LICENSE AND COLLABORATION AGREEMENT

 

1.4                                “Administrator” shall have the meaning set forth in Section 17.2(a).

 

1.5                                “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.

 

1.6                                “Agreement” shall mean this License and Collaboration Agreement, as may be amended in accordance with its terms.

 

1.7                                “Allowable Commercialization Expenses” shall mean the sum of (a) Product Supply Costs, (b) the aggregate fees and expenses paid by Organon and Cypress to outside consultants and counsel in respect of filing, prosecution and maintenance of Cypress Patents, Organon Patents and Joint Patents with respect to Approved Products in the Shared Territory from and after the Date of First Commercial Sale of such Approved Product, (c) the aggregate payments made by Organon or Cypress to Third Parties as milestone, royalty or similar payments that the parties agree is required for the sale or other transfer of Approved Products in the Field in the Shared Territory and (d) the aggregate payments made by Organon and Cypress to Third Parties for the launch, promotion, marketing, distribution and sale of a Approved Product in the Field in the Shared Territory, including, without limitation, Post-Approval Study Expenses, Selling Expenses, Marketing Management, Market and Consumer Research, Advertising, Trade Promotion, Consumer Promotion, Education and Freight and Transportation–Out, using the defined terms set forth below.  For clarification, Allowable Commercialization Expenses shall not include (1) any internal costs of Organon or Cypress for the promotion, marketing, distribution and sale of Approved Product in the Field in the Shared Territory, including any amounts paid to Third Parties for the Cypress Sales Force or (2) any expenses incurred before execution of any agreement entered into by the parties with regard to joint commercialization of an Approved Product in the Field in the Shared Territory.  The costs of activities which promote Organon’s or Cypress’ business as a whole without being specific to Approved Products (such as corporate image advertising) are specifically excluded from Allowable Commercialization Expenses.  To the extent multiple products are involved and some of such products are not Approved Products, then such amounts will be allocated on a pro rata basis to be negotiated between the parties that is designed to account for the respective contributions made to the marketing efforts for each product.  Within 60 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.

 

(a)                                   “Advertising” means payments made by Organon and Cypress to Third Parties for media costs associated with Approved Product advertising in the Shared 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.  Advertising will not include any additional costs except as mutually agreed by the parties in writing in advance.

 

(b)                                   “Consumer Promotion” means payments made by Organon and Cypress to Third Parties for programs to promote Approved Product in the Shared Territory directly to

 

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the prescriber or end user, which specifically means expenses associated with promoting products directly to the professional community such as professional samples, professional literature, promotional material costs, patient aids and detailing aids.  Consumer Protection will not include any additional costs except as mutually agreed by the parties in writing in advance.

 

(c)                                   “Education” means payments made by Organon and Cypress to Third Parties for professional education with respect to a Approved Product in the Shared 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.  Education will not include any additional costs except as mutually agreed by the parties in writing in advance.

 

(d)                                   “Freight and Transportation–Out” means (to the extent not already recovered in the calculation of Net Sales) payments made by Organon and Cypress to Third Parties for the portion of storage and distribution costs relating to storing and moving Approved Product in the Shared Territory from a warehouse to another warehouse or 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.  Freight and Transportation-Out will not include any additional costs except as mutually agreed by the parties in writing in advance.

 

(e)                                   “Market and Consumer Research” means payments made by Organon and Cypress to Third Parties for conducting and monitoring professional and consumer appraisals of existing, new or proposed Approved Product in the Shared Territory, such as market share services (e.g., IMS data), special research testing and focus groups.  Market and Consumer Research will not include any additional costs except as mutually agreed by the parties in writing in advance.

 

(f)                                     “Marketing Management” means payments made by Organon and Cypress to Third Parties for product management and sales promotion management with respect to Approved Product in the Shared Territory, specifically costs associated with developing overall sales and marketing strategies (e.g., product line or customer segment), as well as planning and programs for Approved Product in the Shared Territory and trademark selection, filing, prosecution and enforcement.  Marketing Management will not include any additional costs except as mutually agreed by the parties in writing in advance.

 

(g)                                  “Post-Approval Study Expenses” means the payments made by Organon or Cypress to Third Parties for any trials or studies of Approved Product after Regulatory Approval of such Approved Product, other than those trials or studies of Approved Product that are required to obtain or maintain Regulatory Approval of such Approved Product and are included in Development Expenses.

 

(h)                                  “Selling Expenses” means payments made by Organon and Cypress to Third Parties for the management of and the performance of the selling functions with respect to Approved Product in the Shared Territory, including payments to Third Parties under contract sales and marketing agreements.  Selling Expenses will not include any additional costs except

 

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as mutually agreed by the parties in writing in advance.  The Parties agree that this shall not include the costs of the Cypress or Organon sales forces.

 

(i)                                     “Trade Promotion” means the allowances given to retailers, brokers, distributors, hospital buying groups and similar groups for purchasing, promoting, and distribution of Approved Product in the Shared Territory, specifically purchasing, advertising, new distribution, and display allowances as well as free goods, wholesale allowances and reasonable field sales samples.  Trade Promotion will not include any additional costs except as mutually agreed by the parties in writing in advance.

 

1.8                                “Animal Health Field” shall mean use in companion or production animals.

 

1.9                                “Approved Product” shall mean, on a country by country basis, a Development Candidate for which Regulatory Approval in the Field has been given in the applicable country.

 

1.10                         “Arbitrators” shall have the meaning set forth in Section 17.2(a).

 

1.11                         “Budget” shall mean the budget of Development Expenses for research and development with respect to Development Candidates or Approved Products in the Field in the Shared Territory to be performed under this Agreement or for Allowable Commercialization Expenses for manufacturing, launch, promotion, marketing and sales activities with respect to Development Candidates or Approved Products in the Field in the Shared Territory to be performed under this Agreement for each year of the License Term.

 

1.12                         “Calendar Quarter” shall mean each respective period of three consecutive months ending on March 31, June 30, September 30 and December 31.

 

1.13                         “Calendar Year” shall mean each respective period of 12 consecutive months ending on December 31.

 

1.14                         [...***...]

 

1.15                         [...***...] Agreement” shall mean that certain License Agreement dated April 11, 2005 between Cypress and [...***...] as may be amended in accordance with its terms (which amendment may not expand the exception under the definitions of Cypress Information and Cypress Patents, except with Organon’s written consent).

 

1.16                         “Change in Control” shall have the meaning set forth in Section 18.13(h).

 

1.17                         “Claim” shall have the meaning set forth in Section 17.2(a)

 

1.18                         “Clinical Supply Agreement” means an agreement to be negotiated by Cypress and Organon regarding the manufacture of Development Candidates for use in the Field in the Shared Territory, which shall include applicable terms regarding the manufacture of clinical supplies of Development Candidates as set forth in this Agreement.

 

1.19                         “Clinical Supply Costs” means the cost to have Development Candidates manufactured for use in the Shared Territory pursuant to this Agreement.  Such cost shall be

 

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calculated using Organon’s (or its Affiliate’s) cost accounting methods, including a reasonable cost of capital as agreed by the parties in writing, consistently applied, or, if the parties use a Third Party supplier, the actual cost of supply paid to such Third Party.

 

1.20                         “Compound” shall mean the substance known as mirtazapine, in any form, including, without limitation, its [...***...]enantiomer, salts of mirtazapine and the salts of the [...***...]enantiomer alone.

 

1.21                         “Confidential Information” shall have the meaning set forth in Section 14.1.

 

1.22                         “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.

 

1.23                         “Cypress” shall have the meaning set forth in the introductory paragraph.

 

1.24                         “Cypress Information” shall mean Information related to the Compounds, Approved Products or Development Candidates, which is Controlled by Cypress or its Affiliates as of the Effective Date or developed or acquired by or for Cypress or its Affiliates in the course of performance of this Agreement.  Cypress Information excludes Cypress Patents, Joint Patents and Joint Data, but includes Information licensed to Cypress pursuant to the Cereus Agreement and the Orexigen Agreement.  For clarification, Cypress Information excludes all Information licensed by Cypress to Forest pursuant to the Forest Agreement, including all Patents licensed by Cypress under that agreement.

 

1.25                         “Cypress Option” shall have the meaning set forth in Section 6.2.

 

1.26                         “Cypress Participation Right” shall mean the right of Cypress to participate in the detailing and promotion of Approved Product in the Field in the Shared Territory in accordance with the terms of this Agreement.

 

1.27                         “Cypress Patents” shall mean all Patents Controlled by Cypress as of the Effective Date or during the License Term that are necessary or useful for the development, manufacture, use, sale, offer for sale or import of any Compound, Development Candidate or Approved Product in the Field, including, without limitation, the Patents set forth on Exhibit A , but excluding the Joint Patents and all Patents licensed by Cypress to Forest pursuant to the Forest Agreement, including all Patents licensed by Cypress under that agreement.

 

1.28                         “Cypress Sales Force” shall mean those members of Cypress’ sales force (whether Cypress employees, contractors (including any Organon sales representatives provided pursuant to Section 5.3(b)(v)) or agents), who promote Approved Products pursuant to the exercise of the Cypress Participation Right.

 

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1.29                         “Cypress Technology” shall mean the Cypress Patents and the Cypress Information.

 

1.30                         “Date of First Commercial Sale” shall mean the actual date of first commercial sale of an Approved Product in the Shared Territory.

 

1.31                         “Development Candidate” shall mean any therapeutic preparation containing any of the substances or combinations listed on Exhibit I .

 

1.32                         “Development Expenses” means the costs and expenses that are incurred by either party or their Affiliates in the research and development of a Development Candidate after selection of the first Development Candidate in accordance with an applicable Development Plan and associated Budget approved by the Joint Development Committee, including (without duplication) the sum of:

 

(a)                                   the aggregate costs incurred by Organon and Cypress for Development FTEs performing research and development of any Development Candidate for purposes of registration in the Field in the Shared Territory or performing further development activities required by any governmental authority with respect to Approved Product in the Field in the Shared Territory after Regulatory Approval in order to maintain Regulatory Approval, in each case at the Development FTE Rate;

 

(b)                                   the aggregate fees and expenses paid by Organon and Cypress to outside consultants and counsel in respect of filing, prosecution and maintenance of Cypress Patents, Organon Patents and Joint Patents with respect to the Development Candidate in the Shared Territory prior to the Date of First Commercial Sale of such Development Candidate;

 

(c)                                   the aggregate payments made by Organon and Cypress to Third Parties as milestone payments upon the occurrence of research and development milestone events with respect to Development Candidates in the Field in the Shared Territory;

 

(d)                                   Clinical Supply Costs;

 

(e)                                   the actual payments made by Organon and Cypress to Third Parties to apply for Regulatory Approval; and

 

(f)                                     the aggregate payments made by Organon and Cypress to Third Parties for performing research and development of any Development Candidate for purposes of registration in the Shared Territory, including, without limitation, the cost of studies on the toxicological, pharmacokinetic, metabolic or clinical aspects of a Development Candidate necessary or desirable for the purpose of obtaining and/or maintaining Regulatory Approval of a Development Candidate in the Shared Territory; costs (and related fees) for preparing, submitting, reviewing or developing data or information for the purpose of submission to a governmental authority to obtain and/or maintain Regulatory Approval of a Development Candidate in the Shared Territory; and manufacturing process development and scale-up for a Development Candidate in bulk and finished form for the Shared Territory for purposes of conducting studies necessary to obtain and/or maintain Regulatory Approval of Development Candidates in the Shared Territory.  In addition, Development Expenses include, but are not

 

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limited to, the aggregate payments made by Organon and Cypress to Third Parties in support of further development activities required by any governmental authority with respect to Approved Product in the Field in the Shared Territory after Regulatory Approval in order to maintain Regulatory Approval.  Development Expenses will include, but are not limited to, the following costs incurred for the development of a Development Candidate in the Field for the Shared Territory: the costs of modifying and optimizing a prospective Development Candidate, including its chemical structure and formulation, to achieve product development goals regarding efficacy, safety, dosing and route of administration.

 

1.33                         “Development FTE” shall mean the equivalent of the work time of an employee or consultant of Cypress or Organon with appropriate qualifications performing research, development or regulatory work under the Development Plan on a full-time basis over a 12-month period (including normal vacations, sick days and holidays).

 

1.34                         “Development FTE Rate” shall have the meaning set forth in Section 4.1(f).

 

1.35                         “Development Plan” shall mean the plan(s) for development of Development Candidates, to be approved by the Joint Development Committee.

 

1.36                         “Diligent Efforts” shall mean the carrying out of obligations or tasks by a party (or, as applicable, its Affiliates and sublicensees) in a sustained manner using good faith commercially reasonable efforts, which efforts shall be consistent with the exercise of prudent scientific and business judgment applied in the pharmaceutical industry to products or research, development or marketing projects of similar scientific and commercial potential.

 

1.37                         “Effective Date” shall have the meaning set forth in the introductory paragraph.

 

1.38                         [...***...] Enantiomer” shall mean the [...***...]enantiomer of the substance known as mirtazapine and referred to internally by Organon as [...***...] along with any salts thereof.

 

1.39                         “FDA” shall mean the United States Food and Drug Administration or any successor agency.

 

1.40                         “Field” shall mean the treatment and/or prevention of sleep related breathing disorders in humans.  The parties agree that the development and commercialization of products for the treatment and/or prevention of insomnia are outside the Field.

 

1.41                         “First Notice” shall have the meaning set forth in Section 4.3(a).

 

1.42                         “Forest” shall mean Forest Laboratories Ireland Limited.

 

1.43                         “Forest Agreement” shall mean the License and Collaboration Agreement, dated January 9, 2004, as may be amended (which amendment may not expand the exception under the definitions of Cypress Information and Cypress Patents, except with Organon’s written consent), between Cypress and Forest, which provides for an exclusive license by Cypress to Forest of rights to develop and commercialize milnacipran.

 

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1.44                         “GAAP” shall mean U.S. generally accepted accounting principles, consistently applied.

 

1.45                         “IFRS” shall mean International Financial Reporting Standards, consistently applied.

 

1.46                         “Indemnified Losses” shall have the meaning set forth in Section 16.1(a).

 

1.47                         “Indemnitee” shall mean a person entitled to indemnification under Section 16.1.

 

1.48                         “Indemnifying Party” shall have the meaning set forth in Section 16.2.

 

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

 

1.50                         “IND” shall mean an Investigational 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.

 

1.51                         “Joint Commercialization Committee” shall have the meaning set forth in Section 3.6.

 

1.52                         “Joint Committees” shall have the meaning set forth in Section 3.1.

 

1.53                         “Joint Data” shall mean all test data and results (including pharmacological, toxicological and clinical test data and results), analytical and quality control data, results or descriptions and marketing data with respect to Development Candidates or Approved Products in the Field in the course of performance of activities pursuant to this Agreement provided that neither the Cypress Option nor the Organon Option has been exercised.

 

1.54                         “Joint Development Committee” shall have the meaning set forth in Section 3.5.

 

1.55                         “Joint Marketing/Development Collaborator” shall have the meaning set forth in Section 5.6.

 

1.56                         “Joint Patents” shall mean Patents covering each invention made jointly by both parties pursuant to this Agreement.

 

1.57                         “Level of Effort” shall have the meaning set forth in Section 5.3(b)(iii).

 

1.58                         “License Term” shall have the meaning set forth in Section 15.1.

 

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1.59                         “Manufacturing Agreement” means an agreement to be negotiated by Cypress and Organon regarding the manufacture of Approved Products for use in the Field in the Shared Territory, which shall include applicable terms regarding the arm’s length, commercial manufacture of Approved Products as set forth in this Agreement.

 

1.60                         “Marketing Plan” shall have the meaning set forth in Section 5.3(b)(i).

 

1.61                         “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.

 

1.62                         “Net Sales” shall mean, the gross amount invoiced for sales or other transfers of Approved Products labeled for use in the Field (but not sales or other transfers of any product that is an Approved Product but is labeled only for use for any indication outside the Field) by Cypress and its Affiliates or by Organon and its Affiliates to Third Parties that are not licensees or sublicensees of the applicable party, less the deductions listed in subsections (a) through (f) below (without duplication), as allocable to such Approved Product.  If Organon and Cypress do not share Shared Revenue with respect to such Approved Product, the gross amount invoiced for sales or other transfers of Approved Products labeled for use in the Field by licensees or sublicensees of Organon or Cypress, as applicable, to Third Parties shall also be included in Net Sales.  If Organon and Cypress share Shared Revenue with respect to such Approved Product, the gross amount invoiced for sales or other transfers of Approved Products labeled for use in the Field by licensees or sublicensees of Organon or Cypress (including any Joint Marketing/Development Collaborator) to Third Parties shall not be included in Net Sales.  In addition, if Cypress, Organon or any of their respective Affiliates sells or transfers Approved Products labeled for use in the Field to any licensee or sublicensee of the applicable party that is an end user of such Approved Product, an amount equal to the amount that would have been invoiced to an independent Third Party in an arm’s length transaction upon the sale of Approved Product shall also be included in Net Sales.

 

(a)                                   trade or quantity discounts actually allowed;

 

(b)                                   refunds, rebates, chargebacks, retroactive price adjustments, billing errors and any other allowances (including, without limitation, government-mandated and managed health care-negotiated rebates) actually granted which effectively reduce the net selling price;

 

(c)                                   product returns and credits actually granted;

 

(d)                                   any tax imposed on the production, sale, delivery or use of the product (excluding federal, state or local taxes based on income), in so far as possible to allocate to sale of Approved Product;

 

(e)                                   freight, postage, shipping, customs duties, excises, tariffs, surcharges, other governmental charges (excluding federal, state or local taxes based on income) and insurance charges actually allowed or paid for delivery of Approved Product;

 

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(f)                                     an [...***...] as actually incurred; and

 

(g)                                  payments or rebates paid with respect to such Approved Product, as applicable, in connection with state or federal Medicare, Medicaid or similar programs in the United States or in connection with similar programs in other countries in which there are sales.

 

Such amounts shall be determined from the books and records of Cypress and its Affiliates, licensees and sublicensees or Organon and its Affiliates, licensees and sublicensees, as the case may be, maintained in accordance with IFRS or GAAP, as applicable.

 

As used below, the term “Combination Product” means any Approved Product, as applicable, sold in combination with any other active pharmaceutical ingredient(s) that is not part of the Approved Product (whether packaged together or in the same therapeutic formulation).  The following provisions shall apply only in the event that Organon has exercised the Organon Option or Cypress has exercised the Cypress Option.  In the event the Approved Product is sold as part of a Combination Product, the Net Sales from the Combination Product, for the purposes of determining royalty payments, will be determined by multiplying the Net Sales of the Combination Product by the fraction, [...***...]

 

In the event that the average sale price of the Approved Product can be determined but the average sale price of the other active pharmaceutical ingredient(s) in the Combination Product cannot be determined, Net Sales for purposes of determining royalty payments will be calculated by multiplying the Net Sales of the Combination Product by the fraction [...***...]  If the average sale price of the other active pharmaceutical ingredient(s) can be determined but the average price of the Approved Product, as applicable, cannot be determined, Net Sales for purposes of determining royalty payments will be calculated by multiplying the Net Sales of the Combination Product by the following formula: [...***...]

 

In the event that the average sales price of both the Approved Product, as applicable, and the other active pharmaceutical ingredient(s) in the Combination Product cannot be determined, the Net Sales of the Approved Product shall be negotiated in good faith by the parties.

 

The Net Sales price for a Combination Product in a given country will be calculated once each Contract Year and such price will be used during all applicable royalty reporting periods for the entire Contract Year for such country, absent extraordinary conditions or events.  When determining the average sale price of an Approved Product, as applicable, or the other active pharmaceutical ingredient(s) in the Combination Product, the average sale price will be calculated using data arising from the 12 months preceding the calculation of the Net Sales price for the Combination Product.

 

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In no event shall provision of free samples of Approved Product, as applicable, or the disposition of Development Candidate or Approved Product for, or the use of Development Candidate or Approved Product in, Phase I Clinical Trials, Phase II Clinical Trials, Phase III Clinical Trials or post-approval studies in which such Development Candidate or Approved Product is provided to patients without any payment result in any Net Sales.

 

1.63                         “Operational Control” shall mean, in the context of development, management of the overall development activities, organizing progress meetings between the operational groups, coordinating clinical research organizations and other consultants performing research, development and regulatory activities, organizing information sharing, managing of central database of clinical study results, and harmonizing procedures and information technology systems, in each case in accordance with the Development Plan.  In the context of commercialization, Operational Control shall mean management of marketing strategy, branding of Approved Product, Phase IV studies, trademark matters, launch logistics, and coordination of sales efforts and commercialization of the Approved Product, in each case in accordance with the Marketing Plan.  In no event shall the party exercising Operational Control be entitled to obligate the other party to pay any amount to a third party or to be responsible for costs beyond what was previously agreed in a Budget, or be entitled to modify or amend the Development Plan or Marketing Plan, as applicable.

 

1.64                         [...***...]

 

1.65                         [...***...] Agreement” shall mean that certain License Agreement dated January 3, 2005 between Cypress and [...***...], as may be amended (which amendment may not expand the exception under the definitions of Cypress Information and Cypress Patents, except with Organon’s written consent), in accordance with its terms.

 

1.66                         “Organon” shall have the meaning set forth in the introductory paragraph.

 

1.67                         “Organon Information” shall mean Information related to Compounds, Development Candidates or Approved Products, which is Controlled by Organon or its Affiliates as of the Effective Date or developed or acquired by or for Organon or its Affiliates in the course of performance of this Agreement.  Organon Information excludes Organon Patents, Joint Patents and Joint Data, but includes Information licensed to Organon pursuant to the UIC Agreement.

 

1.68                         “Organon Group” shall have the meaning set forth in Section 18.13(i).

 

1.69                         “Organon Option” shall have the meaning set forth in Section 6.1.

 

1.70                         “Organon Patents” shall mean all Patents Controlled by Organon or its Affiliates as of the Effective Date or during the License Term that are necessary or useful for the development, manufacture, use, sale, offer for sale or import of any Compound, Development Candidate or Approved Product in the Field, including, without limitation, the Patents set forth on Exhibit B , but excluding any Joint Patents.

 

1.71                         “Organon Technology” shall mean the Organon Patents and the Organon Information.

 

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1.72                         “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.

 

1.73                         “Pharmaceutical Company” shall have the meaning set forth in Section 18.13(k).

 

1.74                         “Phase II Clinical Trial” shall mean a Phase II study (however denominated) as defined in 21 C.F.R. 312.21(b) (or its successor regulation).

 

1.75                         “Phase III Clinical Trial” shall mean a Phase III study (however denominated) as defined in 21 C.F.R. 312.21(c) (or its successor regulation).

 

1.76                         “Product Supply Costs” means the cost to have Approved Products manufactured in final packaged form as purchased by Organon from an Affiliate or a Third Party pursuant to the Manufacturing Agreement and delivered to the first independent Third Party.  The price negotiated in the Manufacturing Agreement for “Product Supply Costs” shall be [...***...] that shall include:  (i) actual direct costs incurred in manufacturing or purchasing materials, including freight-in costs, sales and excise taxes imposed thereon and customs duty and charges levied by government authorities, and all costs of packaging components; (ii) actual direct cost of employees engaged in direct manufacturing activities and quality control and quality assurance activities who are directly employed in manufacturing and packaging such Development Candidate; [...***...] (iv) storage costs; (v) cost of maintaining redundant manufacturing capacity as provided in the Manufacturing Agreement; (vi) losses for expired or failed product; (vi) depreciation; (vii) [...***...] and (viii) manufacturing overhead attributable to such Approved Product, which will include a reasonable allocation of indirect labor (not previously included in direct labor costs), a reasonable allocation of administrative costs, and a reasonable allocation of facilities costs, all in accordance with IFRS, but will not include corporate administrative overhead or plant start-up costs or costs associated with excess capacity.  All allocations will be based on the assumption that such party’s plant and equipment are utilized to their reasonable full capacity (except with respect to equipment that is specific to the Approved Product being manufactured), and all costs and allocations shall be based on direct project headcount or other generally accepted accounting methods and consistent with the methods used for such costs and allocations for such party’s internal purposes.  More specifically, the components of Product Supply Costs shall comprise: (A) direct labor (manufacturing personnel); (B) direct materials; (C) facility costs (rent, property taxes, depreciation of leaseholds, utilities, spare parts, maintenance contracts); (D) manufacturing equipment depreciation; (E) allocations for information technology, document control, quality engineering, purchasing, warehouse management, headcount or square footage occupancy, depending on the category); (F) indirect labor (manufacturing supervision); (G) manufacturing department overhead (uniforms, materials used in plant maintenance); (H) quality

 

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assurance/quality control; and (I) such other similar costs as may be reasonably included in such definition as agreed in writing by the parties.

 

1.77                         “Program Materials” shall have the meaning set forth in Section 4.6.

 

1.78                         “Proof of Concept Trial” shall mean a human clinical trial (however denominated) that is conducted in order to ascertain the efficacy of a product and that precedes a Phase II Clinical Trial.

 

1.79                         “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 Development Candidate in such jurisdiction.

 

1.80                         “Rest of the World” shall mean the entire world excluding the Shared Territory.

 

1.81                         “Second Notice” shall have the meaning set forth in Section 4.3(b).

 

1.82                         [...***...] Enantiomer” shall mean the [...***...]enantiomer of the substance known as mirtazapine and any salt thereof.  For purposes of clarity, the parties agree that this does not include the [...***...] Enantiomer.

 

1.83                         “Selection Criteria” shall mean the criteria set forth on Exhibit C .

 

1.84                         [...***...] Product” shall mean a product containing the [...***...] as the [...***...] with an indication in the Field.

 

1.85                         “Shared Revenue” shall mean, on a Approved Product-by-Approved Product basis, an amount equal to (a) Net Sales of such Approved Product, plus (b) Sublicensing Revenue for such Approved Product in each case calculated using GAAP or IFRS, as applicable.

 

1.86                         “Shared Territory” shall mean the United States (including its territories and possessions), Canada and Mexico.

 

1.87                         “Sharing Ratio” shall have the meaning set forth in Section 5.3(b)(iv) .

 

1.88                         “Specifications” shall mean the technical description of the method of manufacture for an Approved Product.

 

1.89                         “Specific Country” shall have the meaning set forth in Section 7.1(b).

 

1.90                         “Sublicensing Revenue” shall mean (a) all license fees, milestone payments, royalties, annual maintenance fees and similar payments and consideration paid by a Third Party licensee or sublicensee to Organon or Cypress, as applicable, and such applicable party’s Affiliates, solely in consideration for the grant by Organon or Cypress, as applicable, or such applicable party’s Affiliates, of a license or sublicense of rights to Cypress Technology, Organon

 

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Technology, Joint Data or Joint Patents in the Field hereunder, and (b) the gross margin (i.e. sales price less reasonable cost of goods sold) on all Development Candidates and Approved Products supplied by Organon or Cypress, as applicable, or such applicable party’s Affiliates, to a Third Party licensee or sublicensee of rights to Cypress Technology, Organon Technology, Joint Data or Joint Patents in the Field hereunder (with any of the foregoing consideration received by Organon or Cypress, as applicable, or such applicable party’s Affiliates, other than in the form of cash to be valued at its fair market value as of the date of receipt); provided, however, that “Sublicensing Revenues” shall in any event exclude payments for equity or debt securities of Organon or Cypress, as applicable, or such applicable party’s Affiliates (at its fair market value upon date of receipt) and, except as provided above, reasonable payments tied to the provision of goods and/or services by Organon or Cypress, as applicable, or such applicable party’s Affiliates, to such Third Party licensee or sublicensee to compensate Organon or Cypress, as applicable, or such applicable party’s Affiliates, for the provision of such goods and/or services.

 

1.91                         “Third Party” shall mean any entity other than Cypress or Organon or an Affiliate of Cypress or Organon.

 

1.92                         “Trademarks” shall mean the registered marks used for the identification of Approved Products.

 

1.93                         [...***...] Agreement” shall mean that certain License Agreement between Organon and [...***...] dated January 17, 2005.

 

1.94                         “Voting Stock” shall have the meaning set forth in Section 18.13(k).

 

2.                                       GENERAL

 

2.1                                Objectives.   The parties intend to carry out their obligations and responsibilities under this Agreement, consistent with the objectives set forth in and the resources allocated to such activities in the Development Plan or the Marketing Plan, as applicable.  It is intended that the work performed under this Agreement will be conducted as a unified collaborative effort with activities by the parties carried out at each party’s respective facilities or through the use contracted Third Parties, and this intent shall be reflected in the Development Plan or the Marketing Plan, as applicable.

 

2.2                                Research and Development Activities.   It is the intention of the parties that each party shall contribute to the research and development of one or more Development Candidates in the Field.  It is intended that each party shall contribute to costs (internal and external) related to such research and development activities applying a 50/50 Split, or, with respect to the [...***...] only, if elected by Organon upon written notice to Cypress upon selection of the [...***...] a 60/40 Split, and the Development Plan will be consistent with and provide for such proportional contribution and subject to the prior approval of a Budget for the relevant time period.

 

2.3                                Commercialization.   It is the intention of the parties to collaborate in the commercialization of one or more Approved Products in the Field in the Shared Territory, consistent with the objectives set forth in and the resources allocated to such activities in the

 

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Marketing Plan.  It is intended that the commercialization activities in the Shared Territory will be conducted as a unified collaborative effort, and this intent shall be reflected in the Marketing Plan.  Shared Revenue generated with respect to Approved Products in the Field in the Shared Territory shall be shared in proportion to the Level of Effort expended by the parties as determined in accordance with the Marketing Plan, except to the extent that such effort is not equal, in which case an appropriate royalty shall be calculated as described herein. In the Rest of the World, Organon shall be solely responsible for commercialization of Approved Products, and shall pay Cypress a royalty on Net Sales.

 

2.4                                Manufacturing.  In support of the collaboration, Organon or its Affiliates shall manufacture and supply all quantities of Development Candidates and Approved Products necessary for development and commercialization in the Field and shall be responsible for implementing all aspects of manufacturing, subject to the terms of the Manufacturing Agreement, unless the parties decide, through the Joint Development Committee or Joint Commercialization Committee, as applicable, to have such supplies provided by a Third Party.

 

3.                                       COLLABORATION MANAGEMENT

 

3.1                                General.  The parties shall coordinate and plan their respective activities hereunder through the use of two committees, a Joint Development Committee and a Joint Commercialization Committee, which shall be collectively known as “Joint Committees.”

 

3.2                                Procedures for the Joint Committees

 

(a)                                   Membership.   The Joint Committees shall include an equal number of members designated by each of Organon and Cypress, such number to be mutually agreed upon by the parties.  Each Joint Committee member shall have experience appropriate for the activities to be conducted by such Joint Committee.

 

(b)                                   Meetings.   The Joint Committees shall meet at such times and such places as shall be determined from time to time by Organon and Cypress, but in any event, not less than twice in each calendar year.  Members of a Joint Committee may participate in meetings of such Joint Committee in person or by conference telephone call.

 

(c)                                   Quorum.   A quorum for the conduct of business by a Joint Committee shall consist of a majority of the members designated by Organon and a majority of the members designated by Cypress.

 

(d)                                   Decisions.   All actions and decisions by a Joint Committee shall require unanimous approval at a meeting at which a quorum is present, with the members representing Cypress collectively having one vote and the members representing Organon collectively having one vote.  All actions taken, whether at a meeting or by an action by written consent, shall be set forth in minutes and circulated to each member of a Joint Committee.  Expenses incurred by a member of a Joint Committee in connection with the activities of the Joint Committee will be borne by the party that designated such member.

 

(e)                                   Administration.   The chairperson of each Joint Committee shall be determined by the party that has Operational Control of the activities relevant to such committee.

 

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The party not designating the chairperson shall designate one of its representative members as secretary to such Joint Committee.  The chairperson shall be responsible for calling meetings of such Joint Committee, sending notices of meetings to all members and leading such meetings.

 

(f)                                     Minutes.  Within 15 days after a Joint Committee meeting, the secretary of such Joint Committee shall prepare and distribute minutes of the meeting, which shall provide a description in reasonable detail of the discussions had at the meeting and a list of any actions, decisions or determinations approved by such Joint Committee.  The secretary shall be responsible for circulation of all draft and final minutes.  Draft minutes shall be first circulated to the chairperson, edited by the chairperson and then circulated in final draft form to all members of such Joint Committee sufficiently in advance of the next meeting to allow adequate review and comment prior to the meeting.  Minutes shall be approved or disapproved, and revised as necessary, within 30 days after the applicable meeting.  Final minutes shall be distributed to the members of such Joint Committee.

 

(g)                                  Diligence.  Each Joint Committee shall adopt project progression guidelines, including criteria for the designation of Development Candidates, the filing of INDs, the commencement of Phase I Clinical Trials, Phase II Clinical Trials and Phase III Clinical Trials, and the filing of INDs and NDAs.  Each party shall use Diligent Efforts to conduct the activities that are assigned to it in the Development Plan or Marketing Plan, as applicable, and each shall devote sufficient resources to carry out such respective activities.

 

(h)                                  Resources.   If either party believes that the parties are not devoting resources and participation to the activities to be conducted under this Agreement substantially in accordance with the principles and objectives set forth in Sections 3.2(g), 4 and 5, such party may submit the matter to the relevant Joint Committee in writing, providing a reasonably detailed description of its reasons for such belief.  Taking into account historical and prospective participation and resource devotion of the parties during the current Calendar Quarter and the immediately following Calendar Quarter, the relevant Joint Committee shall take such steps as may be reasonably necessary to ensure substantial compliance in resources devoted and participation by the parties in the activities to be conducted under this Agreement with the principles and objectives set forth in Sections 3.2(g), 4 and 5.

 

3.3                                Dispute Resolution.   In the event a Joint Committee is unable to decide or resolve any issue related to its functions, the issue shall be referred to an appropriate senior executive officer of Cypress and an appropriate senior executive of Organon.  Such officers of the parties shall meet promptly thereafter and shall negotiate in good faith to resolve such issue within 30 days of commencing such negotiations, but in any event shall continue negotiations until they reach mutual agreement and neither party may take any action related to such disputed issue until there is mutual agreement by the representatives of Organon and Cypress on the Joint Committee or by such officers of the parties.

 

3.4                                Final Decision Authority.

 

(a)                                   Development Candidate Selection.   Final decision making authority with respect to the selection of a Development Candidate with the goal of developing Approved Products is as set forth in Section 4.3.

 

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(b)                                   Operational Control.  Cypress shall have the Operational Control of development of Development Candidates in the Field in the Shared Territory, provided that, if Cypress exercises the Cypress Option, Organon shall thereafter have Operational Control of clinical development of Development Candidates in the Field in the Shared Territory.  Organon shall have the Operational Control of development of Development Candidates in the Field in the Rest of the World, provided that, if Organon exercises the Organon Option, Cypress shall thereafter have Operational Control of clinical development of Development Candidates in the Field in the Rest of the World.  Budgets, the Development Plan and the Marketing Plan shall always require the joint approval of the parties or the Joint Development Committee or the Joint Commercialization Committee, as applicable, provided that neither the Organon Option nor the Cypress Option has been exercised.  Organon shall have Operational Control with respect to commercialization of Approved Products, provided that, if Organon exercises the Organon Option, Cypress shall thereafter have Operational Control with respect to commercialization of Approved Products.  In no event shall either party be required to spend more than was agreed in a Budget for any given year.

 

3.5                                Establishment of Joint Development Committee.   Within 30 days of the Effective Date, the parties shall establish a committee (the “Joint Development Committee” ), which shall coordinate development of Development Candidates in all territories, including the conduct of the following activities:

 

(a)                                   Review, discuss and agree upon the Development Plan, including any trials or studies that are required to obtain or maintain Regulatory Approval of an Approved Product;

 

(b)                                   Monitoring of the execution of the Development Plan, including allocation of activities and responsibilities between parties and review and discussion of progress and performance of parties’ respective research and development activities under the Development Plan;

 

(c)                                   Overseeing, reviewing, discussing and approving  all substantive communications and issues with the relevant regulatory authorities regarding research, development and registration of Development Candidates in the Field, including, but not limited to communications, meetings, submissions, labeling and other regulatory actions;

 

(d)                                   Making of go/no go decisions with respect to filing NDAs and other significant regulatory filings related to the Development Candidates and Approved Product in the Field in the Shared Territory.

 

(e)                                   Review, discuss and approve (subject to final approval by the respective parties) proposed Budgets for Development Expenses, and submit such Budgets for approval by Cypress and Organon;

 

(f)                                     If a party exceeds the expenses which it is permitted to incur under the Budget, review and recommend to the parties, subject to their respective approval, whether the Budget should be revised to include all or a portion of such additional amount;

 

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(g)                                  Discuss and determine whether a Third Party, rather than Organon, should supply Development Candidates, taking into consideration quality and price of supply;

 

(h)                                  Review and discuss Organon Information and Cypress Information presented at each meeting of the Joint Development Committee;

 

(i)                                     Discuss and determine whether both parties should cease development of all Development Candidates in the Field;

 

(j)                                     If there is a dispute between the parties as to which party shall own any particular item of Information, establish a procedure to resolve such dispute, which may include engaging a qualified Third Party patent attorney unaffiliated with and independent of the parties and jointly selected by the parties, as an expert to resolve such dispute; and

 

(k)                                 Review and discuss whether a license to any intellectual property rights of any Third Party is required or beneficial for work under this Agreement.  In the event the Joint Development Committee determines that such Third Party license is required or beneficial, the Joint Development Committee shall determine which party shall be responsible for obtaining such license, as applicable.  In making any such determination provided for in this Section as to the need for or benefit of any such Third Party license, due consideration shall be given to the advisability of seeking an opinion of counsel.

 

3.6                                Joint Commercialization Committee.  As soon as the parties deem appropriate, but in no event later than the date on which the first patient is enrolled in a Phase III Clinical Trial of a Development Candidate, Organon and Cypress shall establish a Joint Commercialization Committee (the “Joint Commercialization Committee” ) to coordinate the commercialization and marketing of Approved Products in the Field in all territories, including the conduct of the following activities:

 

(a)                                   Review, discuss and agree upon the Marketing Plan for the Shared Territory and marketing issues with a worldwide impact, including any trials or studies other than those that are required to obtain or maintain Regulatory Approval of an Approved Product and launch criteria for commercialization (with input from the Joint Development Committee);

 

(b)                                   Review and discuss commercialization strategy for the Rest of the World;

 

(c)                                   Review, discuss and approve (subject to final approval by the respective parties) proposed Budgets for Allowable Commercialization Expenses, and submit such Budgets for approval by Cypress and Organon;

 

(d)                                   Discuss and determine whether a Third Party, rather than Organon, should supply Approved Product, taking into consideration quality and price of supply;

 

(e)                                   Review and discuss Organon Information and Cypress Information presented at each meeting of the Joint Commercialization Committee;

 

(f)                                     Discuss and determine whether both parties should cease commercialization of all Approved Products in the Field; and

 

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(g)                                  If there is a dispute between the parties as to which party shall own any particular item of Information, establish a procedure to resolve such dispute, which may include engaging a qualified Third Party patent attorney unaffiliated with and independent of the parties and jointly selected by the parties, as an expert to resolve such dispute.

 

4.                                       DEVELOPMENT AND REGULATORY APPROVAL ACTIVITIES

 

4.1                                Development Activities.

 

(a)                                   Conduct of Development Activities under the Development Plan.   The parties will undertake and share responsibility for developing and obtaining Regulatory Approval of Development Candidates in the Field in the Shared Territory after the selection of a Development Candidate pursuant to Section 4.3.  Such development and efforts to obtain Regulatory Approval shall be conducted pursuant to the Development Plan.  The Development Plan may be amended from time to time with approval of the Joint Development Committee.

 

(b)                                   Contents of the Development Plan.   The parties agree that the Development Plan will include a Budget and will reflect development activities for Development Candidates in the Field through the first NDA filing.  Each Development Plan shall be in writing and shall set forth with reasonable specificity the research and development objectives, priorities, activities, milestones, budgets, personnel requirements, other resources and allocations of responsibilities between the parties with respect to the applicable Development Candidate for the period covered by such Development Plan in a manner consistent with the terms of this Agreement, including, without limitation, the objectives set forth in Sections 2.1 and 2.2 and the terms and conditions set forth in this Section 4.  The Development Plan shall cover all aspects of development of Development Compounds and Approved Products and shall include, with reasonable specificity, the development activities to be performed by each party and the development activities, if any, to be performed by subcontractors. The parties will use Diligent Efforts to structure the Development Plan in such a way as to maximize the usefulness of data and results generated thereunder for registration of Development Candidates in the Field in the Rest of the World; provided that neither party will be required to conduct studies or other development activities that would cause such party to incur costs that would be significantly greater than the costs that would have been incurred by such party if such studies or other development activities were structured for purposes of generating data and results for use in registration in the Shared Territory only.

 

(c)                                   Adoption and Modification of the Development Plan.   The initial Development Plan shall be discussed at the first meeting of the Joint Development Committee, and shall be finalized within 90 days of the Effective Date.  In subsequent years, the Joint Development Committee shall present an annual Budget of Development Expenses, for each Development Candidate for the subsequent year, by November 1.  The responsibility of the Joint Development Committee to prepare a Development Plan for a Development Candidate shall terminate upon the earlier of (A) the date of exercise of the Organon Option or the Cypress Option, as applicable, or (B) the agreement of the parties to cease further development of the Development Candidate.

 

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(d)                                   Performance of the Development Plan.   The parties will use Diligent Efforts to perform their respective responsibilities under the Development Plan.

 

(e)                                   Shared Effort and Cost under the Development Plan.   The Development Plan is intended to represent a 50/50 sharing of the research and development efforts (which may be adjusted to a 60/40 sharing of efforts as described in Section 5.3(b)(iv)), and internal and Third Party costs of such efforts, required to obtain Regulatory Approval of Development Candidates in the Field in the Shared Territory.

 

(f)                                     Development FTE Rate.   The rate of payment for Development FTEs (the “Development FTE Rate” ) shall be an initial rate of [...***...] per year per Development FTE, which may be modified by the Joint Development Committee.  The Development FTE Rate shall be adjusted on a Calendar Year basis to account for inflation and exchange rates, based on agreed upon references, for the subsequent Calendar Year.  No changes shall be made on account of exchange rates in the event that the rate of exchange between the US Dollar and the Euro remains between [...***...] to the Euro.  The precise method of reconciling these costs shall be determined by the Joint Development Committee.  Calculation of costs for Development FTEs to be included in Development Expenses would be made using actual hours for Development FTEs performing activities pursuant to the Development Plan.  In no event will any internal costs of a party other than those included in the Development FTE Rate be included in the Development Expenses.

 

4.2                                Initial Studies in Obstructive Sleep Apnea.   Cypress shall test [...***...] in a Proof of Concept Trial in the Field, and Organon shall test the […***…] in a Proof of Concept Trial/Phase II Clinical Trial in the Field, which trials are expected to be completed within [...***...] following the Effective Date.  Each party shall bear its own costs for the studies discussed in this Section, and the provisions of Sections 8.4 and 8.5 shall only apply after the completion of the studies described in this Section.

 

4.3                                Selection of Development Candidate.   Following completion of the studies described in Section 4.2, the Joint Development Committee shall apply the Selection Criteria to determine whether the studies referenced in Section 4.2 generated results sufficient to allow selection of a Development Candidate.  In the event that the Joint Development Committee determines that additional studies are required to reach a decision, then the Joint Development Committee shall order additional studies, which will be shared equally by the parties.  In the event that Joint Development Committee determines that it has sufficient information to enable selection of a Development Candidate, the President of Cypress and the Vice President, Research of Organon shall apply the Selection Criteria to determine which Development Candidate to take into further Clinical Trials based on the Selection Criteria within 30 days of presentation to the Joint Development Committee of the results of such studies (and any other information the Joint Development Committee determines to be necessary to make such decision).

 

(a)                                   First Level of Resolution.   If such determination is not made pursuant to the preceding paragraph within such [...***...] the Joint Development Committee shall provide written notice thereof to Cypress and Organon no later than the end of such [...***...] period ( “First Notice” ), referring such determination to a senior scientific officer of Cypress, and a senior research manager of Organon.  Such representatives shall meet and make a final

 

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determination with respect to Development Candidate selection as soon as reasonably practicable, and in no event more than [...***...] of receipt of the First Notice.

 

(b)                                   Second Level of Resolution.   If such representatives are not able to make such determination within such [...***...] period following the First Notice, they shall provide written notice thereof to Cypress and Organon no later than the end of such [...***...] period (the “Second Notice” ), referring such determination to an Organon executive officer more senior than the preceding Section and the Chief Executive Officer of Cypress.  Such executive officers shall meet and make a final determination with respect to Development Candidate selection within [...***...] of receipt of the Second Notice; provided, however, that [...***...] then the determination made by the senior executive officer of Organon shall be deemed the final determination with respect to the Development Candidate selection.

 

4.4                                Assistance; Updates.   The parties shall reasonably assist each other in their efforts to obtain NDA approvals and any additional Regulatory Approvals with respect to Development Candidates in the Field or in the Animal Health Field; provided that no party shall be required to incur costs in providing such assistance that would significantly increase those costs to be incurred by such party in accordance with the other terms of this Agreement.  Cypress shall keep Organon fully informed of the registration process of Development Candidates in the Field in the Shared Territory through the Joint Development Committee.  Organon shall provide reasonable updates as requested on the progress of seeking registration of Development Candidates in the Field in the Rest of the World.

 

4.5                                Regulatory Matters in the Shared Territory.   Organon will hold the IND for each Development Candidate that contains the [...***...] Enantiomer as the [...***...] in the Field in the Shared Territory. Cypress will hold the IND for all other Development Candidates in the Field in the Shared Territory.  If Organon has not exercised the Organon Option, Organon will hold each NDA for each Approved Product in the Field in the Shared Territory, and Cypress will provide reasonable assistance to Organon to facilitate Organon holding the NDA for each Approved Product.  If Cypress exercises the Cypress Option, Cypress will transfer the IND for each Development Candidate in the Field in the Shared Territory to Organon promptly upon exercise of the Cypress Option.  If Organon exercises the Organon Option, Organon will transfer the NDA for each Approved Product in the Field in the Shared Territory to Cypress promptly upon exercise of the Organon Option or at such earlier time as determined by the Joint Development Committee.

 

(a)                                   Regulatory Oversight.   The parties shall be jointly involved in reviewing, discussing, approving and coordinating all material regulatory actions, communications and filings with and submissions, including filings and submissions of supplements and amendments thereto, to regulatory authorities with respect to each Development Candidate in the Field, with Cypress having Operational Control with regard to such matters in the Shared Territory, provided that Cypress has not exercised the Cypress Option, and in the Rest of the World if

 

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Organon has exercised the Organon Option, and Organon being solely responsible with regard to such matters in the Rest of the World, provided that Organon has not exercised the Organon Option, and in the Shared Territory if Cypress has exercised the Cypress Option.  Each party shall give the other a reasonable opportunity for prior review of and comment on all such substantive communications, filings and submissions with or to regulatory authorities with respect to each Development Candidate in the Field and shall incorporate those of such comments as can reasonably be incorporated into such communications, filings and submissions, with all such final substantive communications, filings and submissions to be in a form mutually agreed by the parties.

 

(b)                                   Regulatory Meetings and Correspondence.   The parties shall be jointly responsible for interfacing, corresponding and meeting with Regulatory Authorities with respect to Development Candidates in the Field in the Shared Territory.  Both parties will be entitled to attend all meetings and telephone conferences with Regulatory Authorities in which substantive matters with regard to Development Candidates in the Field are discussed.

 

4.6                                Material Transfer.   Either party may provide to the other party certain material Controlled by the supplying party for use by the other party in furtherance of this Agreement, which material shall be referred to as “Program Materials.”   All such Program Materials shall be considered Confidential Information of the supplying party.  All such Program Materials delivered to the other party shall remain the sole property of the supplying party, shall be used only in furtherance of and in compliance with this Agreement and solely under the control of the other party and its Affiliates, shall not be used or delivered to or for the benefit of any Third Party without the prior written consent of the supplying party and shall not be used in research or testing involving human subjects unless first approved by the supplying party or expressly permitted under this Agreement.  The Program Materials supplied under this Section must be used with prudence and appropriate caution in any experimental work, because not all of their characteristics may be known.  THE PROGRAM MATERIALS ARE PROVIDED “AS IS” AND WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE OR ANY WARRANTY THAT THE USE OF THE PROGRAM MATERIALS WILL NOT INFRINGE OR VIOLATE ANY PATENT OR OTHER PROPRIETARY RIGHTS OF ANY THIRD PARTY.

 

4.7                                Activities in the Rest of the World.   Organon shall be responsible, at its own discretion and its own expense, for developing and obtaining Regulatory Approval of Development Candidates in the Field in the Rest of the World, beyond any of the development activities conducted in the Shared Territory pursuant to this Section 4 that may be useful for such purpose.

 

4.8                                Rights Outside the Field.   Cypress shall offer to Organon a first right to negotiate co exclusive joint research and development of Development Candidates and Approved Products in any field, outside the Field, with the exception of the Animal Health Field, for which Cypress Controls Patents claiming the use of Development Candidates or Approved Products in such field on terms and subject to conditions to be separately negotiated by the parties.  In the event that [...***...] Cypress shall offer

 

***Confidential Treatment Requested

 

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the terms for such collaboration to Organon before offering such opportunity to any Third Party.  Organon shall have 60 days in which to respond to such offer.  If Organon provides written notice to Cypress expressing interest in such rights during such 60 day period, the parties shall negotiate the terms for any such collaboration in good faith; provided, however, that, if the parties have not reached agreement on the principal terms of such collaboration within [...***...] after Organon’s notice expressing its interest, then Cypress shall have no further obligation to Organon with respect to research and development of Development Candidates and Approved Products in such field and may pursue such activities alone or with one or more Third Parties.

 

4.9                                [...***...]  Within 60 days of receiving approval to [...***...] the [...***...] with a [...***...] in any country in the Shared Territory, the parties will meet to discuss in good faith fair and reasonable financial compensation by Organon to Cypress taking into account whether the development or commercialization of the [...***...] in the Field has required or shall require the [...***...]  If the parties are unable to reach agreement within [...***...] after the launch of the [...***...] in the […***…] in any country in the Shared Territory, the parties shall submit the matter for final and binding resolution by a panel of three experts with relevant industry experience.  Each party shall promptly select one person to serve on such panel, and the two persons selected by the parties shall select the third member of the panel within 15 days of their appointment.  Within 15 days after the third member of the panel is selected, each party shall submit to the panel and the other party its final proposal for fair and reasonable financial compensation by Organon to Cypress for the [...***...] in the Shared Territory.  The panel will make a decision within 30 days after receiving both parties’ proposals.  The arbitrators’ decision will be limited to choosing one of the two final proposals and will be final, binding and non-appealable.

 

5.                                       COMMERCIALIZATION

 

5.1                                Commercialization Activities in the Rest of the World.   Organon shall have the option, by itself or through its sublicensees, at its own expense, to manufacture, launch, promote, market and sell Approved Products in the Field in the Rest of the World.

 

5.2                                Commercialization in the Shared Territory.   Organon, by itself or through its sublicensees, shall undertake, and have sole responsibility for, the manufacture, launch, promotion, marketing and sale of Approved Products in the Field in the Shared Territory, subject to the Cypress Participation Right and provided that Organon has not exercised the Organon Option.  Unless Organon has exercised the Organon Option, all sales shall be booked on the account of Organon.  In the event that, within [...***...] after the commencement of the first Phase III Clinical Trial with respect to a Development Candidate in the Field in the Shared Territory, either party may provide the other party with written notice of its offer to enter into an agreement for the joint commercialization of such Approved Product in the Field in the Shared Territory.  The other party shall have the right to accept such offer and enter into such commercialization agreement, which is expected to occur within [...***...] following such notice.

 

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5.3                                Launch, Promoting and Marketing Plans in the Shared Territory.

 

(a)                                   Launch Efforts.   The NDA holder will use Diligent Effort to launch the first Approved Product in the United States within no more than [...***...] following Regulatory Approval of such Approved Product in the United States if the parties agree that the Approved Product has met the launch criteria for commercialization adopted by the Joint Commercialization Committee in the Marketing Plan.  Organon will use Diligent Efforts to prepare for, to launch and to market Approved Products in the Field in the Shared Territory.

 

(b)                                   Marketing Plans.

 

(i)                                     No later than the date of submission of the NDA for the first Approved Product in any country in the Shared Territory, the parties shall prepare, subject to review, comment and approval by the Joint Commercialization Committee, a rolling [...***...] plan for marketing and commercialization of Approved Products in the Field in the Shared Territory (the “Marketing Plan” ) that will include (1) marketing strategy, (2) the Budget for Allowable Commercialization Expenses, including, without limitation, amounts budgeted for expenditures on sales and sales management, physician promotion and medical education for Approved Product in the Shared Territory in such year (3) the aggregate number of detailing calls with respect to Approved Product that are projected in such year, (4) the criteria for commercial launch of an Approved Product and (5) other activities with respect to Approved Product to be conducted by the parties in such year, including professional and consumer education activities and studies of Approved Product in the Field conducted after obtaining Regulatory Approval.  The parties shall endeavor to have the ratio of the value of their respective efforts under the Marketing Plan be equivalent to the Sharing Ratio.  The Marketing Plan shall be updated on an annual basis by the Joint Commercialization Committee three to six months in advance of the beginning of the next applicable Calendar Year.

 

(ii)                                 Each Marketing Plan will be in writing and shall set forth with reasonable specificity the commercialization objectives, priorities, strategies, activities, budgets, personnel requirements, other resources and allocations of responsibilities between the parties with respect to the Approved Products in the Shared Territory for the period covered by such Marketing Plan in a manner consistent with the terms of this Agreement including, without limitation, the terms and conditions set forth in this Section 5.  The Marketing Plan(s) shall cover all aspect of commercialization of the Approved Products in the Field in the Shared Territory, and shall include, with reasonable specificity, the commercialization, marketing and sales activities to be performed by each party and the commercialization, marketing and sales activities, if any, to be performed by subcontractors and/or any other Third Party.

 

(iii)                             The Marketing Plan will set forth the division of promotional effort by Cypress and Organon with respect to Approved Products in the Field in the Shared Territory in each year, which shall take into account following factors (which shall be assigned a value for purposes of computing the Level of Effort of each Party by the Joint Commercialization Committee based on the activity performed):  (A) number of detail calls to be made by or on behalf of each party in which Approved Product is in the “P1” position; (B) number of detail calls to be made by or on behalf of each party in which Approved Product is in the “P2” position; (C) the effort regarding marketing or promotional activities with respect to Approved Product

 

***Confidential Treatment Requested

 

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made by or on behalf of each party, including, without limitation, professional and consumer education activities with respect to Approved Product in the Field, and studies of Approved Product in the Field conducted after obtaining Regulatory Approval.  [...***...]  Furthermore, the Marketing Plan will set forth the activities and allocation of internal and external FTEs related to the commercialization of the Approved Product in the Field in the Shared Territory in each year.  Each party’s detailing and promotional efforts with respect to Approved Products in the Field in the Shared Territory in a given year as a percentage of total detailing and promotional efforts of the parties shall be known as the “Level of Effort.”

 

(iv)                                The Level of Effort between the parties will be designed to achieve a 50/50 Split of detailing and promotional efforts.  Organon may, [...***...] by written notice to Cypress, instead provide for a Level of Effort between the parties designed to achieve a 60/40 Split of detailing and promotional efforts.  The ratio of the Level of Effort of Organon to the Level of Effort of Cypress in a given year is referred to as (the “Sharing Ratio” ).  For example, if the Level of Effort of Organon is 60% and the Level of Effort of Cypress is 40%, the Sharing Ratio would be 60%/40%.  The Sharing Ratio for a given year shall be set forth in the Marketing Plan for that year.  The Joint Commercialization Committee will establish procedures for determining the timing and level of change in the Sharing Ratio.  Any change in the Sharing Ratio would occur on a year-to-year basis, not within a year.  During the course of the year, the parties will cooperate and coordinate to assure that the actual Sharing Ratio determined using the actual Level of Effort of each party for that year will be as close as possible to the Sharing Ratio established in the Marketing Plan.

 

(v)                                    Cypress will have the Cypress Participation Right to perform up to 50% of the total detailing and promotional efforts with the Cypress Sales Force for Approved Products in the Field in the Shared Territory in each year on a per physician basis pursuant to the Marketing Plan.  Organon will supply to Cypress copies of Organon marketing materials for use in such promotion efforts by Cypress, the cost of which shall be included in the Allowable Commercialization Expenses.  Cypress shall have the option to request that Organon sales representatives act on behalf of Cypress to perform some or all of the detailing or promotional efforts allocated to Cypress as reflected in the Level of Effort of Cypress specified in the Marketing Plan for a given year.  Cypress shall be required to exercise this option to perform any Level of Effort in excess of 25% of the total Level of Effort for any given year.  Cypress will notify Organon of its request no less than [...***...] in advance for a given year in connection with the preparation of the Marketing Plan for that year.  Organon will make available to Cypress the Organon sales representatives so requested by Cypress, unless Organon elects to allow Cypress the right to contract with Third Party for such services pursuant to Section 7.4(a)(i)(2).  Cypress shall pay Organon for Organon sales representatives that perform detailing or promotional efforts for Approved Product on behalf of Cypress, as requested by Cypress, at the price [...***...] provided that, if Cypress provides written documentation (from a reputable industry source such as IMS) that the then-current average price for the applicable sales representative activities in the industry is less than the price then charged by Organon for the Organon sales representatives, then Cypress shall instead pay Organon such average price for applicable sales representative

 

***Confidential Treatment Requested

 

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activities performed by the Organon sales representatives.  In the case that Organon would decide to sublicense out its commercialization rights to a Third Party pursuant to Section 7.4(a)(ii)(3), or would decide to make use of a Third Party to perform all or part of the detailing, in the Shared Territory, Organon may transfer (in whole but not in part) its right to perform 25% of the total detailing effort for Cypress as described above to such Third Party.  Cypress may also contract with any Third Party to perform some or all of the detailing or promotional efforts allocated to Cypress (with respect to which Cypress is not required to use Organon sales representatives) as reflected in the Level of Effort of Cypress specified in the Marketing Plan for a given year; provided that the cost to Cypress of such Third Party’s services are not more than the price that Organon would have charged for such services; and further provided that such Third Party services are comparable in quality to those offered by Organon based on factors such as market share gained on launch of new products and number and experience of available sales representatives.

 

5.4                                Sharing of Allowable Commercialization Expenses and Shared Revenue.   All Allowable Commercialization Expenses and Shared Revenue in the Shared Territory will be shared by the parties in accordance with Sections 8.5 and 8.6.  All costs of Organon or Cypress for the launch, promotion, marketing, distribution and sale of Approved Product in the Field in the Shared Territory, other than Allowable Commercialization Expenses shared by the parties in accordance with Section 8.5, shall be borne by the party that incurred such costs.

 

5.5                                Determination of Where to Commercialize Approved Products.   The parties agree that the determination whether to commercialize Approved Products in countries in the Shared Territory is important and will depend upon a variety of commercial factors to be considered jointly by the parties.  The decision of whether to commercialize Approved Products in a country in the Shared Territory other than the United States shall be made by the Joint Commercialization Committee.

 

5.6                                Commercialization in the Shared Territory by Joint Marketing/Development Collaborators.  In the event the Joint Commercialization Committee (or if the Joint Commercialization Committee has not yet been formed, then the parties by mutual agreement) determines that a particular Approved Product should be commercialized entirely by or through one or more Third Parties (each, a “Joint Marketing/Development Collaborator” ) throughout the Shared Territory or in one or more particular countries or regions, then the parties may, in their respective sole discretion, enter into a definitive agreement with the applicable Joint Marketing/Development Collaborator(s) granting rights under such Patents and Information Controlled by such party, including Joint Patents, as necessary to enable such Joint Marketing/Development Collaborator(s) to develop, make, have made, use, sell, offer for sale and import Approved Products in the Field in the Shared Territory or in such country, countries or region(s), as applicable.

 

5.7                                Rights if Organon Option is Exercised.   To the extent Organon exercises the Organon Option, Cypress, by itself or through its sublicensees, shall, at its sole expense, undertake, and have sole responsibility for the launch, promotion, marketing and sale of Approved Products in the Field, and royalties shall be paid by Cypress to Organon pursuant to Section 8.3(a).  Development Expenses and Allowable Commercialization Expenses incurred prior to the exercise of the Organon Option shall be shared pursuant to Sections 8.4 and 8.5,

 

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respectively.  Organon shall maintain its rights to manufacture pursuant to the Clinical Supply Agreement and the Manufacturing Agreement in the event that it exercises the Organon Option.

 

5.8                                Rights if Cypress Option is Exercised.  To the extent Cypress exercises the Cypress Option, Organon, by itself or through its sublicensees, shall, at its sole expense, undertake, and have sole responsibility for the manufacture, launch, promotion, marketing and sale of Approved Products in the Field in the Shared Territory, and royalties shall be paid by Organon to Cypress pursuant to Section 8.3(b).  Development Expenses and Allowable Commercialization Expenses incurred prior to the exercise of the Cypress Option shall be shared pursuant to Sections 8.4 and 8.5, respectively.

 

5.9                                Compliance with Laws.   The parties shall comply, and shall cause their respective sales forces and all other employees, agents and representatives to comply, with all applicable laws, regulations and guidelines in connection with the manufacturing, launch, promotion, marketing and sale of Approved Products.

 

5.10                         Sales and Marketing Diligence.   Organon, by itself or through its sublicensees, shall use Diligent Efforts to promote, market and sell Approved Products in the Field in the Shared Territory in accordance with the Marketing Plan.  Cypress, by itself or through its sublicensees, shall use Diligent Efforts to promote Approved Products in the Field in the Shared Territory in accordance with the Marketing Plan. If a party’s actual Level of Effort during any Calendar Year varies by any significant percentage from the Level of Effort of such party specified in the Marketing Plan for such Calendar Year or there are concerns regarding the detailing and promotional efforts of a party, the Joint Commercialization Committee will discuss and determine how to address the matter with the intent of resolving such matter as expeditiously as possible.

 

5.11                         Product Recall.   In the event that either party determines that an event, incident or circumstance has occurred that may result in the need for a recall or other removal of any Approved Product, or any lot or lots thereof, from a market in the Shared Territory, it shall advise and consult with the other party with respect thereto.  The owner of the relevant Regulatory Approval (or proposed Regulatory Approval), shall make the final determination to recall or otherwise remove the Approved Product or any lot or lots thereof from the market.

 

5.12                         Notice of Adverse Reactions.   Each party shall advise the other as promptly as reasonably practical by facsimile or overnight delivery service addressed to the attention of its Vice President, Regulatory Affairs (or equivalent), of any adverse drug reaction that has been brought to that party’s attention.  The parties intend to enter into a pharmacovigilance agreement, in mutually acceptable form, to set forth in further detail matters related to product recall, adverse event reporting and related matters.

 

6.                                       OPT OUT OPTIONS

 

6.1                                Organon Option.   Organon shall have the option (the “Organon Option” ), in its discretion, to discontinue shared participation in the development and commercialization of Development Candidates and Approved Products, but not before the decision by the Joint Development Committee to proceed with commencement of the first Phase III Clinical Trial.  To

 

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exercise the Organon Option, Organon shall provide at least [...***...] prior written notice to Cypress if such exercise occurs prior to Regulatory Approval of an Approved Product, or at least [...***...] prior written notice if such exercise occurs after Regulatory Approval.  If Organon exercises the Organon Option, then during [...***...] as applicable, following Organon’s written notice of such exercise, the applicable Joint Committee will meet and, if Cypress determines that it also wishes to discontinue the development and commercialization of Development Candidates and Approved Products, then instead of the exercise of the Organon Option, the applicable Joint Committee will be deemed to have determined to cease development of all Development Candidates in the Field or commercialization of all Approved Products in the Field, as applicable, resulting in termination of this Agreement pursuant to Section 15.2(c).  If Organon elects to exercise the Organon Option and Cypress does not decide to discontinue the development and commercialization of Development Candidates and Approved Products as provided in the immediately preceding sentence, Organon will cooperate with Cypress to transfer to Cypress any required approvals, licenses and documentation regarding the Development Candidate in the Field that are in the name of Organon or any of its Affiliates.  Upon exercise of the Organon Option, the Cypress Option shall terminate.

 

6.2                                Cypress Option.   Cypress shall have the option (the “Cypress Option” ), in its discretion, to discontinue shared participation in the development and commercialization of Development Candidates and Approved Products, but not before the decision by the Joint Development Committee to proceed with commencement of the first Phase III Clinical Trial; provided that, in the event that Organon has selected the Selected Enantiomer pursuant to Section 4.3 after completion of the resolution procedures described therein, Cypress may exercise the Cypress Option on or after Development Candidate