LICENSE AND COLLABORATION AGREEMENT

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Exhibit 10.26

***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(b)(4)
and 240.24B-2

LICENSE AND COLLABORATION AGREEMENT

         THIS LICENSE AND COLLABORATION AGREEMENT (this "Agreement" ) is entered into as of January 9, 2004 (the "Effective Date" ) by and between FOREST LABORATORIES IRELAND LIMITED , an Irish corporation ( "Forest" ), having its principal executive offices at Clonshaugh Industrial Estate, Clonshaugh, Dublin 17, Republic of Ireland, and CYPRESS BIOSCIENCE, INC. , a Delaware corporation ("Cypress"), having offices at 4350 Executive Drive, Suite 325, San Diego, CA 92121, United States of America.

RECITALS

         WHEREAS, Cypress and Pierre Fabre Médicament ( "Pierre Fabre" ) entered into the Third Restated License Agreement as of the date hereof, as may be amended (the "License Agreement "), a copy of which has been provided to Forest, pursuant to which Pierre Fabre granted to Cypress an exclusive license to certain patents and know-how to develop and commercialize Milnacipran (as defined below);

         WHEREAS, Cypress and Pierre Fabre also entered into the First Restated Trademark License Agreement as of the date hereof, as may be amended (the "Pierre Fabre Trademark Agreement" ), a copy of which has been provided to Forest, pursuant to which Pierre Fabre granted an exclusive license to Cypress to certain trademarks; and

         WHEREAS, Forest desires to acquire, and Cypress is willing to grant to Forest, an exclusive license under patents and know-how controlled by Cypress to develop and commercialize Milnacipran, including a sublicense of the rights granted to Cypress by Pierre Fabre under the License Agreement and the Pierre Fabre Trademark Agreement, all on the terms and conditions set forth in this Agreement.

AGREEMENT

         NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.     DEFINITIONS

        For purposes of this Agreement, the following capitalized terms shall have the following meanings:

         1.1    "Administrator" shall have the meaning set forth in Section 16.2(a).

         1.2    "Affiliate" shall mean any company or entity controlled by, controlling, or under common control with a party hereto. For this purpose, the term "control" shall mean the direct or indirect ownership of more than 50% of the voting stock or other ownership interests of that entity, or the power, directly or indirectly to cause the direction of the management and policies of such entity.

         1.3    "Agreement" shall have the meaning set forth in the introductory paragraph.

         1.4    Allowable Costs and Expenses" shall mean those costs and expenses incurred by Forest or for its account that are specifically attributable or related to the manufacturing, marketing or

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selling of a Generic Product in the Licensed Territory, and consisting of: Cost of Goods, General and Administrative Expenses, and Sales and Marketing Expenses, using the following defined terms.

         (a)    "Allocable Overhead" means (for any particular cost item) Forest's internal allocation, based on direct project headcount or other generally accepted activity based accounting methods, of indirect overhead costs incurred by Forest to support and carry out the activities of the specific business function, such as manufacturing, and sales and marketing, with respect to Generic Product for the Licensed Territory, which indirect costs may include but are not limited to: indirect labor costs; occupancy costs; repair and maintenance costs; office supplies and service costs; equipment costs; insurance costs; and outside professional and other service costs. Such overhead will exclude any indirect costs associated with any excess or unused capacity not directly related to Generic Product for the Licensed Territory. Furthermore, overhead costs of Forest that are not directed to the manufacturing, marketing or selling of a Generic Product in the Licensed Territory will not be recoverable as Allocable Overhead or otherwise, except as expressly provided herein.

         (b)    "Cost of Goods" shall mean the cost of Generic Product shipped in either bulk or final therapeutic form, as applicable. As used herein, the cost of Generic Product means (a) in the case of products and services acquired from Third Parties, payments made to such Third Parties, including without limitation, royalties paid to Pierre Fabre or other Third Parties, and (b) in the case of manufacturing services performed by Forest or its Affiliates, including manufacturing services in support of Third Party manufacturing, the actual unit costs of manufacture in bulk form or final manufacturing, as the case may be, plus the variances and other costs specifically provided for herein. Actual unit costs shall consist of direct material and direct labor costs and Allocable Overhead specifically attributable to the Generic Product at standard unit costs, all calculated in accordance with reasonable cost accounting methods, consistently applied, of Forest. Direct material costs shall include the costs incurred in purchasing materials, including sales and excise taxes imposed thereon and customs duty and charges levied by government authorities, and all costs of packaging components. Direct labor shall include the cost of employees engaged in direct manufacturing activities and direct or indirect quality control and quality assurance activities who are directly employed in Generic Product manufacturing and packaging. Allocable Overhead included in Cost of Goods shall include other indirect costs associated with the operating unit(s) manufacturing Generic Product for the Licensed Territory. Such Allocable Overhead will include, but not be limited to, expenses associated with: warehousing of Generic Product in the Licensed Territory; quality assurance, manufacturing and engineering associated with the operating unit(s) manufacturing Generic Product for the Licensed Territory; and depreciation, repairs and maintenance, insurance and property taxes associated with the plant(s) manufacturing Generic Product for the Licensed Territory. Allocable Overhead will not include costs associated with capacity not incorporated into standard unit costs. Standard unit costs will exclude costs associated with excess or unused capacity not directly related to Generic Product for the Licensed Territory.

         (c)    "General and Administrative Expenses" shall mean Forest's customary allocation, based on direct project headcount or other generally accepted activity-based accounting methods, of the costs of the following corporate general and administrative functions of Forest incurred to support or facilitate the manufacturing, marketing or selling of Generic Products in the Licensed Territory: finance and accounting; purchasing and receiving; management information systems; facilities; human resources; executive management; and legal, patent and trademark. Such costs include, but not limited to, the costs of employees performing such functions, the direct costs of supporting such individuals in the performance of their jobs (e.g., travel, floor space, computers and other supplies and telephones) and the actual cost of outside services

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(e.g., consulting and audit services). In view of the manner in which General and Administrative Expenses are calculated, administration expenses will be excluded from the definition of each of the other cost items that make up Allowable Costs and Expenses. Notwithstanding any other provision of this Agreement, total General and Administrative Expenses will not exceed 35% of Net Sales of such Generic Product in the Licensed Territory in any quarter, except as otherwise agreed in writing by the parties.

         (d)    "Sales and Marketing Expenses" shall mean the costs which are incurred by Forest or for its account attributable to the distribution, sale, promotion and marketing of Generic Product in the Licensed Territory, calculated on a fully burdened basis (i.e., including Allocable Overhead specifically attributable thereto). Sales and Marketing Expenses shall mean the sum of Selling Expenses, Marketing Management, Market and Consumer Research, Advertising, Trade Promotion, Consumer Promotion, Education Expenses and Freight and Transportation—Out, each of which is specified below. The costs of activities which promote Forest's business as a whole without being product specific (such as corporate image advertising) are specifically excluded from Sales and Marketing Expenses. To the extent multiple products are involved and some of such products are not Generic Product, then such allowances will be allocated on a pro rata basis based upon net sales of each respective product by such operating unit during the most recent quarter. Within 30 days of the end of a calendar year, the parties will make reconciling payments, if any are required, to reflect any difference between actual costs and such allocation for such year.

         (i)     "Advertising" will include, but not be limited to, all media costs associated with Generic Product advertising in the Licensed Territory as follows: production expense/artwork including set up; design and art work for an advertisement; the cost of securing print space, air time, etc. in newspapers, magazines, trade journals, television, radio, billboards, etc.

         (ii)    "Consumer Promotion" will include, but not be limited to, the expenses associated with programs to promote Generic Product in the Licensed Territory directly to the prescriber or end user. This category will include, but not be limited to, expenses associated with promoting products directly to the professional community such as professional samples, professional literature, promotional material costs, patient aids and detailing aids. To the extent multiple products are involved and some of such products are not Generic Product, then such allowances will be allocated on a pro rata basis based upon net sales of each respective product by such operating unit during the most recent quarter.

         (iii)    "Education" will include, but not be limited to, expenses associated with professional education with respect to a Generic Product in the Licensed Territory through any means not covered above, including, but not limited to, articles appearing in journals, newspapers, magazines or other media; seminars, scientific exhibits, and conventions; and symposia, advisory boards and opinion leader development activities.

         (iv)    "Freight and Transportation—Out" will include (to the extent not already recovered in the calculation of Net Sales), but not limited to, the portion of distribution costs relating to moving Generic Product in the Licensed Territory from a warehouse to the customer as follows: outbound transportation costs; costs of moving goods from a manufacturing point to a warehouse at another location from which it is ultimately to be distributed to a customer; the costs of the traffic department where there is a separate department that has responsibility for administration of freight costs.

         (v)    "Market and Consumer Research" will include, but not be limited to, compensation and departmental expenses for market and consumer research personnel

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and payments to Third Parties related to conducting and monitoring professional and consumer appraisals of existing, new or proposed Generic Product in the Licensed Territory, such as market share services (e.g., IMS data), special research testing and focus groups.

         (vi)    "Marketing Management" will include, but not be limited to, product management and sales promotion management compensation and departmental expenses. This will include, but not be limited to, costs associated with developing overall sales and marketing strategies (e.g., product line or customer segment), as well as planning and programs for Generic Product in the Licensed Territory. In addition, payments to Third Parties in connection with trademark selection, filing, prosecution and enforcement in the Licensed Territory will be included in this category.

         (vii)    "Selling Expenses" will include, but not be limited to, the following costs directly associated with the efforts of field sales representatives with respect to Generic Product in the Licensed Territory: field sales force; field sales offices; home offices; staffs directly involved in the management of and the performance of the selling functions; and payments to Third Parties under contract sales and marketing agreements. The costs of detailing sales calls will be allocated on a weighted average basis based on the proportionate time and effort given to the detailing of Generic Product versus product other than Generic Product at an accounting charge rate consistently applied within and across Forest's or a Third Party's operating units and which is no less favorable than the internal charge rate used by Forest or such Third Party for its own internal cost accounting purposes for products other than Generic Product (excluding internal profit margins and markups).

         (viii)    "Trade Promotion" will include, but not be limited to, the allowances given to retailers, brokers, distributors, hospital buying groups and similar groups for purchasing, promoting, and distribution of Generic Product in the Licensed Territory. This will include, but not be limited to, purchasing, advertising, new distribution, and display allowances as well as free goods, wholesale allowances and reasonable field sales samples.

         1.5    "ANDA" shall mean an Abbreviated New Drug Application filed with the FDA (as more fully defined in 21 USC. §355(j)), or the equivalent application filed with any equivalent agency or governmental authority outside the United States (including any supra-national agency such as in the European Union) requiring such filing.

         1.6    "ANDA Proceeding" shall have the meaning set forth in Section 11.4(b).

         1.7    "Annual Cypress Percentage" shall have the meaning set forth in Section 3.5(b).

         1.8    "API" shall mean the active pharmaceutical ingredient Milnacipran contained in Licensed Product.

         1.9    "Arbitrators" shall have the meaning set forth in Section 16.2(a).

         1.10    "Bulk Licensed Product" shall mean Licensed Product in final dosage form or any Forest Formulation, as defined in the Letter Agreement.

         1.11    "Change in Control" means (i) a sale, lease or other disposition of all or substantially all of the assets of the company; (ii) a merger or consolidation of the company in which the holders of the company's outstanding voting stock immediately prior to such transaction own, immediately after such transaction, securities representing less than 50% of the voting power of such company or such company's parent or, if such company is not the surviving entity, any other entity surviving such transaction or the surviving entity's parent; or (iii) an acquisition by any person, entity or group within the meaning of Section 13(d) or 14(d) of the Securities and Exchange Act of 1934, as

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amended (the "Exchange Act" ), or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the company or any entity controlled by such company) of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule) of securities of the company representing at least 50% of the combined voting power entitled to vote in the election of the members of the Board of Directors; provided, however, that clause (ii) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the company or the name of the company.

         1.12    "Claim" shall have the meaning set forth in Section 16.2(a).

         1.13    "Collegium" shall mean Collegium Pharmaceutical, Inc.

         1.14    "Collegium Agreement" shall mean the Reformulation and New Product Agreement between Collegium and Cypress dated August 22, 2002, as may be amended.

         1.15    "Confidential Information" shall have the meaning set forth in Section 13.1.

         1.16    "Control" shall mean, with respect to any Information or intellectual property right, possession by a party of the ability (whether by ownership, license or otherwise, other than any license granted under this Agreement) to grant access, a license or a sublicense to such Information or intellectual property right as provided for herein without violating the terms of any agreement or other arrangement with any Third Party as of the time such party would first be required hereunder to grant the other party such access, license or sublicense, or at any other time during the term of such access, license or sublicense.

         1.17    "Co-Promotion Rights" shall have the meaning set forth in Section 3.7.

         1.18    "Cypress" shall have the meaning set forth in the introductory paragraph.

         1.19    "Cypress Analog" shall mean all analogs of Milnacipran, and products that contain or are comprised of the foregoing, that are Controlled by Cypress other than pursuant to the License Agreement.

         1.20    "Cypress Collegium Compounds" shall have the meaning set forth in Section 2.4(d).

         1.21    "Cypress Compound" shall mean all Cypress Analogs and Cypress Formulations.

         1.22    "Cypress FDA Contact" shall have the meaning set forth in Section 3.2.

         1.23    "Cypress Formulation" shall mean all formulations of Milnacipran, and products that contain or are comprised of the foregoing, that are Controlled by Cypress other than pursuant to the License Agreement.

         1.24    "Cypress Information" shall mean all data and Information developed or acquired by or for Cypress or its Affiliates in the course of performance of the Agreement. Cypress Information excludes Licensed Patents.

         1.25    "Cypress Sales Force" shall mean those members of Cypress' sales force (whether Cypress employees, contractors or agents), who promote Licensed Product pursuant to the exercise of the Promotion Rights.

         1.26    "Cypress Trademark Agreement" shall have the meaning set forth in Section 5.2.

         1.27    "Date of First Commercial Sale" shall mean the actual date of first commercial sale of a Licensed Product in the Licensed Territory.

         1.28    "Development Plan" shall mean the development plan relating to the development of Licensed Product in the Field, including but not limited to, the current two planned Phase III clinical trials and extensions for Licensed Product, in the form attached as Exhibit A , as may be

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amended from time to time by written agreement of Cypress and Forest, which plan shall allocate the responsibilities of Cypress and Forest in conducting development activities.

         1.29    "Effective Date" shall have the meaning set forth in the introductory paragraph.

         1.30    "Equity Issuance Agreement" shall mean the Equity Issuance Agreement between Cypress and Forest to be entered into within 30 days of the Effective Date.

         1.31    "Estimated Date of First Commercial Sale" shall mean the estimated Date of First Commercial Sale of a Licensed Product in the Licensed Territory.

         1.32    "Exclusive Period" shall have the meaning set forth in Section 2.4(e).

         1.33    "FDA" shall mean the United States Food and Drug Administration or any successor agency.

         1.34    "Field" shall mean any and all indications.

         1.35    "Finished Licensed Product" shall mean Licensed Product in final dosage form including final packaging and ready for use by the consumer.

         1.36    "FMS" shall mean the prevention and treatment of fibromyalgia syndrome.

         1.37    "Forest" shall have the meaning set forth in the introductory paragraph.

         1.38    "Forest Information" shall mean all data and Information developed or acquired by or for Forest or any of its Affiliates or sublicensees in the course of performance of, or pursuant to any right granted under, this Agreement.

         1.39    "Forest Parent" shall mean Forest Laboratories, Inc., a Delaware corporation.

         1.40    "Forest Product" shall have the meaning set forth in Section 5.4(c).

         1.41    "Forest Sales Force" shall mean those members of Forest's sales force (whether Forest employees, contractors or agents), who promote Licensed Product, but excluding the Cypress Sales Force.

         1.42    "FTE" shall mean the equivalent of the work time of an employee or consultant of Cypress with appropriate qualifications performing work under the R&D Plan on a full-time basis over a 12-month period (including normal vacations, sick days and holidays).

         1.43    "Generic Product" shall have the meaning set forth in Section 2.3.

         1.44    "Hatch-Waxman Act" shall mean the Drug Price Competition and Patent Term Restoration Act of 1984, as amended.

         1.45    "Impairment" shall mean the registration, marketing or sale of a product for FMS (excluding a Licensed Product) during the Exclusive Period.

         1.46    "IND" shall mean an Investigational New Drug Application filed with the FDA, or the equivalent application or filing necessary to commence human clinical trials in another country or other jurisdiction, as applicable.

         1.47    "Indemnifying Party" shall have the meaning set forth in Section 15.2.

         1.48    "Information" shall mean all tangible and intangible (a) techniques, technology, practices, trade secrets, inventions (whether or not patentable), methods, manufacturing processes, knowledge, know-how, skill, experience, test data and results (including pharmacological, toxicological and clinical test data and results), analytical and quality control data, results or descriptions and software, (b) compounds, compositions of matter, cells, cell lines, assays, and

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physical, biological or chemical material, and (c) marketing data, including clinical studies designed to support promotional efforts.

         1.49    "IR Formulation" shall mean the immediate release formulation in capsule form containing Milnacipran.

         1.50    "Joint Development Committee" shall have the meaning set forth in Section 9.1.

         1.51    "Joint Patents" shall have the meaning set forth in Section 11.8.

         1.52    "Letter Agreement" shall mean the agreement to be entered into among Pierre Fabre, Cypress and Forest as of the Effective Date, as may be amended.

         1.53    "License Agreement" shall have the meaning set forth in the recitals.

         1.54    "License Term" shall have the meaning set forth in Section 14.1.

         1.55    "Licensed Know-How" shall mean Information Controlled by Cypress that is necessary or useful for the development, manufacture, commercialization or use of Milnacipran or any product containing Milnacipran as an active ingredient, in any formulation and through any mode of administration (excluding any Cypress Compounds), in the Licensed Territory, including without limitation, the Information described on Exhibit B. If Forest exercises the Option, Licensed Know-How shall also mean Information Controlled by Cypress that is necessary or useful for the development, manufacture, commercialization or use of any Cypress Compounds. In any case, Licensed Know-How excludes the Licensed Patents and Manufacturing Know-How (subject to the terms of the Supply Agreement).

         1.56    "Licensed Patents" shall mean all Patents Controlled by Cypress that are necessary or useful for the development, manufacture, commercialization or use of Milnacipran or any product containing Milnacipran as an active ingredient, in any formulation and through any mode of administration (excluding any Cypress Compounds), in the Licensed Territory, including without limitation, the Patents set forth on Exhibit C . If Forest exercises the Option, Licensed Patents shall also mean Patents Controlled by Cypress that are necessary or useful for the development, manufacture, commercialization or use of any Cypress Compounds.

         1.57    "Licensed Product" shall mean (a) any product containing Milnacipran as an active ingredient, in any formulation and through any mode of administration (excluding any Cypress Compounds), which incorporates or uses, or was discovered, identified or developed using, the Licensed Technology or the manufacture, use, sale, offer for sale or import of which Licensed Product is otherwise within the scope of any claim of the Licensed Patents, including without limitation, the IR Formulation and SR Formulation, regardless of intended use, and (b) any product containing any analog or derivative of Milnacipran as an active ingredient, in any formulation and through any mode of administration, which is discovered, identified or developed by Forest or any of its Affiliates or sublicensees using any Licensed Technology or any data or Information provided by Cypress to Forest, or developed or acquired by or on behalf of Forest or any of its Affiliates or sublicensees, in the course of performance of this Agreement. If Forest exercises the Option, Licensed Product shall also mean any Cypress Compounds.

         1.58    "Licensed Product Shortfall" shall have the meaning set forth in Section 5.3(b)(ii) of the License Agreement.

         1.59    "Licensed Technology" shall mean Licensed Patents and Licensed Know-How.

         1.60    "Licensed Territory" shall mean the United States of America, its territories and possessions and, if extended pursuant to Section 2.5, Canada.

         1.61    "Losses" shall have the meaning set forth in Section 15.1(a).

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         1.62    "Manufacturing Know-How" shall mean all data, Information and know-how in the possession of Pierre Fabre prior to August 1, 2001 or developed or acquired by or for Pierre Fabre during the term of the License Agreement relating to the manufacture of API.

         1.63    "Marketing Plan" shall have the meaning set forth in Section 3.5(b).

         1.64    "Milnacipran" shall mean the substance known as milnacipran (INN), which expressly excludes any analogs, derivates and enantiomers of milnacipran (INN).

         1.65    "Minimums" shall have the meaning set forth in Section 5.3(b) of the License Agreement.

         1.66    "NDA" shall mean a New Drug Application and all amendments and supplements thereto filed with the FDA (as more fully defined in 21 C.F.R. 314.5 et seq.), or the equivalent application filed with any equivalent agency or governmental authority outside the United States (including any supra-national agency such as in the European Union) requiring such filing, including all documents, data and other information concerning a pharmaceutical product that are necessary for gaining Regulatory Approval to market and sell such pharmaceutical product.

         1.67    "Net Sales" means, for the applicable period, the gross amount invoiced for the sale or other transfer of Licensed Product by Forest and its Affiliates and sublicensees to Third Parties which are not Affiliates or sublicensees of Forest (unless such Affiliates or sublicensees are the final user of and do not further sell such Licensed Product, in which case the amount billed therefor shall be deemed to be the amount that would be billed to a Third Party in an arm's length transaction), less the following items, as allocable to such Licensed Product: (i) trade discounts, credits or allowances, including without limitation, discounts provided by means of chargebacks, rebates and administrative fees charged by customers or health care organizations determined based upon sales, (ii) credits or allowances additionally granted upon returns, rejections or recalls (except where any such recall arises out of Forest's or its Affiliate's or sublicensee's gross negligence, willful misconduct or fraud), (iii) freight, shipping and insurance charges, (iv) taxes, duties or other governmental tariffs (other than income taxes) and (v) rebates, discounts or other payments on sales of Licensed Product that are mandated by the government.

         1.68    "Option" shall have the meaning set forth in Section 2.4(a).

         1.69    "Option Exercise Date" shall have the meaning set forth in Section 2.4(b).

         1.70    "Option Term" shall mean the period from the Effective Date through and including [...***...] .

         1.71    "Patent" shall mean (a) valid and enforceable patents, re-examinations, reissues, renewals, confirmations, extensions (including supplemental protection certificates) and term restorations, and (b) pending applications for patents, including without limitation, continuations, continuations-in-part, provisionals, divisionals and substitute applications, including without limitation, inventors' certificates.

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         1.72    "Pierre Fabre" shall have the meaning set forth in the first recital.

         1.73    "Pierre Fabre [...***...] " shall mean the [...***...] Milnacipran [...***...] , referred to by Pierre Fabre as [...***...] .

         1.74    "Pierre Fabre Patents" shall mean any Licensed Patents licensed to Cypress by Pierre Fabre under the License Agreement.

         1.75    "Pierre Fabre Trademark Agreement" shall have the meaning set forth in the recitals.

         1.76    "Promotion Rights" shall have the meaning set forth in Section 3.6(a).

         1.77    "Profits" shall mean, on a Generic Product-by-Generic Product basis, an amount, which shall not be less than zero, equal to (a) Net Sales of Generic Product, minus (b) Allowable Costs and Expenses, in each case calculated using U.S. generally accepted accounting principles, consistently applied, and consistent with generally accepted methods for activity-based project costing for similar products in similar industries.

         1.78    "R&D Plan" shall mean the portion of the Development Plan that outlines the research and/or development services to be performed by FTEs under this Agreement during the R&D Term, as amended from time to time by the Joint Development Committee.

         1.79    "R&D Term" shall mean the period beginning upon the Effective Date and ending upon the date of first commercial sale of Licensed Product.

         1.80    "Regulatory Approval" shall mean any and all approvals (including price and reimbursement approvals), licenses, registrations, or authorizations of health/regulatory authorities or any country, federal, state or local regulatory agency, department, bureau or other government entity that are legally required or necessary from an economic point of view for the manufacture, use, storage, import, transport and/or sale of a Licensed Product in such jurisdiction.

         1.81    "Rest of the World" shall mean the entire world excluding the Licensed Territory.

         1.82    "Sales Forecast" shall have the meaning set forth in Section 5.3(a) of the License Agreement.

         1.83    "SNDA" shall mean a Supplemental New Drug Application filed with the FDA or the equivalent application filed with any equivalent agency or governmental authority outside the United States (including any supra-national agency such as in the European Union) requiring such filing.

         1.84    "SNRI product" shall mean any serotonin norepinephrine reuptake inhibitor product, meaning an agent whose sole mode of action (including major metabolites) is through the selective reuptake inhibition of the two monoamines, serotonin (5-HT) and norepinephrine (NA). The sole mode of action means a low binding affinity (>1000nM) on standard assays for dopamine D1- and D2 class receptors; serotonergic 1, 2, and 3 class receptors; adrenergic alpha and beta receptors; cholinergic nicotinic and muscarinic receptors; glutamatergic AMPA, Kainate, NMDA, and metabotropic receptors; histaminegic 1- and 2-class receptors; MU-, kappa-, delta-opioid receptors; Orphanin (ORL1) receptors; Neurokinin (NK1, NK2, NK3) receptors; Neuropeptide Y receptors; Sigma (sigma-1, sigma-2) receptors; Vanilloid receptors; Adenosine A1 receptors; Calcitonin gene-related peptide (CGRP) receptor; Cannabinoid (CB1, CB2) receptors; Cholecystokinin (CCK1, CCK2) receptors; Nerotensin receptors; Voltage-gated calcium channels (N-, P/Q-, L-, T-type); Voltage-gated sodium channels; Bradykinin (B1, B2) receptors; GABA-A, GABA-B receptors; Galanin (GAL1, GAL2) receptors; Neuropeptide FF receptors; Melanocortin (MC1, MC3, MC4, MC5) receptors; Prostanoid (EP1) receptors; Endothelin (ETA, ETB) receptors; and Prostanoid (TXA2) receptors . The agent should also not effect MAO-A and—B enzyme activity. The IC50 or KI of in vitro reuptake inhibition for NA and 5-HT must be both <1000nM, while the

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selectivity ratio for 5-HT and NA (i.e., IC50 or KI of 5-HT in vitro reuptake inhibition divided by that of NA) must range between 0.2 and 5. Similarly, the IC50 of KI of in vitro reuptake inhibition for dopamine must be >1000 nM, with a selectivity ratio for dopamine vs. NA or 5-HT of >50. Finally, the agent must not effect the release of the amines, including 5-HT, NA and dopamine.

         1.85    "SR Formulation" shall mean the slow release formulation containing 120 milligrams of Milnacipran.

         1.86    "Steering Committee" shall have the meaning set forth in Section 9.1 of the License Agreement.

         1.87    "Supply Agreement" shall mean the Purchase and Supply Agreement dated as of the date hereof between Pierre Fabre and Cypress, as may be amended.

         1.88    "Third Party" shall mean any entity other than Cypress or Forest or an Affiliate of Cypress or Forest.

         1.89    "Trademarks" shall have the meaning set forth in the Pierre Fabre Trademark Agreement.

         1.90    "Transfer Price" shall have the meaning set forth in Section 5.1(a) of the Supply Agreement.

         1.91    "Working Group" shall have the meaning set forth in Section 3.1 of the Supply Agreement.

2.     LICENSE

        2.1    License Grant.     Subject to the terms and conditions of this Agreement, Cypress hereby grants to Forest, with the right to sublicense under the terms described in Section 2.2, during the License Term:

         (a)    an exclusive license or sublicense, as applicable, to develop and register (but not as to Cypress with respect to activities of Cypress under Section 3), use, sell, offer for sale and import Licensed Product in the Field in the Licensed Territory, which license shall be under the Licensed Technology and, solely in the event that Forest exercises the Option and to the extent Cypress has the right to do so, to make and have made Cypress Compounds in the Field in the Licensed Territory;

         (b)    an exclusive sublicense to use the Licensed Technology licensed to Cypress by Pierre Fabre under the License Agreement, to the extent necessary to formulate or have API formulated into Bulk Licensed Product and package Bulk Licensed Product into Finished Licensed Product, solely for sale of Licensed Product in the Field in the Licensed Territory; and

         (c)    an exclusive sublicense to use, sell and offer for sale Licensed Product under the Trademarks in the Licensed Territory.

Forest acknowledges that the rights granted by Cypress to Forest under this Section 2.1 with respect to Trademarks and any Licensed Technology licensed to Cypress by Pierre Fabre under the License Agreement are subject to the applicable terms and conditions of the License Agreement, the Pierre Fabre Trademark Agreement and if applicable, the Cypress Trademark Agreement.

        2.2    Sublicense Rights.     

         (a)    Right to Sublicense.     To the extent permitted under the License Agreement, the Pierre Fabre Trademark Agreement, the Letter Agreement and if applicable, the Cypress Trademark Agreement, and subject to the terms and conditions of this Agreement, Forest shall have the right to grant sublicenses of the rights granted to it under this Agreement which sublicenses shall not

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permit the further grant of sublicenses unless agreed to in writing by Cypress in its sole discretion. The grant of any sublicense to any person or entity other than Forest Parent or any of its wholly-owned subsidiaries shall require the prior written consent of Cypress, which shall not be unreasonably withheld, and the grant of any such sublicense to Forest Parent or any of its wholly owned subsidiaries shall require prior written notice to Cypress.

         (b)    Sublicense Terms.     Any sublicense granted by Forest under this Agreement shall be subject and subordinate to, and consistent with, the terms and conditions of this Agreement, the License Agreement and the Pierre Fabre Trademark Agreement, and if applicable, the Cypress Trademark Agreement. Forest shall provide Cypress a copy of any sublicense agreement within 15 business days of its execution. In the event of a material default by any sublicensee under a sublicense agreement with Forest, Forest will inform Cypress and take such action as necessary or appropriate to cure such default.

        2.3    Right to Commercialize Generic Licensed Product.     Subject to the terms and conditions of this Agreement, the License Agreement and the Pierre Fabre Trademark Agreement, and if applicable, the Cypress Trademark Agreement, Forest and any of its Affiliates or sublicensees may, under the license granted in Section 2.1(a), use, distribute, sell, offer for sale, have sold and import Licensed Product as a generic product ( "Generic Product" ) in a country of the Licensed Territory at [...***...] Forest will promptly send to Cypress and Pierre Fabre [...***...] and will notify Cypress and Pierre Fabre promptly in writing in the event that Forest or any of its Affiliates or sublicensees decides to use, distribute, sell, offer for sale, have sold and import Licensed Product as a Generic Product in such country of the Licensed Territory, as contemplated by this Section 2.3.

        2.4    Option.     

         (a)    Grant of Option.     Cypress hereby grants to Forest an exclusive option to extend the license described in Section 2.1(a) to Cypress Compounds Controlled by Cypress during the Option Term on a Cypress Compound-by-Cypress Compound basis (the "Option" ) during the Option Term.

         (b)    Exercise of Option.     Forest may exercise the Option with respect to any Cypress Compound at any time during the Option Term upon written notice to Cypress (such date of exercise, the "Option Exercise Date" ).

         (c)    License Grant.     Subject to Section 2.4(d), effective immediately upon the Option Exercise Date with respect to a Cypress Compound, subject to the terms and conditions of this Agreement, including but not limited to, (i) payment of any research and development costs with respect to the applicable Cypress Compound as provided in Section 6.1 and (ii) the license fee with respect to the applicable Cypress Compound as provided in Section 6.2(c) and (iii) the milestone payments with respect to the applicable Cypress Compound as provided in Section 6.3, with no further action required by Forest, the license granted under Section 2.1(a) shall include rights with respect to such Cypress Compound in the Field in the Licensed Territory.

         (d)    Cypress Obligations.     Cypress agrees to exercise its option under the Collegium Agreement by February 21, 2004 and to pursue its diligence obligations under the Collegium Agreement during the Option Term ; provided that, in the event Cypress determines to terminate the Collegium Agreement during the Option Term, Cypress agrees to provide Forest with written notice of such intention and Forest shall have a [...***...] period during which it may exercise the Option as to all Cypress Compounds Controlled by Cypress under the Collegium Agreement ( "Cypress Collegium Compounds" ). In the event of such exercise of the Option by Forest under this Section 2.4(d), subject to Forest assuming responsibility for all obligations of Cypress under the Collegium Agreement and the payment of any future research and development costs related to the Collegium Agreement, as provided in Section 6.1, the license granted under Section 2.1(a)

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shall include rights with respect to all Cypress Collegium Compounds in the Field in the Licensed Territory.

         (e)    Right of First Negotiation.     Cypress shall be permitted, subject to this Section 2.4, to develop, make, have made, use, sell, offer for sale and import any Cypress Analogs, but not any Cypress Formulations, for any indication and this Agreement shall not include any rights with respect to Cypress Compounds or any Information or Patents that pertain to the Cypress Compounds. Beginning upon the Effective Date and ending [...***...] (the "Exclusive Period" ), Forest shall have a first right to negotiate with Cypress to obtain a license to further develop and commercialize Cypress Compounds for all indications to the extent Forest has not exercised the Option with respect to such Cypress Compounds. In the event Cypress desires to enter into a license arrangement for further development or commercialization of any Cypress Analog in any indication or plans to further develop or commercialize any Cypress Analog itself, before entering into discussions with any Third Party with respect to such license or commencing such activities itself, Cypress will notify Forest in writing of its desire. Forest may then elect, by providing written notice to Cypress, to enter into good faith negotiations with Cypress with respect to such license for a period of 90 days following notice to Forest. In addition, Forest may provide written notice to Cypress at any time of its desire to negotiate a license arrangement for further development or commercialization of any Cypress Compound in any indication for a period of 90 days following notice to Cypress. If Cypress and Forest do not enter into an agreement with respect to such license during such 90 day period (or such longer period agreed to in writing by the parties), Cypress will be under no further obligation to negotiate a license with respect to such Cypress Compound, and, if such Cypress Compound is a Cypress Analog, Cypress will be free to further develop and commercialize, or to negotiate and enter into an agreement with any Third Party with regard to further development and commercialization of, such Cypress Analog in any indication on any terms, subject to the last sentence of this Section 2.4(e). In addition, in the event a Cypress Analog is commercialized by Cypress or a sublicensee during the Exclusive Period, Cypress shall pay to Forest, a royalty of [...***...] on net sales of such Cypress Analog by Cypress or any Third Party to whom Cypress grants a license to such Cypress Analog ; provided that such royalty rate may be reduced by written agreement of Cypress and Forest after good faith negotiations to account for any royalty payments that Cypress or its sublicensees must make to any Third Parties with respect to such Cypress Analog. Such royalty shall be payable for the Exclusive Period, but in any event, the payment term shall not be less than [...***...] . With respect to any good faith negotiations regarding a license arrangement for any Cypress Compounds under this Section 2.4(e), the parties agree that the fair market value of the rights subject to negotiation shall be determined solely in respect of the incremental value of the marketing of the Cypress Compounds in question over and above the value of any Licensed Product then being marketed in the Licensed Territory by Forest and excluding value attributable to the conversion of sales of Licensed Product then being marketed to the Cypress Compounds in question. In addition, any agreement entered into by Cypress with any Third Party with respect to the development or commercialization of any such Cypress Analog shall not be on principal financial terms more favorable to such Third Party then those principal financial terms last offered by Cypress to Forest.

        2.5    Potential Extension of Licensed Territory.     At any time prior to the [...***...] anniversary of the Date of First Commercial Sale in the United States, Forest shall have a first right to extend the Licensed Territory to include Canada. In the event that Cypress desires to enter into a license arrangement with respect to Licensed Product in Canada, or plans to commercialize Licensed Product itself in Canada, before entering into discussions with any Third Party with respect to such license or beginning such commercialization activities itself, Cypress will notify Forest in writing of its desire. Forest may then elect, by providing written notice to Cypress within 30 days following such notice from Cypress, to include Canada within the Licensed Territory. If Forest does not provide such written notice to Cypress during such 30-day period, Cypress will be free to negotiate and enter into an agreement

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with any Third Party with respect to such license in Canada on any terms. If Forest provides such written notice to Cypress during such 30-day period, subject to Forest making the payment to Cypress described in Section 6.2(b), the Licensed Territory shall be extended to include Canada.

        2.6    License from Forest.     

         (a)    As contemplated under Section 4.2(d) of the License Agreement, Forest hereby grants to Cypress, with the further right to sublicense to Pierre Fabre and with a further right to sublicense by Pierre Fabre, a royalty-free (subject to the provisions of Section 2.6(b)) exclusive license under all Patents Controlled by Forest that claim any Forest Information used by Forest or any of its Affiliates or sublicensees in filing for any Regulatory Approvals for, or marketing, any Licensed Product in the Licensed Territory, which Patents are necessary or useful for the development, manufacture, commercialization or use of Milnacipran and Licensed Product in the Rest of the World, and to use such Forest Information, in each case to develop, register, manufacture, use, distribute, sell, offer for sale and have sold Milnacipran and Licensed Product in the Rest of the World.

         (b)    In full consideration for the license granted in Section 2.6(a), Cypress shall pay to Forest that portion of amounts received by Cypress from Pierre Fabre under Section 4.2(b) of the License Agreement for the sublicense of rights granted to Cypress by Forest under Section 2.6(a) attributable to the technology related to the license granted in Section 2.6(a) based on the relative contributions of each of Forest and Cypress to the technology in question.

        2.7    Discussions Regarding Pierre Fabre [...***...].     Forest agrees that, in the event it decides to negotiate any arrangement with Pierre Fabre related to the Pierre Fabre [...***...] , Forest shall explore with Cypress the opportunities for Cypress to participate in such arrangement with Forest. In the event an arrangement is reached between Forest and Pierre Fabre (and Cypress, if applicable) with respect to the Pierre Fabre [...***...] , Cypress and Forest shall discuss the terms and conditions of this Agreement that may be impacted by the marketing and sale of the Pierre Fabre [...***...] and shall consider any modifications to such terms and conditions that are appropriate in light of the circumstances at such time. This Section is not intended to imply any obligation on the part of Forest to enter into an agreement with Cypress regarding the Pierre Fabre [...***...] .

3.     DEVELOPMENT; REGISTRATION; PROMOTION, MARKETING AND SALES

        3.1    Development Activities.     

         (a)    Development Activities.     Development and regulatory activities will be conducted as outlined in the Development Plan.

         (b)    Development Activities by Forest.     Beginning upon the Effective Date, Forest shall use commercially reasonable efforts to:

         (i)     conduct clinical trials of Licensed Product in accordance with the Development Plan, with assistance and input from Cypress;

         (ii)    conduct any additional clinical trials of Licensed Product after completion of the clinical trials contemplated in the Development Plan, as determined by the Joint Development Committee; provided that Cypress and Forest must mutually agree upon any clinical trials, including, without limitation, any Phase IV clinical trials, to be conducted by either party for Licensed Product in the Licensed Territory or the Rest of the World, to the extent such clinical trials would reasonably be expected to have implications on sales of Licensed Product by the other party in any other country..

         (iii)    identify new indications for Licensed Product; and

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         (iv)    develop Licensed Product for FMS and all new indications that are identified, at its own expense, according to the Development Plan.

         (c)    FTE Funding.     During the R&D Term, Cypress shall devote the number of FTEs to the R&D Plan as specified therein and Forest shall make research funding payments to Cypress for such number of FTEs, in advance on a quarterly basis at the beginning of each calendar quarter, at the rates specified in the R&D Plan per FTE per year. Cypress shall provide a quarterly report detailing the actual FTE time devoted to the R&D Plan during such quarter. Cypress retains complete discretion to change the identity of any individual employee or consultant assigned to work on matters related to this Agreement and/or the frequency and the time during which such individual employee's or consultant's efforts are devoted to the R&D Plan. Within 30 days of the end of each quarter, the parties will make reconciling payments, if any are required, to reflect the actual FTE time devoted to activities under the R&D Plan in such quarter.

         (d)    Compliance with Laws.     Each party shall comply, and shall cause its employees, agents and representatives to comply, with all applicable laws, regulations and guidelines in connection with research and development of Licensed Product, including any registration of Licensed Product, under this Agreement.

        3.2    Registration Activities.     Forest shall use commercially reasonable efforts to obtain or assist Cypress in obtaining in a timely manner NDA approvals and any additional Regulatory Approvals with respect to Licensed Product by the health/regulatory authorities of the United States, and if determined appropriate by Cypress or Forest after review by the Steering Committee as contemplated in Section 9.2 of the License Agreement, Canada. Upon the Effective Date, Cypress shall appoint Forest as agent for Cypress for purposes of the IND and with respect to the NDA for Licensed Product ; provided that, a representative of Cypress (the "Cypress FDA Contact" ) shall be the primary contact with the FDA prior to commencement of the second Phase III clinical trial for Licensed Product or such other time as mutually agreed. Forest shall be primarily responsible for NDA preparation and submission, and Cypress shall hold the NDA for Licensed Product. Cypress shall review and provide comments on the NDA for Licensed Product, and Forest agrees that it shall not submit any NDA to the FDA until Cypress and Forest mutually agree to such NDA. Forest and Cypress shall keep one another fully informed of the registration process of Licensed Product through the Joint Development Committee.

        3.3    Meetings and Communications with the FDA and Other Regulatory Authorities.     Prior to commencement of the second Phase III clinical trial for Licensed Product, the Cypress FDA Contact shall be the primary day to day contact with the FDA, except that each party shall notify the other party in advance of any substantive communications, in which case both parties shall participate in such substantive communications. Subject to the preceding sentence, Cypress and Forest shall mutually attend all meetings, participate in any oral communications and agree upon any written communications with the FDA and any other health/regulatory authorities in the Licensed Territory relating to Licensed Product and Cypress and Forest shall allow Pierre Fabre representatives to participate in any substantive meetings and communications, to the extent permitted by such authorities. Beginning upon commencement of the second Phase III clinical trial for Licensed Product, Forest shall lead all meetings, oral communications and written communications with the FDA and any other health/regulatory authorities of the Licensed Territory relating to Licensed Product and shall allow Cypress and Pierre Fabre representatives to participate in any substantive meetings and substantive oral or written communications, to the extent permitted by such authorities.

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        3.4    Pre-Marketing Activities.     During the development of Licensed Product and until Forest commences commercialization of Licensed Product, Forest shall conduct pre-marketing activities, with input from the Joint Development Committee, and use commercially reasonable efforts to successfully launch of Licensed Product in the Licensed Territory.

        3.5    Promotion, Marketing and Sales Activities.     Forest shall use commercially reasonable efforts to conduct all promotion, marketing and sales activities with respect to Licensed Product in the Licensed Territory, subject to the Promotion Rights of Cypress.

         (a)      Forest Sales Force.     From the date of launch of Licensed Product and thereafter during the License Term, and consistent with the Marketing Plan, Forest shall deploy the Forest Sales Force. All direct costs of the Forest Sales Force, such as salaries, benefits and travel costs, shall be borne in full by Forest. Forest will train the Forest Sales Force with respect to Licensed Product, and will bear its own expenses in connection therewith.

         (b)      Responsibility for Launch, Promoting and Distributing Licensed Product.     Forest and its sublicensees shall be responsible for the launch, promotion and distribution of Licensed Product in the Licensed Territory, subject to the Promotion Rights held by Cypress, provided that the decision to launch the Licensed Product in Canada shall be subject to the good faith business judgment of Forest, after review by the Steering Committee as contemplated in Section 9.2 of the License Agreement. All costs associated therewith shall be borne by Forest and its sublicensees. The launch of Licensed Product by Forest or its sublicensee in the United States shall take place within no more than six months following NDA approval, including, for this purpose, FDA approval of labeling and product launch promotional materials of such Licensed Product. No later than six months prior to the Estimated Date of First Commercial Sale in the United States, Forest shall prepare and submit to the Joint Development Committee for review and comments a rolling three-year marketing and commercial plan for Licensed Product in the Field in the Licensed Territory that will include its (1) marketing strategy, (2) Sales Forecasts, as described in Section 5.3(b), and (3) Minimums, as described in Section 5.3(c) (the "Marketing Plan" ). The Marketing Plan for each fiscal year shall also include amounts budgeted for expenditures by Forest on sales and sales management, physician promotion and medical education for Licensed Product in such fiscal year, the aggregate number of detailing calls with respect to Licensed Product that are projected in such fiscal year and the percentage (up to 25%) of the total detailing calls with respect to Licensed Product to be performed by the Cypress Sales Force in such fiscal year (the "Annual Cypress Percentage" ). The Marketing Plan shall be updated on an annual basis by Forest by submitting such updated Marketing Plan to Cypress six months in advance of the beginning of the next applicable fiscal year. Cypress and Forest shall then discuss and agree upon such Marketing Plan within 30 days after submission of such Marketing Plan to Cypress. Cypress may submit the Marketing Plan to Pierre Fabre under the License Agreement, and the parties acknowledge that the Marketing Plan shall be reviewed by the Steering Committee as contemplated in Section 9.2 of the License Agreement.

         (c)      Promotion, Marketing and Sales Efforts.     Forest shall use commercially reasonable efforts to promote, market and sell Licensed Product in the Licensed Territory, using efforts consistent with pharmaceutical industry standards for pharmaceutical products of comparable commercial potential. Such efforts shall include, without limitation, positioning Licensed Product at P2 or higher (on a weighted average basis consistent with the weighting of details by position applied by Forest generally to its promotional activities and consistent with industry standards for comparable promotional activities) during the Exclusive Period; provided that such positioning requirements shall be subject to modification by Forest with respect to the last two years of the Exclusive Period based upon competitive conditions, changes in the market and commercial reasonableness. In the event Forest introduces a product as contemplated under Section 5.4(b), Forest agrees to continue to use commercially reasonable efforts to promote Licensed Product,

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taking into account the current life stage of Licensed Product. In addition, Forest agrees that in each fiscal year, it shall spend on promotion, marketing and sales efforts on Licensed Product an amount equal to at least [...***...] of the amount budgeted for such activities in such fiscal year and shall make at least [...***...] of the aggregate number of detailing calls with respect to Licensed Product that are projected in such fiscal year to be made by the Forest Sales Force based on the budget or projection in the Marketing Plan for the applicable year. Failure to comply in any material respect with the obligations of this Section shall be deemed a material breach of this Agreement, subject to all of the terms and conditions applicable to a material breach.

         (d)      Compliance with Laws.     Forest shall comply, and shall cause the Forest Sales Force and all other employees, agents and representatives of Forest to comply, with all applicable laws, regulations and guidelines in connection with the promotion, marketing and sale of Licensed Product, including the Prescription Drug Marketing Act and the Federal Anti-Kickback Statute.

        3.6    Promotion Rights.     

         (a)      Promotion Rights of Cypress.     Cypress shall have the right to promote Licensed Product in the Field in the United States through the Cypress Sales Force by making up to 25% of the total detailing calls with respect to Licensed Product in each year of the License Term measured on a per physician call basis (the "Promotion Rights" ), unless Cypress provides written notice to Forest at any time prior to such NDA filing for the applicable Licensed Product that it waives such Promotion Rights. If Cypress exercises the Promotion Rights, it agrees to use commercially reasonable efforts to cause the Cypress Sales Force to perform the Annual Cypress Percentage of the total detailing calls with respect to Licensed Product. Cypress' right to exercise its Promotion Rights shall be subject to Cypress possessing a fully trained and qualified sales force, based on the same criteria applicable by Forest to the qualification and training of sales representatives generally, at least 30 days prior to the commencement by Cypress of promotional efforts. Cypress shall provide Forest with at least 12 months notice prior to each marketing year of the percentage of detailing efforts (but not more than 25%) which Cypress agrees to undertake for such marketing year; provided that the percentage specified by Cypress for the launch of Licensed Product shall apply for at least the first two marketing years. Cypress' performance of detailing pursuant to the exercise of its Promotion Rights shall be subject to the provisions of the Marketing Plan.

         (b)      Provision of Materials by Forest.     Forest will supply to Cypress, at no cost to Cypress, copies of its art work and other marketing materials with respect to Licensed Product and Cypress will be required to use Forest's art work and other marketing materials in connection with its Promotion Rights.

         (c)      Payment to Cypress.     In each calendar year, Forest will, on a quarterly basis in arrears, pay Cypress for the promotional efforts of the Cypress Sales Force, based on the number of d