The parties shall license their respective intracellular receptor and compound screening Technologies and all Retinoid compounds owned by each of them into a collaborative research, development and commercialization program (the "Retinoid Program") under control of a joint venture entered into by the parties (the "Joint Venture.")
Retinoid(s) shall mean any and all compounds included within the metabolic pathways of beta-carotene and other naturally occurring carotenes acting through the retinoid receptors to which such compounds bind and all agonists and antagonists of such receptors. [Per the 11/93 Amendment, Retinoid(s) shall exclude Compound 168 and Compound 1069.]
Each party's Technology shall mean all technical information useful to conduct R&D or to make, use or sell Products in the Field which such party has now or may develop or acquire during the Research Term and for a period of two years following the termination of the Research Term. [In 12/94, the parties proposed a rights offering to form a new company, Allergan Ligand Retinoid Therapeutics, which will carry out the Retinoid Program upon closing of this subscription offering, whereby the JV will be dissolved--see separate contract analysis.]
B. Research Period:
The Research Term shall end on the fifth anniversary of signing.
C. Cost Sharing & Reimbursement Basis:
During the first three years of the Research Term, each party shall fund the Joint Venture with $5 million per year ($30 million total). Thereafter, the Joint Venture shall be funded by Capital Calls or through arrangements made with third parties.
During years four and five of the Research Term, the maximum amount of funding that can be required of a party to fund Research (work prior to an IND filing) shall be the level of Research funding for the preceding year. The minimum obligation of each party in year four shall be 50% of such party's funding contribution in year three.
The Joint Venture shall reimburse each of the parties for such party's Research Expenses and Development Expenses incurred during the Research Term. Each of the parties shall commit to the Research a team consisting of at least 20 appropriately qualified scientists per year during the first three years of the Research Term.
If either party fails to contribute any amount toward a Capital Call, then the other party shall have the right, but not the obligation, to assume control of any or all unfunded Research and/or Development projects. In the event a party contributes less than the full amount of a Capital Call, such party shall identify the project(s) not being funded, and such party shall retain full rights to the funded project(s). Failure by either party to contribute some or all of a Capital Call shall not constitute a Material Breach of this Agreement.
[Per Ligand's 12/94 Annual Report, contract revenues received by Ligand from the JV were $8.3 million, $10.0 million and $2.1 million for FY1994, FY1993 and FY1992, respectively.]
D. Upfront Payment:
None
E. Benchmark Amounts:
None
F. Technology Acquisition Fees:
None
G. Payment Schedule:
Quarterly payments by each party of $1,250,000, or as adjusted by the Management Committee.
H. Budgets:
NA
I. Reimbursement Start Date:
NA
J. Regulatory Filings:
Allergan shall prepare and control all Development studies for a Compound for Eye or Skin Indications.
For all medical uses of a Compound other than for Eye or Skin Indications, however, the JDPC shall prepare and control all Development studies, except as provided below:
1) Ligand shall have the primary role for Development in North America of Compounds for Eye and Skin Cancer where the dosage form involves systemic administration;
2) Allergan shall have the primary role for Development in North America of Compounds for Eye and Skin Cancer where the dosage form involves topical administration;
3) Ligand shall have the primary role for Development in North America of Compounds for Cancer Indications other than Eye and Skin Cancer; and,
4) Allergan shall have the primary role for Development outside North America of Compounds for Cancer Indications, including Eye and Skin Cancer.
Drug Approval Applications with respect to each Compound shall be filed by the party with primary Development responsibility or by the party designated by the Management Committee.
All Development Expenses shall be reimbursed by the Joint Venture.
K. Special Capital Requirements
None
L. Patent Ownership:
Each party shall own its own Technology and Patent Rights. Joint inventions shall be owned jointly.
Patent Rights shall consist of all claims in the Field filed by the Joint Venture or either Party at any time prior to two years following the termination of the Research Term.
M. Patent Filing Costs:
Patent filing costs in the Field shall be included as Development Costs of the Joint Venture.
N. Patent Defense Costs:
The party owning any infringed Patent shall control joint litigation. All costs shall be borne by the Joint Venture, and any recovery from infringement in the Field shall be treated as profit and shared equally by the parties.
O. 3rd-Party Patents:
The Joint Venture shall assume all of each party's obligations under such party's Technology, including obligations to pay any license fees or royalties with respect to any Product.
P. Non-Compete Provisions:
This collaboration shall be the exclusive means by which the parties shall conduct work in the Field during the Research Term, provided that each party may continue to conduct such party's Permitted Activities.
Each party's Permitted Activities shall consist of such party's using its existing Retinoids, Retinoid receptors and response elements as pharmacological probes in the investigation, with or without a third party, of biological targets as part of drug discovery programs not primarily seeking Retinoids as therapeutics; provided, however, that such party shall not have the right to grant licenses or other rights regarding Retinoids to any third party.
In addition, Ligand Permitted Activities shall also consist of the following:
1) Screening of compounds on behalf of a third party solely for the purpose of toxicology testing or for cross-reactivity with any intracellular receptor or response element; and,
2) Conducting any activity necessary to comply with Ligand's obligations under its 5/1/91 agreement with Pfizer.
Each party agrees to the non-solicitation of the other party's employees during the Research Term and for two years thereafter.
Q. Publications:
No provision
R. Core Technology:
Each party owns its own
S. Cancellation Amounts:
In the event either party is in material breach of this Agreement within the first 18 months after signing, the other party shall have the right to terminate this Agreement and retain an exclusive license, with right to sublicense, Program Compounds for use in the Field, subject to a royalty payment to the breaching party of 4% with respect to products covered by Patent Rights held solely by the breaching party. (Similar rights with respect to Pre-Existing Compounds only in the event of material breach after 18 months.)
T. Termination:
Either party may terminate the Research Term effective upon 12 months advance notice given at any time after the third anniversary of signing.
U. Product Reversion:
Following the expiration of the Research Term, each of the parties shall have a co-exclusive, worldwide license to use the Program Technology (excluding Compounds in Development) in connection with such party's own drug discovery and development activities in the Field and to use the Program Technology to make, have made, use, sell, supply and import products in the Field.
With respect to any Compound that has not entered Development prior to the completion of the Research Term, either party intending to develop such Compound become the Funding Party with respect to such Compound and shall offer to the other party the opportunity to co-develop such Compound in accordance with the terms provided for resumption of participation in an Independent Project (see I.W.)
V. Change in Control:
In the event of an acquisition of a majority interest in either party by a third party, the non-acquired party (the "Continuing Party") shall have options as follows:
1) if such acquisition occurs within five years of signing, the Continuing Party shall have the option to terminate the Research Term upon 12 months advance notice; and,
2) whether or not the Research Term is prematurely terminated, the Continuing Party shall, within 120 days after the close of such acquisition, have the right to assume sole responsibility for the Research, Development and Commercialization of any Compound or Product which is directly competitive with a compound or product being developed or marketed by the acquiror at the time of acquisition; provided, however, that such right shall not apply to any Compounds or Products for Cancer Indications.
In the event of a change in control of Allergan, the acquiror shall assume Allergan's rights to Develop and Commercialize Eye and Skin Compounds and Products.
W. Options/Other:
At any time during the Research Term, either party may propose that the Joint Venture commence Research of a particular compound in the Field. If the Joint Venture does not elect to proceed with such project within two months of proposal, the Funding Party may proceed to fund such project on a unilateral basis (an "Independent Project").
Similarly, if Research is discontinued on a Joint Venture Compound, or the Joint Venture does not elect to proceed with the filing of an IND within two months after completion of the Research phase for a Compound, or the Joint Venture elects to discontinue funding of a Compound after IND filing, then either party may propose to become the Funding Party and proceed to fund such project as an Independent Project on a unilateral basis.
In the event either party defaults in its obligation to make a Capital Contribution to the Joint Venture as and when required, then the other party may elect to become the Funding Party and proceed to fund such project(s) as an Independent Project on a unilateral basis.
The Non-Funding Party shall have a one-time right to resume its participation in an Independent Project. This right may be exercised at any time prior to the commencement of Phase III clinical trials. Upon notice of such exercise, the Funding Party shall provide a statement reporting the unreimbursed Research and Development Expenses incurred in connection with such project. The Non-Funding Party shall reimburse 50% of such expenses, together with an amount representing a 25% per annum rate of return on such unreimbursed expenses.
In addition, in the event the Non-Funding Party exercises its right to resume participation in an Independent Project at any time after the commencement of preliminary safety assessment studies, then the Funding Party shall also be entitled to a Collaboration Royalty, as follows:
1) 2% in the event such resumption is prior to the filing of an IND; or,
2) 4% in the event such resumption is after filing of an IND but prior to commencement of Phase III clinical trials.
Once a Non-Funding Party has exercised it right to resume participation in an Independent Project, it shall have no further right to resume participation in such project should it subsequently cease participation, regardless of the reason.
In the event the Non-Funding Party does not resume participation in an Independent Project, the Funding Party shall be granted by the Joint Venture an exclusive license, with right to sublicense, to make, use or sell compounds involved in such Independent Project, subject to a royalty payment to the Non-Funding Party of 8% of Net Sales with respect to Independent Project commenced within two months after completion of the Research phase and prior to the filing of an IND, or 6% of Net Sales otherwise.
2. Product License(s)
A. License Holder/Type:
Each of the parties grants to the Joint Venture an exclusive, even as to such party, license under such party's Technology to conduct Research and Development in the Field and to make, have made, use, sell, supply and import Products in the Field.
The Joint Venture grants each of Allergan and Ligand a co-exclusive license to use the Program Technology to make, have made, use, sell, supply and import Products. The Joint Venture grants to Allergan an exclusive, even as to the Joint Venture, license to use the Program Technology to make, have made, use, sell, supply and import Eye and Skin Products.
With respect to marketing and sales responsibilities, the Joint Venture shall allocate such responsibilities as follows:
1) Allergan shall have such rights with respect to Eye and Skin Products worldwide;
2) Ligand shall have such rights with respect to Products for use by oncologists in Eye and Skin Cancer in North America;
3) Allergan shall have such rights with respect to Products for use by dermatologists and Eye Specialists (any physician or clinician, including without limitation ophthalmologists, whose principal practice is the treatment or prevention of diseases, disorders, irritations or conditions of the eye) in Eye and Skin Cancer worldwide;
4) Ligand shall have such rights with respect to Products for use in Cancer Indications (treatment or prevention of malignant neoplasms or direct precursors to malignant neoplasms) other than Eye and Skin Cancer in North America;
5) Allergan shall have such rights with respect to Products for use in Cancer Indications outside North America; and
6) the Management Committee shall allocate such rights with respect to all other indications on the basis of the party best placed at the time of such determination to optimize profits over the life of such Products.
Each Product shall be sold under a single trademark which shall be owned by the Joint Venture.
B. Product Field of Use:
The Field shall mean Retinoids, together with the receptors to which such compounds bind and all agonists and antagonists of such receptors, for any use in humans or animals, excluding the Treatment of Osteoporosis (except that the Field shall be expanded to include osteoporosis in the event that limitations on Ligand imposed by its agreement with Pfizer shall lapse) and excluding any use of Allergan's Compound 168 for either of the following :
1) Cancer Indications, where the dosage form of Compound 168 involves topical administration; and,
2) Eye and Skin Indications (treatment or prevention of diseases, disorders, irritations or conditions of the eyes
or skin, excluding Cancer Indications).
Per the 11/93 Amendment, the Field shall be redefined as Retinoids, excluding (a) the Treatment of Osteoporosis, (b) any use of Compound 168 and (c) any use of that certain compound owned by Ligand designated as LG 1069 with the following molecular structure:
4'-[1-(3,5,5,8,8-pentamethyl-5,6,7,8-tetrahydro-2-naphthyl)ethenyl]benzoic acid, its amides, esters or salets thereof ("Compound 1069").
C. Territory Splits:
Worldwide
With respect to Ligand's marketing and sales rights, North America shall mean the US, its Possessions and territories, Canada, Mexico and Puerto Rico.
D. Royalty Rate:
Each party shall receive a distribution of 50% of the Profit from sale of a Product after having funded 50% of the Research Expenses and 50% of the Development Expenses associated with such Product.
Profit shall mean Net Sales less Allowable Expenses and Collaboration Royalties [each as fully defined in the Commercialization Agreement]. Profit from one Product shall not be used to offset losses from any other Product, but shall be distributed to the parties on a monthly basis.
It is the intent of the parties that revenues generated and costs incurred from sales of Products be proportionally consolidated by the parties in their respective financial statements.
E. Right to Sublicense:
Any sublicenses of licenses granted to any party under this Agreement shall be granted only with the prior written consent of the Management Committee.
F. Term/Patent Life:
This Agreement shall remain in effect with respect to each Product until the later of the 15th anniversary of first commercial sale of each Product or expiration of the last to expire Patent Rights. Thereafter, each party will have a fully paid-up co-exclusive license under the Program Technology to make, have made, use and sell such Product.
G. Adv/Min Royalty & Diligence Requirement
None
H. Royalty Accounting:
Allowable Expenses shall mean, with respect to any particular Product for a specified period of time, the sum of Manufacturing Costs, Distribution and Administration Costs, Advertising and Promotion Costs, Selling Expenses, Third Party Contract Costs, Third Party Royalties, Patent Costs, Post-Marketing Study Costs, Joint Venture Expenses and such other costs as are specified under Sections 7.3 and 10.1 of this Agreement and Section 9.5 of the Research Agreement.
Joint Venture Expenses shall mean any cost of the Joint Venture, when authorized and approved by the Management Committee as part of its review of the annual budgets for the respective Program Plans, including, without limitation (i) employee salaries, (ii) administrative costs of the Joint Venture, including maintaining books and records for the Joint Venture, cash management and tax return preparation and filing and (iii) product liability insurance, interest expense, damages, attorneys' fees and costs of settlement, relating to any product liability or warranty claim for Products.
No party shall sell a Product for other than cash without the consent of the other party.
Party requesting pays costs unless audit reveals variance of greater than 5%.
I. Patent-Royalty Tie-In:
NA
J. Options/Other:
Allergan shall have the right, independent of Ligandand the Joint Venture, to develop Program Compounds for the Treatment ofOsteoporosis, and the Joint Venture and Ligand shall grant Allergan theexclusive right to develop, manufacture, market and sell such Program Compoundin the Treatment of Osteoporosis, subject to the payment to Ligand of a royaltyof 4% of Net Sales.
3. Manufacturing & Supply
A. Right Holder/Type:
The Management Committee shall determine the source of supply of Product, except that Allergan shall be responsible for aspects of manufacturing with respect to Eye and Skin Products.
B. Bulk/Dosage Form:
Final dosage form.
C. Territory:
Worldwide
D. Reimbursement Basis:
The Joint Venture will purchase Product from the manufacturing party at Manufacturing Cost.
E. Proc. Dev. Terms:
No provision
F. Clinical Use Manufacturing:
No provision
G. Shipment Terms:
No provision
H. Financing:
None
I. Escape Clause:
No provision
J. Product Liability:
The Joint Venture shall indemnify each of the parties with respect to the Research Program and any negligence on the part of the Joint Venture. Each of the parties shall indemnify the other party and the Joint Venture with respect gross negligence or willful misconduct. The Joint Venture shall procure and maintain general and product liability insurance with the Joint Venture and each of the parties as named insureds.
K. Options/Other:
None
4. Collaboration Management
A. Representation:
The parties shall establish a Management Committee which shall be responsible for the activities of the Joint Venture. The Management Committee shall identify and hire a Director, who will be paid and employed by the Joint Venture.
The Management Committee shall establish a Joint Research Policy Committee (JRPC), consisting of two members from each party, and a Joint Development Policy Committee (JDPC), also consisting of two members from each party.
No later than three months prior to the commencement of Phase III clinicals for any Product, the Management Committee shall establish a Joint Marketing Policy Committee (JMPC), consisting of two members from each party
B. Quorum:
No provision
C. Basis of Actions:
All decisions of the JRPC, JDPC or JMPC shall be unanimous. All decisions of the Management Committee shall be by majority vote.
D. Meetings:
Each of the JRPC, JDPC and the JMPC shall meet at least quarterly.
E. Disagreements:
Any disagreements or stand-offs within the JRPC, JDPC or JMPC shall be referred to the Management Committee. If the Management Committee cannot reach an agreement, the issue shall be referred to the CEOs of the parties. Any issue which cannot be resolved by the parties' CEOs shall not be acted upon by the Joint Venture, except that the party having marketing and sales responsibility with respect to a Product shall be entitled to enact its sales plan in the absence of agreement within the Management Committee.
F. Buyout/Windup:
Neither party may sell its interest in the Joint Venture without the permission of the other party. Upon dissolution of the Joint Venture, each party shall be entitled to an equal and undivided interest in all technology owned by the Joint Venture.
G. Options/Other:
None
5. Equity Investment
A. Type of Security:
1,250,000 shares of Series E preferred stock, which were converted to 312,500 Class A and 937,500 Class B common shares.
[On 11/24/94, each Class A common share was converted into 1.33 shares of Class B common stock-- a total of 1,353,125 Class B shares. Allergan owns approximately 2.4 million shares of Class B Common Stock including IPO shares and warrant shares (see Section V.E).]
B. Pricing:
$15 million ($12/share) plus $5.0 million purchased upon Ligand's IPO plus $4.0 million upon exercise of the warrant (see Section V.E).
C. Board Seat:
One
D. Research Tie-Ins:
See Section I.C.
E. Options & Rights:
Allergan also received a 6-year warrant to purchase an additional 400,000 shares of Series E preferred stock at a price per share based on the time of exercise, as follows:
1) 0-2 years $12.00/share
2) 3-4 years $14.00/share
3) 5-6 years $17.50/share
[In 11/93, Allergan exercised such option and purchased 100,000 Class A shares (converted into 133,000 Class B shares in 11/94) and 300,000 Class B shares for $4.0 million.]
Allergan agrees to purchase at Ligand's IPO the lesser of $5 million in additional equity or an amount such that Allergan owns an aggregate of 19.99% of Ligand's outstanding shares after the IPO. [Pursuant to this provision, Allergan purchased 474,383 Class A shares (converted into 630,929 Class B shares in 11/94)as part of Ligand's IPO.]
Allergan shall be entitled to two demand registrations beginning after the earlier of 12/31/92 or six months after Ligand's IPO. Allergan shall also be entitled to unlimited piggyback and incidental registrations. All such registration rights shall expire five years after the consummation of an IPO by Ligand.
Allergan agrees to a market stand-off of up to 180 days with respect to the first registration of securities by Ligand for sale to the public. Allergan also agrees to an ownership standstill until the fifth anniversary of Ligand's IPO.
Allergan shall have a right of first offer to maintain its percentage ownership in Ligand through any private financing round prior to Ligand's IPO.
Allergan agrees that until 12/31/92 and for a two year period following Ligand's IPO, Allergan agrees not to sell or otherwise dispose of any of its shares or warrants in Ligand. With respect to any permitted sale by Allergan, Ligand shall have a right of first refusal to purchase such shares within 15 days of notice by Allergan; such right shall expire when Allergan owns less than 5% of Ligand's outstanding shares.
6. Signatories
A. For Drug Company:
William C. Shepherd
President & CEO
B. For Biotech Company:
David E. Robinson
President
Key: CON Confidential Treatment granted by SEC; material omitted from public filings. UKN Unknown NA Not applicable
