COLLABORATION AGREEMENT

Collaboration Agreement

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EXELIXIS INC | BRISTOL-MYERS SQUIBB COMPANY

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Title: COLLABORATION AGREEMENT
Governing Law: Delaware Date: 2/27/2007
Industry: BIOTRX Law Firm: Cooley Godward Kronish LLP Sector: HEALTH

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Collaboration Agreement, between Exelixis, Inc. and Bristol-Myers Squibb Company

Exhibit 10.38

[ * ] =

Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24B-2 of the Securities Exchange Act of 1934, as amended.

COLLABORATION AGREEMENT

THIS COLLABORATION AGREEMENT (the “Agreement”) is made and entered into as of December 15, 2006 (the “Execution Date”) by and between EXELIXIS, INC., a Delaware corporation having its principal place of business at 170 Harbor Way, P.O. Box 511, South San Francisco, California 94083-0511 (“Exelixis”), and BRISTOL-MYERS SQUIBB COMPANY, a Delaware corporation headquartered at 345 Park Avenue, New York, New York, 10154 (“BMS”). Exelixis and BMS are sometimes referred to herein individually as a “Party” and collectively as the “Parties”.

RECITALS

A. BMS is a multinational health care company that has expertise and capability in researching, developing and marketing human pharmaceuticals.

B. Exelixis is a drug discovery company that has expertise and proprietary technology relating to therapeutics that modulate signal transduction pathways involved in oncology and other disease areas.

C. BMS and Exelixis desire to establish a collaboration to apply such Exelixis technology and expertise to the discovery, lead optimization and characterization of small molecule compounds that directly bind and modulate certain targets, with a goal of filing an Investigational New Drug applications for small molecule compounds in [ * ], and to provide for the development and commercialization of novel therapeutic and prophylactic products based on such compounds.

NOW, THEREFORE, the Parties agree as follows:

1.	DEFINITIONS

Capitalized terms used in this Agreement (other than the headings of the Sections or Articles) have the following meanings set forth in this Article 1, or, if not listed in this Article 1, the meanings as designated in the text of this Agreement.

1.1 “Affiliate” means, with respect to a particular Party, a person, corporation, partnership, or other entity that controls, is controlled by or is under common control with such Party. For the purposes of the definition in this Section 1.1, the word “control” (including, with correlative meaning, the terms “controlled by” or “under the common control with”) means the actual power, either directly or indirectly through one (1) or more intermediaries, to direct or cause the direction of the management and policies of such entity, whether by the ownership of at least fifty percent (50%) of the voting stock of such entity, or by contract or otherwise.

1.2 “Allowable Expenses” means those expenses that are specifically attributable to a Co-Promotion Product in the U.S. and that consist of: [ * ].

[ * ] =

1.3 “ANDA” means an Abbreviated New Drug Application submitted to the FDA in conformance with applicable laws and regulations, or the foreign equivalent of any such application in any other country.

1.4 “Appealable Matter” means any dispute between the Parties (or their respective designees or Committees) concerning: (a) whether the [ * ] have or may [ * ] have [ * ] the [ * ] of any [ * ]; (b) [ * ] have or may [ * ] have a [ * ] the [ * ] of any [ * ]. For clarity, any dispute regarding whether [ * ] shall be an Appealable Matter.

1.5 “Approved Plan” means, with respect to a Product, any one or more of the Global Development Plans, each Annual Development Plan, the Global Commercialization Strategy, and the U.S. Commercialization Plan, in each case as adopted or approved under the terms of this Agreement.

1.6 “BMS [ * ]” or “[ * ]” means [ * ] which the [ * ] (or a successor thereto) (“[ * ]”) [ * ], including [ * ] (typically, [ * ]) and [ * ] to that effort. At [ * ], the following have been established: (a) one or more [ * ] (through BMS [ * ]); (b) [ * ] to BMS; (c) [ * ] at [ * ]; (d) [ * ]; (e) assay [ * ] for the [ * ] assays; (f) assays for [ * ]; and (g) [ * ] assays.

1.7 “BMS [ * ]” or “[ * ]” means [ * ] which [ * ] for a compound that has [ * ] and a [ * ] made to [ * ]. For clarity, [ * ].

1.8 “BMS [ * ]” or “[ * ]” means [ * ] which [ * ] one or more compounds [ * ] to [ * ]. [ * ], the [ * ] for [ * ] information needed [ * ]. [ * ] is [ * ]. This [ * ] is typically made about [ * ] prior to [ * ]. At [ * ] there will be evidence of [ * ], [ * ], which will include [ * ]. There will be [ * ], and [ * ]. Not all [ * ] testing ([ * ]) will be [ * ] at [ * ], but [ * ] be [ * ] reached. The [ * ] will be [ * ].

1.9 “BMS [ * ]” or “[ * ]” means [ * ] which the BMS [ * ] based [ * ]. An [ * ] follows [ * ]. BMS [ * ] once it contains [ * ].

1.10 “BMS Licensed Know-How” means all Information (other than Patents) Controlled by BMS and its Affiliates, including Information Controlled jointly with Exelixis, as of the Effective Date and during the term of the Agreement that: (a) covers a Collaboration Compound, a composition containing a Collaboration Compound (e.g., a formulation containing a Collaboration Compound), or the manufacture or use of a Collaboration Compound; and (b) is [ * ] for Exelixis to exercise the rights licensed to it under the Agreement or to perform its obligations to the Collaboration under the Agreement.

1.11 “BMS Licensed Patents” means all Patents Controlled by BMS and its Affiliates, including Patents Controlled jointly with Exelixis, as of the Effective Date and during the term of this Agreement that: (a) cover a Collaboration Compound, a composition containing a Collaboration Compound (e.g., a formulation containing a Collaboration Compound), or the manufacture or use of a Collaboration Compound; and (b) are [ * ] for Exelixis to exercise the rights licensed to it under the Agreement or to perform its obligations to the Collaboration under the Agreement.

[ * ] =

1.12 “Change of Control” means any transaction in which a Party: (a) sells, conveys or otherwise disposes of all or substantially all of its property or business; or (b)(i) merges, consolidates with, or is acquired by any other Person (other than a wholly-owned subsidiary of such Party); or (ii) effects any other transaction or series of transactions; in each case of clause (i) or (ii), such that the stockholders of such Party immediately prior thereto, in the aggregate, no longer own, directly or indirectly, beneficially or legally, at least fifty percent (50%) of the outstanding voting securities or capital stock of the surviving Person following the closing of such merger, consolidation, other transaction or series of transactions. As used in this Section 1.12, “Person” means any corporation, firm, partnership or other legal entity.

1.13 “Clinical Costs” means the costs incurred by a Party or for its account, during the term and pursuant to this Agreement, in connection with clinical studies of a Co-Developed Product in the Co-Development Territory, including the following: (a) the preparation for and conduct of clinical trials (except for related Manufacturing Costs otherwise included in Development Costs); (b) data collection and analysis, and report writing; and (c) clinical laboratory work. The Clinical Costs shall exclude costs incurred in connection with [ * ].

1.14 “Co-Developed Product” shall mean a Product for which: (a) Exelixis has exercised an Exelixis Co-Development Option; and (b) Exelixis has not opted-out pursuant to Section 4.7(a).

1.15 “Co-Development Territory” shall mean [ * ].

1.16 “Collaboration” means the collaborative research, development, and commercialization program between the Parties that is contemplated by this Agreement.

1.17 “Collaboration Compounds” means the Lead Compound and Program Backups in each Lead Op Program, Provisional Collaboration Program or Collaboration Program.

1.18 “Commercialize” means to promote, market, distribute, sell (and offer for sale or contract to sell) or provide product support for a Product, including by way of example: (a) detailing and other promotional activities in support of a Product; (b) advertising and public relations in support of a Product, including market research, development and distribution of selling, advertising and promotional materials, field literature, direct-to-consumer advertising campaigns, media/journal advertising, and exhibiting at seminars and conventions; (c) developing reimbursement programs and information and data specifically intended for national accounts, managed care organizations, governmental agencies (e.g., federal, state and local), and other group purchasing organizations, including pull-through activities; (d) co-promotion activities not included in the above; (e) conducting medical education activities and journal advertising; and (f) [ * ]. For clarity, “Commercializing” and “Commercialization” have a correlative meaning.

1.19 “Committee” means the JEC, JRC, JDC, JCC, or JFC, as the case may be.

[ * ] =

1.20 “Committee-Governed Product” means: (a) any Co-Promotion Product; (b) any Co-Developed Product; and (c) any Product with respect to which Exelixis exercised its Product-Opt-Out option pursuant to Section 4.7(a) [ * ].

1.21 “Completed Screening Program” means a Screening Program for which there exists a lead molecule that has completed the following activities (as applicable to such lead molecule): (a) [ * ]; (b) [ * ]; (c) [ * ]; (d) completion of [ * ]; (e) completion of [ * ]; (f) [ * ].

1.22 “Controlled” means, with respect to any compound, material, Information or intellectual property right, that the Party owns or has a license to such compound, material, Information or intellectual property right and has the ability to grant to the other Party access, a license or a sublicense (as applicable) to such compound, material, Information or intellectual property right as provided for herein without violating the terms of any agreement or other arrangements with any Third Party existing at the time such Party would be first required hereunder to grant the other Party such access, license or sublicense.

1.23 “Co-Promotion Product” means a Product for which Exelixis has exercised its option to Co-Promote in the U.S. as set forth in Section 6.4.

1.24 “Core Program” shall mean, with respect to a Product, [ * ] for which any [ * ] or any [ * ] first [ * ] with respect to such Product.

1.25 “Development” means, with respect to a Product, those activities, including research, pre-clinical development activities, clinical trials, supporting manufacturing activities and related regulatory activities, that are [ * ] to: (a) obtain the approval by the applicable Regulatory Authorities of the Drug Approval Application with respect to such Product in the applicable regulatory jurisdiction, whether alone or for use together, or in combination, with another active agent or pharmaceutical product; (b) maintain such approvals; or (c) obtain or maintain compendia listings with respect to such Product. For clarity, “Co-Develop”, “Develop” and “Developing” have a correlative meaning.

1.26 “Development Candidate” means a [ * ] that has met Exelixis’ internal developability criteria, which criteria are consistent with Exelixis’ internal developability criteria for all Exelixis programs (including programs outside of the Collaboration), and that has been approved by Exelixis to transition from [ * ] to [ * ].

1.27 “Development Costs” means the costs incurred by a Party or for its account, during the term and pursuant to this Agreement, that are specifically identifiable (or reasonably allocable) to the Development of a Co-Developed Product in the Co-Development Territory and that are directed to achieving or maintaining Regulatory Approval of such Co-Developed Product in the Co-Development Territory. The Development Costs shall include amounts that a Party pays to Third Parties involved in the Development of a Co-Developed Product ([ * ]), and all internal costs incurred by a Party in connection with the Development of such Co-Developed Product. Development Costs include the following: (a) preclinical costs such as toxicology and formulation development, test method development, delivery system development, stability testing and statistical analysis; (b) Clinical Costs; (c) expenses related to adverse event reporting;

[ * ] =

(d) Manufacturing Costs for a Co-Developed Product for use in preclinical and clinical activities including the manufacture, purchase or packaging of comparators or placebo for use in Clinical Trials (with the manufacturing costs for comparators or placebo to be determined in the same manner as Manufacturing Costs are determined for any Product), as well as the direct costs and expenses of disposal of drugs and other supplies used in such Clinical Trials and any associated release testing and QA/QC development costs; (e) [ * ] incurred in connection with [ * ], to the extent provided therein; and (f) development of the Manufacturing process for a Co-Developed Product (including with respect to any excipients or any active pharmaceutical ingredient included in such Co-Developed Products) and related scale-up, manufacturing process validation, manufacturing process improvements, and qualification and validation of Third Party contract manufacturers; (g) regulatory expenses relating to Development activities for the purpose of obtaining Regulatory Approval for an indication for a Co-Developed Product; (h) costs of real property rented specifically for Development activities (to the extent actually used); and (i) other out-of pocket development expenses including, without limitation institutional and advisory review boards, investigator meetings, quality of life studies, epidemiology and outcomes research.

1.28 “Diligent Efforts” means the carrying out of obligations or tasks in a sustained manner consistent with the efforts a Party devotes to a product or a research, development or marketing project of similar market potential, profit potential or strategic value resulting from its own research efforts, based on conditions then prevailing. Diligent Efforts requires that the Party: (a) [ * ], (b) [ * ], and (c) [ * ] with respect to such [ * ].

1.29 “Distribution Costs” means the costs, [ * ], incurred by a Party or for its account, during the term and pursuant to the Agreement that are reasonably allocable (as determined by the JFC) to the distribution of a Co-Promotion Product in the U.S., including: (a) handling and transportation to fulfill orders (excluding such costs to the extent they are treated as a deduction in the definition of Net Sales); (b) customer services, including order entry, billing and adjustments, inquiry and credit and collection; and (c) direct costs of storage and distribution of Co-Promotion Products.

1.30 “Dollars” or “$” means the legal tender of the United States.

1.31 “Drug Approval Application” or “DAA” means: (a) in the United States, an NDA (or a supplemental NDA for following indications), and (b) in any other country or regulatory jurisdiction, an equivalent application for regulatory approval required before commercial sale or use of a Product (or with respect to a subsequent indication) in such country or regulatory jurisdiction.

1.32 “ECN” or “Early Candidate Nomination” means a compound or other substance that has been approved [ * ] to transition from [ * ] in a [ * ] to [ * ].

1.33 “EMEA” means [ * ] commercial territory, consisting of the following countries and regions: [ * ]. The EMEA also includes: (a) [ * ]; and (b) exports from [ * ] not separately identified in the list. For clarity, the specific list of countries and regions may change to align with any corresponding [ * ].

[ * ] =

1.34 “EU” means the European Union, as its membership may be altered from time to time, and any successor thereto. The member countries of the European Union as of the Execution Date are Belgium, Denmark, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, The Netherlands, Austria, Portugal, Finland, Sweden, the United Kingdom, Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, Hungary, Slovenia, Malta, and Cyprus.

1.35 “Executive Officers” means: (a) in the case of Exelixis, the President and Chief Executive Officer of Exelixis; and (b) in the case of BMS, either (i) a direct report of the BMS CSO (for disputes involving development matters) or (ii) the Head of U.S. Operations (for disputes involving commercial matters).

1.36 “Exelixis Licensed Know-How” means all Information (other than Patents) Controlled by Exelixis and its Affiliates, including Information Controlled jointly with BMS, as of the Effective Date and during the term of this Agreement that: (a) covers a Collaboration Compound, a composition containing a Collaboration Compound (e.g., a formulation containing a Collaboration Compound), or the manufacture or use of a Collaboration Compound; and (b) is [ * ] for BMS to exercise the rights licensed to it under the Agreement or to perform its obligations to the Collaboration under the Agreement.

1.37 “Exelixis Licensed Patents” means all Patents controlled by Exelixis and its Affiliates, including patents controlled jointly with BMS, as of the Effective Date and during the term of this Agreement that: (a) cover a Collaboration Compound, a composition containing a Collaboration Compound (e.g., a formulation containing a Collaboration Compound), or the manufacture or use of a Collaboration Compound; and (b) are [ * ] for BMS to exercise the rights licensed to it under the Agreement or to perform its obligations to the Collaboration under the Agreement.

1.38 “FDA” means the U.S. Food and Drug Administration, and any successor thereto.

1.39 “FTE” means the equivalent of the work of one (1) employee full time for one (1) year consisting of a total of [ * ] hours per year (or such other number as may be agreed to by the JFC) directly related to the Development or Commercialization of any Co-Developed Product or Co-Promotion Product, as the case may be, or any other activities contemplated under this Agreement. Any individual who devotes less than [ * ] hours per year (or such other number as may be agreed by the JFC) shall be treated as an FTE on a pro-rata basis upon the actual number of hours worked divided by [ * ] (or such other number as may be agreed by the JFC). Unless modified by the JFC, the [ * ] figure shall be used without regard to the Parties’ own internal definition of the number of hours that comprises an FTE.

1.40 “GAAP” means U.S. generally accepted accounting principles, consistently applied.

1.41 “[ * ]” means, with respect to a particular Product in a country, [ * ] such Product ([ * ]); and (b) is [ * ] or otherwise), whether [ * ] or [ * ].

[ * ] =

1.42 “HSR Act” means the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended from time to time, and the rules, regulations, guidance and requirements promulgated thereunder as may be in effect from time to time.

1.43 “Identified Target(s)” means the set of one or more Lead Op Targets or Collaboration Targets (as applicable) that the JRC, the JDC or the Parties (as the case may be) reasonably believes [ * ] in such Lead Op Program, Provisional Collaboration Program or Collaboration Program.

1.44 “IND” means an Investigational New Drug Application submitted to the FDA in conformance with applicable laws and regulations, or the foreign equivalent of any such application in any other country.

1.45 “Information” means information, results and data of any type whatsoever, in any tangible or intangible form whatsoever, including, databases, practices, methods, techniques, specifications, formulations, formulae, knowledge, know-how, skill, experience, test data including pharmacological, biological, chemical, biochemical, toxicological and clinical test data, analytical and quality control data, stability data, studies and procedures. For clarity, Information does not include any Patents.

1.46 “Initial Lead Op Programs” means the [ * ] programs conducted by Exelixis on the initial Lead Op Targets selected by the Parties pursuant to Section 3.3(a).

1.47 “Invention” means any and all inventions and improvements thereto, invented or discovered by or on behalf of a Party (and/or its Affiliates) in the performance of its obligations under this Agreement.

1.48 “Joint Invention” means any Invention invented or discovered jointly by or on behalf of the employee(s), contractor(s) or agent(s) of both Parties (and/or their Affiliates).

1.49 “Joint Commercialization Committee” or “JCC” means the committee described in Section 2.4.

1.50 “Joint Development and Regulatory Committee” or “JDC” means the committee described in Section 2.3.

1.51 “Joint Executive Committee” or “JEC” means the committee described in Section 2.2.

1.52 “Joint Finance Committee” or “JFC” means the committee described in Section 2.6.

1.53 “Joint Research Committee” or “JRC” means the committee described in Section 2.5.

1.54 “Knowledge” means, with respect of a Party, the good faith [ * ] facts and information in the possession of an [ * ] of such Party, or any [ * ] of, or [ * ], such Party or its Affiliates, [ * ] execution of this Agreement. For purposes of this definition, an “[ * ]” means any person in the [ * ] of a Party.

[ * ] =

1.55 “Launch” means, for each Product in each country, the first arm’s-length sale to a Third Party for use or consumption by the public of such Product in such country after Regulatory Approval of such Product in such country. A Launch shall not include any Product sold for use in clinical trials, for research or for other non-commercial uses, or that is supplied as part of a compassionate use or similar program.

1.56 “Lead Compound” means, with respect to a Provisional Collaboration Program or Collaboration Program: (a) the Program Lead for such Provisional Collaboration Program or Collaboration Program; and (b) any [ * ] compound described in subsection (a).

1.57 “Lead Op Program” has the meaning described in Section 3.3. The Lead Op Programs include: (a) Initial Lead Op Programs; and (b) any [ * ] programs that were [ * ] and that were [ * ] programs pursuant to Section 3.3(c).

1.58 “Lead Op Target(s)” means: (a) the initial list of targets identified by the Parties pursuant to Section 3.3(a); and (b) any additional target(s) identified by the Parties pursuant to Sections 3.2(b) or 3.3(a). The Lead Op Targets shall be listed in Exhibit 3.3, which shall be updated periodically by the Parties.

1.59 “Major European Countries” means France, Germany, Spain, Italy, and the United Kingdom.

1.60 “Major Territory” means each of the following territories: (a) [ * ].

1.61 “Manufacturing” means all activities related to the production, manufacture, processing, filling, finishing, packaging, labeling, inspection, receiving, holding and shipping of Lead Compounds, Program Backups, Collaboration Compounds, Products, or any raw materials or packaging materials with respect thereto, or any intermediate of any of the foregoing, including process and cost optimization, process qualification and validation, commercial manufacture, stability and release testing, quality assurance and quality control. For clarity, “Manufacture” has a correlative meaning.

1.62 “Manufacturing Costs” means costs that relate to a Co-Developed Product or a Co-Promotion Product which is: (a) supplied by a Third Party; or (b) manufactured directly by a Party or its Affiliate, in each case to the extent such costs relate to the development of a Co-Developed Product or the Commercialization of a Co-Promotion Product in the U.S., as further described below and as allocated in accordance with GAAP.

For costs in subsection (a), Manufacturing Costs means: (i) the amount paid to such a Third Party [ * ]; plus (ii) the relevant manufacturing Party’s reasonable direct and identifiable internal costs and out-of-pocket costs, incurred or accrued (including any prepayments) by the manufacturing Party in connection with manufacturing process improvements, storage, manufacturing scale-up, manufacturing site qualification, quality assurance and quality control (including testing), supply chain management, capital equipment, similar activities comprising the manufacturing Party’s oversight of the manufacturing process of the non-Affiliate Third Party, and any value-added tax or similar tax due for amounts paid to such Third Party.

[ * ] =

For costs in subsection (b), Manufacturing Costs means the “standard cost” per unit, including variances to standard costs and inventory write-offs. This standard cost shall include the cost of raw materials, labor, and other direct and identifiable variable costs incurred or accrued by the manufacturing Party in connection with the manufacture of a Co-Promotion Product, manufacturing process improvements, storage, manufacturing scale-up, manufacturing site qualification, quality assurance and quality control (including testing), supply chain management, and costs of equipment, plant operations and plant support services necessary to produce a Co-Promotion Product. These costs of plant operations and support services shall include [ * ] and other similar activities, including [ * ] charges. Costs that cannot be identified to a specific activity supporting manufacturing of a Co-Promotion Product, such as charges for corporate overhead that are not controllable by the manufacturing plant, shall be [ * ] from the determination of Manufacturing Cost.

Subject to the preceding paragraph, “standard cost” per unit for purposes of ongoing cost accounting purposes shall be calculated in accordance with [ * ]. The Parties shall reconcile the standard cost charges and appropriate credit or payment shall be made to effect such reconciliation as directed by the JFC not less than annually against the above Manufacturing Cost definition.

Manufacturing Costs shall include costs of such activities that are undertaken at any time during the term of this Agreement (including [ * ]).

1.63 “Medical Education Activities” means activities designed to ensure or improve appropriate medical use of, conduct medical education of, or further research regarding, a Co-Promotion Product sold in the U.S., including by way of example: (a) activities of medical sales liaisons; (b) grants to support continuing medical education, symposia, or research related to a Co-Promotion Product in the U.S. (excluding Phase IV Clinical Trials and Development activities conducted for purposes of obtaining an initial Regulatory Approval for an indication for a Co-Promotion Product in the U.S.); (c) development, publication and dissemination of publications relating to Co-Promotion Product in the U.S., as well as medical information services provided in response to inquiries communicated via sales representatives or received by letter, phone call or email; and (d) conducting advisory board meetings or other consultant programs, the purpose of which is to obtain advice and feedback related to the Development or Commercialization of a Co-Promotion Product in the U.S.

1.64 “NDA” means a New Drug Application submitted to the FDA in conformance with applicable laws and regulations.

1.65 “Net Sales” means the amount invoiced or otherwise billed by BMS or its Affiliate or sublicensee for sales or other commercial disposition of a Product to a Third Party purchaser, less the following to the extent included in such billing or otherwise actually allowed or incurred with respect to such sales: (a) discounts, including cash, trade and quantity discounts, price reduction programs, retroactive price adjustments with respect to sales of a product, charge-back payments and rebates granted to managed health care organizations or to federal,

[ * ] =

state and local governments (or their respective agencies, purchasers and reimbursers) or to trade customers, including but not limited to, wholesalers and chain and pharmacy buying groups; (b) credits or allowances actually granted upon rejections or returns of Products, including for recalls or damaged goods; (c) freight, postage, shipping and insurance charges actually allowed or paid for delivery of Products, to the extent billed; (d) customs duties, surcharges and other governmental charges incurred in connection with the exportation or importation of a Product; (e) bad debts relating to sales of Products that are actually written off by BMS in accordance with GAAP during the applicable calculation period; (f) costs due to the factoring of receivables; and (g) taxes, duties or other governmental charges levied on, absorbed or otherwise imposed on sale of Products, including value-added taxes, or other governmental charges otherwise measured by the billing amount, when included in billing, as adjusted for rebates and refunds, but specifically excluding taxes based on net income of the seller; provided that all of the foregoing deductions are calculated in accordance with generally accepted accounting principles consistently applied throughout the Party’s organization.

Notwithstanding the foregoing, if any Product is sold under a bundled or capitated arrangement with other BMS products, then, solely for the purpose of calculating Net Sales under this Agreement, any discount on such Products sold under such an arrangement shall be [ * ] for the applicable accounting period. In case of any dispute as to the applicable [ * ] under the preceding sentence, the determination of same shall be calculated and certified by [ * ], whose decision shall be binding.

A sale of a Product is deemed to occur upon invoicing. [ * ].

For sake of clarity and avoidance of doubt, sales by BMS, its Affiliates or sublicensees of a Product to [ * ]. Any Products [ * ] considered in determining Net Sales hereunder.

In the event a Product is sold as an end-user product consisting of a combination of active functional elements or as a combined product and/or service, Net Sales, for purposes of determining royalty payments on such Product, shall be calculated by multiplying the Net Sales of the end-user product and/or service by the fraction A over A+B, in which A is the gross selling price of the Product portion of the end-user product and/or service when such Product is sold separately during the applicable accounting period in which the sales of the end-user product were made, and B is the gross selling price of the other active elements and/or service, as the case may be, of the end-user product and/or service sold separately during the accounting period in question. All gross selling prices of the elements of such end-user product and/or service shall be calculated as the average gross selling price of the said elements during the applicable accounting period for which the Net Sales are being calculated. In the event that, in any country or countries, no separate sale of either such above-designated Product or such above designated elements of the end-user product and/or service are made during the accounting period in which the sale was made or if gross retail selling price for an active functional element, component or service, as the case may be, cannot be determined for an accounting period, Net Sales allocable to the Product in each such country shall be determined by mutual agreement reached in good faith by the Parties prior to the end of the accounting period in question based on an equitable method of determining same that takes into account, on a country-by-country basis, variations in potency, the relative contribution of each active agent, component or service, as the

[ * ] =

case may be, in the combination, and relative value to the end user of each active agent, component or service, as the case may be. Notwithstanding the foregoing, the Parties agree that, for purposes of this paragraph, drug delivery vehicles, adjuvants, and excipients shall not be deemed to be “active ingredients” or “active functional elements”.

1.66 “Operating Profit (or Loss)” means Net Sales of Co-Promotion Products in the U.S. less Allowable Expenses in the U.S. For sake of clarity, Operating Profit (or Loss) shall be determined [ * ], and if such terms are used individually, “Operating Profit” shall mean a positive Operating Profit (or Loss), and “Operating Loss” shall mean a negative Operating Profit (or Loss).

1.67 “Patent” means all: (a) unexpired letters patent (including inventor’s certificates and utility models) which have not been held invalid or unenforceable by a court of competent jurisdiction from which no appeal can be taken or has been taken within the required time period (and which have not been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise, or been abandoned in accordance with or as permitted by the terms of this Agreement or by mutual written agreement), including any substitution, extension, registration, confirmation, reissue, re-examination, supplementary protection certificates, confirmation patents, patent of additions, renewal or any like filing thereof; (b) pending applications for letters patent which have not been canceled, withdrawn from consideration, finally determined to be unallowable by the applicable governmental authority or court for whatever reason (and from which no appeal is or can be taken), and/or abandoned in accordance with or as permitted by the terms of this Agreement or by mutual written consent, including any continuation, division or continuation-in-part thereof and any provisional or other priority applications; and (c) any international counterparts, and counterparts in any country, to clauses (a) and (b) above.

1.68 “Phase I Clinical Trial” means a clinical trial of a Product on sufficient numbers of normal volunteers and/or patients that is designed to establish that such Product is safe for its intended use, can be delivered in a dose(s) that is therapeutically useful, and to support its continued testing in Phase II Clinical Trials.

1.69 “Phase II Clinical Trial” means a Phase IIa Clinical Trial or a Phase IIb Clinical Trial.

1.70 “Phase IIa Clinical Trial” means a controlled clinical trial of a Product that utilizes the pharmacokinetic and pharmacodynamic information obtained from one (1) or more previously conducted Phase I Clinical Trial(s) and/or other Phase IIa Clinical Trial(s) in order to confirm the optimal manner of use of such Product (dose and dose regimens) and to better determine safety and efficacy.

1.71 “Phase IIb Clinical Trial” means a clinical trial of a Product on sufficient numbers of patients that is designed to provide a preliminary determination of safety and efficacy of such Product in the target patient population over a range of doses and dose regimens.

1.72 “Phase III Clinical Trial” means a clinical trial of a Product on sufficient numbers of patients that is designed to establish that such Product is safe and efficacious for its

[ * ] =

intended use, and to define warnings, precautions and adverse reactions that are associated with such Product in the dosage range to be prescribed, and to support Regulatory Approval of such Product or label expansion of such Product.

1.73 “Phase IIIb Clinical Trial” means a clinical trial of a Product, initiated before regulatory approval and is not required for same, but which may provide data that further defines how and where the drug should be used. A Phase IIIb Clinical Trial may include epidemiological studies, modeling and pharmacoeconomic studies, and investigator-sponsored clinical trials that are approved by the JDC and that otherwise fit the foregoing definition.

1.74 “Phase IV Clinical Trial” means a product support clinical trial of a Product commenced after receipt of Regulatory Approval in the country where such trial is conducted. A Phase IV Clinical Trial may include epidemiological studies, modeling and pharmacoeconomic studies, and investigator-sponsored clinical trials studying Product that are approved by the JDC and that otherwise fit the foregoing definition.

1.75 “Product” means any therapeutic or prophylactic product (for use in animals or humans) that contains or comprises a Collaboration Compound for which BMS has exercised its Co-Development Option in accordance with the terms of this Agreement.

1.76 “Program Backups” means, with respect to a Lead Op Program, Provisional Collaboration Program or Collaboration Program any compounds, other than the Program Lead, that: (a) were created by BMS or Exelixis as part of such Lead Op Program, Provisional Collaboration Program or Collaboration Program (or Backup Program pursuant to Section 3.5); (b) [ * ] the applicable Lead Op Target(s) or Collaboration Target(s) [ * ]; and (c) [ * ] Lead Op Target(s) or Collaboration Target(s), based on the [ * ], and any [ * ] of any such compounds described in ((a), (b) and (c)) above.

1.77 “Program Lead” means, for any Lead Op Program, Provisional Collaboration Program or Collaboration Program, a small molecule compound that: (a) was created by Exelixis as part of the relevant Lead Op Program, Provisional Collaboration or Collaboration Program; (b) [ * ] the applicable Lead Op Target(s) or Collaboration Target(s) [ * ]; (c) [ * ] Lead Op Target(s) or Collaboration Target(s), based on the [ * ]; (d) meets Exelixis’ internal standards applicable to a Development Candidate; and (e) is [ * ] that would otherwise result in [ * ].

1.78 “Registrational Trial” means, with respect to a given Product, either (i) a Phase III Clinical Trial with such Product or (ii) a Phase IIb Clinical Trial that, at the time of commencement, is expected to be the basis for initial Regulatory Approval of such Product.

1.79 “Regulatory Approval” means any and all approvals (including Drug Approval Applications, supplements, amendments, pre- and post-approvals, pricing and reimbursement approvals), licenses, registrations or authorizations of any Regulatory Authority, national, supra-national (e.g., the European Commission or the Council of the EU), regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity, that are necessary for the manufacture, distribution, use or sale of a Product in a regulatory jurisdiction.

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1.80 “Regulatory Authority” means the applicable national (e.g., the FDA), supra-national (e.g., the European Commission or the Council of the EU), regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity that, in each case, governs the approval of a Product in such applicable regulatory jurisdiction.

1.81 “Regulatory Expenses” means costs incurred to prepare product regulatory submissions and to obtain and maintain Regulatory Approval in the U.S. and to comply with Regulatory Approvals and requirements of Regulatory Authorities, including FDA user and other fees, reporting and regulatory affairs activities, and recalls and withdrawals for Co-Promotion Product (other than costs for Co-Promotion Product that are deductible from Net Sales or that are included as Development Costs).

1.82 “Reporting-Only Product” means any Product with respect to which Exelixis exercised a Product Opt-Out pursuant to Section 4.7(a) prior to [ * ] such Product.

1.83 “Royalty-Bearing Product” means a Product: (a) with respect to which Exelixis failed to make the co-development election contemplated by Section 3.7(c); or (b) with respect to which: (i) Exelixis has notified BMS of a Product Opt-Out; or (ii) with respect to which Exelixis elected not to exercise its Co-Promotion Option or where such Co-Promotion Option expired unexercised.

1.84 “Royalty Territory” means the world, excluding the U.S.

1.85 “Sales and Marketing Costs” means the [ * ] costs that are [ * ] the sales and marketing of a Co-Promotion Product in the U.S., including: (a) activities directed to the advertising and marketing of a Co-Promotion Product; (b) professional education (to the extent not performed by sales representatives), including launch meetings; (c) costs of advertising, public relations and medical education agencies; (d) peer-to-peer activities, such as continuing medical education, grand rounds, and lunch and dinner meetings; (e) speaker programs, including the training of such speakers; (f) grants to support continuing medical education or research (excluding Clinical Costs); (g) development, publication and dissemination of publications relating to a Co-Promotion Product; (h) developing, obtaining and providing training packages of a Co-Promotion Product, promotional literature, promotional materials and other selling materials; (i) developing and performing market research; (j) conducting symposia and opinion leader development activities; (k) development reimbursement programs; (l) developing information and data specifically intended for national accounts, managed care organizations and group purchasing organizations; (m) [ * ] incurred in connection with [ * ], to the extent provided therein; (n) direct expenses relating to selling by non-Affiliate Third Parties; (o) costs of transporting, housing and maintaining sales representatives for training; (p) conducting Phase IIIb Clinical Trials and Phase IV Clinical Trials, and clinical trials performed for marketing purposes and post-marketing surveillance activities; (q) administration, operation and maintenance of the sales force that promotes a Co-Promotion Product in the U.S., sales bulletins and other communications, sales meetings, specialty sales forces, consultants, call reporting and other monitoring/tracking costs, district and regional sales management, home office personnel who support the sales force; and (r) costs associated with Medical Education Activities, and other ancillary services to the foregoing (to the extent not otherwise falling within

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subsections (a) through (r). Sales and Marketing Costs shall include costs of such activities that are undertaken at any time during the term of this Agreement (including prior to the initial Regulatory Approval of a Co-Promotion Product in the U.S.).

1.86 “Screening Target(s)” means any one or more targets that: (a) the Parties mutually agree becomes part of the Collaboration pursuant to Section 3.2(a); and (b) are not the subject of: (i) a collaboration between Exelixis and a Third Party; or (ii) discussions between Exelixis and a Third Party concerning a bona fide collaboration. The Screening Targets shall be listed in Exhibit 3.2, which shall be updated periodically by the Parties.

1.87 “Sole Invention” means any Invention invented or discovered solely by or on behalf of a Party (or its Affiliate) and its employees, contractors and/or agents.

1.88 “Specificity Criteria” means, for each Collaboration Compound, that such Collaboration Compound: (a) demonstrates [ * ] as determined [ * ]; and (b) has a [ * ] in such [ * ].

1.89 “Target Potency Threshold” means, for each Collaboration Compound, that such Collaboration Compound [ * ].

1.90 “Territory” means the world.

1.91 “Third Party” means any entity other than: (a) Exelixis; (b) BMS; or (c) an Affiliate of either Party.

1.92 “Third Party Royalties” means royalties and other payments payable to a Third Party in consideration for rights [ * ] for the [ * ] of Co-Promotion Product.

1.93 “Trademark Costs” mean the fees and expenses paid to outside counsel and other Third Parties, direct costs of in-house counsel and filing and maintenance expenses, incurred in connection with the establishment and maintenance of rights under trademarks applicable to Co-Promotion Product in the U.S., including costs of filing and registration fees, actions to enforce or maintain a trademark and other proceedings.

1.94 “United States” or “U.S.” means the United States of America, and its territories, districts and possessions.

1.95 “Unrelated Compound” means, with respect to a Lead Op Program, Provisional Collaboration Program or Collaboration Program, any Program Backups that: (a) were created by BMS or Exelixis as part of such Lead Op Program, Provisional Collaboration Program or Collaboration Program (or Backup Program pursuant to Section 3.5); and (b) either: (i) [ * ] applicable Lead Op Target(s) or Collaboration Target(s) [ * ]; or (ii) are [ * ] Lead Op Target(s) or Collaboration Target(s), based on the [ * ].

1.96 “Valid Claim” means (a) a claim in an issued Patent that has not: (i) expired or been canceled; (ii) been declared invalid by an unreversed and unappealable or unappealed decision of a court or other appropriate body of competent jurisdiction; (iii) been admitted to be

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invalid or unenforceable through reissue, disclaimer or otherwise; or (iv) been abandoned in accordance with or as permitted by the terms of this Agreement or by mutual written agreement of the Parties; or (b) a claim under an application for a Patent that has been pending for [ * ] for [ * ], and, in any case, which has not been canceled, withdrawn from consideration, finally determined to be unallowable by the applicable governmental authority or court for whatever reason (and from which no appeal is or can be taken), or abandoned.

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Additional Definitions

The following table identifies the location of definitions set forth in various Sections of the Agreement.


Definition		Location (Section)
Alliance Manager		2.8(a)
Annual Development Plan