COLLABORATION AGREEMENT

EXHIBIT 10.53

 

COLLABORATION AGREEMENT

 

T HIS C OLLABORATION A GREEMENT (the “ Agreement ”) is entered into and made effective as of March 31, 2005 (the “ Effective Date ”) by and between N UVELO , I NC . , a Delaware corporation having its principal place of business at 675 Almanor Avenue, Sunnyvale, CA 94085 (“ Nuvelo ”), and K IRIN B REWERY C OMPANY , L TD . , a corporation organized under the laws of Japan, having offices at 10-1, Shinkawa 2-chome, Chuo-ku, Tokyo 104-8288, Japan, (“ Kirin ”). Nuvelo and Kirin are sometimes referred to herein individually as a “ Party ” and collectively as the “ Parties .”

 

R ECITALS

 

W HEREAS , Kirin and Nuvelo are parties to that certain Collaboration Agreement dated August 11, 2001 (as amended March 5, 2002, September 3, 2002 and August 10, 2004, the “Prior Collaboration” ) which provides for a research collaboration in which the parties collaboratively apply their proprietary technologies to assign functions to genes of previously unknown function and discover and identify potential therapeutics that interact with such genes and/or their protein products; and

 

W HEREAS , pursuant to the Prior Collaboration the Parties have identified the function of a protein involved in intestinal epithelial cell proliferation as well as a first product candidate they refer to as 17206 (further defined below) relating thereto, and they wish to develop and commercialize together on different terms than those provided in the Prior Collaboration a commercial product based on 17206; and

 

W HEREAS , the Parties wish to provide in this Agreement for such different terms, to supersede the terms of the Prior Collaboration, with respect to 17206 all as further provided below.

 

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

 

ARTICLE 1

 

DEFINITIONS

 

The following terms have the following meanings as used in this Agreement (with derivative forms being interpreted accordingly and references to “Articles,” “Sections,” and “Exhibits” meaning the Articles, Sections and Exhibits of and to this Agreement):

 

1.1 “17206” means the amino acid sequence which is expressly identified in Exhibit C, that was identified by the Parties pursuant to the Prior Collaboration and is referred to by them as 17206. A nucleic acid sequence (or gene sequence) for 17206 is also identified in Exhibit C.

 

1.2 “Affiliate” means a person, corporation, partnership, or other entity that controls, is controlled by or is under common control with a Party. For the purposes of 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, either by the ownership of at least fifty percent (50%) of the voting stock of such entity or by contract or law.

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

 

1.3 “Allowable Commercialization Expenses” has the meaning given in the Financial Appendix.

 

1.4 “Approval Application” means a New Drug Application (NDA) or Biologic License Application (BLA) submitted and filed with the FDA or the equivalent application or filing filed with any equivalent agency or government authority outside of the United States (including any supra-national agency such as in the European Union) necessary for approval of a drug in such jurisdiction.

 

1.5 “Change of Control Period” has the meaning assigned in Section 3.7(b)(i) clause (2).

 

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

 

1.7 “Collaboration Compound” means any compound (including without limitation any protein) that contains, incorporates or comprises any of the following: (a) 17206; [*].

 

1.8 “Collaboration Invention” means any invention that (a) is a composition of matter, formulation, method of use or method of manufacture of any Collaboration Compound and/or Collaboration Product (including without limitation gene sequences, amino acid sequences, devices and other items necessary to manufacture any Collaboration Compound or Collaboration Product), and (b) is conceived under, reduced to practice under, or results from or arises out of the Collaboration, without regard to which of (or whether both of) the Parties has (or had) an employee or agent who is an inventor of such invention, but specifically excluding Service Inventions and Partner Inventions.

 

1.9 “Collaboration Know-How” means any Know-How developed during and in accordance with the Collaboration related to the Development, Commercialization, use or manufacture of a Collaboration Compound or Collaboration Product, but specifically excluding Service Know-How and Partner Know-How.

 

1.10 “Collaboration Patent” means any Patent that claims a Collaboration Invention, and any Outside Method of Use or Composition-Specific Patent.

 

1.11 “Collaboration Period” means:

 

(a) a period commencing upon the Effective Date and terminating upon the earliest of: (i) the effective opt-out of either of the Parties in accordance with Section 3.7, on a country-by-country or territory-by-territory basis as applicable in accordance with Section 3.7, in which case the Collaboration Period shall only terminate with respect to the country or territory with respect to which the Party has opted out; (ii) the effective opt-out by either of the Parties on a country-by-country or territory-by-territory basis in accordance with Section 4.12, in this case

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

(b) the Collaboration Period shall only terminate with respect to the country or territory with respect to which the Party has opted out; and (iii) termination of the Agreement; and

 

(c) any period commencing upon the effective opt back in of a Party in accordance with Section 3.7(b) (which excludes any territory, country, territories or countries from which a Party has opted-out in accordance with Sections 3.7(a)(ii), 3.7(a)(iii) and 4.12) and terminating as set forth in subsection (a) above.

 

1.12 “Collaboration Product” means any pharmaceutical product containing any Collaboration Compound.

 

1.13 “Commence” or “Commencement” when used to describe a Phase 1 Trial, Phase 2 Trial, Phase 3 Trial, Phase 3B or Phase 4 Trial, means the first dosing of the first patient for such trial.

 

1.14 “Commercialization” or “Commercialized” means all activities that are undertaken during the process of, and after completion of the filing of, an Approval Application for a particular Collaboration Product and that relate to the commercial manufacture, marketing and sale of a Collaboration Product, including without limitation pre-commercialization, advertising, education, planning, marketing, promotion, distribution, market and product support studies, and Phase 4 Trials.

 

1.15 “Commercialization Plan and Budget” has the meaning assigned in Section 4.2(a).

 

1.16 “Competitor Change of Control” has the meaning assigned in Section 3.7(b)(i).

 

1.17 “Confidential Information” has the meaning assigned in Section 9.1.

 

1.18 “consistent with the Initial Launch Budget” has the meaning assigned in Section 4.2(a).

 

1.19 “consistent with the (applicable) Overall Plan” has the meaning assigned in Section 3.1(b).

 

1.20 “ Continuing Party ” has the meaning assigned in Section 3.7(d).

 

1.21 “Controlled” means owned or in-licensed from a Third Party, with the ability to grant access to or a license or sublicense to the other Party in accordance with this Agreement, without violating the terms of any agreement or other arrangement with any Third Party.

 

1.22 “Development” means activities relating to the preparation for and conducting of Phase 1 Trials, Phase 2 Trials, Phase 3 Trials, including Phase 3B Trials, and label expansion trials, obtaining Regulatory Approval of a Collaboration Product, and all activities relating to developing the ability to manufacture the same. This includes, but is not limited to: (a) preclinical testing, toxicology, formulation, clinical studies, regulatory affairs and outside counsel regulatory legal services; and (b) manufacturing process development for bulk and final

forms of Collaboration Compounds and Collaboration Products, validation documentation, all documentation generated in connection with the manufacturing or processing activities and manufacturing and quality assurance technical support activities before the first commercial sale of a Collaboration Product. Development excludes Phase 4 Trials.

 

1.23 “Development Costs” has the meaning given in the Financial Appendix.

 

1.24 “Development Plan and Budget” has the meaning given in Section 3.1(b).

 

1.25 “Diligent Efforts” means the efforts required to carry out obligations or tasks in a reasonable and diligent manner consistent with efforts and resources as commonly used in the research-based biotechnology industry (at the Development stage) and in similar sized biopharmaceutical companies (at the Commercialization stage) for a therapeutic product at a similar stage of research, development or commercialization, and having similar market potential, taking into account issues of safety, efficacy, product profile, the costs to develop, the competitiveness of alternative products that are or are expected to be in the relevant marketplace, the proprietary position of the product, the regulatory structure and the likelihood of regulatory approval and product reimbursement, the profitability of the product, and all other relevant commercial factors.

 

1.26 “Direct Commercialization” shall have the meaning given in Section 4.1.

 

1.27 “EMEA” means the European Medicines Agency of the European Union, or any successor agency thereto of the European Union.

 

1.28 “Excess Commercialization Expenses” has the meaning given in Section 7.3.

 

1.29 “Excess Development Cost” has the meaning given in Section 7.2(c).

 

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

 

1.31 “ Financial Appendix ” means the financial appendix attached as Exhibit D.

 

1.32 “ Financial Statement ” has the meaning given in Section 7.4(c).

 

1.33 “FTE” means the equivalent of one person working full time for one 12-month period in a Development, Commercialization, regulatory or other relevant capacity, approximating 1900 hours per year. For clarity, however, a single individual who works more than 1900 hours in a single year shall be treated as one FTE regardless of how many hours in excess of 1900 hours he or she works in the year.

 

1.34 “FTE Rate” has the meaning given in the Financial Appendix.

 

1.35 “Good Clinical Practices” or “GCP” means 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.

1.36 “Good Laboratory Practices” or “GLP” means 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.

 

1.37 “Good Manufacturing Practices” or “GMP” means 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.

 

1.38 “IND” means an Investigational New Drug Application filed with the FDA or the equivalent application or filing filed with any equivalent agency or government authority outside of the United States (including any supra-national agency such as in the European Union) necessary to Commence human clinical trials in such jurisdiction, and including all regulations at 21 CFR §312 et. seq. and equivalent foreign regulations.

 

1.39 “ Indemnitees ” has the meaning assigned in Section 13.1.

 

1.40 “Indication” means any Initial Indication or any Subsequent Indication.

 

1.41 “Information” means information, results and data of any type or kind whatsoever, in any tangible or intangible form whatsoever, and specifically includes, without limitation, preclinical and clinical data.

 

1.42 “Initial Development Plan and Budget” means the Development Plan and Budget to be exchanged by the Parties as soon as reasonably possible after the Effective Date, in accordance with Section 3.2.

 

1.43 “Initial Indications” means [*].

 

1.44 “Initial Launch Period” has the meaning assigned in Section 4.3(a).

 

1.45 “Initial Launch Budget” has the meaning assigned in Section 4.3(a).

 

1.46 “Initial Overall Plan” means the overarching plan attached as Exhibit G that outlines the general features of the Parties’ anticipated Development program for 17206 for the Initial Indication, and an estimated budget for all Phase 1 Trials, Phase 2 Trials, and Phase 3 Trials, including Phase 3B Trials, of the Collaboration Product for the Initial Indication, including without limitation Manufacturing Costs.

 

1.47 “Joint Other Invention” means any invention conceived or reduced to practice during the Collaboration Period, or the Opt-In Period (or the Change of Control Period, if it applies) only if the Opted Out Party has opted back in, by at least one employee, independent contractor or agent of either Party or jointly with at least one employee, independent contractor

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

or agent from each Party in the course of the Parties’ performance and/or exercise of rights under this Agreement, but specifically excluding any Collaboration Invention, Collaboration Patent, Partner Invention or Service Invention.

 

1.48 “Joint Other Patent” mean a Patent that claims a Joint Other Invention.

 

1.49 “Joint Steering Committee” or “JSC” means the steering committee described in Section 2.2.

 

1.50 “Kirin Competitor” means [*]. For the purposes of the preceding sentence, the word “ control ” (including, with correlative meaning, the terms “controlled by” or “under 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 by the ownership of at least 50% of the voting stock of such entity.

 

1.51 “Kirin Information” means all Information produced by or for Kirin, in the course of performing the Development Plan and Budget or the Commercialization Plan and Budget.

 

1.52 “Kirin Territory” means all countries and multinational jurisdictions that were included in the Kirin Territory under the Prior Collaboration, as expressly set forth in Exhibit B of the Prior Collaboration.

 

1.53 “Know-How” means any proprietary data, instructions, processes, methods, formulae, materials, expert opinions, information and biological materials (including without limitation cell lines, vectors and their progeny and derivatives), including without limitation, biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, clinical, safety, manufacturing and quality control data and information. Know-How does not include what is set forth in any published and/or issued Patents.

 

1.54 “Launch Budget Dispute” means the Parties’ failure to agree as to any Initial Launch Budget by the deadline set forth for such Initial Launch Budget in Section 4.3(a).

 

1.55 “Lead” means, during the Collaboration Period and with respect to any activity under the Collaboration, the Lead Development Party, Lead Regulatory Party, or Lead Marketing Party (as the case may be) with respect to such activity.

 

1.56 “ Lead Development Party ” means Nuvelo unless: (a) otherwise agreed by the Parties in writing in their sole discretions on a country-by-country basis or worldwide; or (b) Nuvelo opts-out, in which case such term means Kirin and Kirin will retain the right to lead even if Nuvelo opts back in. Kirin shall not owe any payment for or in connection with conversion to Lead Development Party status resulting from Nuvelo’s opt-out in accordance with clause (b) above.

 

1.57 “ Lead Marketing Party ” means Nuvelo unless: (a) otherwise agreed by the Parties in writing in their sole discretions on a country-by-country basis or worldwide; or (b) Nuvelo opts-out, in which case such term means Kirin and Kirin will retain the right to lead even if Nuvelo opts back in. If Nuvelo has opted out on a country-by-country basis in

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

accordance with Section 4.12, then Kirin shall obtain Lead Marketing Party status only with respect to the opted-out country(ies). Kirin shall not owe any payment for or in connection with conversion to Lead Marketing Party status resulting from Nuvelo’s opt-out in accordance with clause (b) above.

 

1.58 “ Lead Regulatory Party ” means Nuvelo unless: (a) otherwise agreed by the Parties in writing in their sole discretions on a country-by-country basis or worldwide; or (b) Nuvelo opts-out, in which case such term means Kirin and Kirin will retain the right to lead even if Nuvelo opts back in. Kirin shall not owe any payment for or in connection with conversion to Lead Regulatory status resulting from Nuvelo’s opt-out in accordance with clause (b) above.

 

1.59 “Licensed Technology” means: (a) Original Nuvelo Patents, Collaboration Patents, Collaboration Know-How, Other Background Patents that the Parties have mutually agreed to include in the Collaboration pursuant to Section 6.7, Outside Formulation and Manufacture-Specific Patents, Prior Collaboration 17206 Patents and Prior Collaboration 17206 Know-How; and (b) Partner Inventions, Service Inventions and Partner Know-How and Service Know-How, to the extent Controlled by a Party.

 

1.60 “Licensing Revenue” has the meaning given in the Financial Appendix.

 

1.61 “ Losses ” has the meaning given in Section 13.1.

 

1.62 “Manufacturing Costs” has the meaning given in the Financial Appendix.

 

1.63 “MHW” means the Japanese Ministry of Health and Welfare, or any successor thereto in Japan.

 

1.64 “Net Sales” has the meaning given in the Financial Appendix.

 

1.65 “Non-Lead” means the Party to this Agreement that is not the Lead with respect to the referenced activity or activities during the Collaboration Period.

 

1.66 “Non-Removed Party” has the meaning assigned in Section 11.3(d)(i)(1).

 

1.67 “Nuvelo Information” means all Information produced by or for Nuvelo in the course of performing the Development Plan and Budget or Commercialization Plan and Budget.

 

1.68 “Opted-Out Party” means a Party that has elected to opt out of Development and Commercialization in accordance with any of the clauses of Section 3.7(a).

 

1.69 “Opt-In Period” has the meaning given in Section 3.7(b)(i).

 

1.70 “Original Nuvelo Patent” means any Patent listed in Exhibit B (which represent patent filings with respect to the gene sequence coding for 17206, which patent filings pre-existed the Prior Collaboration) and all divisions, substitutions, continuations, or continuations-in-part of the foregoing applications; all patents issuing on any of the foregoing; all extensions, registrations, confirmations, reissues, re-examinations, or renewals of any of the foregoing patents or any like filing thereof; and all counterparts to any of the foregoing in other countries.

1.71 “Other Background Patents” means, to the extent Controlled by a Party, any Patent that (a) is Controlled by a Party during the Collaboration Period, (b) claims an invention that is necessary or useful to Develop or Commercialize a Collaboration Compound or Collaboration Product, and (c) is not a Patent claiming a Service Invention, a Patent claiming a Partner Invention, a Prior Collaboration 17206 Patent, a Collaboration Patent, or an Outside Formulation and Manufacture-Specific Patent.

 

1.72 “Outside Formulation and Manufacture-Specific Patent” means, to the extent owned by a Party, any Patent, other than a Collaboration Patent, that (a) claims an invention conceived or reduced to practice by such Party outside the Collaboration during the Term (whether solely or jointly with another entity), (b)[*] Collaboration Compound or Collaboration Product, and (c) does not claim a Service Invention or a Partner Invention. By way of example but without limiting the foregoing definition, a Patent, other than a Collaboration Patent, that includes in the [*] a Collaboration Compound. For clarity, a Patent that [*] a Collaboration Compound or Collaboration Product would not be an Outside Formulation and Manufacture-Specific Patent.

 

1.73 “Outside Method of Use and Composition-Specific Patent” means any Patent (a) that claims an invention conceived or reduced to practice solely by a Party, its Affiliates, employees or agents outside the Collaboration during the Term, (b) that [*] a Collaboration Compound or Collaboration Product (each a “Use or Composition-Only Item”),[*], and (c) that does not claim a Service Invention or a Partner Invention.

 

1.74 “Overall Plan” means the Initial Overall Plan or any Subsequent Overall Plan.

 

1.75 “Partnered Commercialization” has the meaning given in Section 4.1.

 

1.76 “Partnering Activities” means: (a) activities to identify and negotiate with potential Third Party Partners and prepare, negotiate and execute, and amend as necessary, a Partnering Agreement (the activities in this clause (a) to be referred to as “Partnering Negotiation Activities” ); or (b) any activity which is conducted pursuant to a Partnering Agreement.

 

1.77 “Partnering Agreement” means an executed and in-force written agreement, entered into after the Effective Date, between either Party and a Third Party, wherein such Third Party is granted a license, sublicense or other similar right (including without limitation options for licenses or sublicenses) to Develop and/or Commercialize, alone or in collaboration with a Party (or any other Third Party), a Collaboration Compound or Collaboration Product in any country or countries or territory or territories of the world or on a worldwide basis; but, Service Agreements are not, and shall not be deemed to be, Partnering Agreements.

 

1.78 “Partner Inventions” means any patentable invention conceived or reduced to practice by the employees or agents of a Third Party Partner, either alone or jointly with any employee(s) or agent(s) of a Party, resulting from or arising out of a Partnering Agreement.

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

1.79 “Partner Know-How” means any Know-How made, developed, conceived, reduced to practice or otherwise discovered by the employees or agents of a Third Party Partner, either alone or jointly with any employee(s) or agent(s) of a Party, during and in accordance with a Partnering Agreement and that relates to Development and/or Commercialization.

 

1.80 “Partnering Costs” has the meaning given in the Financial Appendix.

 

1.81 “Partnered Territory” means a territory or territories in the world covered by, or that was or were covered by, a Partnering Agreement.

 

1.82 “Patent” means: (a) an unexpired patent (including inventor’s certificate) 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; (b) any pending patent application, including without limitation any continuation, division or continuation-in-part thereof and any provisional application; or (c) all counterparts to any of the foregoing in other countries.

 

1.83 “Patent Costs” has the meaning given in the Financial Appendix.

 

1.84 “Phase 1 Trial” means that portion of the clinical development program that generally provides for the first introduction into humans of a product with the primary purpose of determining safety, metabolism and pharmacokinetic properties and clinical pharmacology of the product, and generally consistent with 21 CFR §312.21(a) or the applicable rules and regulations of the jurisdiction in which the clinical trial is conducted.

 

1.85 “Phase 2 Trial” means a clinical trial of a product on patients, including possibly pharmacokinetic studies, the principal purpose of which is to make a preliminary determination that such product is safe for its intended use and to obtain sufficient information about such product’s efficacy to permit the design of further clinical trials, and generally consistent with 21 CFR §312.21(b) or the applicable rules and regulations of the jurisdiction in which the clinical trial is conducted.

 

1.86 “Phase 3 Trial” means that portion of the clinical development program that provides for a pivotal human clinical trial of a Product, which trial is designed to: (a) establish that a product is safe and efficacious for its intended use; (b) define warnings, precautions and adverse reactions that are associated with the product in the dosage range to be prescribed; (c) support Regulatory Approval of such product; and (d) generally consistent with 21 CFR §312.21(c) or the applicable rules and regulations of the jurisdiction in which the clinical trial is conducted.

 

1.87 “Phase 3B Trial” means a Phase 3 Trial conducted after an NDA for such product is submitted to the FDA in the United States, but prior to the time that such NDA is approved.

 

1.88 “Phase 4 Trial” means a clinical trial of a product Commenced in a particular country after receipt of Regulatory Approval for commercial sale of the product in such country, in order to support commercialization of the Collaboration Product. Phase 4 Trials exclude all

clinical trials of products conducted to support label expansion for the product, notwithstanding that such clinical trials may be conducted after the Parties obtain Regulatory Approval for the product.

 

1.89 “Preclinical Development” means those Development activities performed before the filing of an IND.

 

1.90 “ Prior Collaboration ” has the meaning given in the Recitals.

 

1.91 “Prior Collaboration 17206 Know-How” means the Know-How developed, made, conceived, reduced to practice or otherwise discovered in the course of performance of the Prior Collaboration that relates to: (a) a Collaboration Compound or Collaboration Product, (b) a method of making any Collaboration Compound or Collaboration Product, (c) an item or device necessary or useful to manufacture any Collaboration Compound or Collaboration Product, or (d) a method of use of any Collaboration Compound or Collaboration Product.

 

1.92 “Prior Collaboration 17206 Patents” means the Patents existing as of the Effective Date and listed in Exhibit A to this Agreement and all divisions, substitutions, continuations, and continuations-in-part of the foregoing applications; all patents issuing on any of the foregoing; all extensions, registrations, confirmations, reissues, re-examinations, or renewals of any of the foregoing patents; and all counterparts to any of the foregoing in other countries. If either Party Controls a Patent resulting from or arising out of the Prior Collaboration directed to (a) a Collaboration Compound, (b) a method of making any Collaboration Compound, (c) an item or device necessary to manufacture any Collaboration Compound (including without limitation any genetic sequence coding for 17206), (d) a method of use of any Collaboration Compound, or (e) any method necessary for the Development of any Collaboration Compound, and such Patent is not listed in Exhibit A, such Patent shall be deemed automatically included in such Exhibit and within the Collaboration Patents licensed hereunder.

 

1.93 “Product Profit(Loss)” has the meaning given in the Financial Appendix.

 

1.94 “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.

 

1.95 “Regulatory Authority” means the FDA or any counterpart of the FDA outside the United States, or other national, supra-national, regional, state or local regulatory agency, department, bureau, commission, council, or other governmental entity with authority over the distribution, importation, exportation, manufacture, production, use, storage, transport or clinical testing or sale of a Collaboration Product.

 

1.96 “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 agency such as in the European Union) relating to such Product, and all data contained therein,

including, without limitation, any IND(s), NDA(s), BLA(s), Investigator’s Brochures, Drug Master File (“ DMF ”), correspondence to and from the FDA or any equivalent agency or governmental authority outside of the United States, minutes from teleconferences 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.

 

1.97 “ Removed Party ” has the meaning assigned in Section 11.3(d)(i)(1).

 

1.98 “ Royalty Period ” has the meaning assigned in Section 7.6(f).

 

1.99 “Share” means, for Nuvelo, 60%, and for Kirin, 40%.

 

1.100 “Service Agreement” means:

 

(a) any agreement in which a Party or Third Party Partner engages a Third Party to perform, on behalf of such Party or Third Party Partner, any Development or Commercialization obligations or activities of such Party or Third Party Partner, including without limitation manufacture of Collaboration Compound or Collaboration Product, without (i) the contracting Third Party obtaining a financial interest in, or right to Develop or Commercialize for its own account, any Collaboration Compound or Collaboration Product, or (ii) paying the contracting Party any monetary consideration, except as set forth in subsection (b) immediately below; and

 

(b) any agreement in which a Party or Third Party Partner engages a Third Party solely to distribute or sell a Collaboration Product to Third Party end users, if and only if such agreement does not include provisions for the payment, to the Party or Third Party Partner, of any upfront, milestone or other payments that are not payments for quantities of Licensed Product.

 

1.101 “Service Invention” means any patentable invention conceived or reduced to practice by the employees or agents of a Third Party, either alone or jointly with any employee(s) or agents of a Party, during and in accordance with a Service Agreement during the Collaboration Period, or the Opt-In Period (or the Change of Control Period, if it applies) if and only if the Opted Out Party has opted back in.

 

1.102 “Service Know-How” means any Know-How made, developed, conceived, reduced to practice or otherwise discovered by the employees or agents of a Third Party, either alone or jointly with any employee(s) or agents of a Party, during and in accordance with a Service Agreement during the Collaboration Period, or the Opt-In Period (or the Change of Control Period, if it applies) if and only if the Opted Out Party has opted back in, and that relates to Development and/or Commercialization.

 

1.103 “Subsequent Indication” means any indication other than the Initial Indications.

 

1.104 “Subsequent Overall Plan” means any overarching plan agreed upon by the Parties in writing after the Effective Date in accordance with Section 2.4(c)(iii), if any.

1.105 “Term” has the meaning assigned in Article 10.

 

1.106 “Third Party” means any entity other than: (a) Nuvelo; (b) Kirin; or (c) an Affiliate of either of them.

 

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

 

1.108 “Title 11” has the meaning assigned in Section 15.3.

 

1.109 “Valid Claim” has the meaning assigned in Section 7.6(c).

 

ARTICLE 2

 

COLLABORATION OVERVIEW AND MANAGEMENT

 

2.1 Overview . The general goals and intent of the Collaboration are to clinically develop and commercialize 17206, so long as the data support such continued activity. All other products arising out of the Prior Collaboration will be Developed and Commercialized pursuant to (and subject to the terms and conditions of) the Prior Collaboration and all agreements entered into hereafter between the Parties.

 

2.2 Overall Management Structure . The Parties shall form a Joint Steering Committee in accordance with this Article 2 (the “ JSC ”) to discuss, review and provide input to the strategic direction of the Collaboration and the Development and Commercialization efforts under the Collaboration and having the powers, responsibilities and other characteristics set forth in the remainder of this Article 2.

 

2.3 Joint Steering Committee.

 

(a) Membership . The JSC shall have at least 6 members, with an equal number of members appointed by each Party. Each Party’s initial membership on the JSC shall be as set forth in Exhibit E. Each Party may replace its JSC representatives at any time upon written notice to the other Party, provided that each Party shall appoint and maintain for the duration of the term of this Agreement at least one senior management representative on the JSC. The JSC shall keep minutes and prepare a quarterly report for internal senior management review by the Parties. The host Party at each in-person meeting shall prepare the minutes for that meeting and the Parties will alternate hosting meetings held via telephone or video conference.

 

(b) Power and Responsibilities . The JSC shall provide recommendations and support the overall strategy for the Collaboration. The JSC shall have the following specific responsibilities and authority:

 

(i) review and comment upon the annual Development Plan and Budget submitted as provided in Section 3.3 and Section 3.4;

(ii) review, comment upon and approve the Initial Launch Budget in accordance with Section 4.3(a) and review and comment upon the annual Commercialization Plan and Budget submitted as provided in Section 4.2(c) and 4.2(d);

 

(iii) evaluate the progress of the Development Plan and Budget and the Commercialization Plan and Budget;

 

(iv) monitor compliance with the diligence provisions set forth in Sections 3.6 and 4.13;

 

(v) review and comment upon the Commercialization of the Collaboration Product, including: the planning, annual budgeting, manufacturing, marketing, sales and distribution and sub-licensing of Collaboration Products;

 

(vi) monitor, review and comment on costs incurred by the Parties in the commercial manufacture, marketing, sale and distribution of the Collaboration Product;

 

(vii) review and comment upon any Subsequent Overall Plan;

 

(viii) receive and provide to the Parties quarterly sales and financial reports pertaining to Commercialization of the Collaboration Product;

 

(ix) facilitate the flow of Information with respect to the Commercialization of the Collaboration Product; and

 

(x) serve as a forum for Information sharing between the Parties with respect to Development and Commercialization of Collaboration Compounds and Collaboration Products and (to avoid any doubt, without conferring on the JSC or the Lead any additional decision-making authority with respect to a Party’s pre-IND-enabling research) any pre-IND-enabling work relating to a Collaboration Compound or Collaboration Product that a Party conducts as permitted under Section 3.1(a)(ii).

 

(c) The JSC shall have no power to amend or waive compliance with this Agreement. Any amendments that alter the terms of this Agreement shall be implemented, if at all, pursuant to Section 15.1 below (i.e. by the Parties agreeing in their sole discretions to do so in a writing executed by authorized officers of each Party). The JSC shall have only the responsibility explicitly provided for it in Section 2.3(b), and shall not have any other powers or responsibilities.

 

2.4 Meetings . The Parties shall endeavor to schedule meetings of the JSC at least 30 days in advance. During the Collaboration Period, the JSC shall meet at least 1 time in each quarter and shall hold at least 2 in-person meetings per year, with at least 1 in-person meeting being held at the offices of each Party each year. During the Opt-In Period (or any Change of Control Period, if it applies), the JSC shall meet in person, only twice each year. Other than the 2 meetings per year that must be held in person as provided above, meetings of the JSC may be held by teleconference or video conference. Committee meetings held in person will: (a) alternate between sites designated by each Party during the Collaboration Period; (b) be held at the offices of the Lead or Continuing Party during the Opt-In Period (or any Change of Control

Period, if it applies), and any and all costs and expenses of each such in person JSC meeting (during the Opt-In Period or any Change of Control Period, if it applies) shall be paid by the Opted-Out Party; or (c) as otherwise agreed upon by the Parties. With the consent of the representatives of each Party serving on the JSC, other representatives of each Party may attend meetings of the JSC. Except as otherwise provided in this Section, each Party shall be responsible for all of its own expenses of participating in JSC meetings, without inclusion in Development Costs or Allowable Commercialization Expenses.

 

(a) Decision Making . During the Collaboration Period and Opt-In Period (or Change of Control Period, if it applies) the JSC will reasonably discuss all matters that come before it. The Lead Development Party is entitled to make all final decisions with respect to Development so long as it follows the processes set forth in Article 3 and the final decisions are consistent with the express terms and conditions of this Agreement. The Lead Marketing Party is entitled to make all final decisions with respect to Commercialization, except as otherwise expressly provided regarding the Initial Launch Budget, so long as it follows the processes set forth in Article 4 and the final decisions are consistent with the express terms and conditions of this Agreement. The Lead Regulatory Party is entitled to make all final decisions with respect to Regulatory Documentation and Regulatory Approvals for the Collaboration Compounds and the Collaboration Product so long as it follows the processes set forth in Section 3.8 and the final decisions are consistent with the express terms and conditions of this Agreement. The JSC shall accept the final decisions made by the Lead Development Party, Lead Marketing Party and Lead Regulatory Party to the full extent such decisions are made in accordance with this Section 2.4 and the express terms and conditions of this Agreement.

 

(b) Collaborative Discussion Process . For matters discussed by the JSC in accordance with Section 2.3 for which a Party has final decision making authority under Section 2.4(a), if the JSC does not agree, and the Non-Lead for the matter, within 5 business days after the JSC meeting requests further discussion, then senior executives (Vice President level and above) of the Parties with full authority to resolve the matter shall meet within 5 business days after the request, by telephone or otherwise, to seek consensus. Both Parties must approach such discussion in good faith. If such senior executives are unable to reach consensus within 30 business days after the JSC meeting at which the disagreement occurred, then the Party with the right to make the final decision under Section 2.4(a) shall be immediately entitled to exercise such final decision-making authority. Nothing in this Section 2.4(b) is intended to prevent or delay the Lead Party from taking an action required under exigent circumstances to respond to an emergency on an interim basis.

 

(c) Reserved Decisions . Notwithstanding anything else express or implied in this Agreement:

 

(i) A Party shall not be entitled to compel through a final decision under and in accordance with Section 2.4(a), allocation of the other Party’s personnel or require actions of the other Party, other than funding in accordance with this Agreement, without the consent of the other Party, which such other Party may withhold in its sole discretion.

 

(ii) The Initial Overall Plan shall only be changed by mutual written agreement of the Parties, and may not be changed by a final decision of any Party or through

dispute resolution in accordance with Article 14, except solely and exclusively as and to the extent stated in 3.1(a)(iii) regarding FDA-, EMEA-, or MHW-mandated Development. A Party may withhold its consent to changes to the Initial Overall Plan in such Party’s sole discretion, except solely and exclusively as and to the extent stated in 3.1(a)(iii).

 

(iii) Any Subsequent Overall Plan for any Subsequent Indication shall only be approved by mutual written agreement of the Parties, which agreement a Party may withhold in its sole discretion, and shall not be approved by a final decision of any Party or through dispute resolution in accordance with Article 14.

 

(iv) Without limiting Section 2.4(c)(ii) regarding the Initial Overall Plan, any Overall Plan shall only be changed by mutual written agreement of the Parties, and may not be changed by a final decision of any Party or through dispute resolution in accordance with Article 14, except solely and exclusively as and to the extent stated in 3.1(a)(iii). A Party may withhold its consent to changes to any Overall Plan in such Party’s sole discretion, except solely and exclusively as and to the extent stated in 3.1(a)(iii).

 

2.5 Obligations of Parties . On a quarterly basis during the Collaboration Period, Nuvelo and Kirin shall provide the JSC with a report summarizing any Information relating to the Development or Commercialization of Collaboration Compounds and Collaboration Products which the JSC may reasonably require in order to perform its obligations hereunder.

 

ARTICLE 3

 

DEVELOPMENT

 

3.1 Overall Plan and Development Plan and Budget.

 

(a) Overall Plan.

 

(i) Initial Overall Plan . The Parties have on or before the Effective Date exchanged the Initial Overall Plan, in accordance with which the Parties intend to Develop a Collaboration Compound into a Collaboration Product for the Initial Indication, in accordance with the terms and conditions of this Agreement.

 

(ii) Subsequent Indication and Subsequent Overall Plan . The Parties acknowledge that during research, Development or Commercialization of a Collaboration Compound or Collaboration Product, a Party, the Parties or a Third Party Partner or a Third Party providing services to a Party, may identify Subsequent Indications for a Collaboration Compound or Collaboration Product that both Parties would desire to further Develop during the Collaboration Period. If and when a Party can provide the other Party to this Agreement with substantive, repeatable Information showing that a Collaboration Compound or Collaboration Product could be Developed for a Subsequent Indication, that Party shall submit a written copy of such Information to the other Party no later than 30 days after such Party developed such Information. If the Collaboration Period and the Opt-In Period (or any Change of Control Period, if it applies) have not expired or been terminated in accordance with Article 11, at the next scheduled JSC meeting, the JSC shall discuss the Information regarding the Subsequent Indication and whether both Parties wish to pursue the Subsequent Indication, and whether both

Parties wish to generate and approve a Subsequent Overall Plan. If the JSC is unable to agree on whether or not to pursue the Subsequent Indication and have a Subsequent Overall Plan generated, the matter will be referred to senior executives (Vice President level and above) of the Parties with full authority to resolve the matter, by telephone or otherwise, to negotiate the matter in good faith, using reasonable diligent efforts. If these senior executives are unable to reach agreement after 90 days of good faith, diligent efforts, neither Party shall have any obligation to negotiate further; the matter may not be referred to dispute resolution in accordance with Article 14; and the Subsequent Indication and Subsequent Overall Plan shall not be approved. To avoid any doubt, the Lead shall not be entitled to compel agreement or approval of any Subsequent Indication or Subsequent Overall Plan through a final decision under Section 2.4(a). The Lead and Non-Lead shall not conduct Development or Commercialization activities for any Subsequent Indications without an approved Subsequent Overall Plan (but may conduct pre-IND-enabling research without limitation as to indication), except that this provision shall in no way limit the Lead’s ability to conduct Partnering Activities. To avoid any doubt, nothing in this Section 3.1(a) prevents, nor shall be deemed to prevent, the Lead or Continuing Party from entering into a Partnering Agreement that includes Subsequent Indications, or conducting Partnering Activities, including entering into Service Agreement(s) pursuant to, in accordance with and solely for the purposes of performing under the Partnering Agreements, for any Subsequent Indication. Unless there is an agreed upon Subsequent Overall Plan, the Non-Lead shall not have any ability under this Agreement to comment upon, approve or otherwise participate in Development or Commercialization of Subsequent Indications conducted in accordance with a Partnering Agreement. Whether or not the Parties have agreed on a Subsequent Overall Plan, the Non-Lead will be entitled to its Share of Product Profit(Loss) that is attributable to such Subsequent Indications, to the extent that there is profit to be Shared after an accounting of the Product Profit(Loss) in accordance with Section 7.4(c), and any Licensing Revenue attributable to such Subsequent Indications, or any applicable royalty under Section 7.6 in such jurisdictions that the Non-Lead has opted-out. However, the Non-Lead shall not be under any obligation to pay any Share of any Development Costs incurred for any Subsequent Indication unless the Parties have agreed to a Subsequent overall Plan in accordance with this Section 3.1(a)(ii). Any Subsequent Overall Plan put in place as set forth in this Section 3.1(a)(ii) shall outline the general features of the Parties’ then-anticipated Development program for 17206 for any Subsequent Indication covered by such plan, and an estimated budget for all Phase 1 Trials, Phase 2 Trials, and Phase 3 Trials, including Phase 3B Trials, of the Collaboration Product for such Subsequent Indication, including without limitation Manufacturing Costs.

 

(iii) FDA-, EMEA-, or MHW-Mandated Development . If after a Collaboration Compound has been studied in a clinical trial sponsored by or on behalf of the Parties to treat an Initial Indication, the FDA, EMEA or MHW indicates that, in order for such agency to approve any subsequent clinical trial or an NDA (or equivalent in such agency’s jurisdiction) for such Collaboration Compound for such Initial Indication, such agency requires additional studies of such Collaboration Compound, and the budget of then-in-effect Overall Plan with respect to the Initial Indication would not allow completion of such additional studies within the applicable phase and indication budgetary constraints of the Overall Plan, the Parties shall promptly meet and discuss the matter. In this case, the Lead shall, within [*] days after it receives notice from the FDA, EMEA or MHW, as applicable, provide to the Non-Lead a good faith estimate of the additional funding necessary to complete such additional studies. Either Party may, within [*]days after the Non-Lead receives the Lead’s good faith estimate (or[*] days

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

after notice from the applicable regulatory authority if later), opt out of the Collaboration for the applicable territory (i.e., the United States, the European Union, or Japan) pursuant to Section 3.7(a)(ii) applied mutatis mutandis as if the territory opted out of under this Section 3.1(a)(iii) were a Partnered Territory opted out of under 3.7(a)(ii) (to avoid any doubt, consequently, the Party that has so opted out shall have no right to Share in the Product Profit(Loss) for such territory and shall have only a right to receive the applicable opt-out royalty for such territory, which opt-out royalty remains subject to any reductions in the applicable royalty rate that apply under Sections 6.3(a), 7.6(d), 7.6(e) and 7.6(g)). In their discussions, the Parties shall seek to agree to an expansion of the Overall Plan for the applicable indication and clinical phase to include the studies required by the FDA, EMEA or MHW and a reasonable budget for such studies. If the Parties fail to reach agreement as to such expansion and budget modifications to the Overall Plan within [*] months, the matter shall as of the [*]-month deadline be deemed a “Required Study Dispute” and shall be resolved as set forth in Section 14.3.

 

(b) Development Plan and Budget . Development shall be governed by a development plan, and associated budget, that describes the proposed overall program of Development (the “ Development Plan and Budget ”). The Development Plan and Budget shall include a description of, without limitation: (i) all major Development tasks to be conducted before submission of filings for Regulatory Approval of a Collaboration Product for the Initial Indications; (ii) key Development objectives, expected associated resources, risk factors, timelines, manufacturing plans, go/no go decision points and relevant decision criteria; (iii) anticipated clinical trials to the extent known; and (iv) a reasonably detailed annual budget for the activities covered by such Development Plan and Budget. All Development Plans and Budgets (including without limitation the budgetary portion thereof) must be consistent with the applicable Overall Plan and with the express terms and conditions of this Agreement. If any Development Plan and Budget is inconsistent with the applicable Overall Plan or the express terms and conditions of this Agreement, the express terms and conditions of this Agreement or the applicable Overall Plan (as applicable) shall prevail. The Lead Development Party shall determine whether to allocate any Development responsibilities to the other Party under this Agreement, but shall have no obligation to allocate any responsibilities to the other Party. The other Party shall have no obligation to participate directly in Development except with its consent, which it may withhold in its sole discretion. As used throughout this Agreement, “consistent with the (applicable) Overall Plan” means that the particular plan and budget being compared to the applicable Overall Plan (i) describes only activities directed at Development for the Indications specified in the applicable Overall Plan, and (ii) contains a budget that, on an indication-by-indication basis, is within the budgetary limits set by the applicable Overall Plan for the phases(s) of Development covered by the plan and budget for the particular indication specified in the Overall Plan (considered together with plans and budgets for other years covering activities for the same stage of Development for such indication).

 

3.2 Initial Development Plan and Budget . The Initial Development Plan and Budget shall set forth: (i) the Development activities for the Initial Indication commencing upon the Effective Date and continuing up through and until the end of 2005; and (ii) Development Costs commencing upon the Effective Date and continuing up through and until the end of 2005. Nuvelo will submit the Initial Development Plan and Budget to Kirin as soon as reasonably possible after the Effective Date, and Kirin will have 30 days thereafter to either approve the Initial Development Plan and Budget or opt-out of the Collaboration in accordance with

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

Section 3.7(a)(i). If Kirin fails to provide Nuvelo with written notice of its decision to either approve the Initial Development Plan and Budget or opt-out in accordance with Section 3.7(a)(i) before the expiration of the applicable 30 day period, Kirin shall be deemed to have approved the Initial Development Plan and Budget. Any decision by Kirin not to approve the Initial Development Plan and Budget is not, does not constitute, and shall not be deemed to be a Dispute under this Agreement; provided , however , that this shall not be read to limit any rights and remedies of Kirin arising under this Agreement if the Initial Development Plan and Budget is not consistent with the Initial Overall Plan or the express terms and conditions of this Agreement. If Kirin in good faith disputes any such consistency, Kirin may so notify Nuvelo in accordance with Article 14, and the Dispute shall be resolved in accordance with Article 14; but, even if Kirin has notified Nuvelo of a consistency Dispute, Kirin shall still be required while the Dispute is being resolved to pay its Share of Development Costs in accordance with the Development Plan and Budgets in effect provided by Nuvelo while the Dispute is being resolved, unless Kirin has sent Nuvelo proper notice that it has opted-out in accordance with Section 3.7(a)(i). If there is a gross discrepancy between the budget of the Initial Development Plan and Budget Nuvelo provided and the budgetary limitation of the Overall Plan for the applicable development period, then Kirin shall only be required to pay its Share of Development Costs within the limit it in good faith believes is imposed by the Overall Plan for the applicable development period, [*]. The eventual resolution of the Dispute may include, without limitation, a refund to the Non-Lead of amounts overpaid, if any, to the extent in accordance with Article 14.

 

3.3 Review and Approval of Development Plan and Budget . No later than [*] days before the commencement of 2006 and no later than [*] days before the commencement of every subsequent calendar year during the Collaboration Period (i.e., on or before [*] of each year), the Lead Development Party shall prepare and submit to the JSC and the Non-Lead a draft of the Development Plan and Budget that is consistent with the applicable Overall Plan and the express terms and conditions of this Agreement for the forthcoming year. The Non-Lead shall submit its comments on the Lead Development Party’s draft Development Plan and Budget to the JSC and the Lead Development Party at least [*] days prior to a JSC meeting to occur no earlier than [*] days after such Non-Lead’s receipt of the draft Development Plan and Budget. At the applicable JSC meeting, the JSC shall evaluate the draft Development Plan and Budget and any comments or proposed revisions to the draft Development Plan and Budget. If the JSC is unable to reach consensus on the Development Plan and Budget at this JSC meeting, and the Non-Lead within [*] business days after the JSC meeting requests further discussion, then senior executives (Vice President level and above) of the Parties with full authority to resolve the matter shall meet within [*] business days after the request, by telephone or otherwise, to seek consensus. The Lead Development Party shall submit the final Development Plan and Budget to the Non-Lead no later than [*] days after such JSC meeting. Such final Development Plan and Budget shall not contain significant changes or new content relative to the preliminary version except to the extent reflecting the Non-Lead’s comments or a compromise fully discussed at the JSC meeting or by the senior executives of the Parties. The Non-Lead shall have until [*] days after its receipt of the final Development Plan and Budget to either approve it or opt out of the Collaboration in accordance with Section 3.7(a)(i) (the ”Development Decision” ). If the Non-Lead fails to provide the Lead Development Party with written notice of its Development Decision before the expiration of [*], then the Non-Lead shall be deemed to have approved the final Development Plan and Budget for the forthcoming year. Any decision by the Non-Lead not

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

to approve the final Development Plan and Budget is not, does not constitute, and shall not be deemed to be a Dispute under this Agreement; provided , however , that this shall not be read to limit any rights and remedies of the Non-Lead arising under this Agreement if the final Development Plan and Budget is not consistent with the applicable Overall Plan and the express terms and conditions of this Agreement. If the Non-Lead in good faith disputes any such consistency, the Non-Lead may so notify the Lead in accordance with Article 14, and the Dispute shall be resolved in accordance with Article 14; but, even if the Non-Lead has notified the Lead of a consistency Dispute, the Non-Lead shall still be required while the Dispute is being resolved to pay its Share of Development Costs in accordance with the Development Plan and Budgets in effect that the Lead has provided while the Dispute is being resolved, unless the Non-Lead has sent the Lead proper notice that it has opted-out in accordance with Section 3.7(a)(i). If there is a gross discrepancy between the budget of the Development Plan and Budget the Lead provided and the budgetary limitation of the Overall Plan for the applicable development period, then the Non-Lead shall only be required to pay its Share of Development Costs within the limit it in good faith believes is imposed by the Overall Plan for the applicable development period, [*]. The eventual resolution of the Dispute may include, without limitation, a refund to the Non-Lead of amounts overpaid, if any, in accordance with Article 14.

 

3.4 Changes to Development Plan and Budget . Development Plans and Budgets may need to change in the course of a calendar year. If the Lead Development Party determines that such a change may be necessary, it shall promptly inform the JSC. The Lead Development Party has the authority to make the final decision (in accordance with Section 2.4(a)) on any change as it determines necessary that is consistent with the Overall Plan and the express terms and conditions of this Agreement; provided, however, that unless the Non-Lead agrees in writing to the proposed modifications to the Development Plan and Budget, the Excess Development Cost (as defined in Section 7.2(c)) for 2005 shall be determined in accordance with the budget set forth in Initial Development Plan and Budget presented to the other Party for approval or opt-out in accordance with Section 3.7(a)(i), and Excess Developments Costs for any subsequent budget year shall be determined in accordance with the budget set forth in the version of the Development Plan and Budget presented to the other Party for the Development Decision (unmodified with respect to the change requested but not approved).

 

3.5 Preclinical Development . The Lead Development Party shall have the responsibility for Preclinical Development in accordance with this Article 3.

 

3.6 Development Diligence . The Parties shall use Diligent Efforts to: (i) conduct their respective tasks, as assigned under the Development Plan and Budget, throughout the Collaboration; and (ii) 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. The Lead Development Party and the Continuing Party shall use Diligent Efforts to Develop the Collaboration Product for the Indications set forth in the applicable Overall Plan for those countries in which it will be and is commercially reasonable to Commercialize the Collaboration Product, as reasonably determined by the Lead or Continuing Party, both before and after any opting out under Section 3.7(a)(i). During the Collaboration Period, the Lead Development Party’s determination as to for which countries it is commercially reasonable to Develop must be objectively reasonable and consistent with the standard of

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

Diligent Efforts, but any evaluation of the Lead Development Party’s determination is only permitted to consider the Lead’s worldwide Development strategy, and cannot evaluate territories in isolation.

 

3.7 Opting Out and Opting In at Development Stage.

 

(a) Opting Out of Development and Commercialization . Subject to the other terms and conditions of this Agreement, each Party may elect to no longer participate in Development and Commercialization of Collaboration Compounds and Collaboration Products upon receipt by the other Party of written notice of such election from the first Party, so long as such election is made:

 

(i) no later than, the later of, [*] days after the Non-Lead receives from the Lead Development Party, or [*] of the applicable year: (1) the Initial Development Plan and Budget in accordance with Section 3.2; or (2) a final Development Plan and Budget in accordance with Section 3.3;

 

(ii) no later than [*] days (subject to Section 4.10(b)(iii)) after the Non-Lead receives from the Lead an executed Partnering Agreement in accordance with Section 7.5; provided, however, that a decision to opt out under this clause (ii) may be either on a worldwide basis or solely with respect to the Partnered Territory and the Party that is opting out shall clearly identify in its written notice on which basis it is opting out; and

 

(iii) Upon [*] days written notice, if a Party is opting out of a Partnered Territory in accordance with Section 7.5(a)(ii).

 

(b) Opting Back In To Development and Commercialization.

 

(i) Timing . Until (1) the expiration of the earlier of [*] after the Party opted out or [*] days after the Opted-Out Party’s receipt of the final report of Phase 3 Trial data for the Collaboration Product submitted to the FDA (the “Opt-In Period” ); or (2) the earlier of the expiration of [*] after Kirin opted out in accordance with Section 3.7(a)(i) or [*] days after Kirin’s receipt of the final report of Phase 3 Trial data for the Collaboration Product (the “ Change of Control Period” ), but the Change of Control Period applies if and only if Kirin is the Opted-Out Party and Nuvelo undergoes a Change of Control (as defined in Section 15.11) during the Change of Control Period which results in Nuvelo, or all or substantially all of its assets, being merged with or owned or controlled (as that term is defined in Section 1.2) by a Kirin Competitor ( “Competitor Change of Control” ), the Opted-Out Party may elect, subject to and only in accordance with Sections 3.7(b)(ii) and 3.7(b)(iii) below, to once again participate in Development and Commercialization.

 

(ii) Requirements . A Party cannot elect to once again participate in accordance with Section 3.7(b)(i) above unless and until the Opted-Out Party provides the other Party with a written notice of its election in accordance with Section 3.8(b)(i), which notice includes a commitment and covenant to pay the fee for opting back in to Development and Commercialization as determined in accordance with Section 3.7(c) ( “Opt-In Fee” ). Thereafter, the Party that did not opt out shall provide the Opted-Out Party with an invoice setting forth the Opt-Out Party’s Share of Development Costs incurred by the other Party during the Opt-In

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

Period or Change of Control Period, if applicable, including such detailed accounting information required by Section 7.2(b) to the extent not already provided to the Opted-Out Party. The Opted-Out Party shall pay the Opt-In Fee within [*] business days after receiving such invoice. The effective date of a Party’s election to opt back in is the date the other Party receives the Opted-Out Party’s written notice of the election. If a Party fails to pay the Opt-In Fee before the expiration of the [*] business day period, the Party’s election to opt-in shall be deemed ineffective and null and void, and the Opted-Out Party shall not in any case be entitled to opt back in under this Section 3.7. Unless a Party has been expressly prohibited from opting back in in accordance with this Section or in accordance with another Section of this Agreement, a Party may opt back in only one time under this Agreement, but will still have the right to opt out (a second time) under Section 3.7(a).

 

(iii) Effect of Partnering Agreement . If during the Opt-In Period (or the Change of Control Period, if it applies) the Lead executes a Partnering Agreement in accordance with this Agreement, the Opted-Out Party shall not be entitled to opt back in with respect to the Partnered Territory. The Opted-Out Party shall retain its right to opt back in, in accordance with and subject to this Section 3.7(b), solely with respect to the remainder of the world outside the Partnered Territory. If the Lead executes a Partnering Agreement during the Collaboration Period and the Non-Lead opts out solely in the Partnered Territory or on a worldwide basis, the Opted-Out shall retain its right to opt back in, in accordance with and subject to this Section 3.7(b), solely with respect to the remainder of the world outside the Partnered Territory.

 

(c) Opt-In Fee . The Opt-In Fee shall be equal to a multiple of the Opted-Out Party’s Share of the Development Costs incurred by the Party that continued Development after the opt-out and prior to the effective date of the Opted-Out Party’s election to opt back in, in accordance with Section 3.7(b), selected from the following table based on the time that the opt-out became effective (i.e., the end of the notice period for opting out):

 

 

(d) Third-Party Rights . The Lead Development Party is entitled to enter into a Partnering Agreement or Partnering Agreements: (i) for Development as further set forth in Section 4.10; and (ii) to which any Development activities of the Parties under this Agreement

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

would be subject in the countries or territories covered by the Partnering Agreement, provided that the terms and conditions of the Partnering Agreement are consistent with the express terms and conditions of this Agreement. Additionally, after a Party opts out during Development in accordance with Section 3.7, the other Party ( “Continuing Party” ) is entitled to enter into a Partnering Agreement or Partnering Agreements in accordance with Sections 3.7 and 4.10. An Opted-Out Party shall not be able to opt back in, in accordance with this Section 3.7, in any Partnered Territory (as is also set forth in Section 3.7(b)(iii)).

 

(e) Effect of Opt-Outs on Lead/Non-Lead Status . In accordance with Sections 1.56 through 1.58, if Nuvelo opts out then Kirin becomes the Lead with respect to the relevant activities. To avoid any doubt, if Nuvelo later opts back in in accordance with this Section, Kirin shall remain the Lead unless the Parties otherwise agree in writing (which agreement Kirin may withhold in its sole discretion).

 

3.8 Regulatory Affairs.

 

(a) Lead Regulatory Party Responsibilities . The responsibilities of the Lead Regulatory Party shall be to undertake the following activities, in a manner consistent with the Development Plan and Budgets and Commercialization Plan and Budgets, as applicable:

 

(i) developing pre-Approval Application Regulatory Documentation and preparing and submitting pre-Approval Application Regulatory Documentation, seeking pre-Approval Application Regulatory Approvals, and maintaining pre-Approval Application Regulatory Approvals for Collaboration Products, including preparing all reports necessary as part of an IND, DMF, BLA or other necessary filing required for Pre-Approval Application Regulatory Approvals; and

 

(ii) developing Approval Application Regulatory Documentation and preparing and submitting Approval Applications for Collaboration Products, seeking Regulatory Approvals, and maintaining Regulatory Approvals for Collaboration Products, including preparing all reports necessary as part of an NDA, DMF, BLA or other necessary filing required for Regulatory Approval.

 

(b) Data and Information Sharing.

 

(i) With regard to sharing of Regulatory Documentation, each Party shall permit the Lead Regulatory Party in any country or territory to access, and shall provide the Lead Regulatory Party in any country or territory with sufficient rights to reference and use in association with exercising its rights and performing its obligations in Development and Commercialization under this Agreement (without creating under this Section any new such rights and obligations), all of its, its Affiliates’ and Third Party Partners’ and their respective suppliers’ Regulatory Documentation and Regulatory Approvals for Collaboration Products. The foregoing sentence shall apply mutatis mutandis to the Non-Lead if and to the extent that the Non-Lead has been allocated a Development responsibility in accordance with Section 3.1(b).

 

(ii) During the Collaboration Period and any Opt-In Period (or Change of Control Period, if it applies) the Lead Regulatory Party shall keep the Non-Lead informed on an ongoing basis regarding the schedule and process for Regulatory Documentation and shall

provide the Non-Lead with reasonable advance notice of any meeting or substantive telephone conference call with any Regulatory Authority relating to any Regulatory Documentation. The Non-Lead shall have the right to attend and observe (but not comment or otherwise participate in) any meeting or conference call with the Regulatory Authority regarding a Collaboration Compound or Collaboration Product. The Lead Regulatory Party shall promptly furnish the Non-Lead with copies of all correspondence that the Lead Regulatory Party receives from any Regulatory Authority, and contact reports it receives concerning substantive conversations or substantive meetings with any Regulatory Authority, in each case relating to any such Regulatory Documentation. The Lead Regulatory Party shall prepare all responses to correspondence that are received from any Regulatory Authority relating to any Regulatory Documentation.

 

(c) Legal Compliance . In conducting any Development activities hereunder, each Party shall: (a) use Diligent Efforts to ensure that its employees, agents, clinical institutions and clinical investigators comply with all applicable 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 (b) not, to the best of its knowledge, utilize, in conducting studies on Collaboration Products any person or entity that at such time are debarred by the FDA, or that, at such time, is under investigation by the FDA for debarment action pursuant to the provisions of the Generic Drug Enforcement Act of 1992 (21 U.S.C. Section 335).

 

(d) Records . Each Party shall maintain a record of all medical product-related complaints and reports of adverse events that it receives with respect to any Collaboration Product. During the Collaboration Period, each Party shall notify the other Party of any complaint received by it and, within 15 days after the initial receipt, provide the other Party with a copy of such complaint(s) and adverse event reports. The Lead Regulatory Party shall be responsible for reporting to Regulatory Authorities any adverse experiences and safety issues for such Collaboration Product in compliance with the requirements of the U.S. Food, Drug and Cosmetic Act, 21 U.S.C. § 321 et seq., the regulations promulgated thereunder, and equivalent foreign laws, rules and regulations. During the Collaboration Period, the Lead Regulatory Party shall promptly thereafter provide the other Party with a copy of each such report.

 

(e) Adverse Events Reporting . At such time as each Party is a Lead Regulatory Party in at least one country or territory and each Party has, or is in good faith intending imminently to Commence clinical trial(s) of, and/or marketing, Collaboration Compound(s) and/or the Collaboration Product, the Parties shall mutually agree in writing to a pharmacovigilance agreement clearly setting forth the time periods, policies and procedures for the Parties to report serious and other adverse events to one another and each Party’s responsibility for reporting such events to Regulatory Authorities having jurisdiction.

 

3.9 Information Sharing . At each meeting of the JSC during the Collaboration Period and any Opt-In Period (or Change of Control Period, if it applies), each Party shall report to the JSC in detail the work it has performed (or work performed for it or by Third Party

Partners and Affiliates) under the Development Plan and Budget since the previous meeting. In addition, regularly and on an ongoing basis during the Collaboration Period, and at the scheduled meetings of the JSC during any Opt-In Period (or Change of Control Period, if it applies), each Party shall make available to the JSC all Information and Know-How resulting from or arising out of the Collaboration related to Development and/or Commercialization of Collaboration Compounds and the Collaboration Product hereunder.

 

3.10 Costs . The Parties shall each bear their Share of Development Costs, as further set forth in Section 1.1.

 

ARTICLE 4

 

COMMERCIALIZATION

 

4.1 Lead Marketing Party . The Lead Marketing Party shall have the responsibilities set forth in this Article 4. The Lead Marketing Party shall determine, on a country-by-country or territory-by-territory basis, whether the Collaboration Product will be Commercialized directly by the Lead Marketing Party (meaning that the Lead Marketing Party will itself be responsible for selling the Collaboration Product in such country or territory, although Third Parties may be engaged for various aspects of Commercialization in the United States as well as other markets) or indirectly (meaning that Commercialization in a particular country or territory shall occur exclusively through Third Parties, under one or more Service Agreements or Partnering Agreements). As used herein, the former structure is referred to as “ Direct Commercialization ” and the latter structure is referred to as “ Partnered Commercialization .” The Lead Marketing Party shall determine whether to allocate any Commercialization responsibilities to the Non-Lead under this Agreement, but shall have no obligation to allocate any responsibilities to the Non-Lead. The Non-Lead shall have no obligation to participate directly in Commercialization except with its consent.

 

4.2 Commercialization Plan and Budget.

 

(a) First Annual Commercialization Plan and Budget . During the Collaboration Period and commencing upon the date of the first filing of an Approval Application for a Collaboration Product, the Lead Marketing Party shall develop a comprehensive written plan and budget for Direct Commercialization and/or Partnered Commercialization of the Collaboration Product (the “ Commercialization Plan and Budget ”). All Commercialization Plans and Budgets (including without limitation the budgetary portion thereof) must be consistent with the Initial Launch Budget, if and to the extent it applies, and the express terms and conditions of this Agreement. As used throughout this Agreement, “consistent with the Initial Launch Budget” means that, solely with respect to a Commercialization Plan and Budget to be or in effect during the Initial Launch Period, the particular Commercialization Plan and Budget contains a budget that is within the budgetary limits set by the Initial Launch Budget for Commercial launches and other Commercial activities to occur during the Initial Launch Period. To avoid any doubt, “consistent with the Initial Launch Budget” only applies to Commercialization Plans and Budgets to be, or in effect during the Initial Launch Period. If any Commercialization Plan and Budget is inconsistent with the Initial Launch Budget, if it applies, or the express terms and conditions of this Agreement, the Initial Launch Budget, if it applies, or

the express terms and conditions of this Agreement, as applicable, shall prevail. The Commercialization Plan and Budget will set forth in detail the marketing, sales and distribution activities to be undertaken with respect to the Collaboration Product (including advertising, education, planning, marketing, sales force training and distribution), as well as the activities required for the manufacture of the Collaboration Product following commercial launch, in each case whether such activities are undertaken before or after Regulatory Approval. The Commercialization Plan and Budget shall include but not be limited to the following, which will evolve over time: (i) demographics, market dynamics and market strategies, estimated country launch dates, a worldwide sales forecast, manufacturing plans and expected product profile; and (ii) a marketing plan.

 

(b) Budget . The Commercialization Plan and Budget shall include a budget of the expenses expected to be incurred in connection with performing Commercialization of a Collaboration Product in the applicable budget year that is consistent with the Initial Launch Budget, if applicable, and the express terms and conditions of this Agreement. In those territories where the Collaboration Product will be sold through Partnered Commercialization, the Commercialization Plan and Budget may be, but shall not be required to be, limited to solely those activities for which the Lead Marketing Party will be responsible.

 

(c) Annual JSC Procedure . Within [*] days after the date of the first filing of an Approval Application for a Collaboration Product during the Collaboration Period, and within [*] days after the expiration of every subsequent calendar year thereafter during the Collaboration Period, the Lead Marketing Party shall prepare and submit to the JSC a draft of the Commercialization Plan and Budget that is consistent with the Initial Launch Budget, if it applies, and the express terms and conditions of this Agreement for the forthcoming year. A JSC meeting shall be scheduled by the Parties to occur no later than [*] days after the Non-Lead’s receipt of the Commercialization Plan and Budget. The Non-Lead shall submit its comments on the draft Commercialization Plan and Budget to the JSC and the Lead Marketing Party at least [*] days prior to the scheduled JSC meeting. At the applicable JSC meeting, the JSC shall evaluate the draft Commercialization Plan and Budget and any comments or proposed revisions to the draft Commercialization Plan and Budget. If the JSC is unable to reach consensus on the Commercialization Plan and Budget at the JSC meeting, and the Non-Lead within [*] business days after the JSC meeting requests further discussion, then senior executives (Vice President level and above) of the Parties with full authority to resolve the matter shall meet within [*] business days after the request, by telephone or otherwise, to seek consensus. The Lead Marketing Party shall submit the final Commercialization Plan and Budget to the Non-Lead no later than [*] days after the JSC meeting. The final Commercialization Plan and Budget shall not contain significant changes or new content relative to the preliminary version except to the extent reflecting the Non-Lead’s comments or a compromise fully discussed at the JSC meeting or by the senior executives of the Parties. The Non-Lead shall have [*] days after its receipt of the final Commercialization Plan and Budget to either approve it or voluntarily terminate the Agreement in accordance with Section 11.2. If the Non-Lead does not provide the Lead Marketing Party with written notice of a decision to either approve the final Commercialization Plan and Budget or voluntarily terminate the Agreement in accordance with Section 11.2, the Non-Lead shall be deemed to have approved the Commercialization Plan and Budget. Any decision by the Non-Lead not to approve the Commercialization Plan and Budget is not, does not constitute, and shall not be deemed to be a Dispute under this Agreement; provided , however ,

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

that this shall not be read to limit any rights and remedies of the Non-Lead arising under this Agreement if the Commercialization Plan and Budget is not consistent with the Initial Launch Budget, if it applies, or the express terms and conditions of this Agreement. If the Non-Lead in good faith disputes any such consistency, the Non-Lead may so notify the Lead in accordance with Article 14, and the consistency Dispute shall be resolved in accordance with Article 14; but, even if the Non-Lead has notified the Lead of a consistency Dispute, the Non-Lead shall still be required to pay its Share of Allowable Commercialization Expenses while the Dispute is being resolved, unless the Non-Lead has sent the Lead proper notice of its voluntary termination in accordance with this Section and Section 11.2. If there is a gross discrepancy between the budget of the annual plan the Lead provided and the budgetary limitation of the Initial Launch Budget (to the extent applicable), then the Non-Lead shall only be required to pay its Share of Allowable Commercialization Expenses with respect to activities required to be budgeted for in the Initial Launch Budget within the limit it in good faith believes is imposed by the Initial Launch Budget, [*]. The eventual resolution of the Dispute may include (without limitation) a refund to the Non-Lead of amounts overpaid, if any, in accordance with Article 14.

 

(d) Commercialization Plans and Budgets may need to change in the course of a calendar year. If the Lead Marketing Party determines that such a change may be necessary, it shall promptly inform the JSC and shall have final decision-making authority (in accordance with Section 2.4(a)) regarding whether to make the change as it determines necessary that are consistent with the Initial Launch Plan, if it applies, and the express terms and conditions of this Agreement; provided, however, that unless the Non-Lead agrees in writing to the proposed modifications to the Commercialization Plan and Budget, the Excess Commercialization Expenses for the applicable budget year shall still be determined in accordance with the budget set forth in the Commercialization Plan and Budget presented to the Non-Lead for the Non-Lead’s approval or voluntary termination in accordance with Section 4.2(b).

 

4.3 Launch Plan and Budget.

 

(a) Initial Launch Budget . Because of the current preclinical research stage of 17206, the Parties are not able at this time to generate a reasonable initial launch budget at a level of detail similar to the Overall Plan for the Collaboration Product for the[*] period commencing [*] before the anticipated launch of the Collaboration Product in [*] and expiring [*] (such time period to the extent falling within the Collaboration Period, “ Initial Launch Period ”), and covering activities within such time period in [*], and in [*], if and to the extent applicable(the “ Initial Launch Budget ”). Consequently, the Overall Plan that the Parties have agreed to, as of the Effective Date, does not cover Commercialization activities. The Parties intend that budgetary limitations for Commercialization for the Initial Launch Period shall be set by mutual agreement of the Parties, with neither Party having a final say. The Parties shall agree upon the Initial Launch Budget for commercial launch covering Commercialization activities during the Initial Launch Period. This Initial Launch Budget shall include, without limitation, Manufacturing Costs for quantities of Collaboration Product required for Commercialization activities during the Initial Launch Period. During the Collaboration Period, the Lead Marketing Party will prepare and submit to the Non-Lead the draft Initial Launch Budget no later than [*] days before a JSC meeting to be scheduled by the Parties to occur no later than [*] before the anticipated filing of the first Approval Application for commercial sale for a Collaboration Product in the United States (so that the draft Initial Launch Budget [*].The Non-Lead shall

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

submit its good faith, commercially reasonable comments on the draft Initial Launch Budget to the JSC and the Lead Marketing Party at least [*] days before the applicable JSC meeting. The JSC shall evaluate the draft Initial Launch Budget and any comments or proposed revisions to the draft Initial Launch Budget at the JSC meeting. Both Parties shall use good faith, diligent efforts to resolve any comments and proposed revisions at the JSC meeting. Within [*] days after the JSC meeting, the Lead Marketing Party shall provide the Non-Lead with a revised version of the Initial Launch Budget, which shall include the revisions mutually agreed upon at the JSC meeting. The Non-Lead shall have [*] days from its receipt of the revised Initial Launch Budget to either (i) notify the Lead Marketing Party in writing of its approval of the revised Initial Launch Budget or (ii) provide a good faith, commercially reasonable revised version of the Initial Launch Budget. The Parties, if they have not reached agreement as to the Initial Launch Budget, shall follow this process of exchanging comments and having discussions through another JSC meeting (the next quarterly meeting). The Non-Lead shall, within [*] days after receiving the Lead’s new version of the Initial Launch Plan reflecting the changes agreed at such second JSC meeting, send the Lead written notice of either the Non-Lead’s approval of such version, or a Launch Budget Dispute, and the matter shall be resolved solely in accordance with Section 14.3. When both Parties have approved the Initial Launch Budget, or the Launch Budget Dispute has been resolved in accordance with Section 14.3, the Initial Launch Budget shall be deemed approved. For the avoidance of doubt, the Lead Marketing Party may proceed with the launch of a Collaboration Product without delay in accordance with the final Initial Launch Budget even if the Non-Lead provides the Lead with notice of a Launch Budget Dispute in accordance with this Section; provided, however , that for purposes of calculating Product Profit(Loss) until the Launch Budget Dispute is resolved, the budgetary limitations imposed by Section 7.3 shall apply using the Non-Lead’s proposed Initial Launch Budget until such time as the Launch Budget Dispute has been resolved. The Initial Launch Plan, once approved or deemed approved, may only be modified by mutual agreement of the Parties, without either Party having a final say, and without disagreements whether to modify it being referable for further dispute resolution under Article 14.

 

(b) Launch Plans and Budgets . During the Collaboration Period, each Commercialization Plan and Budget shall include, in advance of the launch in each country, a plan and budget for the product’s launch in such country and the [*] period following the launch date (the “ Launch Plan and Budget ”). Each Launch Plan and Budget shall be developed by the Lead Marketing Party. A Launch Plan and Budget shall be included in the Commercialization Plan and Budget for the year such launch occurs.

 

(c) Timing . The Parties acknowledge that determining a date for Regulatory Approval and thus launch date is difficult. As a result of this uncertainty, the Lead Marketing Party shall estimate for each country a reasonable date for Regulatory Approval for commercial sale of the Collaboration Product, such date to be used to prepare the Launch Plan and Budget at least [*] before the estimated Regulatory Approval in the applicable territory or country. Any Launch Plan and Budget which has not yet been executed shall be updated by the Lead Marketing Party at least each calendar quarter during the Collaboration Period.

 

(d) Each Launch Plan and Budget, except the Initial Launch Budget, shall include a breakdown of individual Allowable Commercialization Expenses expected to be incurred in connection with performance pursuant to the applicable Launch Plan and Budget.

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

4.4 Right to Engage Third Parties . The Lead Marketing Party may engage Third Parties to assist with the Commercialization of the Collaboration Product in accordance with the Commercialization Plan and Budget. The costs of engaging any such Third Party will be eligible to be Allowable Commercialization Expenses subject to Section 7.3 and to the extent in accordance with the Financial Appendix.

 

4.5 Commercialization Efforts . Each Party shall use Diligent Efforts to carry out its obligations under the Commercialization Plan and Budget and to cooperate with each other in carrying out the Commercialization Plan and Budget.

 

4.6 Advertising and Education; Trademarks.

 

(a) The Lead Marketing Party for each country shall be responsible for developing or having developed advertising and education materials for the Collaboration Product for such country. During the Collaboration Period and any Opt-In Period (or Change of Control Period, if it applies) the Parties shall jointly own all trademarks for the Collaboration Product. Neither Party may use any trademark for a Collaboration Product for any purpose other than Commercializing the Collaboration Product, except if such trademark is transferred to it pursuant to Section 11.3.

 

(b) During the Collaboration Period, the Parties agree that (i) any written and visual promotion or educational materials for the Collaboration Product that refers to or identifies either of the Parties shall identify or refer to both Parties such that Nuvelo and Kirin shall both be presented and described with equal prominence; (ii) all product labeling, documentary information, promotional material and oral presentations (where practical) regarding the detailing and promoting of Collaboration Products shall display the names and logos of both Parties with equal prominence; and (iii) any such materials that specifically refer to the Parties shall be subject to prompt prior review and comment by both Parties, and the Lead shall reasonably consider any comments provided to the Lead by the Non-Lead no later than 10 business days after the Non-Lead receives the applicable materials.

 

(c) Notwithstanding the foregoing, subsections (a) and (b) above are subject to the requirements of applicable laws and regulations of each country in which such materials are presented or in which the Collaboration Product is Commercialized.

 

4.7 Product Recalls . If any Regulatory Authority schedules an inspection, or threatens or initiates any action, to remove the Collaboration Product from the market, the Party that receives such communication shall notify the other Party of such communication within one business day of receipt. If either Party believes, in good faith, that a recall of a Collaboration Product is necessary, such Party shall notify and consult with the other Party within 2 business days after its determination and both Parties shall cooperate to allow such recall to occur under the direction of the Lead Marketing Party. In the event of a dispute about whether to recall a Collaboration Product, such recall shall occur unless one of the Parties has opted out as set forth in Section 3.7(a), in which case the Lead Marketing Party shall make the final decision. The expenses of a Collaboration Product recall shall be an Allowable Commercialization Expense Shared by the Parties during the Collaboration Period (unless and solely to the extent that they are Excluded Costs) and deductible from Net Sales outside the Collaboration Period, except to

the extent one Party is responsible for such expense pursuant to Article 13 (Indemnity). For the purposes of this Section 4.7, “ recall ” means: (a) a “recall” or “market withdrawal” (as such terms are defined in U.S. regulations in 21 CFR 7.3 or other similar national, state or local law or regulations) or field alert or field correction of a Collaboration Product or any lots thereof; or (b) the failure by either Party to sell or ship a Collaboration Product to Third Parties that would have been subject to the actions set forth in clause (a) above if it had been sold or shipped.

 

4.8 Sales and Inventory . Any cost incurred for booking sales, stocking inventory for itself and its sublicensees, and collecting accounts receivable, including without limitation lost material or bad debt, is recoverable by the Lead Marketing Party to the extent provided under the terms of the Financial Appendix and subject to Section 7.3.

 

4.9 Product Profits and Loss . Subject to the terms and conditions of this Agreement, during the Collaboration Period, Nuvelo and Kirin shall each be entitled to, and obligated with respect to, their respective Shares of Product Profit(Loss) in accordance with Section 7.4 or until the Collaboration Product is permanently withdrawn and is no longer being sold anywhere.

 

4.10 Partnering.

 

(a) The Lead Development Party and Lead Marketing Party are entitled to enter into a Partnering Agreement or Partnering Agreements for Development and/or Commercialization of Collaboration Compounds and Collaboration Products. If the Lead Development Party or Lead Marketing Party enters into a Partnering Agreement, neither Party (except as set forth below) shall take any action or allow any omission by its employees, agents, officers, directors or Affiliates that would result in a breach of the express terms and conditions of the Partnering Agreement, provided that the Partnering Agreement does not violate or conflict with the express terms and conditions of this Agreement and does not obligate the Non-Lead to take any action not otherwise already required in accordance with this Agreement. To avoid any doubt, this Agreement is not intended to convey any rights or benefits to any Third Party Partner. No Third Party Partner may enforce the terms of any Partnering Agreement against the Non-Lead except where the Non-Lead is a signatory to such Partnering Agreement. Where an alleged breach of the terms and conditions of a Partnering Agreement is by a Party that is a signatory to the Partnering Agreement, the other Party shall not take any action regarding such breach while the Party is disputing in good faith the breach of the Partnering Agreement with the Third Party Partner or if the alleged breach has no material impact on the other Party’s rights under this Agreement. The Parties acknowledge that a Third Party Partner, in accordance with a Partnering Agreement, may obtain a significant amount of control in a country or territory or territories over the Development and Commercialization of Collaboration Compounds and Collaboration Products, and any Commercialization activities of the Parties under this Agreement would be subject to the Partnering Agreement in the countries or territories covered by the Partnering Agreement provided that the terms and conditions of the Partnering Agreement are consistent with the express terms and conditions of this Agreement. Notwithstanding any other provision of this Article 4 or any other provision of this Agreement, the rights of the Non-Lead in accordance with this Agreement, to review, comment upon or agree upon any Development and Commercialization activities or budgets of any kind conducted in a Partnered Territory shall only apply if the Non-Lead is Sharing Development Costs and Allowable Commercialization

Expenses in the Partnered Territory; provided that the Non-Lead shall have reasonable opportunity to review Development budgets and Commercialization budgets in a Partnered Territory when not Sharing Development Costs and Allowable Commercialization Expenses in the Partnered Territory solely to the extent needed to verify that the apportionment of Development Costs and Allowable Commercialization Expenses between the Partnered Territory and the rest of the world is reasonably equitable.

 

(b) Nuvelo may not enter into a Partnering Agreement with a Kirin Competitor that includes Development or Commercialization of a Collaboration Compound or Collaboration Product in the Kirin Territory without the prior express written consent of Kirin. During the Collaboration Period and any Opt-In Period (or Change of Control Period, if it applies) the Lead Marketing Party and Lead Development Party shall keep the Non-Lead (or Opted-Out Party) informed through the JSC on substantial discussions that the Lead Development Party or Lead Marketing Party is engaging in that may lead to a Partnering Agreement, specifically, the Lead Marketing Party will provide the Non-Lead (or Opted-Out Party) and concurrently the JSC:

 

(i) at each JSC meeting, a general statement of status with respect to ongoing discussion with each Third Party with whom the Lead has entered into a binding term sheet or is trading draft Partnering Agreements;

 

(ii) copies of any term sheet generated by Nuvelo sent to a Third Party, any binding term sheet and the first draft of any Partnering Agreement;

 

(iii) each subsequent draft of any Partnering Agreement that passes between the Lead and the Third Party within 5 business days after such draft is either received by the Lead or sent by the Lead to the Third Party;

 

(iv) reasonably update the Non-Lead on the terms being negotiated with any prospective Third Party Partner and consider the Non-Lead’s comments on the draft Partner Agreements at the applicable JSC meeting; and

 

(v) within 5 business days after execution, provide the final, executed Partnering Agreement to (i) the Non-Lead for the purposes of Section 7.5(a), or (ii) the Opted-Out Party during the Opt-In Period or Change of Control Period (if it applies) to enable the Opted-Out Party to confirm the terms of the Partnering Agreement.

 

(c) The Lead is not required to obtain the Non-Lead’s consent to the final terms of any proposed Partnering Agreement. The Lead shall not be entitled to and shall not enter into any Partnering Agreement that:

 

(i) includes a grant of rights to the Third Party Partner that is broader (or other) than a grant of rights to Collaboration Compounds and the Collaboration Product; or

 

(ii) involves compounds or products that are not Collaboration Compound(s) or Collaboration Product(s), or involves the grant to the Lead of intellectual property or technology rights (including without limitation any option, license, sublicense, right

(iii) to promote, right to co-promote, right to market or right to co-market) that are not related to Collaboration Compound(s) or Collaboration Product(s); or

 

(iv) otherwise grossly misapportions value to types of revenue that will not be Shared hereunder at the expense of revenue that will be Shared hereunder.

 

By way of example but without limiting the express provisions of this Section 4.10(c): the Parties explicitly intend that the Lead shall not be entitled to enter into a Partnering Agreement in which (x) the right to promote a pharmaceutical product that is not a Collaboration Product is granted, or (y) a material portion of the consideration for a grant of Collaboration Product rights is the right to have the Third Party Partner bear commercialization start-up costs of the Lead that under the Financial Appendix would not be subject to Sharing hereunder.

 

(d) The Parties recognize that a Partnering Agreement with a Third Party Partner for the Development and/or Commercialization of a Collaboration Compound or Collaboration Product will require the Lead Development Party or Lead Marketing Party to conduct Partnering Activities and to incur Partnering Costs. Partnering Costs (to the extent not reimbursed by the Third Party) may be an element of Development Costs or Product Profit(Loss), as applicable, and reimbursed accordingly, to the full extent provided in the Financial Appendix.

 

4.11 Progress Report . On or before February 28 and August 30 of each year during the Collaboration Period, and on or before February 28 of each year during the Term outside of the Collaboration Period, following the calendar year in which the Lead Marketing Party, its Affiliates or sublicensees first begins to Commercialize any Collaboration Product, the Lead Marketing Party shall provide a semi-annual progress report to the other Party, each report covering the 6 month period preceding the due date of the report. After the first commercial sale of a Collaboration Product, the Lead Marketing Party shall provide such reports on an annual basis during the Collaboration Period covering the 12-month period preceding the due date of the report. Each report shall describe the progress made by the Lead Marketing Party and its Affiliates in the Commercialization of the Collaboration Product. Such report shall include, at a minimum, information reasonably sufficient to enable the other Party to determine that the Lead Marketing Party is using Diligent Efforts to Commercialize the Collaboration Product.

 

4.12 Opting Out at Commercial Stage . If in any country the Parties’ Product Profit(Loss) is negative (i.e. the Parties are experiencing net losses) for [*], either Party may opt out of Commercializing the Collaboration Product in such country on [*] written notice to the other Party. A Party opting-out of Commercialization of the Collaboration Product in such country shall not share in Product Profit(Loss) (positive or negative) earned or incurred after the end of the [*] notice period with respect to such country and shall not be entitled to any further compensation under this Agreement, including without limitation any Licensing Revenue or royalty, with respect to such country. Neither Party has any right under this Agreement to opt back in to any country of which it has opted-out in accordance with this Section 4.12. If a Party has opted out of any country pursuant to this Section and the other Party grants a Partnering Agreement or Partnering Agreements that cover(s) both the country or countries with respect to which the opt-out is effective under this Section 4.12 and another country or other countries, and the Non-Lead has not otherwise opted opt of the Collaboration in accordance with Section 3.7 in

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

those territories in which the Non-Lead has not opted out pursuant to Section 4.12, then the Lead must equitably apportion any License Revenue received between the country or countries with respect to which the opt-out is effective under this Section 4.12 and such other country(ies). The Lead’s apportionment in such case must be objectively reasonable and equitable. The Lead shall inform the Non-Lead of such apportionment at such time as such apportionment needs to be made for purposes of payments between the Parties in accordance with Article 7.

 

4.13 Commercial Diligence . During the Term, the Lead Marketing Party shall use Diligent Efforts to Commercialize the Collaboration Product in those countries of the world where it is commercially reasonable to Commercialize the Collaboration Product. This obligation applies both before and after any opting out, except with regard to any countries with respect to which the Non-Lead has opted out in accordance with Section 4.12.

 

ARTICLE 5

 

SUPPLY

 

5.1 Supply for Development . The Lead Development Party is entitled to either engage a Third Party to manufacture and supply such quantities of Collaboration Product as may be required for Development, or to manufacture and supply itself all or a portion of the Collaboration Product required for Development, but in any event shall do one of the foregoing so that the Collaboration Product is supplied. If Nuvelo manufactures, the Collaboration Product shall be supplied at [*] of Manufacturing Costs. If a Third Party manufactures, then the Collaboration Product shall be supplied at [*] of the price charged by the Third Party, and the time spent by Nuvelo FTEs to manage the Third Party supplier shall be excluded from the calculation of Manufacturing Costs, Development Costs and Allowable Commercialization Expenses. Manufacturing Costs for Development (with the [*]) are incorporated into Development Costs to the full extent provided in the Financial Appendix.

 

5.2 Commercial Supply.

 

(a) The Lead Marketing Party is entitled to either engage a Third Party to manufacture and supply Collaboration Product as may be required for Commercialization, or to manufacture and supply itself all or a portion of the Collaboration Product required for Commercialization (but in any event shall do one of the foregoing so that the Collaboration Product is supplied). If Nuvelo manufactures, the Collaboration Product shall be supplied at [*] of Manufacturing Costs. If a Third Party manufactures, then the Collaboration Product shall be supplied at [*] of the price charged by the Third Party, and the time spent by Nuvelo FTEs to manage the Third Party supplier shall be excluded from the calculation of Manufacturing Costs, Development Costs and Allowable Commercialization Expenses. Manufacturing Costs for Commercialization (with the [*]) are part of Cost of Goods and thus are an Allowable Commercialization Expense, in each case to the full extent provided in the Financial Appendix.

 

(b) At any time after the Effective Date but before the Commencement of the first Phase 3 Trial of a Collaboration Product (or, if earlier, the first pivotal trial of the Collaboration Product), the JSC shall discuss without any decision-making authority or ability to refer to any dispute resolution for decision-making in accordance with Section 2.4 and the Lead

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

Marketing Party shall determine, if, whether and from whom to solicit competitive bids for Commercial supply of Collaboration Product. The Lead Marketing Party shall subsequently determine, which Third Party entity, if any, shall be selected as the commercial manufacturer of the Collaboration Product. The Lead Marketing Party shall be responsible for negotiating a separate supply agreement for Commercial supply with the Third Party manufacturer, if any. Such supply agreement shall in any event: (i) provide for the Non-Lead to receive supply of Collaboration Product on the same terms and conditions as the Lead if and only if the Non-Lead becomes the Lead Marketing Party in a territory or territories in accordance with this Agreement, (ii) provide for the agreement to be assignable to the Non-Lead if there is an opt-out or termination of this Agreement resulting in the Non-Lead becoming the Lead Marketing Party or Non-Removed Party in accordance with this Agreement, and (iii) be otherwise consistent with this Agreement. The Non-Lead shall be entitled to review and comment on each draft that is to be sent to the Third Party in advance, and the Lead will reasonably consider comments provided by the Non-Lead. The Parties recognize that it may be advantageous to have more than one source for Collaboration Product, and that the Lead may enter into multiple supply agreements for Collaboration Products in accordance with this Section 5.2(b).

 

5.3 Manufacturing Approvals . The Lead Development Party shall use Diligent Efforts to make necessary filings to obtain, or to cause the then current Third Party manufacturer of Collaboration Products to make necessary filings to obtain, Regulatory Approval for the manufacture of Collaboration Compounds and Collaboration Products as part of the approval of an Approval Application for each Collaboration Product. Such filings shall include the filing and maintenance of a DMF or CMC in the United States and the equivalent thereof in the other countries of the world in which the parties seek Regulatory Approval of Collaboration Products.

 

5.4 Specifications . The Parties agree that the manufacture of clinical and commercial supplies of Collaboration Compounds and the Collaboration Product must be in full compliance with all aspects of then-current GMPs. During the Collaboration Period, the Lead Marketing Party shall prepare and submit to the JSC for review and comment draft specifications for the Collaboration Product. Such specifications shall include without limitation any necessary documentation, certificates of analysis and test results, for the Collaboration Compounds and Collaboration Products to be manufactured by Third Party manufacturer(s) or the Lead under this Article 5. During the Collaboration Period and any Opt-In Period (or Change of Control Period, if it applies) the JSC shall be notified in writing of changes in Specifications.

 

ARTICLE 6

 

LICENSES; EXCLUSIVITY

 

6.1 Licenses to Kirin.

 

(a) Ongoing License.

 

(i) Subject to the terms and conditions of this Agreement, upon the Effective Date, Nuvelo hereby grants to Kirin a worldwide license expressly subject to Section 6.3, with the right to sublicense through multiple levels of sublicensees solely as set forth in Section 1.1, under Nuvelo’s interest in the Licensed Technology, to Develop, make, have

made, use, sell, offer for sale and import Collaboration Compounds and the Collaboration Product.

 

(ii) The license set forth in Section 6.1(a)(i) terminates: (A) upon Kirin’s effective opt-out of the Collaboration in accordance with Section 3.7(a)(i); (B) for the Partnered Territory or worldwide, if Kirin opts-out on a worldwide basis, upon Kirin’s effective opt-out under Section 3.7(a)(ii) or for the Partnered Territory upon Kirin’s effective opt-out under Section 3.7(a)(iii); (C) upon termination of the Agreement by Nuvelo for material breach by Kirin in accordance with Section 11.1; (D) upon voluntary termination of this Agreement by Kirin in accordance with Section 11.2; (E) on a country-by-country basis, in each country in which Kirin has opted-out of Commercialization in accordance with Section 4.12; and (F) as set forth in Section 11.6.

 

(b) Opt-In License.

 

(i) Subject to the terms and conditions of this Agreement, effective upon the effective date of Kirin’s election to opt back in to the Collaboration in accordance with Section 3.7, Nuvelo hereby grants to Kirin a worldwide license expressly subject to Section 6.3, with the right to sublicense through multiple levels of sublicensees solely as set forth in Section 1.1, under Nuvelo’s interest in the Licensed Technology, to Develop, make, have made, use, sell, offer for sale and import Collaboration Compounds and the Collaboration Product outside any Partnered Territory.

 

(ii) The license set forth in Section 6.1(b)(i) terminates: (A) upon Kirin’s subsequent effective opt-out of the Collaboration in accordance with Section 3.7(a)(i); (B) upon termination of the Agreement by Nuvelo for material breach by Kirin in accordance with Section 11.1; (C) upon voluntary termination of this Agreement by Kirin in accordance with Section 11.2; (D) on a country-by-country basis, in each country in which Kirin has opted-out of Commercialization in accordance with Section 4.12, and (E) as set forth in Section 11.6.

 

6.2 Licenses to Nuvelo.

 

(a) Ongoing License.

 

(i) Subject to the terms and conditions of this Agreement, upon the Effective Date, Kirin hereby grants to Nuvelo a worldwide license expressly subject to Section 6.3, with the right to grant sublicenses through multiple levels of sublicensees solely as set forth in Section 1.1, under Kirin’s interest in the Licensed Technology, to Develop, make, have made, use, sell, offer for sale and import Collab