COLLABORATION AGREEMENT

Exhibit 10.204

 

Portions of this exhibit marked [*] are omitted and are requested to be treated confidentially.

 

COLLABORATION AGREEMENT

 

T HIS C OLLABORATION A GREEMENT (the “Agreement”) is entered into and made effective as of November 19, 2003 (the “Effective Date”) by and between S YRRX , I NC . , a Delaware corporation having its principal place of business at 10410 Science Center Drive, San Diego, CA 92121 (“Syrrx”), and D EVELOPMENT P ARTNERS , LLC, a Delaware limited liability company having its principal place of business at 3151 South 17th Street, Wilmington, NC 28412 (“PPD”), a wholly owned subsidiary of P HARMACEUTICAL P RODUCT D EVELOPMENT , I NC . , a North Carolina corporation having its principal place of business at 3151 South 17th Street, Wilmington, NC 28412 (“PPD, Inc.”). Syrrx and PPD are sometimes referred to herein individually as a “Party” and collectively as the “Parties.” PPD, Inc. is a party to this Agreement solely for purposes of Sections 17.18 and 17.19.

 

R ECITALS

 

W HEREAS , Syrrx possesses proprietary design expertise and know-how related to the discovery and identification of small molecules for drug development in a variety of disease areas; and

 

W HEREAS , PPD is a provider of drug discovery and development services for pharmaceutical, biotechnology and medical device companies, with expertise and capability in preclinical studies and clinical trials; and

 

W HEREAS , PPD and Syrrx desire to collaborate on the discovery, development, and further preclinical investigation of serine protease dipeptidyl IV inhibitors with the intent of developing or commercializing one or more such inhibitors as human drug products in the Field under the terms of this Agreement.

 

N OW , T HEREFORE , the Parties agree as follows:

 

1.	D EFINITIONS

 

The following terms shall have the following meanings as used in this Agreement:

 

1.1 “Accepted Disease” means, with respect to a particular IND Ready Candidate, the Nominated Disease that corresponded with such IND Ready Candidate when it was accepted as such.

 

1.2 “Affiliate” means, (a) with respect to Syrrx, a particular person, corporation, partnership, or other entity that controls, is controlled by or is under common control with Syrrx; and (b) with respect to PPD, (i) PPD, Inc. or (ii) a particular person, corporation, partnership, or other entity that controls, is controlled by or is under common control with PPD or PPD, Inc. For the purposes of the definition in this Section 1.2, 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 or more intermediaries, to direct 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.

1.3 “Allowable Expenses” means those expenses incurred after the first commercial launch of a Collaboration Product, PPD Terminated Product or Syrrx Terminated Product, which are generally consistent with the Commercialization Plan and Commercialization Budget (or the equivalent for a PPD Terminated Product or Syrrx Terminated Product) and are specifically attributable to such Collaboration Product, PPD Terminated Product or Syrrx Terminated Product, and shall consist of (a) Cost of Goods Sold, (b) Commercialization Costs, (c) Distribution Expenses, (d) Post-Launch Product R&D Expenses, (e) Allocated Administration Expenses, (f) Patent Expenses, (g) Currency Gains or Losses, and (h) Regulatory Expenses (as such terms are defined in this Article 1 or in Exhibit A). Allowable Expenses shall exclude Pre-Commercialization Costs and Development Costs, even if incurred after the first commercial launch of a Collaboration Product, PPD Terminated Product or Syrrx Terminated Product.

 

1.4 “Change of Control” means the occurrence of any of the following: (a) any consolidation or merger of a Party with or into any Third Party, or any other corporate reorganization involving a Third Party, in which those persons or entities that are stockholders of such Party immediately prior to such consolidation, merger or reorganization own less than fifty percent (50%) of the surviving entity’s voting power immediately after such consolidation, merger or reorganization; (b) a change in the legal or beneficial ownership of fifty percent (50%) or more of the voting securities of any Party (whether in a single transaction or series of related transactions) where, immediately after giving effect to such change, the legal or beneficial owner of more than fifty percent (50%) of the voting securities of such Party is a Third Party; or (c) the sale, transfer, lease, license or other disposition of all or substantially all of a Party’s assets in one or a series of related transactions to a Third Party. Notwithstanding Section 17.19, this Section 1.4 shall not apply to any Affiliate of Syrrx that is (i) a subsidiary of Syrrx, (ii) has not performed any work under the Collaboration, and (iii) does not have any rights with respect to DP4 IP, this Agreement or Syrrx Technology.

 

1.5 “Clinical Development” means those Development activities that take place after a Lead Candidate, Potential IND Ready Candidate or Reserved IND Ready Candidate is accepted as an IND Ready Candidate, including the design and manufacturing of CTM and Finished Product incorporating the IND Ready Candidate or a prodrug, metabolite, ionized form (e.g., salt), solvate (e.g., hydrate), stereoisomer (e.g., enantiomer, diastereomer, mixture of isomers), resonant form, or tautomer thereof.

 

1.6 “Collaboration” means all activities performed by or on behalf of Syrrx or PPD in the course of performing the activities described in, or fulfilling of their obligations pursuant to, this Agreement.

 

1.7 “Collaboration Product” means a human therapeutic product that (a) comprises, consists of, or incorporates an IND Ready Candidate (or a prodrug, metabolite, ionized form (e.g., salt), solvate (e.g., hydrate), stereoisomer (e.g., enantiomer, diastereomer, mixture of isomers), resonant form, or tautomer thereof) together with any formulation ingredients, regardless of the formulation or mode of administration of such product, and (b) is not a Partnered Product, PPD Terminated Product, Syrrx Terminated Product or Other Product.

 

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1.8 “Commence”, when used to describe a Phase I Trial, Phase II Trial, Phase IIIa Trial, Phase IIIb Trial, or Phase IV Trial, shall mean the first dosing of the first patient for such trial.

 

1.9 “Commercialization” shall mean all activities that are undertaken during and/or after Completion of a Phase IIIa Trial for a particular Collaboration Product and that relate to the commercial manufacture, marketing and sale of such Collaboration Product including Pre-Commercialization, advertising, education, planning, marketing, promotion, distribution, market and product support studies, Phase IIIb Trials (except for those Phase IIIb Trials designated by the Parties as being part of Development) and Phase IV Trials.

 

1.10 “Complete”, when used to describe a Phase I Trial, Phase II Trial, Phase IIIa Trial, Phase IIIb Trial, or Phase IV Trial, shall mean the date when all data and results of such trial have been collected and analyzed and the final study report has been approved by the JOC.

 

1.11 “Compound Screening” means the activities described in Section 3.4(a).

 

1.12 “Confidential Information” shall have the meaning assigned to it in Section 12.1.

 

1.13 “Control” means, with respect to an item of Information, compound, material or intellectual property right, that a Party owns or has a license to such item, a Patent claiming such compound, or right and has the ability to disclose and grant a license or sublicense as provided for in this Agreement under such item, Patent, or right without violating the terms of any agreement or other arrangement with any Third Party.

 

1.14 “CTM” means a Collaboration Product that is in a finished pharmaceutical dosage form that is (a) suitable for administration and dosing to humans in clinical trials, but (b) not suitable for commercial sale (for example, without limitation, not in packaged form such as blister packs or other containers and not including external packaging and package inserts).

 

1.15 “Development” means all activities relating to identifying and characterizing Target Inhibitors, submitting for and conducting Phase I Trials, Phase II Trials, and Phase IIIa Trials (and where approved by the Parties pursuant to Section 3.2(e), certain Phase IIIb Trials) upon Collaboration Products, PPD Terminated Products or Syrrx Terminated Products, obtaining Regulatory Approval of a Collaboration Product, and all activities relating to developing the ability to manufacture Drug Substance, CTM and Finished Product. This includes, but is not limited to: (a) compound screening and optimization, medicinal chemistry, and SAR structure design, (b) preclinical testing, toxicology, formulation, clinical studies, regulatory affairs and outside counsel regulatory legal services and (c) manufacturing process development for bulk and final forms of Target Inhibitors, Drug Substance, CTM and Finished Product, validation documentation, all documentation generated in connection with the manufacturing and/or processing activities and manufacturing and quality assurance technical support activities with respect to CTM or Finished Product, provided that they occur prior to the first commercial sale of a Collaboration Product. Development shall not include a Party’s costs incurred in connection with the construction of a manufacturing facility.

 

1.16 “Development Budget” shall have the meaning set forth in Section 3.3(a).

 

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1.17 “Development Costs” means the direct expenses incurred by a Party through its internal efforts or the efforts of a Third Party on account of such Party, provided such costs are incurred after the Effective Date and consistent with the Development Plan and Development Budget (or the equivalent for a PPD Terminated Product or Syrrx Terminated Product) and are specifically attributable to the Compound Screening or Preclinical Development of Target Inhibitors, the Clinical Development of Collaboration Products under Development Plans and Development Budgets, or the Clinical Development of PPD Terminated Products or Syrrx Terminated Products under the equivalent of a Development Plan and Development Budget, including, without limitation:

 

(a) costs of conducting Compound Screening efforts;

 

(b) costs of conducting Preclinical Development to accept or reject a Lead Candidate as an IND Ready Candidate;

 

(c) costs of GMP manufacturing of Drug Substance;

 

(d) costs of designing and manufacturing of CTM for Phase I Trials, Phase II Trials and Phase IIIa Trials (and where approved by the Parties pursuant to Section 3.2(e), certain Phase IIIb Trials);

 

(e) costs of conducting Clinical Development of an IND Ready Candidate;

 

(f) costs of preparing, submitting, reviewing or developing data or information for IND or NDA submission, or equivalent regulatory filings outside of the United States;

 

(g) fees, including FDA user fees, associated with U.S. and foreign regulatory filings or other U.S. and foreign governmental requirements related to Collaboration Products;

 

(h) manufacturing process development and scale-up of CTM for Phase IIIa Trials (and Phase IIIb Trials to the extent such is treated as being included under Development as opposed to Commercialization) in bulk and finished form; and

 

(i) such other costs directly related to Development that are later identified and mutually agreed upon by the JOC.

 

Each of the foregoing may include PPD’s costs arising from its employee’s direct performance of the stated Development activities, provided that such costs shall be [ * ] of the normal and customary rates that PPD charges Third Parties at such time, in arm’s length transactions, for equivalent services.

 

Except as provided in the Initial Development Plan, each of the foregoing may also include Syrrx’s costs arising from its employee’s direct performance of the stated Development activities, provided that such costs shall be [ * ] of the normal and customary rates that Syrrx charges Third Parties at such time, in arm’s length transactions, for equivalent services.

[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC.

 

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Notwithstanding the foregoing, Development Costs shall exclude (X) a Party’s overhead expenses (to the extent not included in Section 1.17(i) or in rates to be charged by PPD or Syrrx for its employees as provided in the two preceding paragraphs above), Phase IIIb Costs for Phase IIIb Trials not treated as Development, and Phase IV Costs, (Y) costs associated with each Party’s preparation for and participation in meetings of the JOC, PT, JFC, JCC, JIPC or any other committee formed pursuant to this Agreement, and (Z) costs associated with each Party’s (i) record-keeping regarding expenses incurred or revenues received pursuant to this Agreement and (ii) preparation of financial reporting and reconciliation documents called for under this Agreement.

 

1.18 “Development Plan” shall have the meaning set forth in Section 3.2(a).

 

1.19 “Diligent Efforts” means the carrying out of obligations or tasks in a sustained manner consistent with the efforts a Party devotes to a research, development or marketing project for a pharmaceutical product or products of similar market potential, profit potential or strategic value resulting from its own research efforts, based on conditions then prevailing. Diligent Efforts requires that a Party use commercially reasonable efforts to carry out its obligations in accordance with timelines set forth in a Development Plan, Commercialization Plan or Launch Plan by: (a) promptly assigning responsibility for such obligations to specific employee(s) who are held accountable for progress and monitor such progress on an on-going basis, (b) setting and consistently seeking to achieve specific and meaningful objectives for carrying out such obligations, and (c) consistently making and implementing decisions and allocating resources designed to advance progress with respect to such objectives. The Parties understand and agree that development timelines are subject to delays outside of the control of each Party and that lack of adherence to development timelines attributable as a direct result of the occurrence of one or more of these delays, despite reasonable efforts to avoid such, shall not be considered failure to use Diligent Efforts. Delays may be caused by Third Party vendor non-performance, needed JOC or subcommittee action or approvals, FDA requirements or inaction, patient enrollment problems, investigator performance failure, potential adverse safety findings and Investigational Research Board (IRB) inaction.

 

1.20 “Direct Commercialization” shall have the meaning assigned in Section 5.1(b).

 

1.21 “DP4 IP” means any and all inventions, developments, results, know-how and other Information (including physical, chemical or biological materials), and all Patents relating thereto, made, conceived or reduced to practice by a Party or its Affiliate [ * ].

 

1.22 “Drug Substance” means a Lead Candidate (or a prodrug, metabolite, ionized form (e.g., salt), solvate (e.g., hydrate), stereoisomer (e.g., enantiomer, diastereomer, mixture of isomers), resonant form, or tautomer thereof) together with any formulation ingredients, that is suitable for administration and dosing to animals.

 

1.23 “Early Stage Development Costs” means all Development Costs other than (a) Phase IIIa Development Costs and (b) Phase IIIb Costs (in instances where the Parties agreed, pursuant to Section 3.2(e), to classify the Phase IIIb Trial as part of Development).

[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC.

 

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1.24 “Exercise Period” means, with respect to a particular Rejected Inhibitor, a period, prior to the expiration (pursuant to Section 3.7(d)) of the option set forth in Section 3.7(a) for such Rejected Inhibitor, that (a) starts with Syrrx’s written notification to PPD that it has Completed the first Phase I Trial or Phase II Trial for such Rejected Inhibitor and (b) ends [ * ] later after receipt by PPD of the final study report for such Phase I Trial or Phase II Trial.

 

1.25 “FDA” means the United States Food and Drug Administration, or a successor federal agency thereto.

 

1.26 “Field” means the treatment of humans for one or more of the following diseases: [ * ] and type-2 diabetes, and [ * ].

 

1.27 “Finished Product” means a Collaboration Product in a finished pharmaceutical dosage form that is suitable for commercial sale (for example, without limitation, in packaged form such as blister packs or other containers and including external packaging and package inserts).

 

1.28 “Good Cause” means, at the time that PPD issues a PPD Notice pursuant to Section 4.3, Syrrx does not have the financial ability to satisfy or otherwise remove any then existing liens or obligations which contractually preclude Syrrx from granting, pledging, assigning and/or conveying to PPD liens and security interests in all of Syrrx’s property and assets (other than the Excluded Assets) as required under Section 4.4(h).

 

1.29 “Good Clinical Practices” or “GCP” shall mean current Good Clinical Practices as specified in the United States Code of Federal Regulations, at the time of testing, and all FDA and ICH guidelines, including the ICH Consolidated Guidelines on Good Clinical Practices.

 

1.30 “Good Laboratory Practices” or “GLP” shall mean current Good Laboratory Practices as specified in the United States Code of Federal Regulations at 21 CFR §58 at the time of testing and all applicable ICH guidelines.

 

1.31 “Good Manufacturing Practices” or “GMP” shall mean current Good Manufacturing Practices and standards as provided for (and as amended from time to time) in European Community Directive 91/356/EEC (Principles and Guidelines of Good Manufacturing Practice for Medicinal Products) and in the Current Good Manufacturing Practice Regulations of the United States Code of Federal Regulations Title 21 (21 CFR §§210-211) in relation to the production of pharmaceutical intermediates and active pharmaceutical ingredients, as interpreted by ICH Harmonized Tripartite Guideline, Good Manufacturing Practice Guide for Active Pharmaceutical Ingredients, and subject to any arrangements, additions or clarifications agreed from time to time between the Parties.

 

1.32 “IND” means an Investigational New Drug Application filed with the FDA necessary to commence human clinical trials in conformance with applicable laws and regulations.

[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC.

 

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1.33 “IND Ready Candidate” means (a) a former Lead Candidate that the JOC decided meets Nomination Criteria and was accepted in accordance with Section 3.6(d)(i) or (b) a former Reserved IND Ready Candidate that was accepted by the JOC in accordance with Section 3.6(d)(ii). IND Ready Candidates are incorporated into Collaboration Products that undergo Clinical Development under the Collaboration.

 

1.34 “Independent Profit” means the profits or losses resulting from the Commercialization of a particular Syrrx Terminated Product or PPD Terminated Product and shall be equal to Net Sales for such Product less Allowable Expenses for such Product.

 

1.35 “Information” means information, results and data of any type whatsoever, in any tangible or intangible form whatsoever, including without limitation, databases, inventions, 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, and patent and other legal information or descriptions.

 

1.36 “Inhibitor of Target” means [ * ] .

 

1.37 “Initial Development Budget” means the Development Budget that the Parties have agreed upon in writing as of the Effective Date.

 

1.38 “Initial Lead Candidates” means Syrrx compounds: SYR110085, SYR110322 and [*] .

 

1.39 “Initial Development Plan” means the Development Plan that the Parties have agreed upon in writing as of the Effective Date.

 

1.40 “Initial Target Inhibitors” means the Target Inhibitors disclosed by Syrrx to PPD in writing as of the Effective Date.

 

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

 

1.42 “Joint Finance Committee” or “JFC” means the committee described in Section 2.5.

 

1.43 “Joint IP” means any and all inventions, developments, results, know-how and other Information (including physical, chemical or biological materials), and all Patents relating thereto, that is (a) made, conceived or reduced to practice jointly by employee(s) or agent(s) of both Parties in the performance of the Collaboration and (b) is not DP4 IP, PPD Information or Syrrx Information.

 

1.44 “Joint Intellectual Property Committee” or “JIPC” means the committee described in Section 2.6.

[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC.

 

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1.45 “Joint Operating Committee” or “JOC” means the committee described in Section 2.2.

 

1.46 “Launch Budget” shall have the meaning assigned in Section 5.4(a).

 

1.47 “Launch Plan” shall have the meaning assigned in Section 5.4(a).

 

1.48 “Lead Candidate” means a Target Inhibitor that the JOC decided meets the Lead Candidate Selection Criteria and that has been selected by the JOC pursuant to Section 3.6(c).

 

1.49 “Lead Candidate Screening” means activities performed to determine whether a particular Target Inhibitor satisfies the Lead Candidate Selection Criteria.

 

1.50 “Lead Candidate Selection Criteria” means the criteria approved by the JOC that each Target Inhibitor must fulfill before the JOC can select it for Preclinical Development pursuant to Section 3.6(c), as a Lead Candidate for such disease. Lead Candidate Selection Criteria shall at least include [ * ].

 

1.51 “Lead Marketing Party” shall have the meaning assigned in Section 5.5.

 

1.52 “Licensing Revenues” means any and all forms of consideration that the Parties receive from a Third Party Partner in connection with a Partnering Agreement, which may include upfront license fees, annual license or maintenance payments, milestone payments, royalties, imputed income on interest-free loans received from such Third Party and other similar payments; provided, however, that Licensing Revenues shall exclude any amounts received by a Party or its Affiliate by way of (a) an equity investment by such Third Party (but solely to the extent that such investment is at a price equal to or less than [ * ] of the fair market value of such Party’s or its Affiliate’s stock sold in such investment), (b) a loan at then current market rates and terms, (c) research and development support (at a reasonable FTE value), (d) reimbursement of patent prosecution, maintenance, enforcement or defense expenses, or (e) payments directly attributable to supplying goods (at no more than [ * ] of actual manufacturing cost) and/or services to such Third Party to enable their Clinical Development or commercialization of such Partnered Product.

 

1.53 [*].

 

1.54 “NDA” means a New Drug Application submitted and filed with the FDA necessary for approval of a drug in conformance with applicable laws and regulations.

[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC.

 

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1.55 “Net Sales” means the total amount billed or invoiced in United States dollars (or converted thereto in accordance with the Agreement) by a Party or its licensee, or sublicensees (to the extent licensing and sublicensing is permitted under this Agreement) for sales of Collaboration Products, PPD Terminated Products or Syrrx Terminated Products to a Third Party less, to the extent included within the amount invoiced to and paid by the customer, deductions for: (a) transportation charges, and other charges, such as insurance, relating thereto, (b) sales and excise taxes, customs and any other governmental charges, all to the extent imposed upon the sale of the Collaboration Products and paid by the selling party, (c) distributors fees, rebates or allowances actually granted or allowed, including government and managed care rebates, (d) quantity discounts, cash discounts or chargebacks actually granted, allowed or incurred in the ordinary course of business in connection with the sale of the Collaboration Products, and (e) allowances or credits to customers, not in excess of the selling price of the Collaboration Products, on account of governmental requirements, rejection, outdating recalls or return of the Collaboration Products.

 

1.56 “New Target Inhibitor” shall have the meaning set forth in Section 3.6(a)(ii).

 

1.57 “Nominated Disease” means, with respect to a particular Lead Candidate, the disease within the Field for which such Lead Candidate was selected for Preclinical Development.

 

1.58 “Nomination Criteria” means, with respect to each disease in the Field, the criteria proposed by the PT and approved by the JOC that the JOC must reasonably consider before accepting or rejecting each Lead Candidate, pursuant to Section 3.6(d), as an IND Ready Candidate for such disease. The Parties anticipate such criteria to be equivalent to the data needed to support an IND filing for such disease. Nomination Criteria shall at least include [ * ].

 

1.59 “Other Product” means a human therapeutic pharmaceutical product that (a) comprises, consists of, or incorporates (i) a Target Inhibitor listed in the Target Inhibitor Catalog, Lead Candidate, Potential IND Ready Candidate, or Reserved IND Ready Candidate, or (ii) a prodrug, metabolite, ionized form (e.g., salt), solvate (e.g., hydrate), stereoisomer (e.g., enantiomer, diastereomer, mixture of isomers), resonant form, or tautomer thereof, regardless of the formulation or mode of administration of such product and (b) is not a Collaboration Product, Partnered Product, Syrrx Terminated Product or PPD Terminated Product.

 

1.60 “Partnered Commercialization” shall have the meaning assigned in Section 5.1.

 

1.61 “Partnered Product” means, with respect to particular territories and diseases, (a) a former Collaboration Product, PPD Terminated Product or Syrrx Terminated Product that is the subject of a Partnering Agreement; and (b) all other human therapeutic products that (i) contain the same IND Ready Candidate (or a prodrug, metabolite, ionized form (e.g., salt), solvate (e.g., hydrate), stereoisomer (e.g., enantiomer, diastereomer, mixture of isomers), resonant form, or tautomer thereof) as such former Collaboration Product, PPD Terminated Product or Syrrx Terminated Product and (ii) are the subject of the same Partnering Agreement.

[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC.

 

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1.62 “Partnering Agreement” means an executed and in-force written agreement between one or both Parties and a Third Party, wherein such Third Party is granted the right to develop (if applicable) and commercialize, alone or in collaboration with Syrrx and/or PPD, a human therapeutic product that comprises, consists of, or incorporates an IND Ready Candidate (or a prodrug, metabolite, ionized form (e.g., salt), solvate (e.g., hydrate), stereoisomer (e.g., enantiomer, diastereomer, mixture of isomers), resonant form, or tautomer thereof). PPD and Syrrx shall both be parties to each Partnering Agreement for a former Collaboration Product. PPD (but not Syrrx) shall be a party to each Partnering Agreement for a former Syrrx Terminated Product. Syrrx (but not PPD) shall be a party to each Partnering Agreement for a former PPD Terminated Product. For clarity, an agreement in which a Party engages a Third Party to perform, on behalf of such Party, certain obligations of such Party under the Development Plan or Commercialization Plan is not a Partnering Agreement.

 

1.63 “Partnering Costs” means, with respect to a particular Partnered Product or its predecessor Collaboration Product, PPD Terminated Product or Syrrx Terminated Product, (a) the costs and expenses incurred by the Parties and approved by the JOC in connection with identifying and negotiating with potential Third Party Partners and preparing, negotiating and executing a Partnering Agreement for such Partnered Product, and (b) the costs and expenses incurred by the Parties in the performance of such Partnering Agreement, solely to the extent that such costs and expenses are not reimbursed by the Third Party Partner.

 

1.64 “Partnering Profit” means, on a quarter-by-quarter basis with respect to a particular Partnered Product, (a) the sum of the Parties’ Licensing Revenues for such Partnered Product for such quarter, minus (b) the sum of the Parties’ Partnering Costs for such Partnered Product for such quarter.

 

1.65 “Passive Marketing Party” shall have the meaning assigned in Section 5.5.

 

1.66 “Patent” means (a) an unexpired letters patent (including inventor’s certificates) which has 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, including without limitation any substitution, extension, registration, confirmation, reissue, re-examination, renewal or any like filing thereof, or (b) a pending application for letters patent, including without limitation any continuation, division or continuation-in-part thereof and any provisional applications.

 

1.67 “Permitted Disease” means, with respect to a particular Rejected Inhibitor, any disease that is: (a) the Rejected Disease, provided that such disease is not a Pursued Disease at the time of the rejection of such Rejected Inhibitor and does not subsequently become a Pursued Disease prior to Syrrx’s initiation of GLP toxicology studies for such Rejected Inhibitor; (b) a disease within the Field that is not within the scope of [ * ] and that is not a Pursued Disease at the time of the rejection of such Rejected Inhibitor and does not subsequently become a Pursued Disease prior to Syrrx’s initiation of GLP toxicology studies for such Rejected Inhibitor; (c) a disease outside of the Field; and (d) a Pursued Disease for which at least thirty (30) months have passed since the most recent filing by the Parties of an IND for a Collaboration Product that is directed to such Pursued Disease.

[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC.

 

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1.68 “Phase I Trial” means that portion of the clinical development program that generally provides for the first introduction into humans of a Collaboration Product with the primary purpose of determining safety, metabolism and pharmacokinetic properties and clinical pharmacology of the CTM in healthy patients, and generally consistent with 21 CFR §312.21(a).

 

1.69 “Phase II Trial” means a clinical trial of a Collaboration Product on patients, including possibly pharmacokinetic and dose ranging studies, the principal purposes of which are to make a preliminary determination that such Product is safe for its intended use and to obtain sufficient information about such Collaboration Product’s efficacy to permit the design of further clinical trials, and generally consistent with 21 CFR §312.21(b).

 

1.70 “Phase III Loan” means a line of credit provided by PPD to Syrrx pursuant to Article 4 for the financing of some or all of Syrrx’s portion of Shared Phase IIIa Development Costs (and Phase IIIb Costs, if applicable).

 

1.71 “Phase IIIa Development Costs” means all Development Costs incurred by either Party for (a) direct support of the performance of a Phase IIIa Trial for a Collaboration Product, PPD Terminated Product or Syrrx Terminated Product or (b) process development for a Collaboration Product, PPD Terminated Product or Syrrx Terminated Product in a Phase IIIa Trial. For clarity, Phase IIIa Development Costs include (i) costs to formulate and manufacture Phase IIIa Trial CTM and (ii) excludes Phase IIIb Costs, unless the Parties mutually agree to treat a Phase IIIb Trial within the scope of Development as provided under Section 3.2(e), in which case Phase IIIa Development Costs shall include Phase IIIb Costs.

 

1.72 “Phase IIIa Trial” means that portion of the clinical development program that provides for the pivotal human clinical trials of a Collaboration Product, which trial(s) is/are designed to (a) establish that such Collaboration Product is safe and efficacious for its intended use; (b) define warnings, precautions and adverse reactions that are associated with the Collaboration Product in the dosage range to be prescribed; (c) be a pivotal study for submission of a NDA, and (d) be generally consistent with 21 CFR §312.21(c), but excluding a Phase IIIb Trial.

 

1.73 “Phase IIIb Costs” means, with respect to a Phase IIIb Trial for a Collaboration Product, (a) if the Parties agree pursuant to Section 3.2(e) that such trial will be considered part of Development, then, all Development Costs incurred by either Party for direct support of the performance of such trial, or (b) if the Parties do not agree pursuant to Section 3.2(e) that such trial will be considered part of Development, then all costs incurred by either Party for direct support of the performance of such trial if any only if such costs would have been Development Costs if such trial had been considered part of Development.

 

1.74 “Phase IIIb Trial” means product support clinical trials of a Collaboration Product (i.e., a clinical trial which is not required for receipt of Regulatory Approval but which may be useful in providing additional drug profile data) commenced before receipt of Regulatory Approval.

 

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1.75 “Phase IV Trial” means any clinical trial of a Collaboration Product that is commenced in a particular country after receipt of Regulatory Approval in such country.

 

1.76 “Phase IV Costs” means all expenses incurred by either Party or for its account which are generally consistent with the Commercialization Plan and specifically attributable to: (a) direct support of the performance of a Phase IV Trial for a Collaboration Product or (b) process development for a Collaboration Product in a Phase IV Trial. All Phase IV Costs shall be treated as Post-Launch Product R&D Expenses in accordance with Exhibits A and B.

 

1.77 “Potential IND Ready Candidate” means (a) a former Lead Candidate that was not accepted as an IND Ready Candidate pursuant to Section 3.6(d)(ii) or (b) a former Reserved IND Ready Candidate that was redesignated as a Potential IND Ready Candidate in accordance with Section 3.6(d)(ii).

 

1.78 “PPD Existing Patent Rights” means all Patents Controlled by PPD or its Affiliate as of the Effective Date.

 

1.79 “PPD Generic Third Party Agreement” means, with respect to a particular PPD Terminated Product, an agreement between PPD and a Third Party that relates to such PPD Terminated Product and to other products as well.

 

1.80 “PPD Information” means all Information (other than DP4 IP) produced by PPD or its Affiliate (solely or together with Syrrx) in the course of performing the Development Plan or the Commercialization Plan. For clarity, PPD Information includes all Information generated by PPD or its Affiliate during the course of the Collaboration that is related to Regulatory Filings or Regulatory Documentation other than DP4 IP.

 

1.81 “PPD Specific Third Party Agreement” means, with respect to a particular PPD Terminated Product, an agreement between PPD and a Third Party that relates solely to such PPD Terminated Product.

 

1.82 “PPD Technology” means (a) PPD Information, (b) all data contained in Regulatory Documentation (other than DP4 IP, PPD Information and Syrrx Information), and (c) all Information and Patents that (i)are Controlled by PPD or its Affiliate during the Term as a result of PPD’s or its Affiliate’s entry into a license agreement with a Third Party and (ii) that (1) relate to the composition of matter, manufacture or use of a Target Inhibitor or (2) are incorporated into any Product or necessary for the discovery, identification, manufacture, development, and commercial use or sale of any Product.

 

1.83 “PPD Terminated Product” means

 

(a) a former Collaboration Product for which PPD terminated its rights and obligations pursuant to Section 13.2(c); and

 

(b) all other human therapeutic products that contain the same IND Ready Candidate (or a prodrug, metabolite specific to such former Collaboration Product, ionized form (e.g., salt), solvate (e.g., hydrate), stereoisomer (e.g., enantiomer, diastereomer, mixture of isomers), resonant form, or tautomer thereof) as such former Collaboration Product.

 

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1.84 “Preclinical Development” means, with respect to a particular Target Inhibitor, all Development activities performed after its selection as a Lead Candidate and prior to the time that it is accepted as an IND Ready Candidate. In particular, Preclinical Development shall include those studies set forth as Nomination Criteria by the JOC.

 

1.85 “Pre-Commercialization” means all Commercialization activities undertaken prior to or less than one (1) year after the launch date in accordance with the Launch Plan of a Collaboration Product. Pre-Commercialization shall include advertising, education, product-related public relations, health care economic studies, governmental affairs activities for reimbursement and formulary acceptance, sales force training, trademark selection, filing, prosecution and enforcement, and other activities included within the Launch Plan.

 

1.86 “Pre-Commercialization Costs” means the expenses, excluding Development Costs, incurred prior to or less than one (1) year after the launch date in accordance with the Launch Plan of a Collaboration Product, by a Party or for its account which are specifically attributable to the Pre-Commercialization of such Collaboration Product and generally consistent with the Launch Budget. Pre-Commercialization Costs shall exclude administrative expenses that are not attributable to sales force procurement, training, retention and compensation.

 

1.87 “Product” means a Collaboration Product, Other Product, Partnered Product, PPD Terminated Product or Syrrx Terminated Product.

 

1.88 “Product Profit” means the profits or losses resulting from the Commercialization of Collaboration Products and shall be equal to Net Sales of Collaboration Products less Allowable Expenses for Collaboration Products.

 

1.89 “Project Team” or “PT” means the committee described in Section 2.3.

 

1.90 “Pursued Diseases” means (a) all diseases in the Field for which, at the time in question, a Lead Candidate, IND Ready Candidate, Collaboration Product or Partnered Product is being developed under the Collaboration, (b) all diseases in the Field for which, at the time in question, a Syrrx Terminated Product is being developed outside of the Collaboration, [*].

 

1.91 “Regulatory Agent” means that Party designated by an appropriate authorization to the FDA to be the primary contact with, and recipient of correspondence from, the FDA in connection with any FDA matter or filing relating to a Collaboration Product.

 

1.92 “Regulatory Approval” means any and all approvals (including supplements, amendments, pre- and post-approvals, pricing and reimbursement approvals), licenses, registrations or authorizations of any national, supra-national (e.g., the European Commission or the Council of the European Union), 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 Collaboration Product in a regulatory jurisdiction.

 

1.93 “Regulatory Documentation” means, with respect to a Collaboration Product, all regulatory filings and supporting documents created, submitted to the FDA or any equivalent agency or government authority outside of the United States (including any supra-national

 

[*] Confidential treatment requested; certain information omitted and filed separately with the SEC.

 

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agency such as in the European Union) relating to such Product, and all data contained therein (other than DP4 IP, PPD Information and Syrrx Information), including, without limitation, the contents of any IND(s), NDA(s), BLA(s), Drug Master File (“DMF”), correspondence to and from the FDA or any equivalent agency or governmental authority outside of the United States, minutes from meetings (whether in person or by audioconference or videoconference) with regulatory authorities, registrations and licenses, regulatory drug lists, advertising and promotion documents shared with regulatory authorities, adverse event files, complaint files and manufacturing records.

 

1.94 “Regulatory Filing” means the new drug application (“NDA”) or biologic license application (“BLA”) or investigational new drug application (“IND”) or any foreign counterparts thereof and any other filings required by Regulatory authorities relating to the study, manufacture or commercialization of any Collaboration Product.

 

1.95 “Rejected Disease” means, with respect to a particular Rejected Inhibitor, the Nominated Disease that corresponded with such Rejected Inhibitor when it was a Lead Candidate.

 

1.96 “Rejected Inhibitor” means (a) a former Potential IND Ready Candidate that Syrrx selects in accordance with Section 3.6(d)(ii) and that has not been redesignated a Potential IND Ready Candidate in accordance with Section 3.6(e); (b) a former Lead Candidate for which PPD notifies Syrrx in writing pursuant to Section 3.4(c) of its decision to terminate Preclinical Development activities; and (c) a Target Inhibitor upon which Syrrx has performed some Compound Screening activities and for which PPD subsequently notifies Syrrx in writing pursuant to Section 3.4(a) of its decision to terminate Compound Screening activities. For clarity, a Target Inhibitor shall cease to be listed in the Target Inhibitor Catalog at such time as it becomes a Rejected Inhibitor.

 

1.97 “Reserved IND Ready Candidate” means a former Potential IND Ready Candidate that is designated as such in accordance with Section 3.6(d)(ii) and has not been redesignated, pursuant to Section 3.6(d)(ii), as a Potential IND Ready Candidate.

 

1.98 “Shared Phase IIIa Development Costs” means all Phase IIIa Development Costs incurred by either Party with respect to a Collaboration Product for which the Parties have entered into a Phase III Loan or Syrrx is paying half of Phase IIIa Development Costs out of its own resources.

 

1.99 “Sole IP” means any and all inventions, developments, results, know-how and other Information (including physical, chemical or biological materials), and all intellectual property relating thereto, that is (a) made, conceived or reduced to practice solely by employee(s) or agent(s) of a Party in the performance of its duties to the Collaboration and (b) is not DP4 IP, PPD Information or Syrrx Information.

 

1.100 “Syrrx Existing IP” means all rights to all Patents Controlled by Syrrx or its Affiliate as of the Effective Date.

 

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1.101 “Syrrx Generic Third Party Agreement” means, with respect to a particular Syrrx Terminated Product, an agreement between Syrrx and a Third Party that relates to such Syrrx Terminated Product and to other products as well.

 

1.102 “Syrrx Information” means all Information (other than DP4 IP) produced solely by Syrrx or its Affiliate in the course of performing the Development Plan or the Commercialization Plan. For clarity, Syrrx Information includes Information generated solely by Syrrx or its Affiliate during the course of the Collaboration that is related to Regulatory Filings or Regulatory Documentation.

 

1.103 “Syrrx Specific Third Party Agreement” means, with respect to a particular Syrrx Terminated Product, an agreement between Syrrx and a Third Party that relates solely to such Syrrx Terminated Product.

 

1.104 “Syrrx Technology” means (a) DP4 IP, (b) Syrrx Information, and (c) all Information and Patents (i) that are Controlled by Syrrx or its Affiliate during the Term as a result of Syrrx’s or its Affiliate’s entry into a license agreement with a Third Party and (ii) that (1) relate to the composition of matter, manufacture or use of a Target Inhibitor or (2) are incorporated into any Product or necessary for the discovery, identification, manufacture, development, and commercial use or sale of any Products.

 

1.105 “Syrrx Terminated Product” means

 

(a) a former Collaboration Product for which:

 

(i) Syrrx terminated its rights and obligations pursuant to Section 13.2(c); or

 

(ii) pursuant to Section 4.3(e), Syrrx elects without Good Cause to decline the offer of a Phase III Loan and does not commit to pay for its half of the Phase IIIa Development Costs for the corresponding Collaboration Product and PPD Commences a Phase IIIa Trial for such Product; and

 

(b) all other human therapeutic products that contain the same IND Ready Candidate (or a prodrug, metabolite specific to such former Collaboration Product, ionized form (e.g., salt), solvate (e.g., hydrate), stereoisomer (e.g., enantiomer, diastereomer, mixture of isomers), resonant form, or tautomer thereof) as such former Collaboration Product.

 

1.106 “Target” means human serine protease dipeptidyl peptidase IV (DP4).

 

1.107 “Target Inhibitor” means [ * ].

 

1.108 “Term” shall have the meaning assigned to it in Section 13.1.

[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC.

 

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1.109 “Third Party” means any individual, corporation, partnership, limited liability company or other entity other than (i) Syrrx, (ii) PPD or (iii) an Affiliate of either of them.

 

1.110 “Third Party Partner” means a Third Party that has entered into a Partnering Agreement.

 

2. M ANAGEMENT O F T HE C OLLABORATION

 

2.1 Overall Management Structure. The overall management of the Collaboration shall be vested in the Joint Operating Committee (the “JOC”), with responsibility, as further discussed in Section 2.2, for establishing the strategic direction of the Collaboration and for managing and directing the research, development and commercialization efforts of the Parties under the Collaboration. The JOC shall establish a Project Team (the “PT”) that reports to the JOC and assists with the day-to-day management of Preclinical Development, Clinical Development and launch of Target Inhibitors, IND Ready Candidates, and Collaboration Products, as the case may be. The JOC may establish one or more other committees that report to the JOC and assist the JOC in managing and directing the Collaboration. The committees formed by the JOC and PT are intended to facilitate management of the various Collaboration activities of the Parties; they shall provide information to the JOC upon which the JOC may base its decisions. Each Party agrees to use good faith, cooperative efforts to facilitate and assist the efforts of the JOC, PT and all such additional committees established by the JOC. The JOC may also establish a Joint Commercialization Committee (the “JCC”) to oversee the commercialization activities of the Parties with respect to Products. The JOC may also establish a Joint Finance Committee (“JFC”), to develop and submit to the JOC for approval, annual budgets of expenses to be incurred by the Parties for the development of Target Inhibitors, IND Ready Candidates, and Collaboration Products. In addition, the JOC may also establish a Joint Intellectual Property Committee (the “JIPC”) which shall be responsible for making recommendations to the JOC regarding intellectual property prosecution, Third Party licensing, infringement and patent enforcement issues relating to DP4 IP, Sole IP and Joint IP. Each committee may further establish one or more subcommittees as it deems appropriate and delegate one or more of its responsibilities to such subcommittee, provided that the subcommittee’s actions will be subject to review and approval by the committee.

 

2.2 Joint Operating Committee .

 

(a) Membership. The Joint Operating Committee (the “JOC”) shall be composed of at least six members, three members appointed by each Party. Each Party shall designate its initial JOC representatives within thirty (30) days after the Effective Date. Each Party may replace its JOC representatives at any time upon written notice to the other Party. PPD will designate one of its initial JOC representatives as the initial Chairperson of the JOC.

 

The Chairperson shall alternate between the Parties every twelve (12) months. The Chairperson shall be responsible for scheduling meetings, preparing and circulating an agenda in advance of each meeting, and preparing and issuing minutes of each meeting within 30 days thereafter.

 

(b) Responsibilities. During the term of this Agreement, the JOC shall meet at least on a quarterly basis as provided in Section 2.7. The JOC will make its decisions by

 

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unanimous vote, with each Party’s representatives collectively having one vote. It shall determine the overall strategy for the Collaboration and shall oversee the PT, JCC, JFC and JIPC and any other committees formed by it. In addition to the other duties specifically attributed to the JOC in this Agreement, the JOC shall (i) maintain the Target Inhibitor Catalog, (ii) evaluate the progress of the Development Plan and Commercialization Plan, (iii) determine the circumstances and terms under which a Party can engage a Third Party to perform certain obligations of such Party under the Development Plan or Commercialization Plan, (iv) monitor compliance with the diligence provisions set forth in Sections 3.5 and 5.9, (v) serve as the initial forum to resolve any disputes that arise in the PT, JCC, JFC or JIPC, (vi) approve all modifications and addenda to the Development Plan and Commercialization Plan, and (vii) approve all budgets including the Development Budgets, Commercialization Budgets and Launch Budgets, and any amendments to any budgets.

 

2.3 Project Team.

 

(a) Membership. The Parties shall establish a Project Team (“PT”) composed of as many members from each Party as deemed necessary to perform obligations set forth in a Development Plan. One representative from each Party on the PT shall be the individual at the Party with primary responsibility for the day-to-day management and execution of the Development Plan. The PT shall report directly to the JOC and shall take its direction from the JOC. Each Party may replace its appointed PT representatives at any time. PPD and Syrrx shall each designate one of its representatives as a co-Project Team Leader. The co-Project Team Leaders shall be responsible for scheduling meetings, preparing and circulating an agenda in advance of each meeting, and preparing and issuing minutes of each meeting within thirty (30) days thereafter.

 

(b) Responsibilities. During the Term, the PT shall meet at least monthly and as further needed as provided in Section 2.7. The PT serves an advisory role to the JOC and shall at all times defer to the authority of the JOC. The PT shall inform the JOC regarding matters relating to the advancement of Target Inhibitors to Lead Candidates, Preclinical Development of a Lead Candidate, Clinical Development of an IND Ready Candidate for use in the Accepted Disease or in any additional diseases approved pursuant to Section 3.8, in order to obtain Regulatory Approvals as set forth in Article 3, including the following activities: (i) preparation of proposed Development Plans and Development Budgets, and modifications thereto as needed; (ii) oversight of implementation of Development Plans and Development Budgets, (iii) oversight of outsourced work; and (iv) management of the flow of Information with respect to Preclinical Development being conducted for each Lead Candidate and Clinical Development being conducted for each IND Ready Candidate. At its meetings, the PT shall review the progress of the Development Plan and consider modifications to such Development Plan. The PT shall summarize for the JOC the progress of the Development Plan since the last JOC meeting, bring to the attention of the JOC any overarching issues or significant changes in a proposed modification or amendment to a Development Plan, and address any issues raised by the JOC at its previous meeting. The PT shall also propose Lead Candidate Selection Criteria or Nomination Criteria for different diseases within the Field and submit them to the JOC for approval. The PT shall prepare and timely submit to the JOC objective reports regarding Target Inhibitors or Lead Candidates that one or both Parties believe fulfill either the Lead Candidate Selection Criteria or the Nomination Criteria, as the case may be, for acceptance by the JOC as a Lead Candidate or an IND Ready Candidate pursuant to Section 3.6(b) or 3.6(d), as the case may be.

 

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2.4 Joint Commercialization Committee.

 

(a) Membership. The JOC may establish a Joint Commercialization Committee (the “JCC”) that would be composed of four (4) members, with two (2) members appointed by each Party. It is anticipated that within thirty (30) days after the later of such establishment and the first IND Ready Candidate begins Clinical Development, each Party would appoint two representatives to the JCC. Each Party could replace its JCC representatives at any time upon written notice to the other Party. PPD would designate one of its representatives as the initial Chairperson of the JCC. The Chairperson would alternate between the Parties every twelve (12) months. The Chairperson would be responsible for scheduling meetings, preparing and circulating an agenda in advance of each meeting, and preparing and issuing minutes of each meeting within thirty (30) days thereafter.

 

(b) Responsibilities. Starting with its formation pursuant to Section 2.4(a) and continuing throughout the Term, it is anticipated that the JCC would meet at least quarterly as provided in Section 2.7. The JCC would operate by unanimous vote, with each Party’s representatives collectively having one vote. As the Development of Collaboration Products advances, the JCC would also evaluate, and make recommendations to the JOC regarding, potential arrangements for the manufacturing, marketing and sales, and/or licensing of a Collaboration Product to Third Parties. As set forth in greater detail in Article 5, the JCC would be responsible for overseeing the pre-launch and post-launch commercialization of Collaboration Products under the Collaboration. At its meetings, the JCC would review the progress of the Commercialization Plan and consider proposing to the JOC modifications to such Commercialization Plan. The JCC would also summarize for the JOC the progress of the Commercialization Plan since the last JOC meeting, bring to the attention of the JOC any overarching issues or significant changes in a proposed modified Commercialization Plan, and address any issues raised by the JOC at its previous meeting.

 

2.5 Joint Finance Committee.

 

(a) Membership. The JOC may also establish a Joint Finance Committee (the “JFC”) that would be composed of four (4) members, with two (2) members appointed by each Party. Each Party would be able to replace its JFC representatives at any time upon written notice to the other Party. Syrrx would designate one of its representatives as the initial Chairperson of the JFC. The Chairperson would alternate between the Parties every twelve (12) months. The Chairperson would be responsible for scheduling meetings, preparing and circulating an agenda in advance of each meeting, and preparing and issuing minutes of each meeting within thirty (30) days thereafter.

 

(b) Responsibilities. It is anticipated that the JFC, if formed, would meet at least quarterly during the Term, as provided in Section 2.7. The JFC would operate by unanimous vote, with each Party’s representatives collectively having one vote. The JFC would develop and submit to the JOC for approval Development Budgets, Launch Budgets, Commercialization Budgets and any other budgets required under this Agreement. In particular, the JFC would be responsible for providing the Parties with an estimated budget for Phase IIIa Development Costs (and, if applicable, Phase IIIb Costs) in order to establish the maximum amount of the Phase III Loan.

 

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2.6 Joint Intellectual Property Committee. The JOC may also establish a Joint Intellectual Property Committee (the “JIPC”) that would devise a strategy for the protection of intellectual property arising from the Collaboration. It is anticipated that the committee would consist of one member from each Party’s senior management team or the Party’s designated alternate. The Syrrx representative would serve as the initial Chairperson of the JIPC. The Chairperson would alternate between the Parties every twelve (12) months.

 

2.7 Meetings. The Parties shall endeavor to schedule meetings of the JOC, PT, and all other committees that are formed, at least sixty (60) days in advance. Committee meetings held in person will alternate between sites designated by each Party or as otherwise agreed upon by the Parties. When possible, the meetings of a given committee should occur at the same location as the JOC meetings, with the JOC meeting occurring after the meetings of the other committees. With the consent of the representatives of each Party serving on a particular committee, other representatives of each Party may attend meetings of that committee as nonvoting observers. A meeting of a committee may be held by audio or video teleconference with the consent of both Parties. Meetings of a committee shall be effective only if at least one representative of each Party is present or participating. Each Party shall be responsible for all of its own expenses of participating in the committee meetings.

 

2.8 Obligations of Parties. Syrrx and PPD shall provide the JOC, PT, and all other committees that are formed, and their authorized representatives with reasonable access during regular business hours to all records, documents, and Information relating to the Collaboration which any such committee may reasonably require in order to perform its obligations hereunder, provided that if such records, documents or Information are under a bona fide obligation of confidentiality to a Third Party, then Syrrx or PPD, as the case may be, may withhold access thereto to the extent necessary to satisfy such obligation.

 

3. D EVELOPMENT

 

3.1 Overview .

 

(a) Goals. The general goals and intent of the Collaboration are to discover Target Inhibitors, to perform sufficient screening work on certain Target Inhibitors for them to satisfy Lead Candidate Selection Criteria to become Lead Candidates, to perform sufficient preclinical work on certain Lead Candidates for them to satisfy the Nomination Criteria to become IND Ready Candidates, and to clinically develop and commercialize, either alone or together with a Third Party Partner, Collaboration Products.

 

(b) General. In all matters related to the Collaboration, the Parties shall be guided by standards of reasonableness in economic terms and fairness to each of the Parties, striving to balance the legitimate interests and concerns of the Parties, to further each Development Plan and Commercialization Plan and to realize the economic potential of Collaboration Products.

 

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(c) Independence. Subject to the terms of this Agreement, the activities and resources of each Party shall be managed by such Party, acting independently and in its individual capacity. The relationship between Syrrx and PPD is that of independent contractors and neither Party shall have the power to bind or obligate the other Party in any manner, or be or become or be deemed to be or to become, liable or responsible for the debts, liabilities or obligations of the other Party.

 

3.2 Development Plans.

 

(a) Definition. The Preclinical Development of Target Inhibitors and Lead Candidates and the Clinical Development of IND Ready Candidates shall be governed by a Development Plan that describes the proposed overall program to achieve regulatory agency registration of a Collaboration Product, including, but not limited to, description of Drug Substance, CTM, preclinical, clinical and regulatory activities, with estimated budgets and timelines necessary to achieve such approval related to an Accepted Disease (the “Development Plan”).

 

(b) Initial Development Plan. As of the Effective Date, the Parties have agreed upon and approved an Initial Development Plan that sets forth the Preclinical Development and Clinical Development studies for the Initial Lead Candidates. If the Initial Lead Candidates are terminated and the Parties later initiate Preclinical Development for type II diabetes upon one or more additional Lead Candidates, the Parties shall perform upon such Lead Candidates the types of Preclinical Development and Clinical Development studies described in the Initial Development Plan, or as further modified by the JOC.

 

(c) Development Plan Addenda. In addition to the Initial Development Plan, the Collaboration shall include one or more Development Plans that shall be approved by the JOC and made part of this Agreement by the JOC and attached hereto as Development Plan Addenda.

 

(d) Updates. The PT shall prepare and submit for the JOC’s consideration, by September 1 of each calendar year, an updated Development Plan that includes a detailed description of all Development anticipated to be performed during the following calendar year. The JOC shall provide comments on each such updated Development Plan within thirty (30) days following its submission to them. Within thirty (30) days following such original submission, the JOC shall either approve the original Development Plan or a modified version thereof that is consistent with the objectives for the Collaboration Products and the aims of the Collaboration. The Development Plan shall also be revised in accordance with Sections 3.4(d)(i) and 3.8.

 

(e) Phase IIIb Trials. For some diseases, the Parties may, but shall not be obligated to, choose to treat a selected Phase IIIb Trial as falling within the scope of Development, such as when such Phase IIIb Trial is typically performed in the industry in order to support a NDA or to expand the product label. By way of example, a Phase IIIb Trial for non-insulin dependent type II diabetes with more advanced disease is an example of a Phase IIIb Trial that is highly supportive of an NDA for type II diabetes. For clarity, if the Parties are unable to agree whether to include a Phase IIIb Trial within the scope of Development, the dispute will not be subject to arbitration under Article 16 and the Phase IIIb Costs will be deemed to be part of Commercialization.

 

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(f) Third Party Development Contracts. To the extent a Party is performing any task under a Development Plan or Commercialization Plan that needs to be performed by a Third Party, such Party shall be responsible for entering into contracts with such Third Party. Prior to entry into a given Third Party contract, such contract shall be approved by the JOC pursuant to Section 2.2(b)(iii).

 

3.3 Development Budget.

 

(a) Definition. The expenses incurred by the Parties in the course of performing the Development Plan shall be governed by a development budget (“Development Budget”). Except as permitted by Sections 3.3(e)(ii) and 3.3(f)(ii), the Development Budget shall constitute the maximum Development Costs to be incurred thereunder in each calendar year, unless such budget is modified by the JOC.

 

(b) Initial Development Budget . As of the Effective Date, the Parties have agreed upon and approved an Initial Development Budget that sets forth the Parties’ financial projections for the Initial Development Plan.

 

(c) Development Budgets. A Development Budget shall be included with each Development Plan submitted to the JOC and attached hereto as a Development Plan Addendum or an updated Development Plan.

 

(d) Modifications. The JOC (or the JFC, if formed) shall prepare and submit to the Parties, by September 1 of each calendar year, an updated Development Budget that includes a detailed description of all Development costs authorized to be incurred during the following calendar year. The Parties shall provide comments on each such updated Development Budget within thirty (30) days following its submission to them. Within thirty (30) days following such original submission, the JOC shall either approve the original Development Budget or a modified version thereof that is consistent with the objectives for the development of Collaboration Products and the aims of the Collaboration.

 

(e) Early Stage Development Costs .

 

(i) Syrrx shall be solely responsible for [ * ] of Early Stage Development Costs for the Initial Lead Candidates. PPD shall bear the remainder of all Early Stage Development Costs for the Initial Lead Candidates after [ * ] is depleted. The Parties will strive to develop an IND Ready Candidate from among the Initial Lead Candidates and the Early Stage Development Costs for the Initial Lead Candidates leading to the first IND Ready Candidate will not exceed [ * ] . For clarity, the first [ * ] may be used for GMP manufacturing or GLP manufacturing if authorized by the JOC for Preclinical Development for the Initial Lead Candidates. The first [ * ] will not be used for costs associated with Compound Screening of Target Inhibitors other than the Initial Lead Candidates. In the event that the JOC decides to

[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC.

 

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terminate development of all of the Initial Lead Candidates or otherwise decides that the development of additional Target Inhibitors is warranted and the Early Stage Development Costs incurred with respect to the Initial Lead Candidates are less than [ * ], then the remaining portion of the [ * ] may be used for payment of Compound Screening costs and other Early Stage Development Costs for Preclinical Development of additional Target Inhibitors as approved by the JOC. Such costs shall be subject to approval by the JOC based upon a Development Plan for such additional Target Inhibitors. The JOC shall also determine whether any additional Preclinical Development work will be performed on any additional Target Inhibitors other than the Initial Lead Candidates in excess of the [ * ] referenced above. Such additional Preclinical Development work and the costs associated therewith shall be set forth in a Development Plan and Development Budget and approved by the JOC. If Syrrx desires to perform Preclinical Development work on Target Inhibitors beyond that which is authorized by the JOC, Syrrx may perform such additional Preclinical Development pursuant to this Agreement, provided however, that any costs that Syrrx incurs in performing such additional Preclinical Development shall not be treated as Early Stage Development Costs and shall be paid solely by Syrrx. If Syrrx elects to perform such additional Preclinical Development, it shall keep the JOC informed of the progress of such work and the costs associated therewith. If PPD later votes to accept a given Target Inhibitor that Syrrx develops without JOC approval as an IND Ready Candidate, any reasonable costs that Syrrx incurs in performing such additional Preclinical Development for that Target Inhibitor shall retroactively be deemed an Early Stage Development Cost.

 

(ii) Each Party shall maintain accurate books and records of all costs and expenses allowable as Early Stage Development Costs, within the Development Budget. Within 30 days after the end of each calendar quarter, each Party shall submit to the JOC a summary of all Early Stage Development Costs incurred during that quarter, including reasonable detail demonstrating the specific basis for the costs and expenses included in the summary. The JOC shall review all such expenses to determine if they fall within the Development Budget. Any amounts exceeding [ * ] of the Development Budget shall be borne by the Party making such expenditure, unless approved by JOC and if so approved shall be Early Stage Development Costs.

 

(iii) As long as Syrrx’s cumulative expenditures (both directly and through reimbursement of PPD) upon Early Stage Development Costs between the Effective Date and the end of the quarter for which the report provided pursuant to Section 3.3(e)(ii) pertains are less than a total of [ * ], the JOC shall send Syrrx an invoice to reimburse PPD an amount equal to the smaller of (1) its Early Stage Development Costs for such quarter or (2) that portion of its Early Stage Development Costs for such quarter, that once paid by Syrrx, would bring Syrrx’s cumulative expenditures (both directly and through reimbursement of PPD) upon Early Stage Development Costs since the Effective Date up to a total of [ * ] . Syrrx shall reimburse PPD for the amount stated on such invoice within thirty (30) days of receiving such invoice.

[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC.

 

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(iv) Once Syrrx’s cumulative expenditures (both directly and through reimbursement of PPD) upon Early Stage Development Costs equals [ * ] , PPD will thereafter be solely responsible for all future Early Stage Development Costs. PPD shall reimburse Syrrx for any Early Stage Development Costs that it incurs after such time within thirty (30) days of receiving an invoice from Syrrx therefore.

 

(v) Either Party may audit, in accordance with the procedures set forth in Section 10.7, the accuracy of the other Party’s submissions pursuant to this Section 3.3(e).

 

(f) Shared Phase IIIa Development Costs .

 

(i) Except as set forth in Section 3.3(f)(ii), all Shared Phase IIIa Development Costs shall be shared equally by the Parties.

 

(ii) Each Party shall maintain accurate books and records of all costs and expenses allowable as Shared Phase IIIa Development Costs, within the Development Budget. Within thirty (30) days after the end of each calendar quarter, each Party shall submit to the JOC a summary of all Shared Phase IIIa Development Costs incurred during that quarter, including reasonable detail demonstrating the specific basis for the costs and expenses included in the summary. The JOC shall review all such expenses to determine if they fall within the Development Budget. Any amounts exceeding [ * ] of the Development Budget shall be borne by the Party making such expenditure, unless approved by JOC and if so approved shall be Shared Phase IIIa Development Costs. The JOC shall submit to the Party that bore less than half of such Shared Phase IIIa Development Costs for that quarter (the “Invoiced Party”) an invoice for the amount that Party must remit to the other Party (the “Non-Invoiced Party) to bring the Invoiced Party’s share of the Shared Phase IIIa Development Costs up to one-half for the previous quarter. The Invoiced Party shall remit the amount on the invoice to the Non-Invoiced Party within 30 days of receiving such invoice. In the event that Syrrx is the Invoiced Party, it may remit such invoiced amount from its Phase III Loan and it may reimburse itself by drawing upon such Phase III Loan, for all other Shared Phase IIIa Development Costs it incurred during that quarter. In the event that Syrrx is the Non-Invoiced Party, it may reimburse itself by drawing upon its Phase III Loan for all Shared Phase IIIa Development Costs it incurred during that quarter that were not reimbursed by PPD pursuant to this Section 3.3(f)(ii). Either Party may audit, in accordance with the procedures set forth in Section 10.7, the accuracy of the other Party’s submissions pursuant to this Section 3.3(f).

 

(g) Phase IIIb Costs and Phase IV Costs. All Phase IIIb Costs and Phase IV Costs shall be Post-Launch Product R&D Expenses, which are taken into account in the calculation of Product Profit, except for those Phase IIIb Costs incurred with respect to a Phase IIIb Trial that the Parties mutually agree to include within the scope of Development pursuant to Section 3.2(e). If a Phase IIIb Trial is included within the scope of Development pursuant to Section 3.2(e), then such Phase IIIb Costs shall be classified as Development Costs and shall be subject to the procedures set forth in Section 3.3(f) if the Parties have entered into a Phase III Loan which covers such Phase IIIb Trial or if Syrrx pays its half of such costs.

[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC.

 

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3.4 Development Plan Responsibilities

 

Compound Screening. Syrrx shall be solely responsible for carrying out, in accordance with a Development Plan, compound screening activities to discover Target Inhibitors, performing SAR structure design, medicinal chemistry, and activities described in Section 1.50 to identify Target Inhibitors that satisfy Lead Candidate Selection Criteria to become Lead Candidates. Syrrx shall perform the medicinal chemistry work specified in a Development Plan where Syrrx is reimbursed for all approved Development Costs. If the JOC determines that the Collaboration will benefit from Syrrx’s performance of medicinal chemistry work over and above the work specified in a Development Plan, then the JOC may further authorize Syrrx to perform such additional work and Syrrx may seek reimbursement for all approved Development Costs including the cost of Syrrx employees to perform such work. At any point during Compound Screening activities, PPD shall have the right, at its sole discretion, to terminate such activities for a given Target Inhibitor. PPD shall inform Syrrx in writing of such termination. In the event of such termination, PPD shall have no further obligation to pay Early Development Costs for such Target Inhibitor and the Target Inhibitor shall become a Rejected Inhibitor and be denoted as such in the Target Inhibitor Catalog.

 

(a) GMP Manufacturing . Syrrx shall be solely responsible for carrying out, in accordance with a Development Plan, GMP manufacturing of Drug Substances consisting of those Target Inhibitors selected for animal testing. PPD agrees to carry out such GMP manufacturing tasks as are reasonably requested by Syrrx, accepted by PPD and agreed by the JOC.

 

(b) Preclinical Development. PPD shall be solely responsible for carrying out Preclinical Development activities on Lead Candidates as set forth in a Development Plan to fulfill Nomination Criteria to enable the JOC to select an IND Ready Candidate, and, except as set forth in Section 3.3(e), shall be solely responsible for all costs associated therewith. It is anticipated that the Development Plan will allocate to PPD responsibility for performing GLP toxicity and pharmacokinetic studies on such Lead Candidates. At any point during Preclinical Development activities, PPD shall have the right, at its sole discretion, to terminate such activities for a given Lead Candidate. PPD shall inform the Syrrx in writing of such termination. In the event of such termination, PPD shall have no further obligation to pay Early Development Costs for such Lead Candidate and the Lead Candidate shall become a Rejected Inhibitor and be denoted as such in the Target Inhibitor Catalog. Syrrx agrees to carry out such Preclinical Development tasks as are reasonably requested by PPD, accepted by Syrrx and agreed by the JOC.

 

(c) Clinical Development .

 

(i) Promptly following the selection of any IND Ready Candidate by the JOC, the PT shall prepare a proposed revision to the Development Plan to prepare an IND filing for at least one Collaboration Product corresponding to such IND Ready Candidate and to generate all data, Information and Regulatory Documentation required to obtain Regulatory Approval for such Collaboration Product. In addition, the JOC shall give reasonable consideration to suggestions from the PT when it revises the Development Plan for the purposes described above and the Development Budget to include the costs associated with Clinical Development of such Collaboration Product.

 

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(ii) PPD shall be solely responsible for carrying out all Clinical Development activities pursuant to the Development Plan, provided that the JOC shall discuss and agree how manufacture and supply responsibilities for CTM employed in Phase I Trials, Phase II Trials and Phase III Trials will be allocated between the Parties. Syrrx agrees to carry out such Clinical Development tasks as are reasonably requested by PPD, accepted by Syrrx and agreed by the JOC.

 

(d) Development Records and Reports.

 

(i) Reports . At each meeting of the PT, each Party shall report to the PT the work it has performed during Target Inhibitor screening and under the Development Plan since the previous meeting.

 

(ii) Records . Each Party shall maintain complete and accurate records of all work conducted under the Collaboration and all results, data and developments made pursuant to its efforts under the Collaboration. Such records shall be complete and accurate and shall fully and properly reflect all work done and results achieved in the performance of the Collaboration in sufficient detail and in good scientific manner appropriate for patent and regulatory drug development and approval purposes. Each Party shall have the right to review and copy such records of the other Party at reasonable times to the extent necessary for such Party to conduct its obligations under the Agreement.

 

(e) Regulatory Affairs .

 

(i) Consistent with the Development Plan but subject to the remainder of this Section 3.4(f), PPD shall be responsible for developing Regulatory Documentation and preparing and submitting Regulatory Filings, seeking Regulatory Approvals, and maintaining Regulatory Approvals for Collaboration Products, including preparing all reports necessary as part of an IND, NDA, DMF, BLA or other necessary filing required for Regulatory Approval. All such Regulatory Documentation, Regulatory Filings and Regulatory Approvals shall be owned solely by and filed solely in the name of PPD, and PPD shall be fully responsible for all regulatory activities and requirements and maintaining Regulatory Approvals.

 

(ii) Concurrent with each filing of a Regulatory Filing for a Collaboration Product and each receipt of a Regulatory Approval for a Collaboration Product, PPD shall file with the FDA or the applicable equivalent foreign entity, all documents necessary to grant Syrrx a right of reference to such Regulatory Filing or Regulatory Approval for all purposes, subject in each case to the requirements and restrictions of the FDA or the applicable foreign entity. For clarity, PPD shall not be in breach of this Section 3.4(f)(ii) if the FDA refuses to accept or acknowledge any such documents for any reason, provided PPD makes reasonable efforts to revise such documents to meet the FDA’s requirements for acceptance or acknowledgement.

 

(iii) Syrrx hereby covenants that it will not file with the FDA or the applicable equivalent foreign entity any documents in which Syrrx invokes the right of reference

 

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set forth in Section 3.4(f)(ii) except as necessary or useful to permit Syrrx to exercise its rights under this Agreement with respect to PPD Terminated Products. Subject to approval by the JOC, Syrrx may invoke its right of reference to perform its obligations under the Development Plan, Commercialization Plan or Partnering Agreements. For the sake of clarity, the foregoing covenant shall preclude Syrrx from filing with the FDA or the applicable equivalent foreign entity any documents in which Syrrx invokes the right of reference outside of the Field for any Inhibitor of the Target that is not a PPD Terminated Product.

 

(iv) The negative covenant set forth in Section 3.4(f)(iii) shall terminate, on a Collaboration Product-by-Collaboration Product basis, at such time as PPD fails to perform any of its material obligations under this Agreement with respect to such Collaboration Product and fails to cure such breach within thirty (30) days after Syrrx’s notice thereof.

 

(v) PPD hereby covenants that during the Term it will not revoke the right of reference set forth in Section 3.4(f)(ii) with respect to a given Collaboration Product unless Syrrx fails to perform any of its material obligations under this Agreement with respect to that Collaboration Product being referenced and fails to cure such breach within thirty (30) days after PPD’s notice thereof.

 

(vi) PPD shall keep Syrrx and the JOC informed on an ongoing basis regarding the schedule and process for Regulatory Documentation and Regulatory Filings and give Syrrx the ability to comment on and participate in the preparation of Regulatory Documentation and Regulatory Filings and shall provide Syrrx with reasonable advance notice of any meeting or substantive telephone conference call with any regulatory agency relating to any Regulatory Documents and Regulatory Filing. Syrrx shall have the right to participate with PPD in any such meeting or conference call. PPD shall promptly furnish Syrrx with copies of all Regulatory Documentation and Regulatory Filings (in both paper and electronic form), correspondence that PPD receives from any regulatory agency relating to any such Regulatory Filings, and contact reports it receives concerning substantive conversations or substantive meetings with any regulatory agency relating to any such Regulatory Filings. PPD shall prepare all responses to correspondence that are received from any regulatory agency relating to any Regulatory Documents and any Regulatory Filing. Syrrx shall be provided with advance notice of any such responses and shall be given an opportunity to comment.

 

(f) Standard of Practice. In conducting any Development activities hereunder, each Party shall (i) ensure that its employees, agents, clinical institutions and clinical investigators comply with all FDA statutory and regulatory requirements with respect to Collaboration Products, including but not limited to: the Federal Food, Drug and Cosmetic Act, as amended (FFDCA); the Public Health Service Act (PHSA); regulatory provisions regarding protection of human subjects, financial disclosure by clinical investigators, Institutional Review Boards (IRB), Good Clinical Practices, Good Laboratory Practices, IND regulations, and any conditions imposed by a reviewing IRB or the FDA; and (ii) not utilize, in conducting studies on Collaboration Products any person or entities that at such time are debarred by FDA, or that, at such time, are under investigation by FDA for debarment action pursuant to the provisions of the Generic Drug Enforcement Act of 1992 (21 U.S.C. Section 335).

 

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3.5 Development Diligence.

 

(a) The Parties shall use Diligent Efforts to conduct their respective tasks, as assigned under the Development Plan, throughout the Collaboration and shall conduct the Collaboration in good scientific manner, and in compliance in all material respects with the requirements of applicable laws, rules and regulations, including without limitation then-current Good Laboratory Practices, Good Clinical Practices, and Good Manufacturing Practices, to attempt to achieve their objectives efficiently and expeditiously.

 

(b) If a Party fails to use Diligent Efforts to perform a task assigned to it under the Development Plan and does not cure such failure within [ * ] after the other Party’s written notice thereof, such Party shall not be in material breach of this Agreement, but shall be deemed to have voluntarily terminated its rights, pursuant to Section 13.2(c), with respect to the affected Target Inhibitor or Collaboration Product.

 

3.6 Target Inhibitor Advancement Activities.

 

(a) Target Inhibitor Catalog . The JOC will be solely responsible for maintaining the Target Inhibitor Catalog, which shall specifically identify each Target Inhibitor, related data and its date of entry, as follows:

 

(i) Within thirty (30) days of the Effective Date, the JOC will prepare a Target Inhibitor Catalog consisting of the Initial Target Inhibitors (along with relevant information relating thereto including at least in vitro activity data and minimum selectivity panel data), specifically identifying each Initial Target Inhibitor and its designation as such. Given the highly confidential nature of the chemical identity (including chemical structure) of Target Inhibitors, the Target Inhibitor Catalog shall not include the chemical identity of any Target Inhibitor. PPD may at any time request the identity of a given Target Inhibitor and Syrrx shall provide promptly the chemical identity of such Target Inhibitor to PPD. Such chemical identities shall be deemed the Confidential Information of both Parties, and each Party shall, in addition to its regular obligations with respect to Confidential Information of the other Party, limit disclosure of such information to those employees that require such information to carry out the tasks assigned to such Party in a Development Plan or Commercialization Plan.

 

(ii) Target Inhibitors identified after the Effective Date (each a “New Target Inhibitor”) shall be reported by Syrrx to the JOC, which will enter each New Target Inhibitor (along with relevant information relating thereto) into the Target Inhibitor Catalog, designate each New Target Inhibitor as such, and record the entry date as the “Date of Entry” for such New Target Inhibitor.

 

(iii) The JOC will note, and thereafter update, the status of each Target Inhibitor and its associated products on the Target Inhibitor Catalog (e.g., Lead Candidate, IND Ready Candidate, Reserved IND Ready Candidate, Potential IND Ready Candidate, PPD Terminated Product, or Syrrx Terminated Product).

[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC.

 

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(iv) The JOC will provide an updated Target Inhibitor Catalog to the PT following each JOC meeting.

 

Lead Candidate Screening. Within thirty (30) days of the Effective Date with respect to Initial Target Inhibitors and otherwise within thirty (30) days of the entry of a given New Target Inhibitor into the Target Inhibitor Catalog, the PT shall propose (i) the Lead Candidate Selection Criteria to be used for the disease in the Field for which such Target Inhibitor is directed (to the extent such criteria have not already been established for such disease), and (ii) a related timeline and budget for Lead Candidate Screening. The PT shall report the Target Inhibitor and its associated Lead Candidate Selection Criteria for such disease to the JOC. Within thirty (30) days of the JOC’s receipt of the above PT report, the JOC shall decide whether to authorize such Target Inhibitor to enter Lead Candidate Screening studies. Upon authorization, the JOC shall record, in the Target Inhibitor Catalog, the Target Inhibitor’s entry for implementation of Lead Candidate Screening for such disease. Syrrx shall perform such Lead Candidate Screening and report its results to the PT. The PT shall then provide to the JOC a report (1) providing scientific justification why such Target Inhibitor fulfills or does not fulfill the Lead Candidate Selection Criteria for such disease and (2) the Nomination Criteria for the relevant disease in the Field (“Lead Candidate Report”).

 

(b) Lead Candidate Selection for Diseases Within the Field .

 

(i) Within ninety (90) days of the JOC’s receipt of the Lead Candidate Report, the JOC shall decide if such Target Inhibitor shall become a Lead Candidate. The JOC shall not be obligated to authorize the performance of Preclinical Development of more than [ * ] Lead Candidates during any Calendar Year. Notwithstanding the foregoing, the Parties anticipate that [ * ] Target Inhibitors may enter Lead Candidate selection during or following Preclinical Development of the Initial Lead Candidates. In this case, the JOC may decide to authorize the performance of Preclinical Development on more than [ * ] of such Target Inhibitors. The JOC’s authorization of Preclinical Development of more than [ * ] of such Target Inhibitors shall count towards the following Calendar Year’s Preclinical Development requirement. All Lead Candidates will enter Preclinical Development using the Nomination Criteria. If PPD elects to terminate Preclinical Development activities of a Lead Candidate under Section 3.4(c), the Lead Candidate shall become a Rejected Inhibitor. Notwithstanding the foregoing, the JOC may request additional Lead Selection Criteria information or modify the recommended Nomination Criteria. The JOC shall record a Target Inhibitor’s selection as a Lead Candidate for such disease in the Target Inhibitor Catalog. PPD shall perform Preclinical Development upon such Lead Candidate and report its results to the PT. For the purposes of this Section 3.6(c)(i), “Calendar Year” shall mean any year beginning January 1 ^st and ending December 31 ^st , provided that the period from the Effective Date to December 31, 2003 shall be included in the 2004 Calendar Year.

[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC.

 

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(ii) The PT shall provide to the JOC a report providing scientific justification why a particular Lead Candidate fulfills the Nomination Criteria for a Nominated Disease (the “Preclinical Report”). If the JOC requests further information regarding whether a particular Lead Candidate fulfills the Nomination Criteria for its Nominated Disease, the PT will promptly provide such information to the JOC.

 

(c) Acceptance of IND Ready Candidates for Diseases Within the Field Within ninety (90) days of the JOC’s receipt of the Preclinical Report, the JOC shall either accept or reject such Lead Candidate. Each Lead Candidate accepted by the JOC shall be designated thereafter an IND Ready Candidate, the disease shall be its Accepted Disease, and the Lead Candidate shall be listed as such in the Target Inhibitor Catalog. Subject to Sections 3.4(f)(iii), 3.4(f)(iv) and 9.3, neither Party shall prepare or file an IND for any disease in the Field for any Collaboration Product containing or comprising a Target Inhibitor that is not accepted by the JOC as an IND Ready Candidate.

 

(i) Each Lead Candidate that is rejected or otherwise not accepted by the JOC as an IND Ready Candidate within ninety (90) days of receipt of the associated Preclinical Report shall be designated thereafter a Potential IND Ready Candidate. The JOC may designate in writing a maximum of [ * ] Potential IND Ready Candidates as Reserved IND Ready Candidates. Reserved IND Ready Candidates may be accepted by the JOC as IND Ready Candidates at any time. Reserved IND Ready Candidates are ineligible for redesignation by Syrrx as Rejected Inhibitors. The JOC may subsequently designate additional or different Potential IND Ready Candidates as Reserved IND Ready Candidates, provided there is never more than a total of [ * ] Reserved IND Ready Candidates at any one time. The JOC may redesignate one or more Reserved IND Ready Candidates as Potential IND Ready Candidates in order to be able to designate different Potential IND Ready Candidates as Reserved IND Ready Candidates without exceeding the maximum limit of [ * ] Reserved IND Ready Candidates at any time. A Reserved IND Ready Candidate shall automatically be redesignated a Potential IND Ready Candidate after [ * ] as a Reserved IND Ready Candidate.

 

(d) Rejected Inhibitors . With respect to any Lead Candidate that became a Potential IND Ready Candidate solely as a result of the vote of PPD’s representatives on the JOC to reject or not accept such Lead Candidate as an IND Ready Candidate, Syrrx may, at its sole discretion, select such Potential IND Ready Candidate as a Rejected Inhibitor, and thereafter develop such Rejected Inhibitor(s) pursuant to the terms and conditions of this Agreement. If Syrrx fails to file an IND or enter into a collaboration or a license agreement with a Third Party with respect to a particular Rejected Inhibitor within [ * ] after the date of its selection as a Rejected Inhibitor, then such Rejected Inhibitor shall return to the Collaboration and be re-listed in the Target Inhibitor Catalog as a Potential IND Ready Candidate that may then be subject to designation as a Reserved IND Candidate pursuant to Section 3.6(d)(ii). Syrrx may grant licenses or sublicenses under the DP4 IP, PPD Information and Syrrx Information, with respect to Rejected Inhibitors.

[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC.

 

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Other Inhibitor Nominations. At any meeting of the PT, Syrrx may give notice to PPD of its interest in developing a particular Target Inhibitor outside of the Collaboration for a disease outside the Field. In combination with such notice, Syrrx shall present a report summarizing any Preclinical Development data that has been collected to date by Syrrx regarding such Target Inhibitor. Within [ * ] of Syrrx’s notice, PPD may request that the Parties instead develop such Target Inhibitor within the Collaboration for a disease within the Field. Absent such a timely request, Syrrx shall be free to develop such Target Inhibitor outside the Collaboration for any and all diseases outside the Field. Should PPD request that the Target Inhibitor be pursued against a disease within the Field, the Parties will work diligently, in accordance with the Development Plan, to establish whether such Target Inhibitor satisfies the Nomination Criteria for such disease and the JOC will have a period of [ * ] after such request in which to accept such Target Inhibitor as an IND Ready Candidate. If such Target Inhibitor is not accepted within such period, it shall become a Potential IND Ready Candidate that Syrrx may thereafter designate as a Rejected Inhibitor pursuant to Section 3.6(e).

 

3.7 Rejected Inhibitor Option.

 

(a) Grant. For each Rejected Inhibitor, Syrrx hereby grants PPD the option to negotiate with Syrrx, during the applicable Exercise Period, to reach agreement on the terms under which the Parties would collaborate with respect to the further development of such Rejected Inhibitor for its Permitted Diseases within the Field and the commercialization of such Rejected Inhibitor. At PPD’s request, Syrrx shall provide PPD with such Information that PPD may reasonably need in order to make an informed decision whether to exercise such option.

 

(b) Exercise. PPD may exercise an option set forth in Section 3.7(a) with respect to a particular Rejected Inhibitor by providing written notice thereof to Syrrx during an Exercise Period for such Rejected Inhibitor.

 

(c) Negotiation. During the remainder of the Exercise Period following PPD’s notice pursuant to Section 3.7(b), the Parties shall (i) negotiate in good faith to reach agreement on the terms under which the Parties would collaborate with respect to the further development of such Rejected Inhibitor for its Permitted Diseases within the Field and the commercialization of such Rejected Inhibitor and (ii) if agreement is reached on all terms, execute a collaboration agreement or legally binding heads of agreement that sets forth the agreed upon terms (each, a “Rejected Inhibitor Agreement”). Such time period for entering a Rejected Inhibitor Agreement shall be extended if the Parties agree in writing that they are negotiating in good faith to reach such an agreement, and have made significant progress in so doing, but cannot conclude such negotiations and/or execute a definitive agreement within such Exercise Period.

[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC.

 

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(d) Expiration. Each option set forth in Section 3.7(a) shall expire on the earliest of: (i) the Parties’ execution of a Rejected Inhibitor Agreement with respect to such Rejected Inhibitor, (ii) the expiration (without extension) of all Exercise Periods for such Rejected Inhibitor without the execution of a Rejected Inhibitor Agreement with respect to such Rejected Inhibitor, and (iii) Syrrx’s grant of a license to a Third Party or collaboration with a Third Party to (1) develop the applicable Rejected Inhibitor or products containing or comprising such Rejected Inhibitor for one or more of its Permitted Diseases or (2) commercialize such Rejected Inhibitor or products containing or comprising such Rejected Inhibitor, provided that Syrrx shall not grant such a license during an Exercise Period for such Rejected Inhibitor.

 

(e) Effect of Expiration. After the expiration of the option for a particular Rejected Inhibitor, (i) Syrrx shall not have any obligation, to notify PPD of Syrrx’s completion of its analysis of the full data set from the first Phase I Trial, Phase II Trial or Phase IIIa Trial for such Rejected Inhibitor, and (ii) Syrrx shall not have any other obligations to PPD under this Agreement with respect to such Rejected Inhibitor.

 

3.8 Clinical Development of a Collaboration Product in Multiple Diseases Within the Field. Upon Completion of a Phase I Trial for a given Collaboration Product, either Party may request that such Collaboration Product be approved for Clinical Development in diseases within the Field other than the Accepted Disease for the corresponding IND Ready Candidate. If the PT recommends approval of such Collaboration Product for Clinical Development in such disease within the Field, and if the JOC concurs with the PT’s recommendation, the PT shall revise the Development Plan and the Development Budget to reflect the Clinical Development work to be performed upon such Collaboration Product for such disease.

 

3.9 Target Inhibitors Other Than IND Ready Candidates . Except as set forth in Section 3.6(d) above, Syrrx shall retain all development rights to any Target Inhibitor that (i) does not fulfill the Lead Candidate Selection Criteria or Nomination Criteria or (ii) is not accepted by the JOC as an IND Ready Candidate or a Reserved IND Ready Candidate, and such Target Inhibitors shall not be subject to any terms of this Agreement other than those set forth in Sections 3.6(f), 3.7, 9.2, and 9.3.

 

3.10 Syrrx Change of Control. In the event of any Change of Control of Syrrx, or its successors or permitted assigns, at the effective time of such Change of Control, PPD shall have [ * ]. The foregoing shall not be interpreted as applying to any dispute concerning the rights or obligations of the Parties pursuant to this Agreement or any alleged breach of such an obligation. Such disputes shall be resolved in accordance with Article 16 regardless of whether Syrrx has undergone a Change of Control.

 

3.11 PPD Change of Control. In the event of any Change of Control of PPD, or its successors or permitted assigns, at the effective time of such Change of Control, Syrrx shall have [ * ]. The foregoing shall not be interpreted as applying to any dispute concerning the rights or obligations of the Parties pursuant to this Agreement or any alleged breach of such an obligation. Such disputes shall be resolved in accordance with Article 16 regardless of whether PPD has undergone a Change of Control.

[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC.

 

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4. L INE O F C REDIT

 

4.1 Overview. PPD will consider making available to Syrrx a line of credit that Syrrx may utilize to fund fifty percent (50%) of the Phase IIIa Development Costs for one Collaboration Product (the “Phase III Loan”) and will do so for each Collaboration Product to reach a Phase IIIa Trial until a Phase III Loan is made. For each Collaboration Product that reaches a Phase IIIa Trial after the Parties have entered into a Phase III Loan, PPD shall have no obligation to consider offering a Phase III Loan to Syrrx and Syrrx shall have no obligation to entertain an offer. In the process of considering whether to offer a Phase III Loan to Syrrx, PPD may conduct due diligence and PPD may decide whether to offer a Phase III Loan in its sole and absolute discretion. This Article 4 sets forth the manner in which the Parties will negotiate the terms of, and decide whether to enter into the applicable agreements for such Phase III Loan. Once the Parties have entered into the agreements for a given Phase III Loan, such agreements shall supercede the terms set forth in this Article 4, and PPD shall have no further obligations to make additional lines of credit available to Syrrx pursuant to this Agreement.

 

4.2 Negotiation of Additional Terms. The maximum aggregate amount that Syrrx could borrow from PPD under the Phase III Loan would be one-half of the Phase IIIa Development Costs (and Phase IIIb Costs, if applicable) set forth in such Development Budget for such trial(s) or any subsequent amendment of such Development Budget that is approved by the JOC (the “Maximum Amount”). All money that Syrrx receives pursuant to a Phase III Loan shall be used solely to pay for Syrrx’s half of Phase IIIa Development Costs (and Phase IIIb Costs, if applicable) for the applicable Collaboration Product. Additional terms of such a Phase III Loan are those terms set forth in this Article 4 and, to the extent not otherwise specified therein, such additional terms that the Parties negotiate in good faith that are customarily contained in loan documents required by commercial lenders for comparable loans.

 

4.3 Entry into Phase III Loan; Alternatives . Within [ * ] after the JOC has agreed upon the Development Budget for a Phase IIIa Trial (and Phase IIIb Trial, if applicable) for a Collaboration Product (the “Due Diligence Period”), PPD shall conduct its due diligence upon Syrrx, Syrrx’s financial condition, the Collateral (as defined in Section 4.4(h)) and other matters. PPD’s willingness to enter into the Phase III Loan Documents is subject to its receipt and satisfactory review of such due diligence documents, reports, affidavits and certificates as it may require, including, without limitation, financial statements, budgets, forecasts, asset summaries, legal opinions, appraisals, environmental audits, surveys, flood certifications, title insurance, UCC searches, subordination agreements, evidence of hazard insurance, evidence of Syrrx’s compliance with laws, and other documents and assurances. The scope of PPD’s due diligence requests upon Syrrx shall be commercially reasonable. Prior to the expiration of the Due Diligence Period, PPD shall inform Syrrx in writing if, in PPD’s sole and absolute discretion, it has determined that it is willing, subject to negotiation and execution of the Phase III Loan Documents, to extend a Phase III Loan to Syrrx for such Collaboration Product (the “PPD Notice”). Failure by PPD to deliver the PPD Notice to Syrrx prior to the expiration of the Due Diligence Period shall be deemed an election by PPD not to extend the Phase III Loan pursuant to Section 4.3(b). Within [ * ] of receipt by Syrrx of the PPD Notice (the “Response Period”), Syrrx shall inform PPD in writing whether (i) Syrrx is willing, subject to negotiation and

[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC.

 

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execution of the Phase III Loan Documents, to enter into a Phase III Loan for such Phase IIIa Trial (and Phase IIIb Trial, if applicable); (ii) Syrrx is unable to accept the offer pursuant to Section 4.3(c) for Good Cause; or (iii) Syrrx is unable to accept the offer pursuant to Section 4.3(e) without Good Cause (the “Syrrx Notice”). Failure by Syrrx to deliver the Syrrx Notice to PPD prior to the expiration of the Response Period shall be deemed an election by Syrrx to decline the offer of the Phase III Loan without Good Cause pursuant to Section 4.3(e). Within [ * ] of the receipt by PPD of the Syrrx Notice (the “Document Period”), the Parties shall negotiate in good faith and attempt to agree upon the Phase III Loan Documents.

 

(a) Phase III Loan or Self Funding by Syrrx . If the Parties agree upon and execute the Phase III Loan Documents, then they shall share the Phase IIIa Development Costs and the Product Profit arising from such Collaboration Product as set forth in Section 5.16(a). The same terms shall apply if Syrrx declines an offer for a Phase III Loan from PPD and pays for its half of the Phase IIIa Development Costs from an alternative source of funding.

 

(b) No Offer of Phase III Loan . If PPD elects not to extend the Phase III Loan to Syrrx for a Collaboration Product that is ready to begin a Phase IIIa Trial, then, at PPD’s election, either (1) PPD will pay [ * ] of the Phase IIIa Development Costs for such Collaboration Product (in which case Section 5.16(b) shall apply) or (2) the Parties will enter into a Partnering Agreement for such Collaboration Product prior to incurring any Phase IIIa Development Costs (in which case Section 6.1 shall apply). The failure by PPD to deliver the PPD Notice to Syrrx prior to the expiration of the Due Diligence Period shall be deemed an election by PPD not to extend the Phase III Loan.

 

(c) Syrrx Declines Offer of Phase III Loan for Good Cause . If Syrrx elects to decline the offer of the Phase III Loan with Good Cause, then, at PPD’s election, either (1) PPD will pay all of the Phase IIIa Development Costs for such Collaboration Product (in which case Section 5.16(b) shall apply) or (2) the Parties will enter into a Partnering Agreement for such Collaboration Product prior to incurring any Phase IIIa Development Costs (in which case Section 6.1 shall apply).

 

(d) Parties Fail to Agree upon Phase III Loan Documents . If the Parties fail to agree upon and execute the Phase III Loan Documents during the Document Period, then, at PPD’s election, either (1) PPD will pay [ * ] of the Phase IIIa Development Costs for such Collaboration Product (in which case Section 5.16(b) shall apply) or (2) the Parties will enter into a Partnering Agreement for such Collaboration Product prior to incurring any Phase IIIa Development Costs (in which case Section 6.1 shall apply).

[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC.

 

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(e) Syrrx Declines Offer of Phase III Loan without Good Cause and Fails to Self Fund. If Syrrx elects without Good Cause to decline the offer of a Phase III Loan for a Collaboration Product that is ready to begin a Phase IIIa Trial and does not offer in writing to pay for its half of the Phase IIIa Development Costs from an alternative source of funding, then such Collaboration Product shall be deemed to be a Syrrx Terminated Product upon PPD’s Commencement of a Phase IIIa Trial for such Product, and PPD shall have no further obligation to make a Phase III Loan to Syrrx under this Agreement. If PPD does not Commence a Phase IIIa Trial with respect to such Collaboration Product, the Parties will enter into a Partnering Agreement for such Collaboration Product prior to incurring any Phase IIIa Development Costs (in which case Section 6.1 shall apply).

 

(f) Self Funding by Syrrx and PPD Refusal to Conduct Phase III. If PPD elects not to extend the Phase III Loan to Syrrx pursuant to Section 4.3(b), and Syrrx within [ * ] offers in writing to pay for its half of the Phase IIIa Development Costs from an alternative source of funding, PPD shall commit in writing within [ * ] to Commence the Phase IIIa Trial and pay for its half of the Phase IIIa Development Costs.

 

(g) Option to Terminate Collaboration Product . At any point in time, regardless of the presence or absence of a Phase III Loan, either Party may notify the other Party, pursuant to Section 13.2(c), that it no longer wishes to participate in the Development or Commercialization of a Collaboration Product and as a result the Collaboration Product shall become a Syrrx Terminated Product or PPD Terminated Product based on which Party provides such notice.

 

4.4 Terms and Conditions of Phase III Loan. It is recognized by the Parties that this Article does not constitute a formal loan agreement and as such this Article does not set forth all the terms and conditions of the Phase III Loan. Rather, this Article is intended only as an outline, in summary format, of the major points of understanding which shall be the basis of the final Phase III Loan documentation, which shall include, without limitation, a Phase III Loan agreement, promissory note(s), security agreements, UCC financing statements, deeds of trust, mortgages and other instruments and documents (all if applicable) to evidence the Phase III Loan and the security thereof (hereinafter collectively referred to as the “Phase III Loan Documents”) and which shall be in a form mutually acceptable to PPD and Syrrx. The Phase III Loan Documents may have terms and conditions not set forth herein, including but not limited to conditions precedent, representations and warranties, affirmative covenants, negative covenants, events of default, definition of terms, and other commercially reasonable terms customary to financings of the type contemplated by this Article. In addition to satisfactory due diligence, PPD’s willingness to extend a Phase III Loan to Syrrx in accordance with the terms of this Agreement is subject, without limitation, to the agreement upon, and the execution and delivery of, the definitive Phase III Loan Documents. The date on which the last of the Phase III Loan Documents is executed is hereinafter referred to as the “Phase III Loan Closing” or “Phase III Loan Closing Date”.

[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC.

 

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(a) Interest Rate. Interest on any unpaid principal of the Phase III Loan shall be calculated and compounded daily, based on the actual days elapsed over a three hundred sixty (360) day banking year, at [ * ] and agreed upon by PPD and Syrrx.

 

(i) Late Fee . If any payment is not made within ten day