SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): AUGUST 29, 2001
ISIS PHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
000-19125 330336973
(Commission File No.) (IRS Employer Identification No.)
2292 FARADAY AVENUE
CARLSBAD, CA 92008
(Address of Principal Executive Offices and Zip Code)
Registrant's telephone number, including area code: (760) 931-9200
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Under the terms of a Securities Purchase Agreement between Isis
Pharmaceuticals, Inc. and Eli Lilly and Company, on August 29, 2001, Lilly
purchased 4,166,667 shares, or approximately nine percent (9%), of Isis' Common
Stock at an aggregate purchase price of $75 million, or $18 per share. In
addition, Lilly has committed to loan Isis $100 million to fund a research
collaboration pursuant to a Collaboration Agreement between Isis and Lilly which
provides for Isis and Lilly to collaborate over a four-year period for the
discovery of antisense drugs for metabolic and inflammatory diseases. In
connection with the research collaboration, the companies will use the Isis
GeneTrove antisense technology to determine the functional role of human genes
in disease and to identify genes as potential drug targets for the antisense
drug discovery collaboration. The loan is repayable in cash or, at Isis' option,
convertible into Isis Common Stock at a conversion price of $40 per share at the
end of the research collaboration's term.
Isis and Lilly also entered into a Development and License Agreement
(the "License Agreement"), pursuant to which Lilly has licensed ISIS 3521, an
antisense compound in early Phase III clinical trials for the treatment of
non-small cell lung cancer. Under the License Agreement Lilly has obtained
exclusive worldwide commercialization rights to ISIS 3521. For the license of
ISIS 3521, Lilly has agreed to pay Isis $25 million in upfront fee. In
addition, Lilly will reimburse Isis for the remaining Phase III development
and registration costs. Isis may receive up to $50 million in milestone
payments upon successful submissions and approvals of ISIS 3521 for the
treatment of non-small cell lung cancer and royalties on product sales, as
well as additional milestones and royalties for other indications. Isis may
also receive licensing fees, milestones, royalties and other contingent
payments based on the success of the gene functionalization and antisense
drug discovery programs.
The terms of the license, research and investment arrangements were
determined in negotiations between Isis and Lilly and their respective
representatives and were subject to approval of the United States Federal
Antitrust Agencies.
ITEM 7. EXHIBITS.
2.1 Securities Purchase Agreement, dated August 17, 2001, between
Isis Pharmaceuticals, Inc. and Eli Lilly and Company.
2.2 Loan Agreement, dated August 17, 2001, between Isis
Pharmaceuticals, Inc. and Eli Lilly and Company.
2.3 Registration Rights and Standstill Agreement, dated August 17,
2001, between Isis Pharmaceuticals, Inc. and Eli Lilly and
Company.
2.4 Collaboration Agreement, dated August 17, 2001, between Isis
Pharmaceuticals, Inc. and Eli Lilly and Company. (Certain
confidential information deleted)
2.5 Development and License Agreement, dated August 14, 2001,
between Isis Pharmaceuticals, Inc. and Eli Lilly and Company.
(Certain confidential
1.
information deleted)
2.6 Isis 3521 Clinical Supply Agreement, dated August 29, 2001,
between Isis Pharmaceuticals, Inc. and Eli Lilly and Company,
which is Exhibit B to the Development and License Agreement
dated August 14, 2001 (i.e., Exhibit 2.5). (Certain
confidential information deleted)
99.1 Press Release dated August 22, 2001.
2.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ISIS PHARMACEUTICALS, INC.
Dated: August 29, 2001 By:/s/ B. LYNNE PARSHALL
---------------------------------------
B. LYNNE PARSHALL
Executive Vice President,
Chief Financial Officer and Secretary
3.
INDEX TO EXHIBITS
2.1 Securities Purchase Agreement, dated August 17, 2001, between
Isis Pharmaceuticals, Inc. and Eli Lilly and Company.
2.2 Loan Agreement, dated August 17, 2001, between Isis
Pharmaceuticals, Inc. and Eli Lilly and Company.
2.3 Registration Rights and Standstill Agreement, dated August 17,
2001, between Isis Pharmaceuticals, Inc. and Eli Lilly and
Company.
2.4 Collaboration Agreement, dated August 17, 2001, between Isis
Pharmaceuticals, Inc. and Eli Lilly and Company. (Certain
confidential information deleted)
2.5 Development and License Agreement, dated August 14, 2001,
between Isis Pharmaceuticals, Inc. and Eli Lilly and Company.
(Certain confidential information deleted)
2.6 Isis 3521 Clinical Supply Agreement, dated August 29, 2001,
between Isis Pharmaceuticals, Inc. and Eli Lilly and Company,
which is Exhibit B to the Development and License Agreement
dated August 14, 2001 (i.e., Exhibit 2.5). (Certain
confidential information deleted)
99.1 Press Release dated August 22, 2001.
4.
Exhibit 2.1
ISIS PHARMACEUTICALS, INC.
SECURITIES PURCHASE AGREEMENT
Dated as of August 17, 2001
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT, dated as of August 17,
2001 (this "Agreement"), is by and between Isis Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), and Eli Lilly and Company, an Indiana
corporation (the "Purchaser").
WHEREAS, the Company and the Purchaser wish to enter into a
collaboration arrangement pursuant to which they will conduct certain research
and development programs relating to antisense oligonucleotides;
WHEREAS, to further these joint collaboration efforts, the
Company wishes to issue and sell to the Purchaser an aggregate of four million
one hundred sixty-six thousand six hundred sixty-seven (4,166,667) shares (the
"Shares") of the Company's Common Stock, par value $.001 per share of the
Company ("Common Stock");
WHEREAS, the Purchaser wishes to purchase the Shares on the
terms and subject to the conditions set forth in this Agreement; and
WHEREAS, in conjunction with the purchase and sale of the
Shares pursuant to this Agreement, the Company and the Purchaser are entering
into a Loan Agreement (the "Loan Agreement"), pursuant to which the Company
shall issue a promissory note (the "Note") in favor of the Purchaser, a
Collaboration Agreement (the "Collaboration Agreement"), and a Registration
Rights and Standstill Agreement (the "Registration Rights Agreement"), each as
of the date hereof;
NOW, THEREFORE, in consideration of the promises and the
mutual covenants contained in this Agreement, the parties agree as follows:
ARTICLE I
PURCHASE OF SHARES
SECTION 1.01. PURCHASE AND SALE OF SHARES. Subject to the
terms and conditions hereof and on the basis of the representations and
warranties set forth herein, the Company agrees to issue and sell to the
Purchaser, and the Purchaser agrees to purchase the Shares from the Company, at
the Closing (as defined below), at a per share price equal to $18.00 for an
aggregate purchase price of Seventy-Five Million and Six Dollars ($75,000,006).
SECTION 1.02. CLOSING. The closing of the purchase and sale of
the Shares (the "Closing") shall take place at the offices of Eli Lilly and
Company, Lilly Corporate Center, Indianapolis, Indiana 46285, at 10:00 a.m.,
Indianapolis time, on the third business day following the termination or
expiration of the required waiting period under the HSR Act (as defined below),
or at such other location, date and time as may be agreed upon by the Purchaser
and the Company (such date and time being referred to herein as the "Closing
Date"). At the Closing, the Company shall issue and deliver to the Purchaser a
stock certificate, registered in the name of the Purchaser, representing the
Shares, against payment of the purchase price therefor by wire transfer.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to the Purchaser that,
except as set forth in the Disclosure Schedule attached hereto (the "Disclosure
Schedule"):
SECTION 2.01. ORGANIZATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has all requisite corporate power and authority and all
requisite licenses, permits and approvals of Governmental Entities (as defined
below) to carry on the businesses as they are now being conducted and to own and
use the properties owned and used by it except where the failure to obtain such
licenses, permits and approvals would not have a Company Material Adverse
Effect. The Company is not in default under or in violation of any provision of
its Certificate of Incorporation or Bylaws. The Company is duly qualified to do
business and is in good standing as a foreign corporation in each other
jurisdiction in which the ownership, operation or leasing of its properties or
assets or the nature of its business requires such qualification, except where
the failure so to qualify would not have a Company Material Adverse Effect (as
defined below). Each of the Company's subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Each such subsidiary has all requisite
corporate power and authority, and all requisite licenses, permits and approvals
of Governmental Entities, to carry on the business as it is now being conducted
and to own and use the properties owned and used by it except where the failure
to obtain such licenses, permits and approvals would not have a Company Material
Adverse Effect. No such subsidiary is in default under or in violation of any
provision of its certificate or articles of incorporation or Bylaws. Each such
subsidiary is duly qualified to do business and is in good standing as a foreign
corporation in each other jurisdiction in which the ownership, operation or
leasing of its properties or assets or the nature of its business requires such
qualification, except where the failure so to qualify would not have a Company
Material Adverse Effect.
SECTION 2.02 CAPITALIZATION. The Company has reserved a sufficient
number of shares of Common Stock: (i) for issuance of the Shares to the
Purchaser at the Closing, and (ii) for issuance upon conversion of the Note. The
Shares, when issued against payment therefor in accordance with this Agreement,
will be duly and validly issued, fully paid and nonassessable, will not be
issued in violation of any preemptive or similar rights. The shares of Common
Stock underlying the Note, when issued upon conversion thereof, will be duly and
validly issued, fully paid and nonassessable, and will not be issued in
violation of any preemptive or similar rights. Section 2.02 of the Disclosure
Schedule sets forth the capitalization table of the Company's capital stock on a
fully diluted basis as of June 30, 2001, subject to the assumptions and
projections set forth therein with regard to which the Company makes no
representation as to their reasonableness or appropriateness.
SECTION 2.03. REGISTRATION RIGHTS. Except as provided herein,
pursuant to the Registration Rights Agreements with Elan International Services,
Ltd., and granted in connection with the Purchase Agreement dated October 24,
1997 for 14% Subordinated Discount Notes due November 1, 2007 and Warrants to
Purchase Common Stock between the Company and the Purchaser listed on Schedule I
thereto, the Company is not under any contractual obligation to register any of
its presently outstanding securities or any of its securities which may
hereafter be issued.
SECTION 2.04. AUTHORIZATION OF TRANSACTION. The Company has
all requisite power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and delivery by the Company of
this Agreement and the Loan Agreement, the Note, the Collaboration Agreement and
the Registration Rights Agreement (each, a "Company Ancillary Document"), the
performance by the Company of its obligations hereunder and thereunder, and the
consummation of the transactions contemplated hereunder and thereunder, have
been duly authorized by all requisite corporate action of the Company and will
not violate the Certificate of Incorporation or Bylaws of the Company or any
provision of any agreement or other instrument filed as an exhibit to the
Company Reports except where such violation would not materially impede the
Company's ability to perform its obligations under this Agreement.
SECTION 2.05. VALIDITY. This Agreement has been duly executed
and delivered by the Company and constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms except (a) that enforcement may be limited by (i) applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar
laws affecting creditors' rights, and (ii) general equity principles and
limitations on the availability of equitable relief, including specific
performance, and (b) that any rights to indemnity or contribution hereunder or
thereunder may be limited by state and federal securities laws and by public
policy considerations.. Each Company Ancillary Document to which the Company is
a party, when executed and delivered in accordance with this Agreement, will
constitute the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms except (a) that enforcement may
be limited by (i) applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws affecting creditors' rights, and
(ii) general equity principles and limitations on the availability of equitable
relief, including specific performance, and (b) that any rights to indemnity or
contribution hereunder or thereunder may be limited by state and federal
securities laws and by public policy considerations.
SECTION 2.06. NONCONTRAVENTION. Subject to compliance with the
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and any applicable state securities laws and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), neither the execution and
delivery of this Agreement or the Company Ancillary Documents by the Company nor
the consummation by the Company of the transactions contemplated hereby, will
(a) require on the part of the Company any filing with, or permit,
authorization, consent or approval of, any court, arbitrational tribunal,
administrative agency or commission or other governmental authority or
regulatory agency (a "Governmental Entity"), except for (i) any filing, permit,
authorization, consent or approval which if not obtained or made would not have
a material adverse effect on the assets, business, financial condition, results
of operations or future prospects (other than prospects relating to the economy
in general or the pharmaceutical or biotechnology industries in general) of the
Company (a "Company Material Adverse Effect") or on the ability of the Company
and Purchaser to consummate the transactions contemplated by this Agreement,
(ii) such filings, if any, as may be required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act"), or (iii) any such filing, or permit,
authorization, consent or approval which may be properly obtained following the
Closing, (b) conflict with, result in breach of, constitute (with or without due
notice or lapse of time or both) a default under, result in the acceleration of,
create in any party any right to accelerate, terminate, modify or cancel, or
require any notice, consent or waiver under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest (as defined below)
or other arrangement to which the Company is a party or by which it is bound or
to which any of its assets is subject, other than any conflict, breach, default,
acceleration, termination, modification or cancellation which individually or in
the aggregate would not have a Company Material Adverse Effect or have a
material adverse effect on the ability of the parties to consummate the
transactions contemplated by this Agreement, or (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or any
of its properties or assets which individually or in the aggregate would have a
Company Material Adverse Effect or have a material adverse effect on the ability
of the parties to consummate the transactions contemplated by this Agreement.
For purposes of this Agreement, "Security Interest" means any
mortgage, pledge, security interest, encumbrance, charge or other lien (whether
arising by contract or operation of law), other than (a) mechanic's,
materialmen's and similar liens, (b) liens arising under worker's compensation,
unemployment insurance, social security, retirement, and similar legislation,
and (c) liens on goods in transit incurred pursuant to documentary letters of
credit, in each case arising in the ordinary course of business consistent with
past practice and custom.
SECTION 2.07. REPORTS AND FINANCIAL STATEMENTS.
(a) The Company has timely filed with the
Securities and Exchange Commission (the "SEC") all reports required to be filed
by the Company under Section 13 of the Exchange Act with the SEC (such reports
are collectively referred to herein as the "Company Reports"). As of their
respective dates, the Company Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited financial statements and
unaudited interim financial statements of the Company included in the Company
Reports (i) comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations under the
Exchange Act as promulgated by the SEC with respect thereto, (ii) have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods covered
thereby (except as may be indicated therein or in the notes thereto, and in the
case of quarterly financial statements, as permitted by Form 10-Q under the
Exchange Act and subject to normal year end audit adjustments), (iii) fairly
present the consolidated financial condition, results of operations and cash
flows of the Company as of the respective dates thereof and for the periods
referred to therein, and (iv) are consistent with the books and records of the
Company.
(b) As to each contract that is material to the
Company's business and which has been filed by the Company as an exhibit to any
of the Company Reports, neither the Company nor, to the knowledge of the
Company, any other party thereto is in breach or default thereunder, other than
breaches or defaults which do not, either individually or in the aggregate, have
a Company Material Adverse Effect.
SECTION 2.08 ENVIRONMENTAL AND SAFETY LAWS. To the best of its
knowledge, the Company is not in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety other
than violations which would not result in a Company Material Adverse Effect, and
to the best of its knowledge, no material expenditures are or will be required
in order to comply with any such existing statute, law or regulation.
SECTION 2.09 ABSENCE OF MATERIAL ADVERSE CHANGES. As of the
date of this Agreement, since June 30, 2001, except as contemplated by this
Agreement and the Company Ancillary Documents, the Company has not (a) made,
paid or declared any dividend or distribution to any equity holder (in such
capacity), (b) varied its business plan or practices, in any material respect,
from past practices, (c) entered into any financing, joint venture, license or
similar arrangement that would limit or restrict its ability to perform its
obligations hereunder and under each of the other Company Ancillary Documents to
which it is a party, (d) suffered or permitted to be incurred any liability or
obligation or any lien or encumbrance against any of its properties or assets
that would limit or restrict its ability to perform its obligations hereunder
and under each of the other Company Ancillary Documents to which it is a party,
or (e) no other event shall have occurred which can be reasonably expected to
result in any Company Material Adverse Effect.
SECTION 2.10 ABSENCE OF UNDISCLOSED LIABILITIES. The Company
has no material obligations or liabilities of any nature (matured or unmatured,
fixed or contingent) other than (a) those set forth or adequately provided for
in the Company Reports, (b) those incurred in the ordinary course of business
and not required to be set forth in the balance sheet included in its most
recent Company Report under GAAP, (c) those incurred in the ordinary course of
business since the date of the Company's balance sheet included in its most
recent Company Report and not reasonably likely to have a Company Material
Adverse Effect, and (d) those incurred in connection with the execution of this
Agreement.
SECTION 2.11 BROKERS' FEES. Other than payments to be made to
SG Cowan, the Company has no liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
SECTION 2.12 RESTRICTIONS ON THE SHARES. The Shares are not
subject to any restriction on transfer imposed by the Company, except
restrictions on resale of the Shares imposed pursuant to the Securities Act or
applicable state securities laws and restrictions pursuant to this Agreement.
SECTION 2.13. LITIGATION. The Company is not a party to or, to
the actual knowledge of the Company's Chairman of the Board, Chief Executive
Officer, Chief Financial Officer or General Counsel, threatened to be made a
party to (a) any unsatisfied judgment, order, decree, stipulation or injunction
or (b) any claim, complaint, action, suit, proceeding, hearing or
investigation of or before any Governmental Entity or before any arbitrator
that, in the case of either (a) or (b), reasonably could be expected to have a
Company Material Adverse Effect or a material adverse effect on the ability of
the parties to consummate the transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company
that:
SECTION 3.01. AUTHORIZATION OF AGREEMENTS, ETC. Purchaser has
all requisite corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery
by the Purchaser of this Agreement and the Loan Agreement, the Collaboration
Agreement, and the Registration Rights Agreement (each, a "Purchaser Ancillary
Document") to be delivered by the Purchaser, the performance by the Purchaser of
its obligations hereunder and thereunder, and the consummation of the
transactions contemplated hereunder and thereunder, have been duly authorized by
all requisite corporate action of the Purchaser and will not violate the
Articles of Incorporation or By-Laws of the Purchaser or any provision of any
agreement or other instrument to which the Purchaser is bound.
SECTION 3.02. VALIDITY. This Agreement has been duly executed
and delivered by the Purchaser and constitutes the legal, valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms except (a) that enforcement may be limited by (i) applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar
laws affecting creditors' rights, and (ii) general equity principles and
limitations on the availability of equitable relief, including specific
performance, and (b) that any rights to indemnity or contribution hereunder or
thereunder may be limited by state and federal securities laws and by public
policy considerations.. Each Purchaser Ancillary Document to which the Purchaser
is a party, when executed and delivered in accordance with this Agreement, will
constitute the legal, valid and binding obligation of the Purchaser, enforceable
against the Purchaser in accordance with its terms except (a) that enforcement
may be limited by (i) applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws affecting creditors' rights, and
(ii) general equity principles and limitations on the availability of equitable
relief, including specific performance, and (b) that any rights to indemnity or
contribution hereunder or thereunder may be limited by state and federal
securities laws and by public policy considerations..
SECTION 3.03. INVESTMENT REPRESENTATIONS. The Purchaser (a) is
an "accredited investor" within the meaning of Rule 501 promulgated under the
Securities Act and was not organized for the specific purpose of acquiring the
Shares or the Note issued pursuant to the Loan Agreement; (b) is domiciled in
the State of Indiana; (c) is acquiring the Shares and the Note issued pursuant
to the Loan Agreement for its own account for the purpose of investment and not
with a view to or for sale in connection with any distribution thereof; and (d)
understands that (i) the Shares and the Note issued pursuant to the Loan
Agreement have not been registered under the Securities Act by reason of their
issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Regulation D promulgated
under the Securities Act, (ii) the Shares and the Note issued pursuant to the
Loan Agreement must be held indefinitely unless a subsequent disposition thereof
is registered under the Securities Act or is exempt from such registration and
understands and is capable of bearing the economic risk of such an investment in
the Shares and the Note issued pursuant to the Loan Agreement, (iii) the Shares
and the Note issued pursuant to the Loan Agreement will bear a legend to such
effect (as set forth below) and (iv) the Company will make a notation on its
transfer books to such effect.
The Shares shall bear substantially the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
applicable state securities laws. The shares have been
acquired for investment and may not be sold, transferred or
otherwise disposed of except in compliance with such act and
laws."
SECTION 3.04. BROKERS' FEES. Other than payments to be made
to Merrill Lynch & Co., the Purchaser has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
SECTION 3.05. NONCONTRAVENTION. Subject to compliance with the
applicable requirements of the Securities Act, and any applicable state
securities laws and the Exchange Act, neither the execution and delivery of this
Agreement or the Purchaser Ancillary Documents by the Purchaser nor the
consummation by the Purchaser of the transactions contemplated hereby, will (a)
require on the part of the Purchaser any filing with, or permit, authorization,
consent or approval of, any Governmental Entity, except for (i) any filing,
permit, authorization, consent or approval which if not obtained or made would
not have a material adverse effect on the assets, business, financial condition,
results of operations or future prospects (other than prospects relating to the
economy in general or the pharmaceutical or biotechnology industries in general)
of the Purchaser (a "Purchaser Material Adverse Effect") or on the ability of
the Company and Purchaser to consummate the transactions contemplated by this
Agreement, (ii) such filings, if any, as may be required under the HSR Act, or
(iii) any such filing, or permit, authorization, consent or approval which may
be properly obtained following the Closing, (b) conflict with, result in breach
of, constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of, create in any party any right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest or other arrangement to which the Purchaser is a
party or by which it is bound or to which any of its assets is subject, other
than any conflict, breach, default, acceleration, termination, modification or
cancellation which individually or in the aggregate would not have a Purchaser
Material Adverse Effect or have a material adverse effect on the ability of the
parties to consummate the transactions contemplated by this Agreement, or (c)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Purchaser or any of its properties or assets which
individually or in the aggregate would have a Purchaser Material Adverse Effect
or have a material adverse effect on the ability of the parties to consummate
the transactions contemplated by this Agreement.
ARTICLE IV
CONDITIONS
SECTION 4.01. CONDITIONS TO PURCHASER'S OBLIGATIONS. The
obligation of the Purchaser to purchase and pay for the Shares is subject to the
satisfaction, on or before the Closing Date, of each of the following
conditions, each of which may be waived at the option of the Purchaser:
(a) REPRESENTATIONS AND WARRANTIES TO BE TRUE AND
CORRECT. The representations and warranties contained in Article II and
any Company Ancillary Document shall be true, complete and correct on
and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date,
except to the extent such representations and warranties expressly
relate to an earlier date, in which case, they shall be true, complete
and correct as of such date.
(b) PERFORMANCE. The Company shall have performed all
obligations and agreements and complied with all covenants to be
performed or complied with by them on or before the Closing Date
pursuant to this Agreement and any Company Ancillary Document.
(c) CLOSING CERTIFICATES. The Purchaser shall have
received a certificate from an officer of the Company, dated the
Closing Date, in form and substance reasonably satisfactory to the
Purchaser and its counsel, certifying that (i) the conditions set forth
in Section 4.01(a) and Section 4.01(b) have been satisfied and (ii)
resolutions approving this Agreement and each Company Ancillary
Document and the transactions contemplated hereby and thereby have been
duly adopted by the Board of Directors of the Company.
(d) PROCEEDINGS SATISFACTORY. All actions,
proceedings, instruments and documents required to carry out the
transactions contemplated by this Agreement or incidental hereto, and
all other related legal matters, shall be reasonably satisfactory to
counsel to the Purchaser, and such counsel shall have been furnished
with such other instruments and documents as they shall have reasonably
requested.
(e) OPINION OF COMPANY'S GENERAL COUNSEL. The
Purchaser shall have received from the Company's General Counsel, an
opinion dated the Closing Date, with respect to the matters set forth
on EXHIBIT A.
(f) REVIEW OF BUSINESS AND LEGAL MATTERS. The
Purchaser and its accountants and counsel shall have completed a review
of business, accounting and legal matters with respect to the Company
prior to the execution hereof, and nothing shall have come to the
attention of the Purchaser or its counsel or accountants prior to the
execution hereof that causes the Purchaser to reasonably conclude that
(i) the Company Reports do not present fairly the financial position
and results of operations of the Company as of their respective dates,
or (ii) there
is any material breach or inaccuracy in the representations and
warranties of the Company set forth in this Agreement or any Company
Ancillary Document.
(g) NO MATERIAL ADVERSE CHANGE. Since the date
hereof, there shall not have occurred and be continuing, and no event
shall have occurred which (in the reasonable judgment of the Purchaser)
can be reasonably expected to result in any Company Material Adverse
Effect.
(h) REGISTRATION RIGHTS AGREEMENT. The Company
shall have executed and delivered the Registration Rights Agreement.
(i) COLLABORATION AGREEMENT. The Company shall
have executed and delivered the Collaboration Agreement and all
conditions to commencement of the collaboration to be performed by the
Company thereunder prior to its effectiveness shall have been
satisfied.
(j) LOAN AGREEMENT AND NOTE. The Company shall
have executed and delivered the Loan Agreement and the Note.
(k) OTHER APPROVALS. If applicable, the waiting
period under the HSR Act shall have expired or been terminated. All
other consents, authorizations and approvals, waivers or exemptions,
and filings and registrations, required to be obtained from or made
with any person in connection with the execution, delivery and
performance by the Company of this Agreement and the Company Ancillary
Documents and the consummation by the Company of the transactions
contemplated hereby and thereby shall have been obtained or made, and
all required filings shall have become effective except for such
filings which may be properly made following the Closing.
(l) NO LITIGATION. No injunction shall be
outstanding, which would prevent consummation of the transactions
contemplated by this Agreement or the Company Ancillary Documents. No
action, suit or proceeding shall be pending or threatened in writing by
any government agency or instrumentality or other person, with respect
to which the Purchaser shall have reasonably concluded that the
plaintiff has a reasonable probability of prevailing, and wherein an
unfavorable judgment, order, decree, stipulation or injunction would
(i) cause the transactions contemplated by this Agreement or the
Company Ancillary Documents to be rescinded following consummation,
(ii) materially and adversely affect the right of the Company to own,
operate or control its business in the manner contemplated by the
Company Ancillary Documents, or (iii) cause the Purchaser or the
Company to be subject to any material award of damages or governmental
sanction.
SECTION 4.02. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the transactions contemplated hereby
are subject to the satisfaction, on or before the Closing Date, of each of the
following conditions, each of which may be waived at the option of the Company:
(a) REPRESENTATIONS AND WARRANTIES TO BE TRUE AND
CORRECT. The representations and warranties contained in Article III
and any Purchaser Ancillary Document shall be true, complete and
correct on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of such
date.
(b) PERFORMANCE. The Purchaser shall have performed
all obligations and agreements and complied with all covenants to be
performed or complied with by it on or before the Closing Date pursuant
to this Agreement or any Purchaser Ancillary Document.
(c) CLOSING CERTIFICATES. The Company shall have
received a certificate from an officer of the Purchaser, dated the
Closing Date, in form and substance reasonably satisfactory to the
Company and its counsel, certifying that (i) the conditions set forth
in Section 4.02(a) and Section 4.02(b) have been satisfied and (ii)
resolutions approving this Agreement and each Purchaser Ancillary
Document and the transactions contemplated hereby and thereby have been
duly adopted by the Board of Directors of the Purchaser.
(d) PROCEEDINGS SATISFACTORY. All actions,
proceedings, instruments and documents required to carry out the
transactions contemplated by this Agreement or incidental hereto, and
all other related legal matters, shall be reasonably satisfactory to
counsel to the Company, and such counsel shall have been furnished with
such other instruments and documents as they shall have reasonably
requested.
(e) REGISTRATION RIGHTS AGREEMENT. The Purchaser
shall have executed and delivered the Registration Rights Agreement.
(f) COLLABORATION AGREEMENT. The Purchaser shall
have executed and delivered the Collaboration Agreement and all
conditions to commencement of the collaboration to be performed by the
Purchaser thereunder prior to its effectiveness shall have been
satisfied.
(g) LOAN AGREEMENT. The Purchaser shall have
executed and delivered the Loan Agreement and made the first
Disbursement under the Loan Agreement.
(h) OTHER APPROVALS. If applicable, the waiting
period under the HSR Act shall have expired or been terminated. All
other consents, authorizations and approvals, waivers or exemptions,
and filings and registrations, required to be obtained from or made
with any person in connection with the execution, delivery and
performance by the Purchaser of this Agreement and the Purchaser
Ancillary Documents and the consummation by the Purchaser of the
transactions contemplated hereby and thereby shall have been obtained
or made, and all required filings shall have become effective except
for such filings which may be properly made following the Closing.
(i) NO LITIGATION. No injunction shall be
outstanding, which would prevent consummation of the transactions
contemplated by this Agreement or the Purchaser Ancillary Documents. No
action, suit or proceeding shall be pending or threatened in writing by
any government agency or instrumentality or other person, with respect
to which the Company shall have reasonably concluded that the plaintiff
has a reasonable probability of prevailing, and wherein an unfavorable
judgment, order, decree, stipulation or injunction would (i) cause the
transactions contemplated by this Agreement or the Purchaser Ancillary
Documents to be rescinded following consummation or (ii) cause the
Company or the Purchaser to be subject to any material award of damages
or governmental sanction.
ARTICLE V
TERMINATION
SECTION 5.01. TERMINATION. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned at any time prior to
the Closing:
(a) by mutual written consent of the Purchaser and the
Company;
(b) by the Purchaser, if (i) there has been a material breach
by the Company of any representation, warranty, covenant or agreement
set forth in this Agreement or any Company Ancillary Document that has
not been corrected by the Company within ten (10) days of receiving
notice of such breach from Purchaser or (ii) the Closing shall not have
occurred on or prior to December 31, 2001, by reason of the failure of
any condition precedent set forth in Section 4.01, unless such failure
results primarily from the breach by the Purchaser of any of its
representations, warranties, covenants or agreements set forth in this
Agreement or any Purchaser Ancillary Document; or
(c) by the Company, if (i) there has been a material breach by
the Purchaser of any representation, warranty, covenant or agreement
set forth in this Agreement or any Purchaser Ancillary Document that
has not been corrected by Purchaser within ten (10) days of receiving
notice of such breach from the Company or (ii) the Closing shall not
have occurred on or prior to December 31, 2001, by reason of the
failure of any condition precedent set forth in Section 4.02, unless
such failure results primarily from the breach by the Company of any of
its representations, warranties, covenants or agreements set forth in
this Agreement or any Company Ancillary Document.
SECTION 5.02. PROCEDURE UPON TERMINATION. If this Agreement is
terminated pursuant to Section 5.01, the party terminating this Agreement shall
promptly deliver written notice thereof to the other party hereto, and, upon
such notice, this Agreement shall terminate and the transactions contemplated
hereby shall be abandoned without further action on the part of either of the
parties hereto, but such termination shall not relieve either party of
responsibility for damages arising out of any breach by such party.
ARTICLE VI
CONFIDENTIALITY; NON-DISCLOSURE; COOPERATION
SECTION 6.01. CONFIDENTIALITY; NON-DISCLOSURE. The parties
hereto agree that the provisions of the Collaboration Agreement relating to
confidentiality and non-disclosure are incorporated herein by reference.
SECTION 6.02. COOPERATION UPON SALE OF SECURITIES. In the
event that the Purchaser or any affiliate transferee of Purchaser proposes to
sell, transfer or otherwise dispose of any securities of the Company prior to
the termination of the Collaboration Agreement, the Purchaser or such affiliate
transferee, as appropriate, shall notify the Company in writing at least fifteen
(15) days prior to such proposed sale, transfer or other disposition thereof and
further agrees to cooperate and coordinate with the Company in the development
by the Purchaser or such affiliate transferee, as appropriate, and the Company
of a standby statement to be used in responding to any inquiries from third
parties (or if deemed appropriate by the Company or the Purchaser or such
affiliate transferee, as appropriate, a press release of that party) that would,
as appropriate, indicate the continuing strong support by the Purchaser or such
affiliate transferee, as appropriate, of the collaboration activities, and the
Company, notwithstanding the decision of the Purchaser or such affiliate
transferee, as appropriate, to dispose of some of its holdings of the Company's
securities. Subject to the required notice above, the Company and the Purchaser
or affiliate transferee shall provide each other with comments on any such
proposed standby statement or press release in such manner as is necessary to
not cause a delay in the Purchaser's or such affiliate transferee's, as
appropriate, proposed sale, transfer or other disposition of such securities.
Purchaser shall cause any affiliate transferee to agree to be bound by this
Section 6.02.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. PARTIES IN INTEREST. All representations,
covenants and agreements contained in this Agreement by or on behalf of the
parties hereto shall bind and inure to the benefit of the respective successors
and assigns of the parties hereto whether so expressed or not. Without limiting
the generality of the foregoing, all representations, covenants and agreements
benefiting the Purchaser shall inure to the benefit of any and all subsequent
holders from time to time of the Shares.
SECTION 7.02. SURVIVAL OF AGREEMENTS. All covenants,
agreements, representations and warranties of the parties made in Articles 2 and
3 of this Agreement, any Company Ancillary Document, or any Purchaser Ancillary
Document shall survive the execution and delivery of this Agreement, any
investigation at any time made by the Purchaser or on its behalf, and the
issuance, sale and delivery of the Shares.
SECTION 7.03. NOTICES. All notices and other communications
that are required or permitted to be given under this Agreement shall be in
writing and shall be delivered
personally, mailed by certified or registered mail, return receipt requested,
sent by reputable overnight courier or sent by confirmed telecopier, addressed
as follows:
(a) if to the Company, at 2292 Faraday Avenue, Carlsbad,
California 92008, Attention: Chief Financial Officer, telephone:
760-679-5500; fax: 760-679-5592 with a copy (which shall not constitute
notice to the Company) to Cooley Godward LLP, 4365 Executive Drive,
Suite 1100, San Diego, CA 92121, Attn: Julie M. Robinson, telephone
858-550-6000; fax 858-453-3555; and
(b) if to the Purchaser, at Lilly Corporate Center,
Indianapolis, Indiana 46285, Attention: Rebecca O. Kendall, Esq.,
Senior Vice President and General Counsel, telephone: 317-276-2703;
fax: 317-433-3000, with a copy (which shall not constitute notice to
the Purchaser) to Eli Lilly and Company, Lilly Corporate Center,
Indianapolis, Indiana 46285, Attention: Richard D. DiMarchi, Group Vice
President, Lilly Research Laboratories, telephone: 317-276-5624; fax
317-277-7979.
or to such other address and/or such other addressee as any of the above shall
have specified by notice hereunder. Each notice or other communication that
shall be delivered personally, mailed, sent by overnight courier or telecopied
in the manner described above shall be deemed sufficiently given, served, sent,
received or delivered for all purposes at such time as it is delivered to the
addressee (with the return receipt, the delivery receipt or the affidavit of
messenger being deemed conclusive, but not exclusive, evidence of such delivery)
or at such time as delivery is refused by the addressee upon presentation.
SECTION 7.04. ASSIGNMENT. Neither the Company nor the
Purchaser may assign any of its rights or obligations hereunder without the
express written consent of the other party. The Purchaser shall not transfer,
sell or otherwise dispose of any of the Shares or other securities of the
Company issued pursuant to the Loan Agreement or otherwise, without the prior
written permission of the Company until the earlier of (i) the termination of
the Collaboration Agreement and (ii) the fourth anniversary of the Closing;
provided, however, that subject to Section 6.02, following the first anniversary
of the Closing, Purchaser may sell, transfer or otherwise dispose of the Shares
or other securities of the Company issued pursuant to the Loan Agreement or
otherwise (i) pursuant to Rule 144 of the Securities Act or (ii) to one or more
persons in private placements exempt from registration under the Securities Act,
pursuant to Section 4(1) thereof or otherwise, if such person or persons satisfy
all investor suitability requirements and other restrictions on transfer under
applicable federal and state securities laws and regulations, except that the
Purchaser shall not resell Common Stock to any person or group as such terms are
defined in Section 13 of the Exchange Act and regulations thereunder that would
result in such person or group beneficially owning more than three percent (3%)
of the then outstanding shares of Common Stock of the Company; and provided
further, that Purchaser may sell, transfer or otherwise dispose of Registrable
Securities in a registered transaction pursuant to and as provided by the
Registration Rights Agreement; provided further that Purchaser shall cause any
affiliate transferee to agree to be bound by this Section 7.04.
SECTION 7.05. REMEDIES. If any party to this Agreement obtains
a judgment against any party hereto by reason of any breach of this Agreement or
the failure of such other
party to comply with the provisions hereof, a reasonable attorneys' fee as fixed
by the court shall be included in such judgment. No remedy conferred upon any
party to this Agreement is intended to be exclusive of any other remedy herein
or by law provided or permitted, but each such remedy shall be cumulative or
shall be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute.
SECTION 7.06. WAIVER. None of the terms of this Agreement
shall be deemed to have been waived by any party hereto, unless such waiver is
in writing and signed by that party. No action taken pursuant to this Agreement,
including any investigation by or on behalf of any party hereto, shall be deemed
to constitute a waiver by the party taking such action of compliance with any
representation, warranty, covenant or agreement contained herein. The waiver by
any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other provision of this Agreement or
of any further breach of the provision so waived or of any other provision of
this Agreement. No extension of time for the performance of any obligation or
act hereunder shall be deemed an extension of time for the performance of any
other obligation or act. The waiver by any party of any of the conditions
precedent to its obligations under this Agreement shall not preclude it from
seeking redress for breach of this Agreement.
SECTION 7.07. GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware, without
giving effect to its conflicts of law rules.
SECTION 7.08. ENTIRE AGREEMENT. This Agreement, including the
Schedules and Exhibits hereto, the Company Ancillary Documents, and the
Purchaser Ancillary Documents constitute the entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
SECTION 7.09. COUNTERPARTS. This Agreement may be executed in
the original or by facsimile in any number of counterparts, each of which shall
be effective only upon delivery and thereafter shall be deemed to be an
original, and all of which shall be taken to be one and the same instrument with
the same effect as if each of the parties hereto had signed the same signature
page. Any signature page of this Agreement may be detached from any counterpart
of this Agreement without impairing the legal effect of any signature thereon
and may be attached to another counterpart of this Agreement identical in form
hereto and having attached to it one or more additional signature pages.
SECTION 7.10. AMENDMENTS. This Agreement may not be amended,
modified or changed in any respect without the written consent of the Company
and the approval of the Purchaser.
SECTION 7.11. SEVERABILITY. Whenever possible, each provision
of this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall be
unenforceable or invalid under applicable law, such provision shall be
ineffective only to the extent of such unenforceability or invalidity, and the
remaining provisions of this Agreement shall continue to be binding and in full
force and effect.
SECTION 7.12. FURTHER ASSURANCES. From and after the date
hereof, each of the parties hereto agree to do or cause to be done such further
acts and things and deliver or cause to be delivered to each other such
additional assignments, agreements, powers and instruments, as each may
reasonably require or deem advisable to carry into effect the purposes of this
Agreement, the Purchaser Ancillary Documents, and the Company Ancillary
Documents.
SECTION 7.13. HEADINGS. The section and other headings
contained in this Agreement are for convenience only and shall not be deemed to
limit, characterize or interpret any provision of this Agreement.
SECTION 7.14. CERTAIN DEFINED TERMS. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
(a) "person" shall mean an individual, corporation, limited
liability company, trust, partnership, joint venture, unincorporated
organization, government agency or any agency or political subdivision
thereof, or other entity; and
(b) "affiliate" shall mean, with respect to any person, a
person who controls such person, who is controlled by such person or
who is under common control with such person as such term is defined in
Rule 12b-2 of the Exchange Act.
(c) "subsidiary" shall mean, as to the Company, any
corporation of which more than 50% of the outstanding stock having
ordinary voting power to elect a majority of the Board of Directors of
such corporation (irrespective of whether or not at the time stock of
any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned by the Company, or by one or more of
its subsidiaries, or by the Company and one or more of its
subsidiaries.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company and the Purchaser have
executed this Securities Purchase Agreement as of the day and year first above
written.
ISIS PHARMACEUTICALS, INC.
By: /s/ B. Lynne Parshall
---------------------------------------
Name: B. Lynne Parshall
Title: Executive Vice President and
Chief Financial Officer
ELI LILLY AND COMPANY
By: /s/ Sidney Taurel
-------------------------------
Printed: Sidney Taurel
Title: Chairman of the Board,
Chief Executive Officer and President
EXHIBIT A
[OPINION OF ISIS GENERAL COUNSEL]
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and authority to conduct its business as presently
conducted, to enter into and perform the Agreement and the Company Ancillary
Documents and to carry out the transactions contemplated by the Agreement and
the Company Ancillary Documents. The Company is qualified to do business in the
State of California.
(b) The Shares have been duly authorized and are
duly and validly issued, fully paid and non-assessable and free of statutory
pre-emptive rights.
(c) The execution, delivery and performance by
the Company of the Agreement and the Company Ancillary Documents have been duly
authorized by all necessary corporate action and the Agreement and the Company
Ancillary Documents have been duly executed and delivered by the Company. The
Agreement and the Securities Purchase Agreement, Loan Agreement, Note and
Registration Rights Agreement constitute the valid and binding obligations of
the Company, enforceable in accordance with their terms except no opinion is
rendered as to rights of indemnity under Section 8 of the Registration Rights
Agreement and except as to enforcement of remedies to applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium or similar laws affecting
generally the enforcement of creditors' rights and subject to a court's
discretionary authority with respect to the granting of a decree ordering
specific performance or other equitable principals and limitations on equitable
relief. The execution and delivery of the Agreement and the Company Ancillary
Documents and the offer, issue and sale of the Shares thereunder will not
conflict with, or result in any breach of any of the terms, conditions, or
provisions of, or constitute a default under, (i) the Certificate of
Incorporation or Bylaws of the Company or (ii) any provision of California or
federal law, statute rule or regulation or any provision of the Delaware General
Corporation Law that would result in a material adverse effect on the Company.
(d) Except as obtained and in effect at the
Closing, no consent, approval, order or authorization of, or registration,
qualification, designation, declaration, or filing with, any governmental
authority is required on the part of the Company in connection with the
execution and delivery of the Agreement, or the offer, issue, sale and delivery
of the Shares except for such state and federal securities filings which may be
properly made following the Closing.
(e) Based on the representations of Purchaser
in Article III of the Agreement, the offer, issuance and sale of the Shares
pursuant to the Agreement are exempt from registration under the Securities Act.
2.
Exhibit 2.2
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is entered into as of the 17th day of
August, 2001, (the "Execution Date"), by and between Eli Lilly and Company, an
Indiana corporation ("Lilly"), and Isis Pharmaceuticals, Inc., a Delaware
corporation ("Isis").
RECITALS
1. Lilly and Isis have contemporaneous with the execution of this
Agreement entered into a Collaboration Agreement (the "Collaboration Agreement")
pursuant to which Lilly and Isis will engage in certain research and development
programs involving antisense oligonucleotides and related activities which will
be funded by Isis.
2. In order to assure sufficient financial resources to perform its
responsibilities under the Collaboration Agreement, Isis desires to obtain a
loan from Lilly.
3. Lilly is willing to make a loan to Isis in accordance with the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and promises contained in this Agreement, the Parties, intending to be
fully bound, agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01 DEFINED TERMS. As used in this Agreement, the following
terms shall have the meanings specified below:
"AFFILIATE" means, when used with respect to a specified
Person, another Person that directly or indirectly controls or is controlled by
or is under common control with the Person specified.
"BUSINESS DAY" means any day other than a Saturday, Sunday, or
day on which banking institutions in New York City are not required to be open.
"COMMITMENT" means the obligation of Lilly to make a Loan to
Isis in the amount set forth in Section 2.01.
"COMMON STOCK" means the common stock, par value $.001 per
share, of Isis.
"CONVERSION PRICE" has the meaning assigned to such term in
Section 2.03.
1.
"DEBT" means the total amount of the Loan referred to in
Section 2.01 that remains outstanding at anytime.
"DEFAULT INTEREST" has the meaning assigned to such term in
Section 2.07.
"DISBURSEMENT" has the meaning assigned to such term in
Section 2.02.
"EFFECTIVE DATE" means the date on which the Collaboration
Agreement transaction is closed. If for any reason whatsoever the Collaboration
Agreement transaction is not closed, this Agreement shall be deemed void and of
no force or effect.
"EVENT OF DEFAULT" has the meaning assigned to such term in
Article VII.
"FINANCIAL OFFICER" of any corporation means the chairman,
president, chief financial officer, or treasurer of such corporation.
"FUNDAMENTAL CHANGE" has the meaning assigned to it in Section
2.04.
"GOVERNMENTAL AUTHORITY" means any federal, state, local or
foreign court or governmental agency, authority, instrumentality or regulatory
body.
"LOAN" means a loan of money from Lilly to Isis pursuant to
this Agreement.
"PAYMENT DATE" shall mean the earliest of (i) the date of
termination of the Collaboration Agreement other than pursuant to Section 13.4
thereof (termination for breach by Lilly); (ii) the date on which an Event of
Default has occurred and not been cured within thirty (30) days of its
occurrence; or (iii) the later of the date that is the fourth anniversary of the
Closing Date or such longer period as may be necessary to reflect the extension,
pursuant to Section 2.02(b) hereof and Sections 9.1.5 or 9.1.6 of the
Collaboration Agreement of the final Disbursement hereunder, PROVIDED, HOWEVER,
if any such date specified in (i), (ii) or (iii) herein is not a Business Day,
the Payment Date shall be the first Business Day thereafter.
"PERSON" means any natural person, corporation, business
trust, joint venture, association, company, limited liability company,
partnership or government or any agency or political subdivision thereof.
"TRANSACTIONS" has the meaning assigned to such term in
Section 3.02 in relation to Isis and in Section 4.02 in relation to Lilly.
SECTION 1.02. TERMS GENERALLY. The definitions in Section 1.01 shall
apply equally to both the singular and plural forms of the terms defined. The
words "include", "includes" and "including" shall be deemed to be followed by
the phrase "without limitation".
2.
ARTICLE II. LOAN COMMITMENT,
DISBURSEMENTS AND REPAYMENT
SECTION 2.01. COMMITMENT.
Subject to the terms and conditions of this Agreement and relying on
the representations and warranties set forth herein, Lilly agrees to make
available to Isis a Loan in the aggregate principal amount of One Hundred
Million Dollars ($100,000,000). Except as provided in Section 2.07, the Loan
shall not bear interest. The Loan shall be evidenced by a promissory note as
hereafter described, prepared in substantially the form attached to this
Agreement as Exhibit "A" and dated as of the date of the first Loan Disbursement
and payable to the order of Lilly on the Payment Date, either in cash or through
conversion of the promissory note to Common Stock pursuant to Section 2.03.
SECTION 2.02. LOAN DISBURSEMENTS.
(a) Subject to the provisions of Subsection 2.02(b), the Loan shall be
disbursed by Lilly to Isis in sixteen (16) increments (each a "Disbursement"),
the first of which shall occur on the Closing Date (as defined in the Securities
Purchase Agreement between Lilly and Isis of even date hereof (the "Securities
Purchase Agreement")) of this Agreement, and the subsequent fifteen (15) of
which shall occur on the dates and in the amounts set forth below:
DISBURSEMENT NUMBER DISBURSEMENT DATE AMOUNT
1 Closing Date $10,000,000
2 9/28/01 $ 5,000,000
3 12/31/01 $ 5,000,000
4 03/29/02 $ 5,000,000
5 06/28/02 $ 7,500,000
6 09/30/02 $ 7,500,000
7 12/31/02 $ 7,500,000
8 03/31/03 $ 7,500,000
9 06/30/03 $ 6,250,000
10 09/30/03 $ 6,250,000
11 12/31/03 $ 6,250,000
12 03/31/04 $ 6,250,000
13 06/30/04 $ 5,000,000
14 09/30/04 $ 5,000,000
15 12/31/04 $ 5,000,000
16 03/31/05 $ 5,000,000
PROVIDED, HOWEVER, Lilly shall be under no obligation whatsoever to make any
Disbursements after the earlier of the Payment Date or the date of termination
of the Collaboration Agreement,
3.
and the Commitment of Lilly to Isis under Section 2.01 shall be reduced by an
amount equal to the aggregate amount of any such Disbursements not made prior to
the Payment Date.
(b) Lilly may delay any Disbursement (i) in connection with and as
specified by Section 2.5.2 of the Collaboration Agreement, which provides in
certain cases for the Executive Committee to recommend to Lilly modification of
the Disbursement schedule set forth in Section 2.02(a) in which event the
Disbursement shall be made pursuant to such modified Disbursement schedule; and
(ii) during any period of time that an Event of Default has occurred and has not
been corrected by Isis, in which event any such delayed Disbursement shall be
made by Lilly to Isis on the first Business Day following the date on which the
reason for the delay ceases to exist.
(c) On or before the date of the first Disbursement pursuant to
Subsection 2.02(a), Isis shall deliver to Lilly a promissory note covering the
Debt and the Financial Officer's certificate called for under Article V.
(d) Lilly shall make each Disbursement to Isis by transferring the
amount of such Disbursement by electronic funds transfer to such Isis bank
account as is from time to time designated by Isis to Lilly in writing.
SECTION 2.03. REPAYMENT OF LOAN.
Isis shall pay to Lilly the entire unpaid amount of the Debt on the
Payment Date in cash or through conversion of the promissory note into Common
Stock of Isis pursuant to the following:
(a) Subject to the provisions of Section 2.04, if the Payment Date is
not established as a result of termination of the Collaboration Agreement
pursuant to Section 13.4 thereof (termination for breach by Isis) or as a
result of an Event of Default, Isis shall have the right to require Lilly to
convert the promissory note evidencing the entire outstanding Debt into that
number of shares of Common Stock equal to the aggregate amount of the Debt
divided by Forty Dollars per share, except that if Isis shall at any time
subdivide (by any stock split, stock dividend or otherwise) its outstanding
shares of Common Stock into a greater number of shares, the Forty Dollars ($40)
per share price or that price as previously adjusted shall be proportionately
reduced, and, conversely, in case the outstanding shares of Common Stock shall
be combined into a smaller number of shares, that price per share in effect
immediately prior to such combination shall be proportionately increased (the
price per share of Common Stock as so calculated is defined as the "Conversion
Price");
(b) Subject to the provisions of Section 2.04, if a determination of
the Payment Date results from termination of the Collaboration Agreement
pursuant to Section 13.4 thereof (termination for breach by Isis) or as a result
of an Event of Default, Lilly shall have the right to convert the promissory
note covering the entire outstanding Debt into that number of shares of Common
Stock equal to the aggregate amount of the Debt divided by the Conversion Price;
or
(c) If Isis does not elect the option set forth in Subsection 2.03(a)
or Lilly does not elect the option set forth in Subsection 2.03(b), Isis shall
pay the Debt to Lilly on the Payment Date by
4.
transferring funds equal to the Debt by wire transfer to a Lilly bank account
designated from time to time by Lilly.
The Party having an option to elect to convert the promissory note into Common
Stock shall provide notice to the other Party no later than fifteen (15) days
prior to the Payment Date of its election to so convert the Debt. If such
election is made by a Party and legal counsel for Isis reasonably determines
that Isis cannot legally issue the relevant shares of Common Stock to Lilly on
the Payment Date, the Debt shall be paid to Lilly by Isis in cash on the Payment
Date pursuant to the procedures set forth in Subsection 2.03(c).
SECTION 2.04. FUNDAMENTAL CHANGES. In case of any reclassification of
the outstanding shares of Common Stock, or consolidation, merger or share
exchange of Isis with another Person, or any other transaction or series of
related transactions in which shares of Common Stock are changed into, converted
into or exchanged for other securities or property in each case where Isis is
not the surviving entity (each, a "Fundamental Change") the option to convert
the promissory note to Common Stock as provided in Subsection 2.03(a) or
Subsection 2.03(b), as relevant, shall terminate as of the date of the
Fundamental Change, and the Debt shall be paid on the Payment Date solely in
cash pursuant to the procedures set forth in Subsection 2.03(c).
SECTION 2.05. FRACTIONAL SHARES; PARTIAL CONVERSION. No fractional
shares shall be issued upon conversion of the promissory note into shares of
Common Stock. If any fractional share of Common Stock would, except for the
provisions of this Section, be delivered upon such conversion, Isis, in lieu of
delivering such fractional share shall pay to Lilly an amount in cash equal to
the difference between the aggregate Conversion Price of the whole number of
shares of Common Stock and the Debt outstanding. Except as provided in this
Section 2.05, the option under Subsection 2.03(a) or Subsection 2.03(b) to
convert the promissory note must be exercised, if at all, on the entire Debt
outstanding on the Payment Date.
SECTION 2.06. OTHER MECHANICS. In the event of conversion of the
promissory note to Common Stock, Isis shall deliver to Lilly on the Payment Date
an opinion of counsel from Isis' General Counsel, dated as of the Payment Date,
in substantially the same form and content as set forth on the attached Exhibit
B.
SECTION 2.07. DEFAULT INTEREST. If Isis shall fail to make the payment
on the Debt on the Payment Date, Isis shall on demand from time to time from
Lilly pay interest on such defaulted amount ("Default Interest") up to (but not
including) the date of actual payment (after as well as before judgement) at a
rate per annum of Eighteen Percent (18%) or the maximum allowed by law if lower
(computed on the basis of the actual number of days elapsed over a year of 365
days).
SECTION 2.08. PREPAYMENT.
(a) Isis shall have the right at any time, and from time to time, to
prepay the Debt in cash prior to the Payment Date, in whole or in part, without
penalty upon giving written notice to Lilly before noon Indianapolis time, at
least one Business Day prior to prepayment. Prepayments shall be in a minimum
amount of One Million Dollars ($1,000,000) or in integral multiples thereof.
5.
(b) Each notice of prepayment shall specify the prepayment date and the
amount of the Debt to be prepaid, shall be irrevocable and shall commit Isis to
prepay such amount of the Debt as is stated therein on the date specified
therein. All prepayments under this Section 2.08 shall be made by electronic
funds transfer to Lilly's designated account.
ARTICLE III. ISIS' REPRESENTATIONS AND WARRANTIES
Section 3.01. ORGANIZATION AND POWERS. Isis represents and warrants to
Lilly that Isis:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware,
(b) has all requisite corporate power and authority to own its
property and assets and to carry on its business as now conducted and as
proposed to be conducted, and
(c) has the corporate power and authority to execute, deliver and
perform its obligations under this Agreement and to borrow hereunder.
SECTION 3.02. AUTHORIZATION. Isis represents and warrants to Lilly
that the execution, delivery and performance by Isis of this Agreement and the
borrowing of the Loan and payment of the Debt and Default Interest
(collectively, the "Transactions") (a) have been duly authorized by all
requisite corporate action, and (b) will not (i) violate (A) any provision of
any law, statute, rule or regulation or of the certificate of incorporation or
other constitutive documents or bylaws of Isis; (B) any order of any
Governmental Authority; or (C) any provision of any indenture, agreement or
other instrument filed as an exhibit to the Company Reports (as defined in the
Securities Purchase Agreement); (ii) be in conflict with, result in a breach of,
or constitute (alone or with notice or lapse of time or both) a default under,
any such indenture, agreement or other instrument; or (iii) result in the
creation or imposition of any lien upon any property or assets of Isis except in
each case where such violation, conflict or lien would not materially impede
Isis' ability to fully perform its obligations under this Agreement.
SECTION 3.03. ENFORCEABILITY. Isis represents and warrants to Lilly
that this Agreement constitutes a legal, valid and binding obligation of Isis,
enforceable in accordance with its terms (subject, as to enforceability, to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and to general principles of equity,
regardless of whether such enforceability is considered in a proceeding at law
or in equity).
SECTION 3.04. GOVERNMENTAL APPROVALS. Isis represents and warrants to
Lilly that no action, consent or approval of, registration or filing with, or
other action by, any Governmental Authority is required in connection with the
Transactions other than such filings (i) if any, as may be required under the
HSR Act (as defined in the Securities Purchase Agreement) or (ii) which may be
properly made upon or following conversion of the Note.
6.
SECTION 3.05. LITIGATION. Isis represents and warrants to Lilly that
there are no actions, proceedings or investigations filed or, to the actual
knowledge of Isis' Chairman of the Board, Chief Executive Officer, Chief
Financial Officer or General Counsel, threatened, against Isis in any court or
before any Governmental Authority or arbitration board or tribunal which
question the validity or legality of this Agreement, the Transactions or any
action taken or to be taken by Isis pursuant to this Agreement and no order or
judgment has been issued or entered restraining or enjoining Isis from the
execution, delivery or performance of this Agreement.
SECTION 3.06. USE OF PROCEEDS. Isis represents and warrants to Lilly
that all proceeds of the Loan shall be used solely for funding of the
Collaboration.
SECTION 3.07. SOLVENCY. Isis represents and warrants to Lilly that it
is not currently insolvent, i.e., unable to pay its debts and obligations as
they become due for payment.
ARTICLE IV. LILLY REPRESENTATIONS AND WARRANTIES
Section 4.01. Organization and Powers. Lilly represents and warrants to
Isis that Lilly:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Indiana, and
(b) has all requisite corporate power and authority to execute, deliver
and perform its obligations under this Agreement.
SECTION 4.02. AUTHORIZATION. Lilly represents and warrants to Isis
that the execution, delivery and performance by Lilly of this Agreement and the
making of the Loan (collectively, the "Transactions") (a) have been duly
authorized by all requisite corporate action, and (b) will not (i) violate (A)
any provision of any law, statute, rule or regulation or of the certificate of
incorporation or other constitutive documents or bylaws of Lilly; or (B) any
order of any Governmental Authority; or (C) any provision of any indenture,
agreement or other instrument filed as an exhibit to Lilly's reports required to
be filed under Section 13 of the Exchange Act; (ii) be in conflict with, result
in a breach of, or constitute (alone or with notice or lapse of time or both) a
default under any such indenture, agreement or other instrument; or (iii) result
in the creation or imposition of any lien under any property or assets of Lilly
except in each case where such violation, conflict or lien would not materially
impede Lilly's ability to fully perform its obligations under this Agreement.
SECTION 4.03. ENFORCEABILITY. Lilly represents and warrants to Isis
that this Agreement constitutes a legal, valid and binding obligation of Lilly,
enforceable in accordance with its terms (subject, as to enforceability, to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and to general principles of equity,
regardless of whether such enforceability is considered in a proceeding at law
or in equity).
SECTION 4.04. GOVERNMENTAL APPROVALS. Lilly represents and warrants to
Isis that no action, consent or approval of, registration or filing with, or
other action by, any Governmental
7.
Authority is required in connection with the Transactions other than such
filings (i) if any, as may be required under the HSR Act (as defined in
the Securities Purchase Agreement) or (ii) which may be properly made upon or
following conversion of the Note.
SECTION 4.05. LITIGATION. Lilly represents and warrants to Isis that
there are no actions, proceedings or investigations filed or, to the actual
knowledge of Lilly's Chairman of the Board, Chief Executive Officer, Chief
Financial Officer or General Counsel, threatened, against Lilly in any court or
before any Governmental Authority or arbitration board or tribunal which
question the validity or legality of this Agreement, the Transactions or any
action taken or to be taken by Lilly pursuant to this Agreement and no order or
judgment has been issued or entered restraining or enjoining Lilly from the
execution, delivery or performance of this Agreement.
ARTICLE V. CONDITIONS OF LENDING
SECTION 5.01. FIRST LOAN DISBURSEMENT. The obligations of Lilly to
incur the Commitment set forth in Section 2.01, and to make the first Loan
Disbursement pursuant to Section 2.02 of this Agreement are subject to the
satisfaction of the conditions that on the date of such Loan Disbursement:
(a) The representations and warranties set forth in Article III
shall be true and correct in all material respects with the same effect as
though made on and as of that date, except to the extent such representations
and warranties expressly relate to an earlier date,
(b) No Event of Default shall have occurred and be continuing, and
(c) Lilly shall have received a Financial Officer's Certificate of
Isis confirming compliance with the conditions precedent set forth in paragraphs
(a) and (b) above.
(d) If applicable, the waiting period under the HSR Act shall have
expired or been terminated.
SECTION 5.02. SUBSEQUENT DISBURSEMENTS. The obligations of Lilly to
make Loan Disbursements subsequent to the first Disbursement pursuant to Section
2.02 of this Agreement are subject to the satisfaction of the conditions that on
the date of each subsequent Loan Disbursement:
(a) No Event of Default shall have occurred and be continuing,
(b) Lilly shall have received a Financial Officer's Certificate of
Isis confirming compliance with the conditions precedent set forth in paragraph
(a)above,
(c) In relation to the second Disbursement, Lilly shall have
previously made the first Disbursement pursuant to Section 2.02 of this
Agreement, and
(d) If applicable, the waiting period under the HSR Act shall have
expired or been terminated.
8.
ARTICLE VI. ISIS COVENANTS
Isis covenants and agrees with Lilly that so long as this Agreement
shall remain in effect or the Debt shall be unpaid, unless Lilly shall otherwise
consent in writing, it will not consolidate or merge with, or into, any other
Person or liquidate, wind up or dissolve (or suffer any liquidation or
dissolution) or sell, lease or otherwise transfer (in one transaction or a
series of transactions) all or substantially all of the assets, of Isis to any
other Person, provided that Isis may merge with another Person if:
(a) Isis is the corporation surviving such merger, or if not, the
surviving corporation succeeds to all the rights, duties and
obligations of Isis under this Agreement, and
(b) Immediately after giving effect to such merger, no Event of
Default as set forth in subsections (a) and (b) of
Article VII shall have occurred and be continuing.
ARTICLE VII. EVENTS OF DEFAULT
An "Event of Default" includes any of the following:
(a) default shall be made in the payment of the Debt when and as
the same shall become due and payable;
(b) Isis shall have breached any provision of the Collaboration
Agreement that pursuant to Section 13.4 therein results in Lilly having
terminated the Collaboration Agreement; or
(c) Isis shall have breached the Covenant set forth in Article VI
above. Upon the occurrence of an Event of Default under this Subsection (c),
Lilly shall have no remedies other than those specifically set forth for an
Event of Default in this Agreement or in the Collaboration Agreement.
ARTICLE VIII. SUBORDINATION
The parties acknowledge and agree that the obligations evidenced by the
Note and pursuant to this Agreement are hereby made expressly subordinate and
subject in right of payment to the prior payment in full of all principal,
interest and other charges relating to or arising under (a) the 14% Senior
Subordinated Discount Notes due November 1, 2007, issued by Isis pursuant to
that certain Purchase Agreement, dated October 24, 1997, between Isis and the
Purchasers listed on Schedule I thereto (the "Senior Note Purchase Agreement"),
and (b) all obligations of Isis for borrowed money or other similar obligations
whether now existing or hereafter created or incurred, except for any such
obligations arising in connection with a collaboration with a third party
pharmaceutical or biotechnology company, which may be pari
9.
passu with the obligations evidenced by the Note and pursuant to this
Agreement. The parties hereto further expressly acknowledge and agree that
the obligations of Isis evidenced by the promissory note and this Agreement
rank pari passu with the obligations of Isis under those certain Convertible
Promissory Notes issued by Isis to Elan International Services, Ltd. on April
20, 1999 and January 14, 2000. Notwithstanding the provisions of this Article
VIII, Isis' failure to pay the Debt on the Payment Date shall constitute a
material breach of this Agreement by Isis, and Lilly may pursue any legal
remedy available to it in relation to such material breach.
ARTICLE IX. MISCELLANEOUS
SECTION 9.01. NOTICES. Except as otherwise expressly provided herein,
notices and other communications provided for herein shall be in writing and
shall be delivered by hand or overnight courier service or sent by telecopy, as
follows:
(a) If to Isis
2292 Faraday Avenue
Carlsbad, CA 92008
Attention: Chief Financial Officer
Tel: 760-603-2460
Fax: 760-931-9639
with a copy to:
Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, CA 92121
Attn: Julie M. Robinson, Esq.
Tel: 858-550-6000
Fax: 858-453-3555
(b) If to Lilly:
Eli Lilly and Company
Lilly Corporate Center
Indianapolis, IN 46285
Fax: 317-433-3000
telephone confirmation required at 317-276-2703
Attention: Rebecca O. Kendall, Esq., Senior Vice President and
General Counsel
with a copy to:
Fax: 317-277-7979
telephone confirmation required at 317-276-6524
Attention: Richard D. DiMarchi, Ph.D., Group Vice President,
Lilly Research Center
10.
All notices and other communications given to any Party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt if delivered by hand or overnight courier service
or sent by telecopy to such Party as provided in this Section or in accordance
with the latest unrevoked direction from such Party given in accordance with
this Section.
SECTION 9.02. SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by Isis herein and in the certificates or
other instruments prepared or delivered in connection with or pursuant to this
Agreement shall be considered to have been relied upon by Lilly and shall
survive the making by Lilly of the Commitment set forth in Section 2.01
regardless of any investigation made by Lilly, and shall continue in full force
and effect as long as the Debt or any other amount payable under this Agreement
is outstanding and unpaid or the Commitment has not been terminated.
SECTION 9.03. SUCCESSORS AND ASSIGNS.
(a) Neither Party shall assign or delegate any of its rights and duties
hereunder without the prior written consent of the other Party, and any attempt
so to assign or delegate shall be void, except that Lilly may assign its rights
and obligations hereunder, subject to the restrictions on transfer set forth in
Section 7.04 of the Securities Purchase Agreement, in whole or in part, to an
Affiliate without the approval or consent of Isis; provided that such Affiliate
shall satisfy all investor suitability requirements and other restrictions on
transfer under applicable state and federal securities laws and regulations and
Lilly shall remain liable for all funding obligations hereunder;
(b) Subject to Subsection 8.03(a), whenever in this Agreement one of
the Parties hereto or thereto 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 a Party that are contained in this
Agreement shall bind and inure to the benefit of its successors and assigns.
SECTION 9.04. APPLICABLE LAW. All questions concerning the
construction, validity and interpretation of this Agreement shall be construed
in accordance with and governed by the laws of the State of New York without
regard to principles of conflicts of laws.
SECTION 9.05. WAIVERS: AMENDMENT.
(a) No failure or delay of Lilly 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 a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
Lilly hereunder are cumulative and are not exclusive of any rights or remedies
which it would otherwise have. No waiver of any provision of this Agreement or
consent to any departure therefrom shall in any event be effective unless the
same shall be permitted by Subsection (b) below, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given.
11.
(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 Isis and Lilly.
SECTION 9.06. SEVERABILITY. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein 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, and legal, effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.
SECTION 9.07. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract.
SECTION 9.08. HEADINGS. Article and Section headings used herein are
for convenience only, and do not constitute a part of this Agreement.
SECTION 9.09. RIGHT OF SETOFF. If a failure of Isis to pay the Debt on
the Payment Date or to pay Default Interest shall have occurred and be
continuing, Lilly is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all monetary
obligations at any time owing by Lilly to Isis now or hereafter existing against
any outstanding Debt or Default Interest. Lilly agrees promptly to notify Isis
after such setoff and application, but the failure to give such notice shall not
affect the validity of such setoff and application. The rights of Lilly under
this Section are in addition to other rights and remedies (including other
rights of setoff) which it may have.
SECTION 9.10. CONFIDENTIALITY AND NONDISCLOSURE. The parties hereto
agree that the provisions of the Collaboration Agreement relating to
confidentiality and non-disclosure are incorporated herein by reference.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
12.
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
ELI LILLY AND COMPANY
By: /s/ Sidney Taurel
-----------------------------------------------
Printed: Sidney Taurel
Title: Chairman of the Board,
Chief Executive Officer and President
ISIS PHARMACEUTICALS, INC.
By: /s/ B. Lynne Parshall
---------------------------------------
Name: B. Lynne Parshall
Title: Executive Vice President and
Chief Financial Officer
13.
EXHIBIT A
THIS CONVERTIBLE SUBORDINATED PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN
COMPLIANCE WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A
NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$100,000,000 August 29, 2001
FOR VALUE RECEIVED, ISIS PHARMACEUTICALS, INC., a Delaware corporation
("BORROWER"), hereby promises to pay to the order of ELI LILLY AND COMPANY, an
Indiana corporation ("LENDER"), in lawful money of the United States of America
and in immediately available funds, the principal sum of One Hundred Million
Dollars ($100,000,000) (the "LOAN") together with accrued and unpaid interest
thereon if applicable, each due and payable on the dates and in the manner set
forth in the Loan Agreement (as defined below).
This Convertible Subordinated Promissory Note (this "NOTE") is the
promissory note referred to in and is executed and delivered in connection with
that certain Loan Agreement dated as of even date herewith and executed by
Borrower in favor of Lender (as the same may from time to time be amended,
modified or supplemented or restated, the "LOAN AGREEMENT"). All capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings given to them in the Loan Agreement.
1. LOAN REQUESTS. At the time of any borrowing under this Note (or
at the time of receipt of any payment of principal or conversion thereof into
equity securities of the Borrower), Lender shall make or cause to be made, an
appropriate notation on the Exhibit A attached hereto reflecting the amount of
such borrowing (or the amount of such payment or conversion). The outstanding
amount of this Note set forth on such Exhibit A shall be prima facie evidence of
the principal amount thereof outstanding, but the failure to record, or any
error in so recording, shall not limit or otherwise affect the obligations of
Borrower to make payments of principal of or interest on this Note or to convert
the same when due. Borrower and Lender acknowledge that the initial principal
amount outstanding under this Note as of the date hereof shall be Ten Million
Dollars ($10,000,000), as indicated on the attached Exhibit A.
14.
2. CONVERTIBLE NOTE. This Note is convertible into the Common
Stock of the Borrower under certain circumstances in accordance with the
provisions of Section 2.03 of the Loan Agreement.
3. DEFAULT. Upon the occurrence of an Event of Default (as
defined in the Loan Agreement) that has not been cured within 30 days of its
occurrence, all unpaid principal, accrued interest and other amounts owing
hereunder shall be or may become immediately due, payable and collectible by
Lender pursuant to applicable law, all as provided in the Loan Agreement.
4. SUBORDINATION. The indebtedness evidenced by this Note is
hereby expressly subordinated, to the extent, in the manner and to the
indebtedness as set forth in Section 8.01 of the Loan Agreement.
5. WAIVER. Borrower waives presentment and demand for payment,
notice of dishonor, protest and notice of protest of this Note, and shall pay
all costs of collection when incurred, including, without limitation,
reasonable attorneys' fees, costs and other expenses.
6. GOVERNING LAW. This Note shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.
BORROWER ISIS PHARMACEUTICALS, INC.
By:/s/ B. LYNNE PARSHALL
----------------------------
Printed Name: B. LYNNE PARSHALL
------------------
Title: Executive Vice
President and CFO
-------------------------
15.
EXHIBIT A
PRINCIPAL BORROWINGS SCHEDULE
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
DATE BORROWING REPAYMENT PRINCIPAL BALANCE
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Closing Date $10,000,000 $0 $10,000,000
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16.
EXHIBIT B
OPINION OF COUNSEL
(a) Isis is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has full corporate
power and authority to conduct its business as presently conducted.
(b) The Common Stock to be issued has been duly authorized and is
duly and validly issued, fully paid and non-assessable and free of statutory
pre-emptive rights.
(c) The issuance of the Common Stock pursuant to the conversion
provisions in the Loan Agreement will not conflict with, or result in any breach
of any of the terms, conditions, or provisions of, or constitute a default
under, (i) the Certificate of Incorporation or Bylaws of Isis or (ii) any
provision of California or federal law, statute, rule or regulation or any
provision of the Delaware General Corporation Law.
(d) Except as obtained and in effect on the date of issuance of the
Common Stock, no consent, approval, order or authorization of, or registration,
qualification, designation, declaration, or filing with, any governmental
authority is required on the part of Isis in connection with the issuance of the
Common Stock pursuant to the conversion of the Loan Agreement.
17.
ISIS PHARMACEUTICALS, INC.
REGISTRATION RIGHTS AND STANDSTILL AGREEMENT
THIS REGISTRATION RIGHTS AND STANDSTILL AGREEMENT (the
"Agreement") is made as of August 17, 2001 by and between ISIS PHARMACEUTICALS,
INC., a Delaware corporation (the "Company"), and ELI LILLY AND COMPANY, an
Indiana corporation ("Lilly").
R E C I T A L S:
A. Pursuant to a Securities Purchase Agreement (the "PURCHASE
AGREEMENT") and a Loan Agreement (the "LOAN AGREEMENT") each dated as of the
date hereof, and each by and between the Company and Lilly, Lilly has acquired,
or may acquire in the future, (i) certain shares of common stock, par value
$.001 per share, of the Company (the "COMMON STOCK"), and (ii) a promissory note
(the "Note"), which in certain circumstances may be converted into Common Stock.
B. The execution of the Purchase Agreement and the Loan
Agreement has occurred on the date hereof, and it is a condition to the closing
of the transactions contemplated thereby that the parties execute and deliver
this Agreement.
C. The parties desire to set forth herein their agreement as
to the terms and conditions set forth herein related to the granting of certain
registration rights to the Holders (as defined below) relating to the Common
Stock held by such Holders and the Common Stock underlying the Note.
A G R E E M E N T:
The parties hereto agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the
following terms shall have the following respective meanings:
"COMMISSION" shall mean the U.S. Securities and Exchange
Commission.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission thereunder, all as
the same shall be in effect from time to time.
"HOLDERS" or "HOLDERS OF REGISTRABLE SECURITIES" shall mean
Lilly and any other Person owning Registrable Securities to whom registration
rights shall have been assigned in accordance with Section 10 below.
"PERSON" shall mean an individual, a corporation, a
partnership, a company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental or quasi-governmental
entity, or any department, agency or political subdivision thereof.
"REGISTRABLE SECURITIES" means (i) any shares of Common Stock
purchased pursuant to the Purchase Agreement, (ii) any shares of Common Stock
issued or issuable upon conversion of the Note and (iii) any Common Stock issued
or issuable in respect of the securities referred to in clauses (i) and (ii)
above upon any stock split, stock dividend, recapitalization or similar event;
excluding in all cases, however, any such securities which are not held by a
Holder.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or order of the
effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses, other than
Selling Expenses, incurred by the Company in complying with Sections 2 or 3
hereof, including without limitation, all registration, qualification and filing
fees, exchange listing fees, printing expenses, escrow fees, underwriters' fees
and expenses (excluding discounts and commissions), fees and disbursements of
counsel for the Company, blue sky fees and expenses, the expense of any special
audits incident to or required by any such registration and the fees and
disbursements (not to exceed $20,000) of counsel for the Holders.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect from time to time.
"SELLING EXPENSES" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and the costs of any accountants, attorneys or other
experts retained by the Holders, except as expressly included in Registration
Expenses.
2. DEMAND REGISTRATION.
(a) REQUESTS FOR REGISTRATION. Effective upon the second
anniversary of the Closing (as defined in the Purchase Agreement), until
expiration of such rights as set forth in Section 13 hereof, any Holder or
Holders who collectively hold Registrable Securities representing at least 50%
of the Registrable Securities then outstanding shall have the right at any time
and from time to time, to request registration under the Securities Act of a
minimum of 500,000 shares of Common Stock (as adjusted for any combinations,
consolidations, splits, stock distributions, stock dividends or other
recapitalizations with respect to such shares) on Form S-1, S-2 or S-3 (if
available) or any similar registration statement (a "Demand Registration"), such
form to be selected by the Company as appropriate. The request for the Demand
Registration shall specify the approximate number of Registrable Securities
requested to be registered. Within 20 days after receipt of any such request,
the Company will give written notice of such requested registration to all other
Holders of Registrable Securities. The Company shall include such other Holders'
Registrable Securities in such offering if they have responded affirmatively
within 20 days after the receipt of the Company's notice. The Holders in
aggregate will be entitled to request only one Demand Registration hereunder,
unless any Registrable Securities are issued upon conversion of the Note, in
which case the Holders in aggregate will be entitled to request two Demand
Registrations hereunder. A registration will not count as a Demand Registration
until it has become effective and has been effective for 180 days (or until such
lesser time as all Registrable Securities included therein shall have been sold
thereunder), unless such Demand
Registration has not become effective due solely to the fault of the Holders
requesting such registration, including a request by such Holders that such
registration be withdrawn, unless the Holders have paid the Registration
Expenses pursuant to the provisions of Section 4(b) hereof. The Company shall
pay all Registration Expenses in connection therewith. The Holders whose
Registrable Securities are included therein shall pay all Selling Expenses in
connection therewith.
(b) PRIORITY ON DEMAND REGISTRATION. If, in connection with a
Demand Registration, any managing underwriter (or, if such Demand Registration
is not an underwritten offering, a nationally recognized independent underwriter
selected by the Company and reasonably acceptable to the Holders of a majority
of the Registrable Securities sought to be registered in such Demand
Registration (and whose fees and expenses shall be borne solely by the Company))
advises the Company and the Holders of the Registrable Securities sought to be
included in such Demand Registration ("Demanding Sellers") that, in its opinion,
the inclusion of all the Registrable Securities and any other securities of the
Company, in each case, sought to be registered in connection with such Demand
Registration would adversely affect the marketability of the Registrable
Securities sought to be sold pursuant thereto, then the Company shall include in
the registration statement applicable to such Demand Registration only such
securities as the Company and the Demanding Sellers are advised by such
underwriter can be sold without such an effect (the "Maximum Demand Number"), as
follows and in the following order of priority:
(i) first, the number of Registrable Securities
sought to be registered by each Demanding Seller, PRO RATA in
proportion to the number of Registrable Securities sought to be
registered by all Demanding Sellers; and
(ii) second, if the number of Registrable Securities
to be included under clause (i) next above is less than the Maximum
Demand Number, the number of securities sought to be included by each
other seller, PRO RATA in proportion to the number of securities sought
to be sold by all such other sellers, which in the aggregate, when
added to the number of securities to be included pursuant to clause (i)
next above, equals the Maximum Demand Number.
Other than the securities issued by the Company to Reliance Insurance Company
and to Elan International Services, Ltd. and their permitted transferees, no
securities other than Registrable Securities hereunder shall be included in such
Demand Registration without the prior written consent of Holders who
collectively hold Registrable Securities representing at least 50% of the
Registrable Securities then outstanding.
(c) RESTRICTIONS ON DEMAND REGISTRATION. The Company may
postpone the filing or the effectiveness of a registration statement for a
Demand Registration one time in any 12 month period for up to 90 days if the
Company determines in good faith that such Demand Registration would reasonably
be expected to have a material adverse effect on any proposal or plan by the
Company or would require disclosure of any information that the board of
directors of the Company determines in good faith the disclosure of which would
be detrimental to the Company; provided, however, that in such event, the
Holders initially requesting such Demand
Registration will be entitled to withdraw such request and, if such request is
withdrawn, such Demand Registration will not count as a Demand Registration
hereunder.
(d) SELECTION OF UNDERWRITERS. The Holders will have the right
to select the investment banker(s) and manager(s) to administer an offering
pursuant to the Demand Registration, subject to the Company's prior written
approval, which will not be unreasonably withheld or delayed.
(e) OTHER REGISTRATION RIGHTS. Except as provided in this
Agreement, so long as any Holder owns any Registrable Securities, the Company
will not grant to any Persons the right to request the Company to register any
equity securities of the Company, or any securities convertible or exchangeable
into or exercisable for such securities, which conflicts with the rights granted
to the Holders hereunder, without the prior written consent of the Holders of at
least 50% of the Registrable Securities.
3. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Effective upon the second anniversary
of the Closing (as defined in the Purchase Agreement), any time that the Company
shall propose (whether in a primary offering or pursuant to the exercise of
demand rights by others) to register Common Stock under the Securities Act
(other than in a registration (i) on Form S-3 relating to sales of securities to
participants in a Company dividend reinvestment plan, (ii) on Form S-4 or S-8 or
any successor form or in connection with an acquisition or exchange offer or an
offering of securities solely to the existing shareholders or employees of the
Company, (iii) pursuant to a shelf registration statement filed pursuant to
Section 3 of either of two Registration Rights Agreements by and between Elan
International Services, Ltd., dated as of April 20, 1999 and as of January 14,
2001, (iv) pursuant to a shelf registration statement filed pursuant to Section
7.2 of the Master Agreement by and between Hybridon, Inc. and the Company, dated
as of May 24, 2001 or (v) pursuant to a shelf registration statement filed to
facilitate any equity line of credit financing), the Company shall give prompt
written notice to all Holders of Registrable Securities of its intention to
effect such a registration and, subject to Section 3(b) and the other terms of
this Agreement, shall include in such registration all Registrable Securities
that are permitted under applicable securities laws to be included in such
registration and with respect to which the Company has received written requests
for inclusion therein by the Holders within 20 days after the receipt of the
Company's notice (each, a "PIGGYBACK REGISTRATION"; together with a Demand
Registration, a "REGISTRATION").
(b) PRIORITY ON PIGGYBACK REGISTRATIONS. If a Piggyback
Registration is an underwritten registration on behalf of the Company, and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number that can be sold in such offering without adversely affecting the
marketability of the offering, the Company shall include in such registration,
only as may be permitted in the reasonable business judgment of the managing
underwriters for such registration:
(i) first, up to that number of securities the
Company proposes to sell;
(ii) second, up to that number of Registrable
Securities requested to be included in such registration by the Holders
and that number of securities requested to be included in such
registration by any other Person entitled to registration rights with
respect to such registration, PRO RATA among the Holders of such
Registrable Securities and such other Persons, on the basis of the
number of Registrable Securities and other securities of the Company
requested to be included by each such Holder and such other Persons;
and
(iii) third, up to that number of other securities
requested to be included in such registration.
The Holders of any Registrable Securities included in such a registration shall
execute an underwriting agreement and customary accompanying documents in form
and substance satisfactory to the managing underwriters.
(c) RIGHT TO TERMINATE REGISTRATION. If, at any time
after giving written notice of its intention to register any of its securities
as set forth in Section 3(a) and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register such securities, the Company may, at
its election, give written notice of such determination to each Holder of
Registrable Securities and thereupon be relieved of its obligation to register
any Registrable Securities in connection with such registration (but not of its
obligation to pay the Registration Expenses in connection therewith).
(d) SELECTION OF UNDERWRITERS. The Company shall have the
right to select the investment banker(s) and manager(s) to administer an
offering pursuant to a Piggyback Registration.
4. EXPENSES OF REGISTRATION; WITHDRAWAL RIGHTS.
(a) EXPENSES. Except as otherwise provided herein, all
Registration Expenses incurred in connection with all registrations pursuant to
Sections 2 and 3 shall be borne by the Company, and all Selling Expenses
relating to securities registered on behalf of the Holders of Registrable
Securities shall be borne by such Holders.
(b) WITHDRAWAL RIGHTS. Any Holder of Registrable
Securities having notified or directed the Company to include any or all of its
Registrable Securities in a registration statement under the Securities Act
(whether pursuant to Section 2 or 3 hereof) shall have the right to withdraw any
such notice or direction with respect to any or all of the Registrable
Securities designated for registration thereby by giving written notice to such
effect to the Company prior to the effective date of such registration
statement. In the event of any such withdrawal, the Company shall not include
such Registrable Securities in the applicable registration and such Registrable
Securities shall continue to be Registrable Securities hereunder. No such
withdrawal shall affect the obligations of the Company with respect to any
Registrable Securities not so withdrawn; provided that in the case of a
registration pursuant to Section 2 hereof, if such withdrawal shall reduce the
number of Registrable Securities still sought to be included in such
registration ("Included Securities") below the minimum number required
pursuant to Section 2(a) to be included therein, then the Company shall as
promptly as practicable give each Holder of Included Securities notice to such
effect, referring to this Agreement and summarizing this Section, and within ten
business days following the effectiveness of such notice, either the Company or
the Holders of a majority of the Included Securities may, by written notice to
each Holder of Included Securities or the Company, respectively, elect that such
registration statement not be filed or, if theretofore filed, be withdrawn.
During such ten business day period, the Company shall not file such
registration statement if not theretofore filed or, if such registration
statement has been theretofore filed, the Company shall not seek, and shall use
its best efforts to prevent, the effectiveness thereof. Any registration
statement effected pursuant to Section 2 hereof and not filed or withdrawn in
accordance with this Section 4(b) shall be counted as a Demand Registration for
purposes of Section 2 hereof, unless the Holders of the Included Securities and
the securities withdrawn from the registration statement pay the Registration
Expenses.
5. HOLDBACK AGREEMENTS.
(a) The Company agrees, unless the underwriters managing
the registered public offering otherwise agree, (i) not to effect any public
sale or distribution of its equity securities, or any securities convertible
into or exchangeable or exercisable for such securities, for its own account
during the seven days prior to and during the 90-day period beginning on the
effective date of any underwritten Demand Registration (except (A) as part of
such underwritten registration, (B) pursuant to registration statements on Form
S-4 or Form S-8 or any successor form, (C) pursuant to a registration statement
then in effect or (D) as required under any existing contractual obligation of
the Company), and (ii) to cause its officers and directors and to use reasonable
efforts to cause each holder of at least 5% (on a fully-diluted basis) of its
outstanding Common Stock, or any securities convertible into or exchangeable or
exercisable for Common Stock, purchased from the Company at any time after the
date of this Agreement (other than in a registered public offering) to agree not
to effect any public sale or distribution (including sales pursuant to Rule 144)
of any such securities during such periods (except as part of such underwritten
registration, if otherwise permitted).
(b) Each Holder agrees, so long as such Holder holds at
least 1% (on a fully diluted basis) of the outstanding Common Stock, if
requested by the managing underwriter or underwriters in an underwritten
offering of securities of the Company, not to effect any offer, sale,
distribution or transfer, including a sale pursuant to Rule 144 (or any similar
provision then effect) under the Securities Act (except as part of such
underwritten registration), during the seven-day period prior to, and during the
180-day period (or such shorter period as may be agreed to in writing by the
Company and the Holders of at least 50% of the Registrable Securities) following
the effective date of such Registration Statement to the extent timely notified
in writing by the managing underwriter or underwriters.
6. REGISTRATION PROCEDURES. Whenever the Company is
under the obligation to register Registrable Securities hereunder, the Company
will use all reasonable efforts to effect the Registration and the sale of such
Registrable Securities, and pursuant thereto the Company will as expeditiously
as possible:
(a) subject to Section 2(c) hereof, prepare and file with
the Commission a registration statement on any form for which the Company
qualifies with respect to such Registrable Securities and use all reasonable
efforts to cause such registration statement to become effective (provided that
before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company will (i) furnish to the counsel selected by the
Holders copies of all such documents proposed to be filed, which documents will
be subject to the prompt review of such counsel, and (ii) notify each Holder of
Registrable Securities covered by such registration of any stop order issued or
threatened in writing by the Commission);
(b) subject to Sections 2(c) and 6(e) hereof, prepare and
file with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective for, in the case of a Demand
Registration, a period equal to the shorter of (i) six months and (ii) the time
by which all securities covered by such registration statement have been sold,
and comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use all reasonable efforts to register or qualify
such Registrable Securities under the securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided that the Company will not be required
to (i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 6(d), or (ii) subject
itself to taxation in any jurisdiction;
(e) notify each seller of such Registrable Securities, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the occurrence of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any material fact necessary to make the statements
therein in light of the circumstances under which they were made not misleading,
and, at the request of any such seller, the Company will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein in light of the circumstances under which they were
made not misleading; provided, however, that the Company shall not be required
to amend the registration statement or supplement the Prospectus for a period of
up to six months if the board of directors of the Company determines in good
faith that to do so would reasonably be expected to have a material adverse
effect on any proposal or plan by the Company to engage in any financing,
acquisition or disposition of assets (other than in the ordinary course of
business) or any merger, consolidation, tender offer or similar transaction or
would require the disclosure
of any information that the board of directors of the Company determines in
good faith the disclosure of which would be detrimental to the Company, it being
understood that the period for which the Company is obligated to keep the
Registration Statement effective shall be extended for a number of days equal to
the number of days the Company delays amendments or supplements pursuant to this
provision. Upon receipt of any notice pursuant to this Section 6(e), the Holders
shall suspend all offers and sales of securities of the Company and all use of
any prospectus until advised by the Company that offers and sales may resume,
and shall keep confidential the fact and content of any notice given by the
Company pursuant to this Section 6(e);
(f) cause all such Registrable Securities to be listed on
each securities exchange on which similar securities issued by the Company are
then listed;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
the Holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities;
(i) at reasonable times and as reasonably requested make
available for inspection by a representative of the Holders of Registrable
Securities included in the registration statement, any underwriter participating
in any disposition pursuant to such registration statement and any attorney,
accountant or other agent retained by any such seller or underwriter, all
pertinent financial and other records, pertinent corporate documents and
properties of the Company, and use commercially reasonable efforts to cause the
Company's officers, directors, employees and independent accountants to supply
all information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) otherwise use its reasonable efforts to comply with
all applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least 12 months beginning with the first day of the
Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 12(a) of the Securities Act and Rule 158 thereunder;
(k) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or suspending the
qualification of any Common Stock included in such registration statement for
sale in any jurisdiction, use all reasonable efforts promptly to obtain the
withdrawal of such order; and
(l) if the registration is an underwritten offering, use
all reasonable efforts to obtain a so-called "cold comfort" letter from the
Company's independent public accountants in
customary form and covering such matters of the type customarily covered by cold
comfort letters.
7. OBLIGATIONS OF HOLDERS. Whenever the Holders of
Registrable Securities sell any Registrable Securities pursuant to a
Registration, such Holders shall be obligated to comply with the applicable
provisions of the Securities Act, including the prospectus delivery requirements
thereunder, and any applicable state securities or blue sky laws.
8. INDEMNIFICATION. (a) In connection with any
registration statement for any Registration in which a Holder of Registrable
Securities is participating, the Company agrees to indemnify, to the fullest
extent permitted by applicable law, each such Holder of Registrable Securities,
its officers and directors and each Person who controls such Holder (within the
meaning of the Securities Act) against all losses, claims, damages, liabilities,
reasonable and documented expenses or any amounts paid in settlement of any
litigation, investigation or proceeding commenced or threatened to which each
such indemnified party may become subject under the Securities Act including,
without limitation, reasonable attorneys fees and disbursements (collectively,
"Claims") insofar as such Claim arose out of (i) any untrue or alleged untrue
statement of material fact contained, on the effective date thereof, in any such
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or (ii) any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by or
contained in any information furnished in writing to the Company by such Holder
expressly for use therein or by such Holder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such Holder with a sufficient number of copies
of the same. In connection with an underwritten offering, the Company will
indemnify the underwriters, their officers and directors and each Person who
controls the underwriters (within the meaning of the Securities Act) to the same
extent as provided above with respect to the indemnification of the Holders of
Registrable Securities.
(b) In connection with any registration statements for
any Registration in which a Holder of Registrable Securities is participating,
each such Holder will furnish to the Company in writing such customary
information as the Company reasonably requests for use in connection with any
such registration statement or prospectus (the "Seller's Information") and, to
the fullest extent permitted by applicable law, will indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any and all Claims to which each such
indemnified party may become subject under the Securities Act insofar as such
Claim arose out of (i) any untrue or alleged untrue statement of material fact
contained, on the effective date thereof, in any such registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or (ii) any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided that with respect to a Claim arising pursuant to clause
(i) or (ii) above, the material misstatement or omission is contained in such
Seller's Information; provided, further, that the obligation to indemnify will
be individual to each Holder (not joint and several among Holders) and will be
limited to the amount of proceeds received by such Holder from the sale of
Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will
(i) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification (but the failure to provide such
notice shall not release the indemnifying party of its obligation under
paragraphs (a) and (b), unless and then only to the extent that, the
indemnifying party has been prejudiced by such failure to provide such notice)
and (ii) unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist with
respect to such claim, permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.
(d) The indemnifying party shall not be liable to
indemnify an indemnified party for any settlement, or consent to judgment of any
such action effected without the indemnifying party's written consent (but such
consent will not be unreasonably withheld). Furthermore, the indemnifying party
shall not, except with the prior written approval of each indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to each indemnified party of a release from all liability in respect of such
claim or litigation without any payment or consideration provided by each such
indemnified party.
(e) If the indemnification provided for in this Section 8
is unavailable to an indemnified party under clauses (a) and (b) above in
respect of any losses, claims, damages or liabilities referred to therein, then
each indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of the Company, the underwriters, the
sellers of Registrable Securities and any other sellers participating in the
registration statement in connection with the statement or omission which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company, the
underwriters, the sellers of Registrable Securities and any other sellers
participating in the registration statement shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the sellers of Registrable Securities
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Notwithstanding
anything herein to the contrary, the obligation of any Holder to contribute as
provided herein shall be limited to the amount of net proceeds received by such
Holder from the sale of Registrable Securities pursuant to the registration
statement.
(f) The indemnification provided for under this Agreement
will remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
person of such indemnified party.
9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No
Holder may participate in any registration hereunder which is underwritten
unless such Holder (a) agrees to sell such
Holder's securities on the basis provided in any underwriting arrangements
approved by the Holder or Holders entitled hereunder to approve such
arrangements, (b) as expeditiously as possible notifies the Company of the
occurrence of any event as a result of which any prospectus contains an untrue
statement of material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(c) completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. TRANSFER OF REGISTRATION RIGHTS. The rights to cause
the Company to register Registrable Securities pursuant to this Agreement may be
assigned by a Holder to an affiliate of Lilly and to not more than two other
transferees or assignees of such Registrable Securities pursuant to a private
placement transaction as permitted by the Purchase Agreement; provided that (i)
such transferee or assignee was a Holder of Registrable Securities prior to such
transfer or such transferee or assignee acquires at least 200,000 Registrable
Securities (subject to appropriate adjustment for stock splits, stock
combinations and similar events) and the transferring Holder gives the Company
written notice of such transfer or assignment within a reasonable time after
consummation thereof, which notice states the name and address of the transferee
or assignee and identifies the Registrable Securities with respect to which such
registration rights are being transferred or assigned; (ii) such transferee or
assignee assumes the obligations of the Holder with respect to the transferred
Registrable Securities pursuant to this Agreement; (iii) immediately following
such transfer or assignment, the further disposition of such Registrable
Securities by the transferee or assignee is restricted under the Securities Act;
and (iv) no more than a maximum of three such transferees or assignees in the
aggregate shall be assigned or hold the rights to cause the Company to register
Registrable Securities pursuant to this Agreement.
11. INFORMATION BY HOLDER. Each Holder shall furnish to
the Company such written information regarding such Holder and any distribution
proposed by such Holder as the Company may reasonably request in writing and as
shall be reasonably required in connection with any registration, qualification
or compliance referred to in this Agreement and shall promptly notify the
Company of any changes or updates in such information.
12. EXCHANGE ACT COMPLIANCE. The Company shall comply
with all of the reporting requirements of the Exchange Act then applicable to it
and shall comply with all other public information reporting requirements of the
Commission which are conditions to the availability of Rule 144 for the sale of
the Registrable Securities. The Company shall cooperate with each Holder in
supplying such information as may be necessary for such Holder to complete and
file any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of Rule 144.
13. TERMINATION OF REGISTRATION RIGHTS. All registration
rights granted under this Agreement shall terminate and be of no further force
and effect, as to any particular Holder, at such time as all Registrable
Securities held by such Holder or contingently issuable to such Holder upon
conversion of the Note (i) represent, in the aggregate, less than 2% of the
Common Stock then outstanding and (ii) can be sold by such Holder within a
three-month period without compliance with the registration requirements of the
Securities Act pursuant to Rule 144 (including Rule 144(k)) promulgated
thereunder.
14. STANDSTILL.
(a) Provided that nothing contained herein will prevent
or prohibit Lilly from acquiring Voting Stock (as defined below) of the Company
pursuant to the Purchase Agreement or pursuant to conversion of the Note, Lilly
will not, directly or indirectly, without the prior consent of a majority of the
Board of Directors of the Company (the "Board"), (i) acquire (or offer or agree
to acquire) any Voting Stock if, as a result, Lilly would beneficially own more
than 20% of the then outstanding Voting Stock; (ii) directly or indirectly
solicit proxies or consents or become a participant in a solicitation (as such
terms are defined in Regulation 14A under the Exchange Act) in opposition to the
recommendation of the majority of the Board for a Takeover Event (as defined
below); or (iii) transfer to any third party (other than to its "affiliates,"
"associates" (as such terms are defined in Rule 12b-2 under the Exchange Act),
officers, directors or employees and other than pursuant to a proxy solicitation
conducted by or on behalf of the Board), the right to vote any Voting Stock
except in connection with the transfer of ownership of such Voting Stock for
fair value. Lilly also agrees that it will not advise, assist or encourage any
third party to do any of the foregoing. Notwithstanding the foregoing, (x) Lilly
will not be obligated to dispose of any Voting Stock it owns if its percentage
ownership is increased as a result of a decrease in the number of shares of
Voting Stock outstanding, and (y) in the event of any bona fide third party
tender or exchange offer for at least 50% of the outstanding Voting Stock of the
Company, Lilly will be free to tender or exchange any or all of its Voting Stock
and/or take such other actions as it deems advisable, in its sole discretion.
The covenants in this Section 14(a) shall expire upon the later of (i) the fifth
anniversary of the date hereof and (ii) the first anniversary of the termination
of the Collaboration Agreement, dated as of the date hereof, between the Company
and Lilly (the "Collaboration Agreement").
(b) The Company will give Lilly prompt notice of the
receipt by the Company of any written notice couched in such terms as to put the
Company reasonably on notice of the likelihood that a person or group has
acquired or is proposing to acquire an aggregate position of at least 10% of the
Voting Stock, the Company's receiving any bona fide offer to purchase or acquire
20% or more of the Voting Stock or all or substantially all of the assets of the
Company, and any Board determination to seek an acquiror for in excess of 50% of
the Voting Stock.
(c) Lilly will cause its affiliates and associates to
comply with the provisions of this Section 14, whether directly or indirectly,
individually or as part of a "group" (as such term is defined in Rule 13d-5
under the Exchange Act). When used in this Section 14, the term Lilly includes
Lilly together with its affiliates and associates.
(d) For purposes of this Section 14, the term "TAKEOVER
EVENT" means any proposal for any merger or business combination involving the
Company or any of its subsidiaries, the purchase or sale of all or substantially
all of the assets of the Company or any of its subsidiaries, or the purchase of
at least 20% of the Voting Stock, by tender offer or otherwise (except pursuant
to the exercise of rights, warrants, options or similar securities distributed
by the Company to holders of Voting Stock generally), and the term "VOTING
STOCK" means the Common Stock and any preferred stock of the Company possessing
voting rights and eligible to participate in votes of all of the Company's
stockholders pursuant to the Company's Certificate of Incorporation and Delaware
law, and includes any options, convertible securities or other rights to acquire
such stock.
15. COOPERATION UPON SALE OF SECURITIES. In the event
that Lilly or any affiliate transferee of Lilly proposes to sell, transfer or
otherwise dispose of any securities of the Company prior to the termination of
the Collaboration Agreement, Lilly or any such affiliate transferee shall notify
the Company in writing at least fifteen (15) days prior to such proposed sale,
transfer or other disposition thereof and further agrees to cooperate and
coordinate with the Company in the development by Lilly or such affiliate
transferee, as applicable, and the Company of a standby statement to be used in
responding to any inquiries from third parties (or if deemed appropriate by the
Company or Lilly or such affiliate transferee, as applicable, a press release of
that party) that would, as appropriate, indicate the continuing strong support
by Lilly or such affiliate transferee, as applicable, of the collaboration
activities, and the Company, notwithstanding the decision of Lilly or such
affiliate transferee, as applicable, to dispose of some of its holdings of the
Company's securities. Subject to the required notice above, the Company and
Lilly or such affiliate transferee, as applicable, shall provide each other with
comments on any such proposed standby statement or press release in such manner
as is necessary to not cause a delay in Lilly's or such affiliate transferee's,
as applicable, proposed sale, transfer or other disposition of such securities.
16. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company will not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the Holders of Registrable
Securities in this Agreement without the prior written consent of a majority in
interest of such Registrable Securities.
(b) REMEDIES. Any Person having rights under any
provision of this Agreement will be entitled to enforce such rights specifically
to recover damages caused by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. The parties hereto
agree and acknowledge that money damages may not be an adequate remedy for any
breach of the provisions of this Agreement and that any party may in its sole
discretion apply to any court of law or equity of competent jurisdiction
(without posting any bond or other security) for specific performance and for
other injunctive relief in order to enforce or prevent violation of the
provisions of this Agreement; provided, however, that in no event shall any
Holder have the right to enjoin, delay or interfere with any offering of
securities by the Company which is not in violation of the provisions of Section
5(a) above.
(c) AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, the provisions of this Agreement may be amended or waived only with the
prior written consent of the Company and Holders of at least 50% of the
Registrable Securities; provided, however, that without the prior written
consent of all the Holders, no such amendment or waiver shall reduce the
foregoing percentage required to amend or waive any provision of this Agreement.
Notwithstanding the foregoing, Section 14 may be amended or waived only with the
prior written consent of the Company and Lilly.
(d) SUCCESSORS AND ASSIGNS. All covenants and agreements
in this Agreement by or on behalf of any of the parties hereto will bind and
inure to the benefit of the respective successors and assigns of the parties
hereto, and shall inure to the benefit and be enforceable by each Holder of
Registrable Securities from time to time.
(e) SEVERABILITY. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
(f) COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
will constitute one and the same Agreement.
(g) DESCRIPTIVE HEADINGS. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
(h) GOVERNING LAW. All questions concerning the
construction, validity and interpretation of this Agreement will be governed by
the laws of the State of Delaware without regard to principles of conflicts of
laws, except that all issues concerning the relative rights of the Company and
its stockholders shall be governed by the Delaware General Corporation Law,
without giving effect to the principles thereof relating to conflicts of laws.
(i) NOTICES. All notices, demands and requests of any
kind to be delivered to any party in connection with this Agreement shall be in
writing and shall be deemed to have been duly given if personally delivered or
if sent by nationally-recognized overnight courier or by registered or certified
airmail, return receipt requested and postage prepaid or by facsimile
transmission (with receipt confirmed by telephone), addressed as follows:
(i) if to the Company, to:
Isis Pharmaceuticals, Inc.
2292 Faraday Avenue
Carlsbad, CA 92008
Facsimile: (760) 931-9639
telephone confirmation required at (760) 603-2460
Attention: B. Lynne Parshall
with a copy to:
Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, CA 92121
Facsimile: (858) 453-3555
telephone confirmation required at (858) 550-6000
Attention: Julie M. Robinson, Esq.
(ii) if to Lilly, to:
Eli Lilly and Company
Lilly Corporate Center
Indianapolis, IN 46285
Facsimile: (317) 433-3000
telephone confirmation required at (317) 276-2703
Attention: Rebecca O. Kendall, Esq., Senior Vice
President and General Counsel
with a copy to:
Facsimile: (317) 277-7979
telephone confirmation required at (317) 276-5624
Attention: Richard D. Dimarchi, Ph.D., Group Vice
President, Lilly Research Center
(j) ENTIRE AGREEMENT. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subject matter hereof.
[Signature page follows]
IN WITNESS WHEREOF, the parties have executed this
Registration Rights and Standstill Agreement as of the date first written above.
ISIS PHARMACEUTICALS, INC.
By: /s/ B. Lynne Parshall
--------------------------------------------
Name: B. Lynne Parshall
Title: Executive Vice President and
Chief Financial Officer
ELI LILLY AND COMPANY
By: /s/ Sidney Taurel
---------------------------------------
Name: Sidney Taurel
Title: Chairman of the Board, Chief Executive
Officer and President
Exhibit 2.4
*Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80(b)(4)
200.83 and 240.24b-2
COLLABORATION AGREEMENT
BETWEEN
ELI LILLY AND COMPANY
AND
ISIS PHARMACEUTICALS, INC.
AUGUST 17, 2001
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS.........................................................................1
ARTICLE 2 COLLABORATION OVERVIEW AND GOVERNANCE...............................................1
2.1 The Collaboration.......................................................................1
2.2 Reagent Provision Program...............................................................2
2.3 Drug Discovery Target Validation Program................................................2
2.4 Antisense Drug Discovery Program........................................................2
2.5 Governance - Executive Committee........................................................2
2.5.1 Executive Committee Meetings...................................................2
2.5.2 Executive Committee Responsibilities...........................................3
2.5.3 Executive Committee Decisions..................................................4
2.6 Governance - Joint Research Committee...................................................4
2.6.1 Joint Research Committee Meetings..............................................4
2.6.2 Joint Research Committee Responsibilities......................................5
2.6.3 Joint Research Committee Decisions.............................................6
2.6.4 Joint Research Committee Semiannual Status Reports.............................7
2.7 Governance - Operating Committees.......................................................7
2.7.1 Initial Operating Committees...................................................8
2.7.2 IP Committee...................................................................8
2.8 Dissolution of the Committees...........................................................8
2.9 Alliance Managers.......................................................................9
ARTICLE 3 THE COLLABORATION...................................................................9
3.1 Collaboration Staffing..................................................................9
3.2 Subcontracting..........................................................................9
3.3 Staff Availability.....................................................................10
3.4 Facility Visits........................................................................10
3.5 Exchange of Information................................................................10
3.6 Records................................................................................10
3.7 Compliance.............................................................................10
ARTICLE 4 THE REAGENT PROVISION PROGRAM......................................................11
4.1 Description and Term...................................................................11
i.
TABLE OF CONTENTS
(CONTINUED)
PAGE
4.2 Reagent Targets........................................................................11
4.3 Results of Lilly First Pass In Vitro Analysis..........................................11
4.4 Protected Reagent Targets..............................................................11
4.5 Isis Use of Reagent Targets and Reagent ASO Compounds..................................12
4.6 Isis GeneTrove Database................................................................12
4.7 Reagent ASO Products...................................................................13
4.8 Lilly Confidential Information.........................................................13
4.9 Use and Disclosure.....................................................................13
ARTICLE 5 THE DRUG DISCOVERY TARGET VALIDATION PROGRAM.......................................13
5.1 Description and Term...................................................................13
5.2 Target Designation.....................................................................14
5.3 Target Validation Program..............................................................14
5.4 Joint Research Committee Review........................................................15
5.5 Accepted Validation Targets............................................................15
5.6 Rejected Validation Targets............................................................16
5.7 Lilly Rights Regarding Other Targets...................................................17
5.8 Exclusive Targets......................................................................17
5.9 Validation ASO Products................................................................18
5.10 Lilly Confidential Information.........................................................18
5.11 Use and Disclosure.....................................................................18
ARTICLE 6 THE ANTISENSE DRUG DISCOVERY PROGRAM...............................................18
6.1 Description and Term...................................................................18
6.2 Drug Discovery Target Designation......................................................19
6.2.1 Targets Available for Designation as Drug Discovery Targets...................19
6.2.2 Disagreements Regarding Drug Discovery Target Designation.....................19
6.2.3 Restriction on Isis' Right to Use Drug Discovery Targets......................20
6.3 Further Designation as Stage 1, 2 or 3 Drug Discovery Target...........................20
6.4 Development Candidate Designation......................................................21
6.4.1 During the Antisense Drug Discovery Term......................................21
6.4.2 After the Antisense Drug Discovery Term.......................................21
ii.
TABLE OF CONTENTS
(CONTINUED)
PAGE
6.5 Continued Development of Drug Discovery Targets After the Antisense Drug Discovery
Term...................................................................................21
6.6 Development and Commercialization of Development Candidates............................22
6.7 Abandoned Drug Discovery Targets.......................................................22
6.8 Reserved Targets.......................................................................22
6.9 Limitation on Number of Drug Discovery Targets and Reserved Targets....................23
ARTICLE 7 DEVELOPMENT, COMMERCIALIZATION, MANUFACTURING AND SUPPLY...........................23
7.1 Research Supply........................................................................23
7.2 Clinical Supply........................................................................24
7.3 Development and Commercialization......................................................24
ARTICLE 8 GRANT OF RIGHTS....................................................................24
8.1 Licenses to Lilly......................................................................24
8.1.1 Research Licenses.............................................................24
8.1.2 Product Licenses..............................................................25
8.2 Lilly Product Options..................................................................25
8.2.1 Option to Isis Blocking Patent Rights for Reagent Non-ASO Products............25
8.2.2 Option to Reagent Targets and Validation Targets and Exclusive Targets........25
(a) Grant of Option......................................................25
(b) Exercise of Option...................................................26
(c) Diligence and Reporting..............................................26
8.2.3 Option to Drug Discovery ASO Targets..........................................27
(a) Grant of Option......................................................27
(b) Exercise of Option...................................................27
(c) Diligence and Reporting..............................................27
8.3 Lilly's Right of First Negotiation.....................................................28
8.4 Licenses to Isis.......................................................................30
8.4.1 Research Licenses.............................................................30
8.4.2 Product Licenses..............................................................30
iii.
TABLE OF CONTENTS
(CONTINUED)
PAGE
8.5 Isis Option to License Lilly Non-Collaboration ASO Patent Rights.......................30
8.6 No Implied Licenses....................................................................32
8.7 Isis GeneTrove Database Subscription...................................................32
8.8 Technology Transfer....................................................................32
8.9 Manufacturing Improvements.............................................................33
ARTICLE 9 PAYMENTS AND ACCOUNTING............................................................34
9.1 Collaboration Funding..................................................................34
9.1.1 Collaboration FTEs............................................................34
9.1.2 Reagents......................................................................34
9.1.3 Protected Reagent Targets.....................................................34
9.1.4 Audits........................................................................34
9.1.5 Increase in Loan Commitment...................................................35
9.1.6 Modifications to Loan Disbursement Schedule...................................35
9.1.7 Action by Executive Committee.................................................35
9.2 Technology Access Fee..................................................................35
9.2.2 Credits Against Technology Access Fee.........................................36
9.3 License, Milestone and Royalty Payments - Lilly........................................36
9.3.1 Reagent Non-ASO Products......................................................36
(a) Milestone Payments...................................................36
(b) Royalties............................................................37
9.3.2 Validation Non-ASO Products and Drug Discovery Non-ASO Products...............37
(a) Milestone Payments...................................................37
(b) Royalties............................................................38
9.3.3 Reagent ASO Products and Validation ASO Products..............................38
(a) License Fees.........................................................38
(b) Milestone Payments...................................................38
(c) Royalties............................................................39
9.3.4 Drug Discovery ASO Products...................................................39
(a) License Fees.........................................................39
iv.
TABLE OF CONTENTS
(CONTINUED)
PAGE
(b) Milestone Payments...................................................40
(c) Royalties............................................................40
9.3.5 Lilly Sublicensing Obligations................................................41
9.4 Pass Through Royalties.................................................................41
9.4.1 [*]...........................................................................41
9.4.2 [*]...........................................................................41
9.5 Access to Third Party Rights...........................................................42
9.5.1 Third Party Licenses..........................................................42
9.5.2 Oral Preparation or Formulation Technology....................................42
9.6 Payments by Isis.......................................................................42
9.6.1 Isis Non-Collaboration ASO Products...........................................42
9.6.2 Isis Validation ASO Products..................................................42
9.6.3 Isis Drug Discovery ASO Products..............................................43
9.6.4 Isis Drug Discovery ASO Products..............................................43
9.6.5 Lilly Summary Reports.........................................................43
9.6.6 ASO Product Competition.......................................................44
9.7 Royalty Obligations....................................................................44
9.8 COPS Protection........................................................................44
9.9 Compulsory License.....................................................................45
9.10 Inflation..............................................................................45
9.11 Accounting Reports; Payment of Royalty.................................................45
9.12 Audits.................................................................................45
9.13 Payment................................................................................46
9.14 Income Tax Withholding.................................................................46
ARTICLE 10 CONFIDENTIALITY....................................................................46
10.1 Nondisclosure and Nonuse Obligations...................................................46
10.2 Permitted Disclosure of Confidential Information.......................................46
ARTICLE 11 DISCLAIMERS, REPRESENTATIONS, WARRANTIES AND INDEMNIFICATIONS......................47
11.1 Isis Representations and Warranties....................................................47
* Confidential Treatment Requested
v.
TABLE OF CONTENTS
(CONTINUED)
PAGE
11.1.1 Corporate Existence and Authority.............................................47
11.1.2 Patents, Prior Art............................................................47
11.1.3 Absence of Litigation, Infringement, Misappropriation.........................47
11.1.4 Full Disclosures..............................................................48
11.1.5 Employee Obligations..........................................................48
11.1.6 Compliance with Laws..........................................................48
11.1.7 No Debarment..................................................................48
11.1.8 Licenses......................................................................48
11.1.9 Target Availability...........................................................48
11.2 Lilly Representations and Warranties...................................................48
11.2.1 Corporate Existence and Authority.............................................48
11.2.2 Employee Obligations..........................................................49
11.2.3 Compliance with Laws..........................................................49
11.2.4 No Debarment..................................................................49
11.2.5 Licenses......................................................................49
11.3 Disclaimer.............................................................................49
11.4 Responsibility and Control.............................................................49
11.5 Isis' Right to Indemnification.........................................................49
11.6 Lilly's Right to Indemnification.......................................................50
11.7 Indemnification Procedures.............................................................50
ARTICLE 12 INTELLECTUAL PROPERTY..............................................................51
12.1 Disclosures and Reports................................................................51
12.2 Ownership..............................................................................51
12.3 Patent Filing and Prosecution..........................................................51
12.4 Election Not to File, Prosecute or Maintain............................................52
12.5 Inventions Otherwise Unpatentable in the United States.................................53
12.6 Costs and Expenses.....................................................................53
12.7 Patent Term Extensions.................................................................54
12.8 Audit of Costs.........................................................................54
12.9 Notice of Certification................................................................54
vi.
TABLE OF CONTENTS
(CONTINUED)
PAGE
12.10 Notice of Infringement Claim...........................................................54
12.10.1 Responsibilities...............................................................55
12.11 Infringement Claims Against Third Parties..............................................55
12.11.1 Protection Against Infringement................................................55
12.11.2 Notice of Infringement.........................................................55
12.11.3 Expenses of Bringing Infringement Action.......................................56
12.11.4 Lilly's Failure to Institute, Prosecute and Control............................56
12.11.5 Isis' Failure to Institute, Prosecute and Control..............................56
12.11.6 Settlement Approval............................................................56
ARTICLE 13 TERM AND TERMINATION...............................................................56
13.1 Term of Collaboration..................................................................56
13.2 Term of Agreement......................................................................57
13.3 Termination of Collaboration Upon Change of Control....................................57
13.4 Termination for Breach.................................................................57
13.5 Termination Upon Insolvency............................................................58
13.6 Effect of Termination Due to Lilly Breach or Insolvency................................58
13.7 Effect of Termination Due to Isis Breach or Insolvency.................................59
13.8 Accrued Rights/Surviving Obligations...................................................61
13.9 Limitation of Liability................................................................62
ARTICLE 14 PUBLICITY..........................................................................62
14.1 Disclosure of Agreement................................................................62
14.2 Use of Names, Logos or Symbols.........................................................62
14.3 Publication............................................................................63
ARTICLE 15 HART-SCOTT-RODINO FILING...........................................................64
15.1 HSR Act Compliance.....................................................................64
15.2 Cooperation on Filing..................................................................64
ARTICLE 16 MISCELLANEOUS......................................................................65
16.1 Key Personnel..........................................................................65
16.2 Force Majeure..........................................................................65
16.3 Assignment.............................................................................65
vii.
TABLE OF CONTENTS
(CONTINUED)
PAGE
16.4 Severability...........................................................................65
16.5 Notices................................................................................65
16.6 Dispute Resolution.....................................................................66
16.7 Choice of Law..........................................................................66
16.8 Entire Agreement.......................................................................66
16.9 Headings...............................................................................67
16.10 Independent Contractors................................................................67
16.11 Non-Solicitation of Employees..........................................................67
16.12 Further Actions........................................................................67
16.13 Waiver.................................................................................67
16.14 Jointly Prepared.......................................................................67
16.15 Counterparts...........................................................................67
viii.
COLLABORATION AGREEMENT
THIS COLLABORATION AGREEMENT (the "AGREEMENT") is entered into as of
August 17, 2001 and effective as of the Effective Date, by and between ELI LILLY
AND COMPANY, a corporation organized and existing under the laws of Indiana and
its Affiliates (together "LILLY"), and ISIS PHARMACEUTICALS, INC., a corporation
organized and existing under the laws of Delaware ("ISIS").
RECITALS
A. Isis is engaged in the research and development of antisense
oligonucleotides and has accumulated considerable knowledge in the field of
antisense technology, including processes and techniques relating to the design,
synthesis and research of antisense oligonucleotides for use in gene
functionalization and target validation and as therapeutic products.
B. Lilly has expertise in the research, development, distribution and
sale of prophylactic and therapeutic products for human use.
C. Lilly and Isis wish to establish a collaborative relationship to
identify, characterize and/or develop antisense oligonucleotides that modulate
the expression of biological molecules and to characterize the effect of such
modulation to validate gene targets for drug discovery, including antisense drug
discovery.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Capitalized terms used in this Agreement, whether in the
singular or plural, have the meanings set forth in SCHEDULE 1.1 which is
attached hereto and made part of this Agreement, or as otherwise specifically
defined in this Agreement.
ARTICLE 2
COLLABORATION OVERVIEW AND GOVERNANCE
2.1 THE COLLABORATION. Lilly and Isis hereby agree to undertake
the Collaboration during the Collaboration Term under the terms and conditions
set forth in this Agreement. The Collaboration shall consist of the Reagent
Provision Program, the Target Validation Program and the Antisense Drug
Discovery Program.
1.
2.2 REAGENT PROVISION PROGRAM. Under the Reagent Provision Program
Isis will identify ASO Compounds using Antisense Technology that are directed to
Targets identified by Lilly and provide such ASO Compounds to Lilly for use in
Lilly's research efforts outside of the Collaboration. The Joint Research
Committee will manage the Reagent Provision Program as set forth below. The
activities to be undertaken by the Parties in the course of Reagent Provision
Program are set forth in detail in the Collaborative Research Plan, which is
attached hereto as SCHEDULE 2.2 and is incorporated by reference as part of the
Agreement.
2.3 DRUG DISCOVERY TARGET VALIDATION PROGRAM. The goal of the drug
discovery Target Validation Program is to provide information regarding gene
functionalization and validation for drug discovery with respect to Targets
related to the Collaboration Therapeutic Areas. An additional purpose of the
Target Validation Program is to validate and prioritize Targets related to the
Collaboration Therapeutic Areas for potential inclusion in the Antisense Drug
Discovery Program. The Joint Research Committee will manage the Target
Validation Program as set forth below. The activities to be undertaken by the
Parties in the course of Target Validation Program are set forth in detail in
the Collaborative Research Plan.
2.4 ANTISENSE DRUG DISCOVERY PROGRAM. The goal of the Antisense
Drug Discovery Program is to develop Drug Discovery ASO Compounds directed
against Targets related to the Collaboration Therapeutic Areas and to qualify
such Drug Discovery ASO Compounds as Development Candidates for development by
Lilly or by Isis as pharmaceutical products. The Joint Research Committee will
manage the Antisense Drug Discovery Program as set forth below. The activities
to be undertaken by the Parties in the course of the Antisense Drug Discovery
Program are set forth in detail in the Collaborative Research Plan.
2.5 GOVERNANCE - EXECUTIVE COMMITTEE. The strategic direction and
overall management of the Collaboration shall be the responsibility of the
Executive Committee. The Executive Committee shall consist of three (3) members
from each Party. The initial members of the Executive Committee are listed in
SCHEDULE 2.5. The Executive Committee may name additional members to the
Executive Committee from time to time so long as each Party has an equal number
of members. Each Party will designate a member who will be the primary contact
on the Executive Committee for that Party. Not later than thirty (30) days after
the Effective Date the Executive Committee shall hold an organizational meeting
to establish the operational requirements for the Executive Committee. The
designated Lilly representative shall be responsible for scheduling the meeting
of the Executive Committee for that purpose. Either Party can change its
representatives on the Executive Committee by written notice to the other Party.
2.5.1 EXECUTIVE COMMITTEE MEETINGS. During the
Collaboration Term and for one (1) year thereafter the Executive Committee shall
meet at least every six (6) months to review the research carried out under the
Collaboration and to consider modifications to the strategy and goals of the
Reagent Provision Program, Target Validation Program and the Antisense Drug
Discovery Program. In addition, the Executive Committee may meet on an ad hoc
basis. The Parties shall mutually agree upon the times and places for such
meetings, alternating between Indianapolis, Indiana and Carlsbad, California, or
such other location as members of the Executive Committee shall agree. Each
Party shall bear its own costs associated with holding and attending such
meetings. If mutually agreed by the Parties, such meetings may
2.
be held by videoconference or teleconference. An agenda shall be agreed upon by
the Executive Committee members and be distributed to the Parties no less than
one (1) week before any semiannual meeting. If a representative of a Party on
the Executive Committee is unable to attend a meeting of the Executive
Committee, such Party may designate an alternate to attend such meeting and vote
on behalf of such missing representative. In addition, each Party may, at its
discretion, invite nonvoting employees, consultants or advisors (which
consultants and advisors shall be under an obligation of confidentiality no less
stringent than those terms set forth herein) to attend any meeting of the
Executive Committee. Minutes shall be kept of all Executive Committee meetings
by the hosting Party and sent to all members of the Executive Committee for
review and approval within seven (7) days after each meeting. Minutes shall be
deemed approved unless any member of the Executive Committee objects to the
accuracy of such minutes by providing written notice to the other members of the
Executive Committee within ten (10) days of receipt of the minutes; PROVIDED,
HOWEVER, that in the event of any such objection by a Party that the Parties are
unable to resolve, such MINUTES shall reflect such unresolved dispute.
2.5.2 EXECUTIVE COMMITTEE RESPONSIBILITIES. The Executive
Committee shall have the following responsibilities:
(a) to periodically review the Collaborative
Research Plan from a strategic perspective, including consideration of expanding
or contracting the Collaboration Therapeutic Areas;
(b) to review changes to the Collaborative
Research Plan made by the Joint Research Committee or an Operating Committee as
permitted by Sections 2.6.2 and 2.7.2, respectively, and to resolve any matters
related thereto that are appealed to the Executive Committee by the Joint
Research Committee or an Operating Committee;
(c) to periodically review the progress and
results of the Collaboration to ensure that the Parties are meeting their
commitments for both human and financial support and are each fulfilling all of
their respective contractual obligations;
(d) to attempt to resolve any disagreements
between the Parties with respect to the research conducted under the
Collaboration, including those disagreements referred to it by the Joint
Research Committee, the IP Committee or any Operating Committee;
(e) to approve changes to the allocation of
Collaboration Funds set forth in the Collaborative Research Plan between the
Target Validation Program and Antisense Drug Discovery Program, on the one hand,
and the Reagent Provision Program, on the other hand;
(f) to approve changes to the assignment of
Collaboration Funds and Collaboration FTEs between the Collaboration Therapeutic
Areas as set forth in the Collaborative Research Plan;
(g) to propose to Lilly changes in the amount
and/or timing of funding under the Loan Agreement as provided for in Sections
9.1.5 and 9.1.6, in the unexpected event that such is necessary;
3.
(h) to provide guidance to the Joint Research
Committee as to the data package required by Lilly in considering a Development
Candidate for further development and commercialization efforts; and
(i) to establish and oversee an intellectual
property committee that will operate in accordance with Section 2.7.2.
2.5.3 EXECUTIVE COMMITTEE DECISIONS. Decisions of the
Executive Committee shall be made by unanimous vote, with each member having one
(1) vote. No vote of the Executive Committee may be taken unless all members of
the Executive Committee vote. If the Executive Committee is unable to reach a
unanimous vote on any matter, including matters referred to it for decision by
the Joint Research Committee, then the matter shall be referred to [*] All
decisions related to selection and advancement of Lilly Products being developed
by Lilly outside the scope of the Collaboration Programs shall be made by Lilly.
2.6 GOVERNANCE - JOINT RESEARCH COMMITTEE. Promptly after the
Effective Date a Joint Research Committee shall be established. The Joint
Research Committee shall have the day-to-day management responsibilities for the
Target Validation Program and the Antisense Drug Discovery Program in the
Collaboration Therapeutic Areas. The Joint Research Committee shall consist of
three (3) members from each Party, as appointed by each such Party. The Joint
Research Committee shall be subordinate to the Executive Committee, which shall
have the right upon timely appeal to review, accept, reject or modify all
actions of the Joint Research Committee. The initial members of the Joint
Research Committee are listed on SCHEDULE 2.6. Each Party will designate a
member of the Joint Research Committee who will be the primary contact for that
Party on the Joint Research Committee. Not later than thirty (30) days after
Effective Date the Joint Research Committee shall meet to hold an organizational
meeting to establish the operational requirements for the Joint Research
Committee. The Lilly representatives that are the designated primary contacts on
the Joint Research Committee shall be responsible for scheduling the first
meeting for that purpose. Either Party can change its representatives on the
Joint Research Committee by written notice to the other Party.
2.6.1 JOINT RESEARCH COMMITTEE MEETINGS. The Joint Research
Committee shall meet at least quarterly to review the research carried out under
the Collaboration and, if necessary, to consider modifications to the
Collaborative Research Plan. The Parties shall mutually agree upon the times and
places for such meetings, alternating between Indianapolis, Indiana and
Carlsbad, California, or such other location as members of the Joint Research
Committee shall agree. Each Party shall bear its own costs associated with
holding and attending such meetings. If mutually agreed by the Parties, such
meeting may be held by videoconference or teleconference. An agenda shall be
agreed upon by the members of the Joint Research Committee and be distributed to
the Parties no less than one (1) week before any quarterly meeting. If a
representative of a Party on the Joint Research Committee is unable to attend a
meeting of the Joint Research Committee, such Party may designate an alternate
to attend such meeting and vote on behalf of such missing representative. In
addition, each Party may, at its discretion, invite nonvoting employees,
consultants or advisors (which consultants and advisors shall be under an
obligation of confidentiality no less stringent than those terms set forth
herein) to attend any meeting of the Joint Research Committee. Minutes of all
Joint Research Committee meetings shall be kept by the hosting Party and sent to
all members on the Joint
4.
Research Committee for review and approval within seven (7) days after each
meeting. Minutes shall be deemed approved unless any member of the Joint
Research Committee objects to the accuracy of such minutes by providing written
notice to the other members of the Joint Research Committee within ten (10) days
of receipt of the minutes; PROVIDED, HOWEVER, that in the event of any such
objection by a Party that the Parties are unable to resolve, such minutes shall
reflect such unresolved dispute. Any changes made by the Joint Research
Committee to the Critical Success Factors shall be included in the minutes. A
current and complete version of the Critical Success Factors shall be provided
in the minutes of the Joint Research Committee meeting.
2.6.2 JOINT RESEARCH COMMITTEE RESPONSIBILITIES. The Joint
Research Committee shall oversee implementation and execution of the
Collaborative Research Plan. The Joint Research Committee shall be responsible
for planning, managing, directing and overseeing specific activities under its
areas of responsibility, including but not limited to the following, any of
which may be delegated to an Operating Committee, as the Joint Research
Committee deems appropriate consistent with the goals of the Collaboration:
(a) reviewing the Collaborative Research Plan
from a scientific and operational perspective;
(b) making changes to the portions of the
Collaborative Research Plan relating to the Target Validation Program and the
Antisense Drug Discovery Program as it deems necessary to accomplish the purpose
of the Collaboration, so long as such changes do not cause the Collaboration to
exceed the budget established for the Target Validation Program and the
Antisense Drug Discovery Program in the Collaborative Research Plan, as such
budget may be amended by the Executive Committee;
(c) proposing other changes to the Collaborative
Research Plan to the Executive Committee as it deems necessary to accomplish the
purpose of the Collaboration;
(d) prioritizing and monitoring progress of
antisense lead identification for the Reagent Provision Program, Target
Validation Program and Drug Discovery Program; PROVIDED, HOWEVER, that if there
is a disagreement concerning the prioritization of a Reagent Target or a
Validation Target, such disagreement shall be appealed to the Executive
Committee, and, in the event the Executive Committee is unable to resolve such
disagreement, such prioritization shall be decided by Lilly;
(e) reviewing the progress and results of the
Collaboration to ensure, to the extent reasonably practical, that the Parties
are meeting their commitments for both human and financial support and are each
fulfilling all of their respective contractual obligations;
(f) reviewing the qualifications of the
Collaboration FTEs to ensure that the Parties are meeting the intent of the
Collaborative Research Plan;
(g) referring disputes or appealing decisions to
the Executive Committee as necessary;
(h) approving changes to the allocation of
Collaboration Funds set forth in the Collaborative Research Plan (i) within the
Reagent Provision Program, (ii) between
5.
the Target Validation Program and the Antisense Drug Discovery Program and (iii)
among the Collaboration Therapeutic Areas, so long as such changes do not cause
the Collaboration to exceed the budget established for the Target Validation
Program and the Antisense Drug Discovery Program in the Collaborative Research
Plan, as such budget may be amended by the Executive Committee;
(i) reallocating Collaboration FTEs within each
Collaboration Therapeutic Area;
(j) reviewing and approving the use of any Third
Party in the Collaboration, including review and approval of any related Third
Party contract;
(k) reviewing and monitoring all results of the
work performed under Collaboration, including scientific efforts of both
Parties, and providing prioritization, oversight and direction regarding such
work in accordance with the Collaborative Research Plan;
(l) determining assignment of Collaboration
Funds and Collaboration FTEs assigned to each Collaboration Therapeutic Area;
(m) adopting and modifying the Critical Success
Factors related to a Collaboration Therapeutic Area either generally or
specifically with respect to a Validation Target or a Drug Discovery Target as
documented by approved Joint Research Committee minutes;
(n) determining whether a Validation Target is
an Accepted Validation Target or Rejected Validation Target;
(o) designating Drug Discovery Targets;
(p) making a determination of whether a Drug
Discovery ASO Compound meets the criteria for designation as a Development
Candidate and making such designations; and
(q) coordinating with the IP Committee to
optimize the value of the intellectual property arising from the Collaboration.
2.6.3 JOINT RESEARCH COMMITTEE DECISIONS. Decisions of the
Joint Research Committee shall be made by unanimous vote with each member having
one (1) vote. All issues voted on by the Joint Research Committee shall be
appealable to the Executive Committee. No vote of the Joint Research Committee
may be taken unless all of the members of such Joint Research Committee vote.
Any Party desiring to appeal an issue to the Executive Committee shall make its
appeal in writing to all Executive Committee members within ten (10) days of
receipt of the minutes for the meeting at which the issue was voted on. Action
pursuant to any decision appealed to the Executive Committee shall be suspended
pending a determination by the Executive Committee to accept, reject or modify
the decision of the Joint Research Committee. If it is not feasible to suspend
the action without causing potential damage to the Collaboration, the Executive
Committee shall be requested to provide immediate review. Any Party may at any
time request reconsideration of any issue by the Joint Research Committee or
6.
Executive Committee if such Party in good faith believes that substantial
changes in circumstances have occurred which necessitates such reconsideration.
2.6.4 JOINT RESEARCH COMMITTEE SEMIANNUAL STATUS REPORTS.
During the Collaboration Term and upon expiration thereof the Joint Research
Committee shall provide the Executive Committee with a semiannual status report
(which may be in the form of a presentation) that generally summarizes the
research and development efforts conducted by each Party under the Collaboration
during the two (2) previous Calendar Quarters. Such reports shall be submitted
or presented to the Executive Committee to coincide with the semiannual meeting
of Executive Committee. The report shall include, without limitation, a general
summary of important events, progress on critical success objectives, any
milestones reached, personnel changes, learning points and other matters that
the Executive Committee may deem appropriate. The Joint Research Committee shall
establish annual goals and objectives for each year of the Collaboration to be
provided to and approved by the Executive Committee.
2.7 GOVERNANCE - OPERATING COMMITTEES. The Executive Committee and
the Joint Research Committee may appoint one or more other working teams
("OPERATING COMMITTEES") to perform such functions as the Executive Committee or
Joint Research Committee, respectively, may determine. All Operating Committees
shall have at least one (1) representative of each Party. Operating Committees
shall have such decision-making authority as may be delegated to them by the
Executive Committee or Joint Research Committee (in either case, the "DELEGATING
COMMITTEE"). All issues voted on by an Operating Committee shall be appealable
to the Delegating Committee. No vote of an Operating Committee may be taken
unless all of the members of such Operating Committee vote. Any Party desiring
to appeal an issue to the Delegating Committee shall make its appeal in writing
to all Delegating Committee members within ten (10) days of receipt of the
minutes for the meeting at which the issue was voted on. Action pursuant to any
decision appealed to the Delegating Committee shall be suspended pending a
determination by the Delegating Committee to accept, reject or modify the
decision of such Operating Committee. If it is not feasible to suspend the
action without causing potential damage to the Collaboration, the Delegating
Committee shall be requested to provide immediate review. Any Party may at any
time request reconsideration of any issue by the Delegating Committee if such
Party in good faith believes that substantial changes in circumstances have
occurred which necessitates such reconsideration. Each Operating Committee shall
meet as agreed by its members or directed by the Joint Research Committee. Each
Party shall bear its own costs associated with holding and attending such
meetings. If mutually agreed by the Parties, such meeting may be held by
videoconference or teleconference. If the representative of a Party is unable to
attend a meeting, such Party may designate an alternate to attend such meeting
and vote on behalf of such missing representative. Minutes of all Operating
Committee meetings shall be kept by the hosting Party and sent to the other
Party for review and approval within seven (7) days after each meeting. Minutes
shall be deemed approved unless a Party objects to the accuracy of such minutes
by providing written notice to the other Party within ten (10) days of receipt
of the minutes; PROVIDED, HOWEVER, that in the event of any such objection by a
Party that the Parties are unable to resolve, such minutes shall reflect such
unresolved dispute. Any changes made by an Operating Committee to the Critical
Success Factors shall be included in such minutes
7.
2.7.1 INITIAL OPERATING COMMITTEES. Without limiting the
generality of the foregoing, the Joint Research Committee shall establish the
following three (3) Operating Committees, with such number of representatives of
each Party and such decision-making authority as the Joint Research Committee
shall determine:
(i) the Reagent Provision Operating Committee,
which shall be responsible for matters relating to the Reagent Provision
Program, including, without limitation, managing the submission and acceptance
of Reagent Targets and the timeframe for delivery of Reagent ASO Compounds and
providing each Party with a written quarterly report that lists the Reagent
Targets for which Isis has provided Lilly with Reagent ASO Compounds during the
preceding Calendar Quarter and such Reagent ASO Compounds, the Reagent Targets
for which Isis is scheduled to provide Lilly with Reagent ASO Compounds during
the ensuing Calendar Quarter, and the anticipated timing of delivery of such
Reagent ASO Compounds.
(ii) the Inflammation/Bone Operating Committee,
which shall be responsible for matters relating to the activities of the
Collaboration in the Collaboration Therapeutic Areas of inflammation and bone;
and
(iii) the Metabolic Disease Operating Committee,
which shall be responsible for matters relating to the activities of the
Collaboration in the Collaboration Therapeutic Area of metabolic disease.
For avoidance of doubt, it is intended that the Executive Committee and
Joint Research Committee will delegate decision-making authority for day-to-day
management of the Collaboration to the Operating Committees described in Section
2.7.1. The Joint Research Committee will manage issues that effect more than one
Operating Committee or Collaboration Therapeutic Area. While the Joint Research
Committee retains the ability to review the decisions of the Operating
Committees, it is intended that the Operating Committees shall be given
sufficient latitude to make decisions without the need to first consult the
Joint Research Committee.
2.7.2 IP COMMITTEE. The Executive Committee shall establish
a committee that is responsible for intellectual property issues arising in the
course of the Collaboration and thereafter (the "IP COMMITTEE"). The IP
Committee shall be subordinate to the Executive Committee and shall work closely
with the Joint Research Committee to implement the activities of the Parties as
contemplated by Article 12 and as otherwise agreed by the Parties.
2.8 DISSOLUTION OF THE COMMITTEES. Except as the Parties may
otherwise agree in writing, once the Collaboration Term has expired or is
terminated, the Joint Research Committee shall dissolve. The Executive Committee
shall cease having regular meetings twelve (12) months after expiration or
termination of the Collaboration Term but shall meet on an AD HOC basis for so
long thereafter as is necessary to oversee the activities of the IP Committee.
The IP Committee shall continue for so long as there are Patent Rights that are
licensed by a Party to the other Party under this Agreement.
2.9 ALLIANCE MANAGERS. Each Party shall designate one (1)
representative to coordinate the activities of the Parties under the
Collaboration (the "ALLIANCE MANAGERS"). The
8.
initial Alliance Managers are listed on SCHEDULE 2.9. The Alliance Managers'
responsibilities shall include maintenance of a current list of Reagent Targets,
Validation Targets (including Rejected Validation Targets and Accepted
Validation Targets), Drug Discovery Targets and Reserved Targets, coordinating
meetings of the Joint Research Committee and Executive Committee and otherwise
facilitating the activities of the Parties in the course of the Collaboration
under this Agreement. Each Party may change its Alliance Manager by written
notice to the other Party.
ARTICLE 3
THE COLLABORATION
3.1 COLLABORATION STAFFING. Isis and Lilly employees involved in
the Collaboration will conduct the research activities in a manner as required
to maintain progress on the objectives of the Collaboration as set forth herein
and in the Collaborative Research Plan. To achieve these objectives, Isis and
Lilly will assign qualified employees as set forth herein and in the
Collaborative Research Plan. Isis and Lilly each acknowledge that there will be
a reasonable initial hiring ramp-up period before the number of Collaboration
FTEs dedicated to the Collaboration reaches the level specified in the
Collaborative Research Plan. Isis shall use its best efforts to ramp-up to the
number of Isis Collaboration FTEs specified in the Collaborative Research Plan
as soon as possible after the Effective Date. Lilly shall use its best efforts
to ramp-up to the number of Lilly Collaboration FTEs specified in the
Collaborative Research Plan as soon as possible after the Effective Date. By
decision of the Executive Committee the number of FTEs committed to the
Collaboration may be increased or decreased from the levels specified in the
Collaborative Research Plan. Upon the approval of the Joint Research Committee,
each Party may place one or more employees at the other Party's facilities in
order to participate in the conduct of the Collaboration. Such employee(s) shall
be fully committed to the Collaboration as Collaboration FTEs. Each Party shall
bear the travel, lodging and meal expenses of any of its Collaboration FTEs who
visit the other Party's facilities as described in the preceding sentence and
shall not be reimbursed by the other Party or out of the Collaboration Funds for
any such expenses.
3.2 SUBCONTRACTING. Except to the extent approved by the Joint
Research Committee or as otherwise expressly permitted in the Collaborative
Research Plan, neither Party shall subcontract to a Third Party any portion of
the activities assigned to it under the Collaborative Research Plan, other than
through the use of on site contract employees. To the extent such subcontracting
is approved, prior to engaging a Third Party, Isis or Lilly, as applicable,
shall first obtain a written agreement with such Third Party containing
appropriate confidentiality and non-use provisions as determined by the IP
Committee and written assignments to Isis or Lilly, as applicable, of all Patent
Rights and Know-How that such subcontractors may develop by reason of work
performed under such contract. Moreover, any Third Party subcontractor shall be
required to perform its services in accordance with any applicable generally
accepted professional standards as well as standards designated by the Joint
Research Committee (if any) and with any applicable codes, rules and
regulations.
3.3 STAFF AVAILABILITY. Each Party shall make its employees, and
permitted subcontractors engaged in the Collaboration reasonably available upon
reasonable notice during
9.
normal business hours at their respective places of employment to consult with
the other Party on issues arising during Collaboration and in connection with
any request from any regulatory agency, including those relating to regulatory,
scientific, and technical issues.
3.4 FACILITY VISITS. In addition to a Party's employees located at
the other Party's facilities pursuant to Section 3.1, representatives of Lilly
and Isis may, upon reasonable notice during normal business hours, (a) visit the
facilities where the Collaboration is being conducted, including by Third
Parties, (b) consult informally, during such visits and by telephone, with
personnel for the other Party performing work on the Collaboration, and (c) with
the other Party's prior approval, which approval shall not be unreasonably
withheld, visit the sites of any experiments or tests being conducted by, or on
behalf of, such other Party in connection with the Collaboration. On such
visits, an employee of the Party being visited shall accompany the employee(s)
of the visiting Party. If requested by a Party, the other Party shall cause
appropriate individuals working on the Collaboration to be reasonably available
for meetings at times and places reasonably convenient to the Party subject to
such request.
3.5 EXCHANGE OF INFORMATION. Isis will promptly make available and
disclose to Lilly such information regarding the sequence, design, synthesis and
screening of Reagent ASO Compounds, Validation ASO Compounds and Drug Discovery
ASO Compounds generated by Isis in carrying out the Collaboration as set forth
in the Collaborative Research Plan. All discoveries or inventions made in the
course of the Collaboration by a Party will be promptly disclosed to the other
Party. At a Party's request, the other Party will provide written reports of any
studies performed by such other Party as part of the Collaboration required to
support regulatory submissions relating to Products to be made by such first
Party or its Sublicensees and will allow such first Party and its Sublicensees
to use the data included in such reports to support such submissions. The
Parties are encouraged to communicate often by telephone, electronic mail or
other mechanisms to keep each Party fully advised of the activities being
carried out by a Party under the Collaboration.
3.6 RECORDS. Isis and Lilly will each maintain records in
sufficient detail and in good scientific and business manner appropriate for
purposes such as patent and regulatory matters, which will be complete and
accurate and will fully and properly reflect all work done and results achieved
in the performance of the Collaboration including prompt signing and
corroboration of laboratory notebooks and conception documents.
3.7 COMPLIANCE. All studies done in connection with the
Collaboration shall be carried out in compliance with any applicable laws,
regulations, or guidelines governing the conduct of research at the site where
such studies are being conducted. All animals involved in the Collaboration
shall be provided humane care and treatment in accordance with generally
acceptable current veterinary practices.
ARTICLE 4
THE REAGENT PROVISION PROGRAM
4.1 DESCRIPTION AND TERM. The Reagent Provision Program shall
commence on the Effective Date and be conducted by Isis during the Reagent
Provision Term in accordance with
10.
the Collaborative Research Plan. The Reagent Provision Term shall become
effective on the Effective Date and shall continue in effect for four (4) years,
unless Lilly exercises it option to extend the Reagent Provision Term, as
provided in Section 13.1, the Parties otherwise mutually agree to extend or
terminate the Reagent Provision Program, or the Collaboration is terminated in
accordance with Article 13. The Parties estimate that approximately six hundred
and seventy-five (675) Targets from any therapeutic area of interest to Lilly
will be analyzed in the course of the Reagent Provision Program. Such Targets
shall be selected by Lilly and designated as Reagent Targets.
4.2 REAGENT TARGETS. For each Reagent Target, Isis will use
reasonable efforts to promptly provide to Lilly Reagent ASO Compounds for each
Reagent Target in accordance with the Collaborative Research Plan. Each Reagent
ASO Compound shall be delivered to Lilly in accordance with the specifications
set forth in the Collaborative Research Plan. Isis will also promptly provide to
Lilly Reagent Target gene reduction data generated by Isis on the inhibition of
the Reagent Target by each Reagent ASO Compound delivered to Lilly. Isis shall
also provide to Lilly ongoing consultation as reasonably requested by Lilly on
the utilization of each Reagent ASO Compound in Lilly's research efforts during
the Collaboration Term. Lilly will use best efforts to request, and Isis will
use best efforts to provide to Lilly, Reagent ASO Compounds at the flow rate
that is specified in the Collaborative Research Plan; PROVIDED, HOWEVER, that if
Lilly requests Reagent ASO Compounds at a flow rate that is greater than that
specified in the Collaborative Research Plan, Isis will use reasonable efforts
to provide the Reagent ASO Compounds to Lilly at such greater flow rate.
4.3 RESULTS OF LILLY FIRST PASS IN VITRO ANALYSIS. [*]
4.4 PROTECTED REAGENT TARGETS. [*]
4.5 ISIS USE OF REAGENT TARGETS AND REAGENT ASO COMPOUNDS. Except
as provided otherwise in this Agreement, [*]
4.6 ISIS GENETROVE DATABASE. It is the intention of the Parties
that the designation of Targets to be included in the Reagent Provision Program,
the Target Validation Program or the Antisense Drug Discovery Program shall not
influence the analysis or prioritization of Targets by Isis outside the course
of the Collaboration. To this end, Isis shall not utilize Lilly Confidential
Information outside the Collaboration for the purpose of prioritizing the
Targets to be analyzed for inclusion in the GeneTrove Database or for any other
purpose except as expressly permitted by this Agreement. [*]
(i) [*]
(ii) [*]
(iii) [*]
[*]
4.7 REAGENT ASO PRODUCTS. Lilly shall have an option to obtain one
or more licenses with respect to Reagent ASO Products in accordance with Section
8.2.2.
11.
*Confidential Treatment Requested
4.8 LILLY CONFIDENTIAL INFORMATION. All information provided to
Isis by Lilly with respect to a Reagent Target shall be considered the
Confidential Information of Lilly and shall be subject to the obligations of
Article 10 of this Agreement, including any nucleic acid or amino acid sequence
of a Reagent Target that is provided to Isis by Lilly. As long as such
information is Confidential Information, Isis shall use such Confidential
Information of Lilly only (a) in the course of the Collaboration, (b) in Isis'
internal antisense drug discovery efforts as expressly permitted by this
Agreement, (c) in accordance with Section 4.3 hereof or (d) as otherwise
expressly permitted by this Agreement, but for no other purpose.
4.9 USE AND DISCLOSURE. Use of Reagent ASO Compounds and Reagent
Targets by a Party shall not be considered part of the Collaboration unless such
use is carried out as specifically provided in the Collaborative Research Plan.
Know-How generated outside the course of the Collaboration by Lilly or Isis,
including through use of Reagent ASO Compounds, Reagent Non-ASO Compounds, or
Reagent Targets, shall not be Lilly Collaboration Know-How or Isis Collaboration
Know-How, respectively, and any resulting Patent Rights shall not be Lilly
Collaboration Patent Rights or Isis Collaboration Patent Rights, respectively.
ARTICLE 5
THE DRUG DISCOVERY TARGET VALIDATION PROGRAM
5.1 DESCRIPTION AND TERM. The drug discovery Target Validation
Program shall commence on the Effective Date and be conducted by Lilly and Isis
during the Target Validation Program Term in accordance with the Collaborative
Research Plan. The Target Validation Program Term shall become effective on the
Effective Date and shall continue in effect for four (4) years, unless Lilly
exercises it option to extend the Target Validation Program Term, as provided in
Section 13.1, the Parties otherwise mutually agree to extend or terminate the
Target Validation Program, or the Collaboration is terminated in accordance with
Article 13. The Collaborative Research Plan includes the Critical Success
Factors for the Target Validation Program including the Critical Success Factors
for Validation Targets. By execution of this Agreement, the initial
Collaborative Research Plan, including the Critical Success Factors, are
approved by each Party. The Joint Research Committee is responsible for
implementing the Collaborative Research Plan and any modifications or amendments
thereto consistent with the terms of this Agreement.
5.2 TARGET DESIGNATION. The Parties estimate that approximately
three hundred and twenty five (325) Targets will be analyzed in the course of
the drug discovery Target Validation Program. Such Targets shall be selected by
Lilly and designated as Validation Targets in accordance with this Section 5.2.
Lilly shall provide written notice to Isis identifying each Target that it
wishes to designate as a Validation Target (a "PROPOSED VALIDATION TARGET").
Within fifteen (15) days after such notice, Isis shall provide written notice to
Lilly indicating whether such Proposed Validation Target is subject to any
agreement between Isis and a Third Party under which such Third Party has or may
acquire rights to ASO Products directed to such Proposed Validation Target, or
whether Isis has an Isis Internal Program with respect to such Proposed
Validation Target or ASO Products directed thereto.
12.
5.2.1 If a Proposed Validation Target is not subject to an
agreement between Isis and a Third Party under which such Third Party has or may
acquire rights to ASO Products directed to such Proposed Validation Target and
Isis does not have an Isis Internal Program with respect to such Proposed
Validation Target or ASO Products directed thereto, then such Proposed
Validation Target shall be deemed a Validation Target and shall be made part of
the Target Validation Program.
5.2.2 If a Proposed Validation Target is subject to an
agreement between Isis and a Third Party under which such Third Party has or may
acquire rights to ASO Products directed to such Proposed Validation Target [*]
5.2.3 [*]
5.3 TARGET VALIDATION PROGRAM. Validation Targets and Validation
ASO Compounds directed thereto shall be analyzed under the Target Validation
Program with the aim of achieving the applicable Critical Success Factors set
forth in the Collaborative Research Plan. All results generated in the course of
Target Validation Program shall be promptly provided to a member of the Joint
Research Committee for the other Party by means of a written report generated by
the Parties and by placing such results in the shared database described in the
Collaborative Research Plan. Following consultation with Isis, Lilly shall
decide whether to conduct Validation Tier 1 studies and/or Validation Tier 2
studies (as such terms are defined in the Collaborative Research Plan) with
respect to each Validation Target. [*]
5.4 JOINT RESEARCH COMMITTEE REVIEW. At the next Joint Research
Committee meeting following the completion of the evaluation of a Validation
Target under the Target Validation Program, the Joint Research Committee shall
review the results generated with respect to such Validation Target and shall
determine whether such Validation Target has achieved the Critical Success
Factors set out in the Collaborative Research Plan. If the Joint Research
Committee determines that a Validation Target meets the Critical Success
Factors, such Validation Target shall be deemed an "ACCEPTED VALIDATION TARGET."
If the Joint Research Committee determines that a Validation Target does not
meet the Critical Success Factors, such Validation Target shall be deemed a
"REJECTED VALIDATION TARGET."
5.5 ACCEPTED VALIDATION TARGETS. [*]
5.5.1 [*]
5.5.2 Isis shall provide written notice to Lilly [*]
5.6 REJECTED VALIDATION TARGETS. [*]
5.6.1 [*]
5.6.2 [*]
5.7 LILLY RIGHTS REGARDING OTHER TARGETS. [*]
13.
*Confidential Treatment Requested
5.8 EXCLUSIVE TARGETS. During the Reagent Provision Term or the
Target Validation Program Term, as applicable, Lilly may elect to designate any
Reagent Target or Validation Target, respectively, an "EXCLUSIVE TARGET" as
described in this Section 5.8. Lilly shall provide Isis with a written
description of each Target that Lilly desires to designate as an Exclusive
Target. The date upon which Isis receives such notice from Lilly shall be the
"TARGET NOTICE DATE." [*]
5.9 VALIDATION ASO PRODUCTS. Lilly shall have an option to obtain
one or more licenses with respect to Validation ASO Products in accordance with
Section 8.2.2.
5.10 LILLY CONFIDENTIAL INFORMATION. All information provided to
Isis by Lilly with respect to a Validation Target shall be considered the
Confidential Information of Lilly and shall be subject to the obligations of
Article 10 of this Agreement, including any nucleic acid or amino acid sequence
of a Validation Target that is provided to Isis by Lilly. As long as such
information is Confidential Information, Isis shall use such Confidential
Information of Lilly only (a) in the course of the Collaboration, (b) in Isis'
internal antisense drug discovery efforts as expressly permitted by this
Agreement, (c) in accordance with Section 4.3 hereof or (d) as otherwise
expressly permitted by this Agreement, but for no other purpose.
5.11 USE AND DISCLOSURE. Use of Validation ASO Compounds or
Validation Targets by a Party as expressly permitted by this Agreement shall not
be considered part of the Collaboration unless such use is carried out as
specifically provided in the Collaborative Research Plan. Know-How generated
outside the course of the Collaboration by Lilly or Isis as expressly permitted
by this Agreement, including through use of Validation ASO Compounds, Validation
Non-ASO Compounds, or Validation Targets, shall not be Lilly Collaboration
Know-How or Isis Collaboration Know-How, respectively, and any resulting Patent
Rights shall not be Lilly Collaboration Patent Rights or Isis Collaboration
Patent Rights, respectively.
ARTICLE 6
THE ANTISENSE DRUG DISCOVERY PROGRAM
6.1 DESCRIPTION AND TERM. The Antisense Drug Discovery Program
shall be conducted by Isis and Lilly during the Antisense Drug Discovery Term in
accordance with the Collaborative Research Plan. The Antisense Drug Discovery
Term shall become effective on the Effective Date and shall continue in effect
for four (4) years, unless Lilly exercises it option to extend the Antisense
Drug Discovery Term, as provided in Section 13.1, the Parties otherwise mutually
agree to extend or terminate the Antisense Drug Discovery Program, or the
Collaboration is terminated in accordance with Article 13. Lilly and Isis shall
use commercially reasonable efforts to develop Drug Discovery ASO Compounds into
Development Candidates in accordance with the Collaborative Research Plan. The
Collaborative Research Plan includes the Critical Success Factors for the
Antisense Drug Discovery Program. By execution of this Agreement the Critical
Success Factors are approved by each Party. The Joint Research Committee is
responsible for implementing the Collaborative Research Plan, and any
modifications or amendments thereto, consistent with the terms of this
Agreement.
14.
*Confidential Treatment Requested
6.2 DRUG DISCOVERY TARGET DESIGNATION.
6.2.1 TARGETS AVAILABLE FOR DESIGNATION AS DRUG DISCOVERY
TARGETS. During the Antisense Drug Discovery Term, the Joint Research Committee
shall designate the Drug Discovery Targets to be analyzed under the Antisense
Drug Discovery Program in one or more Collaboration Therapeutic Areas. [*]
Targets designated as Drug Discovery Targets may include any Target that is
suspected of playing a role in a Collaboration Therapeutic Area, including
Reserved Targets, Reagent Targets, Accepted Validation Targets, Exclusive
Targets, Rejected Validation Targets, and other Targets that the Joint Research
Committee determines to be of interest based on the scientific merits of
applying Antisense Technology to modulate such Target; [*] The initial Drug
Discovery Targets provided by Isis for each Collaboration Therapeutic Area and
the stage of development of such Targets as of the Effective Date (I.E., whether
such Target is a Stage 1, Stage 2 or Stage 3 Drug Discovery Target) are
identified in the Collaborative Research Plan.
6.2.2 DISAGREEMENTS REGARDING DRUG DISCOVERY TARGET
DESIGNATION. If the Joint Research Committee cannot agree on whether to
designate a Target a Drug Discovery Target, the matter shall be referred to the
Executive Committee for a decision. If the Executive Committee cannot agree on
whether to designate a Target a Drug Discovery Target, [*]
6.2.3 RESTRICTION ON ISIS' RIGHT TO USE DRUG DISCOVERY
TARGETS. Except as otherwise expressly permitted by this Agreement, Isis shall
not (i) conduct any research on any Drug Discovery Target or any ASO Compound
directed thereto, outside the course of the Collaboration either on its own or
for a Third Party or (ii) grant or assign any rights to a Third Party with
respect to any Drug Discovery Target or ASO Compound directed thereto, in each
case, while such Drug Discovery Target is the subject of an Active Program.
6.3 FURTHER DESIGNATION AS STAGE 1, 2 OR 3 DRUG DISCOVERY TARGET.
Concurrently with the designation by the Joint Research Committee of a Target as
a Drug Discovery Target, the Joint Research Committee shall also designate such
Target as a Stage 1 Drug Discovery Target, Stage 2 Drug Discovery Target, or
Stage 3 Drug Discovery Target, as appropriate.
6.4 DEVELOPMENT CANDIDATE DESIGNATION.
6.4.1 DURING THE ANTISENSE DRUG DISCOVERY TERM. During the
Antisense Drug Discovery Term, if in the opinion of a Party, a Drug Discovery
ASO Compound has met the Critical Success Factors set out in the Collaborative
Research Plan and such Drug Discovery ASO Compound is ready for IND-enabling
toxicology studies, such Party may recommend to the Joint Research Committee
that such Drug Discovery ASO Compound be designated a Development Candidate and,
at the next meeting of the Joint Research Committee, the Joint Research
Committee shall vote on such matter. Either Party may appeal the outcome of such
vote to the Executive Committee, in which event the Executive Committee shall
meet as promptly as practicable thereafter to resolve the matter. If the Joint
Research Committee (in the absence of an appeal to the Executive Committee) or
the Executive Committee determines that a Drug Discovery ASO Compound has met
the Critical Success Factors, then such Drug Discovery ASO Compound shall be
considered to be a "DEVELOPMENT CANDIDATE." Lilly shall have the option to
license each Development Candidate in accordance with Section 8.2.3.
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6.4.2 AFTER THE ANTISENSE DRUG DISCOVERY TERM. Subject to
Section 6.5, after the Antisense Drug Discovery Term, Lilly shall make the
decision of whether a Drug Discovery ASO Compound corresponding to a Drug
Discovery Target that is the subject of an Active Program shall be designated a
Development Candidate, using criteria substantially similar to those used by the
Joint Research Committee during the Antisense Drug Discovery Term. Lilly shall
have the option to license each Development Candidate in accordance with Section
8.2.3.
6.5 CONTINUED DEVELOPMENT OF DRUG DISCOVERY TARGETS AFTER THE
ANTISENSE DRUG DISCOVERY TERM. Within ten (10) days following expiration or
termination (subject to Article 13) of the Antisense Drug Discovery Term and
again on the first (1st) anniversary of such expiration or termination, Lilly
shall provide Isis with written notice of those Drug Discovery Targets with
respect to which Lilly intends to continue an Active Program. In addition, from
the date that is six (6) months following such expiration or termination of the
Antisense Drug Discovery Term until the [*] anniversary of the expiration or
termination (subject to Article 13) of the Antisense Drug Discovery Term, Lilly
shall provide Isis with semiannual written reports describing the work conducted
in the previous six (6) months on each such Drug Discovery Target and Drug
Discovery ASO Compounds directed thereto in sufficient detail to permit Isis to
verify that Lilly is maintaining an Active Program with respect thereto and
notifying Isis of any such Drug Discovery Target with respect to which Lilly has
discontinued an Active Program; PROVIDED, HOWEVER, such reports shall be given
annually once such Drug Discovery Target has been licensed by Lilly under
Section 8.2.3. Subject to the provisions of Article 13, for so long as Lilly
maintains an Active Program with respect to a Drug Discovery Target after the
expiration or termination of the Antisense Drug Discovery Term (but in no event
to exceed [*] years after such expiration or termination), Lilly shall have the
right to continue to perform research and development on such Drug Discovery
Target and Drug Discovery ASO Compounds directed thereto.
6.6 DEVELOPMENT AND COMMERCIALIZATION OF DEVELOPMENT CANDIDATES.
Unless agreed otherwise by the Executive Committee and subject to Section 8.2.3,
Lilly shall be solely responsible for all development and commercialization
activities relating to Development Candidates.
6.7 ABANDONED DRUG DISCOVERY TARGETS. During the Antisense Drug
Discovery Term, the Joint Research Committee may designate a Drug Discovery
Target as an "ABANDONED DRUG DISCOVERY TARGET" if such Joint Research Committee
concludes that such Drug Discovery Target should no longer be the subject of an
Active Program as part of the Collaboration. Such vote shall be appealable to
the Executive Committee. [*]
6.8 RESERVED TARGETS. During the Collaboration Term Lilly may
designate any Target related to a Collaboration Therapeutic Area as a "RESERVED
TARGET," [*] Lilly shall provide written notice to Isis identifying each Target
that Lilly desires to designate as a Reserved Target. The date upon which Isis
receives such notice shall be deemed the "RESERVED TARGET NOTICE DATE." [*]
6.9 LIMITATION ON NUMBER OF DRUG DISCOVERY TARGETS AND RESERVED
TARGETS. During the Antisense Drug Discovery Term, the total number of both (i)
Drug Discovery Targets that are the subject of an Active Program and (ii)
Reserved Targets, shall not [*] PROVIDED,
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HOWEVER, that the Joint Research Committee shall decrease the total number of
Drug Discovery Targets that are the subject of an Active Program and Reserved
Targets to [*] by the expiration of the Antisense Drug Discovery Term or any
extensions thereof. For purposes of clarification, upon exercise by Lilly of its
option under Section 8.2.3 with respect to a Drug Discovery Target, such Drug
Discovery Target shall no longer be counted toward the maximum number of Drug
Discovery Targets and Reserved Targets permitted by this Section 6.9. Effective
as of the [*] anniversary of the expiration of the Antisense Drug Discovery
Term, no Target shall be deemed a Reserved Target for purposes of this
Agreement.
ARTICLE 7
DEVELOPMENT, COMMERCIALIZATION, MANUFACTURING AND SUPPLY
7.1 RESEARCH SUPPLY. Isis shall supply Reagent ASO Compounds,
Validation ASO Compounds and Drug Discovery ASO Compounds to Lilly as set forth
in the Collaborative Research Plan. In the event that Lilly elects to obtain
additional quantities of a Reagent ASO Compound, Validation ASO Compound and/or
Drug Discovery ASO Compound for use outside of the Collaboration, Lilly shall so
inform Isis in writing specifying the additional quantity desired by Lilly. Isis
shall promptly provide Lilly such additional quantities of such Reagent ASO
Compounds, Validation ASO Compound and/or Drug Discovery ASO Compound in
accordance with the specifications set out in the Collaborative Research Plan.
Within [*] days after receipt of such Reagent ASO Compound, Validation ASO
Compound, and/or Drug Discovery ASO Compound, Lilly shall pay Isis [*]
(inclusive of all shipping, freight and other delivery charges) for the first
gram (or fraction thereof) of such additional Reagent ASO Compound, Validation
ASO Compound or Drug Discovery ASO Compound requested by and delivered to Lilly
in any one order. For any quantities of Reagent ASO Compound, Validation ASO
Compound or Drug Discovery ASO Compound requested by and delivered to Lilly
above [*] in any one order Lilly shall pay for such extra quantity in an amount
equal to [*] per gram or fraction thereof within [*] after receipt of such
additional quantities of Reagent ASO Compound, Validation ASO Compound, and/or
Drug Discovery ASO Compound.
7.2 CLINICAL SUPPLY. Upon request by Lilly, Isis will supply all
of Lilly's requirements of any Reagent ASO Compound, Validation ASO Compound
and/or Drug Discovery ASO Compound required by Lilly (not to exceed [*] such ASO
Compounds per year, nor to exceed [*] kilograms of all ASO Compounds provided
under this Section 7.2 per year) through the completion of Phase II Clinical
Trials on such Reagent ASO Compound, Validation ASO Compound or Drug Discovery
ASO Compound. Isis will also provide any information and documentation on such
Reagent ASO Compound, Validation ASO Compound or Drug Discovery ASO Compound
that is required by regulatory authorities. Isis will supply any such Reagent
ASO Compound, Validation ASO Compound or Drug Discovery ASO Compound pursuant to
mutually agreed upon specifications. The Parties will negotiate in good faith on
the terms of a clinical supply agreement containing these and other customary
terms. If Isis is not able to supply a Reagent ASO Compound, Validation ASO
Compound or Drug Discovery ASO Compound to Lilly or if Lilly determines to
obtain supply of any such Reagent ASO Compound, Validation ASO Compound or Drug
Discovery ASO Compounds from a Third Party, then Isis will, at Lilly's request
and expense, promptly transfer all necessary technology and technical assistance
and grant all necessary rights and licenses to permit Lilly, a Lilly
Sublicensee, or
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Third Parties on behalf of Lilly or a Lilly Sublicensee, to manufacture and
supply such Validation ASO Compound and Drug Discovery ASO Compounds.
7.3 DEVELOPMENT AND COMMERCIALIZATION. Lilly shall be solely
responsible for all development and commercialization of Lilly Products,
including toxicology, clinical development, regulatory, manufacturing and
commercialization efforts, except as agreed otherwise by the Parties. Lilly and
its Sublicensees shall have the sole right and responsibility for the
preparation of any regulatory filings required in order to conduct clinical
trials on Lilly Products in the Territory, together with the preparation of
suitable applications for marketing approval in the Territory and shall be the
owner and party of record of all such regulatory filings. Isis shall cooperate
with Lilly, at Lilly's expense, as Lilly reasonably requires in preparing such
regulatory filings including, without limitation, any and all data contained
therein.
ARTICLE 8
GRANT OF RIGHTS
8.1 LICENSES TO LILLY.
8.1.1 RESEARCH LICENSES. Subject to the terms and
conditions of this Agreement, Isis hereby grants to Lilly:
(a) a co-exclusive (with Isis),
nonsublicensable, royalty free license during the Collaboration Term under the
Isis Collaboration Technology solely to the extent necessary or appropriate to
carry out Lilly's responsibilities under the Collaborative Research Plan;
(b) a non-exclusive, nonsublicensable, royalty
free license, under the Isis Technology solely to the extent necessary or
appropriate to carry out Lilly's responsibilities under the Collaborative
Research Plan; and
(c) an exclusive, nonsublicensable, royalty free
license under the Isis Collaboration Blocking Patents, and a non-exclusive,
nonsublicensable, royalty free license under the Isis Collaboration Technology
other than the Isis Collaboration Blocking Patent Rights, in each case to
conduct research outside the course of the Collaboration in the Non-ASO Field in
the Territory.
8.1.2 PRODUCT LICENSES. Subject to the terms and conditions
of this Agreement, Isis hereby grants to Lilly (i) an exclusive license,
including the right to sublicense, under the Isis Collaboration Blocking
Patents, and (ii) a non-exclusive license, including the right to sublicense,
under the Isis Collaboration Technology other than the Isis Collaboration
Blocking Patents, in each case to make, use, import, sell and offer to sell
Reagent Non-ASO Products, Validation Non-ASO Products, and Drug Discovery
Non-ASO Products in the Territory. Such licenses shall be royalty-bearing as
expressly provided by this Agreement.
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8.2 LILLY PRODUCT OPTIONS.
8.2.1 OPTION TO ISIS BLOCKING PATENT RIGHTS FOR REAGENT
NON-ASO PRODUCTS. Subject to the terms and conditions of this Agreement, Isis
hereby grants to Lilly an option, exercisable on a Reagent Non-ASO
Compound-by-Reagent Non-ASO Compound basis, to obtain a non-exclusive
royalty-bearing licenses under the Isis Blocking Patent Rights to develop, make,
use, import, offer for sale and sell Reagent Non-ASO Products in the Territory;
such license(s) shall include the right to grant sublicenses solely for the
purpose of developing, making, using, importing, offering for sale and selling
the applicable Reagent Non-ASO Product. Lilly may exercise an option granted
pursuant to this Section 8.2.1 at any time during the term of this Agreement by
providing written notice to Isis that includes a description of the Isis
Blocking Patent Rights for which Lilly desires to obtain such non-exclusive
license. Any license granted to Lilly pursuant to exercise of an option under
this Section 8.2.1 shall be royalty-bearing in accordance with Section 9.3.1(b)
hereof.
8.2.2 OPTION TO REAGENT TARGETS AND VALIDATION TARGETS AND
EXCLUSIVE TARGETS.
(a) GRANT OF OPTION. Subject to the terms and
conditions of this Agreement, Isis hereby grants to Lilly an option, exercisable
on a Reagent Target-by-Reagent Target or Validation Target-by-Validation Target
basis, as applicable, to obtain an exclusive, royalty-bearing license, including
the right to sublicense, under the Isis Collaboration Technology and the Isis
Technology to develop, make, use, import, offer for sale and sell Reagent ASO
Products containing one or more Reagent ASO Compounds directed to such Reagent
Target or Validation ASO Products containing one or more Validation ASO
Compounds directed to such Validation Target, as applicable, in the Territory.
(b) EXERCISE OF OPTION. Lilly may exercise an
option granted pursuant to this Section 8.2.2 with respect to (i) any Reagent
Target during the [*] year period commencing upon delivery to Lilly of a Reagent
ASO Compound directed to such Reagent Target and (ii) any Validation Target
during the Target Validation Program Term and [*] year thereafter, in each case,
by providing written notice to Isis that includes a description of such Reagent
Target or Validation Target, as applicable. The date that Isis receives such
notice shall be deemed the "SECTION 8.2.2 EXERCISE NOTICE DATE." Within [*] days
following the Section 8.2.2 Exercise Notice Date for a Reagent Target or
Validation Target, Isis shall notify Lilly whether or not Isis has granted or
assigned any rights to any Third Party as permitted by this Agreement with
respect to such Reagent Target or Validation Target, or any ASO Compounds
directed thereto as of the Section 8.2.2 Exercise Notice Date and the nature of
the rights so granted, if any, or whether Isis has an Isis Internal Program with
respect to such Reagent Target or Validation Target. Isis shall have no
obligation to disclose to Lilly the identity of any such Third Party to which
rights or licenses have been granted. If Isis has not granted any such rights or
license and does not have an Isis Internal Program with respect to such Target
as of the Section 8.2.2 Exercise Notice Date, then Isis shall grant to Lilly,
and is hereby deemed to grant to Lilly, the license described above in this
Section 8.2.2 with respect to such Reagent Target or Validation Target as of the
Section 8.2.2 Exercise Notice Date and Lilly shall be obligated to make payments
to Isis with respect to such Reagent ASO Product or Validation ASO Product
directed to such Reagent Target or Validation Target, as applicable, in
accordance
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with Section 9.3.3. It is understood and agreed that a Reagent Target or
Validation Target may not be available to be licensed by Lilly under this
Section 8.2.2 if: (i) Isis has previously granted a Third Party exclusive
rights with respect to such Reagent Target and all ASO Compounds directed
thereto or Validation Target and all ASO Compounds directed thereto, or (ii)
Isis has an Isis Internal Program with respect to the Reagent Target or
Validation Target.
(c) DILIGENCE AND REPORTING. In order to
maintain any license granted to Lilly under this Section 8.2.2 with respect to a
Reagent Target or Validation Target, Lilly must (i) maintain an Active Program
with respect to such Reagent Target or Validation Target, (ii) achieve Program
Sanction Approval on Reagent ASO Compounds or Validation ASO Compounds directed
to such Reagent Target or Validation Target, as applicable, in no more than [*]
months from the time of licensing of such Target by Lilly and (iii) consider a
Reagent ASO Compound directed to such Reagent Target or a Validation ASO
Compound directed to such Validation Target under Lilly's formal review process
for CSAG Approval in no more than [*] months from Program Sanction Approval. In
the event that any of the foregoing diligence obligations is not met by Lilly
with respect to a Reagent Target or Validation Target or ASO Compound directed
thereto, the license granted to Lilly under this Section 8.2.2 with respect to
such Reagent Target or Validation Target and ASO Compounds directed thereto
shall terminate. Lilly shall provide Isis with annual written reports that
include a description of the research, development and commercialization
activities by Lilly on any Reagent Target or Validation Target (and ASO
Compounds directed thereto) licensed by Lilly under this Section 8.2.2. Lilly
shall provide prompt written notice to Isis when it ceases to have an Active
Program on any Reagent Target or Validation Target licensed by Lilly pursuant to
this Section 8.2.2 and thereafter such license shall terminate. Within six (6)
months of such notice from Lilly, or within six (6) months of termination of
this Agreement by Isis pursuant to Section 13.4 or 13.5, Isis shall provide
written notice to Lilly if it desires to develop an ASO Product to such Reagent
Target or Validation Target and receive from Lilly summary reports on completed
IND-enabling toxicology studies and completed clinical trials for the ASO
Compound related to such Reagent Target or Validation Target. Lilly shall
provide such summary reports promptly after receiving such notice from Isis. If
Isis fails to provide such notice within such six (6) month period Lilly shall
have no obligation to provide such summary reports to Isis.
8.2.3 OPTION TO DRUG DISCOVERY ASO TARGETS.
(a) GRANT OF OPTION. Subject to the terms and
conditions of this Agreement, Isis hereby grants to Lilly an exclusive option,
exercisable on a Drug Discovery Target-by-Drug Discovery Target basis, to obtain
an exclusive, royalty-bearing license, including the right to sublicense, under
the Isis Collaboration Technology and the Isis Technology to develop, make, use,
import, offer for sale and sell Drug Discovery ASO Products containing one or
more Drug Discovery ASO Compounds directed to such Drug Discovery Target in the
Territory.
(b) EXERCISE OF OPTION. Lilly's option under
this Section 8.2.3 with respect to any Drug Discovery Target shall be
exercisable during the Antisense Drug Discovery Term and for so long thereafter
(not to exceed [*] as Lilly has an Active Program with respect thereto or to the
Drug Discovery Target; PROVIDED, HOWEVER, that such option shall, in any event,
expire upon the earliest to occur of (i) [*]) days after a Drug Discovery ASO
Compound directed to such Drug Discovery Target achieves CSAG Approval or (ii)
[*] after the date that a Drug Discovery ASO Compound directed
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to such Drug Discovery Target was designated a Development Candidate. Lilly
may exercise an option granted pursuant to this Section 8.2.3 by providing
written notice to Isis that includes a description of the Drug Discovery
Target for which Lilly desires to obtain such exclusive license. The date
that Isis receives such notice shall be deemed the "SECTION 8.2.3 EXERCISE
NOTICE DATE." The exclusive license described above in this Section 8.2.3
shall be deemed granted to Lilly on the Section 8.2.3 Exercise Notice Date
and Lilly shall be obligated to make payments to Isis with respect to Drug
Discovery ASO Products directed to such Drug Discovery Target in accordance
with Section 9.3.4. If Lilly fails to timely exercise its option under this
Section 8.2.3, then thereafter the Drug Discovery Target corresponding to
such the Drug Discovery ASO Compound shall be deemed an Abandoned Drug
Discovery Target; PROVIDED, HOWEVER, that prior to the expiration of Lilly's
option under this Section 8.2.3 with respect to such Drug Discovery Target,
Lilly shall have the right to designate such Drug Discovery Target as a
Reserved Target for no more than [*] months, subject to the provisions of
Sections 6.8 and 6.9.
(c) DILIGENCE AND REPORTING. In order to
maintain any license granted to Lilly under this Section 8.2.3 with respect to a
Drug Discovery Target, Lilly must maintain an Active Program on such Drug
Discovery Target, and as long as Lilly has an Active Program with respect to a
Drug Discovery Target Isis shall not conduct any research on its own or with a
Third Party on such Drug Discovery Target or any ASO Compound directed to such
Drug Discovery Target. In the event that the foregoing diligence obligation is
not met by Lilly with respect to a Drug Discovery Target or Drug Discovery ASO
Compounds directed thereto, the license granted to Lilly under this Section
8.2.3 with respect to such Drug Discovery Target shall terminate. Lilly shall
provide Isis with annual written reports that include a description of the
research, development and commercialization activities by Lilly on any Drug
Discovery Target and Drug Discovery ASO Compounds related thereto licensed by
Lilly under this Section 8.2.3. Lilly shall provide prompt written notice to
Isis when it ceases to have an Active Program on any Drug Discovery Target or
Drug Discovery ASO Compounds directed thereto licensed by Lilly pursuant to this
Section 8.2.3 and thereafter such license shall terminate. Within six (6) months
of such notice from Lilly, or within [*] months of termination of this Agreement
by Isis pursuant to Section 13.4 or 13.5, Isis shall provide written notice to
Lilly if it desires to develop an ASO Product to such Drug Discovery Target and
whether it desires to receive from Lilly summary reports on completed
IND-enabling toxicology studies and completed clinical trials for the ASO
Compound related to such Drug Discovery Target. Lilly shall provide such summary
reports promptly after receiving such notice from Isis. If Isis fails to provide
such notice within such six (6) month period Lilly shall have no obligation to
provide such summary reports to Isis.
8.3 LILLY'S RIGHT OF FIRST NEGOTIATION. Isis hereby grants to
Lilly a right of first negotiation (the "LILLY RIGHT OF FIRST NEGOTIATION") to
obtain from Isis an exclusive, worldwide, license under the Isis Collaboration
Technology and the Isis Technology regarding (a) Isis Products directed to
Abandoned Drug Discovery Targets, Exclusive Targets, Lilly-Blocked Targets
(subject to Section 6.2.2) or Accepted Validation Targets that (i) Isis elects
to partner or develop or commercialize in collaboration with a Third Party or
(ii) are developed by Isis and achieve Phase III Study Initiation. The Lilly
Right of First Negotiation shall be exercisable by Lilly during the term of this
Agreement and shall operate as follows:
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8.3.1 Isis shall promptly notify Lilly in writing (the
"ISIS NOTIFICATION") of (i) its intention to negotiate with or seek a
collaborator for the commercialization of any Isis Product directed to an
Abandoned Drug Discovery Target or Accepted Validation Target or any Isis
Reagent ASO Products and/or (ii) when any Isis Product directed to an Abandoned
Drug Discovery Target, Exclusive Targets, Lilly-Blocked Targets or Accepted
Validation Target achieves Phase III Study Initiation. The Isis Notification
shall include a description of the Isis Product that includes summaries of
preclinical, toxicological and available clinical data and patent information of
the level of detail included in a Clinical Investigators Brochure and, for Isis
Products that achieve Phase III Study Initiation, a written report setting out
the Phase II Clinical Trial Protocol and the Clinical Investigative Brochure for
the Phase III Clinical Trials, in order to permit Lilly to evaluate its interest
in exercising its rights under this Section 8.3. All information contained in
the Isis Notification shall be considered Confidential Information of Isis and
subject to Article 10 and shall be used by Lilly solely for the purpose of
evaluating its interest in exercising its rights under this Section 8.3.
8.3.2 Lilly shall notify Isis within [*] days after receipt
of the Isis Notification (the "LILLY RESPONSE PERIOD"), indicating its interest,
if any, in initiating discussions regarding an agreement with Isis with respect
to the commercialization of such Isis Product.
8.3.3 In the event that Lilly notifies Isis prior to the
termination of the Lilly Response Period that it has an interest in the
commercialization of such Isis Product (a "LILLY EXPRESSION OF INTEREST"), then
the Parties shall negotiate exclusively in good faith reasonable terms that are
intended to form the basis of a final agreement for a period of up to the longer
of (i) [*] from the date of Isis's receipt of the Lilly Expression of Interest
or (ii) [*] days from the Isis Notification.
8.3.4 In the event that (i) Lilly fails to notify Isis
prior to the termination of the Lilly Response Period, or (ii) Lilly notifies
Isis prior to the termination of the Lilly Response Period that it has no
interest in collaborating with Isis in the commercialization of such Isis
Product, or (iii) the Parties fail to reach agreement on the terms that are
intended to form the basis of a final agreement within [*] days of the Isis
Notification, or (iv) the Parties fail to reach a final agreement within [*]
days following the date on which the Parties reach agreement on the terms that
are intended to form the basis of a final agreement, then Isis shall thereafter
be free to develop such Isis Product on its own or to initiate discussions with
potential alternative partners with respect to the commercialization of such
Isis Product; PROVIDED, HOWEVER, that in the event Isis enters into discussions
with alternative partner the following provisions shall apply:
(a) [*] For the purpose of calculating net
present value under this Section 8.3.4 the following timing definitions will
apply:
(I) [*] and
(II) [*] and
(b) [*]
8.3.5 Isis shall disclose the terms of any such proposed
Third Party agreement terms to Lilly, and in the event that Lilly disputes that
such terms meet the requirements of this
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Section 8.3, then an independent Third Party with the requisite expertise,
selected by the Parties, shall make such determination. The expense of such
independent Third Party shall be shared equally by the Parties. In the event
that any Third Party terms include non-monetary consideration (E.G.,
licensing of patent rights), then such independent Third Party shall value
such non-monetary consideration as well as any other terms offered by such
Third Party and decide whether as a whole the Third Party offer exceeds the
Lilly offer as set forth above.
8.3.6 If a Third Party offer for the Isis Product exceeds
the Lilly offer by the guidelines outlined in Section 8.3.4 and is accepted by
Isis, Lilly shall receive from Isis the milestones and running royalty that
would be owed by Isis to Lilly under Section 9.6.
8.3.7 In the event that Lilly provides Isis with a timely
offer of terms, pursuant to Section 8.3.3 (the "LILLY OFFERED TERMS"), but Isis
does not enter into an agreement with Lilly or reach a mutually agreed-upon term
sheet that represents a firm commitment from a Third Party approved by an
officer of the company of such Third Party with respect to the commercialization
of such ASO Product pursuant to the provisions of Section 8.3.4 within [*]
months of the receipt by Isis of the Lilly Offered Terms, then the Lilly Right
of First Negotiation with respect to such ASO Product shall be revived.
8.4 LICENSES TO ISIS.
8.4.1 RESEARCH LICENSES. Subject to the terms and
conditions of this Agreement, Lilly hereby grants to Isis:
(a) a co-exclusive (with Lilly),
nonsublicensable, royalty free license during the Collaboration Term under the
Lilly Collaboration Technology solely to the extent necessary or appropriate to
carry out Isis' responsibilities under the Collaborative Research Plan;
(b) an exclusive, nonsublicensable, royalty-free
license under the Lilly Collaboration Technology in the ASO Field in the
Territory to conduct research outside the course of the Collaboration; PROVIDED,
HOWEVER, that such license shall automatically terminate for any particular
Lilly Collaboration Patent Right that covers a Reagent ASO Product, Validation
ASO Product, or Drug Discovery ASO Product upon the licensing of the related
Reagent Target, Validation Target or Drug Discovery Target by Lilly under
Sections 8.2.1, 8.2.2 or 8.2.3.
8.4.2 PRODUCT LICENSES. Subject to the terms and conditions
of this Agreement, Lilly hereby grants to Isis an exclusive, royalty-bearing
license, including the right to sublicense, under Lilly Collaboration Technology
to develop, make, have made, use, import, offer for sale and sell Isis
Validation ASO Products and Isis Drug Discovery ASO Products in the Territory.
Isis shall provide Lilly with annual written reports that include a description
of the research, development and commercialization activities by Isis on any
Isis Validation ASO Products or Isis Drug Discovery ASO Products licensed by
Isis under this Section 8.4.2.
8.5 ISIS OPTION TO LICENSE LILLY NON-COLLABORATION ASO PATENT
RIGHTS. Subject to the terms and conditions of this Agreement, including this
Section 8.5, [*]. During the Reagent Provision Term plus [*] years thereafter
Isis may acquire the Isis Option with respect to any such Reagent Target as set
forth below:
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(i) [*]
(ii) [*] Isis shall be limited as to the number of Reagent
Targets with respect to which it may make such inquiries as follows:
(1) Until the expiration of [*] months after the
Effective Date, Isis may not make any such inquiries;
(2) During the [*] months following the period
described in Section 8.5(ii)(1), Isis may inquire on the status of up to [*]
Reagent Targets;
(3) During the [*] following the period
described in Section 8.5(ii)(2), Isis may inquire on the status of up to [*]
Reagent Targets; and
(4) During the [*] months following the period
described in Section 8.5(ii)(3) and during each successive [*] month period
thereafter until the expiration of the [*] year following expiration of the
Reagent Provision Term, Isis may inquire on the status of up to [*] Reagent
Targets per [*] month period.
Isis may make such inquiries under this Section 8.5(ii) no more than two (2)
times per year; PROVIDED, HOWEVER, [*] Within five (5) days of receipt of any
such notice from Isis under this Section 8.5(ii), the Third Party Reviewer shall
notify Isis in writing whether such Reagent Target is an Excluded Reagent
Target.
(iii) On or after such time as any Reagent Target validated
and functionalized by Isis in its own internal drug discovery programs has
reached [*]
(iv) Isis may exercise each Isis Option granted under
Section 8.5(iii) at any time following such grant during the Reagent Provision
Term plus [*] years upon written notice to Lilly. Any license granted to Isis
pursuant to exercise of an Isis Option under this Section 8.5 shall be
royalty-bearing in accordance with Section 9.6.1 hereof.
(v) Isis shall provide Lilly with annual written reports
that include a description of the research, development and commercialization
activities by Isis on any Isis Validation ASO Products or Isis Non-Collaboration
ASO Products licensed by Isis under this Section 8.5.
8.6 NO IMPLIED LICENSES. Except as expressly provided otherwise
herein, neither Party hereto will be deemed by this Agreement to have been
granted any license or other rights to the other Party's intellectual property
rights.
8.7 ISIS GENETROVE DATABASE SUBSCRIPTION. Until November 1, 2001,
Lilly shall have the right to become [*] for the GeneTrove Database for a period
of [*] months [*] During such [*] month period, Lilly shall have the option of
becoming a subscriber to the Genetrove Database [*] and otherwise upon the terms
and conditions set forth in SCHEDULE 8.7 hereto and thereafter, during the
Collaboration Term, Lilly shall have the option of becoming a subscriber to the
GeneTrove Database [*] preceding Lilly's exercise of such option for a
comparable subscription.
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8.8 TECHNOLOGY TRANSFER. Upon expiration or termination (other
than for breach by Lilly) of the Collaboration Term, Lilly shall have the option
to obtain a non-exclusive license, including the right to sublicense solely in
connection with the grant of a license to develop, make, use, import, offer for
sale and sell Lilly Products, to use the Isis Technology described in SCHEDULE
8.8 hereto on the terms set forth in such SCHEDULE 8.8.
8.9 MANUFACTURING IMPROVEMENTS. During the first [*] years of the
term of this Agreement, the Parties will meet at least annually to review
Manufacturing Improvements developed by either of the Parties outside of the
course of the Collaboration. [*]
8.9.1 The entire right, title, and interest in and to all
Manufacturing Improvements developed or invented solely by employees or
consultants of Lilly during the term of this Agreement will be the sole and
exclusive property of Lilly. [*]
8.9.2 The entire right, title, and interest in and to all
Manufacturing Improvements developed or invented solely by employees or
consultants of Isis during the term of this Agreement will be the sole and
exclusive property of Isis. [*]
8.9.3 The entire right, title, and interest in and to all
Manufacturing Improvements developed or invented jointly by employees or
consultants of Isis and Lilly during the term of this Agreement will be the
joint property of Isis and Lilly. Each Party will have an undivided joint
ownership interest in such Manufacturing Improvements, and may license its
rights under such Manufacturing Improvements for its own account and without the
consent of the other Party, subject to the licenses granted to Lilly under
Sections 8.1 and 8.2.
ARTICLE 9
PAYMENTS AND ACCOUNTING
9.1 COLLABORATION FUNDING. The Collaboration Funds shall be
applied by Isis solely towards the Collaboration and in accordance with the
Collaborative Research Plan.
9.1.1 COLLABORATION FTES. Collaboration FTEs shall be
billed against the Collaboration Funds at the FTE Rate. Each Party shall
maintain complete and accurate records of all monies expended by it for research
under the Collaboration and the Collaboration FTEs applied in the course of the
Collaboration. During Collaboration Term, each Party shall submit to the other
Party within [*] days following each Calendar Quarter a written statement
accompanied by a certificate signed by the Vice President of Finance or Director
of Finance on behalf of Isis, or in the case of Lilly, the Director of Finance
for Lilly Research Laboratories (or successor positions), setting forth (i) the
number of Collaboration FTEs dedicated to work on the Collaboration for the
previous Calendar Quarter, (ii) the dollar amount of Collaboration Funds
expended during the Calendar Quarter for which the report is made and the
subject matter of such expenditures; and (iii) a description of the activities
conducted. Isis will also include in such report to Lilly the beginning balance
of Collaboration Funds for such Calendar Quarter. Within [*] days of receipt of
Lilly's report for any Calendar Quarter, Isis shall submit to Lilly an
additional written statement, accompanied by a certificate signed by the Vice
President of Finance or Director of Finance of Isis, setting forth the amount of
Collaboration Funds expended
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in the preceding Calendar Quarter, the ending balance of Collaboration Funds
at the end of such Calendar Quarter and the total amount of monies to be
reimbursed to Lilly by Isis from Collaboration Funds for expenses incurred by
Lilly under the Collaboration. Isis shall reimburse Lilly concurrently with
the delivery of the report under the preceding sentence. Such reimbursement
shall be made by wire transfer to an account designated by Lilly.
9.1.2 REAGENTS. Isis shall charge the Collaboration Funds
for Reagent ASO Compounds provided to Lilly by Isis under the Reagent Provision
Program at the Isis HTS Standard Cost or Isis RTS Standard Cost, as applicable,
in accordance with the provisions of Section 9.1.1.
9.1.3 PROTECTED REAGENT TARGETS. For any Reagent ASO
Compound delivered to Lilly by Isis under this Agreement that is directed to a
Target that Lilly chooses to make a Protected Reagent Target pursuant to Section
4.4, Isis shall charge the Collaboration Funds an amount that is [*] above the
amount that would otherwise be charged by Isis under Section 9.1.2 with respect
to Reagent ASO Compounds to such Protected Reagent Target.
9.1.4 AUDITS. If a Party desires to audit the other Party's
records regarding Collaboration Funds and Collaboration FTEs, it shall utilize
the independent, certified public accountant of the other Party to examine such
records. Such accountant shall be instructed to provide the Party desiring the
audit a report on the findings of the agreed upon procedures which verifies any
previous report made or payment submitted by the audited Party during such
period. The expense of such audit shall be borne by the auditing Party;
PROVIDED, HOWEVER, that if an error in favor of the auditing Party of more than
the greater of [*] of the amount reported or paid or [*] is discovered, then
such expenses shall be paid by the audited Party. Any information received by a
Party pursuant to this Section 9.1.4 shall be deemed to be the Confidential
Information of the other Party. This right to audit shall remain during the
Collaboration Term and for a period of [*] years thereafter, but no more often
than one (1) time per year.
9.1.5 INCREASE IN LOAN COMMITMENT. Lilly and Isis have
agreed on the Lilly Loan commitment and the Loan Disbursement schedule set forth
in the Loan Agreement based on the mutual understanding of Lilly and Isis that
that Loan commitment and Loan Disbursement schedule will provide Collaboration
Funds on a timely basis to allow completion of the Collaboration activities
during the initial term of the Collaboration as set forth in this Agreement. If,
pursuant to Subsection 2.5.2(g), the Executive Committee recommends to Lilly
that an increase in Collaboration Funds is desirable to cover Collaboration
efforts during the initial four (4) year term of the Collaboration as a result
of expanding the therapeutic area focus of the Collaboration, Lilly may at its
sole option either increase the Loan commitment under the Loan Agreement or pay
cash to provide sufficient Collaboration Funds to cover such expanded area of
focus, and Lilly and Isis agree to execute such amendments to the Loan Agreement
as are necessary to cover the increased Loan commitment and adjustments in the
Loan Disbursement schedule.
9.1.6 MODIFICATIONS TO LOAN DISBURSEMENT SCHEDULE. While
not expected, if for any reason there is a substantial acceleration or delay in
the conduct of Collaboration activity from the Collaborative Research Plan used
in determining the Loan Disbursement schedule set forth in the Loan Agreement,
the Executive Committee shall recommend modifications to Lilly
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in the Loan Disbursement schedule as appropriate to reflect the resulting
acceleration or delay in the need to provide Collaboration Funds, and, if
such recommended modifications are acceptable to Lilly, then Lilly and Isis
agree to execute such amendments to the Loan Agreement as are appropriate to
reflect the changes recommended by the Executive Committee to the Loan
Disbursement schedule.
9.1.7 ACTION BY EXECUTIVE COMMITTEE. If either Party
believes that activity by the Executive Committee pursuant to Section 9.1.5 or
9.1.6 is appropriate, it shall so notify the other Party in writing, and the
Parties will cooperate in calling an Executive Committee meeting to consider
such matters at the earliest feasible time thereafter.
9.2 TECHNOLOGY ACCESS FEE. If Lilly is conducting any research,
development or commercialization activities relating to any Lilly Product as of
the fourth (4th) anniversary of the Effective Date, Lilly shall commence making
the first of [*] equal installments of the Technology Access Fee to Isis. For a
period of [*] years thereafter, if Lilly continues to conducting any research,
development or commercialization activities relating to any Lilly Product as of
each anniversary of the Effective Date then Lilly shall pay the next installment
of the Technology Access Fee. Technology Access Fee installments shall be paid
by Lilly within thirty (30) days after the fourth (4th) anniversary of the
Effective Date and each anniversary date thereafter until a total [*] such
Technology Access Fee installments have been made by Lilly. The total amount of
each such Technology Access Fee installment shall be calculated by:
(a) subtracting from the Collaboration Funds both:
(i) [*] and
(ii) [*] and
(b) [*] pursuant to this Section 9.2.
Capitalized terms used in this Section 9.2 that are not defined in this
Agreement shall have the meanings set forth in the Loan Agreement.
9.2.2 CREDITS AGAINST TECHNOLOGY ACCESS FEE. [*]
9.3 LICENSE, MILESTONE AND ROYALTY PAYMENTS - LILLY.
9.3.1 REAGENT NON-ASO PRODUCTS.
(a) MILESTONE PAYMENTS. Lilly will pay to Isis
the following milestone payments for a Reagent Non-ASO Product within [*] days
after achievement of each of the following events in the first Major Market
Country; PROVIDED, HOWEVER, that no milestone payment shall be due or owing for
any Reagent Non-ASO Compound being developed as a Reagent ASO Product that has
as its site of activity the same Target that is the site of activity of any
Lilly Product with respect to which such milestone payment has already been
paid:
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- ------------------------------------------ -----------------------------------
MILESTONE EVENT MILESTONE PAYMENT
- ------------------------------------------ -----------------------------------
[*]
- ------------------------------------------ -----------------------------------
- ------------------------------------------ -----------------------------------
- ------------------------------------------ -----------------------------------
- ------------------------------------------ -----------------------------------
Lilly shall be obligated to pay milestone
payments with respect to a Reagent Non-ASO Compound under this Section 9.3.1
only if such Reagent Non-ASO Compound achieves Program Sanction Approval within
[*] years of the date that Lilly performs the Lilly First Pass In Vitro Assay
with respect to the related Reagent ASO Compound delivered to Lilly by Isis
under this Agreement that is directed to the same Target as such Reagent Non-ASO
Compound, as reasonably evidenced by Lilly's laboratory notebooks or other
scientific records.
(b) ROYALTIES. Lilly will pay to Isis one
percent [*] on the annual Net Sales of a Reagent Non-ASO Product on a
country-by-country basis from the date of the First Commercial Sale in each such
country of a Reagent Non-ASO Product until the expiration of the last to expire
Isis Blocking Patent Right licensed by Lilly under Section 8.2.1 that includes a
Valid Claim that Covers such Reagent Non-ASO Product.
9.3.2 VALIDATION NON-ASO PRODUCTS AND DRUG DISCOVERY NON-ASO
PRODUCTS.
(a) MILESTONE PAYMENTS. Lilly will pay to Isis
the following milestone payments for a Validation Non-ASO Product or Drug
Discovery Non-ASO Product within thirty (30) days after achievement of each of
the following events in the first Major Market Country; PROVIDED, HOWEVER, that
no milestone payment shall be due or owing for any Validation Non-ASO Compound
being developed as a Validation Non-ASO Product or Drug Discovery Non-ASO
Compound being developed as a Drug Discovery Non-ASO Product that has as its
site of activity the same Target that is the site of activity of any Lilly
Product with respect to which such milestone payment has already been paid:
- ------------------------------------------ -----------------------------------
MILESTONE EVENT MILESTONE PAYMENT
- ------------------------------------------ -----------------------------------
[*]
- ------------------------------------------ -----------------------------------
- ------------------------------------------ -----------------------------------
- ------------------------------------------ -----------------------------------
- ------------------------------------------ -----------------------------------
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Lilly shall be obligated to make only those
milestone payments for the events listed above in this Section 9.3.2 that occur
after the Validation Target or Drug Discovery Target that is targeted by the
Validation Non-ASO Compound being developed as a Validation Non-ASO Product or
Drug Discovery Non-ASO Compound being developed as a Drug Discovery Non-ASO
Product is designated [*]
Lilly shall be obligated to pay milestone
payments with respect to a Validation Non-ASO Compound being developed as a
Validation Non-ASO Product or Drug Discovery Non-ASO Compound being developed as
a Drug Discovery Non-ASO Product under this Section 9.3.2 only if such
Validation Non-ASO Compound or Drug Discovery Non-ASO Compound achieves Program
Sanction Approval within [*] years of the date that Lilly or the Collaboration,
as applicable, performs the equivalent of the Lilly First Pass In Vitro Analysis
with respect to the related Validation ASO Compound or Drug Discovery ASO
Compound that is directed to the same Target as the Validation Non-ASO Compound
or Drug Discovery Non-ASO Compound, as reasonably evidenced by Lilly's
laboratory notebooks or other scientific records.
(b) ROYALTIES. Lilly will pay the following
royalties to Isis on a country-by-country basis from the date of the First
Commercial Sale in each such country of a Validation Non-ASO Product or Drug
Discovery Non-ASO Product:
(i) [*] on the annual Net Sales of
Validation Non-ASO Product or Drug Discovery Non-ASO Product for a period of [*]
years if there is no Isis Collaboration Patent Right or Isis Patent Right that
includes a Valid Claim that Covers such Validation Non-ASO Product or Drug
Discovery Non-ASO Product; PROVIDED, HOWEVER, that no royalty payment shall be
owed by Lilly under this Section 9.3.2(b) for a Validation Non-ASO Product or
Drug Discovery Non-ASO Product that is [*] or
(ii) [*] on the annual Net Sales of a
Validation Non-ASO Product or Drug Discovery Non-ASO Product until the
expiration of the last to expire Isis Collaboration Patent Right or Isis Patent
Right that includes a Valid Claim that Covers such Validation Non-ASO Product or
Drug Discovery Non-ASO Product.
9.3.3 REAGENT ASO PRODUCTS AND VALIDATION ASO PRODUCTS.
(a) LICENSE FEES. In the event that Lilly
exercises its option to license a Reagent Target or a Validation Target in
accordance with Section 8.2.2, Lilly shall pay Isis a one time license fee of
[*] within [*] days after the Section 8.2.2 Exercise Notice Date for each such
licensed Reagent Target or Validation Target.
(b) MILESTONE PAYMENTS. Lilly will pay to Isis
the following milestone payments for a Reagent ASO Compound being developed as a
Reagent ASO Product or a Validation ASO Compound being developed as a Validation
ASO Product within thirty (30) days after achievement of each of the following
events in the first Major Market Country; PROVIDED, HOWEVER, that no milestone
payment shall be due or owing for any Reagent ASO Compound or a Validation ASO
Compound that has as its site of activity the same Target that is
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the site of activity of any Lilly Product with respect to which such milestone
payment has already been paid:
------------------------------------------ ---------------------------------------
MILESTONE EVENT MILESTONE PAYMENT
------------------------------------------ ---------------------------------------
[*]
------------------------------------------ ---------------------------------------
------------------------------------------ ---------------------------------------
------------------------------------------ ---------------------------------------
------------------------------------------ ---------------------------------------
PROVIDED, HOWEVER, that with respect to any Combination Product that contains
more than one (1) Reagent ASO Compound and/or Validation ASO Compound, Lilly
shall be obligated to the milestones set forth in the foregoing table for Phase
III Study Initiation, Registration and First Commercial Sale only once for such
Combination Product.
(C) ROYALTIES. Lilly will pay to Isis the
following royalties on a country-by-country basis from the date of the First
Commercial Sale in each such country of a Reagent ASO Product or a Validation
ASO Product until the expiration of the last to expire Isis Collaboration Patent
Right or Isis Patent Right that includes a Valid Claim that Covers such Reagent
ASO Product or Validation ASO Product, as applicable:
------------------------------------------------------------- --------------------
WORLDWIDE ANNUAL SALES OF THE PRODUCT ROYALTY RATE
------------------------------------------------------------- --------------------
[*]
------------------------------------------------------------- --------------------
------------------------------------------------------------- --------------------
------------------------------------------------------------- --------------------
PROVIDED, HOWEVER, that the royalty rate payable by Lilly under this Section
9.3.3(c) shall be increased by the amount of any pass through royalties payable
by Isis to a Third Party on Lilly's sale of such Reagent ASO Product or
Validation ASO Product but in no event shall the royalty rate payable by Lilly
under this Section be increased to amount greater than [*]
9.3.4 DRUG DISCOVERY ASO PRODUCTS.
(A) LICENSE FEES. In the event that Lilly
exercises an option to license a Drug Discovery ASO Target in accordance with
Section 8.2.3, Lilly shall pay the following applicable one-time license fee [*]
days after the Section 8.2.3 Exercise Notice Date for each such Drug Discovery
ASO Target:
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--------------------------------------------- ----------------------------------
DRUG DISCOVERY ASO TARGET LICENSE FEE
--------------------------------------------- ----------------------------------
[*]
--------------------------------------------- ----------------------------------
--------------------------------------------- ----------------------------------
--------------------------------------------- ----------------------------------
(B) MILESTONE PAYMENTS. Lilly will pay to Isis
the following milestone payments for a Drug Discovery ASO Compound being
developed as a Drug Discovery ASO Product within [*] days after achievement of
each of the following events in the first Major Market Country; PROVIDED,
HOWEVER, that no milestone payment shall be due or owing for any Drug Discovery
ASO Compound that has as its site of activity the same Target that is the site
of activity of any Drug Discovery ASO Product with respect to which such
milestone payment has already been paid:
- --------------------------------------------------------------------------------------------------------------------
MILESTONE PAYMENT
- --------------------------------------------------------------------------------------------------------------------
MILESTONE EVENT STAGE 1 DRUG DISCOVERY STAGE 2 DRUG DISCOVERY STAGE 3 DRUG DISCOVERY
TARGET TARGET TARGET
- ------------------------------------- ------------------------- ------------------------- --------------------------
[*]
- ------------------------------------- ------------------------- ------------------------- --------------------------
- ------------------------------------- ------------------------- ------------------------- --------------------------
- ------------------------------------- ------------------------- ------------------------- --------------------------
- ------------------------------------- ------------------------- ------------------------- --------------------------
PROVIDED, HOWEVER, that with respect to any Combination Product that contains
more than one (1) Drug Discovery ASO Compound, Lilly shall be obligated to the
milestones set forth in the foregoing table for Phase III Study Initiation,
Registration and First Commercial Sale only once for such Combination Product.
(C) ROYALTIES. Lilly will pay to Isis the
following royalties on a country-by-country basis from the date of the First
Commercial Sale in each such country of a Drug Discovery ASO Product until the
expiration of the last to expire Isis Collaboration Patent Right or Isis Patent
Right that includes a Valid Claim that Covers such Drug Discovery ASO Product:
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- --------------------------------------------- -------------------------------------------------------------------------
ROYALTY RATES
- --------------------------------------------- ------------------------ ------------------------ -----------------------
WORLDWIDE ANNUAL NET SALES OF THE PRODUCT STAGE 1 DRUG DISCOVERY STAGE 2 DRUG DISCOVERY STAGE 3 DRUG
TARGET TARGET DISCOVERY TARGET
- --------------------------------------------- ------------------------ ------------------------ -----------------------
[*]
- --------------------------------------------- ------------------------ ------------------------ -----------------------
- --------------------------------------------- ------------------------ ------------------------ -----------------------
- --------------------------------------------- ------------------------ ------------------------ -----------------------
9.3.5 LILLY SUBLICENSING OBLIGATIONS. In the event that
Lilly elects to sublicense its rights to a Reagent ASO Compound, a Drug
Discovery ASO Product or a Validation ASO Product, as permitted by this
Agreement, Lilly shall be obligated to pay to Isis, at Lilly's option, either
(i) [*] of any and all Sublicense Income received by Lilly pursuant to a
sublicense agreement entered into by Lilly with respect to such Reagent ASO
Compound, a Drug Discovery ASO Product or a Validation ASO Product or (ii) any
payments as set forth in this Article 9 that would be owed by Lilly if Lilly
were selling such Reagent ASO Product, Drug Discovery ASO Product or Validation
ASO Product; PROVIDED, HOWEVER, [*]
9.4 PASS THROUGH ROYALTIES. [*]
9.4.1 [*]
9.4.2 [*]
9.5 ACCESS TO THIRD PARTY RIGHTS.
9.5.1 THIRD PARTY LICENSES. If, after the Effective Date
access to a Third Party's intellectual property rights becomes necessary to
make, use, import, or offer to sell, or sell a Reagent ASO Product, Validation
ASO Product or Drug Discovery ASO Product in the Territory, Lilly shall have the
right to acquire such access. [*] of the acquisition cost paid by Lilly (I.E.,
all consideration paid by Lilly in connection with such acquisition including,
without limitation up-front payments, milestones payments and royalties) shall
be credited against future royalties owed to Isis by Lilly under this Agreement
for a Reagent ASO Product, Validation ASO Product or Drug Discovery ASO Product.
Except as the Parties may otherwise agree in writing, under no circumstance
shall Lilly acquisitions of Third Party intellectual property rights under the
provisions of this Section 9.5 result in a reduction of Net Royalties payable to
Isis under this Agreement by more than [*] percent of the royalty otherwise due
to Isis.
9.5.2 ORAL PREPARATION OR FORMULATION TECHNOLOGY. Any oral
preparation or formulation technology that is applicable to Reagent ASO
Products, Validation ASO Products or Drug Discovery ASO Products that is
obtained by Isis from any Affiliate or Third Party, including Elan, shall be
made available to Lilly for use at a cost (including royalties, milestones and
other payments) that is no greater than the amount payable by Isis to such Third
Party. Any oral preparation or formulation technology developed by Isis during
the term of the Agreement
32.
that is applicable to Reagent ASO Products, Validation ASO Products or Drug
Discovery ASO Products shall be made available to Lilly hereunder as Isis
Technology.
9.6 PAYMENTS BY ISIS. Subject to the terms and conditions of this
Agreement, Isis shall pay to Lilly royalties on a country-by-country basis from
the date of the First Commercial Sale of an Isis Product in each such country as
follows:
9.6.1 ISIS NON-COLLABORATION ASO PRODUCTS. For Isis
Non-Collaboration ASO Products, Isis shall pay Lilly [*] on Isis' annual Net
Sales of each Isis Non-Collaboration ASO Product until the expiration of the
last to expire Lilly Non-Collaboration ASO Patent Right that includes a Valid
Claim that Covers such Isis Non-Collaboration ASO Product;
9.6.2 ISIS VALIDATION ASO PRODUCTS. For Isis Validation ASO
Products, Isis shall pay Lilly [*] on Isis' annual Net Sales of each Isis
Validation ASO Product until the expiration of the last to expire Isis
Collaboration Patent Right or Lilly Collaboration Patent Right that includes a
Valid Claim that Covers such Isis Validation ASO Product; PROVIDED, HOWEVER,
that the total royalty payable by Isis with respect to any Isis Product under
Sections 9.6.1 and 9.6.2 shall not exceed [*] of Net Sales in the aggregate; and
9.6.3 ISIS DRUG DISCOVERY ASO PRODUCTS. For an Isis Drug
Discovery ASO Product that is not directed to a Stage 2 Drug Discovery Target or
a Stage 3 Drug Discovery Target, Isis shall pay to Lilly the applicable
percentage of Net Sales set forth below for each such Isis Drug Discovery ASO
Product until the expiration of the last to expire Isis Collaboration Patent
Right or Lilly Collaboration Patent Right that includes a Valid Claim that
Covers such Isis Drug Discovery ASO Product:
--------------------------------------------------------------- ------------------
STAGE AT WHICH LILLY'S LICENSE TO A ISIS DRUG DISCOVERY ASO ROYALTY RATE
PRODUCT WAS TERMINATED
--------------------------------------------------------------- ------------------
[*]
--------------------------------------------------------------- ------------------
--------------------------------------------------------------- ------------------
--------------------------------------------------------------- ------------------
--------------------------------------------------------------- ------------------
9.6.4 ISIS DRUG DISCOVERY ASO PRODUCTS. For Isis Drug
Discovery ASO Products that are directed to Stage 2 Drug Discovery Targets or
Stage 3 Drug Discovery Targets, Isis will pay to Lilly the applicable percentage
of Net Sales set forth below for each such a Isis Drug Discovery ASO Product
until the expiration of the last to expire Isis Collaboration Patent Right or
Lilly Collaboration Patent Right that includes a Valid Claim that Covers such
Isis Drug Discovery ASO Product:
33.
--------------------------------------------------------------- ------------------
STAGE AT WHICH LILLY'S LICENSE TO A ISIS DRUG DISCOVERY ASO ROYALTY RATE
PRODUCT WAS TERMINATED
--------------------------------------------------------------- ------------------
[*]
--------------------------------------------------------------- ------------------
--------------------------------------------------------------- ------------------
--------------------------------------------------------------- ------------------
--------------------------------------------------------------- ------------------
9.6.5 LILLY SUMMARY REPORTS. If Isis elects to receive a
summary report from Lilly under Section 8.2.2(c) or 8.2.3(c) with respect to an
ASO Compound, Isis shall make the applicable payment set forth below to Lilly
with respect to any Isis Reagent ASO Product, Isis Validation Product or Isis
Drug Discovery Product based thereon, as applicable within [*] days after
receipt of such report from Lilly:
(a) If Isis acquires rights to an Isis Reagent
ASO Product, Isis Validation ASO Product or Isis Drug Discovery ASO Product
pursuant to Section 8.2.2(c) or 8.2.3(c) prior to completion of IND-enabling
toxicology studies, then Isis shall pay Lilly [*];
(b) If Isis acquires rights to an Isis Reagent
ASO Product, Isis Validation ASO Product or Isis Drug Discovery ASO Product
pursuant to Section 8.2.2(c) or 8.2.3(c) after completion of IND-enabling
toxicology studies but before completion of Phase I Clinical Trials, then Isis
shall pay Lilly [*];
(c) If Isis acquires rights to an Isis Reagent
ASO Product, Isis Validation ASO Product or Isis Drug Discovery ASO Product
pursuant to Section 8.2.2(c) or 8.2.3(c) after completion of Phase I Clinical
Trials but prior to completion of Phase II Clinical Trials, then Isis shall pay
Lilly [*]; and
(d) If Isis acquires rights to an Isis Reagent
ASO Product, Isis Validation ASO Product or Isis Drug Discovery ASO Product
pursuant to Section 8.2.2(c) or 8.2.3(c) after completion of Phase II Clinical
Trials, then Isis shall pay Lilly [*].
9.6.6 ASO PRODUCT COMPETITION. In the event that during the
term of this Agreement, Isis develops or commercializes an ASO Product not
subject to payment obligations under any other provision of this Section 9.6
that:
(a) selectively modulates a Target that has [*]
and
(b) [*]
then Isis shall pay to Lilly royalties on the Net Sales of such ASO Product
being developed or commercialized by Isis for such same indication(s) that is
equal to [*] of the Net Royalty payable by Lilly to Isis for such competing
Lilly ASO Product.
34.
9.7 ROYALTY OBLIGATIONS. Except as otherwise provided in this
Agreement both Parties acknowledge and agree that each is solely responsible for
any and all royalty obligations that have accrued or may accrue in the future
with respect to any agreements and/or arrangement that such Party may have
agreed to prior to the Effective Date. Except as otherwise provided in this
Agreement, any Third Party technology acquired by Isis that is applicable to
Reagent ASO Products, Validation ASO Products or Drug Discovery ASO Products
shall be made available to Lilly at the cost (including royalties, milestones
and other payments) payable by Isis to such Third Party.
9.8 COPS PROTECTION. Isis and Lilly agree to discuss in good faith
a royalty reduction for any Lilly Product or Isis Product for which the COPS is
greater than [*]
9.9 COMPULSORY LICENSE. If in any country a Third Party obtains a
Compulsory License to sell a Lilly Product or Isis Product, then Lilly or Isis,
respectively, shall promptly notify the other Party. If the royalty rate payable
by the grantee of the Compulsory License is less than the then-current royalty
rate paid under this Agreement, then the royalty rate, payable under this
Agreement with respect to such Lilly Product or Isis Product, as applicable,
shall be reduced to such lower rate in the subject country for so long as sales
are made pursuant to the Compulsory License; PROVIDED, HOWEVER,[*]
9.10 INFLATION. The increments of annual Net Sales tiers set forth
in Sections 9.3.3(c) or and 9.3.4(c) will be adjusted on a Calendar Year basis
commencing January 1, 2002 (and on January 1 of each year thereafter during the
term of this Agreement) by an amount equal to the percentage change, if any, in
the CPI for the preceding year.
9.11 ACCOUNTING REPORTS; PAYMENT OF ROYALTY. Each Party (including
its Affiliates) and its Sublicensees shall keep complete and accurate books and
records which may be necessary to ascertain properly and to verify the payments
owed hereunder. [*] Each Party will make royalty payments to the other Party for
Products sold by such Party, its Affiliates and Sublicensees during the Calendar
Quarter within [*] days of the last day of that Calendar Quarter. Each royalty
payment will be accompanied by a written report for that Calendar Quarter
showing the Net Sales of the Products sold by such Party, its Affiliates and
Sublicensees worldwide during the quarterly reporting period and the calculation
of the royalties payable under this Agreement.
9.12 AUDITS. Upon the written request of a Party (the "AUDITING
PARTY"), and not more than once in each Calendar Year, the other Party (the
"AUDITED PARTY") will permit the Audited Party's independent certified public
accountant to have access during normal business hours to such of the records of
the Audited Party as may be reasonably necessary to verify the accuracy of the
royalty reports hereunder for the current year and the preceding two (2) years
prior to the date of such request. The Auditing Party shall submit an audit
plan, including audit scope, to the Audited Party for the Audited Party's
approval, which shall not be unreasonably withheld, prior to audit
implementation. The independent certified public accountants shall keep
confidential any information obtained during such inspection and shall report to
the Auditing Party only the amounts of Net Sales and royalties due and payable.
Upon the expiration of two (2) years following the end of any Calendar Year, the
calculation of royalties payable with respect to such year will be binding and
conclusive upon the Auditing Party, and the Audited Party and its
35.
Affiliates and Sublicensees will be released from any liability or
accountability with respect to royalties for such year. If such accounting
firm concludes that additional royalties were owed, or that the Audited Party
overpaid royalties, during such period, the Audited Party will pay the
additional royalties, or the Auditing Party shall return any overpaid
royalties, within ninety (90) days of the date the Auditing Party delivers to
the Audited Party such accounting firm's written report. The fees charged by
such accounting firm will be paid by the Auditing Party unless the additional
royalties owed by the Audited Party exceed [*] of the royalties paid for the
royalty period subject to the audit, in which case the Audited Party will pay
the reasonable fees of the accounting firm. The Audited Party will include in
each sublicense granted by it pursuant to this Agreement a provision
requiring the Sublicensee to make reports to the Audited Party, to keep and
maintain records of sales made pursuant to such sublicense and to grant
access to such records by a mutually agreed upon independent accountant to
the same extent required of the Audited Party under this Agreement. The
Auditing Party will treat all financial information subject to review under
this Section 9.12 or under any sublicense agreement in accordance with the
confidentiality provisions of this Agreement, and will cause its accounting
firm to enter into an acceptable confidentiality agreement with the Audited
Party obligating it to retain all such financial information in confidence
pursuant to such confidentiality agreement.
9.13 PAYMENT. All payments to a Party under this Agreement will be
made in United States Dollars by bank wire transfer in next day available funds
to such bank account in the United States designated in writing by the other
Party from time to time. Each Party will pay a late payment service charge of
[*] per month (or the highest amount allowed by law, if lower than [*] on all
past-due amounts owed by such Party under this Agreement.
9.14 INCOME TAX WITHHOLDING. Each Party will be responsible for its
own tax liabilities resulting from the payments received from the other Party
under this Agreement. If laws, rules or regulations require withholding of
income taxes or other taxes imposed upon payments set forth in this Article 9,
the paying Party will make such withholding payments as required and subtract
such withholding payments from the payments set forth in this Article 9. The
paying Party will submit appropriate proof of payment of the withholding taxes
to the other Party within a reasonable period of time.
ARTICLE 10
CONFIDENTIALITY
10.1 NONDISCLOSURE AND NONUSE OBLIGATIONS. All (i) Confidential
Information disclosed by one Party to the other Party hereunder and (ii)
Collaboration Know-How will be maintained in confidence and will not be
disclosed to any Third Party or used for any purpose except as expressly
permitted herein without the prior written consent of the other Party.
10.2 PERMITTED DISCLOSURE OF CONFIDENTIAL INFORMATION.
Notwithstanding Section 9.1, a Party may disclose Confidential Information of
the other Party or Collaboration Know-How as follows:
10.2.1 to appropriate U.S. and/or foreign tax authorities,
appropriate patent agencies in order to obtain Patent Rights pursuant to this
Agreement, appropriate regulatory
36.
authorities to gain approval to conduct clinical trials or to market Lilly
Products or Isis Products pursuant to this Agreement, but such disclosure,
may be only to the extent reasonably necessary to obtain such Patent Rights
or authorizations;
10.2.2 if required by any governmental authority other than
under Section 10.2.1, provided that prior to such disclosure, the Party subject
to the request for such disclosure (the "NOTIFYING PARTY") promptly notifies the
other Party of such requirement so that such other Party may seek a protective
order or other appropriate remedy; and provided, further, that in the event that
no such protective order or other remedy is obtained, or that such other Party
waives compliance with this Article 10, the Notifying Party will furnish only
that portion of the other Party's Confidential Information or of the
Collaboration Know-How that it is advised by counsel it is legally required to
furnish and will exercise all reasonable efforts to obtain reasonable assurance
that confidential treatment will be accorded the other Party's Confidential
Information or Collaboration Know-How so furnished.
10.2.3 by a Party to its permitted Sublicensees, agents,
consultants, Affiliates and/or other Third Parties for the research and
development, manufacturing and/or marketing of Lilly Products or Isis Products
(or for such Parties to determine their interest in performing such activities)
in accordance with this Agreement on the condition that such Affiliates and
Third Parties agree to be bound by the confidentiality and non-use obligations
contained in this Agreement; or
10.2.4 if required to be disclosed by law or court order,
provided that notice is promptly delivered to the non-disclosing Party in order
to provide an opportunity to challenge or limit the disclosure obligations.
ARTICLE 11
DISCLAIMERS, REPRESENTATIONS, WARRANTIES AND INDEMNIFICATIONS
11.1 ISIS REPRESENTATIONS AND WARRANTIES. Isis represents and
warrants to Lilly as follows:
11.1.1 CORPORATE EXISTENCE AND AUTHORITY. As of the
Effective Date, Isis: (a) is a corporation duly organized, validly existing and
in good standing under the laws of the state in which it is incorporated, (b)
has full corporate power and authority and the legal right to own and operate
its property and assets and to carry on its business as it is now being
conducted and as contemplated in this Agreement, including the right to grant
the options to license and licenses granted hereunder, (c) has the corporate
power and authority and the legal right to enter into this Agreement and perform
its obligations hereunder, (d) has taken all necessary corporate action on its
part required to authorize the execution and delivery of the Agreement and the
performance of its obligations hereunder, and (e) has delivered an Agreement
that has been duly executed and constitutes a legal, valid, binding obligation
of Isis and is enforceable against it in accordance with its terms;
11.1.2 PATENTS, PRIOR ART. As of the Effective Date and to
the best of Isis' knowledge, it has the sufficient legal and/or beneficial title
and ownership under the Isis
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Technology as is necessary to fulfill its obligations under this Agreement
and to grant the licenses and options to license to Lilly pursuant to this
Agreement. Isis is not aware of any communications alleging that it has
violated or, by conducting its business as currently proposed under this
Agreement, would violate any of the intellectual property rights of any Third
Party;
11.1.3 ABSENCE OF LITIGATION, INFRINGEMENT,
MISAPPROPRIATION. As of the Effective Date and to the best of Isis' knowledge,
there is no pending or threatened litigation (and Isis has not received any
communication relating thereto) which alleges that Isis' activities in the field
of Antisense Technology or under this Agreement would infringe or misappropriate
any intellectual property rights of any Third Party. To the best of Isis'
knowledge, there is no material unauthorized use, infringement or
misappropriation of any of its intellectual property rights that are the subject
of the licenses or options to license granted hereunder;
11.1.4 FULL DISCLOSURES. Isis has provided Lilly with all
information that Lilly has requested for deciding the merits of entering into
this Agreement and all information reasonably useful or necessary to enable
Lilly to make an informed decision regarding entering into this Agreement;
11.1.5 EMPLOYEE OBLIGATIONS. All Isis employees who will
conduct research under this Agreement have legal obligations requiring
assignment to Isis of all inventions made in the course of and as a result of
their association with Isis and obligating the individual to maintain as
confidential the Confidential Information of Isis, as well as the Confidential
Information of Lilly which Isis may receive;
11.1.6 COMPLIANCE WITH LAWS. In carrying out its work under
this Agreement, all Isis work shall be carried out in compliance with any
applicable laws including, without limitation, federal, state, or local laws,
regulations, or guidelines governing the work at the site where such work is
being conducted. Moreover, Isis will carry out all work under the Collaboration
in accordance with current Good Laboratory Practices, Good Clinical Practices,
and Good Manufacturing Practices, if applicable based on the specific work to be
conducted;
11.1.7 NO DEBARMENT. Isis will comply at all times with the
provisions of the Generic Drug Enforcement Act of 1992 and will upon request
certify in writing to Lilly that none of its employees nor any person providing
services to Isis in connection with the Collaboration have been debarred under
the provisions of such Act;
11.1.8 LICENSES. Isis has not taken nor will it take any
action which would, in Isis' good faith judgment, interfere with any obligations
of Isis set forth in this Agreement, including but not limited to the obligation
to grant Lilly the licenses and options to license described in Article 8; and
11.1.9 TARGET AVAILABILITY. Isis agrees not to enter into
any collaboration with, or render services for, a Third Party wherein Antisense
Technology is applied to Targets in a Collaboration Therapeutic Area whereby
such collaboration or service with or for a Third Party will negatively impact
the timely accomplishment of the objectives of the Collaboration.
11.2 LILLY REPRESENTATIONS AND WARRANTIES. Lilly represents and
warrants to Isis as follows:
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11.2.1 CORPORATE EXISTENCE AND AUTHORITY. As of the
Effective Date, Lilly: (a) is a corporation duly organized, validly existing and
in good standing under the laws of the state in which it is incorporated, (b)
has full corporate power and authority and the legal right to own and operate
its property and assets and to carry on its business as it is now being
conducted and as contemplated in this Agreement, including the right to grant
the options to license and licenses granted hereunder, (c) has the corporate
power and authority and the legal right to enter into this Agreement and perform
its obligations hereunder, (d) has taken all necessary corporate action on its
part required to authorize the execution and delivery of the Agreement and the
performance of its obligations hereunder, and (e) has delivered an Agreement
that has been duly executed and constitutes a legal, valid, binding obligation
of Lilly and is enforceable against it in accordance with its terms;
11.2.2 EMPLOYEE OBLIGATIONS. All Lilly personnel who will
conduct research under this Agreement have legal obligations requiring
assignment to Lilly of all inventions made in the course of and as a result of
their association with Lilly and obligating the individual to maintain as
confidential the confidential information of Lilly, as well as the confidential
information of Isis which Lilly may receive;
11.2.3 COMPLIANCE WITH LAWS. In carrying out its work under
this Agreement, all Lilly work shall be carried out in compliance with any
applicable laws including, without limitation, federal, state, or local laws,
regulations, or guidelines governing the work at the site where such work is
being conducted. Moreover, Lilly will carry out all work under the Collaboration
in accordance with current Good Laboratory Practices, Good Clinical Practices,
Good Manufacturing Practices, if applicable based on the specific work to be
conducted;
11.2.4 NO DEBARMENT. Lilly will comply at all times with the
provisions of the Generic Drug Enforcement Act of 1992 and will upon request
certify in writing to Isis that none of its employees nor any person providing
services to Lilly in connection with this Collaboration or this Agreement have
been debarred under the provisions of such Act; and
11.2.5 LICENSES. Lilly has not taken not will it take any
action which would, in Lilly's good faith judgment, interfere with any
obligations of Lilly set forth in this Agreement, including but not limited to
the obligation to grant Isis the licenses and options to license described in
Article 8.
11.3 DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY TO THE OTHER
PARTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY
WARRANTY OF NON-INFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. Without limiting the generality of the foregoing, each Party
expressly does not warrant (a) the success of any research undertaken in the
course of the Collaboration or (b) the safety for any purpose of the
technology it provides hereunder.
11.4 RESPONSIBILITY AND CONTROL. Lilly and Isis shall each be
solely responsible for the safety of their respective employees, agents,
licensees or Sublicensees with respect to efforts employed under this Agreement
and each shall hold the other harmless with regard to any
39.
liability for damages or personal injuries resulting from acts of its
respective employees, agents, licensees or Sublicensees.
11.5 ISIS' RIGHT TO INDEMNIFICATION. Lilly shall indemnify each of
Isis, its Affiliates, Sublicensees, permitted successors and assigns, and the
directors, officers, employees, agents and counsel thereof (the "ISIS
INDEMNITEES"), and defend and hold each Isis Indemnitee harmless from and
against any and all liabilities, damages, losses, settlements, claims, actions,
suits, penalties, fines, costs or expenses (including, without limitation
reasonable attorneys' fees) (any of the foregoing, "DAMAGES") incurred by or
asserted against any Isis Indemnitee of whatever kind or nature, including,
without limitation, any claim or liability based upon negligence, warranty,
strict liability, or violation of government regulation but only to the extent
arising from or occurring as a result of a claim or demand made by a Third Party
(a "THIRD PARTY CLAIM") against any Isis Indemnitee arising because of: (a)
breach of any representation or warranty made by Lilly pursuant to this Article
11; (b) any material breach of this Agreement by Lilly; (c) the manufacture,
use, handling, storage, sale or other disposition of a Lilly Product that is
sold by Lilly, its Affiliates, agents or Sublicensees; (d) violation of the
trade secrets of any Third Party by Lilly; (e) any Third Party Claim that any
Lilly Collaboration Technology or Lilly Non-Collaboration ASO Patent Right
should not have been disclosed or made available to Isis; or (f) any Third Party
Claim that either Party's use of a Target designated by Lilly for use in the
Collaboration infringes the intellectual property rights of such Third Party;
except, in each such case in subparagraphs (a) through (f) above, to the extent
that such Damages are finally determined to have resulted from the negligence or
misconduct of an Isis Indemnitee, or the breach of any representation or
warranty under Section 11.1 by Isis.
11.6 LILLY'S RIGHT TO INDEMNIFICATION. Isis shall indemnify each of
Lilly, its Affiliates, Sublicensees, successors and assigns, and the directors,
officers, employees, agents and counsel thereof (the "LILLY INDEMNITEES"), and
defend and hold each Lilly Indemnitee harmless from and against any and all
Damages incurred by or asserted against any Lilly Indemnitee of whatever kind or
nature, including, without limitation, any claim or liability based upon
negligence, warranty, strict liability, violation of government regulation but
only to the extent arising from or occurring as a result of a Third Party Claim
against any Lilly Indemnitee arising because of: (a) breach of any
representation or warranty made by Isis pursuant to this Article 11; (b) any
material breach of this Agreement by Isis; (c) the manufacture, use, handling,
storage, sale or other disposition of an Isis Product that is sold by Isis, its
Affiliates, agents or Sublicensees; (d) violation of the trade secrets of any
Third Party by Isis; (e) any Third Party Claim that any Isis Technology or Isis
Collaboration Technology should not have been disclosed or made available to
Lilly; or (f) any Third Party Claim that either Party's use of a Target
designated by Isis for use in the Collaboration infringes the intellectual
property rights of such Third Party; except, in each such case, in subparagraphs
(a) through (f) above, to the extent that such Damages are finally determined to
have resulted from the negligence or misconduct of a Lilly Indemnitee, or the
breach of any representation or warranty under Section 11.2 by Lilly.
11.7 INDEMNIFICATION PROCEDURES. Promptly after a Party entitled to
indemnification under Section 11.5 or 11.6 (an "INDEMNITEE") receives notice of
any pending or threatened claim against it (an "ACTION"), such Indemnitee shall
give written notice to the Party to whom the Indemnitee is entitled to look for
indemnification pursuant to Section 11.5 or 11.6, as applicable (the
"INDEMNIFYING PARTY"), of the commencement thereof, provided that the failure so
to notify
40.
the Indemnifying Party shall not relieve it of any liability that it may have
to any Indemnitee hereunder, except to the extent the Indemnifying Party
demonstrates that it is prejudiced thereby. In case any Action that is
subject to indemnification under this Article 11, shall be brought against an
Indemnitee and it shall give written notice to the Indemnifying Party of the
commencement thereof, the Indemnifying Party shall be entitled to participate
therein and, if it so desires, to assume the defense thereof with counsel
reasonably satisfactory to such Indemnitee and, after notice from the
Indemnifying Party to the Indemnitee of its election to assume the defense
thereof, the Indemnifying Party shall not be liable to such Indemnitee under
this Article 11 for any fees of other counsel or any other expenses, in each
case subsequently incurred by such Indemnitee in connection with the defense
thereof, other than reasonable costs of investigation. Notwithstanding an
Indemnifying Party's election to assume the defense of any such Action that
is subject to indemnification under this Article 11, the Indemnitee shall
have the right to employ separate counsel and to participate in the defense
of such Action, and the Indemnifying Party shall bear the reasonable fees,
costs and expenses of such separate counsel if: (i) the use of counsel chosen
by the Indemnifying Party to represent the Indemnitee would present such
counsel with a conflict of interest; (ii) the actual or potential defendants
in, or targets of, any such Action include both the Indemnifying Party and
the Indemnitee, and the Indemnitee shall have reasonably concluded that there
may be legal defenses available to it which are different from or additional
to those available to the Indemnifying Party (in which case the Indemnifying
Party shall not have the right to assume the defense of such Action on the
Indemnitee's behalf); (iii) the Indemnifying Party shall not have employed
counsel satisfactory to the Indemnitee to represent the Indemnitee within a
reasonable time after notice of the institution of such Action; or (iv) the
Indemnifying Party shall authorize the Indemnitee to employ separate counsel
at the Indemnifying Party's expense. If an Indemnifying Party assumes the
defense of such Action, no compromise or settlement thereof may be effected
by the Indemnifying Party without the Indemnitee's written consent, which
consent shall not be unreasonably withheld or delayed, unless (1) there is no
finding or admission of any violation of law or any violation of the rights
of any other Party and no effect on any other claims that may be made against
the Indemnitee and (2) the sole relief provided is monetary damages that are
paid in full by the Indemnifying Party.
ARTICLE 12
INTELLECTUAL PROPERTY
12.1 DISCLOSURES AND REPORTS. During the Collaboration Term, each
Party shall promptly disclose to the other in writing all Know-How generated in
the course of the Collaboration. Such disclosure shall be in sufficient detail
to permit the other Party to employ such Know-How as provided herein. Within
ninety (90) days after completion of the Collaboration, each Party shall provide
the other Party with a comprehensive final written report with respect to the
Know-How generated by such Party in the course of the Collaboration.
12.2 OWNERSHIP. Lilly shall own all inventions within the scope of
the Collaboration made solely by its employees and Isis shall own all inventions
within the scope of the Collaboration made solely by its employees. All
inventions made jointly by employees of Lilly and employees of Isis pursuant to
35 USC 116 within the scope of the Collaboration shall be owned jointly by Isis
and Lilly (the "JOINT COLLABORATION PATENT RIGHTS"). All Patent Rights
41.
covering any invention made within the scope of the Collaboration shall be
owned by the Parties or Party, as the case may be, that own(s) said invention.
12.3 PATENT FILING AND PROSECUTION. Lilly and Isis shall work
closely, through their interactions on the Executive Committee and the IP
Committee, to ensure that, when appropriate, Patent Rights are obtained for
inventions arising in the course of the Collaboration. Each Party shall use its
commercially reasonable efforts in filing and prosecuting Patent Rights claiming
inventions arising in the course of the Collaboration under this Section 12.3.
With respect to inventions arising in the course of the Collaboration, and when
appropriate, the Parties shall file patent applications containing ASO Compound
composition of matter claims and claims directed to the use of such ASO Compound
(each, an "ASO COMPOSITION OF MATTER PATENT RIGHT") separately from patent
applications containing all other claims, including, without limitation, non-ASO
Compound composition of matter claims and claims directed to the use of such
non-ASO Compound. Lilly shall not be responsible for reimbursement under Section
12.6 of any of Isis' external costs of filing, prosecuting, maintaining and
extending any ASO Composition of Matter Patent Right solely owned by Isis unless
such ASO Composition of Matter Patent Right is exclusively licensed to Lilly
under Article 8 in which case the terms of Section 12.6 shall apply; PROVIDED,
HOWEVER, that the Parties shall reimburse [*] of Isis' external costs of filing,
prosecuting, maintaining and extending ASO Composition of Matter Patent Rights
claiming Drug Discovery ASO Compounds and/or the use of Drug Discovery ASO
Compounds directed to a Drug Discovery Target until such time as either such
Target ceases to be a Drug Discovery Target for purposes of this Agreement,
Lilly exclusively licenses such ASO Composition of Matter Patent Right, or Lilly
elects to discontinue such reimbursement pursuant to Section 12.6. Isis shall be
responsible for preparing, filing, prosecuting, maintaining and taking such
other actions as are reasonably necessary or appropriate with respect to the
Isis Collaboration Patent Rights and the Isis Patent Rights. Lilly shall be
responsible for preparing, filing, prosecuting, maintaining and taking such
other actions as are reasonably necessary or appropriate with respect to the
Lilly Collaboration Patent Rights. The Executive Committee shall designated one
of the Parties as being the responsible Party for preparing, filing,
prosecuting, maintaining and taking such other actions as are reasonably
necessary or appropriate with respect to the Joint Collaboration Patent Rights.
Each Party shall provide the IP Committee with a copy of any patent application
that first discloses an invention arising in the course of the Collaboration or
any Collaboration Know-How, prior to filing the first of such applications in
any jurisdiction, for review and comment by the IP Committee. Each Party shall
keep the other Party continuously informed of all significant matters relating
to the preparation, filing, prosecution and maintenance of Collaboration Patent
Rights. Each Party shall provide the other Party with copies of any substantial
prosecution papers within thirty (30) days of receipt. Each Party shall endeavor
in good faith to coordinate its efforts with those of the other Party to
minimize or avoid interference with the prosecution of the other Party's patent
applications. The Executive Committee shall review and have oversight
responsibility for all patent matters pertaining to the Collaboration.
12.4 ELECTION NOT TO FILE, PROSECUTE OR MAINTAIN. If the
responsible Party under Section 12.3 elects (a) not to file a patent application
claiming an invention made in the course of the Collaboration in a particular
country, or (b) to discontinue prosecution or maintenance of any Patent Right
Controlled by such Party Covering a Product being developed or commercialized by
the other Party hereunder or of any Collaboration Patent Right, that Party (the
"INITIAL
42.
RESPONSIBLE PARTY") shall give thirty (30) days advance written notice to the
other Party of any decision to cease preparation, filing, prosecution and
maintenance of that Patent Right (a "DISCONTINUED PATENT"); PROVIDED,
HOWEVER, that abandonment of a patent application in favor of a continuation
or a continuation-in-part thereof shall not constitute discontinuance of the
patent application. In such case, the other Party may elect at its sole
discretion to continue preparation, filing, prosecution or maintenance of the
Discontinued Patent at its sole expense. The Party so continuing shall own
any such patent application and patents maturing therefrom and be solely
responsible for all costs, and the Initial Responsible Party shall have a
non-exclusive, worldwide, irrevocable, perpetual, fully-paid license to
continue to practice such Discontinued Patent, including the right to
sublicense solely in connection with the grant of a license to develop, make,
use, import, offer for sale and sell a product of the Initial Responsible
Party. In addition, such Party so continuing shall cease to have any
obligation to pay royalties to the Initial Responsible Party under this
Agreement with respect to the Discontinued Patent. The Initial Responsible
Party shall execute such documents and perform such acts as may be reasonably
necessary for the other Party to file or to continue prosecution or
maintenance, including assigning ownership of such patents and inventions to
such electing Party. Discontinuance may be on a country-by-country basis or
for a patent application or patent series in total.
12.5 INVENTIONS OTHERWISE UNPATENTABLE IN THE UNITED STATES. Any
invention made by a Party in the course of the Target Validation Program or Drug
Discovery Program hereto that would be rendered unpatentable in the United
States solely on account of prior art under one or more of subsections 102(e),
(f), or (g) of Title 35, U.S.C., but for the absence of an obligation of
assignment of said invention (or an undivided interest therein) to the other
Party hereto, is hereby subjected to an obligation of assignment to such other
Party of such interest in the invention as renders the invention patentable in
the United States. Such assignment shall have force and effect only with respect
to patents granted in the United States. The rights of the Parties with respect
to any invention subject to an obligation of assignment under this Section 12.5,
except for subject matter patentable to the assignee in the absence of the
assignment, shall be the same as the rights that would have applied under this
Agreement had no obligation to assign under this Section 12.5 existed. If and
only if required to give force and effect to the immediately preceding sentence
and, in such case, only to the extent required to give such force and effect,
each assignee under this Section 12.5 hereby grants to each of the assignors
under this Section 12.5 such licenses, if any, as are required to vest in the
assignor rights to make, have made, use, sell and import the assigned invention,
except for subject matter patentable to the assignee in the absence of the
assignment.
12.6 COSTS AND EXPENSES. Lilly shall bear its own costs and
expenses in filing, prosecuting, maintaining and extending Lilly Collaboration
Patent Rights and, subject to Section 12.3, shall reimburse Isis for [*] of
Isis' external costs of filing, prosecuting, maintaining and extending any Isis
Collaboration Patent Rights for which costs are incurred after the Effective
Date of this Agreement; PROVIDED, HOWEVER, Lilly shall be responsible for [*] of
Isis' external costs of filing, prosecuting, maintaining and extending such Isis
Collaboration Patent Rights incurred on and after such time as any Isis
Collaboration Patent Right is exclusively licensed to Lilly under Article 8.
Lilly and Isis patent costs and expenses shall not be paid from the
Collaboration Funds. Lilly may at any time, and in its sole discretion,
discontinue reimbursement of the external costs incurred by Isis in filing,
prosecuting (including any interference), maintaining, and extending any Isis
Collaboration Patent Right, on an Isis
43.
Collaboration Patent Right-by-Isis Collaboration Patent Right and
country-by-country basis. Lilly shall provide Isis with written notice
designating each Isis Collaboration Patent Right and country for which Lilly
has decided to discontinue such reimbursement. Lilly's obligation to
reimburse Isis for any external costs with respect to any such Isis
Collaboration Patent Right shall cease on the date of receipt of such
notification; PROVIDED, HOWEVER, that Lilly shall remain responsible for [*]
of the external costs incurred up to the date of receipt of such
notification. The license granted under this Agreement with respect to each
Isis Collaboration Patent Right in each country that is specified in the
written notice provided by Lilly to Isis pursuant to this Section 12.6 shall
terminate on the date of receipt of such written notification and Lilly shall
cease to have any obligation to pay royalties to Isis under this Agreement
with respect to such Isis Collaboration Patent Right.
12.7 PATENT TERM EXTENSIONS. The Parties shall cooperate with each
other in gaining patent term extension wherever applicable to any Lilly Product
or Isis Product. The Party selling the product shall determine which patents
shall be extended. All filings for such extension shall be made by the Party to
whom the patent is assigned; PROVIDED, HOWEVER, that in the event that the Party
to whom the patent is assigned elects not to file for an extension, such Party
shall (i) inform the other Party of its intention not to file, (ii) grant the
other Party the right to file for such extension, and (iii) cooperate as
necessary to assist the other Party in filing such extension.
12.8 AUDIT OF COSTS. Upon written notice, Lilly and Isis shall each
have the right at its own expense and not more than annually in or in respect of
any Calendar Year, and during normal business hours, to audit those books and
records as may be reasonably necessary to verify the accuracy and reasonableness
of any costs incurred by the other Party and for which the other Party is
seeking or has received partial reimbursement pursuant to Section 12.6 in
respect of any Calendar Year ending not more than one (1) year prior to the date
of such notice. Any information received or obtained in connection with an audit
under this Section 12.8 is Confidential Information and both Parties shall
retain all such information in confidence.
12.9 NOTICE OF CERTIFICATION. Isis and Lilly each shall immediately
give notice to the other of any certification filed under the U.S. "Drug Price
Competition and Patent Term Restoration Act of 1984" claiming that (a) a
Collaboration Patent Right or Isis Patent Right Covering a Lilly Product being
developed or commercialized by Lilly hereunder, or (b) a Collaboration Patent
Right Covering an Isis Product being developed or commercialized by Isis
hereunder, is invalid or that any infringement will not arise from the
manufacture, use, sale, offer for sale or import of any product by a Third
Party. If Lilly decides not to bring infringement proceedings against the entity
making such a certification with respect to a Collaboration Patent Right or Isis
Patent Right Covering a Lilly Product being developed or commercialized by Lilly
hereunder, Lilly shall give notice to Isis of its decision not to bring suit
within twenty-one (21) days after receipt of notice of such certification. Isis
may then, but is not required to, bring suit against the entity that filed the
certification. If Isis decides not to bring infringement proceedings against the
entity making such a certification with respect to a Collaboration Patent Right
Covering an Isis Product being developed or commercialized by Isis hereunder,
Isis shall give notice to Lilly of its decision not to bring suit within
twenty-one (21) days after receipt of notice of such certification. Lilly may
then, but is not required to, bring suit against the Party that filed the
certification. Any suit by Lilly or Isis shall either be in the name of Lilly or
in the name of Isis, or jointly by Lilly and Isis, as may be required by law.
For this purpose, the Party not
*Confidential Treatment Requested
44.
bringing suit shall execute such legal papers necessary for the prosecution
of such suit as may be reasonably requested by the Party bringing suit. Any
costs incurred or benefits received as a result of proceeding under this
Section 12.9 shall be paid or received entirely by the Party who pursued the
action.
12.10 NOTICE OF INFRINGEMENT CLAIM. If the practice of a license
granted to a Party under this Agreement results in a claim against a Party for
patent infringement or for inducing or contributing to patent infringement
("INFRINGEMENT CLAIM"), the Party first having notice of an Infringement Claim
shall promptly notify the other in writing. The notice shall set forth the facts
of the Infringement Claim in reasonable detail.
12.10.1 RESPONSIBILITIES. Isis shall have the sole right to
control any defense of any Infringement Claim involving alleged infringement of
Third Party rights by Isis' activities at its own expense and by counsel of its
own choice, and Lilly shall have the right, at its own expense, to be
represented in any such action by counsel of its own choice. Lilly shall have
the sole right to control any defense of any Infringement Claim involving
alleged infringement of Third Party rights by Lilly's activities at its own
expense and by counsel of its own choice, and Isis shall have the right, at its
own expense, to be represented in any such action by counsel of its own choice.
Notwithstanding the foregoing, if the claim involves an allegation of a
violation of the trade secret rights of a Third Party, the Party accused of such
violation shall have the obligation to defend against such claim and shall
indemnify the other Party against all costs associated with such claim. Neither
Party shall have the right to settle any patent infringement litigation under
this Section 12.10 relating to any Patent Rights owned by or exclusively
licensed to the other Party hereunder without the consent of such other Party.
Each Party shall also keep the other Party continually informed of all
significant matters relating to Infringement Claims of Third Parties.
12.11 INFRINGEMENT CLAIMS AGAINST THIRD PARTIES.
12.11.1 PROTECTION AGAINST INFRINGEMENT. Isis and Lilly each
agree to take reasonable actions to protect their respective patents and
technology from infringement and from unauthorized possession or use.
12.11.2 NOTICE OF INFRINGEMENT. If any Collaboration
Know-How, Collaboration Patent Right or any other Patent Right licensed by one
Party to the other under this Agreement is infringed or misappropriated, as the
case may be, by a Third Party, the Party to this Agreement first having
knowledge of such infringement or misappropriation, shall promptly notify the
other in writing. The notice shall set forth the facts of such infringement or
misappropriation in reasonable detail. The owner of the Collaboration Know-How
or Patent Right shall have the primary right, but not the obligation, to
institute, prosecute, and control any action or proceeding with respect to
infringement or misappropriation of such Patent Right or Know-How by its own
counsel. The other Party shall have the right, at its own expense, to be
represented in such action by its own counsel. The Parties shall promptly
determine which Party shall have the primary responsibility to institute,
prosecute, and control any action or proceeding with respect to infringement or
misappropriation of Joint Collaboration Patent Rights, and the other Party shall
have the right, at its expense, to be represented in such action by its counsel.
During the Collaboration Term, such determination may be made by the Executive
Committee.
45.
Except as otherwise agreed to by the Parties as part of a cost-sharing
arrangement, any recovery realized as a result of such litigation, after
reimbursement of any litigation expenses of Isis and Lilly, shall be retained
by the Party that brought and controlled such litigation for purposes of this
Agreement, except that any recovery realized by Isis or Lilly as a result of
such litigation, after reimbursement of the Parties' litigation expenses,
shall, to the extent attributable to lost sales of Isis Products or Lilly
Products, respectively, be treated as Net Sales of Isis Products by Isis or
Net Sales of Lilly Products by Lilly, respectively.
12.11.3 EXPENSES OF BRINGING INFRINGEMENT ACTION. Lilly shall
bear the costs and expenses of all infringement or misappropriation actions on
Collaboration Know-How, Collaboration Patent Rights, or any other Patent Right
licensed to Lilly under this Agreement to the extent such Collaboration
Know-How, Collaboration Patent Rights or any other Patent Right licensed to
Lilly under this Agreement Cover a Lilly Product. Isis shall bear the costs and
expenses of all infringement or misappropriation actions on Collaboration
Know-How, Collaboration Patent Rights, or any other Patent Right licensed to
Isis under this Agreement to the extent such Collaboration Know-How,
Collaboration Patent Rights, or any other Patent Right licensed to Isis under
this Agreement Cover an Isis Product.
12.11.4 LILLY'S FAILURE TO INSTITUTE, PROSECUTE AND CONTROL.
If Lilly fails to institute, prosecute, and control such action or prosecution
within a period of one hundred twenty (120) days after receiving notice of the
infringement, Isis, subject to the prior rights of any Third Party, shall have
the right to bring and control any such action by counsel of its own choice, and
Lilly shall have the right, at its own expense, to be represented in any such
action by counsel of its own choice. Except as otherwise agreed to by the
Parties as part of a cost-sharing arrangement, any recovery realized as a result
of such litigation, after reimbursement of 100% of any litigation expenses of
Isis and 100% of any litigation expenses of Lilly (including the costs and
expenses incurred by Lilly in providing reasonable assistance to Isis), shall be
shared equally by the Parties. No settlement or consent judgment or other
voluntary final disposition of a suit under this Section 12.11.4 may be entered
into without the joint consent of Isis and Lilly (which consent shall not be
unreasonably withheld or delayed).
12.11.5 ISIS' FAILURE TO INSTITUTE, PROSECUTE AND CONTROL. If
Isis fails to institute, prosecute, and control such action or prosecution
within a period of one hundred twenty (120) days after receiving notice of the
infringement, Lilly, subject to the prior rights of any Third Party, shall have
the right to bring and control any such action by counsel of its own choice, and
Isis shall have the right, at its own expense, to be represented in any such
action by counsel of its own choice. Except as otherwise agreed to by the
Parties as part of a cost-sharing arrangement, any recovery realized as a result
of such litigation, after reimbursement of 100% of any litigation expenses of
Lilly and 100% of any litigation expenses of Isis (including the costs and
expenses incurred by Isis in providing reasonable assistance to Lilly), shall be
shared equally by the Parties. No settlement or consent judgment or other
voluntary final disposition of a suit under this Section 12.11.5 may be entered
into without the joint consent of Isis and Lilly (which consent shall not be
unreasonably withheld or delayed).
12.11.6 SETTLEMENT APPROVAL. Neither Party shall settle any
such proceeding under this Section 12.11 without the approval of the other
Party, which approval shall not be unreasonably withheld or delayed.
46.
ARTICLE 13
TERM AND TERMINATION
13.1 TERM OF COLLABORATION. The Collaboration Term shall become
effective on the Effective Date and shall continue in effect for four (4) years
unless terminated in accordance with this Article 13. Prior to the close of the
Collaboration Term, Lilly shall have the option to extend each or all of the
Reagent Provision Program Term, Target Validation Program Term, and/or the Drug
Discovery Program Term for two (2) consecutive two year periods provided that
Lilly gives notice to Isis at least nine (9) months prior to the expiration of
the Collaboration Term or any extension period of the Reagent Provision Program
Term, Target Validation Program Term, and/or the Drug Discovery Program Term.
However, Lilly and Isis shall begin discussions concerning the expiration or
extension of Collaboration at least twelve (12) months prior to the end of the
Collaboration Term or any extension period of the Reagent Provision Program
Term, Target Validation Program Term, and/or the Drug Discovery Program Term. If
the Reagent Provision Program Term, Target Validation Program Term, and/or the
Drug Discovery Program Term are extended, any such extension shall be on terms
that are the same as those provided herein; PROVIDED, HOWEVER, that (i) the
funding amount paid by Lilly for any such extension shall be paid by Lilly in
cash, unless agreed otherwise, disbursed on a schedule substantially the same as
the disbursement schedule of Collaboration Funds under the Loan Agreement and
(ii) such funding amount shall be the same as provided in this Agreement for the
Reagent Provision Program, Target Validation Program, and/or the Drug Discovery
Program, as applicable, such funding amount adjusted for the reduction in the
duration of the extension period as compared to the original Collaboration Term.
13.2 TERM OF AGREEMENT. This Agreement shall commence on the
Effective Date and shall continue until no payments are due or are capable of
becoming due hereinunder, unless the Agreement is terminated earlier. All
licenses granted hereunder that are in effect at expiration of this Agreement
shall be deemed fully paid-up and perpetual, except as provided otherwise by
this Agreement.
13.3 TERMINATION OF COLLABORATION UPON CHANGE OF CONTROL. Lilly has
the right to terminate the Collaboration prior to the fourth (4th) anniversary
after the Effective Date as set forth in this Section 13.3. In the event of a
Change of Control of Isis, Isis shall notify Lilly of such change specifying the
effective date of the change and the name(s) of the controlling Party or
Parties. Lilly has the right to terminate either or all of the Reagent Provision
Program, Target Validation Program and the Antisense Drug Discovery Program and
transfer all research and development activities to Lilly as a result of such
Change of Control at any time within ninety (90) days following such Change of
Control, effective upon thirty (30) days written notice by Lilly. The Parties
shall treat a termination under this Section 13.3 as an expiration of the
Reagent Provision Program, Target Validation Program and/or Antisense Drug
Discovery Program, as applicable. Lilly shall receive a non-exclusive license
from Isis under Isis Technology and Isis Collaboration Technology to carry out
all activities that would have otherwise been carried out under the
Collaboration Agreement if there were no such termination by Lilly under this
Section 13.3. In the alternative, Lilly may elect to continue either or all of
the Reagent Provision Program, Target Validation Program and the Antisense Drug
Discovery Program pursuant to the terms of this Agreement.
47.
13.4 TERMINATION FOR BREACH. Either Party may terminate this
Agreement by notice to the other Party at any time during the term of this
Agreement if the other Party is in breach of any material obligations hereunder
and has not cured such breach within ninety (90) days after notice requesting
cure of the breach or such longer period of time as is required to cure such
breach as long as the breaching Party is proceeding in good faith to cure;
PROVIDED, HOWEVER, that in any case when a breach is alleged regarding the
payment of money hereunder, the time period will be thirty (30) days and
undisputed amounts must be paid prior to such time to avoid breach. Lilly shall
have the right to terminate this Agreement upon written notice to Isis in the
event Isis is in breach of its obligation to pay the debt on the Payment Date as
required by the Loan Agreement, which breach has not been cured within thirty
(30) days of such notice. Upon material breach by a Party of its obligations
hereunder, if such Party decides not to terminate this Agreement, such Party
shall have the right to offset any costs it may incur as a result of curing such
breach against the amounts payable to the breaching Party for the performance of
such obligations. Further, to the extent that a Party prevails in a lawsuit
brought against the other Party for material breach of this Agreement, such
prevailing Party shall be entitled to collect from the other Party reasonable
attorneys' fees and legal costs incurred in connection with such law suit. If
the non-breaching Party terminates this Agreement under Section 13.4 following
material breach by the breaching Party, the breaching Party shall return to the
non-Breaching Party all of the non-breaching Party's Confidential Information
and all materials received from the non-breaching Party during the Agreement,
and the breaching Party shall cease all use of the non-breaching Party's
Confidential Information and materials received from the non-breaching Party for
any purpose except as provided in Sections 13.6 and 13.7, and except that the
breaching Party may (1) keep a copy of all documents for record keeping purposes
only and (2) keep and use any Confidential Information and materials received
from the non-breaching Party that are necessary for the breaching Party to
exercise those of its rights and fulfill those of its obligations that survive
the termination of this Agreement.
13.5 TERMINATION UPON INSOLVENCY. Either Party may terminate this
Agreement upon notice to the other should the other Party become insolvent or
file or consent to the filing of a petition under any bankruptcy or insolvency
law or have any such petition filed against it which has not been stayed within
sixty (60) days of such filing. During the term of this Agreement, all rights
and licenses granted under or pursuant to this Agreement by Isis or Lilly are,
and will otherwise be deemed to be, for purposes of Section 365(n) of the U.S.
Bankruptcy Code, licenses of right to "intellectual property" as defined under
Section 101 of the U.S. Bankruptcy Code. The Parties agree that, during the term
of this Agreement, the Parties, as licensees of such rights under this
Agreement, will retain and may fully exercise all of their rights and elections
under the U.S. Bankruptcy Code. The Parties further agree that, in the event of
the commencement of a bankruptcy proceeding-by or against either Party under the
U.S. Bankruptcy Code, the Party hereto that is not a party to such proceeding
will be entitled to a complete duplicate of (or complete access to, as
appropriate) any such intellectual property and all embodiments of such
intellectual property, and same, if not already in their possession, will be
promptly delivered to them (i) upon any such commencement of a bankruptcy
proceeding upon their written request therefor, unless the Party subject to such
proceeding elects to continue to perform all of its obligations under this
Agreement, or (ii) if not delivered under (i) above, following the rejection of
this Agreement by or on behalf of the Party subject to such proceeding upon
written request therefor by the non-subject Party.
48.
13.6 EFFECT OF TERMINATION DUE TO LILLY BREACH OR INSOLVENCY. If
Isis terminates the Agreement based on material breach by or insolvency of
Lilly, then:
(a) licenses granted by Lilly to Isis pursuant to
Sections 8.4.1(b) and 8.4.2, and all licenses granted under Section 8.5 prior to
such termination, shall survive;
(b) Isis payment obligations set forth in Article 9 shall
continue; PROVIDED, HOWEVER, that the amounts of the payments shall be decreased
to reflect the nature of Lilly's breach and the damages caused thereby by
amounts to be agreed upon by the Parties or, if the Parties are unable to reach
agreement, by an independent Third Party with the requisite expertise selected
by the Parties, the expense of which shall be borne by Lilly;
(c) Lilly's payment obligations set forth in Article 9
shall continue; PROVIDED, HOWEVER, that the amounts of the payments shall be
increased to reflect the nature of Lilly's breach and the damages caused thereby
by amounts to be agreed upon by the Parties or, if the Parties are unable to
reach agreement, by an independent Third Party with the requisite expertise
selected by the Parties, the expense of which shall be borne by Lilly;
(d) the licenses granted by Isis to Lilly pursuant to
Sections 8.1.1(a) and 8.1.1(b) shall terminate;
(e) the licenses granted by Isis to Lilly pursuant to
Sections 8.1.1(c) and 8.1.2 shall survive and the option under Sections 8.2.1,
8.2.2, and 8.2.3 shall terminate; PROVIDED, HOWEVER, that any license granted to
Lilly under Sections 8.2.1, 8.2.2, and 8.2.3 before termination under Section
13.4 or 13.5 by Isis shall survive;
(f) the Lilly Right of First Negotiation granted by Isis
to Lilly pursuant to Section 8.3 shall terminate;
(g) Isis shall retain all rights to Validation Targets,
Reserved Targets and Drug Discovery Targets not licensed by Lilly before such
termination with no obligation to Lilly with respect to such to Validation
Targets, Reserved Targets and Drug Discovery Targets; PROVIDED, HOWEVER, that
Lilly shall have the right to license any such Validation Targets, Reserved
Targets or Drug Discovery Targets within ninety (90) days of the date of
termination under Section 13.4 or 13.5 and thereafter Lilly shall pay the
applicable license fees; and
(h) any sublicense granted by either Party to any
Sublicensee under a license hereunder that terminates as a result of termination
of this Agreement by Isis pursuant to Section 13.4 or 13.5 shall continue in
full force and effect but be assigned by such Party to the other Party, and such
Party shall provide the other Party with complete and accurate copies of such
sublicense agreements within thirty (30) days following the effective date of
such termination.
13.7 EFFECT OF TERMINATION DUE TO ISIS BREACH OR INSOLVENCY. If
Lilly terminates the Agreement based on material breach by or insolvency of
Isis, then:
(a) licenses granted by Isis to Lilly pursuant to
Sections 8.1.1(c), 8.1.2, 8.2.1, 8.2.2, 8.2.3 and 8.3 shall survive;
49.
(b) the Lilly Right of First Negotiation granted by Isis
to Lilly pursuant to Section 8.3 shall survive;
(c) Lilly's payment obligations set forth in Article 9
shall continue, PROVIDED, HOWEVER, that the amounts of the payments shall be
decreased to reflect the nature of Isis's breach and the damages caused thereby
by amounts to be agreed upon by the Parties or, if the Parties are unable to
reach agreement, by an independent Third Party with the requisite expertise
selected by the Parties, the expense of which shall be borne by Isis;
(d) Isis' payment obligations set forth in Article 9
shall continue, PROVIDED, HOWEVER, that the amounts of the payments shall be
increased to reflect the nature of Isis' breach and the damages caused thereby
by amounts to be agreed upon by the Parties or, if the Parties are unable to
reach agreement, by an independent Third Party with the requisite expertise
selected by the Parties, the expense of which shall be borne by Isis;
(e) all Drug Discovery Targets and the Reserved Targets
on the date of such termination of this Agreement by Lilly under Section 13.4 or
13.5 shall be deemed to be licensed by Lilly under Section 8.2.3 as Drug
Discovery Targets; PROVIDED, HOWEVER, that: (i) with respect to each such Drug
Discovery Target and Reserved Target, no license fee shall be payable under
Section 9.3.4(a) until the date that is [*] years after the Effective Date and,
prior to such date, Lilly may terminate its license with respect to any Drug
Discovery Target or Reserved Target by providing written notice to Isis and no
license fee shall be owed by Lilly with respect to such Drug Discovery Target or
Reserved Target; (ii) the provision regarding diligence set forth in Section
8.2.3(c) shall not apply until [*] years after the Effective Date; and (iii)
Lilly's milestone payment obligations set forth in Section 9.3.4(b) and royalty
payment obligations set forth in Section 9.3.4(c) shall continue; PROVIDED,
HOWEVER, that the amounts of the milestone and royalty payments shall be
decreased to reflect the nature of Isis' breach and the damages caused thereby
by amounts to be agreed upon by the Parties or, if the Parties are unable to
reach agreement, by an independent Third Party with the requisite expertise
selected by the Parties, the expense of which shall be borne by Isis;
(f) Lilly shall have the right to select [*] Validation
Targets, to be identified by Lilly within [*] days following the date of
termination of this Agreement by Lilly under Section 13.4 or 13.5, and such
Validation Targets shall be deemed licensed by Lilly under Section 8.2.2;
PROVIDED, HOWEVER, that: (i) with respect to each such Validation Target, no
license fee shall be payable by Lilly under Section 9.3.2(a) until the date that
is [*] years after the Effective Date and, prior to such date, Lilly may
terminate its license with respect to any such Validation Target by providing
written notice to Isis and no license fee shall be owed by Lilly with respect to
such Validation Target; (ii) the provision regarding diligence set forth in
Section 8.2.2(c) shall not apply until [*] years after the Effective Date; and
(iii) Lilly's milestone payment obligations set forth in Section 9.3.3(b) and
royalty payment obligations set forth in Section 9.3.3(c) shall continue;
PROVIDED, HOWEVER, that the amounts of the milestone and royalty payments shall
be decreased to reflect the nature of Isis' breach and the damages caused
thereby by amounts to be agreed upon by the Parties or, if the Parties are
unable to reach agreement, by an independent Third Party with the requisite
expertise selected by the Parties, the expense of which shall be borne by Isis;
*Confidential Treatment Requested
50.
(g) the licenses granted by Lilly to Isis pursuant to
Section 8.4.1 shall terminate;
(h) the option granted by Lilly to Isis pursuant to
Section 8.5 and all of Lilly's obligation under Section 8.5 shall terminate;
PROVIDED, HOWEVER, that any license granted to Isis under Section 8.5 before
termination of this Agreement under Section 13.4 or 13.5 by Lilly shall survive;
(i) Lilly's obligations under Section 4.3 shall cease;
(j) any sublicense granted by either Party to any
Sublicensee under a license hereunder that terminates as a result of termination
of this Agreement by Lilly pursuant to Section 13.4 or 13.5 shall continue in
full force and effect but be assigned by such Party to the other Party, and such
Party shall provide the other Party with complete and accurate copies of such
sublicense agreements within thirty (30) days following the effective date of
such termination;
(k) the Technology Transfer described in Section 8.8
shall (i) occur immediately upon termination under this Section by Lilly, (ii)
be at no cost to Lilly and (iii) Lilly shall have the right to practice such
technology so transferred for research, development and commercialization
purposes; and
(l) any milestone payments that are paid by Lilly between
the date that this Agreement is terminated under Section 13.4 or 13.5 and the
date that is four (4) years after the Effective Date shall be fully creditable
towards any Technology Access Fee payable by Lilly under Section 9.2.
13.8 ACCRUED RIGHTS/SURVIVING OBLIGATIONS. Except as expressly
provided in this Agreement, expiration or termination of this Agreement will not
relieve the Parties of any obligation that accrued prior to such expiration or
termination, and Lilly will be obligated to pay and will pay to Isis, within
thirty (30) days of such expiration or termination, all payments and royalties
due or accrued pursuant to the terms of Article 9 and Isis will be obligated to
pay and will pay to Lilly, within thirty (30) days of such expiration or
termination, all payments and royalties due or accrued pursuant to the terms of
Article 9. Upon expiration or early termination of this Agreement, all rights
and obligations of the Parties shall cease, except as follows:
(a) In the case of expiration of this Agreement only
(and, for purposes of clarification, not in the case of termination of this
Agreement pursuant to Section 13.4 or 13.5), each of the licenses set forth in
Sections 8.1, 8.2, 8.4 and 8.5 shall survive and shall be deemed to be perpetual
and fully paid up, provided that all payment and other obligations with respect
to such licenses have been fulfilled;
(b) The obligations to pay royalties and other sums
accruing hereunder up to the date of termination or expiration shall survive;
(c) The obligations of confidentiality set forth in
Article 10 shall survive;
51.
(d) The obligations for record keeping and accounting
reports set forth in Article 9 shall survive for so long as Lilly Products or
Isis Products are sold. At such time after termination or expiration of this
Agreement when sales or other dispositions of Lilly Products or Isis Products
have ceased, the Party selling such Product shall render a final report along
with any royalty payment due;
(e) Isis' and Lilly's rights to inspect books and records
as described in Article 9 shall survive;
(f) The obligations of defense and indemnity set forth in
Article 11 shall survive;
(g) Any cause of action or claim of Isis or Lilly accrued
or to accrue because of any breach or default by the other Party hereunder shall
survive; and
(h) All other terms, provisions, representations, rights
and obligations contained in this Agreement that are intended to survive as
specifically set forth elsewhere in this Agreement shall survive.
13.9 LIMITATION OF LIABILITY. No Party shall be liable to another
for indirect, incidental, consequential or special damages, including but not
limited to lost profits, arising from or relating to any breach of this
Agreement, regardless of any notice of the possibility of such damages. Nothing
in this Section is intended to limit or restrict the indemnification rights or
obligations of any Party under Article 11.
ARTICLE 14
PUBLICITY
14.1 DISCLOSURE OF AGREEMENT. Neither Party to this Agreement may
release any information to any Third Party regarding the terms or existence of
this Agreement or the reasons for any termination hereof, without the prior
written consent of the other Party. Without limitation, this prohibition applies
to press releases, educational and scientific conferences, quarterly investor
updates, promotional materials, governmental filings and discussions with public
officials, the media, security analysts and investors. However, this provision
does not apply to any disclosures regarding this Agreement or related
information to regulatory agencies such as the FDA or Federal Trade Commission
and/or Department of Justice for such disclosures which may be required by law,
including requests for a copy of this Agreement or related information by tax
authorities. If any Party to this Agreement determines a release of information
regarding the existence or terms of this Agreement is required by law (including
releases a may be required to be filed through the Securities Exchange
Commission or other government agency), that Party will notify the other Party
as soon as practicable and give as much detail as possible in relation to the
disclosure required. The Parties will then cooperate with respect to determining
what information should actually be released. The Parties hereby agree that
release of a press release upon complete execution of this Agreement is
appropriate and such press release shall be mutually agreed upon by the
Parties..
52.
14.2 USE OF NAMES, LOGOS OR SYMBOLS. No Party hereto shall use the
name, trademarks, logos, physical likeness, employee names or owner symbol of
any other Party for any purpose, including, without limitation, private or
public securities placements, without the prior written consent of the affected
Party, such consent not to be unreasonably withheld or delayed so long as such
use of name is limited to objective statements of fact, rather than for
endorsement purposes. Nothing contained herein shall be construed as granting
either Party any rights or license to use any of the other Party's trademarks or
tradenames without separate, express written permission of the owner of such
trademark or tradename.
14.3 PUBLICATION. The Parties acknowledge and agree that scientific
lead time is a key element of the value of the research to be performed under
this Agreement. The Parties also acknowledge and agree that the ability to
publish selected results of the research to be performed under this Agreement in
the course of the Collaboration is essential for the recruitment and retention
of scientific talent by the Parties. In order to ensure that scientific
publications are strictly monitored to prevent any adverse effect of premature
publication, the Joint Research Committee shall establish a procedure for
publication review and approval and each Party shall first submit to the Joint
Research Committee an early draft of all such publications, whether they are to
be presented orally or in written form, at least sixty (60) days prior to
submission for publication. The Joint Research Committee shall review each such
proposed publication in order to avoid the unauthorized disclosure of any
Confidential Information and to preserve the patentability of inventions arising
from the research performed in the course of the Collaboration. If, within
thirty (30) days following receipt of an advance copy of a Party's proposed
publication, the Joint Research Committee informs such Party that its proposed
publication contains the other Party's Confidential Information, then such Party
shall delete such Confidential Information from its proposed publication. If,
within thirty (30) days following receipt of an advance copy of a Party's
proposed publication, the Joint Research Committee informs such Party that its
proposed publication contains Collaboration Know-How, the publication of which
could be expected to have a material adverse effect on any Collaboration Patent
Rights or Collaboration Know-How, then such Party shall at the election of the
Joint Research Committee, either (1) delete such Confidential Information from
such Party's proposed publication or (2) delay such proposed publication
sufficiently long to permit the timely preparation and filing of a patent
application(s) on the information involved. If, within forty five (45) days
following receipt of an advance copy of a Party's proposed publication, the
Joint Research Committee fails to approve of such Party's proposed publication,
then such proposed publication shall be regarded as denied by the Joint Research
Committee and shall not be published.
53.
ARTICLE 15
HART-SCOTT-RODINO FILING
15.1 HSR ACT COMPLIANCE. Notwithstanding anything to the contrary
in this Agreement, the Effective Date of this Agreement and commencement of the
Collaboration shall not occur until such time as (1) the Parties shall have
complied with all applicable requirements of the Hart Scott Rodino Antitrust
Improvements Act of 1976, as amended the "HSR ACT"); (2) the waiting period
under the HSR Act shall have expired or earlier been terminated; (3) no judicial
or administrative proceeding opposing consummation of all or any part of this
Agreement shall be pending; (4) no injunction (whether temporary, preliminary or
permanent) prohibiting consummation of the transactions contemplated by this
Agreement or any material portion hereof shall be in effect; and (5) no
requirements or conditions shall have been imposed in connection therewith which
are not reasonably satisfactory to the Parties (collectively, the "HSR
CONDITIONS").
15.2 COOPERATION ON FILING. Both Lilly and Isis shall file, as soon
as reasonably practicable after the Effective Date of this Agreement, with the
Federal Trade Commission ("FTC") and the Antitrust Division of the United States
Department of Justice ("DOJ") the notification and report form ("REPORT")
required of each of them in the reasonable opinion of either or both Parties
under the HSR Act with respect to the transactions described in this Agreement
and any other agreements between the Parties contemplated hereby (collectively,
the "TRANSACTIONS"). Each Party shall cooperate with the other to the extent
necessary to assist the other Party in the preparation of its Report and to
proceed to obtain necessary approvals under the HSR Act to complete the
Transactions including, but not limited to, the expiration or earlier
termination of any and all applicable waiting periods required by the HSR Act
("REQUIRED APPROVAL"). Each Party will use reasonable efforts to obtain the
Required Approval. Each Party shall use reasonable good faith efforts to assist
the other Party in eliminating any concern on the part of any court of
governmental authority regarding the legality of the Transactions. Such
assistance shall include, if required by federal or state antitrust authorities,
such Party's taking all reasonable steps to secure Required Approval. The other
Party shall cooperate in good faith, at its own cost, with any government
investigation regarding the legality of the Transactions and promptly produce
documents, witnesses, and information demanded by the FTC or DOJ, whether by
informal request or by formal HSR Act Second Request or other legal process;
PROVIDED, HOWEVER, that neither Party shall be obligated to proceed to seek
Required Approval if it has received a second request for documents that it
determines is unreasonably burdensome or costly with which to comply; and
PROVIDED, FURTHER, that neither Party shall be obligated to proceed with
litigation if the transaction is challenged by the FTC or the DOJ. If either
Party determines that it does not wish to proceed with the Report process,
either because of a burdensome second request or litigation, the Parties will
discuss in good faith whether there are any modifications to the Agreement or
any other agreement between the Parties contemplated hereby that will avoid
antitrust issues and facilitate obtaining the Required Approval. Neither Party
shall be obligated in any way to engage in further negotiations of the terms of
this Agreement or any other agreement between the Parties contemplated hereby,
even if modifications are identified that will facilitate obtaining Required
Approval. If an unreasonably burdensome request is received or litigation is
commenced, either Party may terminate this Agreement.
54.
ARTICLE 16
MISCELLANEOUS
16.1 KEY PERSONNEL. During the Collaboration Term, Isis shall
inform Lilly if [*] leave the employ of Isis. In such case, Lilly shall have the
right to suggest replacements and interview any potential replacement in order
to provide feedback to Isis regarding any such potential replacement, but, for
purposes of clarification, Lilly shall not have the right to terminate this
Agreement or the Collaboration as a result of the events described in this
Section 16.1.
16.2 FORCE MAJEURE. No Party will be held liable or responsible to
the other Party nor be deemed to have defaulted under or breached the Agreement
for failure or delay in fulfilling or performing any term of the Agreement
(except payment obligations) when such failure or delay is caused by or results
from causes beyond the reasonable control of the affected Party including, but
not limited to, fire, flood, embargo, war, acts of war (whether war be declared
or not), insurrection, riot, civil commotion, strike, lockout or other labor
disturbance, act of God or act, omission or delay in acting by any governmental
authority or the other Party. The affected Party will notify the other Party of
such force majeure circumstances as soon as reasonably practical.
16.3 ASSIGNMENT. This Agreement may not be assigned or otherwise
transferred, nor, except as expressly provided hereunder, may any right or
obligations hereunder be assigned or transferred, by a Party without the written
consent of the other Party; PROVIDED, HOWEVER, that either Party may, without
such consent, assign the Agreement and its rights and obligations hereunder to
(i) any wholly-owned subsidiary in a manner such that the assignor (if it
continues as a separate entity) shall remain liable and responsible for the
performance and observance of all its duties and obligations hereunder or (ii)
subject to Section 13.3(a) to any successor by merger or sale of substantially
all of its business unit to which this Agreement relates, or in the event of its
merger or consolidation or change in control or similar transaction. This
Agreement shall be binding upon the permitted successors and permitted assigns
of the Parties. Any assignment not in accordance with this Section 16.3 shall be
void.
16.4 SEVERABILITY. In the event that any of the provisions
contained in this Agreement are held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein will not in any way be affected or impaired thereby, unless the
absence of the invalidated provision(s) adversely affect the substantive rights
of the Parties. The Parties will replace the invalid, illegal or unenforceable
provision(s) with valid, legal and enforceable provision(s), which, insofar as
practical, implement the purposes of this Agreement.
16.5 NOTICES. All notices or other communications which are
required or permitted hereunder will be in writing and deemed to be effective
(a) on the date of delivery if delivered in person and written confirmation of
delivery is provided, (b) on the date sent by facsimile or other electronic
transmission, provided such receipt is verified, (c) on the day following date
of deposit with an overnight courier if a receipt confirming delivery by
overnight courier is provided, or (d) three days after mailing if mailed by
first-class certified mail, postage paid, to the respective addresses given
below, or to another address as it will designate by written notice given to the
other Party.
*Confidential Treatment Requested
55.
IF TO ISIS, TO:
Isis Pharmaceuticals, Inc.
2292 Faraday Avenue
Carlsbad, CA 92008
Attention: Chief Executive Officer
Telephone: 760-931-9200
Facsimile: 760-931-0265
WITH A COPY TO:
Attention: Chief Financial Officer
Telephone: 760-931-9200
Facsimile: 760-931-9639
IF TO LILLY, TO:
Eli Lilly and Company
Lilly Corporate Center
Indianapolis, IN 46285
Attention: Group Vice President, Lilly Research Laboratories
Telephone: 317-276-5624
Facsimile: 317-277-7979
WITH A COPY TO:
Attention: General Counsel
Telephone: 317-276-2703
Facsimile: 317-277-3977
16.6 DISPUTE RESOLUTION. In the event of any controversy or claim
arising from or relating to any provision of this Agreement, or any term or
condition hereof, or the performance by a Party of its obligations hereunder, or
its construction or its actual or alleged breach, the Parties will try to settle
their differences amicably between themselves. All disputes relating to the
implementation of the Collaborative Research Plan shall be handled in accordance
with Article 2.
16.7 CHOICE OF LAW. This Agreement will be governed by and
construed in accordance with the laws of the State of New York and the United
States without reference to any rules of conflict of laws.
16.8 ENTIRE AGREEMENT. This Agreement (including all Schedules
hereto), together with the Loan Agreement, Registration Rights Agreement and the
Securities Purchase Agreement, constitutes the entire agreement between the
Parties with respect to the subject matter hereof, and supersedes all previous
arrangement with respect to the subject matter hereof, whether written or oral.
Any amendment or modification to this Agreement shall be made in writing signed
by both Parties. In the event of any conflict between the terms of this
Agreement and the Collaborative Research Plan, the terms of this Agreement shall
govern.
56.
16.9 HEADINGS. The captions to the several Articles and Sections
hereof are not a part of the Agreement, but are merely guides or labels to
assist in locating and reading the several Articles and Sections hereof.
16.10 INDEPENDENT CONTRACTORS. It is expressly agreed that the
Parties will be independent contractors and that the relationship between the
Parties will not constitute a partnership, joint venture or agency. No Party
will have the authority to make any statements, representations or commitments
of any kind, or to take any action, which will be binding on the other Parties,
without the prior consent of such other Parties. Members of the Executive
Committee shall be and shall remain employees of Isis or Lilly as the case may
be. Lilly shall not incur any liability for any act or failure to act by
employees of Isis, including members of the Executive Committee or Joint
Research Committee who are employees of Isis. Isis shall not incur any liability
for any act or failure to act by employees of Lilly, including members of the
Executive Committee or Joint Research Committee who are employees of Lilly.
16.11 NON-SOLICITATION OF EMPLOYEES. During the Collaboration Term
and for a period of six (6) months thereafter, each Party agrees that it will
not directly recruit, solicit or induce any employee of the other Party who is
directly associated with the Collaboration to terminate his or her employment
with such other Party. However, nothing set forth in this Section 16.11 shall
prohibit a Party from indirectly recruiting, soliciting or inducing such
employees to leave the other Party through the use of advertisements in trade
journals and the like or from discussing employment opportunities with such
employees to the extent such employees contact such Party first.
16.12 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of the
Agreement.
16.13 WAIVER. The waiver by a Party hereto of any right hereunder or
the failure to perform or of a breach by another Party will not be deemed a
waiver of any other right hereunder or of any other breach or failure by said
other Party whether of a similar nature or otherwise.
16.14 JOINTLY PREPARED. This Agreement has been prepared jointly and
shall not be strictly construed against either Party.
16.15 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
57.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first set forth above.
ELI LILLY AND COMPANY ISIS PHARMACEUTICALS, INC.
By: /s/ Sidney Taurel By: /s/ B. Lynne Parshall
------------------------------------ --------------------------------
Sidney Taurel B. Lynne Parshall
Chairman of the Board, Chief Executive Vice President and
Executive Officer and President Chief Financial Officer
[SIGNATURE PAGE TO COLLABORATION AGREEMENT]
LIST OF SCHEDULES
Schedule 1.1 Definitions
Schedule 2.2 Collaborative Research Plan
Schedule 2.5 Initial Members of Executive Committee
Schedule 2.6 Initial Members of Joint Research Committee
Schedule 2.9 Initial Alliance Managers
Schedule 8.7 GeneTrove Database Subscription Terms
Schedule 8.8 Technology Transfer Terms
Schedule A Existing Isis Internal Programs
Schedule B Isis Manufacturing Patent Rights
Schedule C Isis Core Technology Patent Rights
SCHEDULE 1.1
DEFINITIONS
"ABANDONED DRUG DISCOVERY TARGET" means any Drug Discovery Target
following termination by Lilly of an Active Program for such Drug Discovery
Target, as more fully described in Section 6.7.
"ACCEPTED VALIDATION TARGETS" has the meaning set forth in Section 5.4.
"ACTIVE PROGRAM" means:
(a) with respect to a Drug Discovery Target, any reasonable (as
defined below) ongoing research, development, or commercialization, including
sublicensing efforts, of a Drug Discovery ASO Compound directed to such Drug
Discovery Target that occurs (i) in the course of the Collaboration or (ii) by
Lilly outside the course of the Collaboration during the Collaboration Term plus
[*] years thereafter; and
(b) with respect to a Reagent Target, Validation Target or a Drug
Discovery Target licensed by Lilly under Article 8 or an Isis-Blocked Target
pursuant to Section 6.2, any reasonable (as defined below) ongoing research,
development, or commercialization, including sublicensing efforts, of an ASO
Compound directed to such Target.
For purposes of clarification, research, development and commercialization
efforts with respect to a Target or ASO Compound shall be deemed reasonable if
Lilly's research and development efforts with respect to such Target or ASO
Compound are reasonably comparable with other projects in Lilly's portfolio at a
similar stage of development and of similar market potential.
"AFFILIATE" means any person, organization, corporation or other
business entity that controls, directly or indirectly, the power to direct, or
cause the direction of, the management and policies of another person,
organization, corporation or entity, whether through the ownership of voting
securities or by contract or court order or otherwise. For purposes of this
definition, an entity will be deemed to control another entity if it owns or
controls, directly or indirectly, at least fifty percent (50%) of the
outstanding stock or other voting rights entitled to elect directors or their
equivalent of such other entity.
"ALLIANCE MANAGERS" has the meaning set forth in Section 2.9.
"ANTISENSE DRUG DISCOVERY PROGRAM" means the program of research and
development of Drug Discovery ASO Compounds and Products in the Collaborative
Therapeutic Areas under this Agreement, as described in Section 2.4, Article 6
and the Collaborative Research Plan.
"ANTISENSE DRUG DISCOVERY TERM" means the term of the Antisense Drug
Discovery Program carried out pursuant to this Agreement and any extension
thereof.
1.1-1.
*Confidential Treatment Requested
"ANTISENSE TECHNOLOGY" means the selective modulation of protein
synthesis at the nucleic acid level caused by the binding of an oligonucleotide
or an analog thereof (an "OLIGONUCLEOTIDE") to a complementary sequence.
"ASO COMPOUND" means an oligonucleotide or an analog thereof (an
"OLIGONUCLEOTIDE") that selectively modulates protein synthesis at the nucleic
acid level through the binding of such oligonucleotide to a complementary
sequence.
"ASO FIELD" means the development, manufacture and sale of ASO Products
as therapeutic or prophylactic pharmaceutical products.
"ASO PRODUCT" means any preparation in final form for sale by
prescription, over-the-counter or any other method for any indication, including
human or animal use, which contains one or more ASO Compounds.
"CALENDAR QUARTER" shall mean the respective three month periods ending
on March 31, June 30, September 30, or December 31 for so long as the Agreement
is in effect.
"CALENDAR YEAR" shall mean each successive twelve month period
commencing on January 1 and ending on December 31 for so long as the Agreement
is in effect.
"CHANGE OF CONTROL" means any of the following events: (i) the
acquisition by any Person or group, other than a Person or group controlling
such Party as of the Effective Date, of "beneficial ownership" (as defined in
Rule 13d-3 under the United States Securities Exchange Act of 1934, as amended),
directly or indirectly, of fifty percent (50%) or more of the shares of such
Party's capital stock the holders of which have general voting power under
ordinary circumstances to elect at least a majority of such Party's Board of
Directors or equivalent body (the "BOARD OF DIRECTORS") (the "VOTING STOCK");
(ii) the first day of which less than two-thirds of the total membership of such
Party's Board of Directors shall be Continuing Directors (as such term is
defined below); (iii) the approval by the shareholders of such Party of a
merger, share exchange, reorganization, consolidation or similar transaction of
such Party (a "TRANSACTION"), other than a Transaction which would result in the
Voting Stock of such Party outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the Voting
Stock of such Party or such surviving entity immediately after such Transaction;
or (iv) approval by the shareholders of such Party of a complete liquidation of
such Party or a sale or disposition of all or substantially all of the assets of
such Party. For purposes of this definition, "Continuing Directors" means
individuals serving as of the date hereof on such Party's Board of Directors and
any individuals elected after the date hereof whose election or nomination was
approved by at least a majority of the Continuing Directors serving at the time.
"COLLABORATION" means, collectively, the Reagent Provision Program, the
Target Validation Program and the Antisense Drug Discovery Program.
"COLLABORATION ASO PRODUCT" means a Drug Discovery ASO Product or
Validation ASO Product.
1.1-2.
"COLLABORATION FTE" means a Lilly Collaboration FTE or an FTE applied
by Isis in conducting the research under the Target Validation Program or
Antisense Drug Discovery Program.
"COLLABORATION FUNDS" means the funds provided to Isis by Lilly
pursuant to the Loan Agreement.
"COLLABORATION KNOW-HOW" means Isis Collaboration Know-How and Lilly
Collaboration Know-How.
"COLLABORATION PATENT RIGHTS" shall mean the Isis Collaboration Patent
Rights, the Lilly Collaboration Patent Rights and the Joint Collaboration Patent
Rights.
"COLLABORATION TERM" means the term of the collaborative research
efforts carried out pursuant to this Agreement and any extension thereof.
"COLLABORATION THERAPEUTIC AREAS" means inflammation, bone, and
metabolism (E.G., diabetes and obesity).
"COMPULSORY LICENSE" shall mean, in the case of a Lilly Product or Isis
Product, a compulsory license under the a Party's technology obtained by a Third
Party through the order, decree or grant of a governmental authority having
competent jurisdiction, authorizing such Third Party to manufacture, use, sell,
offer for sale or import such Lilly Product or Isis Product in a particular
country.
"CONFIDENTIAL INFORMATION" means any and all inventions, know-any, and
data and shall include, without limitation, information relating to research and
development plans, experiments, results and plans, compounds, therapeutic leads,
candidates and products, clinical and preclinical data, trade secrets and
manufacturing, marketing, financial, regulatory, personnel and other business
information and plans, all scientific, clinical, regulatory, marketing,
financial and commercial information or data, all whether communicated in
writing, orally or by any other means, and which is provided by one Party to the
other Party in connection with this Agreement. Confidential Information will not
include information that:
(a) is known by the receiving Party at the time of its receipt,
and not through a prior disclosure by the disclosing Party, as documented by
written records;
(b) is properly in the public domain through no fault of the
receiving Party;
(c) is subsequently disclosed to the receiving Party by a Third
Party who may lawfully do so and is not under an obligation of confidentiality
to the disclosing Party; or
(d) is developed by the receiving Party independently of
Confidential Information received from the other Party, as documented by written
records.
"CONTROL" or "CONTROLLED" means with respect to any intellectual
property right, that the Party owns or has a license to such intellectual
property right and has the ability to grant access, a license, or a sublicense
to such intellectual property right to the other Party as provided for in
1.1-3.
this Agreement without violating an agreement with, or infringing any rights
of, a Third Party as of the time the Party would be first required under this
Agreement to grant the other Party such access, license or sublicense.
"COST OF PRODUCTS" or "COPS" means costs of supplying Products
calculated in accordance with a Party's accounting methods consistently applied
which methodology shall be calculated in compliance with U.S. generally accepted
accounting principles (GAAP). For the purposes of this Agreement, COPS shall
include Third Party royalty burdens, royalties due to the other Party, final
filling/finishing and packaging of the Product.
"COVER" (including variations thereof such as "COVERING", "COVERED",
and "COVERAGE") means that the manufacture, use, import, offer for sale or sale
of a Lilly Product or Isis Product would infringe a Valid Claim; provided, with
respect to a process or manufacturing patent, that such a Valid Claim therein
effectively precludes a Third Party from manufacturing, using, importing,
offering for sale, or selling such Lilly Product or Isis Product. The
determination of whether a Lilly Product or Isis Product is Covered by a
particular Valid Claim shall be made on a country-by-country basis. A Valid
Claim shall be deemed to provide effective preclusion hereunder where (i) there
is no competing product being marketed or (ii) if a product is being marketed by
a competitor, it infringes the Valid Claim (including any period in which, and
provided that, the Valid Claim is being litigated).
"CPI" or "CONSUMER PRICE INDEX" means the consumer price index for all
urban consumer series ID CUUR0000SAO as published from time to time by the US
Bureau of Labor Statistics, where the CPI for June, 2001 was 178.
"CRITICAL SUCCESS FACTOR" has the meaning set forth in the
Collaborative Research Plan as applicable to Reagent Targets, Validation Targets
and Drug Discovery Targets.
"CSAG APPROVAL" means [*]
"DEVELOPMENT CANDIDATE" means a Drug Discovery ASO Compound that is
directed to a Drug Discovery Target, that is ready for IND Supporting Toxicology
Studies and that is designated as a Development Candidate by the Joint Research
Committee, as described in Section 6.4.1 or by Lilly in accordance with Section
6.4.2.
"DRUG DISCOVERY ASO COMPOUND" means an ASO Compound that selectively
modulates protein synthesis of a Drug Discovery Target.
"DRUG DISCOVERY ASO PRODUCT" means any preparation in final form for
sale by prescription, over-the-counter or any other method for any indication,
including human or animal use, which contains one or more Drug Discovery ASO
Compounds.
"DRUG DISCOVERY NON-ASO COMPOUND" means a compound that (a) is
developed by Lilly through the use of Collaboration Know-How and (b) is not an
ASO Compound and (c) is either (i) an agonist or antagonist of a Drug Discovery
Target or (ii) is a Drug Discovery Target.
1.1-4.
*Confidential Treatment Requested
"DRUG DISCOVERY NON-ASO PRODUCT" means any preparation in final form
for sale by prescription, over-the-counter or any other method for any
indication, including human or animal use, which contains one or more Drug
Discovery Non-ASO Compounds.
"DRUG DISCOVERY TARGET" means any Target included in the Antisense Drug
Discovery Program by the Joint Research Committee.
"EFFECTIVE DATE" means the last date on which the last Party executes
this Agreement or, if later, the next day following the expiration or earlier
termination of any notice and waiting period under The Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
"EXCLUSIVE TARGET" has the meaning set forth in Section 5.8.
"EXECUTIVE COMMITTEE" means the committee established pursuant to
Section 2.5.
"FDA" means the United States Food and Drug Administration or any
successor agency having the administrative authority to regulate the approval
for marketing of new human pharmaceutical or biological therapeutic products in
the United States.
"FIRST COMMERCIAL SALE" means with respect to any Lilly Product or Isis
Product the first sale to a Third Party by (i) Lilly or its Sublicensees, or
(ii) Isis, its Affiliates or Sublicensees. First Commercial Sale shall not
include transfer of reasonable quantities of any free samples of a Lilly Product
or Isis Product or reasonable quantities of a Lilly Product or Isis Product
solely for development purposes, such as for use in experimental studies or
clinical trials.
"FTE" means the equivalent of the work of one (1) employee full time
for one (1) year (consisting of at least a total of [*] weeks or [*] hours per
year (excluding vacations and holidays) of work on or directly related to the
Collaboration), carried out by an Isis employee or a Lilly Collaboration FTE, or
Third Party mutually agreed upon by the Joint Research Committee. Overtime shall
not be counted toward the number of hours that are used to calculate the FTE
contribution. No one person shall be permitted to account for more than one (1)
FTE. Scientific work on the Collaboration to be performed by Isis employees,
Lilly Collaboration FTEs, or mutually agreeable Third Parties can include, but
is not limited to, experimental laboratory work, recording and writing up
results, reviewing literature and references, and holding scientific
discussions.
"FTE RATE" means [*]
"GENETROVE DATABASE" means Isis' proprietary GeneTrove Human Gene
Function Database consisting, without limitation, of data from the study of the
effect of gene-specific inhibition of up to 10,000 human genes in a set of human
cell-based pharmacology assays utilizing Isis' proprietary antisense technology,
and software appropriate for storing, viewing and performing queries on the
incorporated data.
"GENETROVE DATABASE QUEUE" means those human genes which have been
identified and prioritized in Isis' HTS and RTS queue to begin the work required
to identify a lead antisense oligonucleotide. The GeneTrove Database Queue will
contain the number of genes
1.1-5.
*Confidential Treatment Requested
which can reasonably be screened within three to six months using Isis'
combined RTS and HTS resources.
"HTS STANDARD COST" [*]
"IDT AGREEMENT" means that certain agreement between Isis and
Integrated DNA Technologies, Inc., effective March 12, 1999, and any amendments
thereto.
"IND" means an Investigational New Drug application as defined in 21
C.F.R. 312 and any versions thereof governing the FDA as may be amended from
time to time.
"IP COMMITTEE" has the meaning provided in Section 2.7.2.
"ISIS ASO COMPOUND PATENT RIGHTS" means Patent Rights Controlled by
Isis on or after the Effective Date that claim inventions that are conceived
outside the course of the Target Validation Program or Drug Discovery Program
and that that Cover the composition of matter of an ASO Compound or the method
of using such ASO Compound per se, including Patent Rights that Cover inventions
made in the course of the Reagent Provision Program and Patent Rights that Cover
the composition of matter or use of an antisense oligonucleotide(s) directed to
Stage 2 Drug Discovery Targets and Stage 3 Drug Discovery Targets included in
the Research Plan on the Effective Date or thereafter.
"ISIS-BLOCKED TARGET" has the meaning set forth in Section 6.2.2.
"ISIS BLOCKING PATENT RIGHTS" means Patent Rights Controlled by Isis on
the Effective Date or come into Isis' Control during the Collaboration Term that
claim inventions that are conceived outside the course of the Validation Program
or Drug Discovery Program and that Cover the method of treating a condition by
modulating a Target through the use of a non-ASO Compound.
"ISIS COLLABORATION ASO COMPOUND PATENT RIGHTS" means Patent Rights
Controlled by Isis that claim inventions conceived in the course of the Target
Validation Program or the Antisense Drug Discovery Program and that Cover the
composition of matter of an ASO Compound or the use of such ASO Compound.
"ISIS COLLABORATION BLOCKING PATENT RIGHTS" means Patent Rights
Controlled by Isis that claim inventions conceived in the course of the Target
Validation Program or the Antisense Drug Discovery Program that Cover the method
of treating a condition by modulating a Target through the use of a non-ASO
Compound.
"ISIS COLLABORATION CORE TECHNOLOGY PATENT RIGHTS" means Patent Rights
Controlled by Isis that claim inventions conceived in the course of the Target
Validation Program or the Antisense Drug Discovery Program that Cover the
practice of Isis Standard Chemistry including Patent Rights that Cover
chemistries, motifs (patterns of arranging the chemical building blocks of an
antisense oligonucleotides) and/or cellular mechanism of action by which an
oligonucleotide promotes RNA cleavage.
1.1-6.
*Confidential Treatment Requested
"ISIS COLLABORATION KNOW-HOW" means Know-How Controlled by Isis that is
conceived in the course of the Target Validation Program or the Antisense Drug
Discovery Program.
"ISIS COLLABORATION MANUFACTURING PATENT RIGHTS" means Patents
Controlled by Isis that claim inventions conceived in the course of the Target
Validation Program or the Antisense Drug Discovery Program that Cover the
practice of the Isis Standard Chemistry Manufacturing Process.
"ISIS COLLABORATION PATENT RIGHTS" means the Isis Collaboration ASO
Compound Patent Rights, Isis Collaboration Manufacturing Patent Rights, Isis
Collaboration Core Technology Patent Rights and Isis Collaboration Blocking
Patent Rights.
"ISIS COLLABORATION TECHNOLOGY" means Isis Collaboration Know-How and
Isis Collaboration Patent Rights.
"ISIS CORE TECHNOLOGY PATENT RIGHTS" means Patent Rights Controlled by
Isis on the Effective Date or during the Collaboration Term that claim
inventions that are conceived outside the course of the Validation Program or
Drug Discovery Program and that Cover the practice of Isis Standard Chemistry
including Patent Rights that Cover chemistries, motifs (patterns of arranging
the chemical building blocks of an antisense oligonucleotides) and/or cellular
mechanism of action by which an oligonucleotide promotes RNA cleavage. The Isis
Core Technology Patent Rights that exist as of the date of this Agreement are
listed in SCHEDULE C.
"ISIS DRUG DISCOVERY ASO PRODUCT" means any preparation in final form
for sale by prescription, over-the-counter or any other method for any
indication, including human or animal use, which contains one or more ASO
Compounds directed against a Drug Discovery Target that is developed by Isis as
permitted by Section 8.2.3(c).
"ISIS INTERNAL PROGRAM" means an internal research effort on the
development of ASO Compounds directed to a Target for use as ASO Products
conducted by Isis conducted outside the course of the Collaboration whereby such
internal research effort on such Target has advanced to a stage that is
equivalent to the achievement of the Critical Success Factors for a Validation
Target as reasonably evidenced to Lilly by written documentation of Isis;
PROVIDED, HOWEVER, that if there is a disagreement as to whether such Target has
advanced to a stage that is equivalent to the achievement of the Critical
Success Factors for a Validation Target such matter shall be referred to the
Executive Committee for resolution, and lacking resolution by the Executive
Committee such internal research effort shall be deemed an Isis Internal
Program. The existing Isis Internal Programs in the Collaboration Therapeutic
Areas as of the date of this Agreement are listed in SCHEDULE A.
"ISIS KNOW-HOW" means all Know-How that is either (i) Controlled by
Isis as of the Effective Date or (ii) that becomes Controlled by Isis after the
Effective Date that is not Collaboration Know-How that is reasonably necessary
or useful for research, development, manufacture, use and sale of Lilly
Products, including Know-How that is discovered or developed by employees or
agents of Isis in the course of the Reagent Provision Program.
"ISIS MANUFACTURING PATENT RIGHTS" means Patent Rights Controlled by
Isis on or after the Effective Date that claim inventions that are conceived
outside the course of the Target
1.1-7.
Validation Program or Antisense Drug Discovery Program that Cover the
practice of the Isis Standard Chemistry Manufacturing Process. The Isis
Manufacturing Patent Rights as of the date of this Agreement are listed in
SCHEDULE B.
"ISIS NON-COLLABORATION ASO PRODUCT" means any preparation in final
form for sale by prescription, over-the-counter or any other method for any
indication, including human or animal use, which contains one or more ASO
Compounds directed against a Target that not designated as a Validation Target
or Drug Discovery Target pursuant to this Agreement and that is developed by
Isis as permitted by this Agreement.
"ISIS PATENT RIGHTS" means the Isis Core Technology Patent Rights, the
Isis Manufacturing Patent Rights, the Isis Blocking Patent Rights and Isis ASO
Compound Patent Rights. To the extent Isis Controls Patent Rights as of the
Effective Date or during the Collaboration Term other than the Isis
Manufacturing Patents, Isis Core Technology Patent Rights, Isis Blocking Patent
Rights and the Isis ASO Compound Patent Rights, and such Patent Rights would
Cover a Lilly ASO Product, such Patent Rights will be included in the definition
of Isis Patent Rights automatically if they can be licensed to Lilly with no
obligation (financial or otherwise) to any Third Party with respect to a
particular Lilly ASO Product at the time the Lilly ASO Product is licensed from
Isis, or if the relevant invention is made subsequent to such license, at the
time such invention is made. To the extent Isis Controls Patent Rights as of the
Effective Date or during the Collaboration Term, other than the Isis
Manufacturing Patent Rights, the Isis Core Technology Patent Rights, Isis
Blocking Patent Rights and Isis ASO Compound Patent Rights that would Cover a
Lilly ASO Product, and such Patent Rights were acquired by Isis from a Third
Party and/or Isis has obligations (financial or otherwise) to a Third Party in
connection with the practice of such Patent Rights, such Patent Rights will only
be included in the definition of Isis Patent Rights if Isis and Lilly negotiate
an agreement to license such Patent Rights which includes (1) the assumption by
Lilly of all financial obligations of Isis arising from the grant to Lilly and
the practice by Lilly, its Affiliates of Sublicensees, of the Patent Rights, (2)
the compensation of an appropriate portion of any acquisition costs incurred by
Isis in connection with obtaining Control of such Patent Rights, and (3) an
agreement by Lilly to abide by all of the terms of the agreement under which
Isis has obtained Control of such Patent Right.
"ISIS PRODUCT" means an Isis Drug Discovery ASO Product, Isis
Non-Collaboration ASO Product, and/or an Isis Validation ASO Product.
"ISIS REAGENT ASO PRODUCT" means any preparation in final form for sale
by prescription, over-the-counter or any other method for any indication,
including human or animal use, which contains one or more ASO Compounds directed
against a Reagent Target that is developed by Isis as permitted by Section
8.2.2(c).
"ISIS STANDARD CHEMISTRY" means "2'MOE Gapmers" or an antisense
phosphothioate oligonucleotide OF 15-30 nucleotides wherein all of the backbone
linkages are modified by adding a sulfur at the non-bridging oxygen
(phosphorothioate) and a stretch of at least 10 consecutive nucleotides remain
unmodified (deoxy sugars) and the remaining nucleotides contain an O'-methyl
O'-ethyl substitution at the 2' position (MOE).
1.1-8.
"ISIS STANDARD CHEMISTRY MANUFACTURING PROCESS" means the manufacturing
process as of the Effective Date represented by the batch record for Isis
113715. Manufacturing for this purpose includes synthesis, purification and
analysis.
"ISIS TECHNOLOGY" means Isis Know-How and Isis Patent Rights.
"ISIS VALIDATION ASO PRODUCT" means any preparation in final form for
sale by prescription, over-the-counter or any other method for any indication,
including human or animal use, which contains one or more ASO Compounds directed
against a Validation Target that is developed by Isis as permitted Isis as
permitted by Section 8.2.2(c).
"JOINT COLLABORATION PATENT RIGHTS" has the meaning set forth in
Section 12.2.
"JOINT RESEARCH COMMITTEE" means the committee established pursuant to
Section 2.6.
"KNOW-HOW" means all tangible or intangible know-how, inventions
(whether patentable or not), discoveries, processes, formulas, data, clinical
and preclinical results, non-patented inventions, trade secrets, and any
physical, chemical, or biological material or any replication of any such
material in whole or in part.
"LILLY ASO PRODUCT" means a Reagent ASO Product, Validation ASO Product
or a Drug Discovery ASO Product that is developed and sold by Lilly.
"LILLY-BLOCKED TARGET" has the meaning set forth in Section 6.2.2.
"LILLY COLLABORATION ASO COMPOUND PATENT RIGHTS" means Patent Rights
Controlled by Lilly that claim inventions conceived in the course of the Target
Validation Program or the Antisense Drug Discovery Program that Cover the
composition of matter of an ASO Compound or the use of such ASO Compound.
"LILLY COLLABORATION BLOCKING PATENT RIGHTS" means Patent Rights
Controlled by Lilly that claim inventions conceived in the course of the Target
Validation Program or the Antisense Drug Discovery Program that Cover the method
of treating a condition by modulating a Target through the use of a non-ASO
Compound.
"LILLY COLLABORATION FTE" means an FTE that is applied by Lilly in
carrying out work in the course of the Target Validation Program or Antisense
Drug Discovery Program in accordance with the Collaborative Research Plan and
reimbursed with Collaboration Funds.
"LILLY COLLABORATION KNOW-HOW" means Know-How Controlled by Lilly that
is conceived in the course of the Target Validation Program or the Antisense
Drug Discovery Program.
"LILLY COLLABORATION PATENT RIGHTS" means the Lilly Collaboration ASO
Compound Patent Rights and the Lilly Collaboration Blocking Patent Rights.
"LILLY COLLABORATION TECHNOLOGY" means Lilly Collaboration Know-How and
Lilly Collaboration Patent Rights.
1.1-9.
"LILLY FIRST PASS IN VITRO ANALYSIS" means [*]
"LILLY NON-ASO PRODUCT" means a Validation Non-ASO Product, Drug
Discovery Non-ASO Product, or Reagent Non-ASO Product that is developed and sold
by Lilly.
"LILLY NON-COLLABORATION ASO PATENT RIGHT" means all Patent Rights that
are Controlled by Lilly, or any Sublicensees to whom Lilly provides data
generated from the use of a Reagent ASO Compound provided to Lilly by Isis
pursuant to this Agreement and that [*]
"LILLY PRODUCT" means a Lilly ASO Product or a Lilly Non-ASO Product.
"LILLY RIGHT OF FIRST NEGOTIATION" has the meaning set forth in Section
8.3.
"LOAN AGREEMENT" means that certain loan agreement by and between Lilly
and Isis signed concurrently with this Agreement.
"MAJOR MARKET COUNTRY" means the United States, Japan, Germany, the
United Kingdom, France, Spain or Italy.
"MANUFACTURING IMPROVEMENTS" means any and all scientific and technical
data, information, methods, techniques, protocols, and processes that are useful
in the manufacture of ASO Compounds developed by or coming under Control of a
Party outside the course of the Collaboration after the Effective Date.
"NDA" means a new drug application or other application filed with the
FDA to obtain approval for marketing a Lilly Product or Isis Product in the
United States, or any future equivalent process.
"NET ROYALTY" means [*]
"NET SALES" means, with respect to a Product, the gross amount invoiced
by a Party, its Affiliates or Sublicensees thereof to unrelated Third Parties,
excluding any Sublicensee, for the Product, less:
(a) Trade, quantity and cash discounts allowed;
(b) Commissions, discounts, refunds, rebates, chargebacks,
retroactive price adjustments, and any other allowances which effectively reduce
the net selling price;
(c) Product returns and allowances;
(d) That portion of the value associated with the cost of the drug
delivery systems;
(e) Any tax imposed on the production, sale, delivery or use of
the Product, including, without limitation, sales, use, excise or value added
taxes;
(f) Allowance for distribution expenses; and
(g) Any other similar and customary deductions.
1.1-10.
*Confidential Treatment Requested
Net Sales will be calculated in U.S. Dollars. Such amounts shall be
determined from the books and records of a Party, its Affiliate or Sublicensee,
maintained in accordance with U.S. Generally Accepted Accounting Principles or,
in the case of Sublicensees, such similar accounting principles, consistently
applied. Each Party further agrees in determining such amounts, it will use its
then current standard procedures and methodology, including its then current
standard exchange rate methodology for the translation of foreign currency sales
into U.S. Dollars or, in the case of Sublicensees, such similar methodology,
consistently applied.
Net Sales excludes:
(i) The transfer of reasonable and customary quantities of free
samples of Product(s) and the transfer of Product(s) as clinical trial
materials, other than for subsequent resale;
(ii) Sales or transfers of Product(s) among a Party and its
Affiliates unless the receiving Party is the consumer or user of the Product(s);
and
(ii) Use by a Party or its Affiliates or Sublicensees of Product
for any use connected with the securing of regulatory approval or validating of
a manufacturing process or the obtaining of other necessary marketing approvals
for Product (unless such Product is subsequently sold).
In the event that the Product(s) is sold as part of a Combination
Product (where "COMBINATION PRODUCT" means any pharmaceutical product which
comprises the Product(s) and at least one other active compound(s) and/or
ingredients), the Net Sales of the Product(s), for the purposes of determining
royalty payments, shall be determined by multiplying the Net Sales of
Combination Product (as defined in the standard Net Sales definition) by the
fraction, A / (A+B) where A is the weighted average sale price of the Product(s)
when sold separately in finished form, and B is the weighted average sale price
of the other product(s) sold separately in finished form.
In the event that the weighted average sale price of the Product(s) can
be determined but the weighted average sale price of the other product(s) cannot
be determined, Net Sales for purposes of determining royalty payments shall be
calculated by multiplying the Net Sales of the Combination Product by the
fraction A / C where A is the weighted average sale price of the Product(s) when
sold separately in finished form and C is the weighted average selling price of
the Combination Product. In the event that the weighted average sale price of
the other product(s) can be determined but the weighted average sale price of
the Product cannot be determined, Net Sales for purposes of determining royalty
payments shall be calculated by multiplying the Net Sales of the Combination
Product by the following formula: one (1) minus B / C where B is the weighted
average sale price of the other product(s) when sold separately in finished form
and C is the weighted average selling price of the Combination Product. In the
event that the weighted average sale price of both the Product(s) and the other
product(s) in the Combination Product cannot be determined, the Parties will
attempt to agree on an appropriate weighted average sale price of both the
Product(s) and the other product(s) in the Combination Product, and lacking such
agreement the Net Sales of the Product(s) shall be deemed to be equal to fifty
percent (50%) of the Net Sales of the Combination Product.
1.1-11.
The weighted average sale price for a Product, other product(s), or
Combination Product shall be calculated once each Calendar Year and such price
shall be used during all applicable royalty reporting periods for the entire
Calendar Year. When determining the weighted average sale price of a Product,
other product(s), or Combination Product, the weighted average sale price shall
be calculated by dividing the sales dollars (translated into U.S. Dollars) by
the units of active ingredient sold during the twelve (12) months (or the number
of months sold in a partial Calendar Year) for the respective Product(s), other
product(s), or Combination Product. In the initial Calendar Year, a forecasted
weighted average sale price will be used for Product(s), other product(s), or
Combination Product. Any over or under payment due to a difference between
forecasted and actual weighted average sale prices will be paid or credited in
the first royalty payment of the following Calendar Year.
"NON-ASO FIELD" means the research, development, manufacture and sale
of compounds other than ASO Compounds as therapeutic or prophylactic
pharmaceutical products.
"NOVARTIS AGREEMENT" means that certain agreement between Isis and
Ciba-Geigy Limited (now Novartis AG) effective June 3, 1996, and all amendments
thereto.
"OPERATING COMMITTEES" has the meaning provided in Section 2.7.
"PARTY" means Lilly or Isis. "PARTIES" means Lilly and Isis.
"PATENT RIGHTS" means: (a) patent applications (including provisional
applications and applications for certificates of invention); (b) any patents
issuing from such patent applications (including certificates of invention); (c)
all patents and patent applications based on, corresponding to, or claiming the
priority date(s) of any of the foregoing; (d) any reissues, substitutions,
confirmations, registrations, validations, re-examinations, additions,
continuations, continued prosecutions, continuations-in-part, or divisions of or
to any of the foregoing; and (e) term extension or other governmental action
which provide exclusive rights beyond the original patent expiration date.
"PHASE I STUDY INITIATION" means the first human clinical trial
conducted on normal volunteers and designed to evaluate safety of a product.
"PHASE II STUDY INITIATION" means the first human clinical trial
conducted in patients and designed to indicate a statistically significant level
of efficacy for product in the desired indication, as well as to obtain some
indication of the dosage regimen required.
"PHASE III STUDY INITIATION" means the first human clinical trial
conducted in patients and designed to establish Product safety and efficacy and
required to obtain clinical registration of a product with health regulatory
authorities such as the FDA.
"PRODUCT" shall mean a Lilly Product or an Isis Product, as applicable.
"PROGRAM SANCTION APPROVAL" means [*]
"PROJECT SANCTION APPROVAL" means [*]
1.1-12.
*Confidential Treatment Requested
"PROPOSED VALIDATION TARGET" has the meaning set forth in Section 5.2.
"PROTECTED REAGENT TARGET" has the meaning set forth in Section 4.4.
"REAGENT ASO COMPOUND" means all ASO Compounds that selectively
modulate protein synthesis of a Reagent Target.
"REAGENT ASO PRODUCT" means any preparation in final form for sale by
prescription, over-the-counter or any other method for any indication, including
human or animal use, which contains one or more Reagent ASO Compounds.
"REAGENT NON-ASO COMPOUND" means a compound that (a) is developed by
Lilly through the use of Collaboration Know-How and (b) is not an ASO Compound
and (c) is either (i) an agonist or antagonist of a Reagent Target or (ii) is a
Reagent Target.
"REAGENT NON-ASO PRODUCT" means any preparation in final form for sale
by prescription, over-the-counter or any other method for any indication,
including human or animal use, which contains one or more Reagent Non-ASO
Compounds.
"REAGENT PROVISION PROGRAM" means the program of identification, and
delivery to Lilly, of ASO Compounds directed to Targets identified by Lilly
under this Agreement, as described in Section 2.2, Article 4 and the
Collaborative Research Plan.
"REAGENT PROVISION TERM" means the term of the Reagent Provision
Program carried out pursuant to this Agreement and any extension thereof.
"REAGENT TARGET" means a Target that is designated a Reagent Target by
Lilly; PROVIDED, HOWEVER, that a Reagent Target that is later designated a
Validation Target or a Drug Discovery Target shall not be considered a Reagent
Target after the date of such designation.
"REGISTRATION" means (a) in the United States, approval by the FDA of
an NDA, or similar application for marketing approval, and satisfaction of any
related applicable FDA registration and notification requirements (if any), and
(b) in any Major Market Country other than the United States, approval by
regulatory authorities having jurisdiction over such country of a single
application or set of applications comparable to an NDA and satisfaction of any
related applicable regulatory and notification requirements, if any, together
with any other approval necessary to make and sell pharmaceuticals and medical
devices commercially in such country.
"REJECTED VALIDATION TARGET" has the meaning provided in Section 5.4.
"RESERVED TARGET" has the meaning set forth in Section 6.8.
"RTS STANDARD COST" for any Reagent ASO Compound for any year of the
Collaboration Term means [*]
"STAGE I DRUG DISCOVERY TARGET" means a Target that is designated a
Drug Discovery Target under Section 6.3 that (i) has not reached the status of a
Stage II Drug Discovery Target
1.1-13.
*Confidential Treatment Requested
or Stage III Drug Discovery Target outside the course of the Collaboration
prior to the designation of such target as a Drug Discovery Target or (ii)
any Accepted Validation Target that enters the Antisense Drug Discovery
Program under Section 6.3.
"STAGE II DRUG DISCOVERY TARGET" means a Target that Isis moves to the
status that is equivalent to Accepted Validation Target outside the course of
the Collaboration (but that has not reached the status of a Stage III Drug
Discovery Target) prior to the designation of such Target as a Drug Discovery
Target.
"STAGE III DRUG DISCOVERY TARGET" means a Target for which Isis has
developed ASO Compounds and has analyzed such ASO Compounds in at least one (1)
animal model in two (2) different species outside the course of the
Collaboration and prior to the designation of such Target as a Drug Discovery
Target.
"SUBLICENSE INCOME" means all consideration received by Lilly from a
Sublicensee of Lilly pursuant to a sublicense agreement permitted under Section
9.3.5 excluding (a) payments made by such Sublicensee in consideration for the
issuance of equity or debt securities of Lilly at fair market value, and (b)
payments made by such Sublicensee to support or fund research activities to be
undertaken by Lilly at cost.
"SUBLICENSEES" means any Third Party to which Lilly or any of its
Affiliates or Isis or any of its Affiliates grants any right to manufacture,
market and sell a Lilly Product or an Isis Product, as applicable. A Third Party
who is granted only the right to sell a Lilly Product or an Isis Product (such
as a wholesaler) will not be considered a Sublicensee.
"TARGET" means a transcriptional unit of a gene, and any protein
product of such transcriptional unit, including all splice variants.
"TARGET VALIDATION PROGRAM" means the program of Target
functionalization and validation under this Agreement, as described in Section
2.3, Article 5 and the Collaborative Research Plan.
"TARGET VALIDATION PROGRAM TERM" means the term of the Target
Validation Program any extensions thereof.
"TERRITORY" means the entire world.
"THIRD PARTY" means any Party other than Isis or Lilly and their
respective Affiliates.
"VALID CLAIM" means any claim in an issued and unexpired patent which
has not been held unenforceable, unpatentable or invalid by a decision of a
court or other governmental agency of competent jurisdiction following
exhaustion of all possible appeal processes and which has not been admitted to
be invalid or unenforceable through reissue, reexamination or disclaimer, or
otherwise.
"VALIDATION ASO COMPOUND" means all ASO Compounds that selectively
modulate protein synthesis of a Validation Target.
1.1-14.
"VALIDATION ASO PRODUCT" means any preparation in final form for sale
by prescription, over-the-counter or any other method for any indication,
including human or animal use, which contains one or more Validation ASO
Compounds.
"VALIDATION NON-ASO COMPOUND" means a compound that (a) is developed by
Lilly through the use of Collaboration Know-How and (b) is not an ASO Compound
and (c) is either (i) an agonist or antagonist of a Validation Target or (ii) is
a Validation Target.
"VALIDATION NON-ASO PRODUCT" means any preparation in final form for
sale by prescription, over-the-counter or any other method for any indication,
including human or animal use, which contains one or more Validation Non-ASO
Compounds.
"VALIDATION TARGET" means any Target designated by Lilly for inclusion
in the Target Validation Program; PROVIDED, HOWEVER, that a Validation Target
that is later designated a Drug Discovery Target, shall be considered a Drug
Discovery Target and not a Validation Target. Validation Targets includes
Accepted Validation Targets and Rejected Validation Targets.
1.1-15.
SCHEDULE 2.2
COLLABORATIVE RESEARCH PLAN
DELETE IN ENTIRETY
2.2
SCHEDULE 2.5
INITIAL MEMBERS OF THE EXECUTIVE COMMITTEE
LILLY ISIS
- --- ------------------------------- ------------------------------------
[*]
2.5 *Confidential Treatment Requested
SCHEDULE 2.6
INITIAL MEMBERS OF THE JOINT RESEARCH COMMITTEE
LILLY ISIS
- --- ------------------------------- ------------------------------------
[*]
2.6 *Confidential Treatment Requested
SCHEDULE 2.9
INITIAL ALLIANCE MANAGERS
LILLY ISIS
- --- ------------------------------- ------------------------------------
[*]
2.9 *Confidential Treatment Requested
SCHEDULE 8.7
GENETROVE DATABASE SUBSCRIPTION TERMS
DELETED IN ENTIRETY
8.7
SCHEDULE 8.8
TECHNOLOGY TRANSFER TERMS
DELETED IN ENTIRETY
8.8
SCHEDULE A
EXISTING ISIS INTERNAL PROGRAMS
DELETED IN ENTIRETY
A-1
SCHEDULE B
ISIS MANUFACTURING PATENT RIGHTS
DELETED IN ENTIRETY
B-1
SCHEDULE C
ISIS CORE TECHNOLOGY PATENT RIGHTS
DELETED IN ENTIRETY
B-2
Exhibit 2.5
*Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80(b)(4)
200.83 and 240.24b-2
DEVELOPMENT AND LICENSE AGREEMENT
BETWEEN
ELI LILLY AND COMPANY
AND
ISIS PHARMACEUTICALS, INC.
DEVELOPMENT AND LICENSE AGREEMENT
THIS DEVELOPMENT AND LICENSE AGREEMENT (the "Agreement") is made as of
August 14, 2001 (the "Signing Date") between Eli Lilly and Company, a
corporation organized and existing under the laws of the State of Indiana
("LILLY") and Isis Pharmaceuticals, Inc., a corporation organized and existing
under the laws of the State of Delaware ("ISIS").
RECITALS
WHEREAS, ISIS has discovered ISIS 3521, an antisense oligonucleotide,
and is developing a product containing ISIS 3521 for the treatment of cancer;
and
WHEREAS, LILLY and ISIS desire to enter into an agreement whereby LILLY
will complete the development of, and commercialize the ISIS 3521 product upon
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms used in this Agreement have the meanings set forth in Exhibit
A.
ARTICLE 2
DEVELOPMENT PROGRAM
2.1 GENERAL.
(a) ISIS will use commercially reasonable efforts to complete ongoing
clinical trials and studies of the Product for non-small cell lung
cancer and non-Hodgkin's lymphoma, as further described in the
Development Plan set forth in Exhibit C hereto, and will participate in
related activities, including the provision of consulting support to
LILLY, in furtherance of the Development Program under the terms and
conditions set forth in this Agreement.
(b) LILLY will undertake all future clinical trials and studies of the
Product as further described in the Development Plan. LILLY will
provide financial and other support for the Development Program and,
other than as provided in subsection (a) above, will be responsible for
implementing the Development Plan.
1.
(c) While the parties will endeavor to reach a consensus with respect to
amendments to the Development Plan and decisions affecting the
Development Program, all final decisions regarding the content of the
Development Plan and conduct of the Development Program will be made by
LILLY after consideration of ISIS' input as provided in Section 2.2(a)
below; provided, however, that ISIS cannot be compelled by LILLY to
perform any studies or other tasks without its consent; and provided
further that LILLY will provide ISIS with reasonable advance notice of
any proposed changes to the Development Plan relating to ISIS's
participation.
2.2 JOINT DEVELOPMENT COMMITTEE.
(a) For so long as ISIS is performing work pursuant to the Development
Plan, the Development Program will be conducted under the overall
oversight of a joint development committee ("JDC") comprised of 2
representatives each from LILLY and ISIS. Each party will designate a
representative as a project leader to serve as the contact person for
that party. The parties may agree to add additional members to the JDC,
as long as equal representation is maintained. LILLY will designate one
of its representatives as chairman of the JDC. In the event of a tied
vote, the JDC chairman will have final decision-making authority.
(b) The JDC will be responsible for overseeing the parties' performance of
the Development Program and for making strategic decisions related to
that program. The JDC will be responsible for approving or disapproving
any amendments to the Development Plan proposed by either party. The
JDC will provide to the parties copies of the amended Development Plan
promptly after approval by the JDC.
(c) During the term of ISIS's participation in the Development Program, the
JDC will meet on a regular basis, and at least quarterly, either in
person, or as the parties otherwise may agree. The JDC will review the
progress of the activities carried out under the Development Program
and will consider proposed modifications to the strategy and goals of
that program. The frequency, dates and times of all meetings will be
mutually agreed upon by the parties, as will the location for
face-to-face meetings, alternating between Indianapolis, Indiana and
Carlsbad, California, or such other location as members of the JDC will
agree. At its first meeting, the JDC will decide upon the
organizational rules under which it will operate during the term of
this Agreement.
(d) Upon completion of the activities required to be performed by ISIS
under the Development Plan, the JDC will be disbanded, and LILLY will
assume full control over the conduct of the Development Program.
However, ISIS and LILLY will meet to discuss the plans for and the
progress of development of the Product on a semi-annual basis for the
duration of the clinical development of the Product. Such meetings may
be held in conjunction with the meetings of LILLY's Therapeutic Area
Steering Committee for Oncology (or any successor committee or group
charged with the oversight of the development of the Product).
2
2.3 DEVELOPMENT PROGRAM; ROLES AND RESPONSIBILITIES OF ISIS AND LILLY.
(a) ISIS' RESPONSIBILITIES.
(i) The activities to be undertaken by ISIS in the course of the
Development Program are set forth in the Development Plan
attached hereto as Exhibit C, as amended from time to time by
the JDC. ISIS will not initiate any activities with the
Product not provided for in the Development Plan, except with
the approval of the JDC.
(ii) A budget estimate and related assumptions for certain
activities to be undertaken by ISIS in the course of the
Development Program and certain other activities to be
undertaken by ISIS pursuant to the Supply Agreement are set
forth in Exhibit E. The budget is a good faith estimate only
of the activities described in the assumptions, and actual
labor and expenses will be determined by more detailed work
plans and approved by the JDC.
(iii) ISIS will conduct its portion of the Development Program in a
good scientific manner and in compliance in all material
respects with all requirements of applicable laws, rules and
regulations, including cGCPs, cGLPs and cGMPs, to achieve the
objectives efficiently and expeditiously. ISIS will proceed
diligently with the ISIS projects set out in the Development
Plan using commercially reasonable efforts, such efforts to be
at least equivalent to those efforts that ISIS uses on its own
products of similar commercial potential value and at a
similar stage of the product life cycle, to provide sufficient
time, effort, equipment, facilities and skilled personnel.
(iv) ISIS will perform CMC activities, technology transfer
activities, and various additional activities in support of
the Development Program and the NDA, all as further described
in the Supply Agreement.
(v) ISIS will provide LILLY with all reasonable assistance and
take all actions reasonably requested by LILLY, at LILLY's
expense and without changing the allocation of
responsibilities assigned in the Development Plan, that are
necessary or desirable to enable LILLY to comply with the
terms and intent of this Agreement.
(b) LILLY'S RESPONSIBILITIES.
(i) The activities to be undertaken by LILLY in the course of the
Development Program are set forth in the Development Plan
attached hereto as Exhibit C, as amended from time to time by
the JDC. LILLY will use commercially reasonable efforts, such
efforts to be at least equivalent to those efforts that LILLY
uses on its own products of similar commercial potential value
and at a similar stage of the product life cycle, to develop
and obtain Marketing Approval for the Product in all Major
Markets and to maximize the commercial value of the Product.
3
(ii) LILLY will conduct its portion of the Development Program in a
good scientific manner and in compliance in all material
respects with all requirements of applicable laws, rules and
regulations, including cGCPs, cGLPs and cGMPs, to achieve the
objectives efficiently and expeditiously. LILLY will proceed
diligently with the LILLY projects set out in the Development
Plan using commercially reasonable efforts, such efforts to be
at least equivalent to those efforts that LILLY uses on its
own products of similar commercial potential value and at a
similar stage of the product life cycle, to provide sufficient
time, effort, equipment, facilities and skilled personnel.
(iii) LILLY will provide ISIS with all reasonable assistance and
take all actions reasonably requested by ISIS, at LILLY's
expense and without changing the allocation of
responsibilities assigned in the Development Plan, that are
necessary or desirable to enable ISIS to comply with the terms
and intent of this Agreement.
2.4 FUNDING OF DEVELOPMENT PROGRAM.
(a) LILLY will pay to ISIS US$20,000,000 for the conduct and conclusion of
preclinical and clinical studies relating to Product and conducted by
ISIS, including the pivotal, on-going Phase III study. Such payment
will be made within [*] days after the Effective Date, and LILLY will
use its best efforts to make such payment no later than September 30,
2001.
(b) LILLY will pay to ISIS [*] for the budgeted expenses in the third
Calendar Quarter of 2001 and [*] for the budgeted expenses in the
fourth Calendar Quarter of 2001 for work performed by ISIS through
December 31, 2001. Such payment will be made within [*] days after the
Effective Date, and LILLY will use its best efforts to make such
payment no later than September 30, 2001.
(c) LILLY will pay for all activities as described in the Development Plan
or as approved by the JDC and performed by ISIS in the course of the
Development Program beginning January 1, 2002 on a time and materials
basis, including Cost of Manufacture of API used by ISIS in the
performance of the Development Program. Labor will be billed at the
ISIS FTE Rate, and Out-of-Pocket Expenses will be passed through to
LILLY at actual cost on a dollar-for-dollar basis.
(d) LILLY will pay ISIS for such activities referred to in Article 2.4(c)
on a quarterly basis [*] for the time and Out-of-Pocket Expenses
budgeted to be expended by ISIS in the performance of the Development
Plan during the [*] Calendar Quarter. ISIS will submit an invoice for
such expenditures to LILLY [*] days prior to the beginning of each
Calendar Quarter beginning in 2002, and LILLY will pay such invoices
within [*] days from date of invoice. Within [*]days after the end of
each Calendar Quarter, ISIS will provide to LILLY a statement
reconciling the budgeted expenditures and the actual expenditures
incurred by ISIS in the performance of the Development Plan during the
preceding Calendar Quarter. Any amounts over- or underpaid by LILLY
will be credited
*Confidential Treatment Requested
4
against or charged to LILLY with the next invoice prepared by ISIS as
provided above. Interest will be charged on late payments as provided
in Section 5.6.
(e) Materials for use in clinical studies conducted by or for LILLY will be
paid in accordance with Section 5.1 of the Supply Agreement as
described in Exhibit 7 of the Supply Agreement.
(f) LILLY will pay all costs of the Development Program, whether incurred
by ISIS (in accordance with the Development Plan or as approved by the
JDC) or by LILLY, and will perform and pay for any other activities
LILLY desires to conduct or which are required to fulfill its
obligations hereunder.
2.5 COMMERCIALIZATION.
(a) Prior to the launch of a Product, LILLY will prepare a global
integrated Product plan outlining the key aspects of market launch and
commercialization (the "Integrated Product Plan" or IPP). The
Integrated Product Plan will contain information customarily contained
in LILLY's commercialization plans, including Product charter,
strategic intent, a market analysis (event maps - demographics, market
dynamics), label need and wants (based on the Development Plan),
Product life overview, geographic overview and financial overview. In
addition, a global marketing plan will be developed which includes
analysis of market (disease overview, Product profile, archetype,
patient segmentation), strategic ends (strategic intent, product
positioning, brand character, core messages, critical success factors,
marketing objectives), strategic means (global Product, place, price,
promotion, launch, market research programs), operational plan
(implementation plan, marketing activities) and budget for the
execution of the plan. Each plan will be updated annually in accordance
with LILLY's internal planning and budgeting process.
(b) LILLY will provide to ISIS a copy of the final draft of the IPPs
(original and updates) for each Major Market. LILLY and ISIS will meet
to discuss the draft IPPs and LILLY will consider, in its discretion,
any proposals and comments made by ISIS for incorporation in the final
Commercialization Plan.
(c) As soon as is commercially reasonable and practicable after Marketing
Approval and pricing approval, if necessary, have been obtained in a
particular country, LILLY will commence and continuously market,
promote, sell and distribute the Product in each such country. As used
in this Article 2.5, "commercially reasonable" means efforts at least
equivalent to those efforts that LILLY uses on its own products of
similar commercial potential value and at a similar stage of the
product life cycle.
(d) LILLY will use commercially reasonable efforts to Manufacture, market,
promote, distribute and sell the Product on a worldwide basis, and
LILLY will apply resources and expend funds in connection with such
activities in a manner and to an extent consistent with and comparable
to LILLY's own oncology pharmaceutical products of similar commercial
potential at a similar stage of the product life cycle.
5
2.6 REGULATORY COOPERATION
(a) The parties will provide each other with all reasonable assistance and
take all actions reasonably requested by the other party, at LILLY's
expense and without changing the allocation of responsibilities
assigned in the Development Plan, that is necessary or desirable to
enable the other party to comply with the terms and conditions of this
Agreement, and any law or regulation applicable to the Product,
including the parties meeting their reporting and other obligations to
(i) obtain, maintain, and update Marketing Approval application or
Marketing Approval for the Product and any filings under this Agreement
or the Development Plan, (ii) report adverse drug experience reports
and serious adverse drug experience reports to the FDA and/or other
governmental or Regulatory Authorities and (iii) submit or file
promotional materials with the FDA and/or other governmental or
Regulatory Authorities.
(b) Such assistance and actions will include keeping the other party
informed, commencing within 48 hours of notification of any action by,
or notification or other information which it receives from, the FDA or
any other governmental or Regulatory Authority, which (a) raises any
material concerns regarding the safety or efficacy of the Product, (b)
which indicates or suggests a potential material liability for either
party to third parties arising in connection with the Product, or (c)
which is reasonably likely to lead to a recall or market withdrawal of
the Product.
(c) Information that will be disclosed pursuant to this Section 2.6 will
include:
1. governmental or Regulatory Authority inspections of
Manufacturing, distribution or other related facilities;
inquiries by governmental or Regulatory Authorities concerning
clinical investigation activities (including inquiries of
investigators, clinical monitoring organizations and other
related parties); any communication from governmental or
Regulatory Authorities involving the Manufacture, sale,
promotion or distribution of Product or any other governmental
or Regulatory Authority reviews or inquiries relating to the
Product;
2. receipt of a warning letter or other notice of alleged
non-compliance with FDA laws or regulations from the FDA
relating to the Product; and
3. an initiation of any governmental or Regulatory Authority
investigation, detention, seizure or injunction concerning the
Product.
2.7 RECORDS.
(a) Each party will maintain records, in sufficient detail and in good
scientific manner, which will fully and properly reflect all work done
and results achieved in the performance of its responsibilities under
the Development Plan. Each party will have the right, during normal
business hours and upon reasonable prior notice, to inspect and copy
those records of the other party referred to herein that are necessary
or useful to the inspecting party for the purposes of making any
required filings with Regulatory Authorities in
6
order to obtain Manufacturing Approvals and/or Marketing Approvals.
Each party will maintain such records and the information disclosed
therein in confidence in accordance with Article 4.
(b) In addition to the foregoing, LILLY will have the right to arrange for
its employees and/or consultants involved in the activities
contemplated hereunder to visit the offices, laboratories and other
facilities of ISIS where activities of the Development Program are
being performed during normal business hours and upon reasonable
notice, subject to any restrictions imposed by ISIS in order to protect
the confidentiality of programs, activities and information unrelated
to the Development Program or ISIS 3521.
ARTICLE 3
GRANT OF RIGHTS; REPLACEMENT PRODUCT; TARGET EXCLUSIVITY
3.1 LICENSE GRANTS.
(a) ISIS hereby grants to LILLY an exclusive, worldwide, sublicensable,
royalty-bearing license under the ISIS Patent Rights to make, have
made, use, import, offer for sale and sell the Product.
(b) ISIS hereby grants to LILLY a non-exclusive, worldwide, sublicensable,
royalty-bearing license under the Core Technology Patent Rights only to
the extent such license is required for LILLY to effectively practice
the license granted to LILLY under subsection (a) above and to fulfill
its duties and obligations hereunder.
(c) ISIS retains the right to practice under the ISIS Patent Rights as
necessary to carry out ISIS' obligations under this Agreement and the
Supply Agreement, and for any purpose other than to make, have made,
use, import, offer for sale and sell the Product. LILLY will not
practice the ISIS Patent Rights and the Core Technology Patent Rights
other than as expressly licensed in subsection (a) and (b) above.
(d) Any sublicense granted by LILLY under this Agreement is subject to and
will be consistent with the terms and conditions of this Agreement. The
grant of any such sublicense hereunder will not relieve LILLY of
responsibility for its obligations under this Agreement, including
ensuring that such sublicensees will perform such obligations as
required. LILLY will promptly provide ISIS with copies of those
sublicenses as well as Sublicensee contact information.
3.2 UPSTREAM LICENSES AND ACQUISITION OF PATENT RIGHTS.
(a) The parties will consult about the need to license any patents
Controlled by Third Parties that claim the composition of matter of
ISIS 3521 or the method of use of ISIS 3521 in the field of oncology.
If it is agreed that there is a need for a license or to acquire any
such patent, the parties will negotiate in good faith regarding (i) the
share of the financial
7
obligations relating to the license or acquisition that each party will
bear; (ii) the compensation of any acquisition costs incurred in
connection with obtaining the patent rights; and (iii) an agreement by
the parties to abide by all terms of the agreement under which the
patent rights are granted.
(b) In the event that (i) ISIS has obtained Control of a Patent claiming
Core Technology Improvements during the term of this Agreement, or (ii)
a change in the Manufacturing Process requires access of LILLY to
Manufacturing Patent Rights or Manufacturing Technology Improvements
Controlled by ISIS that were not practiced in the Manufacture of the
Product prior to such change (the "Additional Rights"), and LILLY
wishes to obtain access to such Additional Rights under this Agreement,
then the license from ISIS to LILLY of such Additional Rights pursuant
to Section 3.1(a) and (b) (the "Downstream License") is conditioned on
the prior agreement to be negotiated in good faith by the parties
regarding (1) the assumption by LILLY of all financial obligations to
ISIS' licensors or collaborators, if any, arising from the grant to
LILLY of the Downstream License and the practice under such Downstream
License by LILLY, its Affiliates or Sublicensees; (2) the compensation
of a reasonable portion of any acquisition costs paid by ISIS to its
licensors or collaborators in connection with obtaining Control of such
Additional Rights; and (3) an agreement by LILLY to abide by all terms
that ISIS is obligated to have any person that accesses such Additional
Rights abide by under the agreement under which ISIS has obtained or
retained Control of such Additional Rights.
3.3 REPLACEMENT PRODUCT OPTION.
(a) In the event LILLY decides to abandon the Development of the Product
because of an unfavorable outcome of a Pivotal Trial or other technical
failure, failure to obtain a Marketing Approval of the Product or
unfavorable market conditions associated with commercialization of the
Product, LILLY will have the right to terminate this Agreement and the
Supply Agreement with written notice to ISIS, and all rights to ISIS
3521 will be returned to ISIS.
(b) Upon such termination, all licenses granted under this Agreement
terminate, and LILLY will assign and transfer to ISIS all its rights
and Information relating specifically to ISIS 3521 obtained or
generated by LILLY during the term of the Agreement. For clarification,
data relating to other LILLY products, including Gemzar and Alimta will
not be returned, provided that ISIS will have the right to access and
reference data obtained in combination trials of ISIS 3521 and other
LILLY products after consultation with LILLY to ensure a reasonable use
of such data in compliance with applicable laws and regulations.
(c) Upon termination of this Agreement pursuant to subsection (a) above,
LILLY will have the right to obtain a license to another antisense
therapeutic compound Controlled by ISIS that is not further advanced in
development than ISIS 3521 as of the Effective Date. The terms of the
license agreement under which such license is granted will be
substantially similar to the terms of this Agreement, except that ISIS
will waive any up-front license fees.
8
3.4 TARGET EXCLUSIVITY.
ISIS will not commercialize any antisense compounds and products that target the
genetic sequence of [*] This obligation will expire upon the earlier of (i)
expiration of the Agreement, or (ii) termination by LILLY of its activities
directed to the development or commercialization of the Product.
ARTICLE 4
CONFIDENTIALITY AND PUBLICATION
4.1 NONDISCLOSURE OBLIGATION.
All Proprietary Information disclosed by one party to the other party hereunder
will be maintained in confidence by the receiving party and will not be
disclosed to a Third Party or Affiliate or used for any purpose except as set
forth below.
4.2 PERMITTED DISCLOSURES.
A party may disclose Proprietary Information received from the other party:
(a) to governmental or other regulatory agencies in order to obtain
Patents, for SEC or tax purposes as required by law, to obtain approval
to conduct clinical trials, or to gain Marketing Approval; provided
that such disclosure may be made only to the extent reasonably
necessary to obtain such patents, purposes or approvals;
(b) to Affiliates, Sublicensees, agents, consultants, and/or other Third
Parties for the development, Manufacturing and/or marketing of the
Product (or for such parties to determine their interest in performing
such activities) in accordance with this Agreement on the condition
that such Affiliates and Third Parties agree to be bound by the
confidentiality obligations contained in this Agreement, provided the
term of confidentiality for such Affiliates and Third Parties will be
no less than 7 years; or
(c) if such disclosure is required by law, including without limitation
disclosures required by court order, provided that notice is promptly
delivered to the other party in order to provide an opportunity to
challenge or limit the disclosure obligations.
4.3 PUBLICATION.
(a) LILLY agrees that it is customary in the industry to publish results
obtained from clinical trials and other studies of the Product, and
that ISIS may publish such information obtained by ISIS in the
performance of the Development Program, subject to the provisions of
this Section 4.3.
*Confidential Treatment Requested
9
(b) Except as provided otherwise herein, the parties will be entitled to
publish or present on the results of the Development Program, ISIS 3521
and the Product, provided that the party seeking to publish will
deliver to the other party for its review a copy of any proposed
publication or an abstract of any oral presentation of clinical results
at scientific meetings involving ISIS 3521, the Product, or the
Proprietary Information of the other party, at least [*] prior to
submission of scientific publications and [*] with respect to abstracts
of oral presentations. The reviewing party will have the absolute right
to request that any of its Proprietary Information be deleted from such
publication or presentation, and the disclosing party will comply with
that request. If the disclosing party does not receive any feedback
from the reviewing party within that [*] period, respectively, the
disclosing party will be free to proceed with the publication or
presentation, with the following limitations:
(i) ISIS will be permitted to publish on matters relating to ISIS
3521 or Product during the term of this Agreement only upon
the prior written approval of LILLY, which may be reasonably
withheld by LILLY unless such publication is permitted to be
made under any publication rights granted by ISIS to clinical
investigators of the 3521 Product prior to the Effective Date.
(ii) LILLY will be permitted to publish on matters relating to any
Manufacturing Technology or Manufacturing Technology
Improvements during the term of this Agreement only upon the
prior written approval of ISIS, which may be given at ISIS'
sole discretion.
(c) The parties recognize that it may not be practical under all
circumstances to comply with the [*] notice requirements for review of
publications and abstracts as provided in subsection (b) above. Each
party will reasonably review proposed publications and abstracts
submitted by the other party as promptly as possible and will not
unreasonably withhold its consent to such publications or presentations
that have been submitted for review with less than the required notice
period.
4.4 PUBLICITY.
(a) The parties will issue a joint press release regarding the execution of
this Agreement.
(b) Except as otherwise provided herein or required by law, neither party
will originate any publication, news release or other public
announcement, written or oral, whether in the public press, or
otherwise, about this Agreement, and neither party will use the name,
trademark, trade name, logo or likeness of the other party or its
employees in any publicity, news release or disclosure about this
Agreement without the prior express written permission of the other
party.
(c) The parties will inform each other of any press releases relating to
the Product permitted hereunder or required to be made by law in
advance of general release to the public.
*Confidential Treatment Requested
10
ARTICLE 5
PAYMENTS, ROYALTIES AND REPORTS
5.1 LICENSE FEE.
LILLY will pay to ISIS an up-front license fee of [*] Such payment will be made
within [*] days after the Effective Date, and LILLY will use its best efforts to
make such payment no later than September 30, 2001.
5.2 MILESTONE PAYMENTS.
(a) LILLY will pay to ISIS the following milestone payments with respect to
the Product developed for the first Major Tumor within 30 days of the
achievement of the corresponding milestone events:
MILESTONE EVENT MILESTONE PAYMENT
[*]
(b) LILLY will pay to ISIS the following milestone payments with respect to
the Product developed for each Major Tumor subsequent to the first
Major Tumor within [*] of the achievement of the corresponding
milestone events:
MILESTONE EVENT MILESTONE PAYMENT
[*]
(c) LILLY will inform ISIS within 10 days of achieving each milestone.
*Confidential Treatment Requested
11
5.3 ROYALTIES.
(a) LILLY will pay ISIS a royalty on Net Sales of the Product according to
the schedule set forth below:
CONSOLIDATED WORLDWIDE ANNUAL NET SALES OF THE PRODUCT ROYALTY RATE
[*]
(b) The increments of the annual Net Sales tiers set forth in subsection
(a) above will be adjusted for the immediately preceding Calendar Year
as follows: the annual Net Sales of the Product set out above are in
2001 U.S. dollars. Such numbers will be adjusted upward on a Calendar
Year basis commencing January 1, 2002 (and on January 1 of each year
thereafter during the term of this Agreement) using the CPI for all
urban consumer series ID CUUR0000SA0 as published from time to time by
the US Bureau of Labor Statistics, where June 2001 was 178.
(c) If the Product is Manufactured in a country where such Manufacture does
not infringe on any ISIS Patent Rights or Core Technology Patent
Rights, and is sold in a country where the Manufacture, use,
importation, offer for sale or sale of the Product does not infringe
any ISIS Patent Rights or Core Technology Patent Rights in the country
of sale, [*]
(d) If the royalty payable by LILLY [*]
(e) [*].
(f) The royalty payment obligation of LILLY under this Section will expire
on a country-by-country basis upon the later of (i) expiration of a
period of [*] from the date of First Commercial Sale in a particular
country and (ii) the expiration of the last to expire Patent within
ISIS Patent Rights and Core Technology Patent Rights in a particular
country.
5.4 PAYMENT OF ROYALTY; REPORTS.
LILLY will provide to ISIS within [*] after the end of each Calendar Quarter a
written report [*] LILLY will make royalty payments to ISIS for the Product sold
during a Calendar Quarter within [*] of the last day of that Calendar Quarter.
Each royalty payment will be accompanied by a written report for that Calendar
Quarter showing the cumulative Net Sales of the Product sold by LILLY, its
Affiliates and its Sublicensees on a country-by-country basis worldwide during
the quarterly reporting period and the corresponding royalties payable under
this Agreement.
*Confidential Treatment Requested
12
5.5 AUDITS.
(a) Upon the written request of ISIS and not more than once in each
Calendar Year, LILLY will permit an independent certified public
accounting firm of nationally recognized standing selected by ISIS and
reasonably acceptable to LILLY, at ISIS' expense, to have access during
normal business hours to those records of LILLY that may be necessary
to verify the accuracy of the royalty reports hereunder for any year
ending not more than 24 months prior to the date of such request. ISIS
will submit an audit plan, including audit scope, to LILLY for LILLY's
approval, which will not be unreasonably withheld, prior to audit
implementation. The accounting firm will disclose to ISIS only whether
the royalty reports of LILLY are correct or incorrect, the specific
details concerning any discrepancies, and the corrected amount of Net
Sales. No other information will be provided to ISIS.
(b) At the request of ISIS, LILLY will direct its Affiliates to permit
audits of the Affiliates' records in accordance with the provisions of
subsection (a) above. Further, LILLY will include in each sublicense
granted by it pursuant to this Agreement a provision requiring the
Sublicensee to submit reports to LILLY, to keep and maintain records of
sales made pursuant to such sublicense and to grant access to such
records by ISIS' independent accounting firm, to the same extent
required of LILLY under Sections 5.4 and 5.5. ISIS' independent
accounting firm will be granted access to such reports in LILLY'S
possession as part of the audit referenced in subparagraph (a) above.
(c) If ISIS' independent accounting firm determines that Net Sales were
underreported or overreported and additional royalties are owed or have
been overpaid, LILLY or ISIS will pay or repay the additional royalties
within [*] days of the date ISIS delivers to LILLY such accounting
firm's written report. The fees charged by such accounting firm will be
paid by ISIS provided that, if the audit determines that the additional
royalties payable by LILLY for such period exceed [*] of the royalties
actually paid for such period, then LILLY will pay the reasonable fees
and expenses charged by such accounting firm. If the audit conducted on
behalf of ISIS reveals an overpayment by LILLY, LILLY will pay the fees
and expenses charged by the accounting firm upon receipt of the payment
by ISIS of such overpaid royalties.
(d) ISIS will treat all financial information subject to review under this
Section 5.5 or under any sublicense agreement as Proprietary
Information of LILLY in accordance with Article 4, and will cause its
accounting firm to enter into an acceptable confidentiality agreement
with LILLY and its Sublicensees obligating such accounting firms to
retain all such financial information in confidence pursuant to such
confidentiality and non-use provisions.
5.6 PAYMENT MODALITIES; FOREIGN CURRENCY CONVERSION; LATE PAYMENT CHARGES.
(a) All payments to be made by LILLY to ISIS under this Agreement will be
made by LILLY in United States dollars and may be paid by bank wire
transfer in immediately available funds to such bank account in the
United States designated in writing by ISIS
*Confidential Treatment Requested
13
from time to time. If the payment is made from outside the U.S., LILLY
will make the payment in a manner that will not result in a tax
liability for ISIS larger than it would be if the payment were made
from inside the U.S with no additional delays in payment when compared
to the timing of payment made in the U.S.
(b) For purposes of calculating royalties due on Net Sales generated
outside the United States, all Net Sales amounts in non-US currency
will be converted into US dollars using LILLY's then current standard
exchange rate methodology. This methodology is used by LILLY in the
translation of its foreign currency operating results, is consistent
with generally accepted accounting principles, is audited by LILLY's
independent certified public accountants in connection with the audit
of the consolidated financial statements of LILLY, and is used for
external reporting of foreign currency operating results.
(c) LILLY will pay a late payment service charge of [*] per month [*] on
all past-due amounts owed under this Agreement.
5.7 INCOME TAX WITHHOLDING.
ISIS will be responsible for its own tax liabilities resulting from the payments
received from LILLY under this Agreement. If laws, rules or regulations require
withholding of income taxes or other taxes imposed upon payments set forth in
this Article 5, LILLY will make such withholding payments as required and
subtract such withholding payments from the payments set forth in this Article
5. LILLY will submit appropriate proof of payment of the withholding taxes to
ISIS within a reasonable period of time.
ARTICLE 6
REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION
6.1 REPRESENTATIONS AND WARRANTIES OF ISIS.
ISIS represents and warrants to LILLY that, as of the date of this Agreement:
(a) it has the full right, power and authority to enter into this
Agreement, to perform the Development Program, to grant the licenses
granted under Article 3 hereof, and to consummate the transaction
contemplated herein;
(b) it has duly and properly taken all action required by its articles of
incorporation and its bylaws to authorize the execution, delivery, and
performance by it of this Agreement;
(c) this Agreement has been duly executed and delivered by ISIS and
constitutes a legal, valid, and binding agreement of ISIS enforceable
against it in accordance with its terms, except as enforcement may be
affected by bankruptcy, insolvency, or other similar laws and by
general principles of equity as applied by a court of competent
jurisdiction;
*Confidential Treatment Requested
14
(d) it has not previously assigned, transferred, conveyed or otherwise
encumbered its right, title and interest in ISIS Patent Rights in a
manner that would interfere with ISIS' ability to grant the licenses
granted to LILLY under this Agreement;
(e) it is the sole and exclusive owner the Compound Patent Rights, all of
which are free and clear of any liens, claims and encumbrances;
(f) all Patents Controlled by ISIS as of the Effective Date that
specifically claim the composition of matter or the use of ISIS 3521
are listed in Exhibit D under the heading of "Compound Patent Rights";
(g) all Patents Controlled by ISIS as of the Effective Date that are
necessary for performing the process steps set forth in master batch
records for ISIS 3521 in the version existing as of the Effective Date
are listed in Exhibit D under the heading of "Manufacturing Patent
Rights";
(h) to the best of ISIS' knowledge, the Manufacture, use and sale of ISIS
3521 and the Product do not infringe any Patents owned by any Third
Party;
(i) there are no claims, judgments or settlements against or owed by ISIS
or pending or threatened claims or litigation relating to the ISIS
Patent Rights; and
(j) ISIS has disclosed to LILLY all patent opinions obtained by ISIS
regarding ISIS Patent Rights.
6.2 REPRESENTATIONS AND WARRANTIES OF LILLY.
LILLY represents and warrants to ISIS that, as of the date of this Agreement:
(a) it has the full right, power and authority to enter into this
Agreement, to perform the Development Program and to consummate the
transaction contemplated herein;
(b) it has duly and properly taken all action required by its articles of
incorporation and its bylaws to authorize the execution, delivery, and
performance by it of this Agreement; and
(c) this Agreement has been duly executed and delivered by LILLY and
constitutes a legal, valid, and binding agreement of LILLY enforceable
against it in accordance with its terms, except as enforcement may be
affected by bankruptcy, insolvency, or other similar laws and by
general principles of equity as applied by a court of competent
jurisdiction.
6.3 INDEMNIFICATION.
(a) ISIS will indemnify, defend and hold LILLY and its Affiliates, and
their respective directors, officers, employees and agents ("LILLY
Indemnitees") harmless against any and all losses, costs, liabilities
and expenses (including reasonable attorneys' fees) ("Losses"), arising
in connection with actions, suits, claims, demands and prosecution
15
that may be brought or instituted by Third Parties ("Third Party
Claims") against LILLY Indemnitees to the extent based upon or arising
out of (i) the gross negligence or willful misconduct of ISIS under
this Agreement, or (ii) the material breach by ISIS of any warranty,
representation or obligation of ISIS under this Agreement, except to
the extent that such Losses are the result of (i) the gross negligence
or willful misconduct of LILLY under this Agreement, or (ii) the
material breach by LILLY of any warranty, representation or obligation
of LILLY under this Agreement.
(b) LILLY will indemnify, defend and hold ISIS and its Affiliates, and
their respective directors, officers, employees and agents ("ISIS
Indemnitees"), harmless against any and all Losses arising in
connection with Third Party Claims that may be brought or instituted
against ISIS Indemnitees to the extent based upon or arising out of (i)
the gross negligence or willful misconduct of LILLY under this
Agreement, (ii) the material breach by LILLY of any warranty,
representation or obligation of LILLY under this Agreement, or (iii)
the Manufacture, use, import or sale by LILLY, its Affiliates or
Sublicensees of ISIS 3521 or Product, except to the extent that such
Losses are the result of (i) the gross negligence or willful misconduct
of ISIS under this Agreement, or (ii) the material breach by ISIS of
any warranty, representation or obligation of ISIS under this
Agreement.
(c) A party that intends to claim indemnification under this Section (the
"Indemnitee") will (i) notify the other party (the "Indemnitor") in
writing of any Losses and Third Party Claims with respect to which the
Indemnitee intends to claim indemnification as soon as practicable
after the Indemnitee becomes aware of any such losses and claims; (ii)
permit the Indemnitor to assume the defense thereof with counsel
selected by the Indemnitor; and (iii) cooperate with the Indemnitor, at
the Indemnitor's expense, in the defense thereof.
(d) Indemnitee will have the right to participate and be represented (at
the Indemnitor's expense) by legal counsel of the Indemnitee's choice
in all proceedings and negotiations, if representation by counsel
retained by Indemnitor would be inappropriate due to actual or
potential differing interests between the Indemnitee and any other
party represented by such counsel in such proceedings.
(e) The indemnity agreement in this Section will not apply to amounts paid
in settlement of any Third Party Claim if such settlement is effected
without the consent of the Indemnitor, which consent will not be
unreasonably withheld. The Indemnitor will not settle or compromise any
Third Party Claim in any manner that admits fault on the part of the
Indemnitee without the express prior written consent of the Indemnitee,
which consent may be withheld for any reason or no reason.
(f) Failure of the Indemnitee to deliver notice to the Indemnitor within a
reasonable time after becoming aware of potential Losses will not
relieve the Indemnitor of any liability to the Indemnitee pursuant to
this Section, except to the extent such delay prejudices the
Indemnitor's ability to defend the Third Party Claim.
16
ARTICLE 7
INTELLECTUAL PROPERTY
7.1 NO IMPLIED LICENSES.
Except as expressly provided otherwise herein, neither party hereto will be
deemed by this Agreement to have been granted any license or other rights to the
other party's intellectual property rights.
7.2 COMPOUND IMPROVEMENTS.
(a) The entire right, title, and interest in and to all Compound
Improvements developed or invented solely by employees or consultants
of LILLY during the term of this Agreement will be the sole and
exclusive property of LILLY. LILLY hereby grants ISIS a worldwide,
royalty-free, nonexclusive license to practice under LILLY's rights to
any such LILLY Compound Improvements to carry out the activities
contemplated by this Agreement.
(b) The entire right, title, and interest in and to all Compound
Improvements developed or invented solely by employees or consultants
of ISIS during the term of this Agreement will be the sole and
exclusive property of ISIS, subject to the license granted to LILLY
under Section 3.1.
(c) The entire right, title, and interest in and to all Compound
Improvements developed or invented jointly by employees or consultants
of ISIS and LILLY during the term of this Agreement will be the joint
property of ISIS and LILLY. Each party will have an undivided joint
ownership interest in such Compound Improvements, and may license its
rights under such Compound Improvements for its own account and without
the consent of the other party, subject to the license granted to LILLY
under Section 3.1.
(d) Promptly after the filing of a patent application claiming a Compound
Improvement, the filing party will disclose to the other party each
Patent claiming such improvements.
7.3 CORE TECHNOLOGY IMPROVEMENTS.
(a) The entire right, title, and interest in and to all Core Technology
Improvements developed or invented solely by employees or consultants
of LILLY during the term of this Agreement will be the sole and
exclusive property of LILLY. LILLY hereby grants ISIS a worldwide,
royalty-free, sublicensable, perpetual, nonexclusive license to
practice under LILLY's rights to any such LILLY Core Technology
Improvements to carry out the activities contemplated by this
Agreement, and to make, have made, use, import, offer for sale and sell
products other than the Product.
(b) The entire right, title, and interest in and to all Core Technology
Improvements developed or invented solely by employees or consultants
of ISIS during the term of this
17
Agreement will be the sole and exclusive property of ISIS, subject to
the license granted to LILLY under Section 3.1.
(c) The entire right, title, and interest in and to all Core Technology
Improvements developed or invented jointly by employees or consultants
of ISIS and LILLY during the term of this Agreement will be the joint
property of ISIS and LILLY. Each party will have an undivided joint
ownership interest in such Core Technology Improvements, and may
license its rights under such Core Technology Improvements for its own
account and without the consent of the other party, subject to the
license granted to LILLY under Section 3.1.
(d) Promptly after the filing of a patent application claiming Core
Technology Improvements, the filing party will disclose to the other
party each Patent claiming such improvements.
7.4 MANUFACTURING TECHNOLOGY IMPROVEMENTS.
(a) The entire right, title, and interest in and to all Manufacturing
Technology Improvements developed or invented solely by employees or
consultants of LILLY during the term of this Agreement will be the sole
and exclusive property of LILLY. LILLY hereby grants ISIS a worldwide,
royalty-free, sublicensable, perpetual, nonexclusive license to
practice under LILLY'S rights to any such Manufacturing Technology
Improvements to carry out the activities contemplated by this Agreement
and to make, have made, use, import, offer for sale and sell products
other than the Product.
(b) The entire right, title, and interest in and to all Manufacturing
Technology Improvements developed or invented solely by employees or
consultants of ISIS during the term of this Agreement will be the sole
and exclusive property of ISIS, subject to the license granted to LILLY
under Section 3.1.
(c) The entire right, title, and interest in and to all Manufacturing
Technology Improvements developed or invented jointly by employees or
consultants of ISIS and LILLY during the term of this Agreement will be
the joint property of ISIS and LILLY. Each party will have an undivided
joint ownership interest in such Manufacturing Technology Improvements,
and may license its rights under such Manufacturing Technology
Improvements for its own account and without the consent of the other
party, subject to the license granted to LILLY under Section 3.1.
(d) Promptly after the filing of a patent application claiming a
Manufacturing Technology Improvement, the filing party will disclose to
the other party each Patent claiming such improvements.
18
7.5 FILING, PROSECUTION AND MAINTENANCE OF PATENTS AND PATENT APPLICATIONS
UNDER ISIS PATENT RIGHTS.
(a) During the term of this Agreement, LILLY will file, prosecute and
maintain the Compound Patent Rights, any Patents filed on Compound
Improvements owned solely by LILLY or jointly by ISIS and LILLY, and
any Patents filed on Core Technology Improvements and Manufacturing
Technology Improvements owned solely by LILLY (the "LILLY Patent
Portfolio"), at its own expense, using patent counsel of its choice,
but reasonably acceptable to ISIS. LILLY will keep ISIS advised of the
status of the actual and prospective patent filings pursuant to this
subsection (a) on a semi-annual basis and upon the request of ISIS,
LILLY will provide copies of any papers related to the filing,
prosecution and maintenance of such patent filings. If LILLY decides to
discontinue the prosecution or maintenance of a Patent within the LILLY
Patent Portfolio entirely or in a particular country, it will inform
ISIS thereof with sufficient time for ISIS to assume the prosecution or
maintenance of such Patent, and, if ISIS continues such prosecution or
maintenance, such Patent in such country will thereafter be included in
the ISIS Patent Rights hereunder, including, without limitation, for
purposes of calculating royalties due and owing to ISIS hereunder.
(b) ISIS will be responsible for filing, prosecuting and maintaining
worldwide the Manufacturing Patent Rights and any Patents filed on Core
Technology Improvements and Manufacturing Technology Improvements owned
jointly by ISIS and LILLY (the "ISIS Patent Portfolio"), at its
expense, using patent counsel of its choice, but reasonably acceptable
to LILLY. ISIS will keep LILLY advised of the status of the actual and
prospective patent filings of Patents within the ISIS Patent Portfolio
on a semi-annual basis and upon the request of LILLY, ISIS will provide
copies of any papers related to the filing, prosecution and maintenance
of such patent filings. If ISIS decides to discontinue the prosecution
or maintenance of any Patent within the ISIS Patent Portfolio entirely
or in a particular country, it will inform LILLY thereof with
sufficient time for LILLY to assume the prosecution or maintenance of
such Patent, and LILLY may assume such prosecution or maintenance if
such Patent provides a substantial competitive advantage to LILLY with
respect to any Product in the applicable country in coordination with
any Third Party to whom ISIS has granted rights under such Patent if
such Patent also provides a substantial competitive advantage to such
Third Party in the applicable country.
7.6 INTERFERENCE, OPPOSITION, REEXAMINATION AND REISSUE.
(a) Either party will, within 10 days of learning of such event, inform the
other party of any request for, or filing or declaration of, any
interference, opposition, or reexamination relating to Patents within
the LILLY Patent Portfolio and the ISIS Patent Portfolio. LILLY and
ISIS will thereafter consult and cooperate fully to determine a course
of action with respect to any such proceeding subject to the provisions
of this Section set forth below.
19
(b) Any interference, opposition, reissue, or reexamination proceedings
relating to the LILLY Patent Portfolio will be conducted at LILLY'S
expense. LILLY and ISIS will cooperate fully and will provide each
other with any information or assistance that any party may reasonably
request. LILLY will keep ISIS informed of developments in any such
action or proceeding. Decisions on whether to initiate such a
proceeding and the course of action in such proceeding, including
settlement negotiations and terms, will be made by mutual agreement of
ISIS and LILLY.
(c) Any interference, opposition, reissue, or reexamination proceeding
relating to the ISIS Patent Portfolio will be conducted by ISIS at
ISIS' expense. To the extent that such interference, opposition,
reissue, or reexamination proceeding materially impacts the commercial
value of the Product in the marketplace, LILLY and ISIS will cooperate
fully and will provide each other with any information or assistance
that either may reasonably request. ISIS will keep LILLY informed of
developments in any such action or proceeding, including, to the extent
permissible, the status of any settlement negotiations and the terms of
any offer related thereto, except that ISIS must obtain LILLY'S consent
to any settlement terms which materially affect LILLY'S freedom to
operate under the licenses granted to LILLY under this Agreement.
7.6 ENFORCEMENT AND DEFENSE.
(a) Either party will, within 10 days of learning of such event, inform the
other party of any infringement of Patents within the LILLY Patent
Portfolio or the ISIS Patent Portfolio. LILLY and ISIS will thereafter
consult and cooperate fully to determine a course of action including,
without limitation, the commencement of legal action by either or both
LILLY and ISIS, to terminate any infringement, subject to the
provisions of this Section 7.6 set forth below.
(b) If there is any infringement of Patents within the LILLY Patent
Portfolio, LILLY will have the first right to initiate and prosecute
such legal action at its own expense and in the name of ISIS and LILLY,
or to control the defense of any declaratory judgment action relating
to Compound Patent Rights. LILLY will promptly inform ISIS if it elects
not to exercise such first right and ISIS will thereafter have the
right to either initiate and prosecute such action or to control the
defense of such declaratory judgment action in the name of ISIS and, if
necessary, LILLY.
(c) In the event that LILLY elects not to initiate and prosecute an action
as provided in subsection (b), and ISIS elects to do so, the costs of
any agreed-upon course of action to terminate infringement of Patents
within the LILLY Patent Portfolio, including the costs of any legal
action commenced or the defense of any declaratory judgment, will be
borne by ISIS, except that the cost of any such action related solely
to ISIS 3521 will be borne by LILLY.
(d) For any action by LILLY pursuant to subsection (b) above, in the event
that LILLY is unable to initiate or prosecute such action solely in its
own name, ISIS will join such action voluntarily and will execute and
cause its Affiliates to execute all documents
20
necessary for LILLY to initiate litigation to prosecute and maintain
such action. In connection with any action, LILLY and ISIS will
cooperate fully and will provide each other with any information or
assistance that either may reasonably request. Each party will keep
the other informed of developments in any action or proceeding,
including, to the extent permissible by law, the status of any
settlement negotiations and the terms of any offer related thereto.
(e) If there is any infringement of Patents within the ISIS Patent
Portfolio, ISIS will have the first right to initiate and prosecute
such legal action at its own expense and in the name of ISIS and LILLY,
or to control the defense of any declaratory judgment action relating
to Patents within the ISIS Patent Portfolio. To the extent that
infringement materially impacts the commercial value of the Product in
the marketplace, ISIS will promptly inform LILLY if it elects not to
exercise such first right and LILLY will thereafter have the right to
either initiate and prosecute such action or to control the defense of
such declaratory judgment action in the name of LILLY and, if
necessary, ISIS.
(f) In the event that ISIS elects not to initiate and prosecute an action
as provided in subsection (e) above, and LILLY elects to do so, the
costs of any agreed-upon course of action to terminate infringement of
Patents within the ISIS Patent Portfolio, including the costs of any
legal action commenced or the defense of any declaratory judgment, will
be shared equally by ISIS and LILLY.
(g) For any action to terminate any infringement of Patents within the ISIS
Patent Portfolio, in the event that ISIS is unable to initiate or
prosecute such action solely in its own name, LILLY will join such
action voluntarily and will execute and cause its Affiliates to execute
all documents necessary for ISIS to initiate litigation to prosecute
and maintain such action. In connection with any action, ISIS and LILLY
will cooperate fully and will provide each other with any information
or assistance that either may reasonably request. Each party will keep
the other informed of developments in any action or proceeding,
including, to the extent permissible by law, the status of any
settlement negotiations and the terms of any offer related thereto.
(h) Except as provided otherwise herein, any recovery obtained by either or
both LILLY and ISIS in connection with or as a result of any action
contemplated by this Section, whether by settlement or otherwise, will
be shared in order as follows:
(i) the party which initiated and prosecuted the action will
recoup all of its costs and expenses incurred in connection
with the action;
(ii) the other party will then, to the extent possible, recover its
costs and expenses incurred in connection with the action;
(iii) the amount of any recovery remaining from actions relating to
Compound Patents Rights, Manufacturing Technology Patents,
Patents claiming Manufacturing Technology Improvements or
Patents claiming Compound Improvements will then be allocated
between the parties on a PRO RATA basis based on the amounts
of
21
proportionate lost royalties of ISIS and lost profits of
LILLY under which ISIS will receive a proportion based on the
royalties it lost and LILLY will receive a proportion based on
its lost profits.
7.7 PROSECUTION, MAINTENANCE, ENFORCEMENT AND DEFENSE OF PATENTS CONTROLLED
BY ISIS.
ISIS will have the sole and exclusive right, in its sole discretion, to file,
prosecute, enforce and defend any Patents within Core Technology Patent Rights
and Patents claiming Compound Improvements, Manufacturing Technology
Improvements and Core Technology Improvements Controlled by ISIS.
7.8 THIRD PARTY PATENTS.
If either party receives notice that a Product infringes a Third Party Patent,
and the parties hereto agree to settle with and pay royalties to such Third
Party, [*] If all the foregoing conditions are met, additional royalties payable
to such Third Party [*]
7.9 CERTIFICATION UNDER DRUG PRICE COMPETITION AND PATENT RESTORATION ACT.
ISIS and LILLY each will immediately give notice to the other of any
certification of which they become aware filed under the United States "Drug
Price Competition and Patent Term Restoration Act of 1984" claiming that
Compound Patent Rights or Manufacturing Patent Rights covering ISIS 3521 or
Product are invalid or that infringement will not arise from the Manufacture,
use or sale of ISIS 3521(s) or Product(s) by a Third Party. If ISIS or LILLY
(depending on which party is defending the relevant ISIS Patent Rights) decides
not to bring infringement proceedings against the entity making such a
certification, such party will give notice to the other party of its decision
not to bring suit within 21 days after receipt of notice of such certification.
The party receiving such notice may then, but is not required to, bring suit
against the party that filed the certification. Any suit by LILLY or ISIS will
either be in the name of LILLY or in the name of ISIS, or jointly by LILLY and
ISIS. For this purpose, the party not bringing Suit will execute such legal
papers necessary for the prosecution of such suit as may be reasonably requested
by the party bringing suit.
7.10 ABANDONMENT.
ISIS will promptly give notice to LILLY of the grant, lapse, revocation,
surrender, invalidation or abandonment of any ISIS Patent Rights licensed to
LILLY for which ISIS is responsible for the filing, prosecution and maintenance.
7.11 PATENT TERM RESTORATION.
The parties hereto will cooperate with each other in obtaining patent term
restoration or supplemental protection certificates or their equivalents in any
country worldwide where applicable to ISIS Patent Rights. In the event that
elections with respect to obtaining such patent term restoration are to be made,
LILLY will have the right to make the election and ISIS agrees to abide by such
election.
22
7.12 PATENT STATUS.
At least 60 days before projected Marketing Approval of a Product, the parties
will agree on which ISIS Patent Rights cover the manufacture, use or sale of
such Product on a country-by-country basis, and such Patents will be deemed to
be "relevant" to such Product. Within 60 days after each calendar year-end
beginning upon Marketing Approval of a Product, ISIS will provide LILLY with a
report describing the status of the ISIS Patent Rights relevant to such Product.
Such report will include, at a minimum, the patent country, patent and
application numbers, filing date, issue date, expiration date and any other
relevant information for ISIS Patent Rights relevant to such Product. Such
report will be mailed to:
Eli Lilly and Company
Attention: Royalty Administration D.C. 1064
Lilly Corporate Center
Indianapolis, IN 46285
ARTICLE 8
TERM AND TERMINATION
8.1 TERM AND EXPIRATION.
This Agreement will be effective as of the Effective Date and unless terminated
earlier pursuant to Section 8.2 below, the term of this Agreement will continue
in effect until expiration of all royalty obligations hereunder.
8.2 TERMINATION FOR CAUSE.
(a) This Agreement may be terminated upon written notice by either party to
the other at any time during the term of this Agreement if the other
party is in material breach of its obligations hereunder and has not
cured such breach within 90 days after written notice requesting cure
of the breach; providing, however, that in the event of a good faith
dispute with respect to the existence of a material breach, the 90-day
cure period will be stayed until such time as the dispute is resolved
pursuant to Subsection 9.6 hereof.
(b) Upon material breach by ISIS of its obligations in the performance of
the Development Program, if LILLY decides not to terminate the
Agreement, LILLY will have the right to offset any costs it may incur
as a result of curing such breach against the amounts payable to ISIS
for the performance of such obligations. Further, to the extent that a
party prevails in a law suit brought against the other party for
material breach of this Agreement, such prevailing party will be
entitled to collect from the other party reasonable attorneys' fees and
legal costs incurred in connection with such law suit commensurate with
extent that its claim is upheld.
23
8.3 EFFECT OF EXPIRATION OR TERMINATION.
(a) In the event this Agreement is terminated by either party under Section
8.2(a), LILLY's license pursuant to Section 3.1 will terminate as of
such termination date. Promptly upon termination, the parties will
prepare a transition plan to ensure the seamless transition of any
clinical studies and distribution and sales activities relating to the
Product. Further, LILLY will transfer all Marketing Approvals to ISIS,
and will instruct its patent counsel to coordinate transfer of the
relevant patent files with ISIS. Once all such files and
responsibilities have been assigned and/or transferred back to ISIS,
LILLY will have no further obligation to pay for the filing,
prosecution or maintenance of such patents and patent applications. In
addition, LILLY will provide ISIS with any and all data relating to
ISIS 3521 and/or to the ISIS Patent Rights that are in LILLY's
possession or control. Further, the licenses granted by LILLY to ISIS
under Compound Improvements, Core Technology Improvements and
Manufacturing Technology Improvements pursuant to Section 7.2(a),
7.3(a) and 7.4(a) will each convert to a worldwide, royalty-free,
sublicensable, perpetual, nonexclusive license to practice under such
LILLY's rights to any such improvements, and to make, have made, use,
import, offer for sale and sell products and Products.
(b) In the event this Agreement is terminated by ISIS under Section 8.2(a),
if LILLY has granted any sublicenses under this Agreement, those
sublicenses will continue, provided that such sublicenses are
consistent with the terms of this Agreement and further provided that
Sublicensees make all royalty payments directly to ISIS effective as of
the termination date of this Agreement.
(c) The foregoing rights and remedies of the parties are non-exclusive and
without prejudice to any rights that either party may have arising
under applicable law or equity.
8.4 SURVIVAL OF CERTAIN RIGHTS AND OBLIGATIONS.
Expiration or termination of the Agreement will not relieve the parties of any
obligation accruing prior to such expiration or termination. The provisions of
following Sections will survive expiration or termination of the Agreement:
3.3(b) and (c); 5.5 to 5.7; 6.3; 7.2(c), 7.3(c) and 7.4(c), other than the
reference to Section 3.1 therein; 8.3 to 8.5; 9.5; 9.7 to 9.13. The provisions
of Section 4.1 and 4.2 will survive the termination or expiration of the
Agreement and will continue in effect for 10 years thereafter. Any expiration or
early termination of this Agreement will be without prejudice to the rights of
either party against the other accrued or accruing under this Agreement prior to
termination, including the obligation to pay royalties for Product sold prior to
such termination.
8.5 RIGHTS IN BANKRUPTCY.
All rights and licenses granted under or pursuant to this Agreement by ISIS and
LILLY are, and will otherwise be deemed to be, for purposes of Section 365(n) of
the United States Bankruptcy Code, licenses of rights to "intellectual property"
as defined under Section 101 of the United States Bankruptcy Code. The parties
agree that the parties, as licensees of such rights under this
24
Agreement, will retain and may fully exercise all of their rights and
elections under the United States Bankruptcy Code. The parties further agree
that, in the event of the commencement of a bankruptcy proceeding by or
against a party under the United States Bankruptcy Code, the party hereto
that is not a party to such proceeding will be entitled to a complete
duplicate of (or complete access to, as appropriate) any such intellectual
property and all embodiments of such intellectual property, which, if not
already in the non-subject party's possession, will be promptly delivered to
it (a) upon any such commencement of a bankruptcy proceeding upon the
non-subject party's written request therefor, unless the party subject to
such proceeding continues to perform all of its obligations under this
Agreement or (b) if not delivered under clause (a) above, following the
rejection of this Agreement by or on behalf of the party subject to such
proceeding upon written request therefor by the non-subject party.
ARTICLE 9
MISCELLANEOUS
9.1 FORCE MAJEURE.
Neither party will be held liable or responsible to the other party nor be
deemed to have defaulted under or breached the Agreement for failure or delay in
fulfilling or performing any term of the Agreement when such failure or delay is
caused by or results from causes beyond the reasonable control of the affected
party including, without limitation, embargoes, acts of war (whether war be
declared or not), insurrections, riots, civil commotions, strikes, lockouts or
other labor disturbances, or acts of God. The affected party will notify the
other party of such force majeure circumstances as soon as reasonably practical
and will make every reasonable effort to mitigate the effects of such force
majeure circumstances.
9.2 ASSIGNMENT.
This Agreement will inure to the benefit and be binding upon each party, its
successors and assigns. The Agreement may not be assigned or otherwise
transferred, nor, except as expressly provided hereunder, may any right or
obligation hereunder be assigned or transferred by either party without the
prior written consent of the other party; provided, however, that either party
may, without such consent, assign the Agreement and its rights and obligations
hereunder to an Affiliate or in connection with the transfer or sale of all or
substantially all of its assets, or in the event of its merger or consolidation
or change in control or similar transaction. Any permitted assignee will assume
all obligations of its assignor under the Agreement. Any attempted assignment
not in accordance with this Section 9.2 will be void.
9.3 SEVERABILITY.
In the event any one or more of the provisions contained in this Agreement
should be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein will
not in any way be affected or impaired thereby, unless the absence of the
invalidated provision(s) adversely affect the substantive rights of the
25
parties. The parties will in such an instance use their best efforts to
replace the invalid, illegal or unenforceable provision(s) with valid, legal
and enforceable provision(s) which, insofar as practical, maintains the
balance of the rights and obligations of the parties under this Agreement.
9.4 NOTICES.
All notices which are required or permitted hereunder will be in writing and
sufficient if delivered personally, sent by facsimile or email (and promptly
confirmed by personal delivery, registered or certified mail or overnight
courier), sent by nationally-recognized overnight courier or sent by registered
or certified mail, postage prepaid, return receipt requested, addressed as
follows:
if to ISIS, to: Isis Pharmaceuticals, Inc.
Carlsbad Research Center
2292 Faraday Avenue
Carlsbad, CA 92008
Attention: Executive Vice President
Fax No.: (760) 931-9639
E-Mail: lparshall@isisph.com
with a copy to: Attention: General Counsel
Fax No.: (760) 603-3820
E-Mail: gbryce@isisph.com
if to LILLY, to: Eli Lilly and Company
Lilly Corporate Center
Indianapolis, IN 46285
Attention: General Patent Counsel
Fax No.: (317) 277-1917
E-Mail: armitage_robert_a@lilly.com
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. Any such notice
will be deemed to have been given when delivered if personally delivered or sent
by facsimile on a business day, on the business day after dispatch if sent by
nationally-recognized overnight courier and on the third business day following
the date of mailing if sent by mail.
9.5 APPLICABLE LAW.
The Agreement will be governed by and construed in accordance with the laws of
the State of Delaware without reference to any rules of conflict of laws.
9.6 DISPUTE RESOLUTION; OVERSIGHT COMMITTEE.
The parties recognize that disputes may from time to time arise between the
parties during the term of this Agreement. In the event of such a dispute,
either party, by written notice to the other
26
party, may have such dispute referred to the Oversight Committee, the
function of which is to attempt resolution of any disputes arising under this
Agreement by good faith negotiations. The Oversight Committee will endeavor
to resolve such disputes within 30 days after such notice is received. The
Oversight Committee will be comprised of two designated executive officers
(or their successors), one from each party. Said designated officers are as
follows:
For ISIS: Chief Executive Officer
For LILLY: Executive Vice President
9.7 REMEDIES.
In the event the parties are unable to resolve any disputes hereunder pursuant
to the dispute resolution measures provided herein, each party may pursue its
rights and remedies in law or equity in any court of competent jurisdiction.
9.8 ENTIRE AGREEMENT.
This Agreement and the Supply Agreement contain the entire understanding of the
parties with respect to the license, development and commercialization of ISIS
3521 and Product. All express or implied agreements and understandings, either
oral or written, heretofore made by the parties on the same subject matter are
expressly superseded by this Agreement. The Agreement may be amended, or any
term hereof modified, only by a written instrument duly executed by both parties
hereto.
9.9 HEADINGS.
The captions to the several Articles and Sections hereof are not a part of the
Agreement nor affect the interpretation of any of its provisions, but are merely
a convenience to assist in locating and reading the several Articles and
Sections hereof.
9.10 INDEPENDENT CONTRACTORS.
It is expressly agreed that ISIS and LILLY will be independent contractors and
that the relationship between the two parties will not constitute a partnership,
joint venture or agency. Neither ISIS nor LILLY will have the authority to make
any statements, representations or commitments of any kind, or to take any
action, which will be binding on the other, without the prior consent of the
other party.
9.11 WAIVER.
The waiver by either party hereto of any right hereunder, or the failure to
perform, or a breach by the other party will not be deemed a waiver of any other
right hereunder or of any other breach or failure by said other party whether of
a similar nature or otherwise.
27
9.12 COUNTERPARTS.
The Agreement may be executed in two or more counterparts, each of which will be
deemed an original, but all of which together will constitute one and the same
instrument.
9.13 WAIVER OF RULE OF CONSTRUCTION.
Each party has had the opportunity to consult with counsel in connection with
the review, drafting and negotiation of this Agreement. Accordingly, the rule of
construction that any ambiguity in this Agreement will be construed against the
drafting party will not apply.
ARTICLE 10
HART-SCOTT-RODINO FILING
10.1 HSR ACT COMPLIANCE.
Notwithstanding anything to the contrary in this Agreement, the Effective Date
of this Agreement and the rights and obligations of the parties hereunder shall
not occur until such time as (a) the parties shall have complied with all
applicable requirements of the Hart Scott Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"); (b) the waiting period under the HSR Act shall
have expired or earlier been terminated; (c) no judicial or administrative
proceeding opposing consummation of all or any part of this Agreement shall be
pending; (d) no injunction (whether temporary, preliminary or permanent)
prohibiting consummation of the transactions contemplated by this Agreement or
any material portion hereof shall be in effect; and (e) no requirements or
conditions shall have been imposed in connection therewith which are not
reasonably satisfactory to the parties (the "HSR Conditions"). Upon satisfaction
of the HSR Conditions, the parties shall enter into the Supply Agreement.
10.2 COOPERATION ON FILING.
Both LILLY and ISIS shall file, as soon as reasonably practicable after the
Signing Date of this Agreement, with the Federal Trade Commission ("FTC") and
the Antitrust Division of the United States Department of Justice ("DOJ") the
notification and report form ("Report") required of each of them in the
reasonable opinion of either or both parties under the HSR Act with respect to
the transactions described in this Agreement and any other agreements between
the parties contemplated hereby (collectively, the "Transactions"). Each party
shall cooperate with the other to the extent necessary to assist the other party
in the preparation of its Report and to proceed to obtain necessary approvals
under the HSR Act to complete the Transactions including, but not limited to,
the expiration or earlier termination of any and all applicable waiting periods
required by the HSR Act ("Required Approval"). Each party will use reasonable
efforts to obtain the Required Approval. Each party will use reasonable best
efforts to assist the other party in eliminating any concern on the part of any
court of governmental authority regarding the legality of the Transactions. Such
assistance shall include, if required by federal or state antitrust authorities,
such party's taking all reasonable steps to secure Required Approval. The other
party shall cooperate in good faith, at its own cost, with any government
investigation
28
regarding the legality of the Transactions and promptly produce documents,
witnesses, and information demanded by the FTC or DOJ, whether by informal
request or by formal HSR Act Second Request or other legal process, provided,
however, that neither party shall be obligated to proceed with litigation if the
transaction is challenged by the FTC or the DOJ. If either party determines that
it does not wish to proceed with the Report process, because of litigation, the
parties will discuss in good faith whether there are any modifications to the
Agreement or any other agreement between the parties contemplated hereby that
will avoid antitrust issues and facilitate obtaining the Required Approval.
Neither party shall be obligated in any way to engage in further negotiations of
the terms of this Agreement or any other agreement between the parties
contemplated hereby, even if modifications are identified that will facilitate
obtaining Required Approval. If litigation is commenced, either party may
terminate this Agreement.
29
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date.
ELI LILLY AND COMPANY ISIS PHARMACEUTICALS, INC.
By: /s/ AUGUST M. WATANABE By:/s/ B. LYNNE PARSHALL
------------------------------- --------------------------------------
Name: August M. Watanabe Name: B. Lynne Parshall
----------------------------- ------------------------------------
Title: Executive Vice President Title: Executive Vice President and CFO
---------------------------- -----------------------------------
30
EXHIBIT A
DEFINITIONS
Each of the capitalized terms used in this Agreement (other than the headings of
the Articles and Sections), whether used in the singular or the plural, will
have the meaning as set forth below or, if not listed below, the meaning as
designated in places throughout this Agreement.
1.1 "AFFILIATE" with respect to either party means any person,
organization, corporation or other business entity (collectively,
"Person") controlling, controlled by, or under common control with such
party. For purposes of this definition, "control" refers to (a) the
possession, directly or indirectly, of the power to direct the
management or policies of a Person, whether through the ownership of
voting securities, by contract or otherwise, and (b) the ownership,
directly or indirectly, of at least 50% of the voting securities or
other ownership interest of a Person.
1.2 "CALENDAR QUARTER" means the respective periods of three (3)
consecutive calendar months ending on March 31, June 30, September 30
and December 31.
1.3 "CALENDAR YEAR" means each successive period of 12 months commencing on
January 1 and ending on December 31.
1.4 "COMBINATION PRODUCT" means any pharmaceutical product that comprises
ISIS 3521 and at least one other active compound(s) and/or ingredients.
All references to the Product in this Agreement will be deemed to
include Combination Product.
1.5 "COMPOUND IMPROVEMENT" means any and all modifications and enhancements
that specifically and solely relate to the composition of matter of
ISIS 3521 or the method of use of ISIS 3521, except pharmaceutical
formulations and dosage forms for administration of the Product,
developed by or coming under Control of a party after the Effective
Date.
1.6 "COMPOUND PATENT RIGHTS" means the Patents Controlled by ISIS as of the
Effective Date that specifically claim the composition of matter or the
use of ISIS 3521 that are Valid and would be infringed by the
Manufacture, use, importation, offer for sale or sale of ISIS 3521 by
an unlicensed Third Party. The Compound Patent Rights are listed in
Exhibit D.
1.7 "CONTROL" or "CONTROLLED" means with respect to any intellectual
property right, that the party owns or has a license to such
intellectual property right and has the ability to grant access, a
license, or a sublicense to such intellectual property right to the
other party as provided for in this Agreement without violating an
agreement with, or infringing any rights of, a Third Party as of the
time the party would be first required under this Agreement to grant
the other party such access, license or sublicense.
1.8 "CORE TECHNOLOGY PATENT RIGHTS" means the Patents Controlled by ISIS as
of the Effective Date that are Valid and would be infringed by the
Manufacture, use,
1
importation, offer for sale or sale of ISIS 3521 by an unlicensed Third
Party that do not constitute Compound Patent Rights or Manufacturing
Patent Rights, such as Patents which claim, cover or relate to the
cellular mechanisms of action by which phosphorothioate antisense
oligonucleotides exert their effect, or to methods of treatment using
such oligonucleotides. The Core Technology Patent Rights are listed in
Exhibit D.
1.9 "CORE TECHNOLOGY IMPROVEMENT" means any and all modifications and
enhancements of antisense technology Controlled by ISIS or LILLY, as
appropriate, after the Effective Date that claim, cover or relate to
the cellular mechanisms of action by which phosphorothioate antisense
oligodeoxynucleotides exert their effect, or to methods of treatment
using such oligodeoxynucleotides, and that are necessary or useful for
the Manufacture or use of the Product. The definition of Core
Technology Improvements does not include any modifications or
enhancements that are Compound Improvements or Manufacturing Technology
Improvements.
1.10 "COST OF MANUFACTURE" means the cost incurred by ISIS in the
Manufacture of API as described in Exhibit 7 of the Supply Agreement.
1.11 "CS17 STUDY" means the Phase III clinical trial conducted by ISIS that
is ongoing as of the Effective Date, as further described in the
Development Plan.
1.12 "DEVELOPMENT PLAN" means the plan for the development of ISIS 3521
attached hereto as Exhibit C.
1.13 "DEVELOPMENT PROGRAM" means the activities undertaken by ISIS and LILLY
as set forth in the Development Plan.
1.14 "EC APPROVAL" means approval of a Product for marketing in the European
Union by the European Commission ("EC") upon recommendation by the
European Medicines Evaluation Agency ("EMEA") or, if LILLY seeks
approval through mutual recognition therein, by the Ministry of Health
of the United Kingdom, France, Germany, Italy or Spain (each a "Major
European Country"), without the requirement for price having been
approved. If a Product is sold in a Major European Country without EC
or Ministry of Health approval, EC Approval will be deemed to have been
obtained on the date of first sale of a Product in a Major European
Country.
1.15 "EFFECTIVE DATE" means the latest of (a) the date on which the last
party executes this Agreement and shall be the Signing Date or, (b) if
applicable, the next day following the Required Approval (as defined in
Section 10.2).
1.16 "FIRST COMMERCIAL SALE" means the first sale of a Product by LILLY, its
Affiliates or a Sublicensee to an independent Third Party in a
particular country after Marketing Approval has been obtained.
1.17 "FTE" means the equivalent of the scientific or technical work of at
least a total of [*] hours per year on or directly related to the
Development Program carried out by a qualified employee or consultant.
[*]
2
*Confidential Treatment Requested
1.18 "INFORMATION" means any information exchanged by the parties under the
confidentiality agreement executed by the parties on December 5, 2000
or generated by a party during the term of this Agreement and includes,
but is not limited to, any and all inventions, know-how, developments,
improvements, materials, data, analyses, and the like, regardless of
whether the information is stored or transmitted in oral, documentary,
or electronic form. "Information" also includes, without limitation,
information relating to research and development plans, experiments,
results, compounds, therapeutic leads, candidates and products,
clinical and preclinical data, trade secrets and Manufacturing,
marketing, financial, regulatory, personnel and other business
information and plans, all scientific, clinical, regulatory, marketing,
financial and commercial information or data.
1.19 "ISIS 3521" means the phosphorothioate oligodeoxyribonucleotide that
targets human protein kinase C alpha disclosed and claimed (as SEQ ID
NO 2) in U.S. Patent No. 5,703,054.
1.20 "ISIS FTE RATE" means [*]
1.21 "ISIS PATENT RIGHTS" means Compound Patent Rights, Manufacturing Patent
Rights, and ISIS' rights and interest in Patents claiming Compound
Improvements and Manufacturing Technology Improvements.
1.22 "JAPANESE APPROVAL" means the approval of a Product for marketing in
Japan by the Japanese Ministry of Health and Welfare (or any future
equivalent process), together with any other approval necessary to make
and sell Product commercially in Japan without the requirement for
price having been approved. If a Product can be sold in Japan without
Ministry of Health and Welfare approval, Japanese Approval will be
deemed to have been obtained on the first sale of a Product in Japan.
1.23 "MAJOR MARKET" means any one of the following countries: United States,
Japan, the United Kingdom, France, Germany, Italy or Spain.
1.24 "MAJOR TUMOR" means one of following tumors: non-small cell lung
cancer, pancreatic, ovarian, lymphoma, hepatoma, breast, colon,
prostate, and bladder.
1.25 "MANUFACTURE" OR "MANUFACTURING" OR "MANUFACTURED" means all operations
involved in the manufacturing, quality control testing (including
in-process, release and stability testing, if applicable), releasing,
and shipping the Product.
1.26 "MANUFACTURING APPROVAL" means the act of a Regulatory Authority
necessary for the Manufacture of the Product in a country or regulatory
jurisdiction.
1.27 "MANUFACTURING PATENT RIGHTS" means Patents Controlled by ISIS that
claim the Manufacturing Technology that are Valid and would be
infringed by the Manufacture, use, importation, offer for sale or sale
of ISIS 3521 by an unlicensed Third Party. The Manufacturing Patent
Rights are listed in Exhibit D.
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1.28 "MANUFACTURING PROCESS" means the process steps set forth in master
batch records for ISIS 3521 in the version existing as of the Effective
Date, including reasonable minor variants and extensions of process
steps thereof.
1.29 "MANUFACTURING TECHNOLOGY" means any and all scientific and technical
data and information including without limitation formulas, methods,
techniques, protocols, and processes Controlled by ISIS as of the
Effective Date which are necessary for performing the Manufacturing
Process.
1.30 "MANUFACTURING TECHNOLOGY IMPROVEMENT" means any and all modifications
and enhancements in the Manufacturing Technology, developed by or
coming under Control of a party after the Effective Date.
1.31 "MARKETING APPROVAL" means the act of a Regulatory Authority necessary
for the marketing and sale of the Product in a country or regulatory
jurisdiction, including, without limitation, the approval of the NDA by
the FDA, EC Approval, and Japanese Approval.
1.32 "NDA" means a new drug application or other application filed with the
FDA to obtain approval for marketing a Product in the United States, or
any future equivalent process.
1.33 "NET SALES" means the gross amount invoiced by LILLY, its Affiliates,
or any Sublicensee thereof to unrelated Third Parties, excluding any
Sublicensee, for the Product, less:
(a) Trade, quantity and cash discounts allowed;
(b) Commissions, discounts, refunds, rebates, chargebacks,
retroactive price adjustments; and any other allowances which
effectively reduce the net selling price;
(c) Refunds or credits for actual Product returns;
(d) the cost of drug delivery systems used for the administration
of the Product;
(e) Any tax imposed on the production, sale, delivery or use of
the Product, including, without limitation, sales, use, excise
or value added taxes;
(f) Allowance for distribution expenses; and
(g) Any other similar and customary deductions.
Such amounts will be determined from the books and records of Lilly or
sublicensee, maintained in accordance with U. S. Generally Accepted
Accounting Principles or, in the case of sublicensees, such similar
accounting principles, consistently applied.
Net Sales excludes:
(i) The transfer of reasonable and customary quantities of free
samples of Product(s) and the transfer of Product(s) as
clinical trial materials, other than for subsequent resale;
and
(ii) Use by LILLY or its Affiliates or Sublicensees of Product for
any use connected with the securing of regulatory approval or
validating of the Manufacturing
4
Process or the obtaining of other necessary Marketing
Approvals for Product (unless such Product is subsequently
sold).
In the event that the Product is sold as part of a Combination Product
(where "Combination Product" means any pharmaceutical product which
comprises the Product and other active compound(s) and/or ingredients),
the Net Sales of the Product, for the purposes of determining royalty
payments, will be determined by multiplying the Net Sales of the
Combination Product (as defined in the standard Net Sales definition)
by the fraction, A / (A+B) where A is the weighted average sale price
of the Product when sold separately in finished form, and B is the
weighted average sale price of the other product(s) sold separately in
finished form.
In the event that the weighted average sale price of the Product can be
determined but the weighted average sale price of the other product(s)
cannot be determined, Net Sales for purposes of determining royalty
payments will be calculated by multiplying the Net Sales of the
Combination Product by the fraction A / C where A is the weighted
average sale price of the Product when sold separately in finished form
and C is the weighted average selling price of the Combination Product.
In the event that the weighted average sale price of the other
product(s) can be determined but the weighted average sale price of the
Product cannot be determined, Net Sales for purposes of determining
royalty payments will be calculated by multiplying the Net Sales of the
Combination Product by the following formula: one (1) minus B / C where
B is the weighted average sale price of the other product(s) when sold
separately in finished form and C is the weighted average selling price
of the Combination Product.
In the event that the weighted average sale price of both the Product
and the other product(s) in the Combination Product cannot be
determined, the Net Sales of the Product will be negotiated by the
parties in good faith. If the parties cannot reach agreement on the
appropriate allocation, the Net Sales of the Product will be deemed to
be equal to fifty percent (50%) of the Net Sales of the Combination
Product.
The weighted average sale price for a Product, other product(s), or
Combination Product will be calculated once each Calendar Year and such
price will be used during all applicable royalty reporting periods for
the entire following Calendar Year. When determining the weighted
average sale price of a Product, other product(s), or Combination
Product, the weighted average sale price will be calculated by dividing
the sales dollars (translated into U.S. dollars) by the units of active
ingredient sold during the twelve (12) months (or the number of months
sold in a partial calendar year) of the preceding Calendar Year for the
respective Product, other product(s), or Combination Product. In the
initial Calendar Year, a forecasted weighted average sale price will be
used for the Product, other product(s), or Combination Product. Any
over or under payment due to a difference between forecasted and actual
weighted average sale prices will be paid or credited in the first
royalty payment of the following Calendar Year.
5
1.34 "OUT-OF-POCKET EXPENSES" means costs, other than labor costs, that are
directly related to the activities outlined in the Development Plan and
the Supply Agreement, including, without limitation, costs of travel,
supplies, outside services and consultants.
1.35 "PATENT" or "PATENTS" means (a) patent applications (including
provisional applications and applications for certificates of
invention); (b) any patents issuing from such patent applications
(including certificates of invention); (c) all patents and patent
applications based on, corresponding to, or claiming the priority
date(s) of any of the foregoing; (d) any reissues, substitutions,
confirmations, registrations, validations, re-examinations, additions,
continuations, continued prosecution applications,
continuations-in-part, or divisions of or to any of the foregoing; and
(e) term extension or other governmental action which provide exclusive
rights to a Product beyond the original patent expiration date.
1.36 "PIVOTAL TRIAL" means a pivotal human clinical trial in any country,
the results of which could be used to establish safety and efficacy of
a ISIS 3521 as a basis for an application for a Marketing Approval or
that would otherwise satisfy the requirements of 21 CFR 312.21(c) or
its foreign equivalent.
1.37 "PRODUCT" means preparation(s) containing ISIS 3521 or a Compound
Improvement.
1.38 "PROPRIETARY INFORMATION" means any and all Information, whether
communicated in writing, orally or by any other means, which is
provided by one party to the other party in connection with this
Agreement. Proprietary Information will not include Information that:
a) is known by the receiving party at the time of its receipt,
and not through a prior disclosure by the disclosing party, as
documented by written records;
b) is properly in the public domain through no fault of the
receiving party;
c) is, subsequent to the disclosure by the disclosing party,
disclosed to the receiving party by a Third Party who may
lawfully do so and is not under an obligation of
confidentiality to the disclosing party; or
d) is developed by the receiving party independently of
Proprietary Information received from the other party , as
documented by written records.
1.39 "REGULATORY AUTHORITY" means any applicable government regulatory
authority involved in granting approvals for the marketing, and/or
pricing of a Product worldwide, including without limitation, in the
United States, the Food and Drug Administration ("FDA"), and any
successor government authority having substantially the same function,
and foreign equivalents thereof.
1.40 "SUBLICENSEE" means any Third Party (including a distributor) to which
LILLY or any of its Affiliates grants any right to make, use, market,
or import and sell a Product. A Third
6
Party who is granted only the right to import and sell a Product (such
as a wholesaler) will not be considered a Sublicensee.
1.41 "SUPPLY AGREEMENT" means the supply agreement for ISIS 3521 to be
entered into by the parties on the Effective Date in the form attached
hereto as Exhibit B.
1.42 "THIRD PARTY" means any party other than ISIS or LILLY and their
respective Affiliates.
1.43 "VALID" means (a) with respect to an issued patent that such patent is
issued and unexpired, has not been revoked, held unenforceable or
invalid by an unappealed or unappealable decision of a court or other
governmental agency of competent jurisdiction, and has not been
admitted by the owner of such patent to be invalid or unenforceable,
and (b) with respect to a patent application that such patent
application has been pending for no more than seven (7) years.
7
EXHIBIT B
ISIS 3521 CLINICAL SUPPLY AGREEMENT
(See Exhibit 2.6 to this 8-K)
1
EXHIBIT C
DEVELOPMENT PLAN
DELETE IN ENTIRETY
[*]
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EXHIBIT D
COMPOUND PATENT RIGHTS
[*]
MANUFACTURING PATENT RIGHTS
[*]
CORE TECHNOLOGY PATENT RIGHTS
[*]
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EXHIBIT E
BUDGET ESTIMATE AND ASSUMPTIONS
DELETE IN ENTIRETY
[*]
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EXHIBIT 2.6
(EXHIBIT B TO EXHIBIT 2.5 HEREOF)
EXHIBIT B
ISIS 3521 CLINICAL SUPPLY AGREEMENT
This ISIS 3521 Clinical Supply Agreement ("Agreement") is made and
entered into as of August 29, 2001 (the "Effective Date") between Eli Lilly
and Company, a corporation organized and existing under the laws of the State
of Indiana ("LILLY") and Isis Pharmaceuticals, Inc., a corporation organized
and existing under the laws of the State of Delaware ("ISIS").
WITNESSETH
WHEREAS, ISIS and LILLY have entered into the Development and License Agreement
relating to the development and commercialization of ISIS 3521, and the
conditions to entering into this Agreement described in the Development and
License Agreement have been satisfied; and
WHEREAS, ISIS will initially manufacture, release and deliver ISIS 3521 API to
LILLY for support of ongoing clinical trials and will also perform CMC
activities and transfer to LILLY or a third party selected by LILLY the
technology to manufacture ISIS 3521 for commercial uses, pursuant to the terms
set forth herein;
NOW, THEREFORE, in consideration of the covenants herein contained, the parties
hereto agree as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms used in this Agreement have the meanings set forth in
Exhibit 1 hereto.
ARTICLE 2
MANUFACTURE AND SUPPLY OF API
2.1 Subject to the terms and conditions set forth herein, LILLY will
provide ISIS with estimates of LILLY's requirements of API for support
of ongoing clinical trials prior to the start of Calendar Years 2002
and 2003. ISIS will supply API to LILLY, in amounts agreed upon by the
parties, based on LILLY's requirements and ISIS' Annual Capacity, in
accordance with the terms of this Agreement.
2.2 ISIS will provide bulk API to LILLY for use in Clinical Products. LILLY
will be responsible for the formulation, filling, finishing, labeling
and packaging of the Clinical Products, including stability studies;
provided, however, that, in accordance with
1
Section 6.2, until the Release Technology Transfer is completed, ISIS
will perform Clinical Product release.
2.3 The parties acknowledge that as of the Effective Date, a third party
manufacturer performs the formulation, filling and finishing of
Clinical Product for ISIS. Following the Effective Date, LILLY will be
responsible for the formulation, filling and finishing of Clinical
Product and will use commercially reasonable efforts to promptly
establish, itself or through a third party manufacturer, the
manufacturing process for formulating, filling, and finishing Clinical
Product. If requested by LILLY, ISIS will cooperate with LILLY, as
appropriate, to enable LILLY to enter into an agreement with the third
party manufacturer used by ISIS to perform the formulation, filling and
finishing of Clinical Product.
ARTICLE 3
ORDERS AND LIMITATION OF SUPPLY
3.1 PRODUCTION AND DELIVERY PLANS AND ORDERS.
(a) Not later than July 1 of each year, except 2001, in which this
Agreement is in effect, LILLY will provide ISIS with a written estimate
of the amount of API LILLY will require during the subsequent Calendar
Year, which estimate will indicate the quantity of API to be utilized
in Clinical Products. [LILLY's API order estimate for Calendar Year
2002 is set forth on Exhibit 2. [*]
(b) At the time of delivery of each such estimate (but within 30 days after
the Effective Date with regard to the estimate for Calendar Year 2002),
LILLY representatives will meet with ISIS representatives to discuss
and agree upon a production and delivery plan for the next Calendar
Year (the "Production and Delivery Plan"). Each year's agreed-upon
Production and Delivery Plan will specify the quantity of API to be
utilized in Clinical Product that ISIS will supply to LILLY during the
subsequent Calendar Year, taking into account all relevant factors
including, without limitation, ISIS' Annual Capacity and its
obligations to other parties. Each such Production and Delivery Plan
will be deemed a firm purchase order of LILLY for the quantities of API
specified therein, and a firm commitment of ISIS to Manufacture and
supply such quantities of API to LILLY.
(c) The Production and Delivery Plan will further specify one or more dates
upon which Delivery of the API to be supplied by ISIS will occur during
the relevant Calendar Year. ISIS will use commercially reasonable
efforts to Deliver the API to LILLY according to the agreed-upon
Delivery schedule set forth in the Production and Delivery Plan. The
Production and Delivery Plan will provide for Delivery of API promptly
after completion of Manufacture and release. The date on which the
parties agree upon a Production and Delivery Plan for the following
Calendar Year will be referred to herein as the "API Order Date."
(d) Based on various considerations, including its obligations to Third
Parties and to its own drug development efforts, ISIS' Annual Capacity
will vary from year to year. ISIS'
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annual capacity for the Manufacture of API for Calendar Years 2002 and
2003 (the "Annual Capacity"), indicating the maximum amount of API
that LILLY may order from ISIS during each such Calendar Year, is set
forth in Exhibit 3.
(e) ISIS will purchase the Raw Materials used in the Manufacture. At its
sole discretion, LILLY will have the option to purchase some or all of
the Raw Materials used in the Manufacture. If Lilly so decides, LILLY
will notify ISIS, and the parties will work together to establish
appropriate procedures for order and delivery of and payment for such
Raw Materials to be purchased by LILLY.
3.2 COMMERCIAL MANUFACTURING .
LILLY and ISIS will work together to complete a plan for commercial
supply of API. LILLY and ISIS will work together to identify and
investigate other sources for the manufacture of API to be utilized for
Commercial Product. LILLY will inform ISIS in writing by July 1, 2002
of LILLY's decision, at its sole discretion, regarding whether LILLY,
ISIS and/or a third party will manufacture API to be utilized for
Commercial Product, and which of them shall be the primary source and
the back-up source of API to be utilized for Commercial Product. If, in
such notice, LILLY elects to have ISIS manufacture API to be utilized
for Commercial Product, LILLY and ISIS will negotiate in good faith,
and ISIS hereby commits, for ISIS to manufacture API to be utilized for
Commercial Product on substantially the terms set forth in Exhibit 8.
In such notice, LILLY will also provide LILLY's API order estimates for
Calendar Years 2003, 2004 and 2005.
3.3 LIMITATIONS OF SUPPLY.
In the event that at any time ISIS anticipates that it will be unable
to supply in whole or in part the quantities of API set forth in an
agreed-upon Production and Delivery Plan for any reason, including
without limitation force majeure, ISIS will notify LILLY in writing as
soon as possible of such anticipated shortfall. ISIS will also notify
LILLY of the underlying reason for the shortfall, proposed remedial
measures, the date such inability to supply the full order of API is
expected to end, and a proposed amount of API to be Delivered to LILLY.
[*] The proposed amount of API to be made available to LILLY hereunder
will be no less than [*] of the amount of raw materials or other
resources required for the Manufacture of API, taking into
consideration the amount of such raw materials or other resources
required by (i) LILLY under this Agreement and (ii) ISIS and its other
programs.
If ISIS cannot Manufacture as set forth in this Agreement, ISIS shall
so inform LILLY immediately upon the prediction or occurrence such
non-supply. In such event, LILLY shall have the right to Manufacture or
have Manufactured API for LILLY's needs and ISIS shall provide all
assistance and relevant information, know-how and data necessary for
LILLY in establishing and beginning the Manufacture of API.
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ARTICLE 4
QUALITY STANDARDS; MANUFACTURING WORKING GROUP
4.1 QUALITY STANDARDS.
(a) With respect to API in process prior to the time the Quality Agreement
is adopted, ISIS will Manufacture such API in accordance with cGMP and
the same specifications as applied to the Manufacture of API for use in
Clinical Product used in the CS17 Study. Subject to the preceding
sentence, ISIS will Manufacture API for use in Clinical Product in
accordance with the API Specifications, cGMP, the DRD, the Quality
Agreement and other applicable rules and regulations of all Regulatory
Authorities and other regulatory agencies with jurisdiction over the
manufacture, use or sale of the API, as then in effect. If cGMP for the
U.S. and its foreign equivalent differ, LILLY will specify in writing
which cGMP will apply to each quantity of API ordered from ISIS by
LILLY. ISIS will be responsible for Manufacturing issues related to API
safety and regulatory compliance. Each party will promptly notify the
other party of any relevant new instructions or specifications required
by a Regulatory Authority, and of other applicable and regulations of
which that party becomes aware. The parties will confer with each other
with respect to the best means to comply with such requirement and will
allocate any costs of implementing such changes on an equitable basis.
The parties acknowledge that frequent change-over in the Manufacture of
API as may be necessary to comply with differing cGMP in the US and
abroad will reduce the Annual Capacity, and that any costs incurred by
ISIS in connection with such change-overs will be included in the
calculation of API Supply Cost.
(b) ISIS will perform quality control testing, as is specified (i) in the
Quality Agreement and API Specifications; and (ii) as required by a
Regulatory Authority and by the mutual written consent of the parties,
on each lot of API supplied for use in Clinical Product, prior to
shipment.
4.2 CERTIFICATE OF ANALYSIS.
(a) ISIS will provide a Certificate of Analysis to LILLY or its designated
agent with each lot of API supplied hereunder. Such Certificate of
Analysis will contain the results of the analysis of API as required in
the API Specifications, and will certify with respect to each shipment
and lot (identified by lot number): (i) the quantity of the shipment,
(ii) that the API delivered was Manufactured in accordance with the API
Specifications and in conformance with cGMP. The Certificate of
Analysis will contain any information in addition to that required
pursuant to subsection (a) above as may be required by the Regulatory
Authority of the country of destination of API or Product; provided,
that LILLY provides to ISIS sufficient documentation and information
necessary or useful to enable ISIS to conform with such requirements.
ISIS will provide the results of such analysis to LILLY, along with any
supporting data.
(b) LILLY will be under no obligation to accept any Delivered lot of API
without an accompanying Certificate of Analysis that conforms to
subsection (a) above. Each
4
Certificate will contain the results of testing per the API
Specifications and a statement that the batch was prepared in
compliance with cGMP. ISIS will also make available for LILLY's
review ISIS' Manufacturing records for the API, including its master
and production batch records, for the purposes of assuring product
quality and compliance with agreed-upon Manufacturing procedures as
per the following Section 9.3, Quality Assurance Audits.
4.3 CHANGES TO MANUFACTURING PROCESS; MANUFACTURING WORKING GROUP.
(a) During the term of this Agreement, if ISIS proposes to make a material
change in Manufacturing materials, equipment, processes, procedures, or
to the API Specifications, the parties will discuss and address such
proposals as follows. Prior to implementing such a material change,
ISIS will notify the Manufacturing Working Group (the "MWG") of ISIS'
proposed material change, for consideration by the MWG pursuant to
Section 4.6. ISIS will provide information to the MWG regarding the
change at a level sufficient to allow the MWG members to evaluate such
changed Manufacturing process.
(b) The MWG will consist of 3 members from LILLY and 3 members from ISIS
and will be established promptly after the Effective Date. The members
will be individuals who are capable of responding to the technical,
financial, quality, and other issues that could arise under this
Agreement. The MWG can consult with, and receive assistance from, LILLY
and ISIS employees who are not MWG members. The additional objectives
of the MWG are (i) with the parties' quality units, to adopt the
initial Quality Agreement and Development Responsibilities Document and
subsequent amendments (if any) to each; and (ii) monitor the parties'
performance under this Agreement, including reviewing, on a periodic
basis, forecast accuracy and on-time delivery. The MWG shall report to
the parties at least once each calendar quarter and more frequently as
requested.
4.4 QUALITY AGREEMENT.
(a) Promptly (and in any event within 60 days) after the Effective Date,
the MWG will adopt the initial Quality Agreement for API for Clinical
Product (the "Quality Agreement").
(b) The MWG will, at least annually, review the Quality Agreement and will
amend it from time to time as necessary through the issuance of a
revised section incorporating the modification and stating the
effective date of the modification, signed by a duly authorized
representative from each party who is a member of the quality
control/quality assurance group, as evidenced by a signed, revised
Quality Agreement incorporating the revision number that sets forth the
effective date of the modifications and reason for the revision.
(c) The Quality Agreement will describe the parties' quality control,
quality assurance and regulatory responsibilities relating to the
Manufacture and release of the API by ISIS. The Quality Agreement will
include as an exhibit the current standard operating procedures of
ISIS, as may be amended by ISIS from time to time, listed in Exhibit 4.
ISIS will provide to LILLY not less than once per calendar year an
updated set of such
5
standard operating procedures. All standard operating procedures used
by ISIS in connection with the Manufacture of API will comply with
cGMP.
(d) In the event of an inconsistency between the Quality Agreement and the
terms of this Agreement, the terms of this Agreement will apply.
4.5 DEVELOPMENT RESPONSIBILITY DOCUMENT.
(a) Promptly after the Effective Date, and in any event before initiation
of LILLY-sponsored clinical trials of the Product, the MWG will adopt
the initial Development Responsibilities Document ("DRD").
(b) The MWG will, at least annually, review the DRD and will amend it from
time to time through the issuance of a revised section incorporating
the modification and stating the effective date of the modification,
signed by a duly authorized representative of each party.
(c) The DRD will be similar to, but shorter than, a Manufacturing
Responsibilities Document and will provide specific guidance to the
parties to ensure the logistics for supply of Clinical Product to
support the Development Program.
(d) In the event of an inconsistency between the DRD and the terms of this
Agreement, the terms of this Agreement will apply.
4.6 PROCEDURES REGARDING CHANGES TO MANUFACTURING PROCESS.
(a) At its initial meeting, the MWG will consider and agree upon the
guidelines to be used to determine the approval process to be applied
to any material change in Manufacturing materials, equipment,
processes, procedures, or to the API Specifications proposed by ISIS.
ISIS will prepare and submit the guidelines to the MWG for
consideration, using the following 3 categories and providing examples
of the types of material changes that will be included in each
category:
(i) changes in production of API that may affect the filing of
an application for Marketing Approval or require prior Regulatory
Approval and will thus require LILLY's approval prior to
implementation;
(ii) changes that will require ISIS to notify LILLY prior to
implementation, but which do not require LILLY's approval; and
(iii) changes that do not require ISIS to notify LILLY prior
to implementation.
(b) If ISIS proposes to make a material change described in subsection
(a)(i), ISIS will notify the MWG and provide information to the MWG
regarding such change at a level sufficient to allow the MWG members to
evaluate the impact of such change on the Manufacturing Process, and to
form a basis for LILLY to determine whether or not to approve such
material change. If there are any additional questions regarding
notification
6
and approval that arise during the term of this Agreement, ISIS will
submit the questions to the MWG or, if an immediate response is
required, will contact LILLY's Quality Assurance function to
determine the level of review/notification that may be required by
the proposed change. The parties will obtain the prior Regulatory
Approval and any other required approvals, if such approval is
required, before any such material change is implemented.
4.7 COMPLIANCE WITH LAWS.
In performing its obligations under this Agreement, ISIS will comply
with all applicable present and future orders, regulations,
requirements and laws ("Legal Requirements") of any and all U.S.
authorities and agencies, including without limitation laws and
regulations applicable to the transportation, storage, use, handling
and disposal of hazardous materials (the "U.S. Legal Requirements"),
and any Legal Requirements of other countries ("Foreign Legal
Requirements") of which it is informed by LILLY. If the U.S. Legal
Requirements conflict with the Foreign Legal Requirements, the parties
will discuss and agree on how to resolve such conflict.
4.8 DOCUMENTATION AND RECORD KEEPING.
ISIS will keep complete, accurate and authentic accounts, notes, data
and records of all of ISIS' work performed under this Agreement,
including, but not limited to, complete and adequate records pertaining
to the methods and facilities used for the Manufacture in accordance
with master production records, batch production records, product
history documents (e.g., master formulae, validation packages,
specifications, CT batch history documents, batch specific deviation
reports, COAs) Standard Operating Procedures ("SOPs"), as well as the
applicable regulations, including in the United States, so that API may
be used in the production of a substance to be used in humans. ISIS
will maintain these records for 2 years after expiration of the
Clinical Product that incorporates the particular API. LILLY will
notify ISIS in writing of the expiration of Products that incorporate
specific API pursuant to the procedures described in the DRD, and if
LILLY changes the expiration date on any Clinical Product. SOPs will be
maintained for 5 years after the document is superseded or deleted.
Upon expiration of the retaining periods for the respective records as
provided in this Section and in case ISIS wishes to cease retention of
such records, ISIS will notify LILLY so that LILLY may, at its cost,
retain such records.
4.9 REVIEWS.
ISIS will generate and provide annual summary reviews for API
Manufacturing and control as well as supporting documents or other
information for annual product reviews as agreed by the parties.
7
ARTICLE 5
SUPPLY PRICE; PAYMENT AND TERMS OF SALE
5.1 SUPPLY PRICE.
(a) The API Clinical Supply Price will apply to all API supplied to LILLY
intended for use in a Clinical Product.
(b) Except as provided in Section 3.1 (a), for each calendar quarter, ISIS
will invoice LILLY for the API Clinical Supply Price of API Delivered
to LILLY during such calendar quarter. LILLY will pay each invoice
within [*] after receipt, subject to the provisions of Section 5.3.
Interest will be charged on late payments consistent with the
provisions of subsection (c) below.
(c) All payments due hereunder will be paid by wire transfer in U.S.
Dollars to such bank account designated in writing by ISIS from time to
time. LILLY will pay a late payment service charge of [*] per month [*]
on all past-due amounts.
5.2 DELIVERY.
(a) ISIS will deliver API to a carrier designated by LILLY FCA ISIS'
Facility (Incoterms 2000). The shipping and packaging specifications
will be agreed upon by the parties.
(b) In the event of a loss of work in process or API prior to the transfer
of title pursuant to the Delivery of API as provided in subsection (a)
above, any uninsured portion of the loss will be shared by LILLY and
ISIS as follows: [*] Any deductible will be applied ratably against all
items damaged or lost.
5.3 ACCEPTANCE AND CLAIMS; MATERIALS REVIEW BOARD.
(a) If LILLY claims that any sample of API did not meet the warranty
specified in Article 8, LILLY will notify ISIS in writing within 30
days of such Delivery, and a joint Materials Review Board formed under
subsection (b) below will review the test data generated by LILLY and
ISIS under QA approved procedures mutually agreed by the parties within
30 days after LILLY's notice to ISIS.
(b) Promptly after the Effective Date, ISIS and LILLY will each select 2
members of their in-house materials review boards (or other senior
personnel with appropriate qualifications) to participate in a joint
Materials Review Board ("MRB") that will review and consider any test
data generated by LILLY and ISIS with respect to the Delivered lot of
API.
(c) If the members of the MRB are thereafter unable to agree as to whether
the API met the warranty specified in Article 8, the parties will
cooperate and have the test data reviewed by an independent third party
selected by LILLY and approved by ISIS, which approval will not be
unreasonably withheld. If the independent third party reviewer cannot
determine whether the Delivered API in dispute met the warranty of
Article 8, a sample
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of the batch of the Delivered API in dispute retained by ISIS will
be analyzed in accordance with the API Specifications, under QA
approved procedures, by an independent testing laboratory of
recognized repute selected by LILLY and approved by ISIS, which
approval will not be unreasonably withheld. The results of such
laboratory testing will be final and binding on the parties on the
issue of compliance of the API with such warranty.
(d) If the Delivered API is determined to meet the warranty set forth in
Article 8, LILLY will bear the cost of any third party review and/or
independent laboratory testing performed pursuant to subsection (c)
above and will pay for the API in accordance with the terms of this
Agreement. If the API is determined not to meet the warranty set forth
in Article 8, ISIS will bear the cost of any third party review and/or
independent laboratory testing performed pursuant to subsection (c)
above.
(e) If ISIS agrees, or if it is determined pursuant to subsection (c)
above, that API did not conform to the warranty set forth in Article 8,
ISIS will use commercially reasonable efforts to Manufacture and
Deliver a replacement batch of API to LILLY for the batch of API that
did not conform to such warranty, and LILLY will pay ISIS for any such
replacement batch of API, including without limitation, all costs and
expenses associated with such Manufacture, consistent with the
provisions of Section 5.1 herein. [*]
(f) Any Delivered API which ISIS agrees did not meet, or which was
determined not to have met, the Article 8 warranty that is in LILLY's
control will, at ISIS' option, either be returned to ISIS or will be
destroyed pursuant to ISIS' instructions and with LILLY's approval,
which approval will not be unreasonably withheld, at ISIS' expense.
(g) Failure by LILLY to notify ISIS within [*] after Delivery of API which
does not meet the warranty under Article 8 will be a waiver of the
remedies available to LILLY under this Section 5.3.
(h) Should either party identify any possible latent defect of API that is
not revealed by the procedures set forth above within [*] of receipt of
any shipment by LILLY, it will so notify the other party immediately
upon discovery. LILLY and ISIS will discuss in good faith and agree
upon the appropriate measures to be taken by the parties related to
such latent defect.
5.4 TERMS OF SALE.
The terms and conditions of this Agreement will be controlling over any
inconsistent terms or conditions included in any agreed-upon order for
API or any other sales acknowledgment or document. No provision of any
LILLY forms purporting to be orders for API that may impose different
conditions than those herein referenced upon ISIS, LILLY or their
respective Affiliates will be of any force or effect unless expressly
agreed to in writing by both parties.
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5.5 RECORD KEEPING AND AUDIT.
ISIS will keep accurate records in sufficient detail to enable the API
Clinical Supply Price to be verified. Upon written request of LILLY and
not more than once in each Calendar Year, ISIS will permit
representatives of LILLY to have access during normal business hours to
such records as may be reasonably necessary to verify the API Clinical
Supply Price. Once specific records have been audited under this
Section 5.5, no further audit of such records may be made. If such
audit correctly concludes that any amounts are due to either party,
such payment will be made within [*] days after the determination by
the parties. The parties will treat all financial information subject
to review under this Section 5.5 in accordance with the confidentiality
provisions of the Development and License Agreement, which are
incorporated herein and made part of this Agreement by reference.
ARTICLE 6
TECHNOLOGY TRANSFER
6.1 TECHNOLOGY TRANSFER TEAM.
(a) The Technology Transfer will be coordinated and implemented under the
MWG. The MWG will form a team (the "Technology Transfer Team")
comprised of the members of the MWG and such additional employees of
each of the parties selected by the MWG as it deems appropriate to
effect the Technology Transfer (with equal representation of each of
the parties). Members of the Technology Transfer Team will each have
appropriate technical credentials, experience and knowledge; the
Technology Transfer Team will be co-chaired by a LILLY representative
and an ISIS representative from the MWG. The advice of additional
employees or consultants of either party may by mutual consent of the
parties be obtained.
(b) Decisions of the Technology Transfer Team will be made by unanimous
decision of the two-co-chairs; provided however, in the event that the
co-chairs do not, after good faith efforts, reach agreement on an
issue, the resolution and/or course of conduct in issue will be
determined in good faith by the MWG. In the event that the MWG does
not, after good faith efforts, reach agreement on such issue, the
resolution and/or course of conduct in issue will be determined in good
faith by the Product Leader at LILLY with respect to Product, who shall
hold at least an Executive Director position at LILLY, after
consultation with the Executive Vice President of ISIS.
(c) Throughout the entire Technology Transfer Term, the Technology Transfer
Team will meet at least once each month in person or by teleconference,
videoconference or by other mutually acceptable means, as necessary to
implement effectively and efficiently the Release Technology Transfer
Plan and the API Technology Transfer Plan.
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6.2 TECHNOLOGY TRANSFER FOR CLINICAL PRODUCT RELEASE.
(a) Promptly after the Effective Date, the Technology Transfer Team will
establish a plan (the "Release Technology Transfer Plan") for the
transfer to LILLY of the Release Technology as specified in the Release
Technology Transfer Plan (the "Release Technology Transfer"). The goal
of the Release Technology Transfer Plan is to effect the Release
Technology Transfer at the same time that Clinical Product release is
conducted for the second Phase III clinical trial of the Clinical
Product and in no event later than December 31, 2002.
(b) The Release Technology Transfer Plan will include INTER ALIA (i)
procedures designed to effect the prompt and efficient Release
Technology Transfer, (ii) a list of events necessary to accomplish the
Release Technology Transfer, (iii) a description of the training and
support to be provided by ISIS to LILLY during the Release Technology
Transfer, and (iv) the time period during which ISIS will perform the
Release Technology Transfer.
(c) During the Technology Transfer Term with respect to the Release
Technology Transfer, ISIS will (i) disclose and transfer to LILLY all
of the Release Technology as specified in the Release Technology
Transfer Plan and (ii) provide to LILLY the training and support
described in the Release Technology Transfer Plan and in this
Agreement.
(d) ISIS will use commercially reasonable efforts to perform the Release
Technology Transfer in accordance with the Release Technology Transfer
Plan and the terms of this Agreement. The parties will cooperate so
that the Release Technology Transfer may be completed as expeditiously
as possible.
(e) LILLY will use commercially reasonable efforts to implement the Release
Technology to be transferred by ISIS pursuant to this Section 6.2, and
to make available all reasonably necessary personnel and other
resources to enable such transfer without delay.
6.3 TECHNOLOGY TRANSFER PLAN FOR MANUFACTURE OF API.
(a) Promptly after LILLY notifies ISIS of its decision regarding the
manufacture of API to be utilized in Commercial Products as provided in
Section 3.2, the Technology Transfer Team will establish a plan (the
"API Technology Transfer Plan") for the transfer of the Manufacturing
Process and the Manufacturing Technology for the Manufacture of API
from ISIS to LILLY, its Affiliates or a third party designated by LILLY
(the "API Technology Transfer"). The goal of the API Technology
Transfer Plan is to enable LILLY to apply the Manufacturing Technology,
implement the Manufacturing Process and Manufacture API as soon as
practicable thereafter and in no event later than December 31, 2003.
(b) The API Technology Transfer Plan will include INTER ALIA (i) procedures
designed to effect the prompt and efficient API Technology Transfer,
(ii) a list of events necessary to accomplish the API Technology
Transfer, (iii) a description of the training and support to
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be provided by ISIS to LILLY during the API Technology Transfer, and
(iv) the time period during which ISIS will perform the API Technology
Transfer.
(c) During the Technology Transfer Term with respect to the API Technology
Transfer, ISIS will (i) disclose and transfer to LILLY all of the
Manufacturing Process and the Manufacturing Technology as specified in
the API Technology Transfer Plan and (ii) provide to LILLY the training
and support described in the API Technology Transfer Plan and in this
Agreement.
(d) ISIS will use commercially reasonable efforts to perform the API
Technology Transfer in accordance with the API Technology Transfer Plan
and the terms of this Agreement. The parties will cooperate so that the
API Technology Transfer may be completed as expeditiously as possible.
(e) LILLY and/or its third party manufacturer will use commercially
reasonable efforts to establish the Manufacturing Process for the
Manufacture of API to be transferred by ISIS pursuant to this Section
6.3, and to make available all reasonably necessary personnel and other
resources to enable such transfer without delay.
6.4 TRAINING AND SUPPORT.
The training and support to be provided by ISIS to LILLY in connection
with the Release Technology Transfer and the API Technology Transfer
(the "Technology Transfer") will include without limitation training
and support in a mutually acceptable facility in all of the methods
necessary to practice the Release Technology and the Manufacturing
Technology, as detailed in the Release Technology Transfer Plan and the
API Technology Transfer Plan. In addition, a reasonable number of
employees of LILLY and its Affiliates will be entitled to visit ISIS
facilities including without limitation pilot and commercial scale
facilities and testing laboratories to observe relevant processes in
operation. Moreover, ISIS will provide technical consultation on an
as-needed basis following NDA approval of Product for a time period to
be established by the Technology Transfer Team. ISIS also will be
available, if requested, for consultation during any regulatory
inspection or to assist in responding to regulatory questions that may
occur during Product registration activities.
6.5 PAYMENT OF TECHNOLOGY TRANSFER COSTS.
The Technology Transfer Team will submit a plan for resourcing the
Technology Transfer to the MWG. A budget for ISIS and LILLY resources
to be used in the performance of the Technology Transfer will be
developed to ensure effective forward planning and cost management.
LILLY will compensate ISIS [*] ISIS will invoice LILLY on a quarterly
basis for all activities performed and expenses incurred in accordance
with this Article. LILLY will pay each invoice within [*] days after
receipt. Interest will be charged on late payments consistent with the
provisions of Section 5.1(c).
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6.6 RECORDS.
ISIS will maintain records, in sufficient detail and in good scientific
manner appropriate for patent, regulatory and manufacturing purposes,
which will fully and properly reflect all of the work done and the
progress achieved in the performance of the Technology Transfer (the
"Records"). The Records at all times will be available to the
Technology Transfer Team and LILLY will have the right, during normal
business hours and upon reasonable notice, to inspect and copy all such
Records. LILLY also will have the right to arrange for its employees
and/or consultants to visit ISIS at its offices and laboratories and
other facilities during normal business hours on reasonable notice
concerning or in furtherance of the Technology Transfer and/or to
discuss the progress of the Technology Transfer and its results in
detail with the technical personnel and consultants of ISIS.
ARTICLE 7
ISIS CMC AND DEVELOPMENT ACTIVITIES
7.1 ISIS CMC ACTIVITIES.
(a) As part of its activities under the Development Plan set forth in the
Development and License Agreement, ISIS will perform the CMC items set
forth in Exhibit 5 hereto. ISIS will perform the listed activities and
such other activities as approved by the JDC in support of the
preparation and filing of the NDA according to the schedule set forth
in the Development Plan.
(b) In consideration of ISIS' performance of CMC activities in connection
with ISIS 3521 as set forth in Exhibit 5, LILLY will compensate ISIS
[*] ISIS will invoice LILLY on a quarterly basis for all activities
performed in accordance with this Article and related expenses.
Payments due under this Section will be due [*] days after receipt of
each invoice by LILLY. Interest will be charged on late payments
consistent with the provisions of Section 5.1(c).
7.2 ISIS DEVELOPMENT ACTIVITIES.
(a) As of the Effective Date, LILLY will also compensate ISIS for
additional development efforts undertaken by ISIS, such as analytical
methods development for raw materials, API and drug product testing and
release, and process development in connection with other
phosphorothioate oligodeoxynucleotides, which additional activities
support the activities of ISIS with regard to ISIS 3521 as approved by
the JDC and required pursuant to this Agreement and the Development and
License Agreement.
(b) In consideration of ISIS' performance of such additional activities in
connection with ISIS 3521, LILLY will compensate ISIS [*] used in
activities allocated to ISIS 3521 development, manufacture or support,
[*] Payments due under this Section will be due [*] days after receipt
of each invoice by LILLY. Interest will be charged on late payments
consistent with the provisions of Section 5.1(c).
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ARTICLE 8
PRODUCT WARRANTY
8.1 API SPECIFICATIONS; CGMPS; APPLICABLE LAWS.
Subject to Section 8.2 below, ISIS warrants that the API will, at the
time of Delivery, be Manufactured in accordance with and meet (a) the
API Specification; (b) cGMP; (c) requirements of the DRD and Quality
Agreement, and (d) the Legal Requirements.
8.2 FOREIGN MANUFACTURING REQUIREMENTS.
If the cGMP or the Legal Requirements applicable to the Manufacture of
API for use in the U.S. (the "U.S. Manufacturing Requirements") are
different from those applicable outside to the Manufacture of API for
use in countries other than the U.S. (the "Foreign Manufacturing
Requirements"), the warranty of subsection (a) will include such
Foreign Manufacturing Requirements only if LILLY has informed ISIS
thereof in writing as provided in Section 4.1, the parties have
resolved any conflicts as provided in Section 4.6, and have adapted the
Manufacturing Process, if necessary, as provided in Section 4.3.
8.3 MRB APPROVED API.
Notwithstanding anything in this Agreement, API will be deemed to
conform with API Specifications at the time of Delivery if approved by
the MRB pursuant to Section 5.3 for release and further processing into
Clinical Product.
ARTICLE 9
QUALITY CONTROL
9.1 SPECIFICATIONS AND PROCESS CHANGES.
The API Specification may not be materially amended, changed or
supplemented, except as provided in Section 4.3 and 4.6 above. Unless
otherwise specified in that Section, material changes required to
comply with applicable laws and regulations and Agency requirements
will be mutually agreed upon by ISIS and LILLY.
9.2 MATTERS RELATING TO THE FACILITY.
(a) ISIS will Manufacture API supplied by ISIS hereunder at the Facility,
which ISIS represents and warrants has passed inspections of the U.S.
and EU Agencies. ISIS will perform release testing of API at the
Facility and/or the facility of subcontractors
(b) ISIS will arrange for one or more qualified technical specialists from
LILLY, upon reasonable prior notice and during normal business hours,
to conduct inspections of the Facility. Observations and conclusions of
LILLY's audits or inspections will be issued to and promptly discussed
with ISIS and such corrective action as LILLY determines to be
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reasonably required will be promptly implemented by ISIS. ISIS will
maintain complete and accurate records of all reasonably relevant
information relating to the performance by ISIS of its obligations
hereunder. ISIS will permit LILLY to review, during the inspection at
the Facility, relevant cGMP documentation. The total number of
inspections under this Section 9.2(b) and audits under Section 9.3 per
Calendar Year will not exceed two.
9.3 QUALITY ASSURANCE AUDITS.
ISIS will perform inspections of its facilities to review its
manufacturing operations and assess its compliance with cGMP. In
addition, upon LILLY's written request and at mutually agreeable times
during normal business hours, ISIS will permit representatives of LILLY
to review ISIS' manufacturing operations and records and assess its
compliance with cGMP and quality assurance standards and to discuss any
manufacturing issues with ISIS' manufacturing and management personnel.
Under the Production and Delivery Plan, LILLY will have notice of how
many production runs ISIS may conduct in a given Calendar Year, which
will permit LILLY personnel to observe any such production run, if
LILLY so chooses, after providing notice to ISIS (and at its own
expense). In the event of a regulatory inspection that directly
involves the API, ISIS will immediately inform LILLY of the issuance of
the Notice of Inspection (or an equivalent notice from a non-U.S.
Regulatory Authority) will provide LILLY with copies of all
communications relating thereto and LILLY will be allowed to
participate.
9.4 TESTING.
(a) ISIS will perform such tests as are indicated in the API Specification.
Such testing methods will be qualified by ISIS prior to use and certain
of such tests will be stability indicating. No production lot of API
will be released for Delivery unless such tests show the API to meet
the API Specification. Should any production lot fail to meet API
Specification limits, such lot will not be released, unless the failure
is identified following release, in which case the identifying party
will immediately notify the other party and they will cooperate on the
actions to be taken as described in Section 5.3.
(b) ISIS is responsible for obtaining and retaining, at LILLY's expense,
the amount of API required for quality control release testing as
indicated in the API Specification, as applicable. Such amounts will be
retained for a period of not less than 1 year from the last retest date
prescribed by ISIS, and thereafter shipped at LILLY's request for
longer term storage at a designated LILLY facility.
(c) At LILLY's expense and approval, ISIS will perform an on-going program
of stability testing, as required in the stability plan to be agreed by
the parties, and provide a stability report to support the
transportation of API to a LILLY-designated facility. The stability
study period will be for a period specified by LILLY following
completion of Manufacture of such production lots and such stability
testing will be stability indicating. In the event that ISIS will
detect a change in a degradant in excess of the amount specified in the
stability plan of API in connection with such testing, ISIS will notify
LILLY, and as a part of each stability test of such lot thereafter,
ISIS will specifically
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incorporate additional testing and controls (e.g., storage condition
changes), as LILLY may reasonably specify.
(d) In consideration of ISIS' performance of testing as set forth in
subsection (c) above, LILLY will compensate ISIS for such performance
at the ISIS FTE Rate and will pay for any Out-of-Pocket Expenses
incurred in connection with such testing. ISIS will invoice LILLY on a
quarterly basis for all activities performed in accordance with this
Section 9.4 and related expenses. Payments due under this Section will
be due [*] after receipt of each invoice by LILLY. Interest will be
charged on late payments consistent with the provisions of Section
5.1(c).
9.5 INFORMATION RELATING TO MANUFACTURING CONDITIONS.
(a) Each party will notify the other immediately of any health hazards with
respect to API of which it becomes aware which may impact employees
involved in the Manufacture of API.
(b) Each party will promptly advise the other of any safety or toxicity
problem that is not part of the knowledge base readily available in
chemical manufacturing facilities of which either party becomes aware
regarding the API.
9.6 AGENCY INSPECTIONS.
ISIS hereby agrees to advise LILLY of any visit or inspection by an
Agency of the Facility relating to the Manufacture of API, provide
copies of all communications relating thereto and will permit one or
more qualified representative(s) of LILLY to be present, when possible.
If LILLY is not present during such a visit or inspection for any
reason, ISIS will promptly provide a copy of the actual report of the
results of the inspection to LILLY. ISIS will furnish LILLY copies of
all reports, documents or correspondence with respect to any such
Agency inspections of the Facility.
9.7 STORAGE AND DELIVERY.
ISIS will store and Deliver API in accordance with the DRD and Quality
Agreement, API Specifications and label requirements set forth by the
MWG and cGMP.
ARTICLE 10
REGULATORY MATTERS
10.1 ISIS will prepare and promptly provide necessary and useful
information, including without limitation Manufacturing information, as
is needed to support filings of Registrations by LILLY, its Affiliates,
sublicensees or distributors of Product. In addition, ISIS will
participate as required in resolving regulatory concerns. ISIS will be
responsible for maintaining current technical information needed to
support such submissions of Registrations, and accordingly will
promptly provide LILLY with advance notification of all changes in such
technical information required to be filed as
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amendment to CMC. All such activities will be at LILLY's expense,
which will be agreed to in advance by the parties.
10.2 The mutual goal of ISIS and LILLY will be to maintain an integrated
approach to the content and timing of all submissions of Registrations
made by LILLY in an effort to obtain and maintain regulatory approvals
of a Product. To ensure this mutual goal is met, with respect to issues
pertaining to API or to a Product, ISIS will provide to LILLY the right
to review and reference all authorizations, certificates, methodologies
and specifications in the possession or under the control of ISIS
relating to the pharmaceutical/technical development and Manufacture or
any component thereof to the extent needed for LILLY's filings of
Registrations.
ARTICLE 11
INDEMNIFICATION AND INSURANCE
11.1 INDEMNIFICATION.
(a) ISIS will defend, indemnify and hold harmless LILLY, its Affiliates and
their respective directors, officers, employees and agents, and their
respective successors and permitted assigns, from any and all claims,
actions, causes of action, liabilities, losses, damages, costs or
expenses, including reasonable attorney's fees, which arise out of or
relate to claims that may be brought or instituted against them by
third parties to the extent based upon or arising out of (i) the
failure by ISIS to meet the warranties set forth in Article 8; (ii) a
material breach by ISIS of its obligations set forth in this Agreement;
or (iii) gross negligence or willful misconduct of ISIS, its officers,
employees and agents in the performance of its obligations hereunder.
(b) LILLY will defend, indemnify and hold harmless ISIS, its Affiliates and
their respective directors, officers, employees and agents, and their
respective successors and permitted assigns, from any and all claims,
actions, causes of action, liabilities, losses, damages, costs or
expenses, including reasonable attorney's fees, which arise out of or
relate to claims that may be brought or instituted against them by
third parties to the extent based upon or arising out of (i) a material
breach by LILLY of its obligations set forth in this Agreement; or (ii)
gross negligence or willful misconduct of LILLY, its officers,
employees and agents in the performance of its obligations hereunder.
11.2 CLAIMS.
(a) If a claim is made against a party entitled to indemnification under
this Article 11, and if that party intends to seek indemnification with
respect thereto under this Article 11, the party seeking
indemnification (the "Indemnitee") will promptly notify the
indemnifying party (the "Indemnifying Party") of such claim. The
Indemnifying Party will defend, negotiate and settle such claim, and
the Indemnitee will cooperate with the Indemnifying Party in connection
therewith. The Indemnitee may participate in the defense of any claim
with counsel of its own choice and at its own expense. Neither party
will settle or compromise any such claim without the other party's
prior written consent, which
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consent will not be unreasonably withheld. The indemnity agreement in
this Article 11 will not apply to amounts paid in settlement of any
claim if such settlement is effected without the consent of the
Indemnifying Party, which consent will not be unreasonably withheld.
Failure of the Indemnitee to deliver notice to the Indemnifying Party
within a reasonable time after becoming aware of a claim will not
relieve the Indemnifying Party of any liability to the Indemnitee
pursuant to this Article 11, except to the extent such delay
prejudices the Indemnifying Party's ability to defend such claim.
11.3 INSURANCE.
Each party will maintain during the term of this Agreement and for [*]
thereafter, at its own expense, (i) commercial general liability
insurance, including contractual liability coverage, with a minimum
limit of [*] per occurrence and [*] annual aggregate; (ii) property
insurance with a minimum limit of [*]; and (iii) statutory workers'
compensation coverage as required by law.
ARTICLE 12
TERM AND TERMINATION
12.1 TERM.
This Agreement will be effective as of the Effective Date, and unless
sooner terminated as provided herein, will continue in effect until
December 31, 2003; provided that LILLY may, in its sole discretion,
extend the term of this Agreement for up to two additional, consecutive
one-year periods by providing ISIS with written notice of such
extension at least six months prior to the then scheduled expiration
date of this Agreement (using ISIS' Annual Capacity for 2003 for any
such additional year). The term of this Agreement may be further
extended by mutual written agreement of the parties.
12.2 TERMINATION BY EITHER PARTY.
This Agreement may be terminated with written notice by either party at
any time during the term of this Agreement:
(a) if the other party is in breach of its material obligations hereunder
and has not cured such breach within 90 days after written notice
requesting cure of the breach has been given; provided, however, in the
event of a good faith dispute with respect to the existence of a
material breach, the 90-day cure period will be tolled until such time
as the dispute is resolved pursuant to Section 14.6; or
(b) upon the filing or institution of bankruptcy, reorganization,
liquidation or receivership proceedings by the other party or upon an
assignment of a substantial portion of the assets for the benefit of
creditors by the other party; provided, however, in the case of any
involuntary bankruptcy proceeding such right to terminate will only
become effective if the party consents to the involuntary bankruptcy or
such proceeding is not dismissed within 90 days of the filing thereof.
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12.3 TERMINATION OF DEVELOPMENT AND LICENSE AGREEMENT.
This Agreement will automatically terminate in the event the
Development and License Agreement is terminated for any reason.
12.4 PAYMENT OF OUTSTANDING DEBTS.
Upon expiration or termination of this Agreement for whatever reason,
LILLY and ISIS will settle all outstanding invoices or monies owed to
the other party in accordance with the terms of this Agreement.
12.5 EFFECT OF TERMINATION OR EXPIRATION.
(a) If this Agreement is terminated by LILLY pursuant to Section 12.2(a),
all orders will be automatically cancelled and ISIS will terminate the
Manufacture of API as soon as practicable. LILLY will have the option
but not the obligation to (i) purchase all quantities of API stored at
ISIS by paying the API Clinical Supply Price as provided in Section
5.1, and (ii) undertake the Manufacture of API or seek a third party to
do such Manufacture. If LILLY undertakes to Manufacture or have
Manufactured API, then ISIS will continue the transfer of technology
pursuant to Article 6 on an expedited basis, at LILLY's expense.
(b) If this Agreement is terminated by LILLY pursuant to Section 12.2(b),
LILLY (i) will purchase all quantities of API stored at ISIS by paying
the API Clinical Supply Price as provided in Section 5.1, and (ii) will
have the right to undertake the Manufacture of API or seek a third
party to do such Manufacture.
(c) If this Agreement is terminated by ISIS pursuant to Section 12.2(a),
ISIS will have the option but not the obligation to supply under all
outstanding quantities set forth in the Production and Delivery Plan at
the API Clinical Supply Price or the API Commercial Supply Price, as
applicable. If ISIS elects to so supply, LILLY's payment obligations
relating thereto including, without limitation, those set forth in
Section 5.1 will continue to apply until all outstanding obligations of
LILLY to ISIS are fulfilled.
(d) If this Agreement is terminated pursuant to Section 12.3, all
outstanding quantities of API set forth in the Production and Delivery
Plan will be automatically cancelled and ISIS will terminate the
Manufacture of API as soon as practicable. In addition, LILLY will be
responsible for all other Manufacturing costs associated with API
pursuant to Section 5.1 at the time of termination. Notwithstanding the
foregoing, ISIS will use its best efforts to mitigate any costs payable
by LILLY under this Section 12.5(d).
(e) If this Agreement expires pursuant to Section 12.1, LILLY will purchase
all API ordered by LILLY during the term of this Agreement. ISIS will
Deliver such API in accordance with Section 5.2.
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ARTICLE 13
DAMAGE LIMITATIONS
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, IN NO EVENT
WILL EITHER PARTY HERETO, OR ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS
OR AFFILIATES BE LIABLE TO THE OTHER PARTY OR SUCH OTHER PARTY'S
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, AFFILIATES OR SUBLICENSEES FOR
ANY INDIRECT, CONSEQUENTIAL, INCIDENTAL OR SPECIAL DAMAGES, COSTS OR
EXPENSES (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOST REVENUES
AND/OR LOST SAVINGS) SUFFERED OR INCURRED BY THE OTHER PARTY, WHETHER
BASED UPON A CLAIM OR ACTION OF CONTRACT, WARRANTY, NEGLIGENCE, STRICT
LIABILITY OR OTHERWISE, ARISING FROM THIS AGREEMENT.
ARTICLE 14
MISCELLANEOUS
14.1 FORCE MAJEURE.
Neither party will be held liable or responsible to the other party nor
be deemed to have defaulted under or breached the Agreement for failure
or delay in fulfilling or performing any term of the Agreement when
such failure or delay is caused by or results from causes beyond the
reasonable control of the affected party including without limitation
embargoes, war, acts of war (whether war be declared or not),
insurrections, riots, civil commotions, strikes, lockouts or other
labor disturbances, or acts of God. The affected party will notify the
other party of such force majeure circumstances as soon as reasonably
practical and will make every reasonable effort to mitigate the effects
of such force majeure circumstances.
14.2 ASSIGNMENT.
This Agreement will inure to the benefit and be binding upon each
party, its successors and assigns. The Agreement may not be assigned or
otherwise transferred, nor, except as expressly provided hereunder, may
any right or obligations hereunder be assigned or transferred by either
party without the prior written consent of the other party; provided,
however, that either party may, without such consent, assign the
Agreement and its rights and obligations hereunder to an Affiliate or
in connection with the transfer or sale of all or substantially all of
its assets, or in the event of its merger or consolidation or change in
control or similar transaction. Any permitted assignee will assume all
obligations of its assignor under the Agreement. Any attempted
assignment not in accordance with this Section 14.2 will be void.
20
14.3 SEVERABILITY.
In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein will not in any way be affected or impaired
thereby, unless the absence of the invalidated provision(s) adversely
affect the substantive rights of the parties. The parties will in such
an instance use their best efforts to replace the invalid, illegal or
unenforceable provision(s) with valid, legal and enforceable
provision(s) which, insofar as practical, implement the purposes of
this Agreement.
14.4 NOTICES.
All notices which are required or permitted hereunder will be in
writing and sufficient if delivered personally, sent by facsimile or
electronic mail (and promptly confirmed), sent by nationally-recognized
overnight courier or sent by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
if to ISIS, to: Isis Pharmaceuticals, Inc.
Carlsbad Research Center
2292 Faraday Avenue
Carlsbad, CA 92008
Attention: Executive Vice President
Fax No.: (760) 931-9639
E-Mail: lparshall@isisph.com
with a copy to: Attention: General Counsel
Fax No.: (760) 603-3820
E-Mail: gbryce@isisph.com
if to LILLY, to: Eli Lilly and Company
Lilly Corporate Center
Indianapolis, IN 46285
Attention: General Patent Counsel
Fax No.: (317) 277-1917
E-Mail: armitage_robert_a@lilly.com
or to such other address as the party to whom notice is to be given may
have furnished to the other party in writing in accordance herewith.
Any such notice will be deemed to have been given when delivered if
personally delivered or sent by facsimile or electronic mail on a
business day, on the business day after dispatch if sent by
nationally-recognized overnight courier and on the third business day
following the date of mailing if sent by mail.
21
14.5 GOVERNING LAW.
This Agreement will be governed by and construed in accordance with the
laws of the State of Delaware without reference to any rules of
conflict of laws.
14.6 DISPUTE RESOLUTION; OVERSIGHT COMMITTEE.
The parties recognize that disputes may from time to time arise between
the parties during the term of this Agreement. In the event of such a
dispute, either party, by written notice to the other party, may have
such dispute referred to the Oversight Committee, the function of which
is to attempt resolution of any disputes arising under this Agreement
by good faith negotiations. The Oversight Committee will endeavor to
resolve such disputes within 30 days after such notice is received. The
Oversight Committee will be comprised of two designated executive
officers (or their successors), one from each party. Said designated
officers are as follows:
For ISIS: Chief Executive Officer
For LILLY: Executive Vice President
14.7 REMEDIES.
In the event the parties are unable to resolve any disputes hereunder
pursuant to the dispute resolution measures provided herein, each party
may pursue its rights and remedies in law or equity in any court of
competent jurisdiction.
14.8 ENTIRE AGREEMENT.
This Agreement and the Development and License Agreement contain the
entire understanding of the parties with respect to the license,
development and commercialization of Products containing API and the
Manufacture and supply of API. All express or implied agreements and
understandings, either oral or written, heretofore made by the parties
on the same subject matter are expressly superseded by this Agreement
and the Development and License Agreement. This Agreement may be
amended, or any term hereof modified, only by a written instrument duly
executed by both parties hereto.
14.9 HEADINGS.
The captions to the several Articles and Sections hereof are not a part
of the Agreement, but are merely a convenience to assist in locating
and reading the several Articles and Sections hereof.
14.10 INDEPENDENT CONTRACTORS.
It is expressly agreed that ISIS and LILLY will be independent
contractors and that the relationship between the two parties will not
constitute a partnership, joint venture or agency. Neither ISIS nor
LILLY will have the authority to make any statements,
22
representations or commitments of any kind, or to take any action,
which will be binding on the other, without the prior consent of the
other party.
14.11 WAIVER.
The waiver by either party hereto of any right hereunder, or the
failure to perform, or a breach by the other party will not be deemed a
waiver of any other right hereunder or of any other breach or failure
by said other party whether of a similar nature or otherwise.
14.12 COUNTERPARTS.
The Agreement may be executed in two or more counterparts, each of
which will be deemed an original, but all of which together will
constitute one and the same instrument.
14.13 WAIVER OF RULE OF CONSTRUCTION.
Each party has had the opportunity to consult with counsel in
connection with the review, drafting and negotiation of this Agreement.
Accordingly, the rule of construction that any ambiguity in this
Agreement will be construed against the drafting party will not apply.
23
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date.
ELI LILLY AND COMPANY ISIS PHARMACEUTICALS, INC.
By:/s/ AUGUST M. WATANABE By:/s/ B. LYNNE PARSHALL
--------------------------------- ------------------------------------
Name: August M. Watanabe Name: B. Lynne Parshall
------------------------------- ---------------------------------
Title: Executive Vice President Title: Executive Vice President & CFO
------------------------------ --------------------------------
24
EXHIBIT 1
DEFINITIONS
1.1 "AFFILIATE" with respect to either party means any person,
organization, corporation or other business entity (collectively,
"Person") controlling, controlled by, or under common control with such
party. For purposes of this definition, "control" refers to (a) the
possession, directly or indirectly, of the power to direct the
management or policies of a Person, whether through the ownership of
voting securities, by contract or otherwise, and (b) the ownership,
directly or indirectly, of at least 50% of the voting securities or
other ownership interest of a Person.
1.2 "AGENCY" means the U.S. Food and Drug Administration. In the event
LILLY provides written notice to ISIS that LILLY intends to conduct
Development Program activities outside of the United States, the term
"Agency" will mean with respect to such activities outside the United
States the Regulatory Authority (as defined below) of the country
specified in such notice involved in granting any approvals relating to
such Development Program activities.
1.3 "ANNUAL CAPACITY" has the meaning as defined in Section 3.1(d).
1.4 "API" means the bulk drug substance ISIS 3521 as described in
Exhibit 6.
1.5 "API SPECIFICATION" will mean the specification comprising methods,
tests and acceptance criteria or release limits of API, which may be
amended from time to time by the MWG. The current API Specification is
attached as Exhibit 6.
1.6 "API CLINICAL SUPPLY PRICE" means [*] of the API Supply Cost.
1.7 API SUPPLY COST" means the cost of Manufacture of API described in
Exhibit 7.
1.8 "API ORDER DATE" means the date on which the parties agree upon a
Production and Delivery Plan for the following Calendar Year, as set
forth in Section 3.1(c).
1.9 "CALENDAR YEAR" means each successive period of 12 months commencing on
January 1 and ending on December 31.
1.10 "cGMP" means the current good manufacturing practices described in Q7A
ICH Good Manufacturing Practice Guide for Active Pharmaceutical
Ingredients and 21 CFR Parts 210 ET SEQ. as applicable to the
Manufacture of API in the U.S., as are in effect on the Effective Date
or as may subsequently be modified or supplemented. In the event LILLY
provides written notice to ISIS that LILLY intends to conduct the
Development Program activities in countries outside of the United
States, the term "cGMP" will also include corresponding good
manufacturing practices in such countries, provided that to the extent
any conflict exists between cGMP applicable in the U.S. and in such
countries, the cGMP of the U.S. will apply, unless the parties agree
otherwise as provided in Section 4.1, 4.3, 4.6 and 8.2.
1.
*Confidential Treatment Requested
1.11 "CLINICAL PRODUCT" means a formulated pharmaceutical product containing
API in finished form for use in conducting clinical trials prior to
Regulatory Approval.
1.12 "COMMERCIAL PRODUCT" means a formulated pharmaceutical product
containing API for all uses after Regulatory Approval has been obtained
for the Product.
1.13 "COMBINATION PRODUCT" means any pharmaceutical product that comprises
the API and at least one other active compound(s) and/or ingredients.
All references to Product in this Agreement will be deemed to include
Combination Product.
1.14 "CS17 STUDY" means the Phase III clinical trial conducted by ISIS that
is ongoing as of the Effective Date, as further described in the
Development Plan.
1.15 "DELIVER" OR "DELIVERY" means the delivery of API by ISIS to the
carrier pursuant to Section 5.2.
1.16 "DEVELOPMENT AND LICENSE AGREEMENT" means the agreement for the
development and commercialization of ISIS 3521 entered into by ISIS and
LILLY on August 14, 2001.
1.17 "DEVELOPMENT PLAN" means the plan for the development of ISIS 3521
attached as Exhibit C to the Development and License Agreement.
1.18 "DEVELOPMENT PROGRAM" means the activities undertaken by ISIS and LILLY
as set forth in the Development Plan.
1.19 "DRD" has the meaning as defined in Section 4.5.
1.20 "FACILITY" means the Manufacturing facility of ISIS located in 2282
Faraday Avenue, Carlsbad, California.
1.21 "FTE" means the equivalent of the scientific or technical work of at
least a total of [*] hours per year on or directly related to the
Manufacture, the Technology Transfer, CMC activities or any other
activities contemplated under this Agreement, carried out by a
qualified employee or consultant. Scientific or technical work can
include, but is not limited to, [*]
1.22 "ISIS 3521" means the phosphorothioate oligodeoxyribonucleotide that
targets human protein kinase C disclosed and claimed (as SEQ ID NO 2)
in U.S. Patent No. 5,703,054.
1.23 "ISIS FTE RATE" means [*]
1.24 "JDC" means the joint development committee established under the
Development and License Agreement.
1.25 "LEGAL REQUIREMENTS" has the meaning as defined in Section 4.7.
1.26 "MANUFACTURE" or "MANUFACTURED" or "MANUFACTURING" means all operations
involved in the manufacturing, quality control testing (including
in-process, release and
2.
*Confidential Treatment Requested
stability testing, if applicable), releasing, packaging and shipping
of API under this Agreement.
1.27 "MANUFACTURING PROCESS" means the process steps set forth in master
batch records for ISIS 3521 in the version existing as of the Effective
Date, including reasonable minor variants and extensions of process
steps thereof.
1.28 "MANUFACTURING TECHNOLOGY" means any and all scientific and technical
data and information including without limitation formulas, methods,
techniques, protocols, and processes controlled by ISIS as of the
Effective Date which are necessary for performing the Manufacturing
Process.
1.29 "MANUFACTURING WORKING GROUP" or "MWG" has the meaning set forth in
Section 4.3 herein.
1.30 "MATERIALS REVIEW BOARD" has the meaning set forth in Section 5.3(b)
herein.
1.31 "MARKETING APPROVAL" means the act of a Regulatory Authority necessary
for the marketing and sale of the Product in a country or regulatory
jurisdiction, including, without limitation, the approval of the NDA by
the FDA.
1.32 "MRD" means the Manufacturing Responsibilities Document for the supply
of Commercial Product that includes key contacts, supply chain
diagrams, forecasting processes, the details of shipping and receiving,
and a process for informing ISIS of the batch numbers and expiration
date of Product referencing the batch numbers of API contained therein.
1.33 "NDA" means a new drug application or other application filed with the
FDA to obtain approval for marketing a Product in the United States, or
any future equivalent process.
1.34 "OUT-OF-POCKET EXPENSES" means costs, other than labor costs, that are
directly related to the activities outlined in the Development Plan and
this Agreement, including, without limitation, costs of travel,
supplies, outside services and consultants.
1.35 "OVERSIGHT COMMITTEE" has the meaning set forth in Section 14.6 herein.
1.36 "PRODUCT" means preparation(s) containing API for the treatment of
cancer in humans, including preparations for use in clinical trials
("Clinical Product") and preparations for sale by prescription,
over-the-counter or any other method ("Commercial Product").
1.37 "PRODUCTION AND DELIVERY PLAN" has the meaning a defined in Section
3.1(b).
1.38 "QUALITY AGREEMENT" has the meaning as defined in Section 4.4.
1.39 "RAW MATERIALS" means any raw materials intended for use in the
Manufacture of the Product, including those that may not appear in the
Product.
3.
1.40 "REGISTRATIONS" means the technical, medical and scientific licenses,
registrations, authorizations and/or approvals of API or Product
(including, without limitation, IND, DMF, NDA or other prerequisite
manufacturing approvals or authorizations, and marketing authorization
based upon such approvals or authorizations) that are required by any
national, supranational (e.g., the European Commission or the Council
of the European Union), regional, state or local regulatory agency,
department, bureau or other governmental entity, as amended or
supplemented from time to time.
1.41 "REGULATORY AUTHORITY" means any applicable government regulatory
authority involved in granting approvals for the marketing, and/or
pricing of a Product worldwide, including without limitation, in the
United States, the Food and Drug Administration ("FDA"), and any
successor government authority having substantially the same function,
and foreign equivalents thereof.
1.42 "REGULATORY APPROVAL" means the act of a Regulatory Authority necessary
for the Manufacture of Product in a country or regulatory jurisdiction.
1.43 "RELEASE TECHNOLOGY" means any and all scientific and technical data
and information including without limitation formulas, methods,
techniques, protocols, and processes controlled by ISIS as of the
Effective Date regarding Clinical Product release.
1.44 "TECHNOLOGY TRANSFER" has the meaning set forth in Section 6.4 herein.
1.45 "TECHNOLOGY TRANSFER TEAM" has the meaning set forth in Section 6.1
herein.
1.46 "TECHNOLOGY TRANSFER TERM" means the time period following the
Effective Date, as determined by the Technology Transfer Team, during
which the Technology Transfer will take place.
4.
EXHIBIT 2
LILLY'S API ORDER ESTIMATE FOR CALENDAR YEAR 2002
DELETE IN ENTIRETY
[*]
*Confidential Treatment Requested
EXHIBIT 3
MANUFACTURING CAPACITY OF ISIS
DELETE IN ENTIRETY
[*]
*Confidential Treatment Requested
EXHIBIT 4
LIST OF ISIS SOPS
DELETE IN ENTIRETY
[*]
*Confidential Treatment Requested
EXHIBIT 5
ISIS CMC ACTIVITIES
DELETE IN ENTIRETY
[*]
*Confidential Treatment Requested
EXHIBIT 6
API SPECIFICATIONS
DELETE IN ENTIRETY
[*]
*Confidential Treatment Requested
EXHIBIT 7
CALCULATION OF API SUPPLY COST
DELETE IN ENTIRETY
[*]
*Confidential Treatment Requested
1
EXHIBIT 8
TERMS OF COMMERCIAL SUPPLY OF API BY ISIS
DELETE IN ENTIRETY
[*]
*Confidential Treatment Requested
1
EXHIBIT 99.1
[LILLY LETTERHEAD]
DATE: August 22, 2001
FOR RELEASE: Immediately
REFER TO: (317) 276-5795 - Terra L. Fox (Lilly)
(760) 603-2521 - Kristina Peterson (Isis)
LILLY AND ISIS PHARMACEUTICALS ANNOUNCE STRATEGIC ALLIANCE THAT INCLUDES
LICENSE OF ISIS' PHASE III ANTISENSE CANCER DRUG AND BROAD ANTISENSE DRUG
DISCOVERY COLLABORATION
Eli Lilly and Company (NYSE: LLY) and Isis Pharmaceuticals, Inc. (NASDAQ: ISIP)
announced today that they have entered into a strategic alliance that includes
the license of Isis' novel antisense cancer compound and the formation of a
broad collaboration to discover antisense drugs.
The licensed compound, ISIS 3521, is a selective inhibitor of protein kinase
C-alpha (PKC-alpha) expression and is in early Phase III trials for the
treatment of non-small cell lung cancer. In an ongoing Phase II trial in
combination with chemotherapy, ISIS 3521 is currently showing a median patient
survival of 15.9 months as compared with a typical 8 to 9 months median survival
of standard chemotherapy alone and is being well tolerated with minimal side
effects. ISIS 3521 is also being evaluated in combination with the Lilly
oncolytic Gemzar(R). Lilly will have exclusive worldwide commercialization
rights to ISIS 3521. Non-small cell lung cancer represents a significant market
as it affects approximately one million people worldwide and is the leading
cause of cancer death.
In addition to the license of ISIS 3521, the companies have formed a four-year
collaboration to discover antisense drugs for metabolic and inflammatory
diseases. The companies will also use the Isis GeneTrove(TM) antisense
technology as a tool to rapidly determine the functional role of up to 1,000
human genes in disease. More than 300 of those genes will be validated as
potential drug targets for the antisense drug discovery collaboration. The
functional genomics efforts will support the companies' drug discovery programs
across multiple therapeutic areas.
Lilly has committed more than $200 million in funding to Isis over a four-year
period. Lilly will make a $75 million equity investment in Isis through the
purchase of stock at $18 per share,
resulting in approximately a 9 percent ownership of outstanding common stock.
In addition, Lilly will loan Isis $100 million, repayable in cash or stock at
$40 per share at the end of the four-year term, to fund the research
collaboration. For the license of ISIS 3521, Isis will receive $25 million in
upfront fees and will be reimbursed for remaining Phase III development and
registration costs. Isis may also receive approximately $50 million in
milestone payments plus royalties on product sales for the non-small cell
lung cancer indication, as well as additional milestones and royalties for
other indications and for successes related to the gene functionalization and
antisense drug discovery programs. Assuming success of ISIS 3521 and the
success of multiple drugs from the collaboration, the cumulative contingent
funds over the life of the development process have the potential to exceed
total committed funds. The transactions relating to ISIS 3521 and relating to
the collaboration and stock purchase are each subject to the approval of the
United States Federal Trade Commission under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
"As an antisense drug, ISIS 3521 represents a potential new method of treating
non-small cell lung cancer. This late-stage compound complements our growing
oncology portfolio and represents a significant market opportunity," said August
M. Watanabe, M.D., executive vice president, science and technology, for Lilly.
"We are also keenly interested in antisense technology as both a novel class of
highly selective drugs and as a tool to leverage genomics and accelerate target
validation in support of our diverse drug discovery programs. We look forward to
continuing our strong partnership with Isis, the antisense leader."
"The formation of this strategic partnership with Lilly is a pivotal event for
Isis. This transaction fortifies our financial position and enables us to
intensify our drug discovery, drug development and technology development
efforts, which we believe will generate substantial value for our shareholders,"
said Stanley T. Crooke, M.D., Ph.D., Isis chairman and chief executive officer.
"Lilly's leadership in oncology and in the creation of innovative therapies
makes Lilly an ideal partner to commercialize ISIS 3521 and to help us establish
antisense technology as an important new class of drugs. Already we have
established a strong working relationship and are looking forward to a long and
productive alliance."
Antisense inhibitors work at the genetic level by binding to messenger RNA to
interrupt the process by which disease-related proteins are produced. Antisense
inhibitors can be used as
-2-
functional genomics tools or as drugs. The effects of antisense gene
inhibition help identify what a gene does in a biological process (gene
functionalization) and help determine whether a specific gene is a good
target for drug discovery (target validation). The same antisense inhibitor
that is used as a functional genomics tool can be scaled up and studied as a
drug candidate in animals and ultimately tested in man in clinical trials,
making antisense drug discovery very rapid and efficient. Antisense drugs can
be designed to treat a wide range of diseases. Due to their gene selectivity,
they have the potential to be highly effective and less toxic than
traditional small molecule drugs.
Isis will conduct a live webcast conference call to discuss this release on
Wednesday, August 22, at 11 a.m. Eastern time. To participate over the Internet,
go to WWW.STREETFUSION.COM. A replay of the webcast will be available at this
address for up to 90 days. Richard D. DiMarchi, Ph.D., group vice president,
research technologies and product development for Lilly, will be a guest on
Isis' conference call.
Lilly, a leading innovation-driven corporation, is developing a growing
portfolio of best-in-class pharmaceutical products by applying the latest
research from its own worldwide laboratories and from collaborations with
eminent scientific organizations. Headquartered in Indianapolis, Ind., Lilly
provides answers - through medicines and information - for some of the world's
most urgent medical needs. Additional information about Lilly is available at
WWW.LILLY.COM.
Isis Pharmaceuticals, Inc. is exploiting its expertise in RNA to discover and
develop novel human therapeutic drugs. The company has commercialized its first
product, Vitravene(TM) (fomivirsen), to treat CMV-induced retinitis in AIDS
patients. In addition, Isis has 11 products in its development pipeline with 2
in late-stage development and 5 in Phase II human clinical trials. ISIS 3521, an
inhibitor of PKC-alpha, is in Phase III trials for non-small cell lung cancer.
Isis is preparing to initiate a Phase III program for ISIS 2302 (alicaforsen),
an ICAM-1 inhibitor, in Crohn's disease. Isis has a broad patent estate as the
owner or exclusive licensee of more than 800 issued patents worldwide. Isis'
GeneTrove division uses antisense to assist pharmaceutical industry partners in
validating and prioritizing potential gene targets through customized services
and access to an extensive gene function database. Ibis Therapeutics(TM) is a
division focused on the discovery of small molecule drugs that bind to RNA.
Additional information about Isis is available at www.isip.com.
-3-
This press release contains forward-looking statements about the potential of
the investigational compound ISIS 3521 in the treatment of non-small cell lung
cancer and the potential of antisense drug discovery and development efforts
that reflect the current beliefs of Lilly and Isis. However, as with any
pharmaceutical under development, there are substantial risks and uncertainties
in the process of pharmaceutical discovery, development and regulatory review.
There are no guarantees that future clinical trials will confirm the preliminary
results referred to in this release or that ISIS 3521 or any other products that
may result from the collaboration will receive regulatory approvals or prove to
be commercially successful. For further discussion of these and other risks and
uncertainties, see Lilly and Isis' filings with the United States Securities and
Exchange Commission. Lilly and Isis undertake no duty to update forward-looking
statements.
# # #
- ---------------------------------------------------
Gemzar(R)(gemcitabine hydrochloride, Lilly)
GeneTrove(TM)and Ibis Therapeutics(TM)are trademarks of
Isis Pharmaceuticals, Inc.
Vitravene(TM)(fomivirsen) is a trademark of Novartis AG
-4-
