party and will
consider in good faith the view of the other Party in connection with any
analysis, appearance, presentation, memorandum, brief, opinion or proposal made
or submitted in connection with any action, request, or investigation under or
relating to the Act or any other federal antitrust, competition or fair trade
law.
(ii) [***] of which shall be [***] which shall [***] the
following:
(1) [***] under this Agreement and the [***] made in
accordance with [***];
(2) [***] this Agreement and the [***] to those of the
[***];
(3) The [***] under the [***] as applies to [***] to the
[***] set forth in Section [***] hereof;
(4) [***] and maintain [***] will be deemed [***] to be
reasonably demonstrated to [***] upon its request;
(5) In the event that [***] under the [***] under the
[***] in Section [***] have been the [***] of this Agreement, and under the
[***] of the [***] have been the [***] if within [***] days of the date of [***]
of such [***]:
(a) That it will be able to meet its obligations
under [***] provided that [***] such requirement to [***] under this subsection
(a) if [***] agrees to [***] for the [***] of such [***] to the [***] under the
[***] which [***] of the [***] and the [***] to be [***] but only to the extent
that such [***] has not [***]; and
(b) That [***] is not in [***] of this Agreement,
the [***] by the end of such [***] day period.
During such [***] the right to [***].
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IN WITNESS WHEREOF, Aviron and Wyeth-Ayerst have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
AMERICAN HOME PRODUCTS CORPORATION AVIRON
By: /s/ GERARD A. JIBILIAN By: /s/ CAROL A. OLSON
--------------------------------- -----------------------------
Name: Name:
-------------------------------- ---------------------------
Title: Title:
------------------------------- ---------------------------
52
<PAGE> 54
SCHEDULE 1.4
AVIRON PATENTS
[***]
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SCHEDULE 1.12
[***]
[***]
[***]
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SCHEDULE 1.39
SEQUENCE FEATURES [***]
[***]
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<PAGE> 57
SCHEDULE 1.41
MICHIGAN AGREEMENT
<PAGE> 58
SCHEDULE 1.63
WYETH-AYERST PATENTS
NONE AS OF THE EFFECTIVE DATE.
<PAGE> 59
SCHEDULE 6.4
PRELIMINARY DEVELOPMENT BUDGET
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
[***] [***]
</TABLE>
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SCHEDULE 16.2(F)
GOVERNMENT FUNDING DISCLOSURE SCHEDULE
1. [***]
2. AVIRON PATENTS
Aviron was assigned Patent No. [***] (the "[***] Patent") by the [***]
pursuant to that certain [***] Agreement dated [***] (the [***]
Agreement"). Section [***] of the [***] Agreement states that such [***]
Patent may have been developed under a funding agreement with the
Government of the United States of America (the "Government"), and, if
so, that the Government "may have certain rights related thereto,
including, but not limited to those arising under 35 U.S.C.
Sections 200-212 and the regulations promulgated thereunder."
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SCHEDULE 17.3
ADVERSE EVENT REPORTING PROCEDURES
The Parties hereby agree that the following terms will govern disclosures of
each Party to the other with respect to adverse event reporting relating to the
Product as clinically tested or marketed by or on behalf of either Party.
1. Definitions.
1.1 An "Adverse Drug Experience" or "ADE" is defined as:
a) any experience which is adverse, including what are commonly described as
adverse or undesirable experiences, adverse events, adverse reactions, side
effects, or death due to any cause associated with, or observed in conjunction
with the use of the Product in humans, whether or not considered related to the
use of the Product:
(i) occurring in the course of the use of the Product,
(ii) associated with, or observed in conjunction with an overdose of the
Product, whether accidental or intentional,
(iii) associated with, or observed in conjunction with abuse of the
product, and/or
(iv) associated with, or observed in conjunction with withdrawal from
the product.
b) Any significant failure of expected pharmacological or biologic therapeutic
action (with the exception of clinical trial use).
1.2
a) A "Serious ADE" is defined as any Adverse Drug Experience occurring at any
dose that results in any of the following outcomes: death, a Life-Threatening
Adverse Drug Experience, inpatient hospitalization or prolongation of existing
hospitalization, a persistent or significant Disability/incapacity, or a
congenital anomaly/birth defect. Other important medical events that may not
result in death, be life-threatening, or require hospitalization may be
considered a Serious Adverse Drug Experience when, based upon appropriate
medical judgment, they may jeopardize the patient or subject and may require
medical or surgical intervention to prevent one of the outcomes listed in this
definition. Examples of such medical events include allergic bronchospasm
requiring intensive treatment in an emergency room or at home, blood dyscrasias
or convulsions that do not result in inpatient hospitalization, or the
development of drug dependency or drug abuse.
b) A Non-Serious ADE is defined as any ADE which does not meet the criteria in
subsection (a) above for a Serious ADE.
1.
<PAGE> 62
1.3 "Life-threatening Adverse Drug Experience" is defined as any Adverse Drug
Experience that places the patient, in the view of the initial reporter, at
immediate risk of death from the Adverse Drug Experience as it occurred, i.e.,
it does not include an Adverse Drug Experience that, had it occurred in a more
severe form, might have caused death.
1.4 "Disability" is defined as a substantial disruption of a person's ability to
conduct normal life functions.
1.5 "Unexpected ADE" is defined as any ADE that is not listed in the current
labeling for the Product. This includes events that may be symptomatically and
pathophysiologically related to an event listed in the labeling, but differ from
the event because of greater severity or specificity.
1.6 "Associated with or related to the use of the Product" is defined as: A
reasonable possibility exists that the ADE was caused by the Product.
1.7 "NDA Holder" is defined as: An "Applicant" as defined in 21 CFR Part
314.3(b), for regulatory approval of the Product in any regulatory jurisdiction,
including a holder of a foreign equivalent thereto.
1.8 "IND Holder" is defined as: A "Sponsor" as defined in 21 CFR Part 313.1(b)
of an investigational new drug in any regulatory jurisdiction, including a
holder of a foreign equivalent thereto.
1.9 Capitalized terms not defined in this Schedule shall have the meaning
assigned thereto in the Agreement.
2. With respect to the Product, the Parties agree as follows:
a. All initial reports and any follow-up information (oral or written)
for any and all Serious ADEs (other than with respect to animal studies), which
become known to either Party (other than from disclosure by or on behalf of the
other Party) must be communicated by telephone, telefax or electronically
directly to the other Party and/or the NDA Holder and IND Holder (individually
and collectively referred to as "Holders") within forty-eight (48) hours of
receipt of the information. Written confirmation of the Serious ADE received by
such Party should be sent to the other Party and/or the Holders as soon as it
becomes available, but in any event within forty-eight (48) hours of initial
report of the Serious ADE by such Party.
b. Both Parties shall exchange Medwatch and/or CIOMs forms and other
health authority reports within forty-eight (48) hours of submission to any
Regulatory Authority.
c. All initial reports and follow-up information received for all
Non-Serious ADEs for the Product which become known to a Party (other than from
disclosure by or on behalf of the other Party) must be communicated in writing,
by telefax or electronically to the other Party within ten (10) days, on
Medwatch or CIOMs forms (where possible).
d. Each Party shall coordinate and cooperate with the other whenever
practicable to prepare a single written report regarding all Serious ADEs and/or
Non-Serious ADEs, provided,
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<PAGE> 63
however, that neither Party shall be obligated to delay reporting of any ADE in
violation of applicable law or regulations regarding the reporting of ADEs.
3. The Parties further agree that:
a. A written report be forwarded to the other Party within forty-eight (48)
hours of receipt by the Party making the report, for adverse drug experiences
for animal studies which suggest a potential significant risk for humans
("Animal ADEs");
b. Each Party will give the other Party a report via a print-out or computer
disk of all ADEs and Animal ADEs reported to it and its Affiliates relating to
the Product or Substance within the last year, within thirty (30) days of
receipt of a written request from the other Party, but not more often than four
(4) times a year;
c. If either Party wishes access to ADE reports of the other Party relating to
the Product, upon request of that Party, the other Party shall make available
its ADE records relating to the Product (including computer disks) for viewing
and copying by the other Party. The Parties may discuss the transfer of ADE
reports by computer disk.
d. Disclosure of information hereunder by a Party to the other Party shall
continue as long as either Party and/or its Affiliates or designees continue to
clinically test or market the Product.
4. Each Party shall diligently undertake the following further obligations where
both Parties are or will be commercializing Product pursuant to the Agreement
and/or performing clinical trials with respect to Product:
a. Upon the Effective Date, each Party shall identify the individuals who shall
be responsible for identifying all ADE reporting requirements in the Territory
as set forth in the Agreement, and any amendments thereto;
b. To immediately consult with the other Party, with respect to the
investigation and handling of any Serious ADE disclosed to it by the other Party
or by a Third Party and to allow the other Party to review the Serious ADE and
to participate in the follow-up investigation;
c. To immediately advise the other Party of any communication received from a
health authority regarding the safety of the Product and consult with the other
Party with respect to any Product warning, labeling change or change to an
investigators' brochure involving safety issues proposed by the other Party,
including, but not limited to the safety issues agreed to by the Parties;
d. To diligently handle in a timely manner the follow-up investigation and
resolution of each ADE reported to it;
e. To provide the other Party access to its ADE reporting system and
documentation as set forth in Section 3 of this Schedule, upon prior written
notice, during normal business hours, at
3
<PAGE> 64
the expense of the auditing Party and under the confidentiality obligations set
forth in the Agreement;
f. To meet in a timely fashion from time to time as may be reasonably required
to implement the ADE reporting and consultation procedures described in this
Schedule 17.3, including identification of those individuals in each Party's
drug safety group who will be responsible for reporting to and receiving ADE
information from the other Party, and the development of a written standard
operating procedure with respect to ADE reporting responsibilities, including
reporting responsibilities to investigators;
g. Where possible and practical, to transmit all data electronically;
h. to report to each other any addenda, revisions or changes to the Agreement
(e.g., change in territories, local regulations, addition of new
licensors/licensees to the Agreement, etc.) which might alter the ADE reporting
responsibilities hereunder;
i. to utilize English as the language of communication and data exchange between
the Parties;
j. to develop a system of exchange of documents and information in the event
that the Agreement involves more than two Parties;
k. to work together to develop a secure electronic system to transmit ADE data.
5. The Parties may meet after the Effective Date of the Agreement to establish a
separate agreement for ADE information exchange which will supersede this
Schedule 17.3.
4
<PAGE> 65
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1 DEFINITIONS................................................................1
1.1 "Affiliate"...................................................................1
1.2 "Annual Net Sales"............................................................2
1.3 "Aviron Know-How".............................................................2
1.4 "Aviron Patents"..............................................................2
1.5 "Aviron Product Materials"....................................................2
1.6 "Aviron Results"..............................................................2
1.7 "Calendar Year"...............................................................2
1.8 "Collaboration"...............................................................2
1.9 "Commercialization Expenses"..................................................2
1.10 "Commercialization Plan"......................................................2
1.11 "Commercially Reasonable Efforts".............................................3
1.12 [***].........................................................................3
1.13 "Confidential Information"....................................................3
1.14 "Control" or "Controlled".....................................................3
1.15 "Co-Promote" or "Co-Promotion"................................................3
1.16 "Co-Promotion Term"...........................................................3
1.17 "Development Plan"............................................................3
1.18 "Effective Date"..............................................................3
1.19 "FDA".........................................................................3
1.20 "FD&C Act"....................................................................4
1.21 "Field".......................................................................4
1.22 "Finished Product"............................................................4
1.23 "Flu Season"..................................................................4
1.24 [***].........................................................................4
1.25 "Good Clinical Practice" or "GCP".............................................4
1.26 "Good Laboratory Practice" or "GLP"...........................................4
1.27 "Good Manufacturing Practice" or "GMP"........................................4
1.28 "Information".................................................................4
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
1.29 "Injectable Product"..........................................................4
1.30 "International Agreement".....................................................5
1.31 "Invention"...................................................................5
1.32 "JCC Forecast"................................................................5
1.33 "Joint Commercialization Committee" or "JCC"..................................5
1.34 "Joint Development Committee" or "JDC"........................................5
1.35 "Joint Patent"................................................................5
1.36 "Joint Technology"............................................................5
1.37 "Launch" or "Launch Date".....................................................5
1.38 [***].........................................................................5
1.39 [***].........................................................................5
1.40 "Michigan"....................................................................5
1.41 "Michigan Agreement"..........................................................6
1.42 "Net Sales"...................................................................6
1.43 [***].........................................................................6
1.44 [***].........................................................................6
1.45 [***].........................................................................6
1.46 "Patent"......................................................................7
1.47 "Person"......................................................................7
1.48 "PLA".........................................................................7
1.49 "Primary Brand Trademark".....................................................7
1.50 "Product".....................................................................7
1.51 "Product Labeling"............................................................7
1.52 "Product Promotional Materials"...............................................7
1.53 "R&D Expenses"................................................................7
1.54 "Regulatory Approvals"........................................................7
1.55 "Sales and Marketing Expenses"................................................8
1.56 "Signing Date"................................................................8
1.57 "Supply Agreement"............................................................8
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
1.58 "Target Population"...........................................................8
1.59 "Territory"...................................................................8
1.60 "Third Party".................................................................8
1.61 "Trademarks"..................................................................8
1.62 "Wyeth-Ayerst Know-How".......................................................8
1.63 "Wyeth-Ayerst Patents"........................................................8
1.64 "Wyeth-Ayerst Results"........................................................9
ARTICLE 2 SCOPE; MANAGEMENT..........................................................9
2.1 Scope.........................................................................9
2.2 Management of the Collaboration...............................................9
2.3 Composition and Conduct of the Committees.....................................9
2.4 Meetings of the Committees...................................................10
2.5 Limitations of Committee Powers..............................................10
2.6 Authority to Call Meetings...................................................10
ARTICLE 3 JOINT COMMERCIALIZATION COMMITTEE.........................................11
3.1 Functions and Powers of the Joint Commercialization Committee................11
3.2 Joint Commercialization Committee Actions....................................11
ARTICLE 4 JOINT DEVELOPMENT COMMITTEE...............................................12
4.1 Functions and Powers of the Joint Development Committee......................12
4.2 Joint Development Committee Actions..........................................12
ARTICLE 5 LICENSES..................................................................12
5.1 License Grant within the Territory...........................................12
5.2 License Grant to Aviron......................................................13
5.3 Distribution through Others..................................................13
5.4 Joint Technology.............................................................13
5.5 Michigan Retained Rights.....................................................13
5.6 Wyeth-Ayerst [***]...........................................................13
5.7 Aviron [***].................................................................14
5.8 [***]........................................................................14
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
5.9 Development of [***] by Aviron...............................................15
5.10 Reservation of Rights........................................................16
5.11 Wyeth-Ayerst Prior Agreement with Michigan...................................16
5.12 Wyeth-Ayerst Covenant........................................................16
ARTICLE 6 PRODUCT DEVELOPMENT.......................................................16
6.1 Current Status...............................................................16
6.2 Product Development..........................................................17
6.3 Development Plan.............................................................17
6.4 Sharing of R&D Expenses......................................................17
6.5 Regulatory Applications......................................................17
6.6 Supplements..................................................................18
6.7 Notification of Wyeth-Ayerst as Distributor..................................18
6.8 Regulatory Meetings and Correspondence.......................................18
6.9 Records......................................................................18
ARTICLE 7 CO-PROMOTION AND MARKETING................................................19
7.1 Principles of Co-Promotion...................................................19
7.2 Commercialization Plan.......................................................19
7.3 Sales and Distribution; Recalls..............................................20
7.4 Commercialization Expenses...................................................20
7.5 Commercialization Expense Commitment.........................................20
7.6 Sales and Marketing Expenses.................................................20
7.7 [***]........................................................................21
7.8 Promotional and Advertising Materials........................................21
7.9 Voluntary Product Recalls....................................................21
7.10 Regulatory Obligations.......................................................21
7.11 Co-Promotion Responsibilities................................................22
ARTICLE 8 MANUFACTURE AND SUPPLY....................................................23
8.1 Supply of [***]..............................................................23
8.2 Supply of [***]..............................................................23
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8.3 Supply Goal Payments.........................................................23
ARTICLE 9 TRADEMARK MATTERS.........................................................24
9.1 Licenses.....................................................................24
9.2 Validity of Trademarks.......................................................24
9.3 Form of Use..................................................................24
9.4 No Contest...................................................................24
9.5 Confusingly Similar and/or Combination Marks.................................25
9.6 Registration Costs...........................................................25
9.7 Infringement.................................................................25
9.8 Trade Dress, Logos, and the Like.............................................25
ARTICLE 10 MICHIGAN AGREEMENT........................................................26
10.1 Sublicense Limitation........................................................26
10.2 Wyeth-Ayerst Obligations.....................................................26
10.3 Use of Aviron Product Materials..............................................27
10.4 Warranty Disclaimer..........................................................27
10.5 Sublicense Termination.......................................................27
10.6 Insurance....................................................................27
10.7 Cooperation..................................................................27
10.8 Sublicenses..................................................................27
ARTICLE 11 PAYMENTS..................................................................28
11.1 License Fee..................................................................28
11.2 Other Payments...............................................................28
ARTICLE 12 ROYALTIES.................................................................30
12.1 Royalty Rates during Co-Promotion Term.......................................30
12.2 Royalty Reports and Payments.................................................31
12.3 Payments.....................................................................31
12.4 [***]........................................................................31
ARTICLE 13 LINE OF CREDIT............................................................32
13.1 Credit Facility..............................................................32
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13.2 Security Interest............................................................32
ARTICLE 14 CONFIDENTIALITY...........................................................32
14.1 Confidential Information.....................................................32
14.2 Authorized Disclosure........................................................33
14.3 Publicity....................................................................33
ARTICLE 15 OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS......................34
15.1 Ownership....................................................................34
15.2 Patent Prosecution...........................................................34
15.3 Enforcement Rights...........................................................35
15.4 Defense and Settlement of Third Party Claims.................................36
15.5 Assignment of Joint Patents..................................................36
ARTICLE 16 REPRESENTATIONS AND WARRANTIES............................................37
16.1 Mutual Representations and Warranties........................................37
16.2 Aviron Representations and Warranties........................................37
16.3 Performance by Affiliates....................................................38
ARTICLE 17 INFORMATION AND REPORTS...................................................38
17.1 Information and Reports During Co-Promotion Term.............................38
17.2 Complaints...................................................................39
17.3 Adverse Drug Experiences.....................................................39
17.4 Records of Revenues and Expenses.............................................39
ARTICLE 18 INDEMNIFICATION...........................................................40
18.1 Indemnification by Aviron....................................................40
18.2 Indemnification by Wyeth-Ayerst..............................................41
18.3 Indemnification Procedures...................................................41
18.4 Insurance....................................................................41
18.5 Payment of Damages...........................................................41
ARTICLE 19 TERM AND TERMINATION; AVIRON CHANGE OF CONTROL............................42
19.1 Term.........................................................................42
19.2 Termination for Material Breach..............................................42
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19.3 Termination by [***].........................................................42
19.4 Termination [***]............................................................42
19.5 Bankruptcy...................................................................43
19.6 Effect of Termination........................................................43
19.7 Wyeth-Ayerst Covenant........................................................44
19.8 Option to Extend Co-Promotion Term...........................................44
19.9 [***]........................................................................46
19.10 Surviving Rights.............................................................46
ARTICLE 20 DISPUTE RESOLUTION........................................................46
20.1 Disputes.....................................................................46
ARTICLE 21 MISCELLANEOUS.............................................................47
21.1 Assignment...................................................................47
21.2 Consents Not Unreasonably Withheld or Delayed................................47
21.3 Force Majeure................................................................47
21.4 Further Actions..............................................................48
21.5 Notices......................................................................48
21.6 Waiver.......................................................................48
21.7 Severability.................................................................49
21.8 Ambiguities..................................................................49
21.9 Governing Law................................................................49
21.10 Headings.....................................................................49
21.11 Counterparts.................................................................49
21.12 Entire Agreement; Amendments.................................................49
21.13 Independent Contractors......................................................50
21.14 Currency.....................................................................50
21.15 Bankruptcy...................................................................50
21.16 Closing Conditions...........................................................50
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TABLE OF CONTENTS
SCHEDULES:
SCHEDULE 1.4 AVIRON PATENTS
SCHEDULE 1.12 [***]
SCHEDULE 1.39 SEQUENCE FEATURES [***]
SCHEDULE 1.41 MICHIGAN AGREEMENT
SCHEDULE 1.63 WYETH-AYERST PATENTS
SCHEDULE 6.4 PRELIMINARY DEVELOPMENT BUDGET
SCHEDULE 16.2(F) GOVERNMENT FUNDING DISCLOSURE SCHEDULE
SCHEDULE 17.3 ADVERSE EVENT REPORTING PROCEDURES
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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
EXHIBIT 10.21
INTERNATIONAL FLUMIST(TM) LICENSE AGREEMENT
AVIRON
AND
AMERICAN HOME PRODUCTS CORPORATION
ACTING THROUGH ITS
WYETH-AYERST LABORATORIES DIVISION
JANUARY 11, 1999
<PAGE> 2
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
INTERNATIONAL FLUMIST(TM) LICENSE AGREEMENT
THIS INTERNATIONAL FLUMIST(TM) LICENSE AGREEMENT (the "Agreement"),
signed on January 11, 1999 (the "Signing Date"), is by and between AVIRON, a
Delaware corporation with its principal place of business at 297 North Bernardo
Avenue, Mountain View, California 94043 ("Aviron"), and AMERICAN HOME PRODUCTS
CORPORATION ("AHPC"), acting through its WYETH-AYERST LABORATORIES DIVISION, a
Delaware corporation with its principal place of business at 555 Lancaster
Avenue, St. Davids, Pennsylvania, 19087 ("Wyeth-Ayerst"). Aviron and
Wyeth-Ayerst are sometimes referred to herein individually as a "Party" and
collectively as the "Parties."
WITNESSETH:
WHEREAS, Aviron has been licensed exclusive rights to, and has developed
substantial additional proprietary rights regarding, an intranasally delivered
cold adapted vaccine formulation against influenza and influenza-associated
illnesses, [***] known as FluMist(TM) or FluEnz(TM) (collectively, "FluMist");
WHEREAS, Aviron is engaged in the development, and when developed, the
manufacture or contract manufacture, marketing and sale, of FluMist, in [***];
WHEREAS, Wyeth-Ayerst is not currently engaged in the development of any
intranasally delivered influenza vaccine product;
WHEREAS, the Parties have entered that certain U.S. License and
Collaboration Agreement of even date herewith;
WHEREAS, the Parties intend to establish a collaboration for the
development and commercialization of FluMist in certain territories outside of
the United States and its territories and possessions, with the purpose of
obtaining the rapid and competitive release of FluMist, and under which
Wyeth-Ayerst will market and promote the FluMist vaccine [***];
WHEREAS, in connection with establishing the collaboration described
herein, Aviron desires to grant to Wyeth-Ayerst, and Wyeth-Ayerst desires to
obtain, certain license rights to FluMist on the terms and conditions set forth
in this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, the Parties hereby agree as
follows:
ARTICLE 1
DEFINITIONS
Any capitalized terms used but not defined herein shall have the meaning
given them in the U.S. Agreement to the extent defined therein. The following
terms, when capitalized, shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined)
as used in this Agreement:
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1.1 "AFFILIATE" means, with respect to a Party or to AHPC, any Person
that, directly or indirectly, is controlled by, controls or is under common
control with such Party, but only for so long as such relationship exists.
"Control," as used in this Section 1.1, means having the power to direct, or
cause the direction of, the management and policies of any entity, whether
through ownership of voting securities, by contract, or otherwise. For purposes
of this Agreement the term "Affiliate" shall not, however, include subsidiaries
in which a Person 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.
1.2 "AGENCY" means any national, supranational, regional, state,
provincial or local regulatory agency, department, bureau, commission, council
or other governmental entity that has authority, responsibility, or jurisdiction
as to any Regulatory Approval for a regulatory jurisdiction within the
Territory.
1.3 "ANNUAL NET SALES" means Net Sales per Calendar Year.
1.4 "AVIRON KNOW-HOW" means any Information owned or Controlled by
Aviron either (a) as of the Effective Date, or (b) during the term of this
Agreement, that is useful or necessary in the clinical development, Regulatory
Approval, commercialization, marketing or manufacture of the Product for use in
the Field in the Territory. "Aviron Know-How" shall not include any Information
in the Joint Technology nor any Aviron Patents.
1.5 "AVIRON PATENTS" means (a) those Patents owned or Controlled by
Aviron which cover the manufacture, use, sale, offer for sale or importation of
the Product in the Field and in the Territory (which as of the Signing Date
consist of those listed on Schedule 1.5 hereto, as may be amended from time to
time); and (b) any Patents claiming any Invention owned solely by Aviron
pursuant to Section 14.1(b) that cover the manufacture, use, sale, offer for
sale or importation of the Product. "Aviron Patents" shall not include any Joint
Patents.
1.6 "AVIRON PRODUCT MATERIALS" means any [***] or any [***] or any other
biological materials transferred to Wyeth-Ayerst by Aviron under this Agreement;
and [***] to the extent that [***] other than [***] as permitted pursuant to
Section [***].
1.7 "AVIRON RESULTS" shall have the meaning ascribed in Section 14.1.
1.8 "CALENDAR YEAR" means the period of time commencing on January 1 of
a given year, and ending on December 31 of such year.
1.9 "COLLABORATION" means the collaborative activities undertaken by the
Parties in accordance with this Agreement to develop and commercialize the
Product in the Field in the Territory.
1.10 "COMMERCIALIZATION EXPENSES" means those costs, excluding [***] but
including [***] incurred by Wyeth-Ayerst or for its account which are
specifically identifiable to the advertising, promotion and marketing (including
market preparation and other pre-launch activities) of the Product and related
professional promotion and education (to the extent not
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<PAGE> 4
performed by sales representatives), including, without limitation, television
and electronic advertisements, advertorials and infomercials, print
advertisements, direct mail, exhibitions at seminars and conferences, samples
packages, promotional literature and market research.
1.11 "COMMERCIALLY REASONABLE EFFORTS" means efforts and resources
normally used by a Party for a vaccine owned by it or to which it has rights,
which is of similar market potential at a similar stage in its product life,
taking into account the competitiveness of the marketplace, the proprietary
position of the vaccine, the regulatory structure involved, the potential or
actual profitability of the vaccine, and other relevant commercial factors. A
Party shall not be determined to have failed to use Commercially Reasonable
Efforts to the extent any failure or delay in such Party's efforts is
attributable to the action or failure to act of the other Party, or material
breach by the other Party of any provision of this Agreement.
1.12 "[***]" means a [***] other than [***] as of the Effective Date or
as [***] pursuant to Section [***] the [***] or any [***] described in Schedule
1.12, which is either [***] for the [***] including [***] in a [***] within a
Region in the Territory.
1.13 "CONFIDENTIAL INFORMATION" shall have the meaning set forth in
Section 13.1.
1.14 "CONTROL" OR "CONTROLLED" means the right to grant a license or
sublicense to intangible property rights (including patent rights, know-how
and/or trade secret information), and the right to provide access to or
cross-reference to regulatory filings, in each case to the extent not in
violation of the terms of any agreement or other arrangement with any Third
Party in existence as of the Effective Date.
1.15 "EFFECTIVE DATE" shall have the meaning set forth in Section 21.16
of the U.S. Agreement.
1.16 "EMEA" means the European Medical Evaluation Agency, or any
successor agency.
1.17 "FDA" means the United States Food and Drug Administration, or any
successor agency.
1.18 "FIELD" means the use of the Product [***] (a) to prevent influenza
and influenza-associated illnesses, [***] in a Target Population, or other
population, for which the Product, as to a regulatory jurisdiction, has been
granted Regulatory Approval by the Relevant Agency; or (b) for any [***] which
are [***] under the Collaboration pursuant to Section [***]. The "Field"
specifically excludes use or sale of the Product [***].
1.19 "FINISHED PRODUCT" means the Product in finished, packaged form.
1.20 "FLU SEASON" means, as to each Region, nation or territory within
the Territory, the influenza vaccine selling season, which shall be deemed to
begin upon the date of the first commercial sale of trivalent Finished Product
comprising the set of influenza strains designated by the governmental agency
having statutory or regulatory authority or responsibility for designating
influenza strains against which influenza vaccines should be targeted, and to
end
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upon the first commercial sale of Finished Product comprising the next set of
influenza strains designated by such governmental agency; provided that a "Flu
Season" shall not in any event extend for more than twelve (12) months from the
first commercial sale of a given Finished Product in such Region, nation or
territory. In the case of a Region, nation or territory that has no such
governmental agency, a given "Flu Season" shall be deemed to begin on the same
date as the "Flu Season" in the U.S. Agreement if such Region, nation or
territory is located in whole or in part in the northern hemisphere, and a given
"Flu Season" shall be deemed to begin on the same date as the first lot release
by Aviron or its contractor for supply to Australia for the upcoming influenza
vaccine selling season if such Region, nation or territory is located entirely
within the southern hemisphere.
1.21 "GOOD CLINICAL PRACTICE" OR "GCP" shall mean the then current
standards for clinical trials for biologicals, as set forth in the United States
Federal Food, Drug and Cosmetics Act ("FD&C Act") and applicable regulations and
guidances promulgated thereunder, as amended from time to time, and such
standards of good clinical practice as are required by the European Union and
other governmental organizations and agencies of nations or territories within
the Territory in which the Product is intended to be sold, to the extent such
standards do not contravene the United States GCP.
1.22 "GOOD LABORATORY PRACTICE" OR "GLP" shall mean the then current
standards for laboratory activities for biologicals, as set forth in the FD&C
Act and applicable regulations promulgated and guidances thereunder, as amended
from time to time, and such standards of good laboratory practice as are
required by the European Union and other governmental organizations and agencies
of nations or territories within the Territory in which the Product is intended
to be sold, to the extent such standards do not contravene the United States
GLP.
1.23 "GOOD MANUFACTURING PRACTICE" OR "GMP" shall mean the current
standards for the manufacture of biologicals, as set forth in the FD&C Act and
applicable regulations and guidances promulgated hereunder, as amended from time
to time, and such standards of good manufacturing practice as are required by
the European Union and other governmental organizations and agencies of nations
or territories within the Territory in which the Product is intended to be sold,
to the extent such standards do not contravene the United States GMP.
1.24 "INFORMATION" means techniques and data relating to the Product and
including (but not limited to) practices, methods, knowledge, know-how, skill,
experience, test data including pharmacological, toxicological, preclinical and
clinical test data, analytical and quality control data, marketing, pricing,
distribution, cost, sales and manufacturing data or descriptions. Information
shall include any Invention for which a patent application has not been filed,
or if filed, has not been published.
1.25 "INJECTABLE PRODUCT" means Wyeth-Ayerst's injectable, inactivated
influenza vaccine product, based on the commercial technology used by
Wyeth-Ayerst as of the Signing Date in the Territory.
1.26 "INTERNATIONAL COMMERCIALIZATION COMMITTEE" OR "ICC" means the
committee formed by the Parties to develop commercial strategies, marketing
plans and budgets for the Product in the Territory and co-ordinate the Product
marketing and sales activities, as further described in Article 3.
4.
<PAGE> 6
1.27 "INTERNATIONAL COMMERCIALIZATION PLAN" shall have the meaning set
forth in Section 7.2.
1.28 "INTERNATIONAL DEVELOPMENT COMMITTEE" OR "IDC" means the committee
formed by the Parties to oversee the clinical development, regulatory strategy
and manufacture of the Product as further described in Article 4.
1.29 "INTERNATIONAL DEVELOPMENT PLAN" means the plan for development of
the Product in the Field in the Territory created by the IDC to be carried out
by the Parties as further described in Section 6.3.
1.30 "INVENTION" means any patentable invention or discovery.
1.31 "JCC" means the Joint Commercialization Committee, as defined in
the U.S. Agreement.
1.32 "JDC" means the Joint Development Committee, as defined in the U.S.
Agreement.
1.33 "JOINT PATENT" means a Patent claiming an Invention in the Joint
Technology.
1.34 "JOINT TECHNOLOGY" means all Information and Inventions discovered
or developed jointly by one or more employees or consultants of one Party and by
one or more employees or consultants of the other Party during the term of and
pursuant to the Agreement, as determined under the United States laws of
inventorship.
1.35 "LAUNCH" OR "LAUNCH DATE" means the date of the first commercial
sale of the Product in the Territory for use in the Field following Regulatory
Approval.
1.36 "[***]" means a [***] of the Product which, during the dating
period established by the FDA or other applicable Regulatory Agency, [***] and
does not [***] provided that if the [***] of the Product which exists as of the
Effective Date is determined to [***] during the dating period, then such [***]
shall be included in "[***]".
1.37 "MAA" means the Marketing Approval Application submitted to the
EMEA for the Product in the Field, or any equivalent marketing approval
application submitted to an Agency for a Regulatory Approval to commercially
market and sell the Product.
1.38 "[***]" means the influenza strains [***] and designated [***] and
any structural equivalents thereto, including any and all progeny, derivatives,
replications, variants, recombinants, and reassortants thereof, whether
generated by viral replication or by recombinant genetic engineering methods.
"Structural equivalents" include any influenza virus: (a) that comprises [***]
genome segments having a cumulative nucleotide sequence identity of at least
[***] to the corresponding genome segments of [***] or (b) that comprises at
least one characteristic nucleotide sequence feature or encoded amino acid
sequence feature of any gene segment selected from the list of such features
shown in Schedule 1.38; or (c) for which Wyeth-Ayerst cannot provide reasonable
evidence to a mutually agreed upon independent Third Party
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laboratory, under an agreement that restricts such Third Party from disclosing
Wyeth-Ayerst's confidential information to Aviron, that the virus is not derived
from [***]
1.39 "MICHIGAN" means the Regents of the University of Michigan, a
constitutional corporation of the State of Michigan with offices located at
Wolverine Tower, Room 2071, 3003 South State Street, Ann Arbor, Michigan,
48109-1280, USA.
1.40 "MICHIGAN AGREEMENT" means the Materials Transfer and Intellectual
Property Agreement between Aviron and Michigan dated February 24, 1995, as
amended and attached hereto as Schedule 1.40.
1.41 "NET SALES" means the sum of all amounts actually received and all
other consideration actually received (or, when in a form other than cash or its
equivalent, the fair market value thereof when received) by Wyeth-Ayerst, its
Affiliates and its sublicensees from persons or entities due to or by reason of
the sale, distribution or use of Finished Product in the Territory, less the
following deductions and offsets, but only to the extent such sums are otherwise
included in the computation of Net Sales, or are paid or credited by
Wyeth-Ayerst, its Affiliates and its sublicensees and not otherwise reimbursed:
(a) [***] in such amounts as [***];
(b) any tax, excise, or other governmental charges upon or
measured by the production, sales, transportation, delivery or use of said
Finished Product contained therein;
(c) [***] other than those described above;
(d) [***] (to the extent that the foregoing [***] do not exceed
[***]) of the sum of all amounts actually received and all other consideration
actually received for the Product (or, when in a form other than cash or its
equivalent, the fair market value thereof when received));
(e) amounts [***]; and
(f) taxes paid by Wyeth-Ayerst or its Affiliates to government or
an instrumentality thereof under a tax regulatory scheme equivalent to 42 U.S.C.
300 aa-1 et seq. or other similar legislation, insuring against liability
arising out of the manufacture, use or sale of Finished Product by Wyeth-Ayerst
or its Affiliates.
Sales of Finished Product intended for resale to Third Parties, and made
internally amongst Wyeth-Ayerst and its Affiliates or sublicensees shall not be
deemed sales for purposes of calculating "Net Sales" (however the resale by the
recipient shall be included in the calculation of "Net Sales" and subject to
royalties).
1.42 "[***]" means the sale or distribution of [***] in the Territory
for use in [***] other than pursuant to a [***].
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1.43 "[***]" means either (a) a [***] (which may include, e.g., a [***]
(b) a [***] or (c) any other [***] determined by Aviron to be useful in [***]
1.44 "[***]" means [***] other than the [***] for which Aviron intends
to [***] in the Territory and to [***] during the term of the Agreement, e.g.,
[***]
1.45 "PATENT" means patents, applications for patent, provisional
applications for patent, and any patents issuing therefrom (including any
divisions, continuations, continued prosecution applications and
continuations-in-part thereof), and reexamination certificates, reissue patents,
patent extensions and patent term restorations.
1.46 "PERSON" means an individual, corporation, partnership trust or
unincorporated organization.
1.47 "PLA" means the Product Licensing Application/Establishment
Licensing Application or Biologics License Application for the Product in the
Field for submission to the FDA, and any supplements thereto.
1.48 "PRIMARY BRAND TRADEMARKS" means FluMist(TM) and FluEnz(TM), as
well as any brand names combining FluMist or FluEnz with other words, e.g.
"Pediatric FluMist."
1.49 "PRODUCT" means Aviron's live, attenuated, intranasally delivered,
cold adapted influenza vaccine [***] including, but not limited to, the [***]
provided, however, that "Product" specifically excludes any [***] unless and
until [***] pursuant to Section [***] "Product" also specifically excludes: (a)
any influenza vaccine Controlled by Aviron which is solely based upon or derived
from [***] or other technologies of Aviron; (b) any product comprising Aviron's
live, attenuated, intranasally delivered, cold adapted influenza vaccine [***]
in combination with any other vaccine or vaccines; and (c) any product in which
a vector [***] is used to deliver a vaccine or other heterologous gene sequence
for use in the prevention, mitigation or cure of influenza.
1.50 "PRODUCT LABELING" means (a) the full prescribing information for
the Product required by an Agency or by applicable law, rule or regulation in a
regulatory jurisdiction within the Territory, including any required patient
information, and (b) all labels and other written, printed or graphic matter
upon any container, wrapper or any package insert or outsert utilized with or
for the Product.
1.51 "PRODUCT PROMOTIONAL MATERIALS" means all sales representative
training materials and all written, printed, graphic, electronic, audio or video
matter, including but not limited to journal advertisements, sales visual aids,
leave items, formulary binders, reprints, direct mail, direct-to-consumer
advertising, internet postings, broadcast advertisements, and sales reminder
aids (for example, scratch pads, pens and other such items) intended for use or
used by Wyeth-Ayerst in connection with any Promotion of the Product, but
excluding Product Labeling.
1.52 "PROMOTE" OR "PROMOTION" means, with respect to the Product, those
activities undertaken by Wyeth-Ayerst to encourage sales of the Product,
including without limitation
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<PAGE> 9
detailing, journal advertising, direct mail programs, direct-to-consumer
advertising, and other forms of advertising and promotion specified in the
International Commercialization Plan.
1.53 "REGION" means any or all of the following regions, which include
the countries set forth in Schedule 1.53, as may be updated from time to time,
and as the context requires:
(a) The "Asia/Pacific Region;"
(b) The "Africa/Middle East Region;"
(c) The "European Region;"
(d) The "Latin America Region;" and
(e) The "North America Region."
1.54 "REGULATORY APPROVALS" means any approvals (including, but not
limited to, PLA approval, labeling, pricing and reimbursement approvals),
product, biologic and/or establishment licenses, registrations or authorizations
of any supranational, national, regional, state, provincial or local regulatory
agency, department, bureau, commission, council or other governmental entity,
necessary for the commercial manufacture, use, storage, importation, export,
transport or sale of the Product in the Field in a regulatory jurisdiction
within the Territory.
1.55 "SIGNING DATE" means the date first set forth on page 1 of this
Agreement.
1.56 "SUPPLY AGREEMENT" means that certain FluMist Supply Agreement
entered into by and between the Parties as of the Signing Date.
1.57 "TARGET POPULATION" means the target populations for which the
Parties anticipate that the Product may receive Regulatory Approval, consisting
of (a) the healthy pediatric population (children aged 1-17 or any subset
thereof), (b) the at-risk pediatric population (children aged 1-17 or any subset
thereof), (c) the healthy adult population (persons from 18-64 years of age),
(d) any at-risk adult population (persons from 18-64 years of age), and (e) the
elderly population (all persons from 65 years of age and up).
1.58 "TERRITORY" means all of the countries of the world, except the
United States and its territories and possessions, the Commonwealth of Puerto
Rico, South Korea, North Korea, Australia, New Zealand, Fiji, Papua New Guinea,
Vanuatu, Tonga, the Solomon Islands and the Cook Islands.
1.59 "THIRD PARTY" means any entity other than Aviron or Wyeth-Ayerst
and their respective Affiliates.
1.60 "TRADEMARKS" means those trademarks and trade names, whether or not
registered in the Territory (including the Primary Brand Trademark), trade dress
and packaging which (a) are owned by either Party, and (b) are applied to or
used in connection with the Product or any Product Promotional Materials.
8.
<PAGE> 10
1.61 "U.S. AGREEMENT" means that certain United States License and
Co-Promotion Agreement entered into by and between the Parties as of the Signing
Date.
1.62 "U.S. TERRITORY" means the United States and its territories and
possessions, and the Commonwealth of Puerto Rico.
1.63 "WYETH-AYERST KNOW-HOW" means any Information owned or Controlled
by Wyeth-Ayerst either (a) as of the Effective Date, or (b) during the term of
this Agreement, that is useful or necessary in the clinical development,
Regulatory Approval, commercialization, marketing or manufacture of the Product
for use in the Field in the Territory. "Wyeth-Ayerst Know-How" shall not include
any Information in the Joint Technology nor any Wyeth-Ayerst Patents.
1.64 "WYETH-AYERST PATENTS" means (a) those Patents owned or Controlled,
as of the Effective Date or thereafter, by Wyeth-Ayerst or its Affiliates that
cover the manufacture, making of, use, sale, offer for sale or importation of
the Product in the Field and in the Territory (which as of the Signing Date
consist of those Patents listed on Schedule 1.63 hereto, as may be amended from
time to time); and (b) any Patents claiming any Invention owned solely by
Wyeth-Ayerst pursuant to Section 14.1(b) that cover the manufacture, making of,
use, sale, offer for sale or importation of the Product. "Wyeth-Ayerst Patents"
shall not include any Joint Patents.
1.65 "WYETH-AYERST RESULTS" shall have the meaning ascribed in Section
14.1.
ARTICLE 2
SCOPE; MANAGEMENT
2.1 SCOPE. The purpose of this Collaboration is to establish a vehicle
through which Wyeth-Ayerst shall market, Promote and sell the Product in the
Field during the term of the Agreement, so as to maximize sales of the Product
in the Territory, in coordination with the activities of the Parties under the
U.S. Agreement. Furthermore, the Parties shall collaborate on manufacturing and
regulatory strategies and procedures in order to maximize supply and obtain
requisite Regulatory Approval for the Product in an expeditious manner. The
Parties will also collaborate with respect to the clinical trials necessary or
useful to increase the populations to which the Product may be administered, and
to expand the label claims of the Product, in the Field and in the Territory.
2.2 MANAGEMENT OF THE COLLABORATION. The Parties intend to manage the
Collaboration primarily through two committees: The International
Commercialization Committee (the "ICC"), which will generally oversee the
Collaboration, and the International Development Committee (the "IDC"), which
will oversee the management of the clinical development, regulatory strategy and
manufacture of Product in and/or for the Territory, pursuant to the
International Development Plan (as further described in Article 4)
(collectively, the "Committees"). It is the intent of the Parties to monitor and
approve Wyeth-Ayerst's activities in commercializing the Product in the
Territory in order to coordinate them with the Parties' activities under the
U.S. Agreement. It is the also the Parties' intent to assign responsibilities
for the various development aspects of the Collaboration to those portions of
the
9.
<PAGE> 11
Parties' respective organizations which have the appropriate resources,
expertise and responsibility for such functions. The Parties will use
Commercially Reasonable Efforts and cooperate with one another in carrying out
their respective obligations hereunder and as set forth further in the
International Development Plan and the International Commercialization Plan.
2.3 COMPOSITION AND CONDUCT OF THE COMMITTEES. The Parties shall
designate their representatives to the Committees within ten (10) days after the
Effective Date. Each Party shall designate three (3) representatives to the ICC,
and two (2) representatives to the IDC. Each member of each Committee shall have
one vote. Wyeth-Ayerst shall also appoint an employee of AHPC's Whitehall-Robins
Healthcare Division as a non-voting representative to the ICC. The Parties will
endeavor to designate representatives with the appropriate skills necessary to
deal with the issues before them. The membership of the ICC and the IDC may
overlap. An alternate such member designated by a Party may serve temporarily in
the absence of a permanent member designated by such Party. Each Party shall
designate one of its representatives to each Committee as a Co-Chair of such
Committee. Each Co-Chair of a Committee will be responsible for the agenda and
the minutes of alternating meetings of such Committee. Each Party shall bear its
own costs of participation in each Committee.
2.4 MEETINGS OF THE COMMITTEES. Each Committee:
(a) shall hold meetings at such times and places as shall be
determined by a majority of the entire membership of such Committee (it being
expected that meetings will alternate between the Mountain View, CA office of
Aviron and the Radnor/St. Davids, PA office of Wyeth-Ayerst) but in no event
shall such meetings be held in person less frequently than once every six (6)
months;
(b) may conduct meetings in person or by telephone or video
conference or other means, provided that: (i) except by mutual consent of the
Co-Chairs, meetings by telephone conference shall not reduce the number of
meetings in person specified in paragraph (a) above; and (ii) any decision made
during a telephone conference meeting is evidenced in writing signed by one of
the members of such Committee from each of the Parties;
(c) by mutual consent of the representatives of each Party, such
consent not to be unreasonably withheld, either Party may invite other personnel
of their organization to attend appropriate meetings of the Committee;
(d) shall keep minutes reflecting actions taken at meetings;
(e) may act without a meeting if prior to such action the
Committee members agree regarding such action and a written consent thereto is
signed by the Co-Chairs of the Committee; and
(f) may amend or expand upon the foregoing procedures for its
internal operation by unanimous written consent.
2.5 LIMITATIONS OF COMMITTEE POWERS. Neither Committee shall have any
power to amend this Agreement and shall have only such powers as are
specifically delegated to them hereunder.
10.
<PAGE> 12
2.6 AUTHORITY TO CALL MEETINGS. Notwithstanding the regular meeting
schedule of the respective Committees, a meeting of either Committee may be
called by either Party on ten (10) days written notice to the other, unless such
notice is waived by the other Party. In the event of any meeting called pursuant
to a notice under this Section 2.6, the Party calling the meeting shall provide
an agenda for the meeting together with the information that such Party believes
is relevant for the items to be discussed. Neither Party shall call more than
four (4) additional meetings per Calendar Year for each Committee under this
Section 2.6 without the other Party's consent. The Party not calling the meeting
under this Section 2.6 shall select the location for the meeting.
ARTICLE 3
INTERNATIONAL COMMERCIALIZATION COMMITTEE
3.1 FUNCTIONS AND POWERS OF THE INTERNATIONAL COMMERCIALIZATION
COMMITTEE. The International Commercialization Committee shall perform the
following functions:
(a) approve the overall commercialization strategy for the
Product in the Territory as proposed by Wyeth-Ayerst;
(b) communicate at least twice per Calendar Year with the JCC in
order to coordinate the Parties' activities hereunder with their activities
under the U.S. Agreement;
(c) review plans and budgets for the Collaboration, all based on
the principles of prompt and diligent development of the Product consistent with
good biological practices and the maximization of sales of the Product in the
Field and in the Territory.
(d) approve the International Commercialization Plan, and any
updates or amendments thereto, as described in Section 7.2;
(e) review the financial performance of the Product in the
Territory;
(f) review and approve material agreements with Third Parties to
be made by Wyeth-Ayerst that cover the marketing or sales of the Product and any
sublicenses and distributorships granted hereunder in the Field and in the
Territory;
(g) review and comment on the International Development Plan, as
modified from time to time;
(h) at its discretion, form and subsequently disband
subcommittees with appropriate representation from each Party; and
(i) perform such other functions as appropriate to further the
purposes of this Agreement as mutually determined by the Parties.
3.2 INTERNATIONAL COMMERCIALIZATION COMMITTEE ACTIONS. No business shall
be transacted at any meeting of the ICC unless a quorum of members is present at
the time when the meeting proceeds to business. A quorum shall be at least four
(4) members present in person or by their alternate, two (2) of whom must be
representatives appointed by Wyeth-Ayerst and two
11.
<PAGE> 13
(2) representatives appointed by Aviron. Actions by the ICC pursuant to this
Agreement shall be taken only with the [***] of the representatives of both
Parties on such committee. If the ICC fails to reach agreement on any matter
before it for decision within ten (10) days, the matter shall be referred for
resolution in accordance with Article 20 hereof.
ARTICLE 4
INTERNATIONAL DEVELOPMENT COMMITTEE
4.1 FUNCTIONS AND POWERS OF THE INTERNATIONAL DEVELOPMENT COMMITTEE. The
International Development Committee shall perform the following functions:
(a) Oversee and coordinate the clinical development of the
Product in the Territory with the United States and its territories (including
without limitation, review of proposals to commence or stop a clinical trial)
pursuant to the International Development Plan;
(b) Prepare the International Development Plan (as described in
Section 6.3), and any necessary amendments thereto, for the ICC's review and
approval; and
(c) Oversee and provide input to Wyeth-Ayerst's efforts in
regulatory affairs regarding the Product and the Parties' manufacture and supply
of Product for sale in the Territory.
ARTICLE 5
LICENSES
5.1 LICENSE GRANT WITHIN THE TERRITORY. Subject to the conditions and
limitations set forth in this Agreement, Aviron hereby grants to Wyeth-Ayerst
(a) the exclusive license, under the Aviron Patents, the Aviron Know-How and
Aviron's interest in any Joint Technology; and (b) the exclusive sublicense
under Aviron's rights under the Michigan Agreement, in each case solely to
manufacture, to the extent set forth in the Supply Agreement, develop,
distribute, use, import, offer for sale and sell the Product in the Territory
for use in the Field during the term of the Agreement. Aviron shall retain all
rights under the Aviron Patents, the Aviron Know-How and Aviron's interest in
any Joint Technology, and under the Michigan Agreement, that are necessary or
useful to Aviron's performance of its rights and obligations under this
Agreement and the Supply Agreement, or that relate to the manufacture of the
Product within the Territory that is to be used or sold in territories for which
Wyeth-Ayerst or its Affiliates do not have a license to use or sell the Product.
5.2 LICENSE GRANT TO AVIRON. Subject to the conditions and limitations
set forth in this Agreement, Wyeth-Ayerst hereby grants to Aviron the exclusive,
paid-up license, under the Wyeth-Ayerst Know-How, the Wyeth-Ayerst Patents, and
Wyeth-Ayerst's interest in any Joint Technology, to manufacture, solely to the
extent set forth in the Supply Agreement, develop, distribute, make, have made,
use, offer for sale and sell the Product in the Territory for use in the Field
during the term of the Agreement. Wyeth-Ayerst shall retain all rights under the
Wyeth-Ayerst Patents, the Wyeth-Ayerst Know-How and Wyeth-Ayerst's interest in
any Joint
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<PAGE> 14
Technology that are necessary or useful to Wyeth-Ayerst's performance of its
rights and obligations under this Agreement and the Supply Agreement.
5.3 SUBLICENSES/DISTRIBUTORSHIPS.
(a) GENERAL. Wyeth-Ayerst may grant one or more Third Parties the
right to distribute, promote and/or sell the Product in the Territory for use in
the Field, provided that:
(i) Wyeth-Ayerst obtains Aviron's prior written consent,
such consent not to be unreasonably withheld;
(ii) The parties to and economic terms of any such
agreement shall be fully disclosed to Aviron, and the terms of such agreement
shall be consistent with all of the relevant terms and provisions of this
Agreement;
(iii) Wyeth-Ayerst shall in no event grant such Third
Party the right to manufacture, or have manufactured, the Product;
(iv) To the extent that any such Third Party is to perform
any obligation of Wyeth-Ayerst's under this Agreement, Wyeth-Ayerst shall remain
liable for such performance;
(v) Wyeth-Ayerst shall pay Aviron its [***] royalty on
all Net Sales of Product by such Third Party, as set forth in Article 12; and
(vi) Wyeth-Ayerst shall pay Aviron [***] of any [***]
consideration received from such sublicensee for such sublicense, including
[***] but excluding [***]. Such payment under this subsection (f) shall be made
to Aviron within fifteen (15) days of Wyeth-Ayerst's receipt of such
consideration.
(b) [***] Aviron hereby grants Wyeth-Ayerst the right to grant a
sublicense, under its exclusive license granted pursuant to Section 5.1, to
[***] to use, market, sell, and distribute the Product for use in the Field,
solely in the [***]. Wyeth-Ayerst hereby agrees that following the Effective
Date and upon [***], Wyeth-Ayerst shall [***] regarding an [***] the Product in
the [***], on terms and conditions which are agreed upon and reasonably
acceptable to both Wyeth-Ayerst and Aviron, and subject to Sections 5.3(a)(ii),
(a)(iv), (a)(v) and (a)(vi). The [***] may be predicated upon [***] achieving
certain performance events, and shall include mutually acceptable economic
terms, which may include certain [***]. In the event that Wyeth-Ayerst does not
[***], Wyeth-Ayerst may not [***] to distribute, promote or sell the Product in
[***] without Aviron's prior written consent.
5.4 JOINT TECHNOLOGY. Wyeth-Ayerst hereby grants to Aviron the
exclusive, worldwide license during the term of the Agreement under
Wyeth-Ayerst's interest in the Joint Technology to use, make, have made, import,
offer for sale and sell the Product outside of the Field in the Territory. Such
license shall be [***]; in the event that Aviron [***], the Parties shall [***]
to be [***] of the Product under such [***] as the Parties may agree upon, [***]
of the [***] of [***] manufacture, use or sale of the Product.
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<PAGE> 15
5.5 MICHIGAN RETAINED RIGHTS. Wyeth-Ayerst acknowledges and agrees that
the license granted under Section 5.1 is subject at all times to the Michigan
Agreement, as further set forth in Article 10. Pursuant to the Michigan
Agreement, Wyeth-Ayerst hereby grants to Michigan an irrevocable, royalty-free
license to utilize any "Improvements" (as defined in Section 2.3 of the Michigan
Agreement) to the Product generated by Wyeth-Ayerst in the manufacture, use,
marketing or sale of Products, as set forth in Section 9.4 of the Michigan
Agreement, and subject to the restrictions placed upon Michigan under Section
3.4 of the Michigan Agreement.
5.6 WYETH-AYERST [***].
(a) In order to induce Aviron to grant the exclusive rights
granted under Section 5.1 above, Wyeth-Ayerst hereby agrees that during the term
of the Agreement, it shall [***] in the Territory, subject to subsection (b)
below.
(b) If Wyeth-Ayerst [***] pursuant to [***] and sales of such
[***] do not comprise more than [***] of the overall [***] of such [***] for the
most recent Calendar Year, subsection 5.6(a) shall not apply to such [***],
provided that Wyeth-Ayerst shall give Aviron written notice that it is [***] in
the Territory as promptly as possible following such [***].
(c) In the event Wyeth-Ayerst does promote, market and/or sell
[***] pursuant to Subsection 5.6(b), then Wyeth-Ayerst shall provide Aviron with
all information necessary to assess [***], in accordance with and subject to
Section 16.4. If Aviron determines that the [***] and its Affiliates and
sublicensees in a particular Region are [***] in such Region, then the Parties
shall proceed as follows:
(i) For thirty (30) days following the date of such
determination, or such other period of time as mutually agreed by the Parties in
writing, the Parties shall enter into good faith discussions regarding whether:
(1) additional provisions shall be added to this
Agreement to [***] for any [***] in such Region caused by [***] its Affiliates
or its sublicensees; or
(2) such [***] shall be [***] in the [***] and if
so, the [***] it for [***] with respect to such [***] the appropriate [***] to
be [***] and any additional [***].
(ii) In the event that the Parties are unable to agree on
either of the options set forth in subsections (i)(1) or (i)(2) above during
such thirty day or other agreed upon period, then during the subsequent thirty
(30) day period, or such other period as mutually agreed by the Parties in
writing, the Parties shall agree that either:
(1) [***] and its Affiliates shall [***] during the
term of this Agreement, provided that [***] shall have right to [***]; or
(2) [***] shall have the right to [***] with
respect to such [***] provided that [***] for its [***] in such Region; or
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14.
<PAGE> 16
(3) [***] rights to such [***] in such Region by
[***] provided that prior to the [***] the Parties shall in good faith agree
upon [***] to be [***] for any [***] in such Region [***] of such [***], its
Affiliates or its sublicensees.
If, at the end of such thirty day or other agreed upon
period, the Parties have not agreed on any of the options set forth in
subsection (1), (2) or (3) above, then either Party may initiate dispute
resolution proceedings as set forth in Article 19.
5.7 AVIRON [***]. Aviron shall have the right during the term of the
Agreement to develop, market and sell any [***] in the Territory, subject to
the terms of this Section 5.7. In the event that Aviron does undertake such
development, Aviron shall be solely responsible for the development of such
[***] unless otherwise agreed to in writing by the Parties.
(a) Prior to the first commercial sale of such [***] in the
Territory, Aviron will notify Wyeth-Ayerst in writing. Upon receipt of such
notice, Wyeth-Ayerst shall have a period of thirty (30) days to notify Aviron in
writing whether it desires that such [***]. If Wyeth-Ayerst so notifies Aviron
that it does desire that such [***] then:
(i) Such [***] will thereafter be [***] including without
limitation, [***];
(ii) The Parties shall agree in good faith upon
appropriate [***] to be [***] for its [***] with respect to such [***] at a
minimum, the [***] under Section [***]; and the Parties will discuss any [***];
and
(iii) Aviron shall retain the exclusive right to [***]
such [***] provided that, if at such time [***] of the [***] (i.e., the [***] as
it [***] prior to the [***] pursuant to subsection (ii) above), and the IDC
confirms that the [***] of such [***] essentially the [***] as or a [***] to
that used for the [***] of the [***] then [***] of such [***] under the
conditions set forth in [***].
(b) If Wyeth-Ayerst notifies Aviron that it does not desire that
such Competing Product be included in the Collaboration hereunder, then Aviron
will have no further obligation thereafter to Wyeth-Ayerst with respect to the
Competing Product which was the subject of the Aviron's notice to Wyeth-Ayerst,
and shall have the right to market and sell the same outside of the
Collaboration, either alone or with or through a Third Party.
5.8 [***] In the event that, prior to the expiration of the term of the
Agreement, Aviron determines that it wishes to grant a Third Party the right to
[***] within the Territory, regardless of whether Aviron intends to solicit such
Third Party or has been solicited by such Third Party, Aviron shall so notify
Wyeth-Ayerst in writing. Upon receipt of such notice, Wyeth-Ayerst shall have a
period of [***] days to deliver to Aviron a written notice of its interest. For
[***] days following receipt of Wyeth-Ayerst's notice, the Parties shall engage
in exclusive, good-faith negotiations for the reasonable commercial terms upon
which the [***] would be [***]. The Parties anticipate that such commercially
reasonable terms would include [***] relevant [***] regarding [***] for such
[***], and the duration of such collaboration in the [***]. If Wyeth-Ayerst does
not exercise the option granted in this Section 5.8, or if the Parties
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15.
<PAGE> 17
have failed to reach agreement on such terms by the end of such [***] period,
then Aviron shall thereafter be free to grant a Third Party such rights to [***]
within the Territory, on terms and conditions which, taken as a whole, are no
less favorable to Aviron than Wyeth-Ayerst's last written offer to Aviron for
such rights. Notwithstanding any other provision of this Section 5.8, Aviron
shall not, nor shall Aviron grant any Third Party the right to, [***] in the
Territory during the term of the Agreement, as it may be extended hereunder.
5.9 OTHER DEVELOPMENT ACTIVITIES BY AVIRON.
(a) Aviron shall have the right, but not the obligation, to
undertake development, in and for the Territory, of (i) any [***], (ii) any
[***] other than [***], or (iii) any [***], and Aviron shall be solely
responsible for the development of such [***], unless otherwise agreed to in
writing by the Parties.
(b) Prior to the [***] in the Territory of [***] any such [***],
Aviron will notify Wyeth-Ayerst in writing. Upon receipt of such notice,
Wyeth-Ayerst shall have a period of [***] days to notify Aviron in writing
whether it desires that such [***] be included under the Collaboration. If
Wyeth-Ayerst so notifies Aviron that it does desire that such [***] be included
under the Collaboration hereunder, then:
(i) Such [***] will thereafter be included under this
Agreement, including without limitation, by [***] (for an [***]) or "[***]" (for
an [***]);
(ii) Within [***] days of such notification, Wyeth-Ayerst
shall [***] if the period from the date of notification to the expiration of the
Agreement is [***] if such period is at least [***] if such period is at least
[***] (as defined in Section [***]). Wyeth-Ayerst shall not be obligated to
[***] under this subsection (b)(ii) during the term of this Agreement.
(iii) Notwithstanding the last sentence of subsection
(b)(ii) above, if the [***] pursuant to Section [***] and such [***] if it had
existed at the time Wyeth-Ayerst provided notification under this subsection (b)
to Aviron, would have resulted in [***] under subsection (b)(ii) than the [***]
to Aviron, then Wyeth-Ayerst shall [***] to Aviron and the [***] under the
[***].
(iv) The [***] set forth in Section [***] shall apply to
such [***] provided that Wyeth-Ayerst shall not [***] for the [***] of any [***]
(as defined in Section [***]), regardless of the [***] the [***] shall apply to
such [***] to the [***] and [***] of such [***] in the Territory shall be [***]
with those of any [***] under Section [***]; and
(v) Aviron shall retain the exclusive right to [***] such
[***] provided that, if at such time [***] of the [***] (i.e., the [***] as it
[***] prior to the [***] of such [***] pursuant to subsection (ii) above), and
the IDC confirms that the [***] of such [***] essentially the [***] as or a
[***] to that used for the [***] of the [***] of the [***] then [***] of such
[***] under the conditions set forth in [***].
(vi) In the event that [***] at such time, in the [***] of
the [***] the Parties shall in good faith amend [***] with respect to an amended
[***] of such [***] so as to
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16.
<PAGE> 18
reflect the [***] of the Parties in the [***] of [***] provided that the amended
[***] shall in no event be [***] set forth in the unamended [***].
(c) If Wyeth-Ayerst notifies Aviron that it does not desire that
such [***] be included in the Collaboration hereunder, then Aviron will have no
further obligation thereafter to Wyeth-Ayerst with respect to the specific [***]
which was the subject of the Aviron's notice to Wyeth-Ayerst, and shall have the
right to market and sell the same in the Territory outside of the Collaboration,
either alone or with or through a Third Party.
5.10 RESERVATION OF RIGHTS. Aviron hereby reserves all rights under the
Aviron Patents and the Aviron Know-How, and all rights to the Product including
without limitation all intellectual property and trademark rights relating
thereto, not specifically granted to Wyeth-Ayerst hereunder or under the U.S.
Agreement, including without limitation all rights to the Product outside of the
Field subject to Sections 5.8 and 5.9, and the right to manufacture, or have
manufactured, the Product in the Territory for use in the Territory outside of
the Field and outside of the Territory within or outside of the Field, subject
to the U.S. Agreement.
5.11 WYETH-AYERST COVENANT. During the term of this Agreement,
Wyeth-Ayerst shall not promote, manufacture for commercial sale or use, sell,
resell, or otherwise commercialize, nor shall Wyeth-Ayerst assist any Third
Party or engage any Third Party to promote, manufacture for commercial sale or
use, sell, resell, or otherwise commercialize, any live, cold-adapted influenza
vaccine, other than the Product, [***] in any country within or outside of the
Territory; provided that [***] shall have the burden of (a) [***], and (b)
providing [***]. Aviron shall [***] under this provision only to the extent that
such [***] prior to [***] of the [***] described in [***].
5.12 [***]. Wyeth-Ayerst may at any time during the term of this
Agreement, request and authorize Aviron to [***] wheresoever located in the
Territory [***] in any [***] and a [***] under the [***] in each case solely to
[***] in the Territory for [***] during the term of the Agreement. Wyeth-Ayerst
shall give written notice of such request and authorization to Aviron, [***].
Upon receipt of such notice, Aviron shall [***] with each of the [***] in such
notice (the [***]). All such [***] shall be consistent with the [***] except for
such [***] as may be required by the laws and regulations of the country or
other subdivision of the Territory in which the [***] will be [***]. No such
[***] shall alter, nor shall it have the effect of altering, [***] (including
without limitation [***]), unless Wyeth-Ayerst [***] in a manner acceptable to
Aviron. In those countries where [***] requires prior governmental approval or
registration, such [***] shall not be [***] until such approval or registration
has been granted. [***] of the obligations of [***].
ARTICLE 6
PRODUCT DEVELOPMENT
6.1 CURRENT STATUS. Prior to the Effective Date, Aviron has (i)
independently developed the Product for use in the Field, including conducting
Phase III trials and data review; and (ii) intends to file the PLA with the FDA
for use of the Product for immunization against
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17.
<PAGE> 19
influenza and its associated complications in individuals 12 months to 64 years
of age, [***][, and for the prevention of [***] febrile illness associated with
influenza.
6.2 PRODUCT DEVELOPMENT. Wyeth-Ayerst shall be responsible for carrying
out all activities relating to the clinical, commercial, regulatory and
manufacturing development of the Product in the Field in the Territory, that
have not been assigned pursuant to the U.S. Agreement, in accordance with the
International Development Plan. Wyeth-Ayerst shall comply with all relevant
laws, rules and regulations in the development of the Product hereunder. Aviron
shall have the right to undertake any development activities it deems necessary
to develop the Product outside of the Field, at its own expense.
6.3 INTERNATIONAL DEVELOPMENT PLAN. The clinical development of the
Product in the Territory shall be governed by a comprehensive development plan
("the International Development Plan"). The International Development Plan shall
contain a detailed and specific plan for all clinical development proposed for
the Product in the Territory during the term of the Agreement. Promptly after
the Effective Date, the IDC shall complete the initial International Development
Plan, and submit it to the ICC for its review and approval. During the term of
the Agreement, the IDC shall periodically update the International Development
Plan as necessary, subject to the approval of the ICC and coordination with the
JCC.
6.4 REGULATORY APPLICATIONS.
(a) Wyeth-Ayerst will be responsible for preparing and filing all
applications for Regulatory Approval of the Product in the Territory in
accordance with the International Development Plan. Wyeth-Ayerst will file all
such applications jointly in Wyeth-Ayerst's and Aviron's name, provided that if
the IDC determines that such joint filing is not necessary for a particular
application, Wyeth-Ayerst shall file such application solely in Wyeth-Ayerst's
name. Wyeth-Ayerst shall be responsible for prosecuting all such applications.
Wyeth-Ayerst shall have the right to use all data and reports generated in the
conduct of the International Development Plan for the filing of applications for
Regulatory Approval in the Field and in the Territory.
(b) Effectively only upon the expiration or termination of the
Agreement, Wyeth-Ayerst hereby assigns its entire right, title and interest in
and to all Regulatory Approvals and applications therefor filed by Wyeth-Ayerst
pursuant to subsection (a) above to Aviron, and shall promptly execute all
instruments, and take all other actions, necessary or useful to effect such
assignment and to transfer such Regulatory Approvals and applications to Aviron,
including without limitation complying with Commission Regulation (EC) 2141/96
of 7 November 1996, as may be amended from time to time, where applicable, and
any other procedures set forth in any applicable regulation, rule or guideline
governing the transfer of such Regulatory Approvals and applications in the
relevant jurisdiction. [***] in the event that [***] pursuant to Section [***]
hereof.
(i) At least six (6) months prior to the expiration of
this Agreement, or such other period of time as mutually agreed to by the
Parties in writing, Wyeth-Ayerst shall
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18.
<PAGE> 20
commence preparation of all necessary documentation, instruments and other
material required by the relevant Agency in order to effect the transfer of all
such Regulatory Approvals and applications to Aviron. At least three (3) months
prior to the expiration of this Agreement, or such other period of time as
mutually agreed to by the Parties in writing, Wyeth-Ayerst shall submit all such
documentation, instruments and other material to the relevant Agency.
(ii) In the event that Aviron terminates this Agreement
pursuant to Section 18.2(b) or 7.12, Wyeth-Ayerst shall use its Commercially
Reasonable Efforts prepare and transmit all necessary documentation, instruments
and other material required by the relevant Agency in order to effect the
transfer of all such Regulatory Approvals and applications to Aviron as promptly
as possible. If Aviron terminates this Agreement pursuant to Section 7.12, this
Section 6.4(b) shall apply only to those Regions with respect to which the
Agreement was terminated.
(iii) Wyeth-Ayerst shall use its Commercially Reasonable
Efforts to ensure that all correspondence, submissions, filings and other
communications with any Agency made by Wyeth-Ayerst pursuant to this Section
6.4(b) shall (A) conform to such Agency's requirements, and (B) be prepared and
submitted in such a manner so as to facilitate and expedite the transfer of the
Regulatory Approvals and applications to Aviron to the extent that it is within
Wyeth-Ayerst's control to do so. Aviron shall cooperate reasonably with
Wyeth-Ayerst in its activities under this Section 6.4(b) as requested.
Wyeth-Ayerst shall provide Aviron with copies of all correspondence,
submissions, filings and other material communications to such Agency pursuant
to such transfer as promptly as possible. At least one (1) Aviron representative
shall be given the opportunity to participate in any meetings or substantive
discussions with such Agency which relate to the transfer of a Regulatory
Approval or application. To the extent Aviron receives any communications from
such Agency relating to such transfer, Aviron shall notify Wyeth-Ayerst in a
timely manner.
(iv) In the event that an Agency rejects Wyeth-Ayerst's
application to transfer a particular Regulatory Approval or application to
Aviron, Aviron shall have the right to appeal such rejection, and to cure or
mitigate the cause of such rejection. Wyeth-Ayerst agrees to cooperate with
Aviron in such appeal, cure and/or mitigation and Aviron shall reimburse
Wyeth-Ayerst for its reasonable out-of-pocket costs of such cooperation.
(v) In the event that, as of the date of expiration or
termination of this Agreement, there remains Regulatory Approvals and/or
applications that have not yet been effectively transferred from Wyeth-Ayerst to
Aviron pursuant to this Section 6.4(b), the Parties shall meet and agree in good
faith upon a fair and commercially reasonable arrangement to allow Aviron to
obtain the economic benefits of such Regulatory Approvals and/or applications as
contemplated hereunder for the period extending from the date of expiration or
termination of the Agreement until the date that such Regulatory Approval and/or
applications are effectively transferred to Aviron.
(c) Aviron shall have the right to use all data and reports
generated in the conduct of the International Development Plan for the filing of
applications for regulatory approval of the Product outside the Field within the
Territory, and within or outside of the Field outside of the Territory, without
payment to Wyeth-Ayerst, and with the right to allow a Third Party licensee the
right to so use such data and reports. However, where Aviron wishes to allow
19.
<PAGE> 21
a Third Party (other than a sublicensee pursuant to Section 5.3) such right of
use, the Parties shall in good faith agree upon [***] to allow it to [***].
6.5 SUPPLEMENTS. Prior to supplementing the Regulatory Approvals or
filing additional and supplemental applications for Regulatory Approvals,
Wyeth-Ayerst shall provide such proposed supplemental application to the IDC for
approval. The IDC shall notify Wyeth-Ayerst within ten (10) days of its receipt
of such application whether it approves or disapproves such application. If the
IDC approves such application, Wyeth-Ayerst shall then be free to file such
application. If the IDC disapproves such application, and if it does not provide
Wyeth-Ayerst with detailed comments and/or revisions to such supplemental
application within thirty (30) days of its receipt of such application,
Wyeth-Ayerst shall thereafter be free to file the originally proposed
supplemental application.
6.6 REGULATORY MEETINGS AND CORRESPONDENCE.
(a) At least one (1) representative of Aviron shall be given the
opportunity to participate in any meetings or substantive discussions with an
Agency which relate to the Product in the Territory, including, but not limited
to, any discussions regarding Product Promotional Materials. To the extent a
Party receives any communications from an Agency relating to the Product in the
Field in the Territory, it shall notify the other Party in a timely manner.
(b) Subject to Sections 6.7(a) and (c) hereof, each Party shall
promptly notify the other Party of, and provide such other Party with, a copy of
any correspondence or other reports or complaints submitted to or received by
the first Party from an Agency, or other Third Party claiming that any Product
Promotional Materials are inconsistent with the Product Labeling or are
otherwise in violation of applicable law within the Territory.
(c) Notwithstanding anything herein to the contrary, Wyeth-Ayerst
or its agent shall have exclusive responsibility for correspondence and for any
official communications with any Agency regarding the Product in the Field in
the Territory.
(d) Wyeth-Ayerst shall provide Aviron with a copy of any
documents or reports filed with any Agency during the term of the Agreement
under this Article 6 with respect to the Product in the Field in the Territory.
6.7 RECORDS. Each Party shall keep complete, accurate and authentic
accounts, notes, data and records, in good scientific manner, of all activities
performed by it under the International Development Plan.
ARTICLE 7
MARKETING
7.1 PRINCIPLES OF PROMOTION. Wyeth-Ayerst shall have the exclusive right
to commercialize the Product in the Field in the Territory during the term of
the Agreement, as further detailed in the International Commercialization Plan.
Wyeth-Ayerst shall use
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<PAGE> 22
Commercially Reasonable Efforts to Promote and commercialize the Product in the
Territory at all times during the term of the Agreement.
7.2 INTERNATIONAL COMMERCIALIZATION PLAN.
(a) The ICC shall have the power to approve a rolling multi-year
plan and budget for commercializing the Product in the Territory (the
"International Commercialization Plan"). Wyeth-Ayerst shall prepare a proposal
for the International Commercialization Plan, which shall include a
comprehensive market development, marketing, sales, pricing, supply and
distribution strategy, including an overall budget for anticipated marketing,
promotion and sales efforts in the calendar year. The International
Commercialization Plan will specify which markets Wyeth-Ayerst shall devote its
Promotion efforts towards, the personnel and other resources to be devoted to
such efforts, the number and positioning of details to be performed by
Wyeth-Ayerst, as well as market and sales forecasts and pricing analysis and
related operating expenses, for the Product in the Territory, and budgets for
projected Commercialization Expenses and sales and marketing expenses.
Wyeth-Ayerst, in its preparation of the International Commercialization Plan,
and the ICC, in its decision to approve or disapprove the International
Commercialization Plan, will take into consideration factors such as market
conditions, regulatory issues, competition and the commitments of the Parties
under the Commercialization Plan. If the ICC disapproves Wyeth-Ayerst's proposed
International Commercialization Plan, the Parties shall then resolve such
dispute in accordance with Article 20 hereof.
(b) The first International Commercialization Plan shall be
prepared and approved as soon as is practicable after the Effective Date and
shall thereafter be immediately in effect. The Parties anticipate that the first
International Commercialization Plan shall become effective during the [***]
Following approval of the first International Commercialization Plan,
Wyeth-Ayerst shall prepare annually an updated and amended proposed
International Commercialization Plan for submission to the ICC.
7.3 SALES AND DISTRIBUTION; RECALLS. During the term of the Agreement,
Wyeth-Ayerst shall be responsible for all sales, distribution and customer
support and for conducting all recalls of the Product in the Territory.
7.4 PROMOTION, COMMERCIALIZATION AND SALES AND MARKETING EXPENSES.
Wyeth-Ayerst shall be responsible for all expenses for all costs and expenses
for Promoting, marketing, selling and commercializing the Product in the
Territory.
7.5 COMMERCIALIZATION EXPENSE COMMITMENT. The Parties anticipate that
Wyeth-Ayerst shall expend approximately [***] in Commercialization Expenses
during the [***] of the term of the Agreement for the purposes of market and
brand development, marketing and promotion of the Product in the Field in the
Territory, except as otherwise determined by the ICC in coordination with the
JCC in light of market conditions at such time, taking into account such factors
as market awareness and Finished Product supply levels. In the event that [***]
(as defined [***] shall have the right to [***] under this Section 7.5, and its
[***] under the [***] with the agreement of the ICC.
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<PAGE> 23
7.6 PROMOTIONAL AND ADVERTISING MATERIALS.
(a) Consistent with applicable law, the ICC shall have the right
to approve any and all Product Promotional Materials, pursuant to mutually
agreed upon procedures and timelines, which, to the extent practicable, shall be
coordinated with both Wyeth-Ayerst's clearance procedures (i.e., Wyeth-Ayerst's
Copy Clearance Committee) and Aviron's clearance procedures. The Parties shall
establish a tracking system or utilize Wyeth-Ayerst's tracking system (if
appropriate and mutually agreed), for Product Promotional Materials to ensure
that all such Product Promotional Materials are accurately tracked and submitted
to each Agency as required by applicable law.
(b) Wyeth-Ayerst will file all Product Promotional Materials with
each Agency as required by applicable law.
(c) All Product Promotional Materials used by Wyeth-Ayerst in the
Promotion of the Product in the Territory shall contain (i) the Primary Brand
Trademark, and the Aviron corporate name and logo, and (ii) the Wyeth-Ayerst
Trademarks, corporate name and logo, in positions of equivalent prominence and
frequency, subject to Section 7.6(d) below, and subject to applicable law.
(d) During the term of the Agreement, Wyeth-Ayerst shall own all
right, title and interest in and to the Product Promotional Materials, including
all copyrights appurtenant thereto. Effective only upon the termination or
expiration of this Agreement, Wyeth-Ayerst hereby assigns all of its right,
title and interest in and to such Product Promotional Materials, including all
copyrights appurtenant thereto, to Aviron, but excluding any Trademarks owned by
Wyeth-Ayerst that are used by Wyeth-Ayerst prior to or during the term of this
Agreement in connection with products other than the Product, which shall remain
the property of Wyeth-Ayerst. Wyeth-Ayerst shall promptly execute all
instruments necessary or useful to effect such assignment. Notwithstanding the
foregoing, Wyeth-Ayerst shall have no obligation to assign any Product
Promotional Materials to Aviron in the event that Wyeth-Ayerst terminates this
Agreement pursuant to Section 18.2 or 18.5.
7.7 PRODUCT PRICING. The International Commercialization Plan will
include the general strategy and operating guidelines for the pricing and
discounting of the Product. As appropriate, [***] and be [***] with respect to
the [***] provided that [***] the pricing of the Product in the Territory.
7.8 VOLUNTARY PRODUCT RECALLS. If either Party believes that a voluntary
recall or market withdrawal of the Product is necessary, such Party shall notify
the other Party within forty-eight (48) hours of its determination and both
Parties shall cooperate to allow such recall or market withdrawal to occur under
the direction of Wyeth-Ayerst (as set forth in Section 7.3). In the event of a
dispute about whether to recall a Product, Wyeth-Ayerst shall, after
consultation with Aviron, have the final authority with respect to such matters,
which authority shall be exercised reasonably and in good faith and subject to
Section 7.3.
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<PAGE> 24
7.9 REGULATORY OBLIGATIONS. Wyeth-Ayerst shall be solely responsible for
all activities in connection with the Regulatory Approvals for the Product in
the Territory, including without limitation communicating and preparing and
filing all reports (including without limitation adverse drug experience
reports, including pharmacovigilance) with all applicable Agencies. Aviron
agrees to cooperate with Wyeth-Ayerst as requested in preparing and filing all
such reports. Each Party agrees to comply with the provisions of Section 16.3
hereof. Wyeth-Ayerst shall pay all fees associated with obtaining and
maintaining the Regulatory Approvals including, without limitation, any
establishment license fees of Wyeth-Ayerst, Aviron or Third Parties which must
be paid with respect to facilities used in the manufacture of Finished Product
by or on behalf of Wyeth-Ayerst.
7.10 PROMOTION RESPONSIBILITIES. During the term of the Agreement,
Wyeth-Ayerst shall, as part of its duties hereunder, have responsibility for
performing the following activities or for ensuring that its Affiliates or
permitted Third Party sublicensees or distributors perform such activities:
(a) Wyeth-Ayerst shall supervise, train and maintain such
competent and qualified sales representatives as may be required to Promote and
detail the Product as provided in the International Commercialization Plan, such
training to include a reasonable proficiency examination for all sales
representatives who will be engaged in detailing.
(b) On or before the forty-fifth (45th) day of each calendar
quarter, commencing with the second calendar quarter after the Launch Date,
Wyeth-Ayerst shall furnish to Aviron a summary of information coming to
Wyeth-Ayerst's attention in the Territory concerning introductions and
promotional activities of products competitive with the Product, and of any
serious complaints regarding the Product (other than those described in Section
16.2), it being understood that there is no obligation on Wyeth-Ayerst to
solicit such information.
(c) In connection with the Promotion and detailing of the Product
hereunder, Wyeth-Ayerst shall each make no statement, representation or
warranty, oral or written, to Third Parties, concerning the Product for any
approved indication for the Product inconsistent with, or contrary to, the
Product Labeling or Product Promotional Materials.
(d) Wyeth-Ayerst shall give prompt written notice to Aviron of
the date on which its sales representatives commence Promoting the Product in
each nation or territory in the Territory.
7.11 COMPLIANCE WITH APPLICABLE LAW. Wyeth-Ayerst, and its Affiliates
and permitted sublicensees, shall conduct all promotion, commercialization,
marketing, sales and recalls of the Product hereunder in compliance with all
applicable laws, rules and regulations.
7.12 FAILURE TO COMMERCIALIZE. If, within [***] of the Launch Date, or,
if there has not been a commercial sale of the Product in the Territory within
[***] of the Effective Date, then within [***] from the Effective Date,
Wyeth-Ayerst, its permitted sublicensees, or permitted distributors (a) have not
made a commercial sale of the Product in a particular Region (except due to
circumstances beyond Wyeth-Ayerst's control), (b) have not obtained Regulatory
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23.
<PAGE> 25
Approval as to such Region (except due to circumstances beyond Wyeth-Ayerst's
control), or (c) have not otherwise used Commercially Reasonable Efforts to
promote and commercialize the Product in such Region as a whole, then [***].
Furthermore, as to such Region, the [***] prescribed in clauses (i), (ii) and
(iii) of Subsection [***] and the [***] shall be in effect.
ARTICLE 8
MANUFACTURE AND SUPPLY
8.1 SUPPLY OF [***] PRODUCT. During the term of the Agreement, [***]
shall have the right to manufacture and supply the [***] Product [***], as set
forth in the Supply Agreement. [***] shall manufacture and supply, or have
manufactured, or supplied, [***] Finished Product [***] Product [***] all as set
forth in the Supply Agreement.
ARTICLE 9
TRADEMARK MATTERS
9.1 LICENSES. Subject to the terms and conditions of this Agreement,
Aviron hereby grants to Wyeth-Ayerst a non-assignable, sublicenseable,
exclusive, royalty-free right and license to use Aviron's Trademarks, as
applicable, in the Territory solely in connection with the Product Promotional
Materials and Product Labeling during the term of the Agreement.
9.2 VALIDITY OF TRADEMARKS. Wyeth-Ayerst acknowledges the validity of
Aviron's right, title and interest in and to its Trademarks and shall not have,
assert or acquire any right, title or interest in or to any of Aviron's
Trademarks, except as otherwise explicitly provided in this Agreement.
9.3 FORM OF USE. Wyeth-Ayerst shall use those Trademarks owned by Aviron
only in the forms approved in writing by Aviron, and shall include where
appropriate the designations necessary or useful to maintain trademark rights in
a nation or territory (e.g.(R) or (TM)) and a statement that the Trademark is
the trademark of Aviron, and other proprietary notices as are reasonably
required by Aviron from time to time. Wyeth-Ayerst shall permit one (1) or more
authorized representatives of Aviron, on reasonable prior notice, at reasonable
intervals, during normal business hours and subject to normal safety and
security procedures, to inspect and examine from time to time, Product
Promotional Materials and Product Labeling and the records of Wyeth-Ayerst that
are related to use of Aviron's Trademarks, or to use of Product Promotional
Materials or Product Labeling. Any sublicenses or distribution agreements
entered into by Wyeth-Ayerst for commercialization of the Product in the Field
in the Territory as permitted hereunder shall contain provisions allowing Aviron
to conduct such inspections and examinations as to the sublicensee or
distributor.
9.4 NO CONTEST. Wyeth-Ayerst agrees that it will not contest, oppose or
challenge Aviron's ownership of the Primary Brand Trademark. In particular,
Wyeth-Ayerst will not register or attempt to register, or maintain registration
of, the Primary Brand Trademark in any jurisdiction nor oppose Aviron's
registration of the Primary Brand Trademark, alone or with
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24.
<PAGE> 26
other words or designs, in any jurisdiction. If Wyeth-Ayerst uses, registers,
applies to register, or maintains registration of, a licensed mark that violates
its obligations under this Section 9.4, Wyeth-Ayerst agrees, at Aviron's
request, to abandon the use of any such mark and any application or registration
for such mark.
9.5 CONFUSINGLY SIMILAR AND/OR COMBINATION MARKS. Wyeth-Ayerst agrees
not to adopt or use any other trademarks, words, symbols, letters, designs or
marks (a) in combination with Aviron's Trademarks in a manner which would create
combination marks, or (b) that would be confusingly similar to the Primary Brand
Trademark, provided that Wyeth-Ayerst may use the Primary Brand Trademark with
other marks or names if such other marks or names are sufficiently distinctive
to avoid the consumer impression that such other marks or their owners are
associated with Aviron.
9.6 REGISTRATION COSTS. Aviron shall be responsible for the payment of
any and all costs relating to registration of the Primary Brand Trademark in the
Territory. Wyeth-Ayerst shall be responsible for the payment of any and all
costs relating to the registration of all other Trademarks in the Territory.
9.7 INFRINGEMENT.
(a) As to the Primary Brand Trademark only, Aviron shall have the
initial right to institute legal proceedings against such Third Party, which
proceedings shall be at [***] Wyeth-Ayerst shall reasonably coordinate with
Aviron in the prosecution of such proceedings. Should Aviron elect not to
institute proceedings against such Third Party within [***] following a notice
thereof in response to the infringement or threatened infringement of the
Primary Brand Trademark, Wyeth-Ayerst shall then be entitled to institute
proceedings in its own name [***]. Aviron shall reasonably cooperate with
Wyeth-Ayerst in the prosecution of such proceedings.
(b) The Parties shall cooperate in good faith with respect to all
Trademark enforcement actions hereunder, and each Party shall notify the other
Party promptly of all substantive developments with respect to such Trademark
enforcement actions, including, but not limited to, all material filings, court
papers and other related documents. Each Party shall consider the timely given,
reasonable comments and advice of the other Party with respect to the strategy
employed and submissions made relative to any Trademark enforcement actions.
[***] any damages or other monetary relief obtained in connection therewith.
9.8 TRADE DRESS, LOGOS, AND THE LIKE.
(a) Wyeth-Ayerst shall be responsible for developing, at its own
expense, all Trademarks, trade dress, logos, slogans, designs and copyrights
used on and in connection with the Product in the Territory that are not
developed for use in or used in the United States of America. Wyeth-Ayerst shall
be responsible, at its own expense, for obtaining registrations and permits for
all Trademarks developed pursuant to the foregoing. The ICC shall approve all
Trademarks, trade dress, logos, slogans, designs and copyrights used on or in
connection with the Product in the Territory. During the term of this Agreement,
Wyeth-Ayerst shall be the sole owner of all Trademarks, trade dress, logos,
slogans, designs and copyrights specifically
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<PAGE> 27
developed for or used on or in connection with the Product in the Territory but
not in the United States of America.
(b) Upon the termination or expiration of this Agreement, all
Trademarks, trade dress, logos, slogans, designs and copyrights developed for or
used on or in connection with the Product in the Territory but not in the United
States of America, except those Trademarks used by Wyeth-Ayerst, prior to or
during the term of the Agreement, in connection with products other than the
Product, shall be deemed assigned by Wyeth-Ayerst to Aviron, and Wyeth-Ayerst
shall promptly execute all instruments useful or necessary to effect such
assignment. [***] in the event that [***] pursuant to Section [***].
ARTICLE 10
MICHIGAN AGREEMENT
10.1 SUBLICENSE LIMITATION. Wyeth-Ayerst acknowledges the existence of
Aviron's license under the Michigan Agreement, and acknowledges and agrees that
Aviron may only grant to Wyeth-Ayerst such rights as Aviron is permitted to
grant pursuant to the Michigan Agreement.
10.2 WYETH-AYERST OBLIGATIONS. Wyeth-Ayerst accepts that the following
provisions of the Michigan Agreement are hereby incorporated by reference and
shall be binding upon Wyeth-Ayerst as a "sublicensee" under the Michigan
Agreement (as defined in Section 2.6 of the Michigan Agreement), except as
otherwise agreed in writing by Michigan:
(a) Section 3.5 (U.S. government "march-in" rights);
(b) Article [***] (obligations and restrictions relating to
[***] (as defined in Section [***] of the Michigan Agreement), products and
their ownership and use);
(c) Section 6.2 (duties of use of a nomenclature system);
(d) Section 6.3 (duties to keep records and rights of
inspection);
(e) Section 8.5 (preference for U.S. manufacturers);
(f) Article 9 (obligations regarding the periodic reporting,
disclosure and grant of rights to certain intellectual property);
(g) Section 13.4 (duties to avoid improper representations or
responsibilities);
(h) Article 14 (obligations to defend, hold harmless and
indemnify Michigan);
(i) Section 14.3 (obligations to retain insurance), as further
specified in Section 10.7 of this Agreement;
(j) Section 15.2 (survival of certain obligations);
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<PAGE> 28
(k) Section 15.5 (obligations relating to the return and non-use
of [***] and certain intellectual property and prohibition on the manufacture of
products after termination of the Michigan Agreement);
(l) Section 15.6 (duties to provide rights to Michigan to certain
intellectual property upon termination of the Michigan Agreement);
(m) Articles 16 and 17 (duties relating to confidential
information and to pre-publication disclosure);
(n) Article 20 (duties to control export); and
(o) Article 22 (duty to restrict use of Michigan's name).
10.3 USE OF AVIRON PRODUCT MATERIALS. Wyeth-Ayerst acknowledges and
agrees that the Aviron Product Materials are the proprietary and confidential
materials of Aviron and Michigan and that access to the Aviron Product Materials
shall be limited to those of its employees reasonably requiring such access for
the purposes set forth in this Agreement, who further will be required, in
writing, to treat the Aviron Product Materials as confidential. In addition,
Wyeth-Ayerst agrees that in the event that [***] other than the Aviron Product
Materials come into its possession, it shall promptly notify Aviron in writing;
provided, however, that although it is not the Parties' intent as of the Signing
Date that any [***] in the event that [***] Wyeth-Ayerst agrees, [***] and
shall not [***], upon expiration or termination of this Agreement, or as
otherwise [***] pursuant to Section [***].
10.4 WARRANTY DISCLAIMER. Wyeth-Ayerst acknowledges Michigan's warranty
disclaimer and limitation of liability contained in the Michigan Agreement, and
will make no statements, representations or warranties inconsistent with such
warranty disclaimer or limitation of liability.
10.5 SUBLICENSE TERMINATION. The sublicense granted to Wyeth-Ayerst by
Aviron under the Michigan Agreement pursuant to Section 5.1(b) (the "Michigan
Sublicense") shall terminate upon the earlier of (i) termination of the Michigan
Agreement, unless [***] in writing by [***] or (ii) termination or expiration of
the this Agreement. In the event that the Michigan Sublicense is [***] is
required to [***] and the [***] under this Agreement, [***] shall not [***]
under this Agreement, [***] prior to such [***] the Michigan Sublicense.
10.6 INSURANCE. Prior to any distribution of Aviron Product by
Wyeth-Ayerst in the Territory, Wyeth-Ayerst shall obtain and maintain in effect
a product liability insurance policy providing reasonable coverage for all
claims with respect to such distribution, or, to the extent permitted by
Michigan, a program of self-insurance. Wyeth-Ayerst shall furnish Aviron with a
certificate of currency of such insurance upon request, or, if Wyeth-Ayerst is
permitted to self-insure, Wyeth-Ayerst shall furnish Aviron with appropriate
documentation of such self-insurance, such documentation to be as mutually
agreed upon by the Parties in writing.
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<PAGE> 29
10.7 COOPERATION. The Parties agree to cooperate reasonably with each
other in assisting each Party to comply with its obligations under the Michigan
Agreement as it pertains to such Party's performance of its rights and
obligations under this Agreement.
10.8 SUBLICENSES. If Wyeth-Ayerst grants any sublicenses to the extent
permitted hereunder, this Article 10 shall be incorporated mutatis mutandis into
such sublicense agreement.
ARTICLE 11
PAYMENTS
11.1 LICENSE FEE. In consideration for the rights granted under this
Agreement, Wyeth-Ayerst shall pay to Aviron a license fee of ten million dollars
($10,000,000), which shall be due and payable upon the Effective Date. Such
payment shall be noncreditable and nonrefundable, and shall be borne solely by
Wyeth-Ayerst.
11.2 OTHER PAYMENTS.
(a) Wyeth-Ayerst shall pay Aviron the following payments within
fifteen (15) business days after either Aviron provides written notice, with
supporting documentation, to Wyeth-Ayerst of the achievement of the relevant
development and/or commercialization event for the Product in the Territory
(each, an "Event") or Wyeth-Ayerst receives notice of such Event from an Agency:
<TABLE>
<CAPTION>
EVENT PAYMENT
------------------------------------------------------------- ------------
<S> <C>
FDA's acceptance for filing of PLA for the Product, $5,500,000
$5,500,000 pursuant to Section 351 of the Public Service Act
and Part 601 of Title 21, Code of Federal Regulations
FDA approval of Product for use in the Field for the first $5,000,000
Target Population
Filing of MAA with EMEA [***]
EMEA approval of Product for use in the Field for the first [***]
Target Population
EMEA approval of Product for use in the Field in second [***]
Target Population
First receipt of Regulatory Approval of the Product for use [***]
in the Field in the Territory in a Region other than Europe
</TABLE>
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28.
<PAGE> 30
<TABLE>
<CAPTION>
EVENT PAYMENT
------------------------------------------------------------- ------------
<S> <C>
Second receipt of Regulatory Approval of the Product for [***]
use in the Field in the Territory in a Region other
than Europe and other than the Region for which payment is
made under (vi)
Third receipt of Regulatory Approval of the Product for use [***]
in the Field in the Territory in a Region other than
Europe and other than the Regions for which payment is made
under (vi) and (vii)
</TABLE>
All payments made pursuant to this Section 11.2 shall be noncreditable and
nonrefundable, and shall be borne solely by Wyeth-Ayerst. The payment in (ii)
above may be due contemporaneously with the payment for (iv) or (vi).
11.3 WYETH-AYERST FINANCING.
(a) PARTICIPATION IN AVIRON OFFERINGS. Subject to Section
11.3(d), in the event that, following the Effective Date of this Agreement and
prior to receipt of Regulatory Approval from the FDA of the Product for use in
the Field, Aviron consummates one or more sales of common stock or other
security convertible into common stock to Third Parties, including pursuant to
subsection (b) below, (other than a sale of Aviron common stock or other
security in connection with or pursuant to any licensing or other
collaboration), Wyeth-Ayerst agrees to purchase, upon Aviron's request,
simultaneously with the closing thereof and at the same price and terms, an
amount of up to [***] of the total amount issued (inclusive of Wyeth-Ayerst's
purchase). Wyeth-Ayerst's obligation shall be subject to a maximum aggregate
limit on Wyeth-Ayerst's purchase of [***] regardless of the number of such
offerings made by Aviron or the cumulative amount of such offerings made. In
addition, Wyeth-Ayerst shall not be obligated to make purchases under this
Section 11.3(a) to the extent that doing so would cause Wyeth-Ayerst and its
Affiliates to own, in the aggregate, securities representing or convertible into
or exchangeable for more than [***] of Aviron's outstanding voting common stock.
Purchases by Wyeth-Ayerst under this Section 11.3(a) shall be made as part of
the same offering as the sale by Aviron to Third Parties; provided, however,
that if the sale to Third Parties is pursuant to a registered public offering,
the sale to Wyeth-Ayerst shall be consummated as a private transaction which
shall close simultaneously with the closing of such public offering. In the
event the proviso in the preceding sentence applies such that securities
convertible into common stock are issued to Wyeth-Ayerst in a private
transaction simultaneous with a public offering, then: (i) notwithstanding the
first sentence of this Section 11.3(a), the price per share to be paid by
Wyeth-Ayerst shall be equal to the price per share received by Aviron in the
public offering net of any underwriting discounts and commissions; and (ii)
Aviron agrees that it will file, within [***] days of the closing of such sale,
a registration statement for the non-underwritten resale of Aviron common stock
held (or issuable upon conversion of securities held) by Wyeth-Ayerst. Aviron
agrees that it will use commercially reasonable efforts to cause such
registration
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29.
<PAGE> 31
statement to become effective as soon as practicable and will keep such
registration statement effective until the [***] of the closing of such sale.
(b) INCENTIVES TO CONVERTIBLE DEBT HOLDERS. If a transfer
contemplated by subsection (a) above involves an offer by Aviron to its then
existing convertible debt holders to reduce the price of their conversion option
as an incentive for such convertible debt holders to purchase additional equity
in Aviron, and such debt holders participate in such offer and purchase
additional equity of Aviron, then Wyeth-Ayerst shall not be obligated to
purchase more than [***] of such class or series of such additional equity in
Aviron (inclusive of Wyeth-Ayerst's purchase) at the same price and terms, up to
a limit on Wyeth-Ayerst's purchase of [***]; provided that, in connection with
this participation by Wyeth-Ayerst, [***] provides to [***] reasonable judgment)
to the [***]
(c) [***] CREDIT FACILITY. The Credit Facility provided to Aviron
by Wyeth-Ayerst pursuant to the Credit Agreement (as defined in Section 13.1 of
the U.S. Agreement) shall be [***] Wyeth-Ayerst under either Section 11.3(a) or
Section 11.3(b) above.
(d) HSR FILINGS. If required by applicable law, as concluded in
good faith by Wyeth-Ayerst, prior to the consummation of any purchases of
securities pursuant to Section 11.3(a) or (b) above, the Parties will, at their
own expense (other than any required filing fees which shall be paid by
Wyeth-Ayerst), prepare and make appropriate filings under Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (16 C.F.R. Sections 801.1 et Seq.)
(the "Act"). Each Party shall use its reasonable good faith efforts (not
including divestiture or out-license of any assets) in the antitrust clearance
process and the resolution of all issues or comments raised, and agrees to
furnish to the Federal Trade Commission and the Antitrust Division of the
Department of Justice any additional information reasonably requested by them in
connection with such filings and the transaction contemplated by this Agreement;
provided, however, that such efforts shall not require any divestiture by either
Party of any products or other assets. In addition, each Party agrees to give
the other Party prompt notice of any communication to or from the Federal Trade
Commission or the Department of Justice regarding this transaction. Each Party
will consult and cooperate with the other Party and will consider in good faith
the view of the other party in connection with any analysis, appearance,
presentation, memorandum, brief, opinion or proposal made or submitted in
connection with any action, request, or investigation under or relating to the
Act or any other federal antitrust, competition or fair trade law.
(e) STANDSTILL.
(i) The Parties agree that [***] shall be extended and
shall remain in full effect until receipt of Regulatory Approval from the FDA of
the Product for use in the Field.
(ii) Notwithstanding anything in this Agreement to the
contrary, AHPC agrees that it will not, nor will it permit any of its Affiliates
to, purchase or otherwise acquire, directly or indirectly from any Third Party,
any equity securities of Aviron (or rights or options to purchase such
securities) which in the aggregate, together with securities then held by
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30.
<PAGE> 32
AHPC and its Affiliates, represent or would if exercised or converted represent
more than [***] of the outstanding voting common stock of Aviron.
(1) The preceding sentence shall not prevent AHPC
from acquiring another entity (even if at the time of acquisition, such entity
owns securities of Aviron), so long as the fair market value of the Aviron
securities owned by such entity represent less than [***] of the assets of such
entity as of the date of the most recent available financial statements of the
entity at the time of such acquisition, and AHPC agrees that within [***] of
such acquisition, it will reduce the aggregate holdings of Aviron equity
securities by such entity and AHPC and its other Affiliates to the extent
necessary to cause such aggregate holdings to be less than [***] of the
outstanding voting common stock of Aviron.
(2) This Section 11.3(e) will terminate and be of
no further force or effect on the later of the date of expiration or termination
of this Agreement or the date of expiration or termination of the U.S.
Agreement; provided, however, that this Section 11.3(e) will automatically
terminate earlier upon the occurrence of any of the following events: (A) the
filing with the SEC of a Schedule 13D by any person or entity indicating that a
person or entity has acquired at least five percent (5%) of Aviron's voting
equity securities which Schedule 13D expresses the filing party's intention to
seek majority control of Aviron, whether by tender offer, merger, proxy contest
or otherwise; (B) the commencement of a tender offer by any person or entity,
other than AHPC or its Affiliates, to acquire fifty percent (50%) or more of
Aviron's voting equity securities; (C) the solicitation of proxies by any party
other than Aviron or AHPC or its Affiliates which is intended to effect a change
in the majority of members of Aviron's Board of Directors; or (D) public
announcement of a definitive acquisition agreement pursuant to which a Third
Party would acquire more than fifty percent (50%) of Aviron's voting equity
securities.
ARTICLE 12
ROYALTIES
12.1 ROYALTY RATES DURING TERM OF THE AGREEMENT. Wyeth-Ayerst shall pay
to Aviron a royalty of [***] of Annual Net Sales of the Product in the Territory
for sales made during the term of this Agreement.
(a) DURATION OF ROYALTY PAYMENTS. All royalties shall accrue from
the Launch Date until the termination or expiration of the Agreement.
(b) THIRD PARTY ROYALTIES.
(i) [***] any royalty owed to any Third Party based on
Net Sales of Product, as "Product" is defined as of the Effective Date (the
"Base Product") in the Territory during the term of the Agreement, subject to
subsection (ii) below.
(ii) If (1) [***] under Section [***], or (2) the IDC
determines that a change should be made to the Base Product [***] in order to
improve its formulation, performance, delivery or any other aspect of such Base
Product (an "Improvement"), and in
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31.
<PAGE> 33
either case a royalty is owed thereafter to any Third Party based on Net Sales
of the Product in the Territory which would not be owed on Net Sales of the Base
Product before [***] or such Improvement to the Base Product, as applicable,
then [***] of such Third Party royalty [***] within thirty (30) days of
invoice.
12.2 ROYALTY REPORTS AND PAYMENTS. Within thirty (30) days after the
first day of January, April, July and October of each year during the term of
the Agreement, Wyeth-Ayerst shall deliver to Aviron a true and accurate report
of Net Sales of Product sold by Wyeth-Ayerst, it Affiliates, and sublicensees in
the Territory during the preceding three (3) month period in the Territory, on a
country by country basis, accompanied by all royalties due under Section 12.1
for the period covered by such report. Such report shall also include the
information necessary for Aviron to calculate "Net Sales" for each country.
12.3 PAYMENTS. Any payments due under this Agreement shall be made in
U.S. dollars by wire transfer to a bank account designated by Aviron.
12.4 EXCHANGE RATE. The rate of exchange to be used in computing Net
Sales and the amount of currency equivalent in United States dollars due to
Aviron shall be made at the rate of exchange, calculated as the average of the
sales and the purchase exchange rate, quoted for the close of business on the
last day of business of the applicable royalty period in The Wall Street
Journal.
12.5 WITHHOLDING. All taxes, assessments and fees of any nature levied
or incurred on account of any payments accruing under this Agreement, by
national, state or local governments, will be assumed and paid by Wyeth-Ayerst,
except taxes levied thereon as income taxes to Aviron, and if such taxes are
required to be withheld by Wyeth-Ayerst by the applicable national, state or
local governmental entity, then Wyeth-Ayerst shall deduct such income taxes from
such payments due to Aviron and shall pay such taxes on the account of Aviron,
and shall secure and provide to Aviron a receipt of such payment, together with
copies of all pertinent communications from or with such governmental entities
with respect thereto. Wyeth-Ayerst agrees to reasonably cooperate with Aviron in
any effort by Aviron in claiming any exemption from such deductions or
withholdings under any double taxation or similar agreement or treaty from time
to time in force and in minimizing the amount required to be so withheld or
deducted, such cooperation to consist of providing receipts of payment of such
withheld tax or other documents reasonably available to Wyeth-Ayerst.
ARTICLE 13
CONFIDENTIALITY
13.1 CONFIDENTIAL INFORMATION. Except to the extent expressly authorized
by this Agreement or otherwise agreed in writing, the Parties agree that the
receiving Party shall keep confidential, and shall not publish or otherwise
disclose or use for any purpose other than as provided for in this Agreement,
any Information and other information and materials (including without
limitation the Aviron Product Materials) furnished to it by the other Party
pursuant to this Agreement or any Information developed during the course of the
collaboration hereunder,
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32.
<PAGE> 34
or any provisions of this Agreement that are the subject of an effective order
of the Securities Exchange Commission (the "SEC") granting confidential
treatment pursuant to the Securities Act of 1934, as amended (collectively,
"Confidential Information"), except to the extent that it can be established by
the receiving Party that such Confidential Information:
(a) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the other Party;
(b) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the receiving Party;
(c) became generally available to the public or otherwise part of
the public domain after its disclosure to the receiving Party, and other than
through any act or omission of the receiving Party in breach of this Agreement;
(d) was disclosed to the receiving 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; or
(e) was independently developed by employees of the receiving
Party who had no knowledge of or access to the Confidential Information of the
other Party.
For Confidential Information other than the Aviron Product Materials and
information relating to the Aviron Product Materials or the manufacture of the
Product, the non-disclosure obligations under this Section 13.1 shall terminate
upon the later of: (i) [***] years following the expiration or termination of
this Agreement, or (ii) [***] years from the Effective Date.
13.2 AUTHORIZED DISCLOSURE.
(a) Each Party may disclose Confidential Information hereunder to
the extent such disclosure is reasonably necessary in prosecuting or defending
litigation, complying with applicable governmental regulations, provided,
however, that if a Party is required by law or regulation to make any such
disclosures of the other Party's Confidential Information it will, except where
impracticable for necessary disclosures (for example in the event of medical
emergency) give reasonable advance notice to the other Party of such disclosure
requirement (e.g., filings with the SEC and stock markets) and, will use its
reasonable efforts to secure confidential treatment of such Confidential
Information required to be disclosed, unless in the judgement of such disclosing
Party's legal counsel such Confidential Information is legally required to be
fully disclosed.
(b) In addition, and with prior notice to the other Party of each
Third Party with whom a confidential disclosure agreement is being entered into,
each Party shall be entitled to disclose, under a binder of confidentiality
containing provisions at least as protective as those of this Article 13,
Confidential Information to any Third Party for the purpose of carrying out the
purposes of this Agreement. Nothing in this Article 13 shall restrict any Party
from using for any purpose in accordance with this Agreement any Confidential
Information independently developed by it during the course of the Collaboration
hereunder, or from using Confidential
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33.
<PAGE> 35
Information that is specifically derived from pre-clinical or clinical trials to
carry out marketing, sales or professional services support functions as is
customary in the pharmaceutical industry.
13.3 PUBLICITY. The Parties agree that the public announcement of the
execution of this Agreement shall be substantially in the form of a press
release to be mutually agreed to by the Parties. Any other publication, news
release or other public announcement relating to this Agreement or to the
performance hereunder, shall first be reviewed and approved by both Parties,
which approval shall not be unreasonably withheld or delayed; provided, however,
that any disclosure which is required by law as advised by the disclosing
Party's counsel may be made without the prior consent of the other Party,
although the other Party shall be given prompt notice of any such legally
required disclosure and to the extent practicable shall provide the other Party
an opportunity to comment on the proposed disclosure. In this regard, the
Parties recognize that Aviron is a publicly-held biotechnology company, that the
Product is Aviron's first potential product and that Aviron will need to provide
information regarding the status of the Product to the investment community from
time to time, subject to the procedures set forth in the preceding sentence. The
Parties acknowledge that Aviron will be obligated to file a copy of this
Agreement with the U.S. Securities and Exchange Commission. Aviron will submit a
copy of its proposed filing to Wyeth-Ayerst for its input and comment and will
redact, if permissible by law or regulation, or will otherwise make reasonable
efforts to obtain confidential treatment of, Wyeth-Ayerst's Confidential
Information contained therein.
ARTICLE 14
OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS
14.1 OWNERSHIP.
(a) PARTY'S INTELLECTUAL PROPERTY. Aviron shall solely own all
right, title and interest in the Aviron Know-How and Aviron Patents.
Wyeth-Ayerst shall solely own all right, title and interest in the Wyeth-Ayerst
Know-How and the Wyeth-Ayerst Patents.
(b) INVENTIONS AND INFORMATION ARISING DURING AGREEMENT. Aviron
shall own all Inventions and Information discovered, generated, conceived or
reduced to practice solely by one or more employees or consultants of Aviron
during the term of and pursuant to the Agreement (the "Aviron Results"); and
Wyeth-Ayerst shall own all Inventions discovered, generated, conceived, or
reduced to practice solely by one or more employees or consultants of
Wyeth-Ayerst during the term of and pursuant to the Agreement (the "Wyeth-Ayerst
Results"). All Joint Technology shall be owned jointly by Aviron and
Wyeth-Ayerst. Except as otherwise expressly provided in the Agreement, Aviron
shall own all intellectual property, including Patents, covering the Aviron
Results; Wyeth-Ayerst shall own all intellectual property, including Patents,
covering the Wyeth-Ayerst Results; and the Parties shall jointly own all
intellectual property covering the Joint Technology. All Joint Technology shall
be subject to the licenses set forth in Section 5.1 and 5.2 during the term of
this Agreement.
(c) CONSULTANTS. Each Party shall take reasonable steps to ensure
that its consultants are obligated to assign their rights in any Inventions or
Information relating to the Product to the appropriate Party, or jointly to the
Parties in accordance with subsection (b) above.
34.
<PAGE> 36
14.2 PATENT PROSECUTION.
(a) PARTY'S PATENTS. Aviron shall have the sole right, but not
the obligation, to file applications for, prosecute and maintain the Aviron
Patents. Wyeth-Ayerst shall have the sole right, but not the obligation, to file
applications for, prosecute and maintain the Wyeth-Ayerst Patents. Neither Party
shall be obligated to disclose to the other Party any prosecution information
relating to the Aviron Patents, in the case of Aviron, and the Wyeth-Ayerst
Patents in the case of Wyeth-Ayerst.
(b) JOINT PATENTS. Aviron shall have the right to file
applications for, and to determine which countries in which to file, prosecute
and maintain any Joint Patents, worldwide, in the name of Aviron and
Wyeth-Ayerst. Aviron will provide Wyeth-Ayerst with the opportunity to review
and comment upon any material document pertaining to a Joint Patent that is to
be filed with the patent office(s) in each filing jurisdiction reasonably in
advance of the filing date of such document. The Parties shall equally share all
expenses related to the filing, prosecution and maintenance of the Joint
Patents, and Wyeth-Ayerst shall pay all invoices for such amounts within thirty
(30) days of receipt of such invoice. At any time, Wyeth-Ayerst may give Aviron
written notice that it will no longer share expenses related to any particular
Joint Patents, whereupon Wyeth-Ayerst shall promptly assign its ownership
interest in such Joint Patent to Aviron and Aviron's obligations under this
Section 14.2(b) shall terminate. In the event of a disagreement between Aviron
and Wyeth-Ayerst with respect to whether or in which countries to file a Joint
Patent application, or the manner in which such application is prosecuted, or
whether to abandon such application, Aviron shall consider in good faith all
comments and issues raised by Wyeth-Ayerst, but shall have the final authority
to make any such decisions. In the event Aviron determines not to file a
specific Joint Patent application in a given jurisdiction, or to abandon such an
application or any Joint Patent, it will notify Wyeth-Ayerst in writing,
whereupon Wyeth-Ayerst shall have the right to pursue such application or
maintain such Joint Patent, at its own expense, and Aviron shall promptly assign
its ownership interest therein to Wyeth-Ayerst.
(c) [***] Wyeth-Ayerst agrees that, within sixty (60) days
following the Effective Date, it shall [***] provided that such [***] shall only
be [***] with respect to [***]. Aviron reserves all rights to [***], and nothing
in this subsection (c) shall [***]. Other than with respect to [***]
Wyeth-Ayerst reserves all rights to [***] and nothing in this subsection (c)
shall [***].
14.3 ENFORCEMENT RIGHTS.
(a) NOTIFICATION OF INFRINGEMENT. If either Party learns of any
misappropriation of any Aviron Product Materials or Information (the "Product
Rights"), or any infringement or threatened infringement by a Third Party of the
Aviron Patents or Joint Patents, in each case, in the Field and in the
Territory, such Party shall promptly notify the other Party and shall provide
such other Party with all available evidence of such misappropriation or
infringement.
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(b) ENFORCEMENT OF PATENTS AND PRODUCT RIGHTS IN THE TERRITORY.
Aviron shall have the right, but not the obligation, to institute, prosecute and
control at its own expense any action or proceeding with respect to infringement
of any Aviron Patents or Joint Patents or any misappropriation of the Product
Rights in the Field and in the Territory, by counsel of its own choice.
Wyeth-Ayerst shall have the right, at its own expense, to be represented in any
such action by counsel of its own choice. Subject to the rights of Michigan, if
Aviron fails to bring an action or proceeding or otherwise take appropriate
action in Aviron's discretion to abate such infringement or misappropriation in
the Field and in the Territory within a period of ninety (90) days of notice by
Wyeth-Ayerst to Aviron requesting such action, Wyeth-Ayerst will have the right,
but not the obligation, to bring and control any such infringement or
misappropriation action or proceeding relating to the Aviron Patents or the
Products Rights by counsel of its own choice. Aviron will cooperate with
Wyeth-Ayerst in any such action or proceeding brought by Wyeth-Ayerst against a
Third Party, and shall have the right to consult with Wyeth-Ayerst and to
participate in and be represented by independent counsel in such litigation at
its own expense. If one Party brings any such action or proceeding under this
Section 14.3(b), the other Party agrees to be joined as a party plaintiff to the
extent necessary to prosecute the action or proceeding and to give the first
Party reasonable assistance and authority to file and prosecute the suit. Any
amounts recovered by either Party pursuant to this subsection (b) shall first be
used to reimburse the Parties for any legal expenses incurred pursuant to such
enforcement, and any remaining amounts shall be paid [***] to the enforcing
Party and [***] to the non-enforcing Party.
(c) SETTLEMENT WITH A THIRD PARTY. The Party that controls the
prosecution of a given action under this Section 14.3 shall also have the right
to control settlement of such action; provided, however, that no settlement
shall be entered into with respect to a Joint Patent without the written consent
of the other Party, such consent not to be unreasonably withheld or delayed.
14.4 DEFENSE AND SETTLEMENT OF THIRD PARTY CLAIMS.
(a) DEFENSE.
(i) If a Third Party asserts that a patent, trade secret,
or other intangible right owned by it is infringed or misappropriated by the
manufacture, use, sale, or offer for sale of the Product in the Territory, the
JCC shall establish a plan for a common defense and select the Party responsible
for managing such common defense plan, subject to subsection (ii) below. The
costs of any such defense to such action incurred by one or both of the Parties
at the direction of the JCC (including the costs of any judgment, award, decree
or settlement) will be [***], subject to the provisions of Section [***].
(ii) If such Third Party asserts that a patent, trade
secret, or other intangible right owned by it is infringed or misappropriated by
the manufacture, use, sale, or offer for sale of the Base Product (as defined in
Section 12.1(b)) in the Territory, then Aviron shall have the right to control
the defense to such action. Wyeth-Ayerst shall have the right to participate in
such defense with its own counsel at its own cost and expense.
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(b) SETTLEMENT WITH A THIRD PARTY. The entity that controls the
defense of a given claim under Subsection (a) with respect to the Product shall
also have the right to control settlement of such claim; provided, however, that
no settlement shall be entered into without the written consent of the other
Party. If there is no agreement between the Parties as to any proposed
settlement, then the dispute shall be decided by the ICC, and, if the ICC is
unable to decide the dispute, the matter will be resolved pursuant to Article
19.
14.5 ASSIGNMENT OF JOINT PATENTS. Neither Party may assign its rights
under any Joint Patent to a Third Party except with the prior written consent of
the other Party; provided, however, that either Party may assign such rights
without consent to an Affiliate or other permitted assignee under this Agreement
in connection with a merger, acquisition or similar reorganization or the sale
of all or substantially all of its assets, or in the case of Wyeth-Ayerst, the
sale or transfer of substantially the entire vaccine business of Wyeth-Ayerst,
as provided for in Section 20.1.
ARTICLE 15
REPRESENTATIONS AND WARRANTIES
15.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Each of the Parties hereby
represents and warrants to the other Party as follows:
(a) such Party (i) is a corporation duly organized, validly
existing and in good standing under the laws of the state in which it is
incorporated, (ii) has the corporate power and authority and the legal right to
own and operate its property and assets, to lease the property and assets it
operates under lease, and to carry on its business as it is now being conducted,
and (iii) is in compliance with all requirements of applicable law, except to
the extent that any noncompliance would not have a material adverse effect on
the properties, business, financial or other condition of such Party and would
not materially adversely affect such Party's ability to perform its obligations
under this Agreement;
(b) this Agreement is a legal and valid obligation binding upon
such Party and enforceable in accordance with its terms, and the execution,
delivery and performance of the Agreement by such Party does not conflict with
any agreement, instrument or understanding, oral or written, to which it is a
Party or by which it is bound, nor violate any law or regulation of any court,
governmental body or administrative or other agency having jurisdiction over it.
Each Party expressly represents and warrants that it has the full power and
authority to enter into this Agreement and to carry out the obligations
contemplated hereby;
(c) such Party has not, and during the term of the Agreement will
not, grant any right to any Third Party relating to its respective Patents and
Know-How in the Field in the Territory which would conflict with the rights
granted to the other Party hereunder;
(d) it has taken all necessary corporate action on its part to
authorize the execution and delivery of this Agreement. Each Party expressly
represents and warrants that it owns (in whole or in part) or Controls all
Patents and that are the subject of the licenses granted to the other Party
herein; and
37.
<PAGE> 39
(e) that with respect to all regulatory filings to obtain
Regulatory Approvals, the data and information in each Party's submissions
shall, to the best of each Party's knowledge, be free from fraud or material
falsity, that the Regulatory Approvals will not be obtained either through
bribery or the payment of illegal gratuities, that the data and information in
each Party's submissions are and shall be accurate and reliable for purposes of
supporting approval of the submissions, and that the Regulatory Approvals shall
be obtained without illegal or unethical behavior of any kind;
15.2 AVIRON REPRESENTATIONS AND WARRANTIES. Aviron represents and
warrants to Wyeth-Ayerst as follows:
(a) that to the best of its knowledge as of the Signing Date, the
manufacture, use, importation, offer for sale or sale of the Product [***] as
contemplated hereunder does not infringe any Third Party intellectual property
right in the Territory;
(b) that to the best of its knowledge as of the Signing Date, all
and only the true inventors of the subject matter claimed are named in the
Aviron Patents and all such inventors have irrevocably assigned all their rights
and interests therein to Aviron;
(c) that as of the Signing Date, it is not aware of any
information material to the examination of the Aviron Patents listed in Schedule
1.6, within the meaning of 37 C.F.R. 1.56, that was not disclosed in writing to
the United States Patent and Trademark Office;
(d) that as of the Signing Date, Aviron is not in material
breach, and has no knowledge of any material breach by the other party thereto,
under the Michigan Agreement; that certain [***] Agreement by and between [***]
and Aviron, dated [***]; that certain [***] Agreement by and between [***] and
Aviron dated [***]; that certain [***] Agreement by and between Aviron and [***]
dated [***]; and that certain [***] Agreement by and between Aviron and [***]
dated [***].
(e) that no federal funding was or is involved in the performance
of work resulting in [***] the Aviron Patents or the Aviron Know-How, except as
set forth in the disclosure schedule attached as Schedule 15.2(e) hereto.
15.3 PERFORMANCE BY AFFILIATES AND SUBLICENSEES. The Parties recognize
that each Party may perform some or all of its obligations under this Agreement
through Affiliates and/or sublicensees, as permitted hereunder, provided,
however, that each Party shall remain responsible for the performance by its
Affiliates and sublicensees hereunder and shall cause its Affiliates and
sublicensees to comply with the provisions of this Agreement in connection with
such performance. Each Party hereby expressly waives any requirement that the
other Party exhaust any right, power or remedy or proceed against an Affiliate
or sublicensee for any obligation or performance hereunder prior to proceeding
directly against such Party.
ARTICLE 16
INFORMATION AND REPORTS
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<PAGE> 40
16.1 INFORMATION AND REPORTS DURING TERM OF THE AGREEMENT.
(a) Each Party agrees to keep complete and accurate records of
its activities carried out pursuant to this Agreement. Wyeth-Ayerst and Aviron
will disclose and make available to each other upon written request and without
charge (other than reasonable duplicating, postage and related out-of-pocket
costs) all such records and all commercial, marketing, promotion, and pricing
information known by Wyeth-Ayerst or Aviron directly concerning Product in the
Field and in Territory at any time during the term of the Agreement. Each Party
will use Commercially Reasonable Efforts to disclose to the other Party all
significant information promptly after it is learned or its significance is
appreciated.
(b) Wyeth-Ayerst shall use commercially reasonable, good faith
efforts to provide Aviron with a preliminary report of its sales figures for the
Product in the Territory during each month or quarter that it sells Product
hereunder, within thirty (30) days following the end of such month or calendar
quarter. Aviron acknowledges that such report may be unaudited, is only for
Aviron's internal planning use, and may be further revised prior to
Wyeth-Ayerst's submission of the royalty report described in Section 12.2 for
such calendar quarter.
16.2 COMPLAINTS. Each Party shall maintain a record of all complaints it
receives with respect to the Product. Each Party shall notify the other Party of
any complaint with regulatory implications received by it in sufficient detail
and within two (2) business days after the event, and in any event in sufficient
time to allow the responsible Party to comply with any and all regulatory
requirements imposed upon it; provided, however, that notice of any complaint
involving a field alert report shall be transmitted within one (1) business day.
16.3 ADVERSE DRUG EXPERIENCES. In order for the Parties to comply with
their respective responsibilities under this Article 16 and otherwise relating
to the reporting of adverse drug experiences, to the extent either Party
receives any information regarding adverse drug experiences related to the use
of the Product, whether such use is within or outside of the Territory, such
Party shall promptly provide the other Party with such information in accordance
with the Adverse Event Reporting Procedures set forth in Schedule 16.3 (as may
be amended from time to time upon mutual agreement of the Parties).
16.4 RECORDS OF REVENUES AND EXPENSES.
(a) Each Party will maintain complete and accurate records which
are relevant to revenues, costs, expenses and payments under this Agreement and
such records shall be open during reasonable business hours for a period of
[***] from the creation of individual records for examination at the other
Party's expense, and not more often than [***] by an independent certified
public accountant selected by the other Party and reasonably acceptable to the
audited Party for the sole purpose of verifying for the inspecting Party the
correctness of calculations and classifications of such revenues, costs,
expenses or payments made under this Agreement. In the absence of material
shortfalls (in excess of [***] of the royalties or other amounts payable under
this Agreement) in any request for reimbursement resulting from such audit, the
accounting expense shall be paid by the Party requesting the audit. If material
shortfalls do result, the audited Party shall bear the accounting expense. In
any case, the audited Party shall pay the
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<PAGE> 41
shortfall. Any records or accounting information received from the other Party
shall be Confidential Information for purposes of Article 13. Results of any
such audit shall be provided to both Parties, subject to Article 13.
(b) If there is a dispute between the Parties following any audit
performed pursuant to Subsection 16.4(a), either Party may refer the issue (an
"Audit Disagreement") to an independent certified public accountant for
resolution. In the event an Audit Disagreement is submitted for resolution by
either Party, the Parties shall comply with the following procedures:
(i) The Party submitting the Audit Disagreement for
resolution shall provide written notice to the other Party that it is invoking
the procedures of this Subsection 16.4(b).
(ii) Within thirty (30) business days of the giving of
such notice, the Parties shall jointly select a recognized international
accounting firm to act as an independent expert to resolve such Audit
Disagreement.
(iii) The Audit Disagreement submitted for resolution
shall be described by the Parties to the independent expert in writing within
ten (10) business days of the selection of such independent expert.
(iv) The independent expert shall render a decision on the
matter as soon as practicable.
(v) The decision of the independent expert shall be final
and binding and shall not be subject to Article 19, unless such Audit
Disagreement involves alleged fraud, breach of this Agreement or construction or
interpretation of any of the terms and conditions hereof.
(vi) All fees and expenses of the independent expert,
including any Third Party support staff or other costs incurred with respect to
carrying out the procedures specified at the direction of the independent expert
in connection with such Audit Disagreement, shall be borne by the losing Party.
ARTICLE 17
INDEMNIFICATION
17.1 INDEMNIFICATION BY AVIRON. Except as set forth in Section 17.2
hereof, and except to the extent caused by Wyeth-Ayerst's negligent, reckless or
willful acts or omissions, Aviron shall indemnify, defend and hold Wyeth-Ayerst
and its directors, officers, employees, agents and Affiliates harmless from and
against any liabilities, damages, costs or expenses, including reasonable
attorneys' fees (collectively, "Liabilities"), (a) which arise out of, relate to
or result from the breach by Aviron of any of its representations or warranties
contained within this Agreement; (b) which arise from any claim, lawsuit or
other action by a Third Party caused by the manufacture, use or sale of the
Product in the Territory during the term of this Agreement due to a defect
caused by Aviron's manufacture of the Product or due to a [***] including, but
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40.
<PAGE> 42
not limited to, a claim, lawsuit, or other action related to the death of or
injury to a Third Party, but only to the extent that such claim, lawsuit or
other action does not arise out of [***], (c) are attributable to statements or
representations by Aviron, its employees, or its agents, that are inconsistent
with, or contrary to, the Product Labeling or Product Promotional Materials; or
(d) in the case of any trademark infringement claim, lawsuit or other action,
result solely from Wyeth-Ayerst's proper use of Aviron Trademarks in accordance
with the terms of this Agreement.
17.2 INDEMNIFICATION BY WYETH-AYERST. Except as set forth in Section
17.1 hereof, and except to the extent caused by Aviron's negligent, reckless or
willful acts or omissions, Wyeth-Ayerst shall indemnify, defend and hold Aviron
and its directors, officers, employees, agents and Affiliates harmless from and
against any Liabilities which arise from any claim, lawsuit or other action to
the extent such Liabilities (a) arise out of, relate to or result from the
breach by Wyeth-Ayerst of any of its representations or warranties contained
within this Agreement; (b) arise from any claim, lawsuit or other action by a
Third Party due to a [***], including, but not limited to, a claim, lawsuit or
other action related to the death of or injury to a Third Party, but only to the
extent that such claim, lawsuit or other action does not arise out of Aviron's
manufacture of the Product; (c) are attributable to statements or
representations by Wyeth-Ayerst, its employees, or its agents, that are
inconsistent with, or contrary to, the Product Labeling or Product Promotional
Materials; or (d) in the case of any trademark infringement claim, lawsuit or
other action, result solely from Aviron's proper use of Wyeth-Ayerst's
Trademarks in connection with the Product in accordance with the terms of this
Agreement.
17.3 INDEMNIFICATION PROCEDURES. A Party which intends to claim
indemnification under Section 17.1 or 17.2 hereof (the "Indemnitee") shall
promptly notify the other Party (the "Indemnitor") in writing of any claim,
lawsuit or other action in respect of which the Indemnitee or any of its
directors, officers, employees, agents and Affiliates intend to claim such
indemnification. The Indemnitee shall permit, and shall cause its directors,
officers, employees, agents and Affiliates to permit, the Indemnitor, at its
discretion, to settle any such claim, lawsuit or other action and agrees to the
complete control of such defense or settlement by the Indemnitor; provided,
however, that such settlement does not adversely affect the Indemnitee's rights
hereunder or impose any obligations on the Indemnitee in addition to those set
forth herein in order for it to exercise such rights. No such claim, lawsuit or
other action shall be settled without the prior written consent of the
Indemnitor, and the Indemnitor shall not be responsible for any legal fees or
other costs incurred other than as provided herein. The Indemnitee, its
directors, officers, employees, agents and Affiliates shall cooperate fully with
the Indemnitor and its legal representatives in the investigation and defense of
any claim, lawsuit or other action covered by the provisions of this Article 17.
The Indemnitee shall have the right, but not the obligation, to be represented
by counsel of its own selection and expense.
17.4 INSURANCE. Each Party shall maintain comprehensive general
liability insurance coverage, including products liability, with a minimum limit
of not less than [***] and shall provide the other Party with a certificate of
such insurance as requested.
17.5 PAYMENT OF DAMAGES.
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41.
<PAGE> 43
(a) Any Liability for which [***] becomes liable under the
Section 17.1 or 17.2 due to a [***] shall be paid first from any funds available
through a vaccine injury protection compensation trust established pursuant to
legislation similar to 42 U.S.C. 300 aa-1 et seq., social insurance fund,
vaccine injury compensation fund, sick fund or similar arrangement that may be
employable in the Territory, if applicable.
(b) Any Liabilities not subject to subsection (a) above shall be
the responsibility of the Indemnitor.
ARTICLE 18
TERM AND TERMINATION; AVIRON CHANGE OF CONTROL
18.1 TERM.
(a) This Agreement shall commence as of the Effective Date and,
unless sooner terminated as provided herein, shall continue in effect until the
eighth anniversary of the date of first commercial sale of the Product in the
Territory, but shall in no event extend past December 31, 2012, except as set
forth in Section 18.8 [***].
(b) If, as of [***] prior to the expiration of the Agreement
pursuant to Subsection 18.1(a), the Agreement has not terminated and [***] has
determined that [***] of the Agreement, then [***] shall promptly notify [***],
whereupon [***] shall [***]. Upon such notice, [***] shall have [***] days to
[***]. If [***] timely [***], the Parties shall negotiate in good faith for a
period of not more than [***] days to reach an agreement [***] in such [***] for
a [***] on such terms as the Parties shall agree. If, despite such good faith
negotiations, the Parties have not executed a definitive agreement for such an
[***] within such [***] day period, [***][shall be free to negotiate and enter
into a [***] with a Third Party, provided that prior to the expiration of the
term of this Agreement, [***] shall not enter into such a [***] with a Third
Party on terms and conditions that, taken as a whole, are less favorable to
[***] than the terms last offered in writing by [***] for the [***].
18.2 TERMINATION FOR MATERIAL BREACH.
(a) Subject to the provisions of this Section 18.2, if either
Party (the "Breaching Party") shall have committed a material breach of this
Agreement and such material breach shall remain uncured and shall be continuing
for a period of [***] days following receipt of notice thereof by the other
Party (the "Non-Breaching Party"), or if such breach is incapable of cure during
the applicable notice period, the Breaching Party fails to make good faith
efforts to cure such breach, then the Non-Breaching Party shall have the right
to terminate this Agreement by written notice to the Breaching Party. Any such
notice of alleged material breach shall include a reasonably detailed
description of all relevant facts and circumstances demonstrating, supporting
and/or relating to each such alleged material breach by the other party.
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<PAGE> 44
(b) If [***] terminate this Agreement as provided in subsection
(a) above if such material breach is of Sections [***].
(c) If [***] is entitled to terminate this Agreement as provided
in subsection (a) above, [***] may elect not to terminate this Agreement as so
provided, and may instead [***] in accordance with Section [***]. Any [***]
pursuant to such [***] hereunder. The [***] in such [***] in connection with
such [***]. If [***] shall be [***] hereunder. If, upon expiration of the term
of the Agreement or earlier termination of this Agreement, [***] and there are
[***] hereunder, then [***].
18.3 TERMINATION BY [***] may terminate this Agreement in whole or in
part:
(a) on [***] days written notice, in the event [***] which result
in [***] sufficient to cause [***]; or
(b) upon at least [***] prior written notice to [***] at any time
after [***].
18.4 TERMINATION [***]. This Agreement may be terminated by [***] as to
any nation within the Territory after the Launch Date upon at least [***] prior
written notice to [***] after the occurrence of both of the following events
("Termination Period"): (i) a [***] that the [***] and (ii) within the [***]
period after the [***] cooperates in good faith with [***] in its good faith
efforts to [***] and such [***] during such [***] period. Commencing [***] days
following [***] receipt of [***] proper notice of termination under this Section
18.4, [***] for all [***] from such [***] which are [***] of the Termination
Period. Notwithstanding the foregoing, this Section 18.4 shall not apply where
[***] by the Parties.
18.5 BANKRUPTCY. This Agreement may be terminated by either Party upon
at least [***] prior written notice thereof if the other Party becomes
insolvent, makes an assignment for the benefit of creditors, is the subject of
proceedings in voluntary or involuntary bankruptcy instituted on behalf of or
against such Party, or has a receiver or trustee appointed for all or
substantially all of its property, provided that in the case of an involuntary
bankruptcy proceeding such right to terminate shall only become effective if the
Party consents to the involuntary bankruptcy or such proceeding is not dismissed
within [***] after the filing thereof.
18.6 EFFECT OF TERMINATION.
(a) GENERAL. Upon termination or expiration of the Agreement, (i)
the licenses granted by Aviron to Wyeth-Ayerst under Sections 5.1 and 9.1 will
terminate immediately; (ii) all rights in the Product shall revert immediately
to Aviron; (iii) any and all claims and payment obligations that accrued prior
to the date of such termination or expiration shall survive such termination;
(iv) each Party shall, within sixty (60) days of such termination, return all of
the other Party's Confidential Information; and (v) Wyeth-Ayerst will return to
Aviron all Aviron Product Materials, including without limitation [***] in its
control; provided, however, that Wyeth-Ayerst, to the extent of the licenses
granted under Section 5.1 and 9.1 and as otherwise permitted by this Agreement,
shall thereafter have a reasonable period, not to exceed six (6) months
following such termination or expiration, within which to sell existing
inventory of Product and to use existing inventory of Product promotional
Materials and Product
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<PAGE> 45
Labeling containing any Trademarks of Aviron, in all cases according to the
terms of this Agreement.
(b) PRODUCT RE-PURCHASE.
(i) Upon termination or expiration of the Agreement,
Wyeth-Ayerst shall provide Aviron with full particulars of all unsold Finished
Product (including quantities of Finished Product, and the dates on which the
Finished Product was manufactured) in its possession. Aviron shall be entitled,
at its discretion, to purchase from Wyeth-Ayerst any unsold Finished Product, at
a price equal to the average transfer price per dose of the immediately
preceding Flu Season. If so requested by Aviron, Wyeth-Ayerst shall arrange for
delivery of the Finished Product purchased by Aviron pursuant to this subsection
(i) to such destination or destinations as may be designated by Aviron. All
delivery arrangements shall be subject to the prior approval of Aviron. Freight
and insurance of such delivery shall be at the cost of Aviron.
(ii) Any Finished Product in respect of which Aviron has
notified Wyeth-Ayerst in writing that it does not wish to repurchase pursuant to
subsection (i) may be sold by Wyeth-Ayerst within [***] months after termination
or expiration of this Agreement, in which case the terms of this Agreement or
such of them as is or are relevant shall continue to operate until the remaining
Finished Product has been sold or the [***] month period expires, whichever
first occurs.
(c) JOINT TECHNOLOGY. Upon termination (other than by
Wyeth-Ayerst pursuant to Section [***]) or upon expiration of the Agreement,
Wyeth-Ayerst shall be deemed to have granted to Aviron the non-exclusive,
world-wide, perpetual, royalty-free, sublicenseable license in the Territory
under Wyeth-Ayerst's interest in the Joint Technology to use, make, have made,
import, offer for sale and sell the Product in the Field. Such license shall be
[***]; in the event that Aviron wishes to [***], the Parties shall agree upon
[***] and as agreed by the Parties [***] of the [***] manufacture, use or sale
of the Product.
(d) WYETH-AYERST KNOW-HOW AND PATENTS. Upon termination (other
than by Wyeth-Ayerst pursuant to Section [***]) or upon expiration of the
Agreement, Wyeth-Ayerst shall be deemed to have granted to Aviron a
non-exclusive, perpetual, royalty-free, sublicenseable license in the Territory
to utilize the Wyeth-Ayerst Know-How and to practice the Wyeth-Ayerst Patents to
use, make, have made, import, offer for sale and sell the Product in the Field.
Such license shall be [***], in the event that Aviron wishes to [***], the
Parties shall agree upon [***] and as agreed by the Parties [***] of the [***].
18.7 WYETH-AYERST COVENANT. For period of [***] following the expiration
or termination of this Agreement, Wyeth-Ayerst shall not promote, manufacture
for commercial sale or use, sell, resell, or otherwise commercialize, nor shall
Wyeth-Ayerst assist any Third Party or engage any Third Party to promote,
manufacture for commercial sale or use, sell, resell, or otherwise
commercialize, any [***], in any country within or outside of the Territory;
provided that [***] shall have the burden of (a) [***], and (b) providing [***].
Aviron shall [***] under this provision only to the extent that such [***] prior
to [***] described in [***].
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18.8 OPTION TO EXTEND TERM OF THE AGREEMENT.
(a) GENERAL. Subject to the provisions of this Section 18.8,
Aviron hereby grants to Wyeth-Ayerst the option to extend the term of this
Agreement in one (1) year increments, but in no event by more than a total of
[***] provided that Wyeth-Ayerst may not exercise such option if it is in
material breach of any provision of this Agreement, the U.S. Agreement or the
Supply Agreement. The term of the Agreement shall not by extended by more than
one (1) year during any given twelve (12) month period. Wyeth-Ayerst shall
provide Aviron written notice that it is exercising its option to extend the
term of the Agreement no later than [***] months prior to the date of expiration
of the then current term of the Agreement (the "Extension Expiration Date"). If
Wyeth-Ayerst does not provide such notice by the Extension Expiration Date, such
option shall lapse and Aviron shall thereafter have no further obligation to
Wyeth-Ayerst to allow it to extend the term of the Agreement. If Wyeth-Ayerst
does provide such notice to Aviron by the Extension Expiration Date, then:
(i) Wyeth-Ayerst shall pay Aviron as set forth in
subsection (b) below;
(ii) The term of the Agreement shall be automatically
extended for one (1) year; and
(iii) Aviron shall have the right, but not the obligation,
to require that [***] (as defined in [***]) of the [***] under the [***] (as
defined in [***]) shall be [***] (as defined in [***]).
Upon the expiration or termination of the term of this Agreement as
extended under this Section 18.8, Wyeth-Ayerst's rights to sell the Product
shall apply as set forth in Section 18.6(b).
(b) OPTION PRICE. If Wyeth-Ayerst exercises its option to extend
the term of the Agreement, then Wyeth-Ayerst shall pay Aviron the "Option Price"
(as defined in the following sentence) for each one year extension of the term
of the Agreement as permitted in subsection (a) above. The "Option Price" shall
be the greater of [***] or the Designated Percentage (as defined in subsection
(c) below) of Net Sales for the final year of the term of the Agreement, [***]
most recent one year extension hereunder (the "Term Extension"). In no event
shall Wyeth-Ayerst be obligated to pay Aviron more than [***] in combined Option
Price payments under this Section 18.8(b) and Section 19.8(b) of the U.S.
Agreement for any single Calendar Year.
(i) OPTION PRICE PAYMENT. Wyeth-Ayerst shall make an
advance payment to Aviron of [***] at the time that it provides Aviron with the
written notice that it is exercising its option for each one year extension of
the term of the Agreement, as set forth in subsection (a) above.
(ii) RECONCILIATION. During each Term Extension, and in
addition to any royalties and any other payments that are due to Aviron
hereunder, Wyeth-Ayerst shall pay to Aviron the applicable Designated Percentage
of Net Sales [***], such payment to be made with each royalty report delivered
under Section 12.2 that relates to Net Sales [***], provided
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<PAGE> 47
that the [***] paid by Wyeth-Ayerst pursuant to subsection (i) above for such
Term Extension shall be credited against any payments due from Wyeth-Ayerst
under this subsection (ii) for such Term Extension, but may not be credited
against any other amounts due hereunder, or under the U.S. Agreement or the
Supply Agreement, including without limitation any amounts due for any Term
Extension other than the Term Extension to which the [***] payment relates.
(c) DESIGNATED PERCENTAGE. The "Designated Percentage" shall be
as follows:
(i) For the [***] of the term of the Agreement, the
"Designated Percentage" shall be deemed to be [***];
(ii) For the [***] of the term of the Agreement, the
"Designated Percentage" shall be deemed to be [***]; and
(iii) For the [***] of the term of the Agreement, the
"Designated Percentage" shall be deemed to be [***].
(d) [***] shall be as follows:
(i) For the [***] of the term of the Agreement, the [***]
shall be deemed to be [***];
(ii) For the [***] of the term of the Agreement, the [***]
shall be deemed to be [***]; and
(iii) For the [***] of the term of the Agreement, the
[***] shall be deemed to be [***].
18.9 SURVIVING RIGHTS. The following provisions will survive expiration
or termination of this Agreement: Sections 5.4, 5.5, 6.4, 7.6(d), 9.8(b),
10.2(j), 14.1, 14.2, 14.5, 16.3, 16.4, 18.6(b) and 18.7, and Articles 13, 17 and
20.
ARTICLE 19
DISPUTE RESOLUTION
19.1 DISPUTES.
(a) The Parties recognize that disputes as to certain matters may
from time to time arise during the term of this Agreement that relate to either
Party's rights and/or obligations hereunder or thereunder. It is the objective
of the Parties to establish procedures to facilitate the resolution of disputes
arising under this Agreement in an expedient manner by mutual cooperation and
without resort to litigation. To accomplish this objective, the Parties agree to
follow the procedures set forth in this Article 19 if and when a dispute arises
under this Agreement.
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(b) Unless otherwise specifically recited in this Agreement,
disputes between the Parties shall be first referred to the ICC by either Party
as soon as reasonably possible after such dispute has arisen. If the ICC is
unable to resolve such a dispute within ten (10) days of being requested by a
Party to resolve such dispute, either Party may, by written notice to the other,
have such dispute referred to their respective executive officers designated
below or their designees, for attempted resolution by negotiations within
fifteen (15) days after such notice is received. The designated officers are as
follows:
For Wyeth-Ayerst: President of Wyeth-Ayerst Global Pharmaceuticals
For Aviron: Aviron Chief Executive Officer
In the event such designated officers are unable to resolve such dispute, the
parties shall then be forced to pursue all available remedies at law or in
equity; provided, however, that no lawsuit may be commenced by one Party unless
it gives the other Party fifteen (15) days notice of its intent to initiate an
action.
ARTICLE 20
MISCELLANEOUS
20.1 ASSIGNMENT.
(a) Neither Party may assign its rights or obligations under this
Agreement without the prior written consent of the other Party, except in
connection with a merger, acquisition nor similar reorganization or the sale of
all or substantially all of its assets, or, in the case of Wyeth-Ayerst, the
sale or transfer of substantially all of the vaccine business of Wyeth-Ayerst.
[***], this Agreement shall survive any such merger or reorganization of either
Party with or into, or such sale of assets to, another party and no consent for
such merger, reorganization or sale shall be needed; provided, that in the event
of such merger, reorganization or sale, no intellectual property rights of the
acquiring corporation shall be included in the technology licensed hereunder.
(b) This Agreement shall be binding upon and inure to the benefit
of the successors and permitted assigns of the Parties. Any assignment not in
accordance with this Agreement shall be void.
20.2 CONSENTS NOT UNREASONABLY WITHHELD OR DELAYED. Whenever provision
is made in this Agreement for either Party to secure the consent or approval of
the other, that consent or approval shall not unreasonably be withheld or
delayed, unless specifically otherwise provided.
20.3 FORCE MAJEURE. Neither Party shall lose any rights hereunder or be
liable to the other Party for damages or losses on account of failure of
performance by the defaulting Party if the failure is occasioned by government
action, war, fire, explosion, flood, strike, lockout, embargo, act of God, or
any other similar cause beyond the control of the defaulting Party, provided
that the Party claiming force majeure has exerted all reasonable efforts to
avoid or
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<PAGE> 49
remedy such force majeure and has given the other Party prompt notice describing
such event, the effect thereof and the actions being taken to avoid or remedy
such force majeure; provided, however, that in no event shall a Party be
required to settle any labor dispute or disturbance.
20.4 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
20.5 NOTICES. All notices hereunder shall be in writing and shall be
deemed given if delivered personally or by facsimile transmission (receipt
verified), telexed, mailed by registered or certified mail (return receipt
requested), postage prepaid, or sent by 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 that notices of a change of address shall be
effective only upon receipt thereof).
If to Aviron: Aviron
297 North Bernardo Avenue
Mountain View, California 94043
Attention: Chief Executive Officer
Telephone: (650) 919-6500
Facsimile: (650) 919-6612
With copies to: Cooley Godward LLP
5 Palo Alto Square
3000 El Camino Real
Palo Alto, California
Attention: Barbara A. Kosacz
Telephone: (650) 843-5000
Facsimile: (650) 857-0663
If to Wyeth-Ayerst: Wyeth-Ayerst Laboratories
555 Lancaster Avenue
St. Davids, Pennsylvania, 19087
Attention: Sr. Vice President, Global Business
Development
Telephone: (610) 688-5809
Facsimile: (610) 688-9498
With copies to: American Home Products Corporation
Five Giralda Drive
Madison, New Jersey 07940
Attention: Sr. Vice President and General Counsel
Telephone: (973) 660-6040
Facsimile: (973) 660-7155
48.
<PAGE> 50
20.6 WAIVER. Except as specifically provided for herein, the waiver from
time to time by either of the Parties of any of their rights or their failure to
exercise any remedy shall not operate or be construed as a continuing waiver of
same or any other of such Party's rights or remedies provided in this Agreement.
20.7 SEVERABILITY. If any term, covenant or condition of this Agreement
or the application thereof to any Party or circumstances shall, to any extent,
be held to be invalid or unenforceable, then (i) the remainder of this
Agreement, or the application of such term, covenant or condition to Parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent permitted by law;
and (ii) the Parties hereto covenant and agree to renegotiate any such term,
covenant or application thereof in good faith in order to provide a reasonably
acceptable alternative to the term, covenant or condition of this Agreement or
the application thereof that is invalid or unenforceable, it being the intent of
the Parties that the basic purposes of this Agreement are to be effectuated.
20.8 AMBIGUITIES. Ambiguities, if any, in this Agreement shall not be
construed against any Party, irrespective of which Party may be deemed to have
authored the ambiguous provision.
20.9 GOVERNING LAW. This Agreement shall be governed by and interpreted
under the laws of the [***] without regard to conflicts of laws, except for
questions regarding patents, which shall be resolved in the United States courts
having jurisdiction over the matter.
20.10 HEADINGS. The Sections and paragraph headings contained herein are
for the purposes of convenience only and are not intended to define or limit the
contents of the Sections or paragraphs to which they apply.
20.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20.12 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the Supply
Agreement, the U.S. Agreement and the Credit Agreement (as defined in Section
13.1 of the U.S. Agreement) (collectively, the "Agreements"), including all
Exhibits and Schedules attached thereto, set forth all the covenants, promises,
agreements, warranties, representations, conditions and understandings between
the Parties hereto with respect to the subject matter thereof, and supersede and
terminate all prior agreements and understandings between the Parties with
respect to such subject matter, except as provided in Section 11.3(e) of this
Agreement. There are no covenants, promises, agreements, warranties,
representations, conditions or understandings, either oral or written, between
the Parties with respect to the subject matter thereof other than as set forth
therein. No subsequent alteration, amendment, change or addition to the
Agreements shall be binding upon the Parties hereto unless reduced to writing
and signed by the respective authorized officers of the Parties. The Agreements,
including without limitation the Exhibits, Schedules and attachments thereto,
are intended to define the full extent of the legally enforceable undertakings
of the Parties thereto with respect to the subject matter
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49.
<PAGE> 51
thereof, and no promise or representation, written or oral, which is not set
forth explicitly is intended by either Party to be legally binding. Both Parties
acknowledge that in deciding to enter into the Agreements and to consummate the
transaction contemplated thereby neither Party has relied upon any statement or
representations, written or oral, other than those explicitly set forth therein.
20.13 INDEPENDENT CONTRACTORS. The status of the Parties under this
Agreement shall be that of independent contractors. Neither Party shall have the
right to enter into any agreements on behalf of the other Party, nor shall it
represent to any person that it has any such right or authority. Nothing in this
Agreement shall be construed as establishing a partnership or joint venture
relationship between the Parties.
20.14 CURRENCY. The references in this Agreement to amounts expressed in
dollars ($) shall mean United States dollars.
20.15 BANKRUPTCY. All rights and licenses granted under or pursuant to
this Agreement are, and shall otherwise be deemed to be, for purposes of Section
365(n) of Title 11, U.S.C. (the "Bankruptcy Code"), licenses and rights to
"intellectual Property" as defined under Section 101(60) of the Bankruptcy Code.
The Parties agree that the other Party, as a licensee of such rights under this
Agreement, shall retain and may fully exercise all of its rights and elections
under the Bankruptcy Code. Each Party agrees during the term of this Agreement
to create and maintain current copies of or, if not amenable to copying,
detailed descriptions or other appropriate embodiments, of all such intellectual
property. The Parties further agree that, in the event of the commencement of a
bankruptcy proceeding by or against one Party under the 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 its possession, shall
be promptly delivered to the other Party (i) upon any such commencement of a
bankruptcy proceeding upon written request therefor by the other Party, unless
such Party elects to continue to perform all of its obligations under this
Agreement, or (ii) if not delivered under (i) above, upon the rejection of this
Agreement by or on behalf of such Party upon written request therefor by the
other Party. Any delivery of descriptions or embodiments of intellectual
property pursuant to this Section 20.15 shall not be deemed to effect a transfer
of title or other change in ownership or license rights, or to reduce in any
respect the payment obligations of the receiving Party under this Agreement.
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50.
<PAGE> 52
20.16 EFFECTIVE DATE.
(a) In the event that the Effective Date has not occurred within
three (3) months after the Signing Date, the Parties shall revert to their
status prior to signing this Agreement; provided that Aviron may extend such
three month period in one (1) month increments upon written notice to
Wyeth-Ayerst, such extended period not to exceed three (3) months. This Section
20.16 shall bind Aviron and Wyeth-Ayerst upon the Signing Date, but the other
provisions of the Agreement shall not become effective until the Effective Date.
(b) As a condition precedent to this Agreement becoming
effective, [***] which shall be [***] which shall [***] the following:
(1) [***] under this Agreement and [***] made in
accordance with [***];
(2) [***] this Agreement and [***] to those of the
[***];
(3) The [***] under the [***] as applies to [***]
to the [***] set forth in Section [***] hereof;
(4) [***] and maintain [***] will be deemed [***],
to be reasonably demonstrated to [***] upon its request;
(5) In the event that [***] under the [***] under
the [***] in Section [***] for [***] have been the [***] of this Agreement, and
under the [***] of the [***] have been [***], if within [***] of the date of
[***] of such [***]:
(a) That it will be able to meet its
obligations under [***], provided that [***] such requirement to [***] under
this subsection (a) if [***] for the [***] of such [***] to the [***] under the
[***] of the [***] and the [***] but only to the extent that [***] has not
[***]; and
(b) That [***] is not [***] of this
Agreement, [***] (as defined in [***]) by the end of such [***] day period.
During such [***] period, [***] the right to [***].
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51.
<PAGE> 53
IN WITNESS WHEREOF, Aviron and Wyeth-Ayerst have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
AMERICAN HOME PRODUCTS CORPORATION AVIRON
By: /s/ Gerad A. Jibilian By: /s/ Carol A. Olson
------------------------------- -------------------------------
Name: Name:
------------------------------ ------------------------------
Title: Title:
----------------------------- -----------------------------
52.
<PAGE> 54
SCHEDULE 1.5
AVIRON PATENTS
NON-U.S. PATENTS OR APPLICATIONS ORIGINALLY FILED AS:
[***]
NON-U.S. APPLICATIONS THAT CLAIM PRIORITY TO:
[***]
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I.
<PAGE> 55
SCHEDULE 1.12
[***]
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II.
<PAGE> 56
SCHEDULE 1.38
SEQUENCE FEATURES [***]
[***]
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III.
<PAGE> 57
SCHEDULE 1.40
MICHIGAN AGREEMENT
IV.
<PAGE> 58
SCHEDULE 1.53
LATIN AMERICAN REGION EUROPEAN REGION
Argentina Austria
Bolivia Belgium
Brazil Bulgaria
Central America/CAR CIS
Chile Croatia
Colombia Czech
Ecuador Denmark
Mexico Estonia
Paraguay Egypt
Peru Finland
Uruguay France
Venezuela Germany
Greece
Hungary
NORTH AMERICAN REGION Iceland
Canada Ireland
Carribean Italy
Latvia
Luxembourg
ASIA/PACIFIC REGION Middle East
Hong Kong Netherlands
India Norway
Japan Poland
Indonesia Portugal
Malaysia Romania
Pakistan Serbia
PRC South Africa
Philippines Slovakia
Singapore Slovenia
Taiwan Spain
Thailand Sweden
Switzerland
Turkey
Ukraine
UK
V.
<PAGE> 59
SCHEDULE 1.63
WYETH-AYERST PATENTS
AS OF THE EFFECTIVE DATE, THERE ARE NO WYETH-AYERST PATENTS.
II.
<PAGE> 60
SCHEDULE 16.2(F)
GOVERNMENT FUNDING DISCLOSURE SCHEDULE
1. [***]
2. AVIRON PATENTS
Aviron was assigned Patent No. [***] (the "[***] Patent") by the [***]
pursuant to that certain [***] Agreement dated [***] (the [***]
Agreement"). Section [***] of the [***] Agreement states that such [***]
Patent may have been developed under a funding agreement with the
Government of the United States of America (the "Government"), and, if
so, that the Government "may have certain rights related thereto,
including, but not limited to those arising under 35 U.S.C.
Sections 200-212 and the regulations promulgated thereunder."
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<PAGE> 61
SCHEDULE 16.3
ADVERSE EVENT REPORTING PROCEDURES
The Parties hereby agree that the following terms will govern disclosures of
each Party to the other with respect to adverse event reporting relating to the
Product as clinically tested or marketed by or on behalf of either Party.
1. Definitions.
1.1 An "Adverse Drug Experience" or "ADE" is defined as:
a) any experience which is adverse, including what are commonly described as
adverse or undesirable experiences, adverse events, adverse reactions, side
effects, or death due to any cause associated with, or observed in conjunction
with the use of the Product in humans, whether or not considered related to the
use of the Product:
(i) occurring in the course of the use of the Product,
(ii) associated with, or observed in conjunction with an overdose of the
Product, whether accidental or intentional,
(iii) associated with, or observed in conjunction with abuse of the
product, and/or
(iv) associated with, or observed in conjunction with withdrawal from
the product.
b) Any significant failure of expected pharmacological or biologic therapeutical
action (with the exception of clinical trial use).
1.2
a) A "Serious ADE" is defined as any Adverse Drug Experience occurring at any
dose that results in any of the following outcomes: death, a Life-Threatening
Adverse Drug Experience, inpatient hospitalization or prolongation of existing
hospitalization, a persistent or significant Disability/incapacity, or a
congenital anomaly/birth defect. Other important medical events that may not
result in death, be life-threatening, or require hospitalization may be
considered a Serious Adverse Drug Experience when, based upon appropriate
medical judgment, they may jeopardize the patient or subject and may require
medical or surgical intervention to prevent one of the outcomes listed in this
definition. Examples of such medical events include allergic bronchospasm
requiring intensive treatment in an emergency room or at home, blood dyscrasias
or convulsions that do not result in inpatient hospitalization, or the
development of drug dependency or drug abuse.
b) A Non-Serious ADE is defined as any ADE which does not meet the criteria in
subsection (a) above for a Serious ADE.
IV.
<PAGE> 62
1.3 "Life-threatening Adverse Drug Experience" is defined as any Adverse Drug
Experience that places the patient, in the view of the initial reporter, at
immediate risk of death from the Adverse Drug Experience as it occurred, i.e.,
it does not include an Adverse Drug Experience that, had it occurred in a more
severe form, might have caused death.
1.4 "Disability" is defined as a substantial disruption of a person's ability to
conduct normal life functions.
1.5 "Unexpected ADE" is defined as any ADE that is not listed in the current
labeling for the Product. This includes events that may be symptomatically and
pathophysiologically related to an event listed in the labeling, but differ from
the event because of greater severity or specificity.
1.6 "Associated with or related to the use of the Product" is defined as: A
reasonable possibility exists that the ADE was caused by the Product.
1.7 "NDA Holder" is defined as: An "Applicant" as defined in 21 CFR Part
314.3(b), for regulatory approval of the Product in any regulatory jurisdiction,
including a holder of a foreign equivalent thereto.
1.8 "IND Holder" is defined as: A "Sponsor" as defined in 21 CFR Part 313.1(b)
of an investigational new drug in any regulatory jurisdiction, including a
holder of a foreign equivalent thereto.
1.9 Capitalized terms not defined in this Schedule shall have the meaning
assigned thereto in the Agreement.
2. With respect to the Product, the Parties agree as follows:
a. All initial reports and any follow-up information (oral or written)
for any and all Serious ADEs (other than with respect to animal studies), which
become known to either Party (other than from disclosure by or on behalf of the
other Party) must be communicated by telephone, telefax or electronically
directly to the other Party and/or the NDA Holder and IND Holder (individually
and collectively referred to as "Holders") within forty-eight (48) hours of
receipt of the information. Written confirmation of the Serious ADE received by
such Party should be sent to the other Party and/or the Holders as soon as it
becomes available, but in any event within forty-eight (48) hours of initial
report of the Serious ADE by such Party.
b. Both Parties shall exchange Medwatch and/or CIOMs forms and other
health authority reports within forty-eight (48) hours of submission to any
Regulatory Authority.
c. All initial reports and follow-up information received for all
Non-Serious ADEs for the Product which become known to a Party (other than from
disclosure by or on behalf of the other Party) must be communicated in writing,
by telefax or electronically to the other Party within ten (10) days, on
Medwatch or CIOMs forms (where possible).
d. Each Party shall coordinate and cooperate with the other whenever
practicable to prepare a single written report regarding all Serious ADEs and/or
Non-Serious ADEs, provided,
V.
<PAGE> 63
however, that neither Party shall be obligated to delay reporting of any ADE in
violation of applicable law or regulations regarding the reporting of ADEs.
3. The Parties further agree that:
a. A written report be forwarded to the other Party within forty-eight (48)
hours of receipt by the Party making the report, for adverse drug experiences
for animal studies which suggest a potential significant risk for humans
("Animal ADEs");
b. Each Party will give the other Party a report via a print-out or computer
disk of all ADEs and Animal ADEs reported to it and its Affiliates relating to
the Product or Substance within the last year, within thirty (30) days of
receipt of a written request from the other Party, but not more often than four
(4) times a year;
c. If either Party wishes access to ADE reports of the other Party relating to
the Product, upon request of that Party, the other Party shall make available
its ADE records relating to the Product (including computer disks) for viewing
and copying by the other Party. The Parties may discuss the transfer of ADE
reports by computer disk.
d. Disclosure of information hereunder by a Party to the other Party shall
continue as long as either Party and/or its Affiliates or designees continue to
clinically test or market the Product.
4. Each Party shall diligently undertake the following further obligations where
both Parties are or will be commercializing Product pursuant to the Agreement
and/or performing clinical trials with respect to Product:
a. Upon the Effective Date, each Party shall identify the individuals who shall
be responsible for identifying all ADE reporting requirements in every country
in the Territory as set forth in the Agreement, and any amendments thereto;
b. To immediately consult with the other Party, with respect to the
investigation and handling of any Serious ADE disclosed to it by the other Party
or by a Third Party and to allow the other Party to review the Serious ADE and
to participate in the follow-up investigation;
c. To immediately advise the other Party of any communication received from a
health authority regarding the safety of the Product and consult with the other
Party with respect to any Product warning, labeling change or change to an
investigators' brochure involving safety issues proposed by the other Party,
including, but not limited to the safety issues agreed to by the Parties;
d. To diligently handle in a timely manner the follow-up investigation and
resolution of each ADE reported to it;
e. To provide the other Party access to its ADE reporting system and
documentation as set forth in Section 3 of this Schedule, upon prior written
notice, during normal business hours, at the expense of the auditing Party and
under the confidentiality obligations set forth in the Agreement;
VI.
<PAGE> 64
f. To meet in a timely fashion from time to time as may be reasonably required
to implement the ADE reporting and consultation procedures described in this
Schedule 17.3, including identification of those individuals in each Party's
drug safety group who will be responsible for reporting to and receiving ADE
information from the other Party, and the development of a written standard
operating procedure with respect to ADE reporting responsibilities, including
reporting responsibilities to investigators;
g. Where possible and practical, to transmit all data electronically;
h. to report to each other any addenda, revisions or changes to the Agreement
(e.g., change in territories, local regulations, addition of new
licensors/licensees to the Agreement, etc.) which might alter the ADE reporting
responsibilities hereunder;
i. to utilize English as the language of communication and data exchange between
the Parties;
j. to develop a system of exchange of documents and information in the event
that the Agreement involves more than two Parties;
k. to work together to develop a secure electronic system to transmit ADE data.
5. The Parties may meet after the Effective Date of the Agreement to establish a
separate agreement for ADE information exchange which will supersede this
Schedule 16.3.
VII.
<PAGE> 65
<TABLE>
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<S> <C> <C>
ARTICLE 1 DEFINITIONS................................................................1
1.1 "Affiliate"...................................................................2
1.2 "Agency"......................................................................2
1.3 "Annual Net Sales"............................................................2
1.4 "Aviron Know-How".............................................................2
1.5 "Aviron Patents"..............................................................2
1.6 "Aviron Product Materials"....................................................2
1.7 "Aviron Results"..............................................................2
1.8 "Calendar Year"...............................................................2
1.9 "Collaboration"...............................................................2
1.10 "Commercialization Expenses"..................................................2
1.11 "Commercially Reasonable Efforts".............................................3
1.12 "[***]".......................................................................3
1.13 "Confidential Information"....................................................3
1.14 "Control" or "Controlled".....................................................3
1.15 "Effective Date"..............................................................3
1.16 "EMEA"........................................................................3
1.17 "FDA".........................................................................3
1.18 "Field".......................................................................3
1.19 "Finished Product"............................................................3
1.20 "Flu Season"..................................................................3
1.21 "Good Clinical Practice" or "GCP".............................................4
1.22 "Good Laboratory Practice" or "GLP"...........................................4
1.23 "Good Manufacturing Practice" or "GMP"........................................4
1.24 "Information".................................................................4
1.25 "Injectable Product"..........................................................4
1.26 "International Commercialization Committee" or "ICC"..........................4
1.27 "International Commercialization Plan"........................................5
1.28 "International Development Committee" or "IDC"................................5
1.29 "International Development Plan"..............................................5
1.30 "Invention"...................................................................5
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1.31 "JCC".........................................................................5
1.32 "JDC".........................................................................5
1.33 "Joint Patent"................................................................5
1.34 "Joint Technology"............................................................5
1.35 "Launch" or "Launch Date".....................................................5
1.36 "[***]".......................................................................5
1.37 "MAA".........................................................................5
1.38 "[***]".......................................................................5
1.39 "Michigan"....................................................................6
1.40 "Michigan Agreement"..........................................................6
1.41 "Net Sales"...................................................................6
1.42 "[***]".......................................................................6
1.43 "[***]".......................................................................7
1.44 "[***]".......................................................................7
1.45 "Patent"......................................................................7
1.46 "Person"......................................................................7
1.47 "PLA".........................................................................7
1.48 "Primary Brand Trademarks"....................................................7
1.49 "Product".....................................................................7
1.50 "Product Labeling"............................................................7
1.51 "Product Promotional Materials"...............................................7
1.52 "Promote" or "Promotion"......................................................7
1.53 "Region"......................................................................8
1.54 "Regulatory Approvals"........................................................8
1.55 "Signing Date"................................................................8
1.56 "Supply Agreement"............................................................8
1.57 "Target Population"...........................................................8
1.58 "Territory"...................................................................8
1.59 "Third Party".................................................................8
1.60 "Trademarks"..................................................................8
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(CONTINUED)
<S> <C> <C>
1.61 "U.S. Agreement"..............................................................9
1.62 "U.S. Territory"..............................................................9
1.63 "Wyeth-Ayerst Know-How".......................................................9
1.64 "Wyeth-Ayerst Patents"........................................................9
1.65 "Wyeth-Ayerst Results"........................................................9
ARTICLE 2 SCOPE; MANAGEMENT..........................................................9
2.1 Scope.........................................................................9
2.2 Management of the Collaboration...............................................9
2.3 Composition and Conduct of the Committees....................................10
2.4 Meetings of the Committees...................................................10
2.5 Limitations of Committee Powers..............................................10
2.6 Authority to Call Meetings...................................................11
ARTICLE 3 INTERNATIONAL COMMERCIALIZATION COMMITTEE.................................11
3.1 Functions and Powers of the International Commercialization Committee........11
3.2 International Commercialization Committee Actions............................11
ARTICLE 4 INTERNATIONAL DEVELOPMENT COMMITTEE.......................................12
4.1 Functions and Powers of the International Development Committee..............12
ARTICLE 5 LICENSES..................................................................12
5.1 License Grant Within the Territory...........................................12
5.2 License Grant to Aviron......................................................12
5.3 Sublicenses/Distributorships.................................................13
5.4 Joint Technology.............................................................13
5.5 Michigan Retained Rights.....................................................14
5.6 Wyeth-Ayerst [***]...........................................................14
5.7 Aviron [***].................................................................15
5.8 [***]........................................................................15
5.9 Other Development Activities by Aviron.......................................16
5.10 Reservation of Rights........................................................17
5.12 [***]........................................................................17
ARTICLE 6 PRODUCT DEVELOPMENT.......................................................17
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(CONTINUED)
<S> <C> <C>
6.1 Current Status...............................................................17
6.2 Product Development..........................................................18
6.3 International Development Plan...............................................18
6.4 Regulatory Applications......................................................18
6.5 Supplements..................................................................20
6.6 Regulatory Meetings and Correspondence.......................................20
6.7 Records......................................................................20
ARTICLE 7 MARKETING.................................................................20
7.1 Principles of Promotion......................................................20
7.2 International Commercialization Plan.........................................21
7.3 Sales and Distribution; Recalls..............................................21
7.4 Promotion, Commercialization and Sales and Marketing Expenses................21
7.5 Commercialization Expense Commitment.........................................21
7.6 Promotional and Advertising Materials........................................22
7.7 Product Pricing..............................................................22
7.8 Voluntary Product Recalls....................................................22
7.9 Regulatory Obligations.......................................................23
7.10 Promotion Responsibilities...................................................23
7.11 Compliance with Applicable Law...............................................23
7.12 Failure to Commercialize.....................................................23
ARTICLE 8 MANUFACTURE AND SUPPLY....................................................24
8.1 Supply of [***] Product......................................................24
ARTICLE 9 TRADEMARK MATTERS.........................................................24
9.1 Licenses.....................................................................24
9.2 Validity of Trademarks.......................................................24
9.3 Form of Use..................................................................24
9.4 No Contest...................................................................24
9.5 Confusingly Similar and/or Combination Marks.................................25
9.6 Registration Costs...........................................................25
9.7 Infringement.................................................................25
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9.8 Trade Dress, Logos, and the Like.............................................25
ARTICLE 10 MICHIGAN AGREEMENT........................................................26
10.1 Sublicense Limitation........................................................26
10.2 Wyeth-Ayerst Obligations.....................................................26
10.3 Use of Aviron Product Materials..............................................27
10.4 Warranty Disclaimer..........................................................27
10.5 Sublicense Termination.......................................................27
10.6 Insurance....................................................................27
10.7 Cooperation..................................................................28
10.8 Sublicenses..................................................................28
ARTICLE 11 PAYMENTS..................................................................28
11.1 License Fee..................................................................28
11.2 Other Payments...............................................................28
11.3 Wyeth-Ayerst Financing.......................................................29
ARTICLE 12 ROYALTIES.................................................................31
12.1 Royalty Rates during term of the Agreement...................................31
12.2 Royalty Reports and Payments.................................................32
12.3 Payments.....................................................................32
12.4 Exchange Rate................................................................32
12.5 Withholding..................................................................32
ARTICLE 13 CONFIDENTIALITY...........................................................32
13.1 Confidential Information.....................................................32
13.2 Authorized Disclosure........................................................33
13.3 Publicity....................................................................34
ARTICLE 14 OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS......................34
14.1 Ownership....................................................................34
14.2 Patent Prosecution...........................................................35
14.3 Enforcement Rights...........................................................35
14.4 Defense and Settlement of Third Party Claims.................................36
14.5 Assignment of Joint Patents..................................................37
ARTICLE 15 REPRESENTATIONS AND WARRANTIES............................................37
</TABLE>
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15.1 Mutual Representations and Warranties........................................37
15.2 Aviron Representations and Warranties........................................38
15.3 Performance by Affiliates and Sublicensees...................................38
ARTICLE 16 INFORMATION AND REPORTS...................................................38
16.1 Information and Reports During term of the Agreement.........................39
16.2 Complaints...................................................................39
16.3 Adverse Drug Experiences.....................................................39
16.4 Records of Revenues and Expenses.............................................39
ARTICLE 17 INDEMNIFICATION...........................................................40
17.1 Indemnification by Aviron....................................................40
17.2 Indemnification by Wyeth-Ayerst..............................................41
17.3 Indemnification Procedures...................................................41
17.4 Insurance....................................................................41
17.5 Payment of Damages...........................................................41
ARTICLE 18 TERM AND TERMINATION; AVIRON CHANGE OF CONTROL............................42
18.1 Term.........................................................................42
18.2 Termination for Material Breach..............................................42
18.3 Termination by [***].........................................................43
18.4 Termination [***]............................................................43
18.5 Bankruptcy...................................................................43
18.6 Effect of Termination........................................................43
18.8 Option to Extend Term of the Agreement.......................................44
18.9 Surviving Rights.............................................................46
ARTICLE 19 DISPUTE RESOLUTION........................................................46
19.1 Disputes.....................................................................46
ARTICLE 20 MISCELLANEOUS.............................................................47
20.1 Assignment...................................................................47
20.2 Consents Not Unreasonably Withheld or Delayed................................47
20.3 Force Majeure................................................................47
20.4 Further Actions..............................................................48
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20.5 Notices......................................................................48
20.6 Waiver.......................................................................49
20.7 Severability.................................................................49
20.8 Ambiguities..................................................................49
20.9 Governing Law................................................................49
20.10 Headings.....................................................................49
20.11 Counterparts.................................................................49
20.12 Entire Agreement; Amendments.................................................49
20.13 Independent Contractors......................................................50
20.14 Currency.....................................................................50
20.15 Bankruptcy...................................................................50
20.16 Effective Date...............................................................51
SCHEDULE 1.5 AVIRON PATENTS.................................................................I
SCHEDULE 1.12 [***]........................................................................II
SCHEDULE 1.38 Sequence Features [***].....................................................III
SCHEDULE 1.40 MICHIGAN AGREEMENT...........................................................IV
SCHEDULE 1.53 ..............................................................................V
SCHEDULE 1.63 WYETH-AYERST PATENTS.........................................................II
SCHEDULE 16.2(F) GOVERNMENT FUNDING DISCLOSURE SCHEDULE...................................III
SCHEDULE 16.3 ADVERSE EVENT REPORTING PROCEDURES...........................................IV
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vii.
<PAGE> 1
EXHIBIT 10.22
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
FLUMIST(TM) SUPPLY AGREEMENT
BY AND BETWEEN
AVIRON
AND
AMERICAN HOME PRODUCTS CORPORATION
ACTING THROUGH ITS
WYETH-AYERST LABORATORIES DIVISION
JANUARY 11, 1999
1.
<PAGE> 2
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
FLUMIST(TM) SUPPLY AGREEMENT
THIS FLUMISTTM SUPPLY AGREEMENT (the "Agreement"), dated as of January
11, 1999 (the "Signing Date"), is by and between Aviron, a Delaware corporation
with its principal place of business at 297 North Bernardo Avenue, Mountain
View, California 94043 ("Aviron"), and AMERICAN HOME PRODUCTS CORPORATION
("AHPC"), acting through its WYETH-AYERST LABORATORIES DIVISION, a Delaware
corporation with its principal place of business at 555 Lancaster Avenue, St.
Davids, Pennsylvania, 19087 ("Wyeth-Ayerst"). Aviron and Wyeth-Ayerst are
sometimes referred to herein individually as a "Party" and collectively as the
"Parties."
RECITALS:
WHEREAS, Aviron and Wyeth-Ayerst have entered into that certain United
States License and Co-Promotion Agreement of even date herewith regarding the
marketing and co-promotion of Aviron's intranasally delivered cold adapted
vaccine formulation for the prevention of influenza and influenza-associated
illnesses, [***], known as FluMist(TM) or FluEnz(TM) (the "Product," as further
described herein) in the United States and its territories and possessions (the
"U.S. Agreement"); and
WHEREAS, Aviron and Wyeth-Ayerst have entered into that certain
International FluMist(TM) License Agreement of even date herewith, under which
Aviron has granted to Wyeth-Ayerst exclusive marketing rights in certain
territories outside of the United States and its territories and possessions
(the "International Agreement"); and
WHEREAS, Aviron and Wyeth-Ayerst desire to enter into an agreement
pursuant to which Aviron shall (a) supply, or have supplied, Finished Product in
the [***] for distribution and sale under the U.S. Agreement; (b) supply, or
have supplied, Finished Product in the [***] to Wyeth-Ayerst for distribution
and sale under the U.S. Agreement and the International Agreement; (c) supply,
or have supplied, [***] from the [***] for the Product [***] in order that [***]
Product in the [***] for distribution and sale under the U.S. Agreement and the
International Agreement; and (d) blend, fill, finish and package [***] Product
in the [***] for distribution and sale under the U.S. Agreement and the
International Agreement; and [***] (a) manufacture and supply [***] Product in
the [***] for the U.S. Territory and [***] the International Territory, and (b)
blend, fill, finish and package [***] Product in the [***] for distribution and
sale under the International Agreement [***].
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, the parties hereby agree as
follows:
1. DEFINITIONS
Unless otherwise indicated, capitalized terms used herein shall have the
same meaning as in the U.S. Agreement.
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<PAGE> 3
1.1 "[***] PRODUCT" means the Finished Product manufactured and supplied
[***] by Aviron (or its contractor(s)) hereunder [***] the manufacturing
process.
1.2 "[***] PRODUCT" means [***] Product for which [***].
1.3 "CALENDAR YEAR" means the period of time commencing on January 1 of
a given year, and ending on December 31 of such year.
1.4 "COMMERCIALIZATION COMMITTEE" means the JCC or the ICC, as
applicable, which may be collectively referred to herein as the
"Commercialization Committees."
1.5 "COMMERCIALLY REASONABLE EFFORTS" shall have the meaning set forth
in Section 1.11 of the U.S. Agreement.
1.6 "DEVELOPMENT COMMITTEE" means the "Joint Development Committee" (as
defined in the U.S. Agreement) or the "International Development Committee" (as
defined in the International Agreement), as applicable, which may be
collectively referred to herein as the "Development Committees."
1.7 "EFFECTIVE DATE" shall have the meaning set forth in Section 1.18 of
the U.S. Agreement.
1.8 "[***] AGREEMENT" means that certain [***] Agreement by and between
[***] and Aviron on [***].
1.9 "FINISHED PRODUCT" shall mean the Product in the [***] in finished,
packaged form.
1.10 "[***]" means [***] the Product which, during the dating period
established by the FDA, maintains stability [***] and may maintain stability
[***] but does not maintain stability [***] or [***].
1.11 "FLU SEASON" means the "Flu Season" as defined in the U.S.
Agreement or the International Agreement, as applicable.
1.12 "FORECAST" shall mean the U.S. [***] Forecast (as defined in
Section 3.1 hereof), the U.S. [***] Forecast (as defined in Section 3.2 hereof),
or the International Forecast (as defined in Section 4.1 hereof), as applicable.
1.13 "[***] PRODUCT" means the Finished Product [***].
1.14 "[***] MONOVALENT" means Monovalent Bulk for the [***].
1.15 "GLOBAL TERRITORY" means the U.S. Territory and the International
Territory.
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2.
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1.16 "GROSS SALES REVENUE" means the sum of all amounts actually
received and all other consideration actually received (or, when in a form other
than cash or its equivalent, the fair market value thereof when received) by
Wyeth-Ayerst and its Affiliates and sublicensees from persons or entities due to
or by reason of the sale, distribution or use of Finished Product. Sales of
Finished Product intended for resale to Third Parties, and made internally
amongst Wyeth-Ayerst and its Affiliates or sublicensees shall not be deemed
sales for purposes of calculating "Gross Sales Revenues" (however the resale by
the recipient shall be included in the calculation of "Gross Sales Revenues").
1.17 "GOOD MANUFACTURING PRACTICE" OR "GMP" shall mean the standards and
regulations for the manufacture of biologicals promulgated by any applicable
Regulatory Agency.
1.18 "JCC" means the "Joint Commercialization Committee" as defined in
the U.S. Agreement.
1.19 "[***] PRODUCT" means [***] Product for which [***] has supplied
the [***] has manufactured the [***] and [***] has conducted [***].
1.20 "ICC" means the "International Commercialization Committee" as
defined in the International Agreement.
1.21 "[***]" means [***] to be [***] in order to [***] Product for sale
and distribution by Wyeth-Ayerst [***].
1.22 "INTERNATIONAL TERRITORY" means the "Territory" as defined in the
International Agreement.
1.23 "[***]" means a [***] of the Product which, during the dating
period established by the FDA, maintains stability [***] provided that if [***]
the Product which exists as of the Effective Date is determined to [***] during
the dating period, then such [***] shall be included in [***].
1.24 "[***] MONOVALENT" means Monovalent Bulk for the [***].
1.25 "[***] PRODUCT" means the Finished Product in the [***].
1.26 "[***] PLANT" means [***] plant located at [***].
1.27 "[***]" shall have the meaning set forth in Section [***] of the
U.S. Agreement.
1.28 "MICHIGAN" means the Regents of the University of Michigan, a
constitutional corporation of the State of Michigan with offices located at
Wolverine Tower, Room 2071, 3003 South State Street, Ann Arbor, Michigan,
48109-1280, USA.
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3.
<PAGE> 5
1.29 "MICHIGAN AGREEMENT" means the Materials Transfer and Intellectual
Property Agreement between Aviron and Michigan dated February 24, 1995, as
amended, and attached as Schedule 1.41 to the U.S. Agreement.
1.30 "MONOVALENT BULK" means the three influenza virus strains contained
in the Product, each in monovalent bulk form.
1.31 "PLA" means the Product Licensing Application/Establishment
Licensing Application or Biologics License Application for the Product in the
Field.
1.32 "PRODUCT" means the "Product" as defined in the U.S. Agreement or
the International Agreement, as applicable.
1.33 "[***]" means:
(A) In the case of [***] manufactured [***] the [***] of (i)
[***] the Product to be included in the [***] of Finished Product, or (ii) [***]
(as defined in Section [***] hereof) per Flu Season ending with the Flu Season
that commences in Calendar Year [***]; and the [***] of (x) [***] the Product to
be included in the [***] of Finished Product, or (y) [***] of the [***] per Flu
Season beginning with the Flu Season that commences in Calendar Year [***]; or
as otherwise agreed in writing by the Parties; and
(B) In the case of [***] Product supplied by Aviron to
Wyeth-Ayerst for sale and distribution pursuant to the U.S. Agreement and the
International Agreement, [***] Finished Product per each Flu Season (as defined
in the U.S. Agreement), or as otherwise agreed in writing by the Parties.
1.34 "REGULATORY AGENCY" means any supranational, national, regional,
state, provincial or local regulatory agency, department, bureau, commission,
council or other governmental entity, responsible for the granting of any
approvals, licenses, registrations or authorizations necessary for the
commercial manufacture, use, storage, importation, export, transport or sale of
the Product in a regulatory jurisdiction within the Global Territory.
1.35 "SECONDARY MANUFACTURE" OR "SECONDARY MANUFACTURING" means the
blending of the monovalent Product, e.g. [***] Monovalent, to form trivalent
Product, and the filling, finishing and packaging of such trivalent Product to
create Finished Product.
1.36 "SPECIFICATIONS" means the applicable specifications pursuant to
which [***] (in the case of [***]), or [***] (in the case of [***]), as
established in the PLA approved by the FDA, or as otherwise approved by the
applicable Development Committee.
1.37 "TERRITORY" means the U.S. Territory or the International
Territory, as applicable.
1.38 "[***]" means [***] to be utilized in [***] in order to [***] for
sale and distribution by Wyeth-Ayerst [***].
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4.
<PAGE> 6
1.39 "U.S. TERRITORY" shall mean the "Territory" as defined in the U.S.
Agreement.
1.40 "WORKING SEEDS" means the manufacturer's working virus seeds [***]
from which monovalent bulk Product is produced.
2. SCOPE
2.1 GENERAL OBLIGATIONS AND RIGHTS OF THE PARTIES.
(a) MANUFACTURE AND SUPPLY FOR THE U.S. TERRITORY.
(i) Aviron shall have the exclusive right and obligation,
using Commercially Reasonable Efforts, to manufacture and supply [***] Product
to Wyeth-Ayerst for distribution and sale by Wyeth-Ayerst pursuant to the U.S.
Agreement.
(ii) [***] shall manufacture and supply [***] as follows:
(A) [***] shall have the right and obligation, using Commercially Reasonable
Efforts, to manufacture and supply [***] to the extent that the JCC determines
that the market demand for [***] Product in the U.S. Territory for a given Flu
Season will [***] for [***] or the amount [***] for such Flu Season if less than
such [***] and (B) [***] shall have the right, but not the obligation, to
manufacture and supply [***] to the extent of the forecasted market demand for
[***] Product up to [***] for [***].
(iii) Subject to the right of [***] to establish [***] as
provided herein, [***] shall have the right and obligation, using Commercially
Reasonable Efforts, to perform, or have performed, all [***] of all [***]
including that [***] and shall exclusively supply all [***] Product [***] for
distribution and sale by Wyeth-Ayerst pursuant to the U.S. Agreement, provided
that [***] shall not be obligated, nor shall it have the right, to perform, or
have performed, [***] of all [***] taken together) in excess of [***] Product.
[***] shall have the right to perform all [***] to produce [***] Product in
[***] of [***] Product.
(iv) The provisions of this subsection (a) are subject to
[***] under Section [***] of the U.S. Agreement.
(b) MANUFACTURE AND SUPPLY FOR THE INTERNATIONAL TERRITORY.
(i) [***] shall have the right and obligation, using
Commercially Reasonable Efforts, to [***] subject to [***] as set forth in
Section [***].
(ii) If the ICC determines that the market demand for
[***] Product in the International Territory for a given Flu Season is [***] to
[***] then [***] shall have the [***] right to [***] of such doses of [***] as
are in excess of [***] for such Flu Season. Such manufacture and supply shall
occur in a manner to be determined by the IDC.
(iii) Subject to [***] as provided herein, Aviron shall
have the right and obligation, using Commercially Reasonable Efforts, to
perform, or have performed, all [***] of
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5.
<PAGE> 7
all [***] and shall exclusively supply all [***] for distribution and sale by
Wyeth-Ayerst pursuant to the International Agreement, provided that [***] shall
not be obligated, nor shall it have the right, to perform, or have performed,
[***] of all [***] taken together) in [***] Product. [***] to perform all [***]
to produce [***] Product in [***] Product. Such [***] shall occur in a manner to
be determined by the appropriate Development Committee.
(iv) The provisions of this subsection (b) are subject to
[***] under Section [***] of the International Agreement.
(c) FACILITIES. [***] to undertake the capital investment and
staffing commitments and to take all other actions necessary to enable it to
[***] obligations hereunder, including establishing a new facility, or
remodeling an existing facility, and validating and licensing such facility for
such manufacture and supply, as directed by the applicable Development
Committees.
(d) [***]. Aviron shall, using Commercially Reasonable Efforts,
produce and supply [***] for all of [***] hereunder.
(e) GENERAL PRINCIPLES. The Parties shall collaborate in their
activities hereunder in order to: (i) minimize the time of the Product's
production cycle, (ii) minimize the time required to bring the Product to
market, (iii) maintain low production cost, and (iv) comply with GMP in their
manufacturing efforts, all as coordinated by the applicable Development
Committee and Commercialization Committee. The applicable Development Committee
will decide the best way to meet the production goals for [***].
(f) AGREEMENT OF TECHNICAL RESPONSIBILITY. In order to achieve
the goals set forth in subsection (d) above, the Parties shall, as soon as is
practicable following the Effective Date, agree upon the [***] for the
manufacturing activities contemplated hereunder (the "Agreement of Technical
Responsibility"), which agreement shall be generally in the form of [***]. The
Agreement of Technical Responsibility shall contain the criteria for [***]
hereunder, as determined by the applicable Development Committee, and shall be
reviewed and approved at the first meeting of each Development Committee
following the Effective Date. The Agreement of Technical Responsibility shall be
implemented within thirty (30) days of its execution. The applicable Development
Committee shall have the right to amend the Agreement of Technical
Responsibility from time to time.
2.2 MANAGEMENT BY COMMERCIALIZATION COMMITTEES. All supply constraints
and coordination of the Parties' activities hereunder shall be managed jointly
by the JCC and the ICC, with the overall objective of maximizing sales of the
Product, subject to the terms of this Agreement.
2.3 THIRD PARTY SUPPLY. Aviron may, at its election in its sole
discretion, arrange for one or more Third Party contractors to carry out any or
all of its manufacturing and supply rights or obligations hereunder, subject to
the prior written approval of the Commercialization Committee that oversees the
territory as to which such manufacturing and supply rights or
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6.
<PAGE> 8
obligations apply. Such Commercialization Committee's prior written approval
shall not be required for the contractors set forth on Schedule 2.3.
2.4 WYETH-AYERST ADVISORY ROLE. Wyeth-Ayerst, at its own expense, shall
provide to Aviron reasonable manufacturing expertise, advice and know-how in its
possession and control and consultation services with respect to the manufacture
and supply of the Finished Product, as determined by the Development Committee,
in order to optimize the supply of the Finished Product to Wyeth-Ayerst.
3. PRODUCT FORECASTS FOR U.S. TERRITORY
3.1 U.S. [***] FORECAST. The JCC shall prepare and present to Aviron and
Wyeth-Ayerst a rolling [***]* forecast of the anticipated market demand for the
[***] Product in the U.S. Territory for the applicable Flu Season, subject to
Section 2.2., together with an estimate of Net Sales in the U.S. Territory for
such Flu Season. Such forecast shall be updated regularly and shall be
non-binding except as follows: The JCC shall update such forecast to Aviron and
Wyeth-Ayerst in writing no later than [***] of the year immediately prior to the
year in which the applicable Flu Season begins. The JCC shall thereafter update
the forecast of [***] of the year immediately prior to the year in which the
applicable Flu Season begins, provided that the [***] forecast may not vary by
more than [***] from the [***] forecast. The [***] forecast shall thereafter be
deemed the "U.S. [***] Forecast" for such Flu Season, provided that if Aviron
reasonably believes that for such Flu Season it will be unable to meet the
forecast set by the JCC, Aviron shall inform the JCC of the amount of [***]
Product which it reasonably believes it will be in a position to supply to
Wyeth-Ayerst for such Flu Season, and upon the JCC's confirmation of Aviron's
estimate of its production capacity for [***] Product for such Flu Season, such
amount shall then be deemed to be the U.S. [***] Forecast for such Flu Season.
Notwithstanding the foregoing, the JCC's original forecast shall be deemed the
"JCC Forecast" for purposes of awarding to Aviron the supply goal payments
pursuant to Section 8.3 of the U.S. Agreement. Wyeth-Ayerst agrees to purchase
all [***] Product supplied by Aviron in accordance with the U.S. [***] Forecast
and accepted by Wyeth-Ayerst pursuant to Section 6.3(a). In the event that
Aviron fails to meet the JCC Forecast for a given year, Wyeth-Ayerst's sole
remedy shall be [***] as set forth in Section [***] of the U.S. Agreement,
provided that Wyeth-Ayerst may not [***] nor any [***] under the U.S. Agreement
or the International Agreement.
3.2 U.S. [***] FORECAST. The JCC shall prepare and present to Aviron and
Wyeth-Ayerst a rolling [***] forecast of the anticipated market demand for the
[***] Product in the U.S. Territory for the applicable Flu Season, subject to
Section 2.2., together with an estimate of Net Sales and Gross Sales Revenue in
the U.S. Territory for such Flu Season. Such forecast shall be updated regularly
and shall be non-binding except as follows: The JCC shall update such forecast
to Aviron in writing no later than [***] of the year immediately prior to the
year in which the applicable Flu Season begins. The JCC shall thereafter update
the forecast of [***] of the year immediately prior to the year in which the
applicable Flu Season begins, provided that the [***] forecast may not vary by
more than [***] from the [***] forecast. The [***] forecast shall thereafter be
deemed the "U.S. [***] Forecast" for such Flu Season. Wyeth-Ayerst agrees to
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7.
<PAGE> 9
purchase all [***] Product supplied by Aviron in accordance with the U.S. [***]
Forecast and accepted by Wyeth-Ayerst pursuant to Section 6.3(a).
3.3 [***]. During a given Flu Season and on a calendar quarter basis,
the JCC may [***]* for such Flu Season, subject to Section 2.2 and further
provided that:
(a) The JCC may [***] without the [***] and [***] shall use
Commercially Reasonable Efforts to [***] provided that [***] failure to [***]
shall not be a breach of this Agreement;
(b) In the event that the JCC decreases or cancels a Forecast for
a given Flu Season, Aviron shall use Commercially Reasonable Efforts to wind
down any Secondary Manufacturing then occurring or planned to produce doses of
the applicable Finished Product in excess of the JCC's revised Forecast, and
Wyeth-Ayerst shall reimburse Aviron for all non-cancelable costs actually
incurred by Aviron in the manufacture and supply of the applicable Finished
Product for such Flu Season in fulfilling its obligation to meet the Forecast
first specified by the applicable JCC for such Flu Season, provided that
Wyeth-Ayerst shall only be obligated to reimburse Aviron for those costs which
are in excess of any payments made by Wyeth-Ayerst pursuant to Section 7.2 for
such Flu Season; and
(c) If the JCC increases the U.S. [***] Forecast for such Flu
Season, the original JCC Forecast for such Flu Season, and not the increased
figure, shall be the basis for determining whether Aviron has achieved the
supply goals set forth in Section 8.3 of the U.S. Agreement.
4. [***] FORECASTS FOR INTERNATIONAL TERRITORY
4.1 FORECASTS.
(a) The ICC shall prepare and present to the Parties, in
coordination with the JCC pursuant to Section 3.1 of the International
Agreement, a rolling [***] forecast of the market demand for [***] Product in
the International Territory, in accordance herewith and with Section 2.2 (the
"International Forecast"). Such Forecast shall include the Specifications for
the [***] to be manufactured and supplied by Aviron to Wyeth-Ayerst [***], and
the amount and Specifications for the [***], as well as a schedule for the
foregoing activities, together with an estimate Gross Sales Revenue in the
International Territory for such Flu Season. Such Forecast shall be updated
regularly and shall be non-binding except as follows:
(i) For Flu Seasons in the Northern Hemisphere, the ICC
shall update such Forecast in writing to the Parties, in coordination with the
JCC, no later than [***] of the year immediately prior to the year in which the
applicable Flu Season begins, provided that the Forecast of [***] may not vary
more than [***] from the Forecast of [***].
(ii) For Flu Seasons in the Southern Hemisphere, the ICC
shall update such Forecast in writing to the Parties, in coordination with the
JCC, no later than [***] of the year [***] the year in which the applicable Flu
Season begins, and [***] of the year immediately
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<PAGE> 10
prior to the year in which such Flu Season begins, provided that the Forecast of
[***] may not vary more than [***] from the Forecast of [***].
(b) [***] to conduct the manufacture and supply activities
anticipated hereunder in order to produce a sufficient quantity of [***] Product
to meet such Forecast for each Flu Season. Wyeth-Ayerst agrees to purchase all
[***] Product supplied by Aviron in accordance with the International Forecast
and accepted by Wyeth-Ayerst as provided herein.
5. FAILURE TO [***].
5.1 NOTICE OF [***]. In the event that a Party with an obligation to
[***] hereunder (the "[***] Party") reasonably believes that it will fall short
of its obligations to [***] under [***] for a given Flu Season by [***], it
shall give prompt written notice of such belief to the applicable Development
Committee and Commercialization Committee. The other Party (the "[***] Party")
shall then have the right, but not the obligation, to [***] by providing written
notice that it is exercising such right to the applicable Development Committee
and Commercialization Committee.
5.2 [***] PRODUCT. If, for a given Flu Season, (a) the [***] Party fails
to meet its obligations to [***] under [***], and (b) the [***] Party has not
[***] pursuant to Section 5.1, and (c) there is no [***] in the applicable
Territory, then the applicable Commercialization Committee shall determine
whether the [***] Party has [***] to the [***] Party's [***] to manufacture
[***] under such [***] and the [***] if any, on the [***] Party. If the [***] is
so determined to have [***], it shall be [***] as follows:
(i) If [***] is the [***] Party with a [***], then [***]
shall elect, in its sole discretion, to [***] for such Flu Season under either
subsection (1) or subsection (2) below:
(1) The [***] as applicable, shall be [***]; or
(2) [***] shall have the right to [***] for the
subsequent Flu Season under [***] as applicable, by [***] of the [***] which
would have been applicable in the Flu Season in which the [***] based on the
[***] by the applicable Commercialization Committee. Such [***] shall apply only
for such period of time until the [***] that would be [***] the originally
applicable [***] for such period, and (B) the [***] under the [***] for such
period, [***] as determined above by the applicable Commercialization Committee.
Thereafter, the [***] shall apply.
(ii) If [***] is the [***] Party with a [***], then [***]
shall have the right to [***] for the subsequent Flu Season under [***], as
applicable, by [***] of the [***] which would have been applicable in the Flu
Season in which the [***] based on the [***] by the applicable Commercialization
Committee. Such [***] shall apply only for such period of time until the [***]
under the [***] for such period, and (B) the [***] that would be [***] under the
originally applicable [***] for such period, [***] as determined above by the
applicable Commercialization Committee. Thereafter, the [***] shall apply.
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9.
<PAGE> 11
(iii) This Section 5.2 shall not apply to the extent that
a Party's failure to meet its obligations to [***] is attributable to the other
Party's failure to meet its obligations [***].
5.3 [***]. In the event that [***] to meet its obligations to [***]
under [***] results in [***] being unable to [***] for the Flu Season to which
[***] relates, the provisions of Section 5.2 above shall not apply, and [***]
shall be entitled to [***] (in the case of a [***]) or the [***] (in the case of
[***]) by [***] upon written notice to [***]. [***] must provide such written
notice to [***] within [***] days of the end of the Flu Season in which such
[***] occurred, or its right to [***] as applicable, due to [***] for such Flu
Season shall lapse.
5.4 SOLE REMEDY. The provisions of this Article 5 shall be the [***]
Party's sole remedy for the [***] Party's failure to meet its obligations to
[***] hereunder, subject to Section [***].
6. SPECIFICATIONS, DELIVERY AND ACCEPTANCE OF [***] PRODUCT
6.1 SPECIFICATIONS. Aviron shall manufacture and supply (or cause to be
manufactured and supplied) [***] Product to Wyeth-Ayerst in accordance with the
applicable Specifications and GMP or other relevant governmental laws, rules and
regulations for Wyeth-Ayerst's exclusive sale pursuant to the U.S. Agreement and
the International Agreement. As of the Signing Date, it is Aviron's intent to
manufacture Monovalent Bulk in the [***] Formulation through its contractor
[***] pursuant to and for the term of the [***] which as of the Signing Date is
in effect through [***]; provided that Aviron shall retain at all times the
right to manufacture and supply to Wyeth-Ayerst [***] Product and [***] Product
itself and/or through one or more other Third Party contractors, subject to
Section 2.3.
6.2 DELIVERY AND SHIPMENT. Finished Product shall be shipped ex works
Aviron's applicable Secondary Manufacturing site. Receipt shall be made by
Wyeth-Ayerst's designated carrier. Each lot of Finished Product so received
shall be accompanied by the FDA lot release letter (to the extent required by
the FDA) or comparable documentation from the applicable Regulatory Agency (if
available), and other lot release specifications to be agreed upon by the
applicable Development Committee.
6.3 ACCEPTANCE AND REJECTION.
(a) Any lot of Finished Product released to Wyeth-Ayerst
hereunder shall be received by Wyeth-Ayerst or its designated carrier subject to
inspection and testing by Wyeth-Ayerst or its designated agent, to ensure that
such lot of Finished Product meets the applicable Specifications and otherwise
complies with the warranties provided in this Agreement, in accordance with
testing and release procedures for the Finished Product, as established in the
PLA as approved by the FDA or as otherwise required by the applicable Regulatory
Agency. Wyeth-Ayerst shall be allowed a maximum of [***] days from the date of
release of any shipment, or such other time period agreed in writing by the
applicable Development Committee, (the "Inspection Period") for inspection and
provision of written notice to Aviron of rejection of
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10.
<PAGE> 12
any portion or all of that lot. If Wyeth-Ayerst does not deliver such written
notice to Aviron within the Inspection Period, such lot of Finished Product
shall be deemed to have met the applicable Specifications and to comply with all
warranties hereunder, and Wyeth-Ayerst shall be deemed to have accepted the
shipment. Aviron shall, as soon as is commercially feasible, but in no event
later than [***] days after receipt of a rejection notice from Wyeth-Ayerst,
replace the rejected quantity of Finished Product, subject to Sections 6.3(b)
and (c).
(b) Promptly following any rejection of a lot of Finished
Product, Aviron shall determine whether the rejected lot conformed to the
applicable Specifications and warranties. If Aviron does not agree with
Wyeth-Ayerst, the applicable Development COMMITTEE shall select an independent
laboratory mutually acceptable to both Parties to carry out tests on
representative samples from the rejected portion of the lot. The results of
these tests shall be binding on both Parties.
(c) If it is determined, either by the Parties' mutual agreement
or by such independent laboratory, that the rejected lot of Finished Product did
not conform to the applicable Specifications and/or warranties, Aviron shall, as
promptly as is commercially reasonable, replace such rejected lot with a
conforming lot as provided in subsection (a) above. Such replacement shall be
Aviron's sole responsibility to Wyeth-Ayerst for non-conforming Finished
Product. Rejected lots shall be returned to Aviron or disposed of at Aviron's
expense, in accordance with Aviron's instructions. In the event of any
destruction of a non-conforming lot, Wyeth-Ayerst shall deliver to Aviron an
appropriate certificate of destruction.
(d) In the event that Wyeth-Ayerst has paid Aviron for Finished
Product which the Third Party tester determines does not conform to the
Specifications, Wyeth-Ayerst shall receive a credit to its account for such
amounts actually paid to Aviron for such non-conforming Finished Product,
provided that Wyeth-Ayerst shall remain liable for all payments owed to Aviron
under Article 7 for replacement Finished Product accepted by Wyeth-Ayerst
hereunder. Such credit may only be applied to costs incurred by Wyeth-Ayerst
under this Agreement. Wyeth-Ayerst shall receive a refund of any such credit
existing at the expiration or termination of this Agreement.
7. PRICING AND PAYMENT FOR [***] PRODUCT
7.1 TRANSFER PRICE. The transfer price for each dose of each [***]
Product supplied by Aviron to Wyeth-Ayerst hereunder shall be [***] of the
average Net Sales per dose for the relevant Flu Season (the "Transfer Price").
7.2 TRANSFER PRICE PAYMENT.
(a) [***] PRODUCT, FIRST FLU SEASON.
(i) For the first Flu Season during which [***] Product is
sold commercially in the U.S. Territory, Wyeth-Ayerst shall make an advance
payment to Aviron of [***] per dose of [***] Product multiplied by the number of
doses estimated to be sold during the applicable Flu Season according to the
U.S. [***] Forecast (the "Transfer Price Payment"),
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11.
<PAGE> 13
in order to assist Aviron in defraying its initial manufacturing expenses.
Except as set forth in subsection (ii) below, the Transfer Price Payment shall
be paid in full on the January 1 of the Calendar Year in which such Flu Season
begins.
(ii) In the event that on or following the October 1
preceding the Calendar Year in which such Flu Season begins and prior to January
1 of such Calendar Year, Aviron determines that there is a reasonable likelihood
that it will [***] Aviron shall so notify Wyeth-Ayerst in writing. Wyeth-Ayerst
shall pay to Aviron up to [***] of the Transfer Price Payment as requested by
Aviron as soon as reasonably practicable following Wyeth-Ayerst's receipt of
such notice, or shall otherwise provide to Aviron such [***], but in no event
shall Wyeth-Ayerst be required to pay more than [***] of the Transfer Price
Payment to Aviron pursuant to such notice. Wyeth-Ayerst shall pay Aviron the
balance of the Transfer Price Payment in three (3) equal installments on the
January 1, April 1 and July 1 of the Calendar Year in which such Flu Season
begins.
(b) OTHER TRANSFER PRICE PAYMENTS. For all [***] Product that is
[***] Product, and for all [***] Product to which subsection (a) above does not
apply, the Transfer Price Payment shall be [***] of the projected Net Sales in
the relevant Forecast for the relevant Flu Season. Wyeth-Ayerst shall pay Aviron
such Transfer Price Payment upon Wyeth-Ayerst's acceptance of such [***]
Product, calculated by multiplying the number of doses of Finished Product
accepted by the average Net Sales price per dose based upon the applicable
Forecast.
7.3 RECONCILIATION.
(a) CALCULATION OF TRANSFER PRICE. Within thirty (30) days
following the end of each Flu Season, Wyeth-Ayerst shall provide Aviron with a
written calculation of the Transfer Price per dose for [***] Product for such
Flu Season based upon Net Sales of [***] Product during such Flu Season.
(b) TRANSFER PRICE PAYMENT EXCEEDS TRANSFER PRICE. If the
Transfer Price Payment for [***] Product for a given Flu Season exceeds the
Transfer Price for such [***] Product payable by Wyeth-Ayerst for such Flu
Season, Aviron shall pay Wyeth-Ayerst the difference between such amounts.
(c) TRANSFER PRICE EXCEEDS TRANSFER PRICE PAYMENT. If the
Transfer Price for an [***] Product for a given Flu Season exceeds the Transfer
Price Payment for such [***] Product paid by Wyeth-Ayerst for such Flu Season,
Wyeth-Ayerst shall pay to Aviron the difference between such amounts.
(d) TIMING. All payments due under this Section 7.3 shall be made
within thirty (30) days of Aviron's receipt from Wyeth-Ayerst of the calculation
report set forth in Section 7.3(a).
(e) AUDITING. Aviron shall have the right to audit Wyeth-Ayerst's
records in order to conform its calculation of the Transfer Price, in accordance
with the procedures provided in Section 17.4 of the U.S. Agreement or Section
16.4 of the International Agreement,
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12.
<PAGE> 14
as applicable, provided that such audit shall be made within ninety (90) days of
the end of the relevant Flu Season, but in no event more than once per each
Calendar Year.
8. PROCEDURES AND PAYMENTS FOR [***] PRODUCT
8.1 SUPPLY OF [***].
(a) GENERAL. Aviron shall manufacture and supply to Wyeth-Ayerst
the [***] hereunder, in accordance with the applicable Specifications and with
GMP and all other relevant laws, rules and regulations promulgated by the
applicable Regulatory Agency.
(b) [***] TRANSFER PRICE AND PAYMENT. In the event that Aviron
supplies [***] to Wyeth-Ayerst [***] for which [***] Wyeth-Ayerst shall pay
Aviron for such [***] at a transfer price equal to [***] per each trivalent dose
of Finished Product [***], as set forth in the applicable Forecast. Such
transfer price shall be due and payable within [***] days of Wyeth-Ayerst's
acceptance of such [***] pursuant to Section 8.1(d).
(c) SHIPPING AND DELIVERY. Aviron shall deliver each lot of [***]
to the [***] Aviron shall ship the [***] in a commercially reasonable manner
using a validated shipping protocol approved by the applicable Development
Committee. Risk of loss for each lot of [***] delivered hereunder shall transfer
to Wyeth-Ayerst upon Wyeth-Ayerst's acceptance of such lot pursuant to Section
8.1(d). Each lot of [***] so delivered to Wyeth-Ayerst shall be accompanied by
the appropriate analytical summaries for such lot as agreed upon in writing by
the appropriate Development Committee.
(d) ACCEPTANCE AND REJECTION.
(i) Any lot of [***] released to Wyeth-Ayerst hereunder
shall be received by Wyeth-Ayerst subject to inspection and testing by
Wyeth-Ayerst or its designated agent, to ensure that such lot of [***] meets the
applicable Specifications and otherwise complies with the warranties provided in
this Agreement, in accordance with testing and release procedures for the [***]
as established in the PLA as approved by the FDA or as otherwise required by the
applicable Regulatory Agency. Wyeth-Ayerst shall be allowed a maximum of [***]
days from the date of delivery of any shipment, or such other time period agreed
in writing by the appropriate Development Committee, (the "Inspection Period")
for inspection and provision of written notice to Aviron of rejection of any
portion or all of that shipment. If Wyeth-Ayerst does not deliver such written
notice to Aviron within the Inspection Period, such lot of [***] shall be deemed
to have met the applicable Specifications and to comply with all warranties
hereunder, and Wyeth-Ayerst shall be deemed to have accepted the shipment.
Aviron shall, as soon as is commercially feasible, but in no event more than
[***] days after receipt of a rejection notice from Wyeth-Ayerst, replace the
rejected quantity of [***] subject to Sections 8.1(d)(ii) and (iii).
(ii) Promptly following any rejection of a lot of [***]
Aviron shall determine whether the rejected lot conformed to the applicable
Specifications and warranties. If Aviron does not agree with Wyeth-Ayerst, the
applicable Development Committee shall select
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13.
<PAGE> 15
an independent laboratory mutually acceptable to both Parties to carry out tests
on representative samples from the rejected portion of the shipment. The results
of these tests shall be binding on both Parties.
(iii) If it is determined, either by the Parties' mutual
agreement or by such independent laboratory, that the rejected lot of [***] did
not conform to the applicable Specifications and/or warranties, Aviron shall, as
promptly as is commercially reasonable, replace such rejected lot with a
conforming lot as provided in subsection (i) above. Such replacement shall be
the Aviron's sole responsibility to Wyeth-Ayerst for non-conforming [***] Aviron
acknowledges and agrees that [***] performance of its obligations under Section
[***]. Rejected lots shall be returned to Aviron or disposed of at Aviron's
expense, in accordance with Aviron's instructions. In the event of any
destruction of a non-conforming lot, Wyeth-Ayerst shall deliver to Aviron an
appropriate certificate of destruction. Wyeth-Ayerst shall remain liable for all
payments due to Aviron under subsection (b) above for all replacement [***]
accepted by Wyeth-Ayerst pursuant to this subsection (d).
8.2 SUPPLY OF [***].
(a) MANUFACTURE, SHIPMENT AND DELIVERY. [***] shall deliver each
lot of [***] facility, as directed by [***] expense. [***] shall ship the [***]
in a commercially reasonable manner using a validated shipping protocol. Risk of
loss for each lot of [***] delivered to [***] hereunder shall transfer to [***]
upon [***] acceptance of such lot pursuant to Section 8.2(d). Such delivery
shall be accompanied by the appropriate analytical summaries for such lot as
agreed upon in writing by the appropriate Development Committee.
(b) ACCEPTANCE AND REJECTION.
(i) Any lot of [***] released to [***] hereunder shall be
received by [***] subject to inspection and testing by [***] or its designated
agent, to ensure that such lot of [***] meets the applicable Specifications and
otherwise complies with the warranties provided in this Agreement, in accordance
with testing and release procedures for the [***] established in the PLA as
approved by the FDA or as otherwise required by the applicable Regulatory
Agency. [***] shall be allowed a maximum of [***] days from the date of delivery
of any shipment, or such other time period as agreed in writing by the
appropriate Development Committee, (the "Inspection Period") for inspection and
provision of written notice to [***] of rejection of any portion or all of that
shipment. If [***] does not deliver such written notice to [***] within such
Inspection Period, such lot of [***] shall be deemed to have met the applicable
Specifications and to comply with all warranties hereunder, and [***] shall be
deemed to have accepted the shipment. [***] shall, as soon as is commercially
feasible, but in no event more than [***] days after receipt of a rejection
notice from [***] replace the rejected quantity of [***] subjection to
subsections (ii) and (iii) below.
(ii) Promptly following any rejection of a lot of [***]
Aviron and Wyeth-Ayerst agree to mutually determine whether the rejected lot
conformed to the applicable Specifications and warranties. If the Parties cannot
agree, the applicable Development
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14.
<PAGE> 16
Committee shall select an independent laboratory mutually agreeable to both
Parties to carry out tests on representative samples from the rejected portion
of the shipment. The results of these tests shall be binding on both Parties.
(iii) If it is determined, either by the Parties' mutual
agreement or by such independent laboratory, that the rejected lot of [***] did
not conform to the applicable Specifications and/or warranties, [***] shall
replace such rejected lot with a conforming lot. [***] acknowledges and agrees
that [***] performance of its obligations under Section [***]. Rejected lots
shall be returned to [***] or disposed of at [***] expense, in accordance with
[***] instructions. In the event of any destruction of a non-conforming lot,
[***] shall deliver to [***] an appropriate certificate of destruction.
8.3 [***] MANUFACTURE OF [***].
(a) DELIVERY AND SHIPMENT. [***] Product shall be shipped ex
works Aviron's applicable [***] site. Receipt shall be made by Wyeth-Ayerst's
designated carrier. Each lot of [***] Product so received shall be accompanied
by the FDA lot release letter (to the extent required by the FDA) or comparable
documentation from the applicable Regulatory Agency (if available), and other
lot release specifications to be agreed upon by the applicable Development
Committee.
(b) ACCEPTANCE AND REJECTION.
(i) Any lot of [***] Product released to Wyeth-Ayerst
hereunder shall be received by Wyeth-Ayerst or its designated carrier subject to
inspection and testing by Wyeth-Ayerst or its designated agent, to ensure that
such lot of [***] Product meets the applicable Specifications and otherwise
complies with the warranties provided in this Agreement, in accordance with
testing and release procedures for the [***] Product, established in the PLA as
approved by the FDA or other applicable Regulatory Agency. Wyeth-Ayerst shall be
allowed a maximum of [***] days from the date of release of any shipment, or
such other time period agreed in writing by the applicable Development
Committee, (the "Inspection Period") for inspection and provision of written
notice to Aviron of rejection of any portion or all of that lot. If Wyeth-Ayerst
does not deliver such written notice to Aviron within the Inspection Period,
such lot of [***] Product shall be deemed to have met the applicable
Specifications and to comply with all warranties hereunder, and Wyeth-Ayerst
shall be deemed to have accepted the shipment. Aviron shall, as soon as is
commercially feasible, but in no event later than [***] days after receipt of a
rejection notice from Wyeth-Ayerst, replace the rejected quantity of [***]
Product, subject to Sections 8.3(c)(ii) and 8.3(c)(iii).
(ii) Promptly following any rejection of a lot of [***]
Product, Aviron shall determine whether the rejected lot conformed to the
applicable Specifications and warranties. If Aviron does not agree with
Wyeth-Ayerst, the applicable Development Committee shall select an independent
laboratory mutually acceptable to both Parties to carry out tests on
representative samples from the rejected portion of the lot. The results of
these tests shall be binding on both Parties.
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15.
<PAGE> 17
(iii) If it is determined, either by the Parties' mutual
agreement or by such independent laboratory, that the rejected lot of [***]*
Product did not conform to the applicable Specifications and/or warranties,
Aviron shall, as promptly as is commercially reasonable, replace such rejected
lot with a conforming lot as provided in subsection (i) above. Such replacement
shall be Aviron's sole responsibility to Wyeth-Ayerst for non-conforming [***]
Product. Rejected lots shall be returned to Aviron or disposed of at Aviron's
expense, in accordance with Aviron's instructions. In the event of any
destruction of a non-conforming lot, Wyeth-Ayerst shall deliver to Aviron an
appropriate certificate of destruction. Wyeth-Ayerst shall remain liable for all
payments owed to Aviron under subsection (c) below for all replacement [***]
Product accepted by Wyeth-Ayerst pursuant to this subsection (b).
(c) [***] PRODUCT TRANSFER PRICE. The combined transfer price for
the [***] Product delivered by Aviron and accepted by Wyeth-Ayerst hereunder
shall be the greater of [***] per trivalent dose of [***] Product, or [***] of
the average Gross Sales Revenue per trivalent dose of Finished Product per Flu
Season in the U.S. Territory or International Territory, as applicable.
Wyeth-Ayerst shall pay Aviron such transfer price as follows:
(i) [***]. For each lot of [***] accepted by Wyeth-Ayerst
pursuant to Section 8.1(d), Wyeth-Ayerst shall pay Aviron an amount equal to
[***] times the number of doses of [***] manufactured and supplied hereunder
[***], based on the [***] (the "[***] Doses"). Such amount is due and payable to
Aviron within [***] days of Wyeth-Ayerst's acceptance of the [***] pursuant to
Section 8.1(d).
(ii) [***] Wyeth-Ayerst shall pay Aviron an amount equal
to [***] times the number of doses of [***] Product manufactured and supplied
hereunder. Such payment is due and payable to Aviron within [***] days of
Wyeth-Ayerst's acceptance of each lot thereof pursuant to Section [***].
(iii) RECONCILIATION. Within thirty (30) days following
the end of each Flu Season in applicable Territory, Wyeth-Ayerst shall provide
Aviron with a written calculation of (A) the average Gross Sales Revenue per
dose of Finished Product sold in such Territory during such Flu Season, and (B)
the number of doses of [***] Product delivered by Aviron and accepted by
Wyeth-Ayerst pursuant to Section 8.3(b) in such Territory during such Flu Season
(the "Doses Supplied"). The "Sales-Based Transfer Price" for [***] Product in
such Territory during such Flu Season shall be deemed to be [***] of the product
of (A) multiplied by (B).
(1) If the Sales-Based Transfer Price for such
Territory during such Flu Season exceeds the total amount paid by Wyeth-Ayerst
to Aviron pursuant to subsections (i) and (ii) above for such [***] Product,
then Wyeth-Ayerst shall pay Aviron the difference between such amount and the
Sales-Based Transfer Price. All payments due under this subsection (iii) shall
be made within thirty (30) days of Aviron's receipt from Wyeth-Ayerst of such
calculation report.
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16.
<PAGE> 18
(2) If Aviron [***] manufacture Finished Product
under a U.S. [***] Forecast or an International Forecast, then Aviron shall
[***] provided that Aviron shall not [***] to the extent that [***] arises from
[***] hereunder in manufacturing the [***] from which the [***] Product was
[***].
(d) AUDITS. Aviron shall have the right to audit Wyeth-Ayerst's
records in order to confirm its calculation of the Sales-Based Transfer Price,
in accordance with the procedures provided in Section 17.4 of the U.S. Agreement
or Section 16.4 of the International Agreement, as applicable, provided that
such audit shall be made within ninety (90) days of the end of the relevant Flu
Season.
9. REGULATORY ISSUES
9.1 COMPLIANCE.
(a) AVIRON. Aviron shall obtain and maintain, and shall require
all of its contractors to obtain and maintain, all necessary permits,
registrations and licenses required to manufacture and supply [***] Product
under this Agreement. Aviron shall, and shall require all of its contractors to,
manufacture and handle all [***] Product manufactured and supplied by Aviron
hereunder in accordance with all laws, rules and regulations promulgated by the
applicable Regulatory Agency, and in compliance with GMP.
(b) WYETH-AYERST. Wyeth-Ayerst shall obtain and maintain all
necessary permits, registrations and licenses required to manufacture and supply
such [***] under this Agreement. Wyeth-Ayerst shall manufacture and handle all
[***] manufactured and supplied by Wyeth-Ayerst hereunder in accordance with all
applicable federal, state and local laws, government regulations, and in
compliance with GMP.
(c) COORDINATION OF EFFORTS. The applicable Development Committee
will coordinate the Parties' efforts under this Section 9.1 in complying with
all facilities and process regulatory requirements of the applicable Regulatory
Agency.
9.2 AUDITS.
(b) BY WYETH-AYERST. Wyeth-Ayerst shall have the right during
normal business hours and upon reasonable notice to Aviron, but not more often
than once during any Calendar Year, to inspect and audit in a reasonable manner
Aviron's manufacturing and other facilities in order to ensure its compliance
with its obligations under Section 9.1(a), including the inspection and audit of
all batch records and lot release records for all lots of [***] supplied by
Aviron hereunder. If any issue of product quality arises with respect to any of
such [***], then Wyeth-Ayerst shall have the right to inspect the relevant
manufacturing facilities, including all applicable documentation and records
relating to the manufacture of the product in question, upon reasonable notice
to Aviron. Aviron shall use Commercially Reasonable Efforts to obtain for
Wyeth-Ayerst substantially similar audit rights from its contractors hereunder.
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17.
<PAGE> 19
(b) BY AVIRON. Aviron shall have the right during normal business
hours and upon reasonable notice to Wyeth-Ayerst, but not more often than once
during any Calendar Year, to inspect and audit in a reasonable manner
Wyeth-Ayerst's manufacturing and other facilities in order to ensure its
compliance with its obligations under Section 9.1(b), including the inspection
and audit of all batch records and lot release records for all lots of [***]*
manufactured by Wyeth-Ayerst hereunder. If any issue of product quality arises
with respect to any of such [***] then Aviron shall have the right to inspect
the relevant manufacturing facilities, including all applicable documentation
and records relating to the manufacture of the product in question, upon
reasonable notice to Wyeth-Ayerst.
10. WARRANTIES, REPRESENTATIONS AND COVENANTS
10.1 BY AVIRON. Aviron hereby represents and warrants that all [***]
manufactured by Aviron and supplied to Wyeth-Ayerst under this Agreement: (a)
will conform to the applicable Specifications; (b) will not be adulterated or
misbranded within the meaning of any applicable U.S. or other governmental law,
rule, order or regulation; and (c) will comply with all U.S. laws, regulations,
rules, standards, FDA approvals, registrations or permits, and all other
regulatory permits, approvals and licenses applicable to the manufacture of such
[***] In no event shall Aviron be liable under this Agreement for any failure of
any [***] to meet the applicable Specifications due to improper use, storage or
shipment by Wyeth-Ayerst.
10.2 BY WYETH-AYERST. Wyeth-Ayerst hereby represents and warrants that
all [***] manufactured by Wyeth-Ayerst [***] under this Agreement, and all [***]
manufactured by Wyeth-Ayerst under this Agreement and sold or distributed by
Wyeth-Ayerst pursuant to the U.S. Agreement: (a) will conform to the applicable
Specifications; (b) will not be adulterated or misbranded within the meaning of
any applicable U.S. or other governmental law, rule, order or regulation; and
(c) will comply with all U.S. laws, regulations, rules, standards, FDA
approvals, registrations or permits, and all other regulatory permits, approvals
and licenses applicable to the manufacture of such [***]. In no event shall
Wyeth-Ayerst be liable under this Agreement for any failure of any [***] to meet
the applicable Specifications due to improper use, storage or shipment by
Aviron.
10.3 WARRANTY DISCLAIMERS AND LIMITATIONS. EXCEPT AS SPECIFICALLY SET
FORTH IN SECTIONS 10.1 AND 10.2 ABOVE, NEITHER PARTY MAKES ANY WARRANTIES,
EXPRESS OR IMPLIED, WITH RESPECT TO ANY [***] MANUFACTURED AND SUPPLIED
HEREUNDER, AND SPECIFICALLY, WITHOUT LIMITATION, EACH PARTY HEREBY DISCLAIMS ANY
IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. EXCEPT AS SET FORTH ABOVE,
NEITHER PARTY ASSUMES OR AUTHORIZES ANY PERSON TO ASSUME ANY LIABILITY OR
WARRANTY IN CONNECTION WITH ANY [***] MANUFACTURED AND/OR SUPPLIED HEREUNDER. IN
THE EVENT OF A BREACH BY AVIRON OF THE WARRANTY SET FORTH IN SECTION 10.1 ABOVE,
OR A BREACH BY WYETH-AYERST OF THE WARRANTY SET FORTH IN SECTION 10.2 ABOVE, THE
NON-
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18.
<PAGE> 20
BREACHING PARTY'S SOLE REMEDY WILL BE TO RETURN THE AFFECTED [***]* FOR
REPLACEMENT OR CREDIT, IN ACCORDANCE WITH THE TERMS HEREOF.
10.4 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE
FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING LOSS
OF PROFITS, REVENUE, DATA OR USE, INCURRED BY THE OTHER PARTY, WHETHER IN
CONTRACT OR TORT OR BASED ON A WARRANTY, EVEN IF THE OTHER PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
11. TERM AND TERMINATION
11.1 TERM. The term of this Agreement will begin on the Effective Date
and will expire on the later of (a) the date of expiration or termination of the
U.S. Agreement (the "U.S. Termination Date"), or (b) the date of expiration or
termination of the International Agreement (the "International Termination
Date"), unless terminated earlier or extended by the mutual written agreement of
the Parties.
(a) In the event that the U.S. Termination Date occurs prior to
the International Termination Date, all provisions of this Agreement
specifically relating to the manufacture and supply of Product for the U.S.
Territory shall terminate, except as set forth in Section 11.3 or otherwise
explicitly stated herein, and all other provisions of this Agreement shall
continue in full force and effect.
(b) In the event that the International Termination Date occurs
prior to the U.S. Termination Date, all provisions of this Agreement
specifically relating to the manufacture and supply of Product for the
International Territory shall terminate, except as set forth in Section 11.3 or
otherwise explicitly stated herein, and all other provisions of this Agreement
shall continue in full force and effect.
11.2 EFFECT OF TERMINATION.
(a) CONFIDENTIAL INFORMATION. Each Party shall return all of the
other Party's Confidential Information within sixty (60) days of termination or
expiration of this Agreement.
(b) WORK IN PROCESS. Upon termination or expiration of this
Agreement, Wyeth-Ayerst shall provide Aviron with full particulars of all [***]
(including quantities of [***], and the dates on which the [***] was
manufactured) in its possession. Aviron shall be entitled, at its discretion, to
purchase from Wyeth-Ayerst any such [***] at a fair and reasonable price to be
agreed on in good faith by the Parties, but which in no event shall exceed [***]
of the average Net Sales per dose based on the then-current Flu Season. If so
requested by Aviron, Wyeth-Ayerst shall arrange for delivery of such [***]
purchased by Aviron pursuant to this subsection (i) to such destination or
destinations as may be designated by Aviron. All delivery arrangements shall be
subject to the prior approval of Aviron. Freight and insurance of such delivery
shall be at the cost of Aviron.
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<PAGE> 21
11.3 SURVIVAL. Sections 11.2 and 11.3, and Articles 10, 12, 13 and 14 of
this Agreement shall survive any expiration or termination of this Agreement, or
of any provisions thereof as provided in Section 11.1. Any and all claims and
payment obligations that accrue prior to any termination or expiration of this
Agreement, or of any provision hereof, shall survive such termination or
expiration.
12. CONFIDENTIALITY
12.1 CONFIDENTIAL INFORMATION. Except to the extent expressly authorized
by this Agreement or otherwise agreed in writing, the Parties agree that the
receiving Party shall keep confidential, and shall not publish or otherwise
disclose or use for any purpose other than as provided for in this Agreement,
any Information and other information and materials (including without
limitation the Aviron Product Materials) furnished to it by the other Party
pursuant to this Agreement or any Information developed during the course of the
collaboration hereunder, or any provisions of this Agreement that are the
subject of an effective order of the Securities Exchange Commission (the "SEC")
granting confidential treatment pursuant to the Securities Act of 1934, as
amended (collectively, "Confidential Information"), except to the extent that it
can be established by the receiving Party that such Confidential Information:
(a) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the other Party;
(b) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the receiving Party;
(c) became generally available to the public or otherwise part of
the public domain after its disclosure to the receiving Party, and other than
through any act or omission of the receiving Party in breach of this Agreement;
(d) was disclosed to the receiving 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; or
(e) was independently developed by employees of the receiving
Party who had no knowledge of or access to the Confidential Information of the
other Party.
For Confidential Information other than the Aviron Product Materials and
information relating to the Aviron Product Materials or the manufacture of the
Product, the non-disclosure obligations under this Section 12.1 shall terminate
upon the later of: (i) [***]* years following the expiration or termination of
this Agreement, or (ii) [***] years from the Effective Date.
12.2 AUTHORIZED DISCLOSURE.
(a) Each Party may disclose Confidential Information hereunder to
the extent such disclosure is reasonably necessary in securing agreements with
Third Party contractors, prosecuting or defending litigation or complying with
applicable governmental regulations,
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20.
<PAGE> 22
provided, however, that if a Party is required by law or regulation to make any
such disclosures of the other Party's Confidential Information it will, except
where impracticable for necessary disclosures (for example in the event of
medical emergency) give reasonable advance notice to the other Party of such
disclosure requirement (e.g., filings with the SEC and stock markets) and, will
use its reasonable efforts to secure confidential treatment of such Confidential
Information required to be disclosed, unless in the judgement of such disclosing
Party's legal counsel such Confidential Information is legally required to be
fully disclosed.
(b) In addition, and with prior notice to the other Party of each
Third Party with whom a confidential disclosure agreement is being entered into,
each Party shall be entitled to disclose, under a binder of confidentiality
containing provisions at least as protective as those of this Article 12,
Confidential Information to any Third Party for the purpose of carrying out the
purposes of this Agreement.
13. MICHIGAN AGREEMENT
13.1 WYETH-AYERST OBLIGATIONS. Wyeth-Ayerst accepts that the following
provisions of the Michigan Agreement are hereby incorporated by reference and
shall be binding upon Wyeth-Ayerst as a "sublicensee" under the Michigan
Agreement (as defined in Section 2.6 of the Michigan Agreement):
(a) Section 3.5 (U.S. government "march-in" rights);
(b) Article 4 (obligations and restrictions relating to [***]
(as defined in Section [***] of the Michigan Agreement), products and their
ownership and use);
(c) Section 6.2 (duties of use of a nomenclature system);
(d) Section 6.3 (duties to keep records and rights of
inspection);
(e) Section 8.5 (preference for U.S. manufacturers);
(f) Article 9 (obligations regarding the periodic reporting,
disclosure and grant of rights to certain intellectual property);
(g) Section 13.4 (duties to avoid improper representations or
responsibilities);
(h) Article 14 (obligations to defend, hold harmless and
indemnify Michigan);
(i) Section 14.3 (obligations to retain insurance);
(j) Section 15.2 (survival of certain obligations);
(k) Section 15.5 (obligations relating to the return and non-use
of [***] and certain intellectual property and prohibition on the manufacture of
products after termination of the Michigan Agreement);
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21.
<PAGE> 23
(l) Section 15.6 (duties to provide rights to Michigan to certain
intellectual property upon termination of the Michigan Agreement);
(m) Articles 16 and 17 (duties relating to confidential
information and to pre-publication disclosure);
(n) Article 20 (duties to control export); and
(o) Article 22 (duty to restrict use of Michigan's name).
13.2 USE OF AVIRON PRODUCT MATERIALS. Wyeth-Ayerst acknowledges and
agrees that the Aviron Product Materials (as defined in the U.S. Agreement and
the International Agreement) are confidential materials of Aviron and Michigan,
and that access to the Aviron Product Materials shall be limited to those of its
employees reasonably requiring such access for the purposes set forth in this
Agreement, who further will be required, in writing, to treat the Aviron Product
Materials as confidential. In addition, Wyeth-Ayerst agrees that in the event
[***] other than the Aviron Product Materials come into its possession, it shall
promptly notify Aviron in writing; provided, however, that although it is not
the Parties' intent as of the Signing Date that [***] in the event that [***]
Wyeth-Ayerst agrees [***] and shall not [***] upon expiration or termination of
this Agreement, except to the extent [***] pursuant to [***].
13.3 WARRANTY DISCLAIMER. Wyeth-Ayerst acknowledges Michigan's warranty
disclaimer and limitation of liability contained in the Michigan Agreement, and
will make no statements, representations or warranties inconsistent with such
warranty disclaimer or limitation of liability.
13.4 COOPERATION. The Parties agree to cooperate reasonably with each
other in assisting each Party to comply with its obligations under the Michigan
Agreement as it pertains to such Party's performance of its rights and
obligations under this Agreement.
14. INDEMNIFICATION
14.1 INDEMNIFICATION BY AVIRON. Except as set forth in Section 14.2
hereof, and except to the extent caused by Wyeth-Ayerst's or its Affiliates' or
sublicensees' negligent, reckless or willful acts or omissions, Aviron shall
indemnify, defend and hold Wyeth-Ayerst and its directors, officers, employees,
agents and Affiliates harmless from and against any third party claims, damages,
costs or expenses, including reasonable attorneys' fees (collectively,
"Liabilities"), which Wyeth-Ayerst incurs by reason of any [***] supplied by
Aviron to Wyeth-Ayerst hereunder that results in injury, death or illness of any
person, to the extent that such claims arise out of, relate to or result from
the breach by Aviron of any of its representations or warranties contained
within this Agreement.
14.2 INDEMNIFICATION BY WYETH-AYERST. Except as set forth in Section
14.1 hereof, and except to the extent caused by Aviron's negligent, reckless or
willful acts or omissions, Wyeth-Ayerst shall indemnify, defend and hold Aviron
and its directors, officers, employees, agents and Affiliates harmless from and
against any Liabilities which Aviron incurs by reason of
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<PAGE> 24
any [***] manufactured by Wyeth-Ayerst hereunder that results in injury, death
or illness of any person, to the extent such Liabilities arise out of, relate to
or result from the breach by Wyeth-Ayerst of any of its representations or
warranties contained within this Agreement.
14.3 INDEMNIFICATION PROCEDURES. A Party which intends to claim
indemnification under Section 14.1 or 14.2 hereof (the "Indemnitee") shall
promptly notify the other Party (the "Indemnitor") in writing of any third party
claim, lawsuit or other action in respect of which the Indemnitee or any of its
directors, officers, employees, agents and Affiliates intend to claim such
indemnification. The Indemnitee shall permit, and shall cause its directors,
officers, employees, agents and Affiliates to permit, the Indemnitor, at its
discretion, to settle any such claim, lawsuit or other action and agrees to the
complete control of such defense or settlement by the Indemnitor; provided that
such settlement does not adversely affect the Indemnitee's rights hereunder or
impose any obligations on the Indemnitee in addition to those set forth herein
in order for it to exercise such rights. No such claim, lawsuit or other action
shall be settled without the prior written consent of the Indemnitor, and the
Indemnitor shall not be responsible for any legal fees or other costs incurred
other than as provided herein. The Indemnitee, its directors, officers,
employees, agents and Affiliates shall cooperate fully with the Indemnitor and
its legal representatives in the investigation and defense of any claim, lawsuit
or other action covered by the provisions of this Article 14. The Indemnitee
shall have the right, but not the obligation, to be represented by counsel of
its own selection and expense.
14.4 INSURANCE. Each Party shall maintain comprehensive general
liability insurance coverage, including products liability, with a minimum limit
of not less than [***],* and shall provide the other Party with a certificate of
such insurance as requested.
15. DISPUTE RESOLUTION
15.1 DISPUTES.
(a) The Parties recognize that disputes as to certain matters may
from time to time arise during the term of this Agreement that relate to either
Party's rights and/or obligations hereunder or thereunder. It is the objective
of the Parties to establish procedures to facilitate the resolution of disputes
arising under this Agreement in an expedient manner by mutual cooperation and
without resort to litigation. To accomplish this objective, the Parties agree to
follow the procedures set forth in this Article 15 if and when a dispute arises
under this Agreement.
(b) Unless otherwise specifically recited in this Agreement,
disputes between the Parties shall be first referred to the Commercialization
Committee or Development Committee responsible for such issue by either Party as
soon as reasonably possible after such dispute has arisen. If the relevant
Commercialization Committee or Development Committee is unable to resolve such a
dispute within ten (10) days of being requested by a Party to resolve such
dispute, or if the preceding sentence is not applicable to such dispute, either
Party may, by written notice to the other, have such dispute referred to their
respective executive
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<PAGE> 25
officers designated below or their designees, for attempted resolution by
negotiations within fifteen (15) days after such notice is received. The
designated officers are as follows:
For Wyeth-Ayerst: President of Wyeth-Ayerst Global Pharmaceuticals
For Aviron: Aviron Chief Executive Officer
In the event such designated officers are unable to resolve such dispute, the
Parties shall then be permitted to pursue all available remedies at law or in
equity; provided, however, that no lawsuit may be commenced by one Party unless
it gives the other Party fifteen (15) days notice of its intent to initiate an
action.
16. MISCELLANEOUS
16.1 ASSIGNMENT.
(a) Neither Party may assign its rights or obligations under this
Agreement without the prior written consent of the other Party, except in
connection with a merger, acquisition nor similar reorganization or the sale of
all or substantially all of its assets, or, in the case of Wyeth-Ayerst, the
sale or transfer of substantially all of the vaccine business of Wyeth-Ayerst.
Subject to [***], this Agreement shall survive any such merger or
reorganization of either Party with or into, or such sale of assets to, another
party and no consent for such merger, reorganization or sale shall be needed;
provided, that in the event of such merger, reorganization or sale, no
intellectual property rights of the acquiring corporation shall be included in
the technology licensed hereunder.
(B) This Agreement shall be binding upon and inure to the benefit
of the successors and permitted assigns of the Parties. Any assignment not in
accordance with this Agreement shall be void.
16.2 CONSENTS NOT UNREASONABLY WITHHELD OR DELAYED. Whenever provision
is made in this Agreement for either Party to secure the consent or approval of
the other, that consent or approval shall not unreasonably be withheld or
delayed, unless specifically otherwise provided.
16.3 FORCE MAJEURE. Neither Party shall lose any rights hereunder or be
liable to the other Party for damages or losses on account of failure of
performance by the defaulting Party if the failure is occasioned by government
action, war, fire, explosion, flood, strike, lockout, embargo, act of God, or
any other similar cause beyond the control of the defaulting Party, provided
that the Party claiming force majeure has exerted all reasonable efforts to
avoid or remedy such force majeure and has given the other Party prompt notice
describing such event, the effect thereof and the actions being taken to avoid
or remedy such force majeure; provided, however, that in no event shall a Party
be required to settle any labor dispute or disturbance.
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24.
<PAGE> 26
16.4 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
16.5 NOTICES. All notices hereunder shall be in writing and shall be
deemed given if delivered personally or by facsimile transmission (receipt
verified), telexed, mailed by registered or certified mail (return receipt
requested), postage prepaid, or sent by 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 that notices of a change of address shall be
effective only upon receipt thereof).
If to Aviron: Aviron
297 North Bernardo Avenue
Mountain View, California 94043
Attention: Chief Executive Officer
Telephone: (650) 919-6600
Facsimile: (650) 919-6612
With copies to: Cooley Godward LLP
5 Palo Alto Square
3000 El Camino Real
Palo Alto, California
Attention: Barbara A. Kosacz
Telephone: (650) 843-5000
Facsimile: (650) 857-0663
If to Wyeth-Ayerst: Wyeth-Ayerst Laboratories
555 Lancaster Avenue
St. Davids, Pennsylvania, 19087
Attention: Sr. Vice President,
Global Business Development
Telephone: (610) 688-5809
Facsimile: (610) 688-9498
With copies to: American Home Products Corporation
Five Giralda Drive
Madison, New Jersey 07940
Attention: Sr. Vice President and
General Counsel
Telephone: (973) 660-6040
Facsimile: (973) 660-7155
16.6 WAIVER. Except as specifically provided for herein, the waiver from
time to time by either of the Parties of any of their rights or their failure to
exercise any remedy shall not operate or be construed as a continuing waiver of
same or any other of such Party's rights or remedies provided in this Agreement.
16.7 SEVERABILITY. If any term, covenant or condition of this Agreement
or the application thereof to any Party or circumstances shall, to any extent,
be held to be invalid or
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25.
<PAGE> 27
unenforceable, then (i) the remainder of this Agreement, or the application of
such term, covenant or condition to Parties or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected thereby and
each term, covenant or condition of this Agreement shall be valid and be
enforced to the fullest extent permitted by law; and (ii) the Parties hereto
covenant and agree to renegotiate any such term, covenant or application thereof
in good faith in order to provide a reasonably acceptable alternative to the
term, covenant or condition of this Agreement or the application thereof that is
invalid or unenforceable, it being the intent of the Parties that the basic
purposes of this Agreement are to be effectuated.
16.8 AMBIGUITIES. Ambiguities, if any, in this Agreement shall not be
construed against any Party, irrespective of which Party may be deemed to have
authored the ambiguous provision.
16.9 GOVERNING LAW. This Agreement shall be governed by and interpreted
under the laws of the [***] as applied to contracts entered into and performed
entirely in [***]* residents.
16.10 HEADINGS. The Sections and paragraph headings contained herein are
for the purposes of convenience only and are not intended to define or limit the
contents of the Sections or paragraphs to which they apply.
16.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16.12 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the U.S. Agreement,
the International Agreement and the Credit Agreement (as defined in Section 13.1
of the U.S. Agreement) (collectively, the "Agreements"), including all Exhibits
and Schedules attached thereto, set forth all the covenants, promises,
agreements, warranties, representations, conditions and understandings between
the Parties hereto with respect to the subject matter thereof, and supersede and
terminate all prior agreements and understandings between the Parties with
respect to such subject matter, except as provided in Section 11.3(e) of the
International Agreement. There are no covenants, promises, agreements,
warranties, representations, conditions or understandings, either oral or
written, between the Parties with respect to the subject matter thereof other
than as set forth therein. No subsequent alteration, amendment, change or
addition to the Agreements shall be binding upon the Parties hereto unless
reduced to writing and signed by the respective authorized officers of the
Parties. The Agreements, including without limitation the Exhibits, Schedules
and attachments thereto, are intended to define the full extent of the legally
enforceable undertakings of the Parties thereto with respect to the subject
matter thereof, and no promise or representation, written or oral, which is not
set forth explicitly is intended by either Party to be legally binding. Both
Parties acknowledge that in deciding to enter into the Agreements and to
consummate the transaction contemplated thereby neither Party has relied upon
any statement or representations, written or oral, other than those explicitly
set forth therein.
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16.13 INDEPENDENT CONTRACTORS. The status of the Parties under this
Agreement shall be that of independent contractors. Neither Party shall have the
right to enter into any agreements on behalf of the other Party, nor shall it
represent to any person that it has any such right or authority. Nothing in this
Agreement shall be construed as establishing a partnership or joint venture
relationship between the Parties.
16.14 CURRENCY. The references in this Agreement to amounts expressed in
dollars ($) shall mean United States dollars.
16.15 EFFECTIVE DATE. The "Effective Date" of this Agreement shall be
the same as the "Effective Date" as defined in the U.S. Agreement. In the event
that the Effective Date has not occurred within three (3) months after the
Signing Date, the Parties shall revert to their status prior to signing this
Agreement; provided that Aviron may extend such three month period in one (1)
month increments upon written notice to Wyeth-Ayerst, such extended period not
to exceed three (3) months. This Section 16.15 shall bind Aviron and
Wyeth-Ayerst upon execution of this Agreement, but the other provisions of the
Agreement shall not become effective until the Effective Date.
27.
<PAGE> 29
IN WITNESS WHEREOF, Aviron and Wyeth-Ayerst have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
AMERICAN HOME PRODUCTS CORPORATION AVIRON
By: /s/ Gerad A. Jibilian By: /s/ Carol A. Olson
----------------------------- -------------------------------
Name: Name:
----------------------------- -------------------------------
Title: Title:
----------------------------- -------------------------------
28.
<PAGE> 30
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. DEFINITIONS..........................................................................1
1.1 "[***] Product"...............................................................2
1.2 "[***] Product"...............................................................2
1.3 "Calendar Year"...............................................................2
1.4 "Commercialization Committee".................................................2
1.5 "Commercially Reasonable Efforts".............................................2
1.6 "Development Committee".......................................................2
1.7 "Effective Date"..............................................................2
1.8 "[***] Agreement".............................................................2
1.9 "Finished Product"............................................................2
1.10 "[***]".......................................................................2
1.11 "Flu Season"..................................................................2
1.12 "Forecast"....................................................................2
1.13 "[***] Product"...............................................................2
1.14 "[***] Monovalent"............................................................2
1.15 "Global Territory"............................................................2
1.16 "Gross Sales Revenue".........................................................3
1.17 "Good Manufacturing Practice" or "GMP"........................................3
1.18 "JCC".........................................................................3
1.19 "[***] Product"...............................................................3
1.20 "ICC".........................................................................3
1.21 "[***]".......................................................................3
1.22 "International Territory".....................................................3
1.23 "[***]".......................................................................3
1.24 "[***]".......................................................................3
1.25 "[***] Product"...............................................................3
1.26 "[***] Plant".................................................................3
1.27 "[***]".......................................................................3
1.28 "Michigan"....................................................................3
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
1.29 "Michigan Agreement"..........................................................4
1.30 "Monovalent Bulk".............................................................4
1.31 "PLA".........................................................................4
1.32 "Product".....................................................................4
1.33 "[***]".......................................................................4
1.34 "Regulatory Agency"...........................................................4
1.35 "Secondary Manufacture" or "Secondary Manufacturing"..........................4
1.36 "Specifications"..............................................................4
1.37 "Territory"...................................................................4
1.38 "[***]".......................................................................4
1.39 "U.S. Territory"..............................................................5
1.40 "Working Seeds"...............................................................5
2. SCOPE................................................................................5
2.1 General Obligations and Rights of the Parties.................................5
2.2 Management by Commercialization Committees....................................6
2.3 Third Party Supply............................................................6
2.4 Wyeth-Ayerst Advisory Role....................................................7
3. PRODUCT FORECASTS FOR U.S. TERRITORY.................................................7
3.1 U.S. [***] Forecast...........................................................7
3.2 U.S. [***] Forecast...........................................................7
3.3 [***].........................................................................8
4. [***] FORECASTS FOR INTERNATIONAL TERRITORY..........................................8
4.1 Forecasts.....................................................................8
5. FAILURE TO [***].....................................................................9
5.1 Notice of [***]...............................................................9
5.2 [***] Product.................................................................9
5.3 [***]........................................................................10
5.4 Sole Remedy..................................................................10
6. SPECIFICATIONS, DELIVERY AND ACCEPTANCE OF [***] PRODUCT............................10
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
6.1 Specifications...............................................................10
6.2 Delivery and Shipment........................................................10
6.3 Acceptance and Rejection.....................................................10
7. PRICING AND PAYMENT FOR [***] PRODUCT...............................................11
7.1 Transfer Price...............................................................11
7.2 Transfer Price Payment.......................................................11
(a) [***] Product, First Flu Season.......................................11
(b) Other Transfer Price Payments.........................................12
7.3 Reconciliation...............................................................12
8. PROCEDURES AND PAYMENTS FOR [***] PRODUCT...........................................13
8.1 Supply of [***]..............................................................13
8.2 Supply of [***]..............................................................14
8.3 [***] Manufacture of [***]...................................................15
9. REGULATORY ISSUES...................................................................17
9.1 Compliance...................................................................17
9.2 Audits.......................................................................17
10. WARRANTIES, REPRESENTATIONS AND COVENANTS...........................................18
10.1 By Aviron....................................................................18
10.2 By Wyeth-Ayerst..............................................................18
10.3 Warranty Disclaimers and Limitations.........................................18
10.4 Limitation of Liability......................................................19
11. TERM AND TERMINATION................................................................19
11.1 Term.........................................................................19
11.2 Effect of Termination........................................................19
11.3 Survival.....................................................................20
12. CONFIDENTIALITY.....................................................................20
12.1 Confidential Information.....................................................20
12.2 Authorized Disclosure........................................................20
13. MICHIGAN AGREEMENT..................................................................21
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
13.1 Wyeth-Ayerst Obligations.....................................................21
13.2 Use of Aviron Product Materials..............................................22
13.3 Warranty Disclaimer..........................................................22
13.4 Cooperation..................................................................22
14. INDEMNIFICATION.....................................................................22
14.1 Indemnification by Aviron....................................................22
14.2 Indemnification by Wyeth-Ayerst..............................................22
14.3 Indemnification Procedures...................................................23
14.4 Insurance....................................................................23
15. DISPUTE RESOLUTION..................................................................23
15.1 Disputes.....................................................................23
16. MISCELLANEOUS.......................................................................24
16.1 Assignment...................................................................24
16.2 Consents Not Unreasonably Withheld or Delayed................................24
16.3 Force Majeure................................................................24
16.4 Further Actions..............................................................25
16.5 Notices......................................................................25
16.6 Waiver.......................................................................25
16.7 Severability.................................................................25
16.8 Ambiguities..................................................................26
16.9 Governing Law................................................................26
16.10 Headings.....................................................................26
16.11 Counterparts.................................................................26
16.12 Entire Agreement; Amendments.................................................26
16.13 Independent Contractors......................................................27
16.14 Currency.....................................................................27
16.15 Effective Date...............................................................27
</TABLE>
iv.
<PAGE> 1
EXHIBIT 10.23
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of January 11, 1999 (the "Agreement") is
between AVIRON, a Delaware corporation ("Aviron"), and AMERICAN HOME PRODUCTS
CORPORATION, a Delaware corporation ("AHPC").
WITNESSETH
WHEREAS, Aviron [***]* to continue the development of its intranasal
influenza vaccine product and for general operational requirements and has
requested that AHPC provide Aviron with loans (the "Loans") in the aggregate
principal amount of up to [***]; and
WHEREAS, AHPC is willing to so advance such funds necessary to cover
such expenses of Aviron, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, unless otherwise clearly indicated by
the context, the following terms shall have the meanings specified below:
1.01 "AFFILIATE" shall mean as to any Person, any other Person which,
directly or indirectly, either controls, is controlled by or is under common
control with such Person. "Control" as used in this Section 1.01 shall mean
having the power to direct, or cause the direction of, the management and
policies of an entity, whether through ownership of voting securities, by
contract or otherwise. Notwithstanding the foregoing, for purposes of this
Agreement, the term "Affiliate" shall not include subsidiaries in which a Person
or its Affiliates own 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.
1.02 "AVAILABILITY TERMINATION DATE" shall mean the earlier of (i) the
termination of both the U.S. Co-Promotion Agreement and the International
License Agreement in accordance with their respective terms and (ii) the [***]
Aviron of the [***] (as defined in the U.S. Co-Promotion Agreement).
1.03 "BUSINESS DAY" shall mean any day, other than a Saturday, Sunday
or legal holiday in the State of New York, on which banks are open for
substantially all their banking business in New York City.
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<PAGE> 2
1.04 "CAPITAL STOCK" means, with respect to any Person, any and all
shares, interests, participations, rights in, or other equivalents (however
designated and whether voting or non-voting) of, such Person's capital stock,
and any and all rights, warrants or options exchangeable for or convertible into
such capital stock.
1.05 "COLLATERAL" shall mean all collateral and security as described
in the Security Agreement.
1.06 "COMMISSION" shall have the meaning set forth in Section 3.06.
1.07 "COMMON STOCK" means the common stock, $.001 par value, of Aviron.
1.08 "CONSOLIDATED NET WORTH" means, with respect to any Person at any
date of determination, the consolidated stockholders' equity represented by the
shares of such Person's Capital Stock outstanding at such date, as determined on
a consolidated basis in accordance with United States generally accepted
accounting principles.
1.09 "U.S. CO-PROMOTION AGREEMENT" shall mean the United States License
and Co-Promotion Agreement of even date herewith between Aviron and AHPC with
respect to Aviron's intranasal influenza vaccine product.
1.10 "CREDIT EVENT" shall mean each borrowing hereunder.
1.11 "DOLLARS" or the symbol "$" shall mean dollars in lawful currency
of the United States of America.
1.12 "DRAWDOWN DATE" shall mean the date Aviron borrows or draws down a
Loan.
1.13 "EVENT OF DEFAULT" shall have the meaning assigned such term in
Article IX hereof.
1.14 "EXCHANGE ACT" shall have the meaning set forth in Section 3.02.
1.15 "FDA" shall mean the federal Food and Drug Administration of the
U.S. Department of Health and Human Services.
1.16 "FINANCIAL OFFICER" shall mean, with respect to any Person, its
Chairman of the Board, President, or Chief Financial Officer.
1.17 "GUARANTEE" shall mean any obligation, contingent or otherwise, of
any Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness or obligation of any other Person in any manner, whether directly
or indirectly.
1.18 "INDEBTEDNESS" shall mean, with respect to any Person, (a) all
obligations of such Person for borrowed money, or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes, notes convertible into shares of Common Stock or other
similar instruments, (c) all obligations of such Person upon which interest
charges are customarily paid, (d) all obligations of such Person for the
deferred purchase
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2.
<PAGE> 3
price of property of services, except current accounts payable arising in the
ordinary course of business and not overdue, (e) all obligations of such Person
under conditional sale or other title retention agreements relating to property
purchased by such Person, (f) all Indebtedness of any third party secured by
property or assets of such Person, and (g) all Guarantees of such Person.
1.19 "INTERNATIONAL LICENSE AGREEMENT" shall mean the International
FluMist(TM) License Agreement of even date herewith between Aviron and AHPC with
respect to Aviron's intranasal influenza vaccine product.
1.20 "LIEN" shall mean, with respect to any asset, (i) any mortgage,
lien, pledge, encumbrance, charge or security interest in or on such asset, (ii)
the interest of a vendor or a lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset, (iii)
in the case of securities, any purchase option, call or similar right of a third
party with respect to such securities or (iv) any other right of or arrangement
with any creditor to have his claim satisfied out of such assets, or the
proceeds therefrom, prior to the general creditors of the owner thereof.
1.21 "LOANS" shall have the meaning set forth in the first WHEREAS
clause of this Agreement.
1.22 "MATERIAL ADVERSE EFFECT" shall have the meaning set forth in
Section 3.01 hereof.
1.23 "NOTE OR NOTES" shall have the meaning assigned to such term in
Section 2.03(a) hereof.
1.24 "PERMITTED INDEBTEDNESS" means (i) Indebtedness of Aviron existing
on the date hereof; (ii) all Indebtedness of Aviron or its Subsidiaries incurred
from time to time in connection with the purchase of goods, materials or
services in the ordinary course of business and owed to trade creditors; (iii)
Indebtedness of Aviron under the Loans; (iv) other Indebtedness of Aviron or its
Subsidiaries not to exceed [***]* in any fiscal year during the term hereof or
[***] in the aggregate outstanding at any time; (v) Indebtedness of Aviron or
its Subsidiaries owing to financial institutions not to exceed [***] in the
aggregate; (vi) Indebtedness that by its terms is expressly subordinated in
right of payment to the Loans; (vii) Indebtedness of Aviron or its Subsidiaries
secured by a Lien described in subsection (iii) of the definition of "Permitted
Liens" below; (viii) Guarantees and other credit support of the obligations of
vendors and suppliers of Aviron or its Subsidiaries in respect of transactions
entered into in the ordinary course of business; (ix) Indebtedness of Aviron or
its Subsidiaries in respect of capital lease obligations; (x) prepaid royalties
owing to, and deferred revenue of, Aviron or its Subsidiaries in the ordinary
course of business; (xi) Indebtedness to the extent incurred specifically for,
and limited to the financing of, Aviron's manufacturing facility and leasehold
improvements thereto; and (xii) any deferrals, renewals, extensions,
replacements, or refinancings of, or amendments, modifications or supplements
to, Indebtedness described above.
1.25 "PERMITTED LIENS" means (i) any Liens existing on the date hereof;
(ii) Liens to secure Permitted Indebtedness owing to financial institutions (ii)
Liens for taxes, fees,
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3.
<PAGE> 4
assessments or other governmental charges or levies, either not delinquent or
being contested in good faith by appropriate proceedings; (iii) Liens (A) upon
or in any property acquired or held by Aviron to secure the purchase price of
such property or Indebtedness incurred solely for the purpose of financing the
acquisition of such property, or (B) existing on such property at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such property; (iv) Liens
on property leased by Aviron pursuant to operating or capital leases in the
ordinary course of business (including proceeds thereof and accessions thereto)
incurred solely for the purpose of financing the lease of such property; (v)
leases or subleases and licenses and sublicenses granted to others in the
ordinary course of Aviron's business not interfering in any material respect
with the business of Aviron and its Subsidiaries taken as a whole, and any
interest or title of a lessor, licensor or under any lease or license; (vi)
Liens on assets (including the proceeds thereof and accessions thereto) that
existed at the time such assets were acquired by Aviron (including any Liens on
assets of any Person that existed at the time it became or becomes a
Subsidiary); provided such Liens are not granted in contemplation of or in
connection with the acquisition of such asset by Aviron; (vii) Liens arising
from judgments, decrees or attachments in circumstances not constituting an
Event of Default under this Agreement; (viii) easements, reservations,
rights-of-way, restrictions, minor defects or irregularities in title and other
similar charges or encumbrances affecting real property not constituting a
Material Adverse Effect; (ix) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payments of customs duties in connection
with the importation of goods; (x) Liens which constitute rights of set-off of a
customary nature or bankers' or securities intermediaries' Liens with respect to
amounts on deposit or investment property, whether arising by operation of law
or by contract, in connection with arrangements entered into with banks and
securities intermediaries in the ordinary course of business; and (xi) Liens on
Aviron's manufacturing facility, leasehold improvements thereto and proceeds
thereof.
1.26 "PERSON" shall mean any natural person, corporation, business
trust, association, limited liability company, company, joint venture,
partnership or government or any agency or political subdivision thereof.
1.27 "PREFERRED STOCK" shall have the meaning set forth in Section
3.03.
1.28 "PRIME RATE" shall mean the rate of interest per annum publicly
announced from time to time by The Chase Manhattan Bank at its principal office
in New York City as its prime rate (each change in the Prime Rate to be
effective on the date such change in the prime rate is publicly announced).
1.29 "RESPONSIBLE OFFICER" shall mean, with respect to any Person, the
Chairman, President, or any Vice President of such Person.
1.30 "SEC DOCUMENTS" shall have the meaning set forth in Section 3.05.
1.31 "SECURITIES ACT" shall have the meaning set forth in Section 4.01.
1.32 "SECURITY AGREEMENT" shall mean a Security Agreement dated as of
the date of the initial draw down, between Aviron and AHPC, in conformity with
the requirements set forth
4.
<PAGE> 5
in the U.S. Co-Promotion Agreement and the International License Agreement and
otherwise in form and substance satisfactory to AHPC.
1.33 "SUBSIDIARY" shall mean, with respect to any Person, any
corporation, partnership or joint ventures of which securities or other
ownership interests representing more than 50% of the ordinary voting power are,
at the time as of which any determination is being made, owned or controlled by
such Person or one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person.
1.34 "TRANSACTIONS" shall have the meaning set forth in Section 3.02.
ARTICLE II
THE LOANS
2.01 THE LOANS.
(a) During the term hereof and subject to the terms and
conditions and relying upon the representations and warranties herein set forth,
AHPC agrees to make Loans to Aviron at any time and from time to time commencing
with the date of regulatory approval by the FDA to market Aviron's intranasal
influenza vaccine product for use in the Field through the Availability
Termination Date, in an aggregate amount not to exceed [***]* subject to
Sections 2.01 (b) and (c), below. Each Loan shall be in an amount not less than
[***] per draw down; provided, however, that if the aggregate balance remaining
for available Loans is less than [***] Aviron shall have the right to drawdown
the balance of such remaining amount.
(b) To the extent AHPC has purchased shares of Common Stock
(or instruments convertible into shares of Common Stock) pursuant to Section
11.3 of the International License Agreement, the aggregate amount borrowable
hereunder shall automatically be [***] of shares of Common Stock (or instruments
convertible into shares of Common Stock pursuant to Section 11.3 of the
International License Agreement) so purchased.
(c) The initial Loans shall be made subject to satisfaction of
the conditions set forth in Sections 6.01 and 6.02 against delivery of the Note.
2.02 NOTICE OF BORROWINGS. Aviron may draw down Loans on any Business
Day, provided, however, that Aviron shall give AHPC written notice of each such
borrowing in the form of Exhibit B not later than 12:00 noon, New York City
time, three (3) Business Days before a proposed borrowing.
2.03 NOTES; REPAYMENT OF LOANS.
(a) Each Loan shall be evidenced by a separate note (each, a
"Note" and collectively with other Notes, the "Notes"), duly executed on behalf
of Aviron, dated the Drawdown Date for each Loan, in substantially the form of
Exhibit C hereto.
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[***] = CONFIDENTIAL TREATMENT REQUESTED.
5.
<PAGE> 6
(b) The outstanding principal balance of each Loan shall
mature and be due and payable on the [***] anniversary of the making of such
Loan, such principal amount being subject to reduction pursuant to Section 2.07
of this Agreement. Each Loan shall bear interest from its date on the
outstanding principal balance thereof, as provided in Section 2.04.
(c) AHPC shall, and is hereby authorized by Aviron, to endorse
on the schedule attached to each Note an appropriate notation evidencing the
date and amount of each payment and prepayment with respect thereto; provided,
however, that the failure of AHPC to make such a notation on any Note shall not
affect any obligations of Aviron hereunder or thereunder.
2.04 INTEREST ON LOANS. Subject to the provisions of Section 2.06, each
Loan shall bear interest at a floating rate per annum equal to [***]. Interest
shall be computed based on the number of days elapsed in a year of 365 days for
the actual days elapsed. Interest shall accrue on the unpaid principal amount of
each Loan from the date on which the Loan is made to or on account of Aviron
under this Agreement and shall be payable by Aviron on the last Business Day of
each calendar quarter. Aviron shall make such payments of interest until the
principal amount for each such Loan shall be paid in full.
2.05 [***] . Except as otherwise provided herein, all payments to be
made by Aviron on account of principal and interest shall be made [***] and
shall be made to AHPC in Dollars in immediately available funds at its principal
office (or as otherwise directed by AHPC) not later than 12:00 noon New York
time on the date on which such payment shall become due (each such payment made
after such time on such due date to be deemed to have been made on the next
succeeding Business Day).
2.06 INTEREST ON OVERDUE AMOUNTS. If Aviron shall default in the
payment of the principal of or interest on any Loan or any other amount becoming
due hereunder (by acceleration or otherwise), Aviron shall on demand from time
to time pay interest, to the extent permitted by law, on such defaulted amount
from the date of such non-payment up to the date of actual payment (after as
well as before judgment) at a rate per annum equal to the rate then in effect
for such Loan [***].
2.07 PREPAYMENT OF LOANS.
(a) Aviron may upon two (2) Business Days' irrevocable notice
to AHPC (i) prepay any Loan, as applicable, at any time in whole or from time to
time in part; provided, however, that each such optional partial prepayment of
any such term Loan shall be in an integral multiple of [***] and (ii) terminate
the commitments hereunder; provided, however, that any such termination shall be
effective only upon the repayment by Aviron of all principal, accrued interest
and other amounts then owing hereunder and under the Notes.
(b) AHPC may, at its option, [***] pursuant to the [***]
hereunder and [***].
(c) Aviron shall make a mandatory prepayment of all principal,
accrued interest and other amounts owing hereunder and under the Notes upon the
occurrence of any
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6.
<PAGE> 7
event or series of events pursuant to which any Person, or two or more Persons
acting in concert, acquire beneficial ownership (within the meaning of Rule
13d-3 of the Commission), directly or indirectly, of securities of Aviron
representing greater than fifty percent of the combined voting power of all
securities of Aviron entitled to vote in the election of directors in a
transaction (i) in which the acquiring Person or Persons includes [***] or (ii)
in which the [***]. Any mandatory prepayment pursuant to this Section 2.07(c)
shall be paid in immediately available funds to an account as directed in
writing by AHPC.
(d) Aviron may [***] amounts that have been prepaid.
2.08 WARRANTS. Upon each Drawdown Date, Aviron will grant AHPC warrants
to purchase Aviron common stock, in substantially the form of Exhibit A hereto,
according to the terms set forth in Schedule 2.08. In addition, Aviron agrees
that as soon as reasonably practicable following each issuance of warrants
hereunder it will file a registration statement for the non-underwritten resale
of the Aviron common stock issuable upon exercise of such warrants. Aviron
agrees that it will use commercially reasonable efforts to cause such
registration to become effective as soon as practicable and will keep such
registration effective until the earlier of (i) the sale by AHPC of all shares
issued upon exercise of the warrant, or (ii) [***] years following the issuance
of the warrant.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AVIRON
Aviron represents and warrants to AHPC that:
3.01 ORGANIZATION, CORPORATE. Aviron is a corporation duly organized,
validly existing and in good standing under the laws of the state of Delaware,
has the requisite power and authority to own its property and assets and to
carry on its business as now conducted and is qualified to do business in every
jurisdiction where such qualification is required, except where the failure so
to qualify would not have a material adverse effect on the business, condition
(financial or otherwise), assets, operations performance, properties or
prospects of Aviron (each, a "Material Adverse Effect"). Aviron has the
corporate power to borrow hereunder and to execute and deliver the Notes and has
the corporate power to execute, deliver and perform its obligations under this
Agreement and the Security Agreement.
3.02 AUTHORIZATION. The execution, delivery and performance by Aviron
of this Agreement, the Security Agreement, the borrowings hereunder, the
execution and delivery by Aviron of the Notes and the grant of security
interests in the Collateral (collectively, the "Transactions") (a) have been
duly authorized by all requisite corporate and, if required, stockholder action
and (b) will not (i) violate (A) any provision of law (including, without
limitation, the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) statute, rule or regulation or the certificate of incorporation or the
by-laws of Aviron, (B) any order of any court, or any rule, regulation or order
of any other agency of government binding upon or applicable to Aviron, or (C)
any provisions of any indenture, agreement or other instrument to
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[***] = CONFIDENTIAL TREATMENT REQUESTED.
7.
<PAGE> 8
which Aviron or any of its properties or assets are or may be bound, (ii) result
in the creation or imposition of any Lien, or any other type of preferential
arrangement upon any property or assets of Aviron or (iii) violate or result in
a breach or result in the acceleration or termination of, or the creation in any
third party of the right to accelerate, terminate, modify or cancel, any
material indenture, contract, lease, sublease, loan agreement, note or other
material obligation or liability to which Aviron is a party or is bound.
3.03 CAPITALIZATION. As of the date of this Agreement, the authorized
capital stock of Aviron is 35,000,000 shares, consisting of 5,000,000 shares of
Preferred Stock, $.001 par value (the "Preferred Stock"), and 30,000,000 shares
of Common Stock. As of the date hereof no shares of Preferred Stock are issued
and outstanding, and as of November 4, 1998, 15,718,991 shares of Common Stock
were issued and outstanding. Except as disclosed in the SEC Documents and except
for the transactions contemplated hereby, since November 15, 1998, Aviron has
not issued any shares of Preferred Stock or Common Stock, granted any option
(except for stock options granted under the Aviron's employee, consultant and
director stock option plans), warrants, rights (including conversion or
preemptive rights, except for stock purchased under Aviron's stock purchase
plans), or similar rights to any person or entity to purchase or acquire any
rights with respect to any shares of capital stock of Aviron. The outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable; and none of the outstanding shares of Common Stock
were issued in violation of the preemptive rights, if any, of any stockholder of
Aviron.
3.04 INDEBTEDNESS. Schedule 3.04 sets forth a complete and correct list
of all outstanding Indebtedness of Aviron as of the date hereof. Except as
described in the SEC Documents, Aviron is not in default and no waiver of
default is currently in effect, in the payment of any principal or interest on
any indebtedness of Aviron and no event or condition exists with respect to any
Indebtedness of Aviron that would permit (or that with notice or the lapse of
time, or both, would permit) one or more Persons to cause such Indebtedness to
become due and payable before its stated maturity or before its regularly
scheduled dates of payment.
3.05 FULL DISCLOSURE. Aviron has furnished to AHPC Aviron's annual
report on Form 10-K for the fiscal year ended December 31, 1997, Aviron's
Current Report on Form 8-K dated March 17, 1998, Aviron's quarterly reports on
Form 10-Q for the quarterly periods ended March 31, 1998, June 30, 1998 and
September 30, 1998 and all documents filed by Aviron pursuant to any of Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act (collectively, the "SEC
Documents") since September 30, 1998. Aviron warrants that, as of their
respective dates (or if amended, as of the date of such amendment), the SEC
Documents complied as to form with the requirements of the Exchange Act, and the
information contained in such documents did not contain any untrue statement of
a material fact, and did not omit to state any material fact necessary to make
any statement, in light of the circumstances under which such statement was
made, not misleading.
3.06 SEC FILINGS. Aviron has timely filed with the Securities and
Exchange Commission (the "Commission") all reports and other documents required
to be so filed.
3.07 GOVERNMENTAL APPROVALS. No registration, notices or filing (other
than the filings necessary to perfect the liens and security interests created
by the Security Agreement)
8.
<PAGE> 9
with or consent or approval of, or other action by, any federal, state or other
governmental agency, authority or regulatory body is or will be required in
connection with the Transactions.
3.08 BINDING EFFECT. This Agreement and the Security Agreement
constitutes, and the Notes, when duly executed and delivered by Aviron, will
constitute valid, legal and binding obligation of Aviron, enforceable in
accordance with its terms, subject, as to the enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency and similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity.
3.09 MATERIAL ADVERSE CHANGE. Since September 30, 1998, except as
provided in Schedule 3.09 hereto, there has been no change or effect which has
had or would be reasonably likely to have a Material Adverse Effect.
3.10 LITIGATION; COMPLIANCE WITH LAWS; ETC.
Except as described in the SEC Documents:
(a) There are no actions, suits or proceedings at law or in
equity or by or before any governmental instrumentality or other agency or
regulatory authority now pending or, to the knowledge of any Responsible Officer
of Aviron, threatened against or affecting Aviron or the business, assets or
rights of Aviron (i) which involve any of the Transactions or (ii) which if
adversely determined would, individually or in the aggregate, materially impair
the ability of Aviron to conduct its business or materially and adversely affect
the business, assets, operations or financial condition of Aviron or impair the
validity or enforceability of or the ability of Aviron to perform its
obligations under this Agreement or the Security Agreement.
(b) There are no violations of any law, or any default with
respect to any judgment, writ, injunction, decree, rule or regulation of any
court or governmental agency or instrumentality, where such violation or default
would have a Material Adverse Effect.
3.11 TAXES. Aviron has filed or caused to be filed all federal, state,
local and foreign tax returns which are required to be filed by it, on or prior
to the date hereof, other than tax returns in respect of taxes which in the
aggregate are not material and would not, if unpaid, result in the imposition of
any Lien on any property or assets of Aviron. Aviron has paid or caused to be
paid all taxes shown to be due and payable on such filed returns or on any
assessments received by it, other than (i) any taxes or assessments the validity
of which it is contesting in good faith by appropriate proceedings, and with
respect to which it shall, to the extent required by generally accepted
accounting principles applied on a consistent basis, have set aside on its books
adequate reserves and (ii) taxes that in the aggregate are not material and
which would not, if unpaid, result in the imposition of any Lien on any property
or assets.
3.12 INVESTMENT COMPANY ACT. Aviron is not an "investment company" as
defined in, or is otherwise subject to regulation under, the Investment Company
Act of 1940, as amended.
3.13 USE OF PROCEEDS. The proceeds of the Loans made hereunder shall be
used to finance the development, manufacture and commercialization of Aviron's
intranasal influenza
9.
<PAGE> 10
vaccine product and for general operational requirements. Such proceeds shall in
no event be used for any other business purpose or in any way in violation of
Regulation U of the Board of Governors of the Federal Reserve System.
3.14 SECURITY INTEREST. The Security Agreement , when executed and
delivered, will create and grant to AHPC a legal, valid and enforceable security
interest in the Collateral which shall be perfected upon the filing of Uniform
Commercial Code financing statements in appropriate offices. Such Collateral is
not subject to any other lien or security interest whatsoever except Permitted
Liens.
3.15 TITLE TO PROPERTIES; POSSESSION UNDER LEASES; TRADEMARKS.
(a) Aviron has good and marketable title to, or valid
leasehold interest in, all of its properties and assets except for Permitted
Liens and minor defects in title that do not interfere with its ability to
conduct its business as now conducted.
(b) Aviron has complied with all material obligations under
all leases to which it is a party and under which it is in occupancy. Aviron has
a valid lease-hold interest in all such leases and all such leases are in full
force and effect. Aviron enjoys peaceful and undisturbed possession under all
such leases.
(c) Aviron owns, possesses or controls all trademarks,
trademark rights, trade names, trade name rights, copyrights, patents, patent
rights and licenses which are necessary for the conduct of the business of
Aviron. To the best knowledge of Aviron, Aviron is not infringing upon or
otherwise acting adversely to any trademarks, trademark rights, trade names,
trade name rights, copyrights, patent rights or licenses owned by any other
Person or Persons. There is no claim or action by any such other Person pending,
or to the knowledge of Aviron threatened against Aviron with respect to any of
the rights or property referred to in this Section 3.15(c).
3.16 ABSENCE OF CERTAIN DEVELOPMENTS. Except as disclosed in or
contemplated by the SEC Documents, since September 30, 1998, Aviron has not (a)
incurred or become subject to any material liabilities (absolute or contingent)
except current liabilities incurred, and liabilities under contracts entered
into, in the ordinary course of business, consistent with past practices; (b)
sold, assigned or transferred any of its assets or canceled any debts or
obligations except in the ordinary course of business, consistent with past
practices; (c) suffered any extraordinary losses, or waived any rights of
substantial value; (d) sold, assigned or transferred to a third party that is
not an affiliate (within the meaning set forth in Rule 405 under the Act) any
material trademark, trademark rights, trade names, trade name rights,
copyrights, patents, patent rights, licenses or other intangible assets for
compensation less than the fair value of such assets; (e) declared, paid or
otherwise made any dividend or distribution of any kind on its capital stock; or
(f) entered into any material transaction other than in the ordinary course of
business, consistent with past practices.
10.
<PAGE> 11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AHPC
4.01 INVESTMENT INTENT. AHPC is acquiring the Notes for investment for
its own account only and not with a view to, or for resale in connection with,
any "distribution" thereof within the meaning of the Securities Act. AHPC
understands that the Notes have not been registered under the Securities Act or
registered or qualified under any state securities law in reliance on specific
exemptions therefrom, which exemptions may depend upon, among other things, the
bona fide nature of AHPC's investment intent as expressed herein.
4.02 NO LEGAL, TAX OR INVESTMENT ADVICE. AHPC understands that nothing
in this Agreement or any other materials presented to AHPC in connection with
the issuance of the Notes constitutes legal, tax or investment advice.
4.03 CORPORATE POWER; AUTHORITY. AHPC has all requisite legal and
corporate power and has taken all requisite corporate action to execute, deliver
and perform its obligations under this Agreement. This Agreement has been duly
authorized, executed and delivered on behalf of AHPC and constitutes the valid,
legal and binding agreement of AHPC, enforceable in accordance with its terms,
subject, as to the enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency and similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity.
ARTICLE V
RESTRICTIONS ON TRANSFER
5.01 RESTRICTIONS ON TRANSFERABILITY. The Notes shall not be
transferable in the absence of a registration under the Securities Act or an
exemption therefrom.
ARTICLE VI
CONDITIONS OF CREDIT EVENTS
The obligation of AHPC to make Loans hereunder shall be subject to the
following conditions precedent:
6.01 ALL CREDIT EVENTS. On each date on which a Credit Event is to
occur:
(a) AHPC shall have received a notice of borrowing as required
by Section 2.02.
(b) AHPC shall have received a Note dated the Drawdown Date,
duly executed by Aviron in the amount of such borrowing.
(c) The representations and warranties set forth in Article
III hereof and in any documents delivered in connection herewith, including
without limitation, the Security Agreement, shall be true and correct in all
material respects with the same effect as though made
11.
<PAGE> 12
on and as of such date (except insofar as such representations and warranties
relate expressly to an earlier date).
(d) At the time of and immediately after such borrowing no
Event of Default or event which with notice or lapse of time or both would
constitute an Event of Default shall have occurred and be continuing.
6.02 INITIAL DRAWDOWN DATE. The obligation of AHPC in respect of the
initial Credit Event hereunder are subject to the satisfaction of the following
conditions precedent:
(a) AHPC shall have received the favorable written opinion of
counsel for Aviron, dated the Drawdown Date in respect of the matters set forth
in Sections 3.01-3.09, 3.10(a) and 3.12, and satisfactory in form and substance
to AHPC.
(b) AHPC shall have received (i) a copy of the certificate of
incorporation of Aviron, certified as of a recent date by the Secretary of State
of Delaware, and a certificate as to the good standing of Aviron from such
Secretary of State, in each case dated as of a recent date; (ii) a certificate
of the Secretary of Aviron, dated the Drawdown Date and certifying (A) that
attached thereto is a true and complete copy of its By-laws as in effect on the
date of such certificate and as in effect at all times since the date of the
resolutions described in item (B) below, (B) that attached thereto is a true and
complete copy of resolutions adopted by its Board of Directors authorizing the
execution, delivery and performance of this Agreement, the Security Agreement,
the Notes and the borrowings hereunder, and that such resolutions have not been
modified, rescinded or amended and are in full force and effect, (C) that its
certificate of incorporation has not been amended since the date of the last
amendment thereto shown on the certificate of good standing furnished pursuant
to (i) above, and (D) as to the incumbency and specimen signature of each of
Aviron's Responsible Officers executing this Agreement, the Notes, or any other
document delivered in connection herewith or therewith to which it is a party;
(iii) a certificate of another of its officers as to incumbency and signature of
its Secretary; and (iv) such other documents as AHPC may reasonably request.
(c) AHPC shall have received a certificate, dated the Drawdown
Date and signed by a Financial Officer of Aviron, confirming compliance with the
conditions precedent set forth in this Section 6.02.
(d) AHPC shall have received the Security Agreement duly
executed by Aviron.
(e) AHPC shall have received certified copies of requests for
copies of information on Form UCC-11 or certificates satisfactory to AHPC of a
UCC Reporter Service, listing all effective financing statements which name as
debtor Aviron and which are filed in the appropriate offices in the state in
which are located the chief executive offices of Aviron, together with copies of
such financing statements.
(f) Each document (including, without limitation, each Uniform
Commercial Code financing statement), required by law or reasonably requested by
AHPC to be filed, registered or recorded in order to create in favor of AHPC a
perfected security interest in the Collateral shall be properly filed,
registered or recorded in each jurisdiction in which the filing,
12.
<PAGE> 13
registration or recordation thereof is so required or requested. AHPC shall have
received an acknowledgment copy, or other evidence satisfactory to it, of each
such filing, registration or recordation.
(g) AHPC shall have received the results of a search of the
Uniform Commercial Code filings made with respect to Aviron in the jurisdictions
in which Uniform Commercial Code filings have been made against Aviron pursuant
to paragraph (e) above.
(h) AHPC shall have received such other documents as it shall
reasonably deem necessary and all other legal matters in connection with the
Transactions shall be satisfactory to AHPC and its counsel.
(i) AHPC shall have entered into a subordination agreement as
contemplated by Section 13.2 of the U.S. Co-Promotion Agreement.
ARTICLE VII
AFFIRMATIVE COVENANTS
Aviron covenants and agrees that, so long as AHPC shall have any
obligation to make any Loans under this Agreement, or the principal of or
interest on any Note shall be unpaid, unless AHPC shall otherwise consent in
writing, it will:
7.01 COMPLIANCE WITH LAWS. Comply in all material respects with all
applicable laws, rules, regulations and orders applicable to the operation of
its business whether now in effect or hereafter enacted.
7.02 CORPORATE EXISTENCE. Do or cause to be done all things necessary
to preserve, renew and keep in full force and effect its legal existence, rights
(charter and statutory) and franchises.
7.03 BUSINESS AND PROPERTIES. At all times do or cause to be done all
things necessary to preserve, renew and keep in full force and effect the
rights, licenses, permits, franchises, patents, copyrights, trademarks and trade
names material to its business to the extent reasonably necessary to further the
best economic interests of Aviron; take all action which may be required to
obtain, preserve, renew and extend all material licenses, permits, franchises
and other authorizations to the extent reasonably necessary to further the best
economic interests of Aviron; and at all times maintain, preserve and protect
all property material to its business and keep such property in good repair,
working order and condition (ordinary wear and tear excepted) and from time to
time make, or cause to be made, all necessary and proper repairs, renewals,
additions, improvements and replacements thereto necessary in order that the
business carried on in connection therewith may be properly conducted at all
times.
7.04 INSURANCE. (a) Keep its insurable properties adequately insured at
all times by financially sound and reputable insurers, (b) maintain such other
insurance, to such extent and against such risks, including business
interruption, fire and other risks insured against by extended coverage, as is
customary with companies similarly situated and in the same or similar
businesses, (c) maintain in full force and effect public liability insurance
against claims for
13.
<PAGE> 14
personal injury or death or property damage occurring upon, in about or in
connection with the use of any properties owned, occupied or controlled by
Aviron, in such amount as Aviron shall reasonably deem necessary, (d) maintain
such other insurance as may be required by law or as may be reasonably requested
by AHPC for purposes of assuring compliance with this Section 7.04 and (e)
furnish to AHPC, upon written request, full information as to the insurance
carried.
7.05 TAXES. Pay and discharge promptly when due all taxes, assessments
and governmental charges or levies imposed upon it or upon its income or profits
or in respect of its property before the same shall become delinquent or in
default, as well as all lawful claims for labor, materials and supplies or
otherwise, which, if unpaid, might give rise to liens or charges upon such
properties or any part thereof unless, in each case, the validity or amount
thereof is being contested in good faith by appropriate proceedings, adequate
reserves have been established with respect thereto and no Liens have attached
to its properties or any portion thereof.
7.06 FINANCIAL STATEMENTS, REPORTS. ETC. Furnish to AHPC:
(a) Promptly as they are available and in any event: (i)
within five (5) Business days of the filing of Aviron's Form 10-K with the
Commission after the end of each fiscal year of Aviron, the financial statements
of Aviron filed with such Form 10-K, together with consolidating financial
statements with respect to Aviron and (ii) within five (5) Business Days of the
filing of Aviron's Form 10-Q with the Commission after the end of each of the
first three fiscal quarters of Aviron, the financial statements of Aviron filed
with such Form 10-Q, together with consolidating financial statements with
respect to Aviron.
(b) Promptly after the same become publicly available, copies
of any registration statements, annual, periodic, current and other reports, and
such proxy statements and other information, if any, as shall be filed by Aviron
with the Commission pursuant to the requirements of the Securities Act or the
Exchange Act;
(c) At the same time as each delivery of financial statements
pursuant to Section 7.06 (a), a certificate of Aviron's Financial Officer or
other senior officer stating that he or she has reviewed the provisions of this
Agreement and that to the best of his or her knowledge, Aviron is not in default
in the observance or performance of any of the provisions hereof, or if Aviron
shall be so in default, specifying all such defaults and events of which he or
she may have knowledge and setting forth the calculation of compliance or
noncompliance.
(d) Such other information as AHPC may reasonably request from
time to time.
7.07 LITIGATION AND OTHER NOTICES. Give AHPC prompt written notice of
the following:
(a) the issuance by any court or governmental agency or
authority of any injunction, order, decision or other restraint prohibiting, or
having the effect of prohibiting, the making of any of the Loans, or
invalidating, or having the effect of invalidating, any provision of this
Agreement or the Security Agreement or the initiation of any material litigation
or material similar proceeding seeking any such injunction, order, decision or
other restraint;
14.
<PAGE> 15
(b) the filing or commencement of any material action, suit,
proceeding or investigation against Aviron whether at law or in equity or by or
before any court or any federal, state, municipal or other governmental agency
or authority;
(c) the occurrence of any Event of Default or event or
condition which, with the giving of notice or lapse of time or both, would
constitute an Event of Default, specifying the nature and extent thereof and the
action (if any) which is proposed to be taken with respect thereto; and
(d) any development in the business or affairs of Aviron which
has resulted in or which in the good faith judgment of Aviron is reasonably
likely to result in a Material Adverse Effect.
7.08 MAINTAINING RECORDS, ACCESS TO PROPERTIES AND INSPECTIONS.
Maintain books and records in accordance with accepted business practices and,
upon reasonable notice (which may be telephonic), at all reasonable times and as
often as AHPC may reasonably request, permit any authorized representative
designated by AHPC to visit and inspect the properties and financial books and
records of Aviron and to make extracts from such books and records, and permit
any authorized representative designated by AHPC to discuss the operations,
affairs, finances and condition of Aviron, with the chief financial officer and
such other officers as such Person shall deem appropriate such Person's
independent public accountants, as applicable.
7.09 USE OF PROCEEDS. Use the proceeds of the Loans only for the
purposes set forth in Section 3.13.
7.10 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature and any additional costs that are
imposed as a result of any failure to so pay, discharge or otherwise satisfy
such obligations, except when the amount or validity of such obligations and
costs is currently being contested in good faith by appropriate proceedings and
reserves in conformity with generally accepted accounting principles with
respect thereto have been provided on the books of Aviron.
7.11 FURTHER ASSURANCES. Execute any and all further documents and take
all further actions which may be required under applicable law, or which AHPC
may reasonably request, to grant, preserve, protect and perfect the security
interest in the Collateral created by the Security Agreement.
ARTICLE VIII
NEGATIVE COVENANTS
Aviron covenants and agrees that, so long as AHPC shall have any
obligation to make any Loans under this Agreement, or the principal of or
interest on any Note shall be unpaid, Aviron will not, and will not permit any
of its Subsidiaries, without the written consent of AHPC, to:
15.
<PAGE> 16
8.01 DIVIDENDS AND DISTRIBUTIONS. Except as set forth in Schedule 8.01,
declare or pay, directly and indirectly, (i) any dividends or make any other
distributions (other than dividends or other distributions payable solely in
stock of Aviron or its Subsidiaries or dividends or other distributions payable
from Aviron's Subsidiaries to Aviron), whether in cash, property, securities or
a combination thereof, with respect to (whether by reduction of capital or
otherwise) any shares of its capital stock, or directly or indirectly redeem,
purchase, retire or otherwise acquire for value any shares of any class of its
capital stock or set aside any amount for any such purpose or (ii) any amounts
in respect of Indebtedness at any time owing to any Affiliate of Aviron.
8.02 INDEBTEDNESS. Incur, create, assume or permit to exist any Lien or
any Indebtedness other than Permitted Liens and Permitted Indebtedness, or grant
a security interest in any of Aviron's or its Subsidiaries' intellectual
property; provided, however, that, subject to the terms of the U.S. Co-Promotion
Agreement and the International License Agreement, nothing herein shall limit
Aviron's or its Subsidiaries' ability to license or assign (but not grant a
security interest in) its intellectual property if such licensing or assignment
is in the best interests of Aviron and its Subsidiaries in the good faith
judgment of Aviron.
8.03 CONSOLIDATIONS, MERGERS AND SALES OF ASSETS.
(a) Sell, lease, convey, transfer or assign to any Person or
otherwise dispose of (whether in one transaction or a series of transactions),
other than for fair value, assets (whether now owned or hereafter acquired)
having a fair market value exceeding [***], or, permit another Person to merge
into it or acquire in excess of 50% of its capital stock, or acquire all or
substantially all the capital stock or assets of any other Person, if an Event
of Default has occurred and is continuing or would result therefrom.
(b) Consolidate with or merge with or into any Person or group
of affiliated Persons in a single transaction or through a series of
transactions, unless, after giving effect thereto either (i) Aviron shall be the
continuing Person or (ii) the resulting surviving or transferee Person shall
have a Consolidated Net Worth equal to or greater than the Consolidated Net
Worth of Aviron, to be determined as of the effective date of the transaction.
8.04 BUSINESS. Alter the nature of its business in any material respect
from that of the research, development, manufacturing and marketing of medical
products.
ARTICLE IX
EVENTS OF DEFAULT
In the case of the happening of any of the following events (herein
called "Events of Default"):
(a) any representation or warranty made or deemed made in or
in connection with this Agreement, the Security Agreement or any Note or the
borrowings hereunder or in any report, certificate, financial statement or other
instrument or agreement furnished in connection
- ------------------
[***] = CONFIDENTIAL TREATMENT REQUESTED.
16.
<PAGE> 17
with this Agreement, the Security Agreement or the execution and delivery of any
Note or the borrowings hereunder shall prove to have been false or misleading in
any material respect when made or deemed to be made;
(b) default shall be made in the payment of any principal or
interest of any Note when and as the same shall become due and payable, whether
at the due date thereof or at a date fixed for prepayment thereof or by
acceleration thereof or otherwise and such default shall continue for five days
after written notice thereof;
(c) default shall be made in the due observance or performance
of any covenant, condition or agreement contained herein or in the Security
Agreement and such default shall continue for [***] days, or material default
shall be made in the due observance or performance of any covenant, condition or
agreement contained in the U.S. Co-Promotion Agreement or International License
Agreement and such default shall continue for [***] days after written notice
thereof;
(d) Aviron shall fail to pay any principal of or premium or
interest on any Indebtedness in an original aggregate amount of [***] or more
(but excluding any Indebtedness evidenced by a Note hereunder) when the same
becomes due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Indebtedness; or any other event shall occur or condition shall
exist under any agreement or instrument relating to any such Indebtedness and
shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such Indebtedness;
or any such Indebtedness shall be declared to be due and payable, or required to
be prepaid (other than by a regularly scheduled required prepayment), redeemed,
purchased or defeased, or an offer to prepay, redeem, purchase or defease such
Indebtedness shall be required to be made, in each case prior to the stated
maturity thereof;
(e) Aviron shall (i) voluntarily commence any proceeding or
file any petition seeking relief under Title 11 of the United States Code or any
other federal, state or foreign bankruptcy, insolvency, liquidation or similar
law, (ii) consent to the institution of, or fail to contravene in a timely and
appropriate manner, any such proceeding or the filing of any such petition,
(iii) apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator or similar official for such Person or for a substantial part of
its property or assets, (iv) file an answer admitting the material allegations
of a petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors, (vi) become unable, admit in writing
its inability or fail generally, to pay its debts as they become due or (vii)
take corporate action for the purpose of effecting any of the foregoing;
(f) an involuntary proceeding shall be commenced or an
involuntary petition shall be tried in a court of competent jurisdiction seeking
(i) relief in respect of Aviron or of a substantial part of its property or
assets under Title 11 of the United States Code or any other federal, state or
foreign bankruptcy, insolvency, receivership or similar law, (ii) the
appointment
[***] = CONFIDENTIAL TREATMENT REQUESTED.
17.
<PAGE> 18
of a receiver, trustee, custodian, sequestrator or similar official for Aviron
or for a substantial part of the property of Aviron, or (iii) the winding-up or
liquidation of Aviron; and such proceeding or petition shall continue
undismissed for [***] or an order or decree approving or ordering any of the
foregoing shall continue unstayed and in effect for [***];
(g) a judgment or judgments for the payment of money (not
reimbursed by insurance policies) shall be rendered by a court or other tribunal
against Aviron and (i) shall remain undischarged for a period of [***] days
from the entry thereof during which the execution of such judgment shall not
have been stayed effectively or (ii) any judgment creditor shall legally
commence actions to collect on or enforce such judgment;
(h) this Agreement, the Security Agreement or any Note shall
for any reason cease to be, or be asserted by Aviron not to be, a legal, valid
and binding obligation enforceable in accordance with its terms, or the security
interest or lien purported to be created by the Security Agreement shall for any
reason cease to be, or be asserted by Aviron not to be, a valid, perfected
security interest in any Collateral except as otherwise permitted by this
Agreement; or
(i) a Material Adverse Effect shall have occurred;
then, and in any such event (other than an event described in paragraph
(e) or (f) above), and at any time thereafter during the continuance of such
event, AHPC may, by written or telegraphic notice to Aviron, take any or all of
the following actions at the same or different times: (i) terminate forthwith
all or any portion of the obligation to make additional Loans hereunder and (ii)
declare any Note to be forthwith due and payable whereupon the principal of a
Note, together with accrued interest thereon and other liabilities of Aviron
accrued hereunder, shall become due and payable both as to principal and
interest, without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived by Aviron, anything contained herein or
in any Note to the contrary notwithstanding; provided, however, that with
respect to a default described in paragraph (e) or (f) above, the obligation to
make additional Loans hereunder shall automatically terminate and all Notes, and
any other liabilities of Aviron accrued hereunder shall automatically become due
and payable, both as to principal and interest, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by
Aviron, anything contained herein or in the Notes to the contrary
notwithstanding.
ARTICLE X
MISCELLANEOUS
10.01 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given if delivered personally,
mailed by reputable overnight courier or certified mail (return receipt
requested) or sent by telecopier (confirmed thereafter by such certified mail)
to the parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice:
(a) if to Aviron:
- ------------------
[***] = CONFIDENTIAL TREATMENT REQUESTED.
18.
<PAGE> 19
Aviron
297 North Bernardo Avenue
Mountain View, California 94043
Attention: J. Leighton Read, M.D.
Chairman and Chief Executive Officer
Fax: (650) 919-6612
With a copy to:
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306-2155
Attention: Barbara A. Kosacz, Esq.
Fax: (650) 857-0663
(b) if to AHPC:
American Home Products Corporation
Five Giralda Farms
Madison, New Jersey 07940
Attention: Treasurer
Fax:; and
a copy to General Counsel
Fax: (973) 660-7155
Notices so given shall (in the case of notice so given by mail) be
deemed to be given and received on the third calendar day after mailing or the
next Business Day if sent by a reputable overnight courier and (in the case of
notice so given by telecopier or personal delivery) on the date of actual
transmission (as the case may be) personal delivery.
10.02 SURVIVAL OF AGREEMENT. All covenants, agreements, representations
and warranties made by Aviron herein and in the certificates or other
instruments prepared or delivered in connection with this Agreement or the
Security Agreement shall be considered to have been relied upon by AHPC and
shall survive the making of the Loans and the execution and delivery of the
Notes and shall continue in full force and effect as long as the principal of or
any accrued interest on the Notes or any other amount payable under the Notes or
this Agreement is outstanding and unpaid.
10.03 SUCCESSORS AND ASSIGNS. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of Aviron or AHPC that are contained in this Agreement shall
bind and inure to the benefit of their respective successors and assigns. Aviron
may not assign or transfer any of its rights or obligations hereunder without
the written consent of AHPC. AHPC may assign, to any one or more Persons, all or
a portion of its interests, rights and obligations under this Agreement or the
Security Agreement (including,
19.
<PAGE> 20
without limitation, all or a portion of the Loans at the time owing to it and
the same portion of the Note held by it); provided, however, except following
the occurrence of an Event of Default, AHPC may not assign any such interests,
rights, and obligations to a Person that is not an Affiliate of AHPC without the
written consent of Aviron.
10.04 EXPENSES; INDEMNITY.
(a) Aviron agrees to pay all out-of-pocket expenses incurred
by AHPC in connection with the enforcement or protection (whether through
negotiations, legal proceedings or otherwise) of its rights in connection with
this Agreement, the Security Agreement, a Note and the other documents to be
delivered hereunder or with the Loans made or a Note, or in connection with any
pending or threatened action, proceeding, or investigation relating to the
foregoing, including but not limited to the reasonable fees and disbursements of
counsel. Aviron further agrees that it shall indemnify AHPC from and hold it
harmless against any documentary taxes, assessments or charges payable or
determined to be payable in connection with the execution and delivery of this
Agreement, the Security Agreement, a Note and the other documents to be
delivered hereunder.
(b) Aviron agrees to indemnify AHPC and its directors,
officers, employees and agents against, and to hold AHPC and each such Person
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable counsel fees and expenses, incurred by or
asserted against AHPC or any such Person arising out of, in any way connected
with, or as a result of this Agreement or the other documents contemplated
hereby or thereby, the performance by the parties hereto and thereto of their
respective obligations hereunder and thereunder and consummation of the
transactions contemplated hereby and thereby; or any claim, litigation,
investigation or proceedings relating to any of the foregoing, whether or not
AHPC or any such Person is a party thereto; provided that such indemnity shall
not apply to any such losses, claims, damages, liabilities or related expenses
to the extent that they result from the gross negligence or willful misconduct
of AHPC.
(c) The provisions of this Section 10.04 shall remain
operative and in full force and effect regardless of the expiration of the term
of this Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement or a Note, or any investigation made by or on behalf
of AHPC. All amounts due under this Section 10.04 shall be payable on written
demand therefore.
10.05 APPLICABLE LAW. This Agreement, the Security Agreement and the
Note shall be governed by and interpreted under the laws of the State of [***]
as applied to contracts entered into and performed entirely in [***] residents.
10.06 PAYMENTS ON BUSINESS DAYS. Should the principal of or interest on
the Note or any fee or other amount payable hereunder become due and payable on
other than a Business Day, payment in respect thereof may be made on the next
succeeding Business Day, and such
20.
<PAGE> 21
extension of time shall in such ease be included in computing interest, it any,
in connection with such payment.
10.07 WAIVERS; AMENDMENTS.
(a) No failure or delay of AHPC in exercising any power or
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of AHPC hereunder are cumulative and not exclusive of any rights or
remedies which they may otherwise have. No waiver of any provision of this
Agreement or any Note nor consent to any departure by Aviron therefrom shall in
any event be effective unless the same shall be authorized as provided in
paragraph (b) below, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on Aviron in any case shall entitle any such party to any other or
further notice or demand in similar or other circumstances. Each holder of any
Note shall be bound by any amendment, modification, waiver or consent authorized
as provided herein, whether or not any Note shall have been marked to indicate
such amendment, modification, waiver or consent.
(b) Neither this Agreement, nor any provision hereof, may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by Aviron and AHPC.
10.08 SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement or in a Note should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein or therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
10.09 ENTIRE AGREEMENT; AMENDMENTS; ETC. This Agreement, the U. S.
Co-Promotion Agreement, the International License Agreement and the FluMist(TM)
Supply Agreement entered into by and between Aviron and AHPC as of even date
herewith (collectively, the "Agreements"), including all Exhibits and Schedules
attached thereto, set forth all the covenants, promises, agreements, warranties,
representations, conditions and understandings between Aviron and AHPC with
respect to the subject matter thereof, and supersede and terminate all prior
agreements and understandings between Aviron and AHPC with respect to such
subject matter, except as provided in Section 11.3(e) of the International
License Agreement. There are no covenants, promises, agreements, warranties,
representations, conditions or understandings, either oral or written, between
Aviron and AHPC with respect to the subject matter thereof other than as set
forth therein. No subsequent alteration, amendment, change or addition to the
Agreements shall be binding upon Aviron and AHPC hereto unless reduced to
writing and signed by the respective authorized officers of each of Aviron and
AHPC. The Agreements, including without limitation, the Exhibits, Schedules and
attachments thereto, are intended to define the full extent of the legally
enforceable undertakings of Aviron and AHPC thereto with respect to the subject
matter thereof, and no promise or representation, written or oral, which is
21.
<PAGE> 22
not set forth explicitly is intended by either Aviron and AHPC to be legally
binding. Both Aviron and AHPC acknowledge that in deciding to enter into the
Agreements and to consummate the transaction contemplated thereby neither Aviron
and AHPC has relied upon any statement or representations, written or oral,
other than those explicitly set forth therein.
10.10 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall constitute an original but all of which when taken together
shall constitute but one contract.
10.11 HEADINGS. Article and Section headings and the Table of Contents
used herein are for convenience of reference only and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Agreement.
10.12 EFFECTIVENESS OF THIS AGREEMENT. This Agreement shall become
effective upon the Effective Date (as defined in the U.S. Co-Promotion
Agreement), and shall terminate upon the later of (a) the Availability
Termination Date and (b) the repayment in full of all principal, interest and
other amounts by Aviron hereunder and under the Notes.
22.
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
AMERICAN HOME PRODUCTS CORPORATION AVIRON
By: /s/ Gerad A. Jibilian By: /s/ Carol A. Olson
------------------------------ ---------------------------------
CAROL A. OLSON
SENIOR VICE PRESIDENT,
COMMERCIAL DEVELOPMENT
23.
<PAGE> 24
SCHEDULE 2.08
TERMS OF WARRANTS
TERMS OF WARRANTS FOR WYETH-AYERST TO PURCHASE COMMON STOCK IN AVIRON
o Warrants will be issued on the date Aviron receives a loan from
Wyeth-Ayerst under Section 2 of this agreement: the "Date of Issue."
o Warrants issued will have a 3-year Term from the Date of Issue, or will
expire earlier upon a merger or consolidation of Aviron.
o The strike price of the Warrants will be the 30-day trailing average of the
Fair Market Value of Aviron Common Stock on the Date of Issue.
o The Number of Warrants issued for each Loan will be calculated by Aviron
using the Black-Scholes Option Pricing Model on the Date of Issue, provided
that such calculation is subject to AHPC's acceptance of such calculation.
If the parties disagree on such calculation, the calculation shall be made
by a mutually acceptable independent third party. All such calculations
shall be made using the following assumptions:
<TABLE>
<S> <C> <C>
Po Value of option Amount of Loan Multiplied by 5% Multiplied by the Loan Term
Divided by the Number of Warrants Granted
For example: $10,000,000 X 5% X 5 Years=$2,500,000
Ps Current price of stock 30 day-trailing Fair Market Value of Aviron Common Stock
on Date of Issue
E Exercise price of option 30 day-trailing Fair Market Value of Aviron Common Stock
on Date of Issue
e Constant used in 2.718
Black-Scholes Option
Pricing Model
t Time remaining until 3 Years
expiration
r Risk Free Interest Rate To be calculated on Date of Issue
v Volatility To be calculated based on the daily closing price of Aviron Common Stock in
the previous 12 month period of time prior to the Date of Issue
</TABLE>
24.
<PAGE> 25
SCHEDULE 3.04
EXISTING INDEBTEDNESS
1. $100,000,000 aggregate principal amount of 5-3/4% convertible subordinated
notes due 2005 issued by Aviron under an Indenture dated as of March 15, 1998,
by and between Aviron and Marine Midland Bank, as trustee
2. Approximately $554,000 remaining aggregate principal amount under an
Equipment Financing Agreement Number 10768 between Lease Management Services,
Inc. and Aviron
25.
<PAGE> 26
SCHEDULE 3.09
MATERIAL ADVERSE CHANGE
None
26.
<PAGE> 27
SCHEDULE 8.01
DIVIDENDS AND DISTRIBUTIONS
None
27.
<PAGE> 28
EXHIBIT A
FORM OF WARRANT
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
AVIRON
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
No. CSW-__ _________ Shares
FOR VALUE RECEIVED, AVIRON, a Delaware corporation (the "Company"),
with its principal office at 297 North Bernardo Avenue, Mountain View, CA 94043,
hereby certifies that American Home Products Corporation or its assigns (the
"Holder") is entitled, subject to the provisions of this Warrant, to purchase
from the Company, at any time prior to the Expiration Date (as defined in
Section 11 below), _______ fully paid and nonassessable shares of Common Stock
of the Company, at an exercise price per share equal to _____________ (the
"Exercise Price"). The term "Common Stock" shall mean the aforementioned Common
Stock of the Company, together with any other equity securities that may be
issued by the Company in addition thereto or in substitution therefor as
provided herein.
The number of shares of Common Stock to be received upon the exercise
of this Warrant and the price to be paid for a share of Common Stock are subject
to adjustment from time to time as hereinafter set forth. The shares of Common
Stock deliverable upon such exercise, as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares."
SECTION 1. EXERCISE OF WARRANT. This Warrant may be exercised in whole
or in part on any business day prior to the Expiration Date by presentation and
surrender to the Company at its principal office at the address set forth in the
initial paragraph hereof (or at such other address as the Company may hereafter
notify the Holder in writing) with the Purchase Form annexed hereto duly
executed and accompanied by proper payment of the Exercise Price in lawful money
of the United States of America in the form of a check, subject to collection,
for the number of Warrant Shares specified in the Purchase Form. If this Warrant
should be exercised in part only, the Company shall, upon surrender of this
Warrant, execute and deliver a
28.
<PAGE> 29
new Warrant evidencing the rights of the Holder thereof to purchase the balance
of the Warrant Shares purchasable hereunder. Upon receipt by the Company of this
Warrant and such Purchase Form, together with proper payment of the Exercise
Price, at such office, the Holder shall be deemed to be the holder of record of
the Warrant Shares, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such Warrant Shares shall
not then be actually delivered to the Holder.
SECTION 2. NET ISSUE EXERCISE. Notwithstanding any provisions herein to
the contrary, in lieu of exercising this Warrant for cash, the Holder may elect
to receive shares equal to the value (as determined below) of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with the Net Issue Exercise Form
annexed hereto duly executed in which event the Company shall issue to the
Holder a number of shares of Common Stock computed using the following formula:
X = Y (A - B)
---------
A
Where X = the number of shares of Common Stock to be
issued to the Holder
Y = the number of shares of Common Stock purchasable
under the Warrant or, if only a portion of the
Warrant is being exercised, the number of shares
purchased under the Warrant being canceled (at the
date of such calculation)
A = the fair market value as determined by the
closing sales price on the date of exercise of one
share of the Company's Common Stock as quoted on
NASDAQ
B = Exercise Price (as adjusted to the date of such
calculation)
SECTION 3. ISSUANCE OF NEW WARRANT. In the event of any exercise of the
rights represented by this Warrant, certificates for the Warrant Shares so
purchased shall be delivered to the holder hereof as soon as practicable and,
unless this Warrant has been fully exercised or has expired, a new Warrant
representing the portion of the Warrant Shares, if any, with respect to which
this Warrant shall not then have been exercised shall also be issued to the
holder hereof within a reasonable time. Such exercise shall be deemed to have
been made immediately prior to the close of business on the date of surrender of
this Warrant.
SECTION 4. RESERVATION OF SHARES. The Company hereby agrees that at all
times while any shares may be purchased pursuant to this Warrant Agreement there
shall be reserved for issuance and delivery upon exercise of this Warrant all
shares of its Common Stock or other shares of capital stock of the Company from
time to time issuable upon exercise of this Warrant. All such shares shall be
duly authorized and, when issued upon such exercise in accordance with the terms
of this Warrant, shall be validly issued, fully paid and nonassessable.
33.
<PAGE> 30
SECTION 5. FRACTIONAL INTEREST. The Company will not issue a fractional
share of Common Stock upon exercise of this Warrant. Instead, the Company will
deliver its check for the current fair market value of the fractional share as
determined in good faith by the Company.
SECTION 6. ASSIGNMENT OR LOSS OF WARRANT.
(a) Except as provided in Section 10, the Holder of this
Warrant shall be entitled, without obtaining the consent of the Company, to
assign its interest in this Warrant in whole or in part to any person or
persons. Subject to the provisions of Section 10, upon surrender of this Warrant
to the Company or at the office of its stock transfer agent or warrant agent,
with the Assignment Form annexed hereto duly executed and funds sufficient to
pay any transfer tax, the Company shall, without charge, execute and deliver a
new Warrant or Warrants in the name of the assignee or assignees named in such
instrument of assignment and, if the Holders entire interest is not being
assigned, in the name of the Holder, and this Warrant shall promptly be
canceled.
(b) Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and (in
the case of loss, theft or destruction) of indemnification satisfactory to the
Company (with such lost or stolen Warrant being duly canceled on the books and
records of the Company), and upon surrender and cancellation of this Warrant, if
mutilated, the Company shall execute and deliver a new Warrant of like tenor and
date.
SECTION 7. RIGHTS OF THE HOLDER. The Holder shall not, by virtue
hereof, be entitled to any rights of a shareholder in the Company, either at law
or equity, and the rights of the Holder are limited to those expressed in this
Warrant. Nothing contained in this Warrant shall be construed as conferring upon
the Holder hereof the right to vote or to consent or to receive notice as a
shareholder of the Company on any matters or with respect to any rights
whatsoever as a shareholder of the Company. No dividends or interest shall be
payable or accrued in respect of this Warrant or the interest represented hereby
or the Warrant Shares purchasable hereunder until, and only to the extent that,
this Warrant shall have been exercised in accordance with its terms.
SECTION 8. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The
number and kind of securities purchasable upon the exercise of the Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) RECLASSIFICATION OF OUTSTANDING SECURITIES. In case of any
reclassification, change or conversion of securities of the class issuable upon
exercise of this Warrant (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination), the Company shall execute a new Warrant (in form and substance
reasonably satisfactory to the Holder of this Warrant) providing that the Holder
of this Warrant shall have the right to exercise such new Warrant and upon such
exercise to receive, in lieu of each share of Common Stock theretofore issuable
upon exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification or change
by a holder of one share of Common Stock. Such new Warrant shall provide for
adjustments that shall be as nearly equivalent as may
34.
<PAGE> 31
be practicable to the adjustments provided for in this Section 8. The provisions
of this subsection (a) shall similarly apply to successive reclassification or
changes.
(b) SUBDIVISIONS OR COMBINATION OF SHARES. If the Company at
any time while this Warrant remains outstanding and unexpired shall subdivide or
combine its Common Stock, the Exercise Price and the number of Warrant Shares
issuable upon exercise hereof shall be proportionately adjusted.
(c) STOCK DIVIDENDS. If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend payable in shares of
Common Stock (except any distribution specifically provided for in the foregoing
subsections (a) and (b)), then the Exercise Price shall be adjusted, from and
after the date of determination of shareholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Exercise
Price in effect immediately prior to such date of determination by a fraction
(a) the numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution, and (b) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution and the number of
Warrant Shares subject to this Warrant shall be proportionately adjusted.
(d) NOTICE OF RECORD DATE. In the event of any taking by the
Company of a record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend (other than a
cash dividend) or other distribution, any right to subscribe for, purchase or
otherwise acquire any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed merger or consolidation of
the Company with or into any other corporation, or any proposed sale, lease or
conveyance of all or substantially all of the assets of the Company, or any
proposed liquidation, dissolution or winding up of the Company, the Company
shall mail to the Holder of this Warrant, at least twenty days prior to the date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
(e) NO ADJUSTMENT UPON EXERCISE OF WARRANTS. No adjustments
shall be made under any Section herein in connection with the issuance of
Warrant Shares upon exercise of the Warrants.
SECTION 9. OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of Section 8, the Company shall deliver
an officer's certificate showing the adjusted Exercise Price determined as
herein provided, setting forth in reasonable detail the facts requiring such
adjustment and the manner of computing such adjustment. Each such officer's
certificate shall be signed by the chairman, president or chief financial
officer of the Company.
SECTION 10. TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933. This
Warrant may not be exercised and neither this Warrant nor any of the Warrant
Shares, nor any interest in either, may be sold, assigned, pledged,
hypothecated, encumbered or in any other manner transferred or disposed of, in
whole or in part, except in compliance with applicable United
35.
<PAGE> 32
States federal and state securities or Blue Sky laws and the terms and
conditions hereof. Each Warrant shall bear a legend in substantially the same
form as the legend set forth on the first page of this Warrant. Each certificate
for Warrant Shares issued upon exercise of this Warrant, unless at the time of
exercise such Warrant Shares are acquired pursuant to a registration statement
that has been declared effective under the Securities Act of 1933 (the "Act"),
shall bear a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
Any certificate for any Warrant Shares issued at any time in exchange or
substitution for any certificate for any Warrant Shares bearing such legend
(except a new certificate for any Warrant Shares issued after the acquisition of
such Warrant Shares pursuant to a registration statement that has been declared
effective under the Act) shall also bear such legend unless, in the opinion of
counsel for the Company, the Warrant Shares represented thereby need no longer
be subject to the restriction contained herein. The provisions of this Section
10 shall be binding upon all subsequent Holders of certificates for Warrant
Shares bearing the above legend and all subsequent Holders of this Warrant, if
any. In addition, in connection with the issuance of this Warrant, the Holder
specifically represents to the Company by acceptance of this Warrant as follows:
(a) The Holder is an "accredited investor" as defined in Rule
501(a) under the Act. Investor has such business and financial experience as is
required to give it the capacity to protect its own interests in connection with
the purchase of the Warrants and the Warrant Shares. The Holder is acquiring
this Warrant for its own account for investment purposes only and not with a
view to, or for the resale in connection with, any "distribution" thereof in
violation of the Act.
(b) The Holder understands that this Warrant has not been
registered under the Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of the Holder's
investment intent as expressed herein.
(c) The Holder further understands that this Warrant must be
held indefinitely unless subsequently registered under the Act and qualified
under any applicable state securities laws, or unless exemptions from
registration and qualification are otherwise available.
36.
<PAGE> 33
SECTION 11. EXPIRATION DATE. This Warrant shall expire and shall be
wholly void and have no effect after 5:00 p.m. (San Francisco time) on the date
which is the earlier of (a) the third anniversary of the date hereof, or (b) the
business day immediately preceding the closing date of a merger or consolidation
of the Company with or into any other entity, including a reverse triangular
merger involving the Company (other than a merger or consolidation in which the
Holders of the voting power of the Company immediately prior to such
consolidation or merger hold a majority of the surviving or resulting entity
immediately following such consolidation or merger), provided that, if the last
day on which this Warrant may be exercised, or on which it may be exercised at a
particular Exercise Price, is a Sunday or a legal holiday or a day on which
banking institutions doing business in the city of San Francisco are authorized
by law to close, this Warrant may be exercised prior to 5:00 p.m. (San Francisco
time) on the next succeeding full business day with the same force and effect
and at the same Exercise Price as if exercised on such last day specified
herein.
SECTION 12. COMPETITION LAWS. At the time of exercise of this Warrant,
it will be necessary for the Company to undertake a review of such exercise to
determine if a filing with the U.S. Federal Trade Commission and the U.S.
Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules promulgated thereunder (16 C.F.R. Sections 801.1
et seq.) is required, and if such filing is required, the Company and Investor
(or its successor) shall promptly make any such required filings.
SECTION 13. GOVERNING LAW. This Warrant is delivered in the State of
California and shall be construed in accordance with and governed by the laws of
that State.
SECTION 14. MODIFICATION AND WAIVER. Neither this Warrant nor any term
hereof may be amended, waived, discharged or terminated other than by an
instrument in writing signed by the Company and by the Holder hereof.
SECTION 15. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Company shall be
delivered or shall be sent by certified mail, postage prepaid, to each such
Holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor in the first paragraph of this Warrant.
SECTION 16. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description
headings of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of California.
SECTION 17. ENTIRE AGREEMENT. This Warrant constitutes the entire
agreement between the parties pertaining to the subject matter herein and
supersedes all prior and contemporaneous agreements, representation and
undertakings of the parties.
37.
<PAGE> 34
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be
signed by its duly authorized officer and to be dated as of ________________.
AVIRON
By:
-------------------------------------
J. Leighton Read, M.D.
Chairman and Chief Executive Officer
38.
<PAGE> 35
EXHIBIT B
FORM OF BORROWING NOTICE
American Home Products Corporation
Five Giralda Farms
Madison, New Jersey 07940
Gentlemen:
Reference is made to the Credit Agreement, dated as of January 11, 1998
(the "Credit Agreement"), between Aviron ("Aviron") and American Home Products
Corporation. Terms not defined herein shall have the meanings assigned to such
terms in the Credit Agreement.
Pursuant to Section 2.01 of the Credit Agreement, Aviron hereby
requests that a Loan be made on _________ in the amount of $______________.
NOTE: THE AMOUNT APPEARING ABOVE MUST BE IN A WHOLE MULTIPLE OF [***]
SUBJECT TO AVIRON'S RIGHT TO DRAWDOWN THE BALANCE WHERE THE BALANCE IS
LESS THAN [***]
The representations and warranties contained in Article III of the
Credit Agreement are true and correct on and as of the date hereof and will be
true and correct on and as of the date of the Loan requested hereby as though
made on and as of the date hereof and the date of the Loan requested hereby
(except insofar as such representations and warranties relate expressly to an
earlier date).
No event has occurred and is continuing, or would result from the Loan
requested hereby, or from the application of the proceeds thereof which
constitutes an Event of Default under the Credit Agreement.
Very truly yours,
AVIRON
By:
-----------------------------------------
Name:
Title:
- ------------------
[***] = CONFIDENTIAL TREATMENT REQUESTED.
1.
<PAGE> 36
EXHIBIT C
FORM OF NOTE
$__________ Mountain View, California
FOR VALUE RECEIVED, the undersigned, AVIRON, a Delaware
corporation (the "Maker"), hereby promises to pay to the order of AMERICAN HOME
PRODUCTS CORPORATION, a Delaware corporation ("AHPC"), on ________ (or earlier
as provided in the Credit Agreement dated as of January 11, 1999 between the
Maker and AHPC (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement")), the aggregate unpaid principal amount of all
Loans made by AHPC to the Maker pursuant to Sections 2.01 of the Credit
Agreement, in lawful money of the United States of America in immediately
available funds, and to pay interest from the date hereof on the principal
amount hereof from time to time outstanding, in like funds, at AHPC's office, at
a rate or rates per annum and payable on such dates as determined pursuant to
the terms of the Credit Agreement. Interest on the unpaid principal amount of
this Note shall be paid from the date of this Note until such principal amount
is paid in full and shall accrue at a floating rate per annum equal to [***].
All accrued and unpaid interest shall be payable on the last Business Day of
each calendar quarter beginning on [end of first calendar quarter after a Loan
is made]. The principal amount of this Note shall payable in full on [date that
is [***] after date of the Note]. Notwithstanding the foregoing, interest shall
continue to accrue on all principal amounts outstanding under the Loans until
payment in full.
The Maker hereby waives diligence, presentment, demand,
protest and notice of any kind whatsoever. The nonexercise by the holder of any
of its rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
All borrowings evidenced by this Note and all payments and
prepayments of the principal hereof and interest hereon and the respective dates
thereof shall be endorsed by the holder hereof on the schedule attached hereto
and made a part hereof, or on a continuation thereof which shall be attached
hereto and made a part hereof, or otherwise recorded by such holder in its
internal records; provided, however, that the failure of the holder hereof to
make such a notation or any error in such a notation shall not in any manner
affect the obligation of the Maker to make payments of principal and interest in
accordance with the terms of this Note and the Credit Agreement.
This Note is secured by personal property collateral pursuant
to, and is entitled to the benefits of, the Security Agreement (as defined in
the Credit Agreement). Reference is made to the Security Agreement for the terms
and conditions governing the collateral security for the obligations of Aviron
hereunder.
Upon the occurrence of any one or more of the Events of
Default specified in the Credit Agreement, all amounts unpaid on the Note shall
become, or may be declared to be, immediately due and payable, all as provided
therein.
________
[***] = CONFIDENTIAL TREATMENT REQUESTED.
1.
<PAGE> 37
This Note is referred to in the Credit Agreement, which, among
other things, contains provisions for the acceleration of the maturity hereof
upon the happening of certain events, for optional and mandatory prepayment of
the principal hereof prior to the maturity hereof and for the amendment or
waiver of certain conditions therein specified. THIS NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO CHOICE OF LAW DOCTRINE.
Terms not defined herein shall have the meaning assigned to
such terms in the Credit Agreement.
AVIRON
By:
-----------------------------------------
Name:
Title:
2.
<PAGE> 38
Loans and Payments
<TABLE>
<CAPTION>
Unpaid Name of
Principal Person
Payments Balance Making
Date Amount Principal Interest of Note Notation
- ---- ------ ------------------ --------- --------
<S> <C> <C> <C> <C>
</TABLE>
3.
<PAGE> 39
SUBSCRIPTION FORM
THE UNDERSIGNED, holder of this Warrant, (1) hereby irrevocably elects
to exercise the right of purchase represented by this Warrant for, and to
purchase thereunder, ________________ full shares of the Common Stock of Aviron
provided for therein, (2) makes payment in full of the purchase price of such
shares, (3) requests that certificates for such shares be issued in the name of
----------------------------------------------------------------
(Please print name and address)
----------------------------------------------------------------
(Please insert social security or other identifying number)
and (4) if said number of shares shall not be all the shares purchasable
thereunder, requests that a new Warrant for the unexercised portion of this
Warrant be issued in the name of and delivered to:
----------------------------------------------------------------
----------------------------------------------------------------
(Please print name and address)
Dated:
---------------------------------------------
Signature:
---------------------------------------------
By:
---------------------------------------------
1.
<PAGE> 40
ASSIGNMENT FORM
Dated _________, 19__
FOR VALUE RECEIVED, ________________________________ hereby sells,
assigns and transfers unto _________________________________________________
(the "Assignee"),________________________________________________
(please type or print in block letters)
- --------------------------------------------------------------------------------
(insert address)
its right to purchase up to ____ shares of Common Stock of AVIRON represented by
this Warrant and does hereby irrevocably constitute and appoint
____________________________ Attorney, to transfer the same on the books of the
Company, with full power of substitution in the premises.
Signature
--------------------------
2.
<PAGE> 41
NET ISSUE ELECTION NOTICE
The undersigned, _______________________, hereby irrevocably elects
under Section 2 of the within Warrant to surrender the right to purchase
________ shares of Common Stock pursuant to this Warrant. The certificate(s) for
the shares issuable upon such net issue election shall be issued in the name of
the undersigned or as otherwise indicated below.
Date: ________,_______
-----------------------------------------
[Signature]
-----------------------------------------
[Name of Registration]
-----------------------------------------
[Street Address]
-----------------------------------------
[City and State]
<PAGE> 42
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I DEFINITIONS.....................................................................................1
1.01 "Affiliate".....................................................................................1
1.02 "Availability Termination Date".................................................................1
1.03 "Business Day"..................................................................................1
1.04 "Capital Stock".................................................................................2
1.05 "Collateral"....................................................................................2
1.06 "Commission"....................................................................................2
1.07 "Common Stock"..................................................................................2
1.08 "Consolidated Net Worth"........................................................................2
1.09 "U.S. Co-Promotion Agreement"...................................................................2
1.10 "Credit Event"..................................................................................2
1.11 "Dollars".......................................................................................2
1.12 "Drawdown Date".................................................................................2
1.13 "Event of Default"..............................................................................2
1.14 "Exchange Act"..................................................................................2
1.15 "FDA"...........................................................................................2
1.16 "Financial Officer".............................................................................2
1.17 "Guarantee".....................................................................................2
1.18 "Indebtedness"..................................................................................2
1.19 "International License Agreement"...............................................................3
1.20 "Lien"..........................................................................................3
1.21 "Loans".........................................................................................3
1.22 "Material Adverse Effect".......................................................................3
1.23 "Note or Notes".................................................................................3
1.24 "Permitted Indebtedness"........................................................................3
1.25 "Permitted Liens"...............................................................................3
1.26 "Person"........................................................................................4
1.27 "Preferred Stock"...............................................................................4
1.28 "Prime Rate"....................................................................................4
1.29 "Responsible Officer"...........................................................................4
</TABLE>
<PAGE> 43
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1.30 "SEC Documents".................................................................................4
1.31 "Securities Act"................................................................................4
1.32 "Security Agreement"............................................................................4
1.33 "Subsidiary"....................................................................................5
1.34 "Transactions"..................................................................................5
ARTICLE II THE LOANS.......................................................................................5
2.01 The Loans.......................................................................................5
2.02 Notice of Borrowings............................................................................5
2.03 Notes; Repayment of Loans.......................................................................5
2.04 Interest on Loans...............................................................................6
2.05 [***]...........................................................................................6
2.06 Interest on Overdue Amounts.....................................................................6
2.07 Prepayment of Loans.............................................................................6
2.08 Warrants........................................................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF AVIRON........................................................7
3.01 Organization, Corporate.........................................................................7
3.02 Authorization...................................................................................7
3.03 Capitalization..................................................................................8
3.04 Indebtedness....................................................................................8
3.05 Full Disclosure.................................................................................8
3.06 SEC Filings.....................................................................................8
3.07 Governmental Approvals..........................................................................8
3.08 Binding Effect..................................................................................9
3.09 Material Adverse Change.........................................................................9
3.10 Litigation; Compliance with Laws; etc...........................................................9
3.11 Taxes...........................................................................................9
3.12 Investment Company Act..........................................................................9
3.13 Use of Proceeds.................................................................................9
3.14 Security Interest..............................................................................10
</TABLE>
- ------------------
[***] = CONFIDENTIAL TREATMENT REQUESTED.
<PAGE> 44
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
3.15 Title to Properties; Possession Under Leases; Trademarks.......................................10
3.16 Absence of Certain Developments................................................................10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF AHPC.........................................................11
4.01 Investment Intent..............................................................................11
4.02 No Legal, Tax or Investment Advice.............................................................11
4.03 Corporate Power; Authority.....................................................................11
ARTICLE V RESTRICTIONS ON TRANSFER.......................................................................11
5.01 Restrictions on Transferability................................................................11
ARTICLE VI CONDITIONS OF CREDIT EVENTS....................................................................11
6.01 All Credit Events..............................................................................11
6.02 Initial Drawdown Date..........................................................................12
ARTICLE VII AFFIRMATIVE COVENANTS..........................................................................13
7.01 Compliance With Laws...........................................................................13
7.02 Corporate Existence............................................................................13
7.03 Business and Properties........................................................................13
7.04 Insurance......................................................................................13
7.05 Taxes..........................................................................................14
7.06 Financial Statements, Reports. etc.............................................................14
7.07 Litigation and Other Notices...................................................................14
7.08 Maintaining Records, Access to Properties and Inspections......................................15
7.09 Use of Proceeds................................................................................15
7.10 Payment of Obligations.........................................................................15
7.11 Further Assurances.............................................................................15
ARTICLE VIII NEGATIVE COVENANTS.............................................................................15
8.01 Dividends and Distributions....................................................................16
8.02 Indebtedness...................................................................................16
8.03 Consolidations, Mergers and Sales of Assets....................................................16
8.04 Business.......................................................................................16
ARTICLE IX EVENTS OF DEFAULT..............................................................................16
ARTICLE X MISCELLANEOUS..................................................................................18
10.01 Notices........................................................................................18
</TABLE>
<PAGE> 45
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
10.02 Survival of Agreement..........................................................................19
10.03 Successors and Assigns.........................................................................19
10.04 Expenses; Indemnity............................................................................20
10.05 Applicable Law.................................................................................20
10.06 Payments on Business Days......................................................................20
10.07 Waivers; Amendments............................................................................21
10.08 Severability...................................................................................21
10.09 Entire Agreement; Amendments; etc..............................................................21
10.10 Counterparts...................................................................................22
10.11 Headings.......................................................................................22
10.12 Effectiveness of This Agreement................................................................22
SCHEDULE 2.08 TERMS OF WARRANTS.................................................................................24
SCHEDULE 3.04 EXISTING INDEBTEDNESS.............................................................................25
SCHEDULE 3.09 MATERIAL ADVERSE CHANGE...........................................................................26
SCHEDULE 8.01 DIVIDENDS AND DISTRIBUTIONS.......................................................................27
EXHIBIT A FORM OF WARRANT.......................................................................................28
EXHIBIT B FORM OF BORROWING NOTICE..............................................................................
EXHIBIT C FORM OF NOTE..........................................................................................
</TABLE>
<PAGE> 1
AVIRON
FORM 1998 10K
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Forms S-8, No. 333-17029 and 333-58955) pertaining to the 1996 Equity Incentive
Plan, Employee Stock Purchase Plan, 1996 Non-Employee Directors' Stock Option
Plan and the Non-Plan Option Grants and in the Registration Statements (Forms
S-3, No. 333-41649 and 333-50505) of Aviron of our report dated February 17,
1999, with respect to the financial statements of Aviron included in this Annual
Report (Form 10-K) for the year ended December 31, 1998.
/s/ Ernst & Young LLP
Palo Alto, California
March 25, 1999
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