CLINICAL SUPPLY, DEVELOPMENT AND LICENSE AGREEMENT

EXHIBIT 10.7

 

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CERTAIN INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

CLINICAL SUPPLY, DEVELOPMENT AND LICENSE AGREEMENT

This CLINICAL SUPPLY, DEVELOPMENT AND LICENSE AGREEMENT (this “Agreement”), is entered into as of 15 day of Jan., 2004 (“ Effective Date ”) by and between

NeurogesX Inc., a California corporation with its principal place of business at San Carlos Business Park, 981 F Industrial Road, San Carlos, CA 94070, USA (“ NeurogesX ”)

and

LTS Lohmann Therapie-Systeme AG, a company existing under the laws of Germany and having its head office at Lohmannstraße 2, D-56626 Andernach, Germany (“ LTS ”).

Each of NeurogesX and LTS shall be a “ Party ,” and together shall be referred to as the “ Parties .”

RECITALS

WHEREAS, NeurogesX and LTS have previously entered into the Memorandum of Understanding dated May 29, 2001 (“ MOU ”), pursuant to which the Parties cooperated on the development of a Patch containing capsaicin and wish to complete such development under this Agreement;

WHEREAS, NeurogesX desires to seek Marketing Approval for the Patches in the Territory;

WHEREAS, NeurogesX desires to exclusively purchase from LTS, and LTS desires to exclusively supply to NeurogesX, Clinical Samples of the Patches, all in accordance with the terms and conditions of this Agreement;

WHEREAS, the Parties desire to restate all of their rights and obligations with respect to the Patches in this Agreement, and for this Agreement to supersede the MOU with respect to the Parties’ rights, obligations and activities from this point forward.

NOW THEREFORE, in consideration of the mutual agreements and covenants herein contained and intending to be legally bound thereby, NeurogesX and LTS agree as follows:

AGREEMENT

ARTICLE 1

DEFINITIONS

As used herein, the following terms will have the meanings set forth below:

1.1 “ Affiliates ” of an entity means the other entities that control, are under common control or are controlled by the subject entity. For purposes of this definition, an entity shall be regarded as in control of another entity if it owns or controls fifty percent (50%) or more of the shares of the subject entity entitled to vote in the election of directors (or, in the case of an entity that is not a corporation, for the election of the corresponding managing authority).

1.2 “ Clinical Samples ” means Patches supplied by LTS under this Agreement meeting the Specifications, that are intended by NeurogesX to be used in human clinical trials for purposes of obtaining Marketing Approval for the Patches.

1.3 “ Clinical Program Patents ” means patents worldwide owned or Controlled by LTS covering or claiming any subject matter which is incorporated into, or utilized as part of the operation of, the Patches, or any method of use of the Patches.

1.4 “ Control ” means the possession at any time during the term of this Agreement of the right or power to grant licenses of or within the scope set forth herein without violating the terms of any agreements with non-Affiliate third parties.

1.5 “ Current GMP ,” or “ cGMP ” means then current Good Manufacturing Practices promulgated by the United States Food & Drug Administration (FDA) or its counterpart governmental agencies in the Territory in the form of laws, regulations or guidance documents.

1.6 “ Defect ” or “ Defective ” when applied to Clinical Samples means the failure of such Clinical Samples to meet the warranty set forth in Section 9.2.

1.7 “ Development Costs ” means those costs paid by NeurogesX to LTS for the development of the Patch, solely as set forth in the Development Plan, attached hereto as Exhibit D.

1.8 “ Development Plan ” means the development plan set forth in Exhibit D.

1.9 “ Development Team ” has the meaning as set forth in Article 4.

1.10 “ Field ” has the meaning as set forth in Section 7.2.

1.11 “ Kit ” means the ultimate commercial product in the form sold by NeurogesX, its Affiliates or Sublicensees of which the Patch(es) is a component.

 

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1.12 “ Marketing Approval ” means all approvals, registrations or authorizations of any federal, state or local regulatory agency, department, bureau or other governmental entity, necessary for the manufacturing, use, storage, import, transport and sale of Patches in a regulatory jurisdiction.

1.13 “ Net Sales ” means the [***] of Kits sold by NeurogesX, its Affiliates or Sublicensees to a non-Affiliate third party in bona-fide, arms-length transactions, after deducting (to the extent actually incurred and to the extent not already deducted in the amount invoiced): (a) [***] and [***], (b) [***] and [***], including for [***], and [***], (c) [***] and other [***] or [***] and [***], (d) if included in the [***] of the Kits, [***] or [***] (including any such [***] as a [***] or similar [***] or [***]), (e) if included in the [***] of Kits, [***] and [***] on [***] of Kits, and (f) [***] determined in accordance with Generally Accepted Accounting Principles in the United States, consistently applied.

If mutually agreed in writing by the Parties, some or all such items may be estimated and subsequently adjusted. If a Kit is sold for consideration other than solely cash, the value of such other consideration attributable to the sale of the Kit shall be included in calculating Net Sales. In the event Kit is sold by NeurogesX to an Affiliate or Sublicensees for resale, Net Sales shall include the amounts invoiced by such entities to third parties on the resale (excluding (a) through (f) above), but not the amounts invoiced by NeurogesX to such entities. Net Sales shall not include any sales of Kits as samples, for clinical trials, or for research and development efforts by or for NeurogesX.

1.14 “ Patch ” or “ Patches ” means any TTS containing VRl-Ligands of the same design as patches developed for or delivered to NeurogesX under the MOU or this Agreement which meet any version of the Specifications.

1.15 “ Patch Regulatory Information ” means any and all information in the possession of LTS relating to the Patches, as reasonably necessary for NeurogesX’s efforts to obtain Marketing Approval therefor in any regulatory jurisdiction, including without limitation (a) such information as is required for the Chemistry, Manufacturing and Controls (CMC) section of an Investigational New Drug application (IND) or New Drug Application (NDA) for the Patches, (b) all data regarding stability, storage conditions and shelf life of Clinical Samples, and (c) all data reasonably required to qualify a manufacturing facility for the Patches under Regulatory Requirements.

1.16 “ Quality Assurance Agreement ” means the quality assurance procedures then currently, mutually agreed upon in writing. The Quality Assurance Agreement as of the Effective Date is attached as Exhibit C.

1.17 “ Reasonable Commercial Efforts ” means those reasonable commercial efforts employed by a Party, equivalent to at least that level of attention and care that it devotes to its other businesses and products of similar commercial potential and at a similar stage of progress of development.

1.18 “ Regulatory Requirements ” means all laws, regulations and other legal requirements applicable to the manufacture of Patches or components thereof, including without limitation cGMP,

 

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FDA regulations, any applicable local laws and regulations in the place of manufacture, storage and handling, and any requirements set forth in the IND, NDA, Marketing Approval Application (MAA) and other regulatory filings or approvals for the Patches.

1.19 “ Specifications ” means the specifications for the Patches and/or Clinical Samples as then currently, mutually agreed upon in writing under the MOU or this Agreement. The Specifications for the Patches at the time of execution of the MOU is set forth in Exhibit B-l, and the Specifications for the Clinical Samples at the time of this Agreement is set forth in Exhibit B-2 of this Agreement. Unless indicated to apply to only a particular batch of Clinical Samples, the Specifications then currently agreed upon for the Clinical Samples shall also be the Specifications men currently agreed upon for the Patches in general.

1.20 “ Sublicensees ” means non-Affiliate third party to whom NeurogesX has granted (i) the right to market and sell a Product purchased from LTS under this Agreement or the Supply Agreement, provided that such third party has primary responsibility for and has the right to direct and control the marketing and promotion of such Product in its distribution territory and the right to record sales of such Product for its own account or (ii) the right to make (to the extent that NeurogesX has the right to do so pursuant to Section 7.3 or the Supply Agreement) and sell a Product, with respect to Products that were manufactured and then sold by such third party, within the scope of the license from LTS hereunder. For the avoidance of doubt, Sublicensee shall exclude retailers, wholesalers, distributors or specialty distributors, but shall include marketing partners of NeurogesX.

1.21 “ Supply Agreement ” has the meaning as set forth in Section 6.2.

1.22 “ Territory ” means the United States, European Union (in one or more countries therein selected by NeurogesX) and Japan (at NeurogesX’s option). In addition, the Territory may be extended by NeurogesX to include additional countries and/or regulatory jurisdictions in accordance with Section 3.7.

1.23 “ TTS ” means [***] or other patch products for delivering drugs [***].

1.24 “ VR1-Ligands ” means compounds that bind to the vanilloid receptor subtype 1, as further described in Exhibit A. The parties may amend Exhibit A from time to time upon mutual written agreement.

ARTICLE 2

SUPPLY OF CLINICAL SAMPLES

2.1 Supply of NeurogesX Requirements of Clinical Samples . Subject to the terms and conditions of this Agreement, LTS shall manufacture for and supply NeurogesX’s requirements of Clinical Samples. However, LTS shall not be liable under this Section 2.1 for failure to meet such obligation to manufacture for and supply NeurogesX’s requirements of Clinical Samples so long as LTS used its Reasonable Commercial Efforts to comply with its obligation stated in this Agreement.

 

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2.2 Purchase Orders . All supply of Clinical Samples hereunder shall be initiated by a purchase order placed by NeurogesX. Purchase orders shall include the quantity of Clinical Samples ordered, requested delivery date(s), and shipping destination and/or instructions. LTS shall accept and fill all purchase orders for Clinical Samples placed by NeurogesX hereunder, and shall deliver the Clinical Samples by the delivery dates requested therein, unless (a) a purchase order includes substantially higher volumes and/or provides for substantially shorter lead times than those purchase orders previously placed by NeurogesX and accepted by LTS, and (b) LTS cannot fill such purchase order by using [***]. With respect to such purchase orders, LTS shall notify NeurogesX within [***] business days of receipt thereof, and NeurogesX shall have the option, to be executed with [***] business days thereafter, to either (i) modify the purchase order based on the parties’ mutual discussion, or (ii) in case of LTS acceptance of such order (which shall not be unreasonably withheld provided that LTS shall not be forced to breach any of its other obligations), NeurogesX shall [***] LTS for its [***] beyond those normally [***], if any, for LTS to meet such order. Such [***] shall be [***] and [***] prior to acceptance of the order, and it is understood that LTS shall use [***] to [***] any such additional [***]. In the event LTS does not so notify NeurogesX within such [***] business days, NeurogesX’s purchase order shall be deemed accepted by LTS, and Section 2.2(ii) above shall not apply thereto.

2.3 Delivery . All Clinical Samples for delivery will be placed at the disposal of NeurogesX at the relevant LTS manufacturing facility. Title and risk of loss, delay or damage to the Clinical Samples in transit shall pass to NeurogesX upon delivery of the Clinical Samples to the carrier. Unless NeurogesX requests otherwise, all Clinical Samples shall be packed for shipment and storage fit for the respective way of transportation using the packaging set forth in Exhibit E and any requirements set forth in the Quality Assurance Agreement. In the event NeurogesX has any special freight packaging requirements, it shall notify LTS, and LTS will use Reasonable Commercial Efforts to comply with any such requirements. All costs associated with any special freight packaging requirement shall be borne by NeurogesX. NeurogesX shall bear all costs of freight, shipping and insurance as well as indirect taxes, including import, customs, excise and sales taxes but not income taxes related to the sale and purchase of the Clinical Samples hereunder.

2.4 Quality Assurances . LTS shall comply with each requirement set forth in the Quality Assurance Agreement with respect to manufacturing (and associated support functions including without limitation testing, release, stability studies), storage, handling and delivery of Clinical Samples to NeurogesX hereunder; provided, however, the provisions concerning LTS responsibility and liability as set forth in this Agreement shall supersede any conflicting provisions in the Quality Assurance Agreement or any amendment thereof.

2.5 Manufacturing Facility . LTS’s manufacturing facilities for the Clinical Samples are and shall continue to be in compliance with cGMP and shall be available for governmental inspection if any competent authority or governmental organization so requests. LTS shall promptly provide to NeurogesX any cGMP certificate issued by the competent authority/authorities.

2.6 Audits . NeurogesX and its Sublicensees shall have the right to audit LTS, its Affiliates, and any sub-contractors and vendors of LTS with respect to the Patches, as shall other third parties designated by NeurogesX and approved by LTS in written form (which approval shall not be unreasonably withheld) for compliance with this Agreement, at reasonable times and on reasonable notice and during regular business hours.

 

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2.7 Supply of Capsaicin . NeurogesX shall provide LTS with the necessary amounts of the active principle capsaicin according to the specifications as set forth in Exhibit I (“ Materials ”), solely for LTS to fill NeurogesX’s purchase orders for Clinical Samples placed under this Article 2, and for performing the activities described in the Development Plan under Article 3. LTS shall only perform identity testing of the Materials. NeurogesX shall retain all right, title and interest in the Materials. The Materials shall be (i) clearly marked as property of NeurogesX, (ii) stored under conditions specified in Exhibit I, (iii) kept free of any liens and encumbrances, and (iv) subject to inspection by NeurogesX at any time during LTS’s business hours. LTS shall maintain an accurate inventory of Materials and shall be responsible for any and all loss, damage, or theft of Materials. Upon termination or expiration of this Agreement (or an earlier request of NeurogesX), LTS will promptly deliver to NeurogesX or NeurogesX’s designee all Materials F.O.B. NeurogesX’s address first set forth above.

2.8 Conflicting Terms and Conditions . The supply of Clinical Samples by LTS to NeurogesX and of Materials by NeurogesX to LTS shall be solely in accordance with the terms and conditions of this Agreement ANY TERMS OR CONDITIONS OF ANY PURCHASE ORDER OR ACKNOWLEDGMENT GIVEN OR RECEIVED WHICH ARE ADDITIONAL TO OR INCONSISTENT WITH THIS AGREEMENT SHALL HAVE NO EFFECT AND SUCH TERMS AND CONDITIONS ARE HEREBY EXCLUDED AND REJECTED BY EACH PARTY.

ARTICLE 3

DEVELOPMENT

3.1 Continuing Development of the Patch . The Parties agree to cooperate on the continuation of the development of the Patch in accordance with this Agreement. LTS shall use Reasonable Commercial Efforts to continue carrying out the activities set forth in the Development Plan in accordance with the schedules set forth therein and this Agreement, and NeurogesX shall use Reasonable Commercial Efforts to continue to pursue obtaining Marketing Approval for the Patch in the Territory, and, if elected, any additional countries in accordance with Section 3.7 below.

3.2 Changes to the Specifications . Each Party shall be available to consult, and shall cooperate with the other Party with respect to any changes to the Specifications NeurogesX requires to facilitate obtaining Marketing Approval for the Patches in the Territory. Without limiting the foregoing, neither Party shall unreasonably withhold its approval for any changes to the Specifications that (a) NeurogesX reasonably determines are necessary for its efforts to obtain such Marketing Approval for the Patches in the Territory or (b) LTS reasonably determines are necessary to meet the CMC section of any HMD or NDA for the Patch (or the equivalents thereof outside the United States).

The Party requesting such change shall be fully responsible for any reasonable delay, complications and/or cost increases connected to such change. Changes to the Specification which are mutually agreed upon in writing shall apply to all Patches and/or Clinical Samples ordered after the date of such change, unless otherwise agreed upon by the Parties.

 

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3.3 Patch Regulatory Information . LTS shall provide NeurogesX with Patch Regulatory Information upon NeurogesX’s request. To the extent such Patch Regulatory Information constitutes LTS’s manufacturing or patch trade secrets, LTS may notify NeurogesX and provide a general description thereof, and if requested by NeurogesX, LTS may, instead of providing the Patch Regulatory Information to NeurogesX, elect to directly provide such Patch Regulatory Information to the applicable regulatory authority.

3.4 Regulatory Issues . LTS will notify NeurogesX in due time (and no later than five (5) business days after LTS obtaining notice thereof) of any inspections, written notice of findings and/or actions by regulatory agencies or other enforcement bodies of LTS facilities and/or processes which will directly affect the Patch. Where reasonably possible, LTS shall afford NeurogesX the opportunity to be present at any such inspections. LTS shall consult with NeurogesX in responding to any such inspections, written notice of findings and/or actions that directly affect the Patch, including by providing NeurogesX copies of any responses thereto for NeurogesX’s review and comment in advance of their submission to the regulatory agency, and using reasonable efforts to incorporate therein NeurogesX’s comments as appropriate.

3.5 Changes by LTS to the Manufacturing Process . Notification of intent by LTS to change any aspect of manufacture, which to LTS’s best knowledge has the potential to substantially affect the Patch will be provided by LTS to NeurogesX prior to implementation of the change, which change shall further be subject to the approval of NeurogesX.

3.6 Reporting Safety and Toxicity Problems . Each Party shall promptly advise the other Party of any safety or toxicity problems of which it becomes aware regarding the Patches or raw materials used in the manufacture of the Patches.

3.7 Additions to the [***] . NeurogesX shall have the right to elect from time to time to pursue [***] for the Patches in [***] or [***] other than [***] upon written notice to LTS within a reasonable lead time. In the event NeurogesX’s decision to add any [***] or [***] to the [***] shall cause LTS to [***], as a result of specific [***] of such [***] or [***] (“ [***] ”), and/or impose requirements beyond LTS’s standard manufacturing practice, LTS shall in due time notify and discuss with NeurogesX such [***] and such additional requirements. Upon such mutual agreement of the [***] and ways of accommodating such additional requirements, NeurogesX shall have the option to either (a) modify or limit such addition to the [***], or (b) include such [***] or [***] within the [***] and [***] LTS for the [***]. It is understood that LTS shall use [***] to [***] any such [***] and accommodate such reasonable requirements.

3.8 Delegation to LTS Affiliates . LTS shall have the right to delegate all or any portion of its obligations under this Agreement to its Affiliates, provided that such Affiliates shall be bound by all of the terms and conditions set forth herein as if named as a Party, and provided further that LTS remains responsible for the performance of such Affiliates under this Agreement or otherwise.

 

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ARTICLE 4

COORDINATION

4.1 Development Team . Promptly after the Effective Date, the Parties will form a team (the “ Development Team ”) to facilitate communications and decision making by the Parties regarding the activities to be carried out pursuant to this Agreement including, but not limited to, facilitating the transfer of information between the Parties relating to NeurogesX’s applications for Marketing Approval, discussing capacity constraints and other supply issues, discussing additions to the Territory, establishing, supplementing and modifying the Patch development or the Specifications, discussing intellectual property issues relating to the Patch in conjunction with a competent patent counsel of NeurogesX and/or LTS as appropriate.

4.2 Composition . The Development Team shall consist of [***] representatives from [***], one of which shall be a designated project leader for such Party (the “Project Leader”). Each Party shall provide the other Party written notice of, and contact information for, its representatives on the Development Team. In the event that a member of the Development Team resigns, or a Party desires to replace one of its members, such Party will provide the other Party written notice of such event and the name of the member’s replacement.

4.3 Meetings . The Development Team will conduct formal meetings via teleconference or in person on at least a [***] basis, and will issue minutes of those meetings within [***] days to the management of each respective company.

4.4 Decisions . All decisions made by the Development Team shall be based on the mutual agreement of the Project Leaders. Each Project Leader shall have the authority to fully represent the position of his company and the decision of his company management, except with respect to any aspects of liability, In case the Project Leaders do not agree, the principal executive officers of NeurogesX and LTS or their designees shall try to resolve the dispute. Notwithstanding the foregoing, no action, inaction, decision or inability to reach a decision by or of the Development Team shall vary the terms and conditions of this Agreement, nor the rights and obligations of the Parties hereunder.

ARTICLE 5

PAYMENT

5.1 Payment: Rates . In accordance with this Article 5, NeurogesX shall compensate LTS, at a rate of:

(a) [***] per person hour, and

(b) [***] per machine hour for work performed on the large scale TTS production equipment;

each plus [***], if applicable, for all hours actually expended by LTS on activities set forth in the Development Plan performed in accordance with this Agreement (“LTS Activities”), such as for example, the supply of Clinical Samples to NeurogesX under Article 2 and continuing development

 

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activities under Article 3. It is understood that the amounts to be paid by NeurogesX under this Section 5.1 are in lieu of any purchase price to be paid by NeurogesX for the supply of Clinical Samples, and LTS shall not charge NeurogesX any amounts for the supply of Clinical Samples or its other activities hereunder except as expressly set forth in this Agreement.

5.2 Advance Payments . [***] days prior to the beginning of each calendar quarter during the term of this Agreement, LTS shall provide the Development Team for its approval an estimate of the hours it expects to spend on activities under the Development Plan in such quarter, broken down by category of activity (as approved, the “ Estimated Hours ”). Within [***] days thereafter, NeurogesX shall pay LTS an advance payment (“ Advance Payment ”) equal to the amount calculated under Section 5.1 for [***] of the Estimated Hours. LTS shall verify and document the person hours and machine hours actually expended on the LTS Activities each quarter, and will submit such documentation to NeurogesX along with an invoice at the end of each calendar quarter. If the amount actually owed under Section 5.1 for LTS Activities is less than the Advance Payment, then the difference will be credited against the amounts due in the succeeding calendar quarters, including without limitation any future Advance Payments. If the amount actually owed under Section 5.1 for LTS Activities is greater than the balance of the Advance Payment, then NeurogesX shall pay such difference within [***] days after receipt of the invoice. All payments hereunder shall be in Euros. Upon termination or expiration of this Agreement for any reason, (a) LTS shall promptly refund to NeurogesX any unused Advance Payments or (b) in case the amount actually owed under Section 5.1 for LTS Activities is greater than the balance of the Advance Payment, then NeurogesX shall promptly pay such difference.

5.3 Audits . At NeurogesX’s request, NeurogesX shall have the right through an independent auditor, acting in confidence, to audit LTS’s allocation of person-hours and machine-hours for the LTS Activities.

5.4 No Setoff nor Suspension of Performance .

(a) NeurogesX shall not exercise any right of setoff, net-out or deduction, take any credit, or otherwise reduce the balance owed to LTS, in each case with respect to payments under Sections 5.1 and 5.2 of this Agreement, unless the Parties otherwise agree or until NeurogesX has obtained a final and non-appealable judgment against LTS in the amount asserted by NeurogesX.

(b) LTS shall not have the right to suspend performance (including without limitation refusing or withholding delivery of Clinical Samples) under this Agreement unless and until LTS has obtained a final and non-appealable judgment against NeurogesX holding that NeurogesX has materially failed to perform its obligations under this Agreement relating thereto.

ARTICLE 6

OTHER ASPECTS OF THE BUSINESS RELATIONSHIP

6.1 Memorandum of Understanding . The MOU shall continue to be in effect only with respect to rights and obligations of the Parties prior to the Effective Date arising from activities prior to the Effective Date, notwithstanding any survival provisions set forth in the MOU. With respect to

 

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(a) activities of the Parties after the Effective Date, and/or (b) rights and obligations of Parties after the Effective Date (including those arising from activities under the MOU prior to the Effective Date), this Agreement shall supersede the MOU and the MOU shall be of no further effect. For purposes of determining the rights and obligations of the Parties after the Effective Date arising from the MOU, all activities by the Parties under the MOU shall be deemed to have been activities under Article 3 of this Agreement.

6.2 Supply Agreement . In case NeurogesX is interested in continuing to commercialize the Patches, LTS will be NeurogesX’s exclusive (to be defined in the Supply Agreement) partner for manufacturing and supply of the Patch, and NeurogesX will be LTS’s exclusive (as defined in Section 7.2 below) partner for sale and distribution of the Patches; subject to terms and conditions, including but not limited to [***], as well as [***], to be negotiated between the Parties in good faith (the “ Supply Agreement ”). Notwithstanding the foregoing, in the event the Parties cannot in good faith agree on the terms and conditions of the Supply Agreement within [***] after such negotiation has commenced, which shall not be later than [***] after the Effective Date (“ Failure to Agree ”), NeurogesX shall be free to negotiate and enter into any manufacturing and supply agreement(s) with any third party(ies) and its rights set forth in Section 7.3 below shall become active.

(a) Milestone Payment . It is the Parties’ intent that the Supply Agreement would provide for a one time payment by NeurogesX in the amount of [***] within [***] days of first receipt by NeurogesX of Marketing Approval of a Patch in the first launch country.

(b) Royalties . It is the Parties’ intent that the Supply Agreement would provide for a royalty rate of [***] on the Net Sales of Kits sold by NeurogesX, its Affiliates or Sublicensees, containing Patch(es) purchased from LTS under the Supply Agreement. Royalties shall be paid according to Section 7.3(e).

(c) Transfer Price . It is the Parties’ intent that the transfer price for the Patches shall be negotiated at the time of the negotiation of the Supply Agreement based on the non-binding price offer for the Patch provided by LTS in its letter dated June 13, 2001, attached hereto as Exhibit H, and the email dated August 29, 2002 from [***] to [***] amending the non-binding price offer based on discussions between the Parties regarding insurance and liability issues, which states that the non-binding price offer for the Patch shall be increased by not more man [***] per [***] Patches.

(d) Other Terms . To the extent the rationale behind the provisions set forth in this Agreement are applicable to like provisions of the Supply Agreement, the Parties shall endeavor not to vary the terms and conditions of such provisions when negotiating the Supply Agreement.

 

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ARTICLE 7 LICENSES

7.1 Clinical Program License to NeurogesX . LTS hereby grants NeurogesX a worldwide, [***], [***] right and license under the Clinical Program Patents and the Patch Regulatory Information to use said patents and information, for purposes of obtaining Marketing Approval for the Patches, including without limitation for designing and conducting clinical trials, toxicological, pharmacological and other studies, inclusion in the CMC documentation and other regulatory filings, and preparing documentation regarding the preparation, manufacturing and/or use of the Patches or the delivery of services relating thereto. The license set form in this Section 7.1 shall be exclusive, for purposes of obtaining Market Approval for TTS in the Field.

7.2 Limited Exclusivity .

(a) LTS shall for the duration of this Agreement and any future Supply Agreement not develop for, sell or license to, any third parties any TTS with capsaicin with an [***] (such TTS, the “ Field ”).

(b) LTS shall not use, manufacture, sell, distribute or license for or to any third party any Patches, except as authorized in writing by NeurogesX.

(c) Except as set forth in this Section 7.2, LTS shall at all times have the right to develop and/or manufacture any other TTS’s or products developed by LTS and/or a third party, even if it contains VRl-Ligands.

7.3 Backup Commercialization License .

(a) Definitions . For the purpose of this Section 7.3, the following terms will have the meanings set forth below.

(i) “ LTS Know-how ” means instructions, specifications, know-how, technology, materials and intellectual property describing the composition and manufacture of the Patches, including a description of the suppliers, raw materials, processes, equipment and instruments used for such manufacture and all Patch Regulatory Information. It is understood that LTS Know-how shall include all information or materials disclosed or provided under this Agreement, the MOU and the Secrecy Agreement.

(ii) “ LTS Technology ” means LTS Know-how and any and all patents or other intellectual property worldwide owned or Controlled by LTS which cover, is incorporated in or is used as part of any of the Patches, or which relate to a method of use or manufacture of any of the Patches.

(b) Delivery of Technology . In the event of a Failure to Agree (as defined in Section 6.2), in order to permit NeurogesX to manufacture or have manufactured and commercialize the Patch, LTS shall, upon NeurogesX’s request, deliver to NeurogesX at no additional cost, [***]

 

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[***]. EXCEPT AS SET FORTH IN THIS SECTION 7.3(B), LTS SHALL IN NO CASE BE OBLIGED TO PROVIDE ITS PROPRIETARY KNOW-HOW WITH REGARD TO GENERAL TTS MANUFACTURING METHODS, BUT SHALL IF REQUESTED BY NEUROGESX AND AT NEUROGESX’S COSTS [***].

(c) License . LTS hereby grants NeurogesX a world-wide right and license, with right to grant and authorize sublicenses, under LTS Technology, to use, make, have made, sell, offer for sale, import, promote, market, develop, obtain regulatory approval for and otherwise commercialize Patches and any derivatives or improvements thereof made by or for NeurogesX, and to [***]; provided that NeurogesX shall not exercise any rights set forth in this Section 7.3 except in the event of a Failure to Agree (as defined in Section 6.2). NeurogesX shall not disclose any LTS Know-how to any third party except in connection with exercising the rights set forth in this Section 7.3(c), and subject to reasonable confidentiality obligations on the part of such third party. [***]

(d) Royalties . In consideration of the license set forth in this Section 7.3, NeurogesX shall pay LTS a [***] running royalty on the Net Sales of Kits by NeurogesX, its Affiliates or Sublicensees, in the event NeurogesX exercises the rights set forth in this Section 7.3 for such Kits after a Failure to Agree.

(e) Computation of Royalties . The royalties set forth in Section 6.2(b) and 7.3(d) shall be computed for each applicable [***] period ([***]), and shall be due and payable within [***] days after such [***] period. For purposes of computing royalties, the Patch will be considered sold when paid for NeurogesX shall report to LTS, within [***] days after the end of each such [***] period during the term of this Agreement and thereafter, until all dispositions made pursuant to this Agreement have been accounted for, any and all royalties under Sections 6.2 or 7.3 accruing during such [***] period. NeurogesX shall keep records in sufficient detail to enable the royalties’ payable under the Section 6.2 or this Section 7.3 to be determined. The records of NeurogesX shall be available during reasonable business hours for inspection not more than once every [***] month period, by an independent Certified Public Accountant reasonably acceptable to NeurogesX acting in confidence and retained by LTS at LTS’s expense, for the purpose of verifying royalty reports and payments due hereunder. In the event of an underpayment by NeurogesX of more than [***] of the total is found, NeurogesX shall bear the costs connected with the verification.

7.4 Sublicensing . In the event NeurogesX desires to grant a sublicense to any third party under the licenses set forth in Section 7.1 and/or 7.3, [***], provided that

(a) LTS is informed of [***] (as it relates to the scope of such sublicense); and

 

***	Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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(b) those Sublicensees shall be obligated to indemnify LTS regarding product liability to the extent NeurogesX is so obligated under Sections 10.2 and 10.3(b).

ARTICLE 8

INTELLECTUAL PROPERTY

8.1 Inventions from the LTS Development of the Patch .

(a) LTS Owned . All inventions developed by the Parties under this Agreement solely relating to LTS’s existing TTS technology, including but not limited to [***] of TTS, shall be the property of LTS (“ LTS IP ”). [***]. NeurogesX hereby irrevocably assigns, and agrees to assign to LTS any right, title and interest it may have in and to the LTS IP, and shall assist LTS, upon reasonable request and at LTS’s sole expense, to secure or perfect any and all such rights.

(b) NeurogesX Owned . All inventions developed by the Parties under this Agreement [***] uses of VRl-Ligands shall be the property of NeurogesX (“ NeurogesX IP ”). LTS hereby irrevocably assigns, and agrees to assign to NeurogesX all of its right, title and interest in and to NeurogesX IP, and shall assist NeurogesX, upon reasonable request and at NeurogesX’s sole expense, to secure or perfect any and all such rights.

(c) Jointly Owned . [***] inventions developed by the Parties under this Agreement shall be the joint property of the Parties (“ Joint IP ”), provided that it does not belong to [***]. Neither Party shall have any obligation to account to the other Party for profits with respect to, or to obtain any approval of the other Party to license or exploit, any Joint IP by reason of their joint ownership, and each Party waives any such right it might have under the applicable laws in any country; provided , that NeurogesX [***] have the right to [***] applications and products.

8.2 Prosecution of Patents Covering the Patch .

(a) As used in this Sections 8.2 and 8.4, “prosecute” means the procedure(s) involved in securing patent rights in patent offices worldwide.

(b) LTS shall have the right, but not the obligation, to file, prosecute and/or maintain any patent or patent application solely owned by LTS covering the Patches.

(c) If LTS elects to file, prosecute and maintain any such patent or patent application, the expenses of such action shall be borne by LTS.

(d) If LTS elects not to file, prosecute or maintain any such patent or patent application in any jurisdiction, it shall notify NeurogesX at least [***] prior to the due date for action or payment. NeurogesX shall then have the right, to file, prosecute and/or maintain any such patent or patent application.

 

***	Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.

 

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(e) If NeurogesX elects to file, prosecute and maintain any such patent or patent application in such jurisdiction, the expenses of such action shall be borne by NeurogesX, and NeurogesX shall have a non-exclusive (except as set forth in this Section 8.2(e)), transferable, sublicensable, royalty free, perpetual license under such patents or patent applications to make, use, sell, offer for sale, export, practice and otherwise exploit the subject matter thereof. The foregoing license shall be exclusive for the Field. NeurogesX shall have the first right to enforce such patents and patent applications in the Field and retain all revenues therefrom, notwithstanding Section 8.3 below.

8.3 Third Party Infringement in the Field . Each Party agrees to promptly notify the other Party if it becomes aware of any third party’s TTS in the Field that infringes LTS’s patents covering the Patch (an “ Infringement ”). LTS shall have the first right, but not the obligation, to enforce its patents against any Infringement. LTS shall solely control any such enforcement action. LTS shall keep NeurogesX informed of the proceeding of such enforcement. In case NeurogesX believes LTS is not diligently pursuing the enforcement, NeurogesX shall have the right to consult with LTS. LTS agrees not to settle or otherwise terminate or delay its enforcement against any Infringement in a manner which would permit the third party to continue manufacturing and/or selling infr