COLLABORATION AND LICENSE AGREEMENT

 

This Collaboration and License Agreement (the “Agreement”) is made as of October 17, 2005 (the “Execution Date”) by and between Sonus Pharmaceuticals, Inc., a Delaware corporation (“Sonus”), and Schering AG, a German corporation (“Schering”).  Sonus and Schering are sometimes referred to collectively herein as the “Parties” or singly as a “Party.”

 

RECITALS

 

WHEREAS, Sonus has developed a novel formulation of paclitaxel, known as TOCOSOL® Paclitaxel, a cancer therapy product;

 

WHEREAS, Schering possesses substantial resources and expertise in the research, development, manufacturing, marketing and sale of pharmaceutical products; and

 

WHEREAS, Schering and Sonus desire to collaborate to develop, promote and commercialize the Product in the Territory for use in the Field;

 

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants and agreements contained herein, the Parties hereto, intending to be legally bound, do hereby agree as follows:

 

AGREEMENT

 

ARTICLE I
DEFINITIONS

 

The following terms as used in this Agreement shall, unless the context clearly indicates to the contrary, have the meaning set forth below:

 

“Act” means the United States Food, Drug and Cosmetics Act, as amended from time to time and regulations promulgated thereunder.

 

“ Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with such Person.  For the purposes of this definition, a Person shall be deemed to control another Person if such Person possesses the power to direct or cause the direction of the management, business and policies of such Person, whether through ownership of fifty percent (50%) or more of the voting securities of such Person, by contract or otherwise.

 

“Applicable Laws” means all applicable laws, statutes, rules, regulations, orders, judgments, injunctions and/or ordinances of any Governmental Authority in the Territory, including but not limited to: laws, rules and regulations governing the import, export, development, manufacturing, marketing, distribution and sale of the Product in the Territory; all current Good Clinical Practices, Good Manufacturing Practices or current Good Laboratory Practices standards promulgated by the FDA or other Governmental Authorities, where applicable; U.S. export control laws and the U.S. Foreign Corrupt Practices Act and equivalent statutes of any other Governmental Authority; and, for the U.S., the Guidance of the U.S. Department of Health and Human Services, Office of Inspector General, entitled “Compliance Program for Pharmaceutical Manufacturers” released in April 2003,

 

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as it may be amended from time to time, and equivalent laws, regulations and guidances in other countries.

 

“Approval” means any approval (including, without limitation, Pricing Approvals), registration, license or authorization from any Governmental Authority required for the manufacture, development, Co-Promotion, distribution, sale, storage or transport of the Product in the Field in any country of the Territory, and shall include, without limitation, an approval, registration, license or authorization granted in connection with, any Approval Application.

 

“Approval Application” means the submission to the relevant Governmental Authority of an appropriate application seeking any approval, registration, license or authorization from any Governmental Authority required for the manufacture, development, Co-Promotion, distribution, sale, storage or transport of the Product in the Field in any country of the Territory, and shall include, without limitation, a marketing authorization application, supplementary application or variation thereof, Pricing Approval, NDA, HRD or any equivalent application in any country of the Territory.

 

“Audit Disagreement” has the meaning set forth in Section 8.03(d).

 

“Bankruptcy Event” has the meaning set forth in Section 16.02(c).

 

“Business Day” means a day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in the States of Washington or New Jersey, US, or in Berlin, Germany.

 

“Clinical Development” means all activities relating to planning and execution of clinical studies in humans directed towards obtaining Approval of a Product, including but not limited to Phase 1 clinical trials, Phase 2 clinical trials, Phase 3 clinical trials and Phase 4 clinical trials but does not include any activities falling within the definition of CMC/Manufacturing or ISS Activities.

 

“CMC/Manufacturing” means the development of one or more processes for the manufacture and packaging of the Product for Preclinical Development, Clinical Development and Commercialization necessary to achieve a scale of [*] per aggregate batch, defined as the sum of the batch size capacities of development facilities.  This includes, without limitation, formulation, production, fill-finish, sourcing of plant, equipment, components, raw materials and packaging supplies, development of regulatory methods and controls, including assays, quality control and quality assurance methodology and stability protocols, and qualification and scale-up of one or more production facilities.

 

“CMC/Manufacturing Costs” means the Development Costs incurred by a Manufacturing Party or for its account consistent with the CMC/Manufacturing Plan and Budget and specifically attributable to the CMC/Manufacturing of the Product.

 

“CMC/Manufacturing Plan and Budget” means a written development plan and budget providing for the CMC/Manufacturing of the Product in the Territory, as updated, amended, supplemented and otherwise modified from time to time by the Steering Committee.

 

[*]                                  CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE COMMISSION

 

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“Commercialize” means to promote, market, use for commercial purposes, import, export, distribute and sell or offer to sell, or to the extent permitted under this Agreement to have any of those things done, and “ Commercialization ” has a corresponding meaning.

 

“Commercially Reasonable Efforts” means, with respect to the efforts to be expended by a Party with respect to any objective, such reasonable, diligent and good faith efforts as would normally be expended by a reasonably prudent pharmaceutical company to accomplish a similar objective with respect to a product at a similar stage in its development or product life and of similar market potential, taking into account efficacy, safety, anticipated or approved labeling, the competitiveness of alternative products in the marketplace, the patent and other proprietary position of the Product, the likelihood of Approval given the regulatory structure involved, the profitability of the Product and other relevant factors.

 

“Confidential Information” means Information and any other information and materials regarded by the disclosing Party as confidential (including, without limitation, information relating to the Sonus Technology) furnished by one Party to the other pursuant to this Agreement and all Information created or developed during the course of the Parties’ collaboration hereunder, whether in oral, written, graphic or electronic form.  Confidential Information shall not include any information which the receiving Party can prove by competent evidence:

 

(a)                                   is now, or hereafter becomes, through no act or failure to act on the part of the receiving Party, generally known or available;

 

(b)                                  is known by the receiving Party, without obligations of confidentiality, at the time of receiving such information, as demonstrated by written evidence;

 

(c)                                   is hereafter furnished to the receiving Party by a Third Party, as a matter of right and without restriction on disclosure;

 

(d)                                  is independently developed by the receiving Party without the aid, application or use of, the disclosing Party’s Confidential Information, as demonstrated by written evidence; or

 

(e)                                   is the subject of a written permission to disclose provided by the disclosing Party.

 

“Co-Promotion” means marketing and promotional activities with respect to the Product in the Field, including, without limitation, detailing of the Product.

 

“Core Development” means: (i) all Preclinical Development, Clinical Development, and regulatory affairs activities, regardless of where they are performed, which are part of the Core Development Plan for the Product for the Field and which the Steering Committee believes are reasonably necessary to obtain or maintain NDA Approval in the US for the Product for the Core Indications, and shall include, without limitation, any post-Approval studies required by a Governmental Authority with respect to such NDA Approval; and (ii) all ISS Activities to be performed in the US and which the Steering Committee believes are reasonably necessary or desirable for the Development of the Product in the Field in the US.

 

“Core Development Costs” means those Development Costs incurred in the performance of Core Development in accordance with the Core Development Plan and Budget.

 

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“Core Development Plan and Budget” means a written development plan and budget providing for the performance of Core Development, as updated, amended, supplemented and otherwise modified from time to time by the Steering Committee in accordance with Section 5.02(b).

 

“Core Indications” shall mean those Indications for which the Parties wish to jointly develop the Product as part of their Core Development activities hereunder, which Indications are identified as Core Indications in the Initial Development Plan and Budget, together with such additional Indications as may be identified as Core Indications in the Core Development Plan as updated and modified from time to time in accordance with this Agreement.

 

“Development” and “Develop ” shall refer to all activities relating to PreclinicaI Development, Clinical Development, regulatory activities, CMC/Manufacturing and ISS Activities.

 

“Development Costs” means the total of: (i) the cost of Development FTEs, calculated in accordance with Section 5.09(c); and (ii) Out-of-Pocket Costs, in each case incurred by a Party or for its account consistent with the Development Plan and Budget and specifically attributable to the Development of the Product.

 

“Development FTE” means a full-time equivalent person year for a person engaged in Development activities.  The Parties’ respective Development FTE costs shall be included in the applicable Development Plan and Budget and shall be reviewed and mutually agreed upon annually by the Steering Committee in accordance with Section 5.09(c).

 

“Development Plan and Budget” means: (i) the Core Development Plan and Budget; and (ii) the CMC/Manufacturing Plan and Budget, agreed upon by the Parties in accordance with Sections 5.02 and 5.03 respectively of this Agreement, as updated, amended, supplemented and otherwise modified from time to time by the Steering Committee in accordance with this Agreement.

 

“Execution Date” means the date first written above in the introductory paragraph of this Agreement.

 

“EMEA” means the European Medicines Evaluation Agency, or successor agency thereto.

 

“EU Approval” means receipt by Schering or its Affiliate or sublicensee of the EU Commission’s written decision granting Approval for the marketing and sale of the Product in the Field in the EU, or in the case of Approvals granted pursuant to the de-centralized procedure, the written decisions of all Major EU Member States granting Approval for the marketing and sale of the Product in the Field in their respective regulatory jurisdictions.

 

“European Union” or “EU” means the countries of the European Union as constituted from time to time.

 

“EU Commission” means the Commission of the European Communities or successor agency thereto.

 

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

 

“Field” means all uses of the Product for the diagnosis, prevention, treatment, cure or mitigation of all disease states, conditions, disorders and indications in humans or in animals.

 

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“GAAP” means those generally accepted accounting principles in agreement with IFRSs.

 

“Generic Product” means a product which, if sold in the US on the Execution Date, would infringe a Valid Claim of a Sonus Patent.

 

“Good Clinical Practices” means the Good Clinical Practices guidelines published by the FDA, and published standards of the FDA (or other standards of the FDA that are generally recognized within the United States pharmaceutical industry) that relate to the conduct of clinical studies in humans.  Good Clinical Practices also includes similar standards, guidelines and regulations promulgated or otherwise required by Governmental Authorities in any country of the Territory that relate to the conduct of clinical studies in humans including, without limitation, the ICH Harmonised Tripartite Guideline for Good Clinical Practice, as amended from time to time.

 

“Good Manufacturing Practices” means current Good Manufacturing Practices as defined from time to time by the applicable FDA regulations in effect for the manufacture, handling, testing, storage and control of pharmaceutical materials as applied to “finished products” in the United States of America and the corresponding requirements of each Governmental Authority within the Territory.

 

“Good Laboratory Practices” means the current Good Laboratory Practices as defined by the applicable FDA regulations in effect for nonclinical laboratory studies that support applications for research and marketing of products regulated by the FDA in the United States of America and the corresponding requirements of each Governmental Authority in the Territory in which the Product is to be marketed and sold.

 

“Governmental Authority” means any court, agency, authority, department, regulatory body or other instrumentality of any government or country or of any national, federal, state, provincial, regional, county, city or other political subdivision of any such government or any supranational organization of which any such country is a member including, without limitation, the FDA for the United States, the EMEA and EU Commission for the EU and the MHLW for Japan.

 

“HRD” means a health registration dossier covering the Product for the Field, filed in any country in the Territory and which is analogous to an NDA.

 

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

“IFRSs” mean international financial reporting standards, as published by the International Accounting Standards Board and its predecessor, the International Accounting Standards Committee.

 

“Improvements” means any and all developments, inventions or discoveries owned, controlled or licensed by Sonus, or its Affiliates, at any time during the Term hereof, which do not relate specifically to the Product but which may be of benefit to the Development or Commercialization of the Product, and shall include, but not be limited to, developments which may enhance the safety and/or efficacy of the Product, or a combination product or new formulation of the Product for use in the Field.

 

“IND” means an Investigational New Drug application required for approvals or authorizations from the FDA to commence human clinical testing of a drug, as defined by the FDA, or the equivalent application in another country.

 

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“Indication” means a particular application of the Product in the Field.

 

“Information” means (i) techniques, data, and information relating to the Product, including, but not limited, to inventions, practices, methods, knowledge, know-how, skill, trade secrets, experience, test data including pharmacological, toxicological, preclinical and clinical test data; data, records and information derived from Preclinical Development, Clinical Development and ISS Activities; Approval Applications, adverse reactions, CMC/Process Development, analytical and quality control data, marketing, pricing, distribution, cost, sales and manufacturing data or descriptions and, (ii) compounds, compositions of matter, assays and materials relating to the Product.

 

“Initial Development Plan and Budget” means the initial Development Plan and Budget concerning the Development of the Product set out in Schedule Ito this Agreement.

 

“Investigator Sponsored Study ” or “ISS” means any clinical study with respect to the Product in the Field where the sponsor of the study is a physician or group of physicians acting as sponsor-investigator(s) and neither of the Parties nor any of their Affiliates or sublicensees accept the role of sponsor or co-sponsor of such a study.

 

“ISS Activities” means interactions with physicians relating to the conduct of Investigator Sponsored Studies (including discussion of potential Investigator Sponsored Studies) and the processing of appropriate agreements pursuant to which a Party provides support (in the form of funding or drug supply) for Investigator Sponsored Studies for the Product in the Field.

 

“Loss” means the losses as defined in Section 12.01.

 

“Major EU Member States” means Germany, France, Italy, Spain, United Kingdom, Belgium, The Netherlands and Luxembourg.

 

“Manufacturing Party” means the Party who is from time to time responsible for: (i) manufacture and supply of Product for use during Development, or (ii) manufacture and supply of Product for use during Commercialization.

 

“Marketing Plan” means the marketing plan as provided in Section 6.01.

 

“MHLW” means the Japanese Ministry of Health, Labor and Welfare, including the agency responsible for regulating the development and commercialization of human pharmaceuticals in Japan, and any successor agency.

 

“MHLW Approval” means receipt by Schering or its Affiliate or sublicensee of the official approval letter from the MHLW approving the marketing and sale of the Product in the Field in Japan under an HRD.

 

“NDA” means New Drug Application, as described in FDA regulations, 21 C.F.R.  50, including all amendments and supplements to the application.

 

“NDA Approval” means receipt by Schering, its Affiliate or permitted sublicensee of the official approval letter from the FDA approving the marketing and sale of the Product in the Field in the United States of America under an NDA or supplemental NDA, as applicable.

 

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“Net Sales” means, for any period, the amount invoiced for sales by Schering, its Affiliates or sublicensees, of Product in the Territory to Third Parties less the following deductions:

 

(a)                                   distributors’ fees, fees paid to wholesalers or other entities in the chain of distribution, quantity discounts, cash discounts, chargebacks, rebates or allowances actually paid, granted, allowed or incurred in the ordinary course of business in connection with the sale of a Product;

 

(b)                                  allowances or credits to customers in the ordinary course of business in connection with the sale of a Product, not in excess of the selling price of such Product, on account of outdating, recall, market withdrawal, rejection, or return of such Product;

 

(c)                                   sales and excise taxes, customs brokers fees or customs duties paid by the selling Party, and any other governmental charges imposed upon the sale of a Product and paid by the selling Party;

 

(d)                                  transportation charges, and related charges such as insurance relating to the shipment of Product to the customer, and paid by the selling Party;

 

(e)                                   fees paid to governmental agencies based on the sales volume (expressed in units or currency) or selling price of a Product, such as Medicaid rebates paid to Medicaid authorities, and paid by the selling Party;

 

(f)                                     costs of customer programs such as cost effectiveness or patient assistance studies or programs designed to aid in patient compliance with medication schedules, in the ordinary course of business in connection with the sale of a Product; and

 

(g)                                  all actual bad debts.

 

Components of Net Sales shall be determined in the ordinary course of business and using the accrual method of accounting in accordance with GAAP.  Any deductions listed above which involve a payment by a party shall be taken as a deduction against aggregate sales for the period in which the payment or deduction is made.  Sales of a Product between the selling Party and its Affiliates or sublicensees shall be excluded from the computation of Net Sales.  Net Sales will be accounted for in accordance with IFRSs, consistently applied.

 

For the purpose of calculating a selling Party’s Net Sales, the Parties recognize that: (a) a Party’s customers may include persons in the chain of commerce who enter into agreements with a Party as to price even though title to the Product does not pass directly from a Party to such customers, and even though payment for such Product is not made by such customers directly to a Party, and (b) in such cases chargebacks paid by a Party to or through a Third Party (such as a wholesaler) can be deducted by a Party from gross revenue in order to calculate a Product’s Net Sales.

 

In the event that Schering or its Affiliates or sublicensees sells Product (or offers any rebate or discount or any other reduction in the price of Product) to a Third Party in return for any form of consideration other than money (for example, in return for obtaining more favorable pricing for Schering or its Affiliates or sublicensees on other products), then the amount of such reasonable

 

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value of such non-cash consideration will be included in assessing any payments due to Sonus as if such non-cash consideration were payment in cash for sales of the Product.

 

“Non-Core Development” means: (i) Preclinical Development, Clinical Development, or regulatory affairs activities that do not constitute Core Development but which are performed for the purpose of obtaining or maintaining Approval in the US, regardless of where such Preclinical Development or Clinical Development is actually performed; and (ii) ISS Activities performed in the US that do not constitute Core Development.

 

“Non-Core Development Costs” means Development Costs incurred in the performance of Non-Core Development.

 

“Operating Profits on US.  Net Sales” means the profits before interest and taxes of Schering from the sale of the Product in the United States determined in accordance with IFRSs.

 

“Out-of-Pocket Costs” means direct expenses paid or payable to Third Parties (other than employees or employees of an Affiliate) that are: (i) specifically identifiable and incurred in the Development of the Product in the Field in the Territory; and (ii) recorded as income statement items in accordance with IFRSs.  For avoidance of doubt, Out-of-Pocket Costs shall not include pre-paid amounts or capital expenditures-

 

“Patent” means all existing US patents and patent applications and all US patent applications hereafter filed, including any continuation, continuation-in-part, division, provisional or any substitute applications, any patent issued with respect to any such patent applications, any reissue, re-examination, renewal or extension (including any supplemental protection certificate) of any such patent, and any confirmation patent or registration patent or patent of addition based on any such patent, and all foreign counterparts of any of the foregoing that are now owned or controlled or hereafter acquired or controlled by a Party or its Affiliates.  “Patents” also includes a Supplementary Certificate of Protection of a member state of the EU and any other similar protective rights in any other country.

 

“Patent Committee” means the patent committee established by the Parties pursuant to Section 9.04 of this Agreement.

 

“Person” means any individual, partnership, joint venture, limited liability company, corporation, firm, trust, association, unincorporated organization, governmental authority or agency, or any other entity not specifically listed herein.

 

“Pharmacovigilance Agreement ” means the pharmacovigilance agreement concerning exchange and reporting of pharmacovigilance information to be entered into by the Parties in accordance with Section 8.02 of this Agreement.

 

“Phase 3 Clinical Trial” has the meaning set forth in 21 CFR 312.21(c), as amended from time to time.

 

“Pivotal Trial” means the Phase 3 clinical trial of approximately 800 evaluable patients conducted under protocol number SON-8184-1075.

 

“Preclinical Development” means all activities relating to the planning and execution of non-human studies conducted in in vitro or in relevant in vivo animal models directed toward obtaining

 

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Approval of a Product in each regulatory jurisdiction in the Territory.  This includes preclinical testing, pharmacokinetics, toxicology, documentary and medical writing directly related to Preclinical Development activities and related regulatory affairs.

 

“Pricing Approval” means, in countries of the Territory where Governmental Authorities may approve or determine pricing or pricing reimbursement for pharmaceutical products, and where such pricing or reimbursement approval is reasonably necessary for widespread sales of the Product, such approval or determination.

 

“Product” means the product known as TOCOSOL Paclitaxel, as more particularly described in Exhibit A, and any other formulation of unmodified paclitaxel that uses