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EXHIBIT 10.26
*** TEXT OMITTED AND FILED SEPARATELY
PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST
UNDER 17 C.F.R. SECTION 200.80(b)(4)
AND RULE 406 UNDER THE SECURITIES
ACT OF 1933, AS AMENDED
CONFIDENTIAL
COLLABORATION AGREEMENT
THIS COLLABORATION AGREEMENT (the "AGREEMENT") is effective as
of March
18, 2004 (the "EFFECTIVE DATE") by and between STRUCTURAL
GENOMIX, INC., a
Delaware corporation located at 10505 Roselle Street, San Diego,
CA 92121
("SGX"), and SERONO INTERNATIONAL SA, a corporation organized
under the laws of
Switzerland, located at 15bis chemin des Mines, 1202 Geneva,
Switzerland
("SERONO"). SGX and Serono may be referred to herein
individually as a "Party"
and collectively as the "Parties."
BACKGROUND
WHEREAS, SGX has expertise in the field of structure directed
drug
discovery; and
WHEREAS, Serono is in the business of, and has expertise in,
developing,
manufacturing and commercializing biotechnology products;
and
WHEREAS, SGX and Serono wish to enter into a collaborative
research
program to develop early lead compounds against certain Serono
drug targets;
NOW, THEREFORE, in consideration of the foregoing premises and
the
covenants, agreements and promises contained in this Agreement,
the Parties
hereby agree as follows:
1. DEFINITIONS
1.1 "Affiliate" means, with respect to a Party hereto, a
corporation,
company or other entity that controls, is controlled by or under
common control
with such Party. The term "control" means the direct or indirect
possession of
the power to direct or cause the direction of the management and
policies of a
party, whether through the ownership of voting securities, by
contract or
otherwise. Control will be presumed if a party owns, either of
record or
beneficially, more than fifty percent (50%) of the outstanding
shares or
securities (representing the right to vote for the election of
directors or
other managing authority) of a corporation, company or other
entity. Such
corporation, company or other entity shall be deemed to be an
Affiliate only so
long as such control exists.
1.2 "Collaboration" means the research collaboration performed
by the
Parties pursuant to Section 2.1.
1.3 "Collaboration Plan" shall have the meaning ascribed in
Section 2.1.
1.4 "Collaboration Product" means any Product that incorporates
an Early
Lead Compound.
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1.5 "Collaboration Technology" means Patents and Know-How which
are
made, conceived or reduced to practice or otherwise discovered
or developed by
or on behalf of Serono or SGX, or jointly by or on behalf of
Serono and SGX,
during and in the performance of the Collaboration.
1.6 "Commercially Reasonable Efforts" means efforts to develop
or
commercialize a product consistent with those efforts Serono
would devote, with
the exercise of prudent scientific and business judgment, to a
product at a
similar stage of development resulting from its own research
efforts, that has
similar commercial potential, a similarly sized market and faces
a similar
competitive environment, based on conditions then
prevailing.
1.7 "Confidential Information" shall have the meaning ascribed
in
Section 6.1.
1.8 "Controls" or "Controlled" means possession of the legal
right of a
Party to grant the licenses or sublicenses as provided for
herein or to
otherwise disclose proprietary or trade secret information to
the other Party,
without violating the terms of any agreement or other
arrangement with a Third
Party or misappropriating or infringing the proprietary or trade
secret
information of a Third Party.
1.9 "Early Lead Compound" means (a) the [...***...] identified
in the
course of the Collaboration from an [...***...] or an
[...***...], with the
following characteristics: [...***...], which have been
identified in the course
of the Collaboration from an [...***...] or an [...***...], with
the
characteristics ([...***...]) through ([...***...]) above, and
which the
[...***...]; and (c) [...***...] identified in the course of the
Collaboration
from the same [...***...] to which the [...***...] in clauses
(a) and (b) belong
that have the characteristics described in clauses ([...***...])
through
([...***...]) above.
1.10 "Early Lead Patent" shall have the meaning ascribed in
Section
5.2(b).
1.11 "Elaborated Fragment" means a compound identified in the
course of
the Collaboration from an Initial Fragment Hit with the
following
characteristics: (i) [...***...]; and (ii) [...***...].
1.12 "First Commercial Sale" means the first sale of a Product
to a Third
Party in any country after all required marketing and pricing
and/or pricing
reimbursement approvals for such country have been obtained,
other than a
transfer or disposition (whether or not for consideration) of
such Product for
charitable or promotional purposes or for preclinical, clinical,
manufacturing,
regulatory or governmental purposes.
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1.13 "GLP" means the standards set forth in the current Good
Laboratory
Practices regulations promulgated by the U.S. Food and Drug
Administration,
published at C.F.R. Part 58, as such regulations may be amended
from time to
time, and equivalent foreign regulations or standards as
applicable.
1.14 "IND" means an Investigational New Drug application filed
with the
U.S. Food and Drug Administration pursuant to 21 C.F.R. Part
312, or any
corresponding foreign application, registration or
certification.
1.15 "Initial Fragment Hit" means a compound from the SGX
FAST(TM)
screening library shown in a co-crystal structure determined in
the course of
the Collaboration to be bound to a Serono Target.
1.16 "Initial Structure" means a [...***...] of a Serono Target
which has
the following characteristics: [...***...].
1.17 "Joint Patent" shall have the meaning ascribed in Section
5.2(b).
1.18 "JSC" shall have the meaning ascribed in Section 2.7.
1.19 "Know-How" means all inventions (whether patentable or
not),
instructions, designs, formulas, software, materials,
compositions, methods,
processes, techniques, improvements, trade secrets, information
and data.
1.20 "Milestone" means any or each of the milestone events
described in
Sections 3.2 and 3.4.
1.21 "Net Sales" means the total amount received by Serono or
its
Affiliates or sublicensees, as the case may be, for sales of
Products to Third
Parties (other than sublicensees) in arm's length transactions,
less: (i)
ordinary and customary prompt payment and other trade or
quantity discounts
actually allowed and taken; (ii) credits or allowances actually
granted for
damaged goods, recalls, returns or rejections of Products or for
retroactive
price reductions; (iii) charge back payments, reimbursements and
rebates,
including government-mandated rebates (including Medicaid
rebates); (iv)
freight, postage and duties (including insurance premiums)
actually incurred;
and (v) excise taxes, other consumption taxes, customs duties
and compulsory
payments to governmental authorities actually paid and
separately identified on
the invoice or other documentation maintained in the ordinary
course of
business. A "sale" shall include any transfer or other
disposition for
consideration, and Net Sales shall include the fair market value
of all other
consideration received by Serono or its Affiliates or
sublicensees in respect of
any grant of rights to make, use, sell or otherwise distribute
Products, whether
such consideration is in cash, payment in kind, exchange or
other form.
Transfers or dispositions, whether or not for consideration, of
Products for
charitable or promotional purposes or for preclinical, clinical,
manufacturing,
regulatory or governmental purposes shall not be deemed "sales."
For
clarification, sale of a Product by Serono, its Affiliates
***CONFIDENTIAL TREATMENT REQUESTED
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or sublicensees to another of these entities for resale by such
entity to a
Third Party shall not be deemed a sale for purposes of
calculating "Net Sales"
hereunder, but the sale of such Product by such entity to such
Third Party shall
be deemed to be a sale by such entity of a Product for purposes
of calculating
Net Sales hereunder.
If a Product is sold in the form of a combination product
containing one or more
products or active ingredients, devices, equipment or components
which are
themselves not Products (a "Combination Product"), then for the
purpose of
calculating royalties owed under this Agreement on sales of the
Combination
Product, Net Sales shall be calculated as follows: first, Serono
shall determine
the actual Net Sales of such Combination Product (calculated
using the above
described deductions) and then such amount shall be multiplied
by the fraction
A/(A+B), where A is the invoice price or fair market value,
whichever is
greater, of the actual Product component of such Combination
Product, and B is
the total invoice price(s) or fair market value, whichever is
greater, of the
other product(s) or active ingredients, devices, equipment or
components of such
Combination Product.
1.22 "Patents" means patent applications filed in any country
worldwide,
including provisionals, utilities, continuations,
continuations-in-part,
divisionals, and substitutions thereof, any patents issued on
such applications
as well as any reissue, reexamination, and renewal thereof, any
extensions of
term, registrations or confirmation of such patents or patent of
addition based
on any such patent, and all foreign counterparts of any of the
foregoing.
1.23 "Phase II Trial" and "Phase III Trial" means Phase II and
Phase III
human clinical trials conducted in conjunction with the U.S.
Food and Drug
Administration marketing approval process for a product, as more
fully defined
in 21 C.F.R. Section 312.21(b) and (c), respectively, and (ii)
equivalent human
clinical trials conducted pursuant to similar requirements in
other countries in
the world.
1.24 "Product" means any product developed by or on behalf of
Serono or
its permitted sublicensees that incorporates or is derived from
an Early Lead
Compound.
1.25 "Project Team" shall have the meaning ascribed in Section
2.7.
1.26 "Regulatory Approval" means the approval of a Regulatory
Authority
necessary for the marketing and sale of a pharmaceutical or
biotechnology
product in the United States, one or more countries in the
European Union or
Japan.
1.27 "Regulatory Authority" means (a) the U.S. Food and Drug
Administration or (b) any regulatory body with similar
regulatory authority in
any other jurisdiction anywhere in the world.
1.28 "Royalty Term" shall have the meaning ascribed in Section
3.6.
1.29 "Serono Background Technology" means all Patents and
Know-How owned
or Controlled by Serono which are: (a) existing on the Effective
Date or
discovered or developed during the Term of the Collaboration (i)
outside of the
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Collaboration or (ii) within the Collaboration but are of
general application
(for example, have application to other proteins in addition to
the Serono
Targets); and (b) necessary for the conduct of the
Collaboration. Any Serono
Background Technology shall be deemed Confidential Information
of Serono subject
to the rights and obligations set forth in Article 6
hereunder.
1.30 "Serono Co-Crystal Structure" means the [...***...] of
the
[...***...] of a [...***...] with a [...***...], made in the
course of the
Collaboration, which has the following characteristics: (i)
[...***...] (i.e.,
the last [...***...] or is [...***...]); (ii) [...***...] in the
[...***...];
(iii) [...***...]% [...***...] and [...***...]% in the
[...***...]; (iv)
[...***...]; (v) [...***...] ([...***...]) [...***...] and (vi)
[...***...] of
the [...***...] of the [...***...] is [...***...] a
[...***...].
1.31 "Serono Compound" means an active small molecule ligand
that is
provided by Serono to SGX for inclusion in the Collaboration
that is not
publicly known to bind to, inhibit or modulate the Serono Target
to which it is
intended to be bound under the Collaboration.
1.32 "Serono Materials" means the biological and chemical
materials
embodying Serono Targets, Serono Compounds and any protein,
clone or vector used
to express Serono Targets, in each case, which are owned or
Controlled by
Serono. Any Serono Materials shall be deemed Confidential
Information of Serono
subject to the rights and obligations set forth in Article 6
hereunder.
1.33 "Serono Target(s)" means the protein targets listed in the
attached
Exhibit A, as this Exhibit may be amended from time to time
under Section 2.4.
1.34 "SGX Background Technology" means all Patents and Know-How
owned or
Controlled by SGX which are (a) existing on the Effective Date
or discovered or
developed during the Term of the Collaboration (i) outside of
the Collaboration
or (ii) within the Collaboration but are of general application
(for example,
have application to other proteins in addition to the Serono
Targets); and (b)
necessary for the conduct of the Collaboration. Any SGX
Background Technology
shall be deemed Confidential Information of SGX subject to the
rights and
obligations set forth in Article 6 hereunder.
1.35 "SGX Co-Crystal Structure" means a [...***...] of the
[...***...] of
a [...***...] with an [...***...], an [...***...] or an
[...***...], made in the
course of the Collaboration, which has the following
characteristics: (i)
[...***...] (i.e., the [...***...] or is [...***...]); (ii)
[...***...] in the
[...***...]; (iii) [...***...]% [...***...]and [...***...]% in
the [...***...];
(iv) [...***...]; (v) [...***...] ([...***...]) [...***...] and
(vi) the
[...***...] of the [...***...] of the [...***...], [...***...]
or [...***...] is
[...***...] in a [...***...].
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1.36 "SGX Materials" means the biological and chemical
materials
embodying any Initial Structure, SGX Co-Crystal Structure,
Serono Co-Crystal
Structure or Early Lead Compound, in each case which are owned
or Controlled by
SGX and are developed in the course of the Collaboration. Any
SGX Materials
shall be deemed Confidential Information of SGX subject to the
rights and
obligations set forth in Article 6 hereunder.
1.37 "Term of the Collaboration" means the period commencing on
the
Effective Date, and terminating twenty-four (24) months
thereafter, unless
extended by mutual agreement of the Parties.
1.38 "Third Party or Third Parties" means any individual,
corporation,
limited liability company, partnership, association, trust,
unincorporated
organization, other entity or government or political
subdivision thereof other
than Serono or SGX or their respective Affiliates.
1.40 "Valid Claim" means a claim of an issued and unexpired
patent, which
has not been held invalid or unenforceable by a court or other
governmental
agency of competent jurisdiction, after any applicable appeal,
or time for
appeal, is concluded, and which has not lapsed, been abandoned,
withdrawn,
canceled, disclaimed or admitted to be invalid or unenforceable
through reissue,
reexamination or otherwise.
2. COLLABORATION.
2.1 Collaboration. Subject to the terms and conditions of
this
Agreement, Serono and SGX will use commercially reasonable and
diligent efforts
to conduct the Collaboration in accordance with the
collaboration plan attached
to this Agreement as Exhibit A (the "Collaboration Plan")
including the timeline
set forth therein. The Parties shall begin the performance of
the Collaboration
promptly following the Effective Date but no later than thirty
(30) days
thereafter. SGX shall have principal responsibility for the
conduct of the
Collaboration, and Serono shall provide consultation, advice and
such research
effort as may be deemed appropriate by the JSC and accepted by
Serono. The JSC
shall review and coordinate each Party's activities with respect
to the
Collaboration.
2.2 Provision of Serono Materials and Background Technology. At
Serono's
discretion, promptly following the Effective Date and during the
Term of the
Collaboration, Serono will provide SGX, at Serono's expense,
with reasonable
quantities of such available Serono Materials and other Serono
Background
Technology as are necessary for the conduct of the Collaboration
by SGX;
PROVIDED, HOWEVER, that Serono is able to provide such Serono
Materials and
Serono Background Technology without paying any royalties or
other fees to Third
Parties.
2.3 Provision of SGX Materials, SGX Background Technology
and
Collaboration Technology. Subject to payment by Serono to SGX
under Sections
3.2(a), (d), (e) or (f) for achievement of the applicable
Milestone, SGX will
promptly provide Serono with reasonable quantities of SGX
Materials, and with
the SGX Background
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Technology and Collaboration Technology associated with such
Milestone,
including those deliverables set forth on Exhibit B, to the
extent reasonably
necessary for Serono to conduct research and development
activities. SGX will
have no obligation to provide quantities of SGX Materials to
Serono with respect
to the Initial Structures and SGX Co-Crystal Structures that are
the subjects of
such Milestones beyond the quantities required for Serono to
reproduce such
Initial Structures and SGX Co-Crystal Structures. Serono will
not provide SGX
Materials to any Third Party without SGX's prior written
consent. The SGX
Materials will be delivered to Serono Ex Works (Incoterms 2000).
Nothing in this
Section 2.3 shall be construed as affecting in any way the scope
of the licenses
granted to Serono under Section 4.1.
2.4 Designation of Additional Targets. Prior to the first
anniversary of
the Effective Date, Serono may in its discretion, nominate by
written notice to
SGX up to an additional [...***...] ([...***...]) protein
targets which Serono
would like to include in The Collaboration. SGX will have a
period of two (2)
weeks from receipt of such notice to reject (in writing) the
inclusion of such
nominated proteins if any such protein is the subject of an
existing research
program at SGX, if SGX has existing contractual obligations to a
Third Party
with respect to such protein that would prevent its inclusion in
the
Collaboration or otherwise reasonably determines in good faith
that such
inclusion would present a conflict of interest for SGX, or if
SGX reasonably
determines in good faith that determination of an Initial
Structure with respect
to such protein is unlikely to be completed with the resources
and timelines
contemplated under this Collaboration (and in such event, SGX
will provide
Serono with an explanation of the basis for such determination).
Any protein
nominated by Serono and not rejected by SGX under this Section
2.4 will be
deemed a Serono Target. In the event any protein is rejected by
SGX, then Serono
may nominate a replacement protein target in accordance with the
terms of this
Section 2.4; PROVIDED, HOWEVER, that such nomination may occur
after the
[...***...] anniversary of the Effective Date.
2.5 Determination of Serono Co-Crystal Structures. In the event
that
during the Term of the Collaboration Serono desires SGX to
perform
co-crystallization of any Serono Targets with Serono Compounds,
Serono will
provide SGX with at least thirty (30) days prior written notice
and thereafter
will provide SGX with batches of at least [...***...]
([...***...]) Serono
Compounds per batch, which may be directed to any one or more of
the Serono
Target(s) indicated in such notice, and upon receipt of each
batch of
[...***...] ([...***...]) such Serono Compounds, SGX will use
commercially
reasonable and diligent efforts to perform co-crystallization in
accordance with
the Collaboration Plan within thirty (30) days of such receipt.
Each Serono
Compound provided under this Section 2.5 wILL be provided in an
amount of at
least five (5) milligrams and will have the following
characteristics: (i)
solubility > 5mM in DMSO and (ii) potency against the Serono
Target of <10mM.
Upon completion of each Serono Co-Crystal Structure, SGX will
promptly provide
Serono with quantities of the SGX Materials associated with the
Serono
Co-Crystal Structure, and with the SGX Background Technology and
Collaboration
Technology associated with such Serono Co-Crystal Structure,
including those
deliverables set forth on Exhibit B, to the extent reasonably
necessary for
Serono to conduct research and development activities. SGX will
have no
obligation to provide quantities of SGX Materials to Serono with
respect to the
Serono Co-Crystal Structures
***CONFIDENTIAL TREATMENT REQUESTED
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beyond the quantities required for Serono to reproduce such
Serono Co-Crystal
Structures. The Serono Co-Crystal Structures will be delivered
to Serono Ex
Works (Incoterms 2000). Prior to the expiration of the Term of
the
Collaboration, the Parties will discuss in good faith extending
the
Collaboration for [...***...] ([...***...]) [...***...] after
the Term of the
Collaboration to permit SGX to perform co-crystallization of the
additional
Serono Targets designated pursuant to Section 2.4 with Serono
Compounds to be
proVIDED bY Serono. Nothing in this Section 2.5 shall be
construed as affecting
in any way the scope of the licenses granted to Serono under
Section 4.1.
2.6 Records; Reports. SGX shall prepare and maintain complete
and
accurate written records, accounts, notes, reports and data with
respect to all
work conducted in the performance of the Collaboration in
conformity with
standard industry practices. SGX shall notify Serono promptly
upon the
completion of an Initial Structure for a Serono Target or upon
the determination
of an SGX Co-Crystal Structure, and will provide the JSC, at its
request, for
its review, all information regarding such SGX Co-Crystal
Structures which is
reasonably required for the JSC to determine the achievement of
Milestones.
Promptly upon completion of the Collaboration, SGX shall provide
a final written
report of its activities during the Collaboration and the
results thereof.
2.7 Joint Steering Committee.
(a) Establishment. SGX and Serono will establish a Joint
Steering
Committee ("JSC") to oversee the Collaboration promptly
following the Effective
Date but no later than fifteen (15) days thereafter.
(b) Membership; Decisions. The JSC shall comprise two (2)
representatives from Serono and two (2) representatives from
SGX, designated by
the Parties promptly following the Effective Date but no later
than fifteen (15)
days thereafter. Each Party may replace its JSC representatives
at any time,
with written notice to the other Party. Each Party shall have
one vote on the
JSC. The JSC will strive to reach consensus on any matters
requiring a decision
by it; PROVIDED, HOWEVER, that in the event of any dispute, the
decision shall
be made by [...***...] reasonably taking into consideration the
position of
[...***...].
(c) Project Team. The JSC shall establish a project team
(the
"Project Team") comprising at least two (2) representatives from
Serono and two
(2) representatives from SGX, designated by the Parties promptly
following the
Effective Date. The JSC may expand the size of the Project Team,
in its sole
discretion, provided that the Project Team shall always comprise
an equal number
of representatives from Serono and SGX. Each Party may replace
its Project Team
representatives at any time, with written notice to the other
Party. The Project
Team will direct the performance of the Collaboration and shall
meet to
discharge its responsibilities from time to time via
videoconference or in
person, as the Project Team may agree. Meetings of the Project
Team may be held
only if a quorum of at least one (1) representative of each
Party participates.
Within thirty (30) days of the end of each calendar quarter the
Project Team
shall submit a quarterly report to the JSC describing the
performance of the
Collaboration
***CONFIDENTIAL TREATMENT REQUESTED
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during such calendar quarter. Each Party will be responsible for
paying its own
expenses in connection with participating in the meetings of the
Project Team.
(d) Responsibilities. The JSC will review and supervise the
performance of the Collaboration and supervise the Project Team.
The JSC will be
responsible for (i) monitoring research progress during the
Collaboration and
ensuring open exchange between the Parties with respect to
Collaboration
activities; (ii) designating compounds as Early Lead Compounds
in accordance
with the criteria in Section 1.9 and (iii) determining the
achievement of
Milestones under Section 3.2. Any changes to the Collaboration
Plan which
materially alter the nature or scope of the Collaboration must
be agreed in
writing by the Parties. SGX will not engage the services of any
Third Party to
perform any activities under the Collaboration outside of the
United States
without the prior approval of the JSC.
(e) Meetings. The JSC shall meet via videoconference or in
person,
on a quarterly basis (alternating between San Diego, CA, U.S.A.,
and Geneva,
Switzerland or as the JSC may otherwise agree), to discharge
its
responsibilities. Serono may also direct that any additional
meetings are held
that it reasonably believes are necessary for the optimal
conduct of the
Collaboration. Meetings of the JSC may be held only if a quorum
of at least one
(1) representative of each Party participates. SGX will call the
JSC meetings
and will prepare the initial draft of an agenda for each
meeting, which shall
include the most recent report from the Project Team, and will
submit the draft
to Serono for comments a reasonable period before the scheduled
meeting date.
Except as provided above, each Party will be responsible for
paying its own
expenses in connection with participating in the meetings of the
JSC. SGX shall
prepare and deliver to the members of the JSC, within thirty
(30) days after the
date of each meeting, minutes of such meeting setting forth,
among other things,
all decisions of the JSC. Serono may suggest changes or
amendments to the
minutes, and may provide a supplement addressing activities at
the meeting which
are not reported in the minutes, which shall be distributed to
the Parties and
filed with the meeting minutes.
3. CONSIDERATION
3.1 Technology Access Payment. Within thirty (30) days of the
Effective
Date, Serono will pay, or cause to be paid, to SGX the sum of
U.S.$100,000.
3.2 Research Milestone Payments. Within sixty (60) days of the
date of
achievement of the applicable Milestone during the Term of the
Collaboration,
Serono will pay, or cause to be paid, to SGX the following
non-refundable
Milestone payments, on a Serono Target-by-Serono Target
basis:
<TABLE>
<CAPTION>
MILESTONES AMOUNT
---------- ------
<S> <C>
(a) Completion of [...***...] for a Serono Target U.S.
$[...***...] per Serono Target
</TABLE>
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<TABLE>
<S> <C>
(b) Determination of an [...***...] containing the first U.S.
$[...***...] per Serono Target
[...***...] for a Serono Target
(c) Determination of an [...***...] containing the first U.S.
$[...***...] per Serono Target
[...***...] for a Serono Target
(d) Determination of an [...***...] containing the first U.S.
$[...***...] per Serono Target; PROVIDED,
[...***...] for a Serono Target HOWEVER, if an [...***...] for a
Serono Target is
identified directly from an [...***...], the payment
under this Section 3.2(d) will be U.S. $[...***...]
(e) Determination of a [...***...] for a Serono Target U.S.
$[...***...] per Serono Target
containing the [...***...] as described in Section
[...***...] ([...***...])
(f) Determination of a [...***...] for a Serono Target U.S.
$[...***...] per Serono Target
containing the [...***...] as described in Section
[...***...] ([...***...])
</TABLE>
3.3 Serono Co-Crystal Payments. As consideration for the
co-crystallization activities to be performed by SGX pursuant to
Section 2.5,
Serono will pay, or cause to be paid, to SGX U.S. $[...***...]
for each batch of
[...***...] ([...***...]) Serono compounds delivered to SGX
pursuant to Section
2.5. SGX will invoice Serono on a quarterly basis for this
amount upon delivery
of the Serono Compounds, and Serono will pay SGX within sixty
(60) days of
receipt of such invoice.
3.4 Development Milestones. Within sixty (60) days of
achievement of
each of the applicable Milestones, in consideration of the
rights granted
hereunder, Serono will pay, or cause to be paid, to SGX the
following
non-refundable Milestone payments for each Product, on a
Product-by-Product
basis:
<TABLE>
<CAPTION>
MILESTONES AMOUNT
---------- ------
<S> <C>
(a) Initiation of [...***...] U.S. $[...***...]
(b) [...***...] of [...***...] U.S. $[...***...]
(c) The [...***...] of the [...***...] in a [...***...] U.S.
$[...***...]
(d) The [...***...] of the [...***...] in a [...***...] U.S.
$[...***...]
(e) [...***...] of [...***...] U.S. $[...***...]
</TABLE>
***CONFIDENTIAL TREATMENT REQUESTED
Page 10 of 41
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CONFIDENTIAL
Each Milestone payment under this Section 3.4 shall be due only
if the Product
achieving such Milestone is the first Product derived from its
corresponding
Early Lead Compound to achieve the Milestone associated with
such payment and is
either: (i) if directed primarily against a Serono Target, the
first Product
directed primarily against the Serono Target in connection with
which its
corresponding Early Lead Compound was identified, to achieve the
Milestone
associated with such payment, or (ii) if directed primarily
against another
target, the first Product directed primarily against such other
target to
achieve the Milestone associated with such payment.
3.5 Royalties. In consideration of the rights granted hereunder,
Serono
shall pay, or cause to be paid, to SGX the greater of the
following royalty
payments, as applicable, on Net Sales on a Product-by-Product
and
country-by-country basis:
(a) [...***...] percent ([...***...]%) of Net Sales of Products
in
the event that the use, import, offer for sale or sale of such
Product is
covered in such country by an Early Lead Patent made, conceived
or reduced to
practice solely by or on behalf of SGX; or
(b) [...***...] percent ([...***...]%) of Net Sales of Products
in the
event that the use, import, offer for sale or sale of such
Product is covered in
such country by a Joint Patent.
Notwithstanding the above, in the event that [...***...],
[...***...],
[...***...], then Serono shall [...***...] to SGX [...***...] of
the amounts
[...***...] in such country, and in the event that such a
[...***...], upon such
[...***...], [...***...] percent ([...***...]%) of the amounts
due under
[...***...] and, in the event Serono receives a [...***...] or
[...***...] from
a Third Party with respect to the [...***...] including such
[...***...] or
analogous [...***...], [...***...] to SGX the remaining
[...***...] percent
([...***...]%) of the amounts [...***...] above during the
period from the
[...***...] of the applicable Product to the date of the
issuance of such
[...***...]. In addition, notwithstanding the foregoing, in the
event that the
[...***...], [...***...], [...***...] is covered by an
[...***...] in the United
States, Japan and all countries in the European Union, then
[...***...] to
subsection [...***...] above for each country in which
[...***...], [...***...],
[...***...] whether or not the [...***...], [...***...],
[...***...] is covered
by an [...***...] in such country. Similarly, in the event that
the [...***...],
[...***...], [...***...] by a [...***...] in the United States,
Japan and all
countries in the European Union, then [...***...] to subsection
[...***...]
above for each country in which [...***...], [...***...],
[...***...] whether or
not the use, [...***...], [...***...] is covered by a
[...***...].
3.6 Royalty Term. The obligation of Serono to pay royalties
under
Section 3.5 with respect to a Product shall begin with the First
Commercial Sale
of such Product
***CONFIDENTIAL TREATMENT REQUESTED
Page 11 of 41
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CONFIDENTIAL
and continue for such Product, on a country-by-country basis,
until the later of
(i) such time as there are no Valid Claims of an Early Lead
Patent or Joint
Patent in such country that would be infringed by the use,
import, offer for
sale or sale of such Product in such country or (ii) [...***...]
([...***...])
years after the First Commercial Sale of such Product in such
country (such
period the "Royalty Term").
3.7 Third Party Royalties. In the event that Serono, its
Affiliates or
sublicensees are required to pay royalties to a Third Party for
patent licenses
necessary to use or practice Collaboration Technology covering
Early Lead
Compounds or SGX Co-Crystal Structures containing Early Lead
Compounds for the
purpose of making, using, selling, offering to sell or importing
Products,
Serono may offset up to [...***...] percent ([...***...]%) of
such amounts due
Third Parties against payments due SGX under Section 3.5 above;
PROVIDED,
HOWEVER, that Serono may not offset these amounts against more
than [...***...]
percent ([...***...]%) of the royalties otherwise due SGX in any
calendar
quarter. Any amount that has not been so offset may be offset
against royalties
due in subsequent calendar quarters, subject to the limitation
set forth in the
previous sentence.
3.8 Withholding Taxes. SGX shall be responsible for any and all
income
or other taxes required to be withheld from any of the royalty
and other
payments made by Serono under this Agreement and shall provide
Serono any
information necessary to determine the taxes that should be
withheld and paid.
Any tax that Serono, its Affiliates or sublicensees are required
to withhold and
pay on behalf of SGX with respect to the royalties and other
payments due under
Sections 3.1 through 3.5 shall be deducted from and offset
against said payments
prior to remittance to SGX; PROVIDED, HOWEVER, that in regard to
any tax so
deducted, Serono shall give or cause to be given to SGX such
assistance as may
reasonably be necessary to enable SGX to claim exemption
therefrom or credit
therefor, and in each case, Serono shall furnish to SGX proper
evidence of the
taxes paid on its behalf. In the event that Serono [...***...]
by a party
located in a [...***...] or [...***...] and as a result
[...***...] incremental
to that which it would have incurred if such payments were made
by a party
located in the United States or [...***...], then Serono shall
[...***...] to be
[...***...] to the extent necessary so that the [...***...]
after the
[...***...] the [...***...] without the imposition of such
[...***...].
3.9 Reports; Payments. The royalties due under Section 3.5 shall
be paid
quarterly within sixty (60) days after the close of each
calendar quarter in
which such royalties are earned. With each such quarterly
payment, Serono shall
furnish SGX a royalty statement setting forth in reasonable
detail on a
country-by-country and Product-by-Product basis: (i) the total
number of units
of each Product sold hereunder for the quarterly period for
which the royalties
are due; (ii) the calculation of Net Sales pursuant to Section
1.19; (iii) the
royalties due SGX in such calendar quarter; and (iv) details of
payments (if
any) to Third Parties pursuant to Third Party licenses as
described in Section
3.7 above. For any calendar quarter after the First Commercial
Sale of a
Product, if no royalties are due, Serono shall so report. Any
such quarterly
report shall be deemed
***CONFIDENTIAL TREATMENT REQUESTED
Page 12 of 41
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CONFIDENTIAL
Confidential Information of Serono subject to the rights and
obligations set
forth in Article 6.
3.10 Currency Conversion. All amounts required to be paid under
this
Agreement shall be paid in United States dollars. Royalties
earned shall first
be determined in the currency of the country in which they are
earned and then
converted to their equivalent in United States currency using
the standard
exchange rate methodology for the translation of foreign
currency sales into
United States dollars customarily used by Serono in its
accounting practice.
3.11 Late Payments. Any payments or portions thereof due
hereunder which
are not paid on the date such payments are due shall bear
interest until paid at
the rate equal to the lesser of the prime rate as reported by
the Chase
Manhattan Bank, New York, New York, plus [...***...] percent
([...***...]%) or
the maximum amount permitted by law. This Section 3.11 shall in
no way limit any
other remedies available to SGX.
3.12 Legal Restrictions. If at any time legal restrictions
prevent the
remittance by Serono of all or any part of royalties on Net
Sales in any
country, Serono shall have the right and option to make such
payment by
depositing the amount thereof in local currency to an account in
the name of SGX
in a bank or other depository in such country. Serono shall
consult with SGX
regarding, and promptly notify SGX of, any and all such
arrangements.
3.13 Audits. Serono shall maintain accurate books and records
which
enable the calculation of royalties payable under this Agreement
to be verified.
Serono shall maintain the books and records for each quarterly
period for two
(2) years after the submission of the corresponding report under
Section 3.9.
Upon [...***...] ([...***...]) [...***...] prior notice to
Serono, independent
accountants selected by SGX, reasonably acceptable to Serono,
may have access to
Serono's books and records after executing a reasonable
confidentiality
agreement, during Serono's normal business hours at mutually
agreed times to
conduct a review or audit no more than once per calendar year,
for the sole
purpose of verifying the accuracy of Serono's payments and
compliance with this
Agreement. Records for any calendar year may only be audited
once. The
accounting firm shall report to SGX only whether there has been
a royalty
underpayment or overpayment and, if so, the extent thereof. Any
such inspection
shall be at SGX's expense; PROVIDED, HOWEVER, in the event that
an inspection
reveals an underpayment of [...***...] percent ([...***...]%) or
more for any
calendar year, Serono shall pay the costs of the inspection.
Serono shall
promptly pay to SGX any underpayment identified in such audit,
with interest
from the date such amount(s) were due at a rate equal to the
lesser of the prime
rate reported by the Chase Manhattan Bank, New York, New York,
plus [...***...]
percent ([...***...]%) or the maximum amount permitted by law.
SGX shall
promptly pay to Serono any overpayment identified in such
audit.
***CONFIDENTIAL TREATMENT REQUESTED
Page 13 of 41
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CONFIDENTIAL
4. LICENSES
4.1 License to Serono. Subject to the terms and conditions of
this
Agreement, SGX hereby grants to Serono the following
licenses:
(a) [...***...], [...***...], [...***...] license (with the
right
to grant sublicenses in accordance with Section 4.3 below) under
SGX's interest
in the Collaboration Technology (other than that which
constitutes SGX
Background Technology) covering Early Lead Compounds and SGX
Co-Crystal
Structures containing Early Lead Compounds to make, have made,
use, import,
offer for sale and sell Products.
(b) [...***...], [...***...], [...***...], [...***...]
license
(with the right to grant sublicenses in accordance with Section
4.3 below) under
SGX's interest in the Collaboration Technology (other than that
which
constitutes SGX Background technology) covering Serono
Co-Crystal Structures to
practice and use such Collaboration Technology for any
purpose.
(c) [...***...], [...***...], [...***...] license (with the
right
to grant sublicenses in accordance with Section 4.3 below) under
SGX's interest
in the Collaboration Technology (other than that which
constitutes SGX
Background Technology) covering Initial Structures to practice
and use such
Collabora
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