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