LICENSE AND COLLABORATION AGREEMENT BY AND BETWEEN NUVELO, INC. AND BAYER HEALTHCARE AG LICENSE AND COLLABORATION AGREEMENT

EXHIBIT 10.56

LICENSE AND COLLABORATION AGREEMENT

BY AND BETWEEN

NUVELO, INC.

AND

BAYER HEALTHCARE AG

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

LICENSE AND COLLABORATION AGREEMENT

T HIS L ICENSE AND C OLLABORATION A GREEMENT (“ Agreement ”) is made as of January 4, 2006 (the “Effective Date”) by and between N UVELO , I NC ., a Delaware corporation having its principal place of business at 201 Industrial Road, Suite 310, San Carlos, Ca 94070-6211 (“ Nuvelo ”) and B AYER H EALTHCARE AG, a corporation organized and existing under the laws of Germany and having its principal office at 51368 Leverkusen, Germany (“ Bayer ”). Nuvelo and Bayer are sometimes referred to herein individually as a “Party” and collectively as the “Parties” .

R ECITALS

W HEREAS Nuvelo is the exclusive licensee of worldwide rights to a polypeptide known as Alfimeprase (as defined in Exhibit A);

W HEREAS , Bayer has significant experience in the development, marketing, promotion and sale of pharmaceutical products and can make significant contributions to the successful global development and commercialization of Licensed Product (as defined in Exhibit A);

W HEREAS , Nuvelo and Bayer wish to collaborate in the global development and commercialization of Licensed Product, on the terms and conditions in this Agreement;

N OW T HEREFORE , for and in consideration of the foregoing premises and the covenants, representations and agreements set forth below, the Parties, intending to be legally bound, hereby agree as follows:

ARTICLE 1

DEFINITIONS

Capitalized terms used but not otherwise defined herein have the meanings provided in Exhibit A.

ARTICLE 2

GRANT OF LICENSES AND OTHER RIGHTS

2.1 Nuvelo Technology Licenses . Subject to the terms and conditions of this Agreement, Nuvelo hereby grants to Bayer, and Bayer hereby accepts, an exclusive, fee-bearing license under Nuvelo Technology to develop, use, sell, offer to sell, have sold, import, export, transfer physical possession of and transfer title or interest in and to Licensed Product in the Bayer Territory. Bayer will have the right to grant sublicenses under the foregoing license only as set forth in Section 2.4.

2.2 Trademark License . Subject to the terms and conditions of this Agreement, including without limitation Article 6, Nuvelo hereby grants to Bayer an exclusive, royalty-free license under Nuvelo’s entire right, title and interest in and to the Product Trademarks, to use and

display the Product Trademarks in connection with the Commercialization of Licensed Product in the Bayer Territory. Bayer will have the right to grant sublicenses under the foregoing license only as set forth in Section 2.4.

2.3 Bayer Technology License . Subject to the terms and conditions of this Agreement, Bayer hereby grants to Nuvelo, and Nuvelo hereby accepts, an exclusive, fully paid- up, royalty-free, sublicensable license in the United States under Bayer Technology to make, have made, use, sell, offer to sell, have sold, import, export, transfer physical possession of and transfer title or interest in and to Licensed Product in the United States.

2.4 Sublicensing .

(a) Subject to this Section 2.4, Bayer will have the right to sublicense any of its rights under Section 2.1 or 2.2, provided that Bayer may grant a sublicense only to Sublicensees who are distributors doing business in one or more Sublicense Countries. Any such sublicense will require the Sublicensee to comply with the obligations of Bayer as contained herein (specifically including, without limitation, obligations under Articles 8 and 10 and Section 17.15), and include an obligation of the Sublicensee to account for and report its sales of Licensed Product to Bayer on the same basis as if such sales were Net Sales by Bayer. Any sublicense will provide for the termination of the sublicense or the conversion to a license directly between the Sublicensee and Nuvelo, at the option of Nuvelo, upon termination of this Agreement pursuant to Article 15. Bayer will forward to Nuvelo a copy of each fully executed sublicense agreement within sixty (60) days of the execution of the agreement.

(b) Bayer will remain responsible for the full and complete performance of all of Bayer’s obligations and duties under this Agreement, whether the obligations and duties are performed by Bayer or by any Sublicensee. For the avoidance of doubt, Bayer will forward to Nuvelo and Bayer acknowledges that Nuvelo will be entitled to receive, Royalties on Net Sales of Licensed Product(s) sold by Sublicensees hereunder and that Bayer will be responsible to Nuvelo for paying Royalties due on Net Sales of Licensed Product sold by Sublicensees.

2.5 Right of First Refusal . If Nuvelo, in its sole discretion, decides to offer to a Third Party an exclusive or co-exclusive license to Commercialize Licensed Product in the United States, it shall offer such a license to Bayer (or, at Bayer’s option, Bayer’s Affiliate) on terms no less favorable to Bayer than those offered to that Third Party, provided that Bayer’s (or its Affiliate’s, as applicable) commercial infrastructure in the United States, including without limitation its United States market coverage, the size and capabilities of its United States Field Force, and its reimbursement expertise are, in Nuvelo’s sole discretion, at least equal to those of the Third Party. If Bayer (or its Affiliate, as applicable) fails to accept such terms within fifteen (15) business days of Nuvelo’s offer, Nuvelo shall be free to offer such a license to the Third Party for a period of nine (9) months thereafter, provided that the terms offered to the Third Party are not, in the reasonable judgment of Nuvelo, less attractive to Nuvelo, taken as a whole, than the terms previously offered to Bayer. The provisions of this Section 2.5 do not apply to any merger, acquisition or other business combination to which Nuvelo may be a party, whether or not such a transaction involves an assignment of Nuvelo’s rights under this Agreement as contemplated by Section 17.5

2.6 Assignment to Bayer . Promptly after the Effective Date, Nuvelo will transfer to Bayer all of Nuvelo’s right, title and interest in all Regulatory Filings, Drug Approval Applications and Regulatory Approvals owned or controlled in each case by Nuvelo in the Bayer Territory, and will deliver to Bayer all correspondence between Nuvelo and Regulatory Authorities relating to all Regulatory Filings, Drug Approval Applications and Regulatory Approvals in the Bayer Territory that are Controlled by Nuvelo.

2.7 Retained Rights . With respect to the licenses granted under this Article 2, Nuvelo reserves for itself and its Affiliates the exclusive (subject to Article 7) right to make and have made Licensed Product under Nuvelo Technology and Nuvelo Materials and Manufacturing Information in the Bayer Territory for the purpose of supplying (i) the requirements for Licensed Product of Nuvelo and any Nuvelo licensee for use in the Nuvelo Territory and (ii) Bayer’s requirements for Licensed Product pursuant to this Agreement. In addition, Nuvelo retains a non-exclusive, sublicensable (with Bayer approval, which shall not be unreasonably withheld) right to distribute and use Licensed Product in the Bayer Territory exclusively for non-commercial research and Development purposes, provided that no Bayer approval will be required under this Section 2.7 with regard to Nuvelo activities in the Bayer Territory conducted under a Global Development Program. For the avoidance of doubt, Nuvelo retains all rights in Nuvelo Technology and the Nuvelo Materials and Nuvelo Manufacturing Information not expressly licensed hereunder, including the right to make, have made, use, sell, lease, offer to sell or lease, have sold, import, export or otherwise exploit, transfer physical possession of and transfer title or interest in and to products, other than Licensed Product, for any purpose in the Bayer Territory.

2.8 Annual Reports . On each anniversary of this Agreement, each Party will provide the other Party with a detailed written report setting forth all Development, regulatory, and Commercialization activities (pursuant to Articles 4, 5, and 6) for Licensed Product that have been conducted by such reporting Party during the past year. At the other Party’s request, the reporting Party will promptly discuss with the other Party such annual report and any progress made by the reporting Party regarding its Development, regulatory and Commercialization activities.

ARTICLE 3

MANAGEMENT OF ACTIVITIES

3.1 Generally . Subject to the other provisions of this Agreement, the Parties agree that the principal objectives of the Parties hereunder are to jointly continue Nuvelo’s in-progress worldwide Development and Commercialization of Licensed Product, including, without limitation, by sponsoring various clinical studies in the United States and worldwide in support of obtaining global Regulatory Approval of Licensed Product. The Parties agree that they shall establish a formal framework within which they will discuss strategies for the worldwide Development and Commercialization during the Term.

3.2 Joint Steering Committee . The formal framework referred to in Section 3.1 shall be headed by a Joint Steering Committee (the “ JSC ”), with such subcommittees as the JSC may establish from time to time as it deems appropriate, including, without limitation, standing subcommittees for Development and Commercialization as more fully described in Article 4 and Article 6. The Parties will establish the JSC within ten (10) days of the Effective Date.

3.3 Membership of JSC . The JSC will be comprised of at least three (3) members representing each Party, all of whom shall have appropriate expertise and seniority to enable them to make decisions on behalf of the Parties with respect to the issues falling within the jurisdiction of the JSC. Either Party, in its sole discretion, may substitute members of the JSC from time to time upon written notice to the other Party, provided , however that, without limiting the generality of the foregoing, a key objective with respect to membership in the JSC shall be preserving continuity. The JSC shall be chaired at each meeting by a representative of the Party hosting that meeting, as described in Section 3.5. One representative of each of Bayer and Nuvelo from the JDC and from the JCC shall take part in all meetings of the JSC.

3.4 Responsibilities of JSC . The JSC shall have responsibility for overseeing and coordinating the global Development and Commercialization of Licensed Product, including the following specific responsibilities:

(a) establishing a global strategy for the Development and Commercialization of Licensed Product, and overseeing the implementation of such strategy worldwide;

(b) reviewing and approving, or as appropriate amending, all plans, programs, proposals and budgets developed by the JDC and JCC, including, without limitation, Global Development Programs and the annual budget for Development Expenses associated with Global Development Programs;

(c) evaluating the broad range of indications for which Development of Licensed Product might be appropriate;

(d) determining whether the Parties should reprioritize their Development activities based on the JSC’s ongoing evaluation of all such potential indications and adjusting any associated Milestone Events and Milestone Payments due hereunder accordingly; and

(e) performing such other functions as are set forth herein or as the Parties may mutually agree in writing.

3.5 Administrative Matters .

(a) The JSC will establish its own procedural rules for its operation, consistent with the terms of this Article 3. The chairperson of the JSC will be responsible for calling regular meetings of the JSC and for leading the meetings. The chairperson of each JSC meeting will alternate between the Parties. Regular meetings of the JSC will be held at least once per calendar quarter either by phone, videoconference or in person. The JSC also shall meet as necessary, either by phone or in person, to timely address all matters it is called upon to resolve by the JDC or the JCC. A JSC member of the Party hosting the JSC meeting will serve as secretary of that meeting. Within ten (10) business days following each meeting, the secretary of the meeting will prepare and distribute to all members of the JSC the written minutes of the meeting. The minutes will provide a reasonably detailed description of the meeting discussions and a list of any actions, decisions or determinations approved by the JSC. The minutes of each

JSC meeting will be approved or disapproved by each member within ten (10) business days of receipt, and revised as necessary, at the next meeting. Final minutes of each meeting will be distributed to the members of the JSC by the chairperson prior to commencement of the next meeting. Each Party shall bear its own costs associated with its participation on the JSC, including all travel and living expenses.

(b) If a Party’s representative is unable to attend a meeting, that Party may designate an alternate representative with decision making authority for that Party to attend the meeting. Any decision made by that attendee will be considered to be a decision made by the absent representative. In addition, each Party may, at its discretion (and with the consent of the other Party), invite additional employees, consultants or scientific advisors to attend any JSC meetings, provided that any individual so invited will not have any voting power at such JSC meetings. A quorum for each JSC meeting will consist of at least two (2) members from each Party.

3.6 Decision Making . The JSC will operate by consensus. The representatives from each Party will have collectively one vote on behalf of that Party. If the members of the JSC cannot reach consensus on any matter that comes before the JSC, then:

(a) Bayer shall have the deciding vote on the JSC with respect to any matter that relates entirely or substantially to (i) a Country Specific Trial required to support Regulatory Approval solely in one country in the Bayer Territory; (ii) Unilateral Activities (as defined in Section 4.8) pursued by Bayer; and (iii) Commercialization of Licensed Product in the Bayer Territory (except with respect to any issue pertaining to a Global Brand); and

(b) Nuvelo shall have the deciding vote on the JSC with respect to any matter that relates entirely or substantially to (i) a Country Specific Trial required to support Regulatory Approval solely in the United States; (ii) Unilateral Activities (as defined in Section 4.8) pursued by Nuvelo; (iii) Commercialization of Licensed Product in the Nuvelo Territory; (iv) Global Development Programs; and (v) if the Parties decide to use a Global Brand for a particular indication as provided in Section 6.2(a), Global Brand issues.

For the avoidance of doubt, control of decision-making authority for any matter as provided above will not relieve the Party with control from any of its representations, warranties and/or covenants in this Agreement, nor will it enable that Party to unilaterally modify or amend the terms of this Agreement.

3.7 Dispute Resolution . Notwithstanding the foregoing, if either Party reasonably believes that the final decision of the Party authorized to cast the deciding vote above would prevent or significantly impinge on the other Party’s ability to undertake the Development or Commercialization of a Licensed Product in such other Party’s portion of the Territory, then the other Party shall have the right to refer such decision to the Chief Executive Officer of Nuvelo and the Head of the Pharmaceutical Division of Bayer, and such dispute shall be resolved in accordance with Section 16.1. Until such dispute is resolved, the Parties shall refrain from taking action on the decision; provided that this Section shall not apply to any decision relating to a Clinical Trial required by a Regulatory Authority in a Party’s portion of the Territory, and the affected Party shall be entitled to conduct such Clinical Trial as so required.

ARTICLE 4

DEVELOPMENT

4.1 Diligence; Compliance .

(a) Following the Effective Date, each Party will use Commercially Reasonable Efforts to undertake Development of Licensed Product in all indications agreed to by the Parties in each Party’s portion of the Territory in the manner contemplated in this Agreement. Without limiting the foregoing, Bayer will endeavor to file a Drug Approval Application with respect to obtaining Regulatory Approval of a first indication for Licensed Product in Europe and Canada within [    *    ] after the date that Nuvelo files a Drug Approval Application in the United States for that same indication and both Parties will thereafter use Commercially Reasonable Efforts to obtain Regulatory Approval for the Licensed Product in such countries.

(b) To the extent applicable, Bayer agrees to maintain all regulatory and governmental permits, licenses and approvals and to comply with all Bayer Territory Drug Laws that are applicable to its activities in each country in the Bayer Territory and the particular stage of Development of Licensed Product in such country in the Bayer Territory. In addition, to the extent applicable, Bayer will comply with good laboratory practices (“ GLP ”), good clinical practices (“ GCP ”) and good manufacturing practices (“ GMP ”) as these standards are defined in accordance with the applicable guidance and regulations including the International Conference of Harmonization (ICH). To the extent applicable, Nuvelo agrees to maintain all regulatory and governmental permits, licenses and approvals and to comply with all US Drug Laws that are applicable to its activities in the Nuvelo Territory and the particular stage of Development of Licensed Product in the Nuvelo Territory. In addition, to the extent applicable, Nuvelo will comply with GLP, GCP and GMP as these standards are defined in accordance with the applicable FDA rules and regulations.

4.2 Joint Development Committee . Within ten (10) days after the Effective Date, the Parties will establish a Joint Development Committee (the “ JDC ”) comprised of at least three (3) members representing each Party, all of whom shall have appropriate expertise and seniority to enable them to make decisions on behalf of the Parties with respect to the issues falling within the jurisdiction of the JDC. The JDC will follow the organizational and meeting procedures set forth in Section 4.4.

4.3 JDC Responsibilities . The JDC will be responsible for developing a plan for the overall worldwide strategy for the Development of Licensed Product including, without limitation the following:

(a) reviewing and recommending to the JSC Global Development Programs and Country Specific Trials for each country, including any changes to Global Development Programs as the JDC considers appropriate in response to Regulatory Authority requirements imposed or directed following preparation of an annual budget for a Global Development Program, and managing and allocating clinical drug supply of Licensed Product to facilitate Global Development Programs, Country Specific Trials and Phase 4 Clinical Trials for post-launch marketing support, or other purposes;

 

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

(b) reviewing and recommending to the JSC a detailed annual budget and a three-year projection for Development Expenses associated with Global Development Programs beginning with the 2007 calendar year, the Parties having approved the budget for Global Development Programs in 2006 prior to the Effective Date, a summary of which is attached hereto as Exhibit E;

(c) establishing and recommending to the JSC forecasts for non-clinical and clinical supply of Licensed Product;

(d) together with the JCC, recommending to the JSC Phase 4 Clinical Trials and target product profiles for Licensed Product, including acute peripheral arterial occlusion, catheter occlusion, stroke, deep vein thrombosis, and other indications for Licensed Product as they are identified as potential indications for which the Parties intend to Develop Licensed Product;

(e) facilitating the exchange of all data, Information, Materials or results relating to Licensed Product; and

(f) performing such other functions as appropriate to further Development of Licensed Product in the Territory.

4.4 Decision Making; Administrative Matters .

(a) Decision Making . The JDC will operate by consensus. The representatives from each Party will have collectively one vote on behalf of that Party. If the members of the JDC cannot reach consensus on a matter, the matter will be referred to the JSC for resolution as provided in Section 3.6, and a special meeting of the JSC may be called for such purpose.

(b) Administrative Matters . The JDC will establish its own procedural rules for its operation, consistent with the terms of this Article 4. The chairperson for each meeting of the JDC will be a representative of the Party hosting that meeting. The chairperson will be responsible for calling regular meetings of the JDC and for leading the meetings. The regular meetings will be held at least once per calendar quarter either by phone, videoconference or in person. The chairperson of each JDC meeting will alternate between the parties. A JDC member of the Party hosting the JDC meeting will serve as secretary of that meeting. Within ten (10) business days following each meeting, the secretary of the meeting will prepare and distribute to all members of the JDC the written minutes of the meeting. The minutes will provide a reasonably detailed description of the meeting discussions and a list of any actions, decisions or determinations approved by the JDC. The minutes of each JDC meeting will be approved or disapproved by each member within ten (10) business days of receipt, and revised as necessary, at the next meeting. Final minutes of each meeting will be distributed to the members of the JDC by the chairperson prior to commencement of the next meeting. Each Party shall bear its own costs associated with its participation on the JDC, including all travel and living expenses.

(c) Attendance at JDC Meetings . If a Party’s representative is unable to attend a meeting, that Party may designate an alternate representative with decision making authority for that Party to attend, the meeting. Any decision made by that attendee will be considered to be a decision made by the absent representative. In addition, each Party may, at its discretion (and

with the consent of the other Party), invite additional employees, consultants or scientific advisors to attend any JDC meetings, provided that any individual so invited will not have any voting power at such JDC meetings. A quorum for each JDC meeting will consist of at least two (2) members from each Party.

4.5 Information and Data . Each Party will disclose to the other Party all material scientific, medical or technical information relating to Licensed Product that it discovers in the course of its Development activities in its portion of the Territory, promptly after it is learned or its materiality is appreciated. Nuvelo will own and maintain a Clinical Trial database containing data from all Global Development Programs and all Country Specific Trials in the Territory. In addition, Bayer will maintain a database that contains all Clinical Trial data accumulated by Bayer from Global Development Programs and Country Specific Trials conducted or sponsored by Bayer. Each Party will be entitled to have access, during regular business hours and upon reasonable advance notice, to the other Party’s database. Each Party will own the complete interest in all data and Information generated by such Party in its Clinical Trials of Licensed Product, however the other Party will have the right to use all such data and Information for any purpose necessary for the other Party to Develop and Commercialize Licensed Product in such other Party’s Territory.

4.6 Quality Assurance Audit . Nuvelo will have the right to conduct reasonable quality assurance audits with respect to all facilities, operations and laboratories (and any records related thereto) operated by Bayer or its Third Party subcontractors, where Development activities are conducted, as is reasonably necessary solely for the purpose of verifying Bayer’s conformance with applicable GMP, GLP, GCP and other regulatory requirements in each country in the Bayer Territory. All audits initiated by Nuvelo will be conducted at Nuvelo’s sole expense, upon reasonable prior notice to Bayer, and during regular business hours. Bayer will have the right to conduct reasonable quality assurance audits with respect to all facilities, operations and laboratories (and any records related thereto) operated by Nuvelo or its Third Party contractors where Development or manufacturing activities for Licensed Product are conducted, including the right to audit activities that formed the basis of CMC documentation, only to the extent reasonably necessary for Bayer to carry out its Development and Commercialization obligations hereunder and as is reasonably necessary solely for the purpose of verifying Nuvelo’s conformance with applicable GMP, GLP, GCP and other regulatory requirements in the Nuvelo Territory. All audits initiated by Bayer will be conducted at Bayer’s sole expense, upon reasonable prior notice to Nuvelo, and during regular business hours.

4.7 Funding .

(a) All Development Expenses incurred in conducting the Global Development Programs will be funded jointly by the Parties, with Bayer responsible for forty percent (40%) of all such Development Expenses, and Nuvelo responsible for sixty percent (60%) of all such Development Expenses, subject to the provisions of this Section 4.7. Reimbursable Development Expenses for the Global Development Programs will include all amounts actually incurred up to the amounts budgeted and approved pursuant to Sections 3.4 and 4.3(b), and any additional Development Expenses incurred in conducting the Global Development Program up to [    *    ] percent ([    *    ]% ) in excess of the total amounts so budgeted. Development Expenses incurred in conducting Global Development Programs in excess of [    *    ]% of the amounts so budgeted shall

 

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

also be reimbursed if both Parties approve the excess Development Expenses (either before or after they are incurred). Within thirty (30) days after the end of each calendar quarter, the Parties will send to each other written statements showing Development Expenses incurred by it during that calendar quarter in connection with Global Development Programs. Within fifty (50) days after the end of each calendar quarter, the Party that has incurred less than its pro rata share of Development Expenses for Global Development Programs during that calendar quarter shall reimburse the other Party, so that following any such Development Expense reimbursement Nuvelo will have incurred sixty percent (60%) of such Development Expenses and Bayer will have incurred forty percent (40%) of such Development Expenses during that calendar quarter.

(b) Nuvelo will not be obligated to expend more than [     *    ] Dollars ($[    *    ]) as its share of Development Expenses for Global Development Programs for Licensed Product in any calendar year during the term of this Agreement (the “ Nuvelo Development Cap ”). If the JSC approves an annual budget for such Global Development Programs, [    *    ] percent ([    *    ]%) of which would exceed the Nuvelo Development Cap, or if during the course of any calendar year Nuvelo incurs agreed-upon Development Expenses that exceed the Nuvelo Development Cap, upon Nuvelo’s written request, Bayer will have the right, but not the obligation to advance any such excess amounts. Bayer will have the right to recover any such advances by reducing royalties payable to Nuvelo under Section 8.3 by [    *    ] percent ([    *    ]%) on annual Net Sales of Licensed Products less than or equal to [    *    ] Dollars ($[    *    ]) and [    *    ] percent ([    *    ]%) on annual Net Sales of Licensed Products in excess of [    *    *    ] Dollars. In addition, all amounts owed to Bayer as a result of any advances made by Bayer under this Section 4.7(b) will become due and payable within [*] ([*]) business days following the earlier of (i) the tenth anniversary of the Effective Date; and (ii) any merger or acquisition of the equity or assets of Nuvelo pursuant to which a single Third Party acquires control of more than fifty percent (50%) of the voting securities of Nuvelo.

(c) Upon reasonable notice, during normal business hours, and no more than once per calendar year, each Party shall have the right to have independent, certified public accountants, which shall be reasonably acceptable to the audited Party, audit the records of the other Party with respect to Development Expenses incurred by the audited Party during the previous three (3) calendar years. The report of such accountant will be limited to a certificate verifying the correctness of such Development Expenses as previously reported by the audited Party, or identifying any discrepancy between actual and reported Development Expenses, along with an explanation of the basis for such a finding. The result of the audit and the audit report shall be subject to Article 12. The results of such audit may be disputed by the audited Party in accordance with Section 16.1. If an audit discloses a discrepancy between actual and reported Development Expenses, within sixty (60) days of the Parties’ receipt of the audit report or, if disputed, within sixty (60) days after resolution of such dispute, the Party who is obligated to reimburse the other Party for any Development Expenses resulting from the discrepancy will do so. The Party requesting the audit shall bear the full cost and expense of the performance of any such audit, unless such audit discloses an overstatement by a Party of its Development Expenses in the audited period by more than five percent (5%), in which case the audited Party will reimburse the auditing Party the full cost of the performance of such audit. Upon the expiration of three (3) years following the end of any calendar year, the calculation of Development Expenses for purposes of this Section 4.7 will be binding upon the Parties.

 

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

(d) Each Party will be solely responsible for all Development Expenses incurred in connection with Country Specific Trials required to support Regulatory Approval in a country in such Party’s portion of the Territory and for all Unilateral Activities pursued by such Party. If Bayer desires to use the efficacy data from a Country Specific Trial in the Nuvelo Territory to support an application for Regulatory Approval in a country in the Bayer Territory, Bayer shall bear forty percent (40%) and Nuvelo shall bear sixty percent (60%) of the Development Expenses incurred in conducting such Country Specific Trial (and Bayer shall make reconciling payments as needed to reflect such split, plus [    *    ] percent ([    *    ]%) of Bayer’s share of such Development Expenses). If Nuvelo desires to use the efficacy data from a Country Specific Trial in the Bayer Territory to support an application for Regulatory Approval in United States, Bayer shall bear forty percent (40%) and Nuvelo shall bear sixty percent (60%) of the Development Expenses incurred in conducting such Country Specific Trial (and Nuvelo shall make reconciling payments as needed to reflect such split, plus [    *    ] percent ([    *    ]%) of Nuvelo’s share of such Development Expenses). Nothing in this Section 4.7(d) will require either Party to compensate the other Party if it submits to a Regulatory Authority in that Party’s portion of the Territory data from a Country Specific Trial conducted by the other Party solely because the Regulatory Authority or applicable statutes or regulations require it to do so.

4.8 Unilateral Activities .

(a) In the event the JSC cannot agree whether to pursue a Clinical Trial in support of an indication for a Licensed Product (other than an indication for Licensed Product agreed upon by the Parties as of the Effective Date), a Party shall have the right, on written notice to the other Party, to proceed unilaterally with such Clinical Trial solely to support Regulatory Approval or Commercialization of such Licensed Product in such Party’s portion of the Territory (such activities, the “Unilateral Activities” ), and the non-pursuing Party shall be deemed to have opted-out (each, an ‘Opt-Out” ), with respect to such Unilateral Activities, provided that, subject to Section 4.8(b), (i) the pursuing Party shall be solely responsible for all Development Expense incurred in connection with such Unilateral Activities, and (ii) the non-pursuing Party shall have no further financial obligation to support or otherwise fund any additional efforts in respect of such Unilateral Activities, and no obligation, responsibility, or authority regarding such additional efforts in respect of such Unilateral Activities; provided, however, that if the non-pursuing Party reasonably believes that the pursuing Party’s conduct of such Unilateral Activities would prevent or significantly impinge on such non-pursuing Party’s ability to undertake the Development or Commercialization of Licensed Product for agreed-upon indication(s) in such non-pursuing Party’s portion of the Territory, then the non-pursuing Party shall have the right to refer such decision to the Chief Executive Officer of Nuvelo and the Head of the Pharmaceutical Division of Bayer, and such dispute shall be resolved in accordance with Section 16.1. Until such dispute is resolved, the Parties shall refrain from taking action on the decision; provided that this Section shall not apply to any decision relating to a Clinical Trial required by a Regulatory Authority, and the affected Party shall be entitled to conduct such Clinical Trial as so required.

(b) The non-pursuing Party shall have the right to opt-in (“ Opt-In ”) with respect to any Unilateral Activities of which such Party Opted-Out at any time in accordance with this Section 4.8(b). Within twenty (20) days after receipt of a written request by the non-pursuing Party, the pursuing Party shall provide to the non-pursuing Party a written statement of

 

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

Development Expenses incurred by the pursuing Party in connection with such Unilateral Activities to date. Within thirty (30) days after receipt of such statement (subject to the non-pursuing Party’s audit rights in accordance with Section 4.7(c)), the non-pursuing Party shall have the right to Opt-In with respect to such Unilateral Activities by providing written notice thereof to the pursuing Party (an “Opt-In Notice” ), which Opt-In Notice shall be accompanied by a payment equal to (i) [    *    ] percent ([    *    ]%) of the total amount of the non-pursuing Party’s share of such Development Expenses, as though such costs and expenses were Development Expenses shared in accordance with Section 4.7(a), and (ii) all interest on such amount accrued from the date that such costs would have been reimbursed had the non-pursuing Party not Opted-Out of such Unilateral Activities (calculated in accordance with Section 10.1(d)). From and after the pursuing Party’s receipt of such payment for the non-pursuing Party’s share of such Development Expenses, such Unilateral Activities shall cease to be Unilateral Activities and shall be deemed Global Development Programs Development Expenses, and the Parties shall share all such Development Expenses in accordance with Section 4.7(a).

ARTICLE 5

REGULATORY

5.1 Regulatory Filings and Regulatory Approvals . Bayer will prepare, file and own all right, title and interest in Regulatory Filings and Regulatory Approvals relating to Licensed Product in each country in the Bayer Territory. Nuvelo will prepare, file and own all right, title and interest in Regulatory Filings and Regulatory Approvals relating to Licensed Product in the Nuvelo Territory.

5.2 Country Specific Trials . Bayer will be the sponsor of record for each Country Specific Trial in the Bayer Territory and Nuvelo will be the sponsor of record for each Country Specific Trial in the Nuvelo Territory, and each such Party will have the right and obligation to monitor, review and direct all aspects of regulatory matters regarding Licensed Product for each such Country Specific Trial, including making all strategic and tactical decisions with respect thereto and establishing the methods and means by which it performs such services, including the management of permitted subcontractors. Bayer will have responsibility for all official correspondence, communications and Regulatory Filings with Regulatory Authorities regarding Country Specific Trials in the Bayer Territory and Nuvelo will have responsibility for all official correspondence, communications and Regulatory Filings with Regulatory Authorities regarding Country Specific Trials in the Nuvelo Territory. Each Party will promptly provide the other Party with copies of all Regulatory Filings, Regulatory Approvals and all official correspondence with Regulatory Authorities in the United States, Major Countries, Canada and Japan. Bayer will also promptly provide Nuvelo with copies of all Regulatory Filings, Regulatory Approvals and all official correspondence with Regulatory Authorities addressing matters of material importance to the Development or Commercialization of Licensed Product in every other country in the Bayer Territory. Bayer will not transfer title in or otherwise attempt in any manner to dispose of any Regulatory Filings or Regulatory Approvals or other governmental licenses, approvals or certificates for Licensed Product in the Bayer Territory, or otherwise impair Nuvelo’s rights in the Regulatory Filings or Regulatory Approvals, or other governmental licenses, approvals or certificates.

 

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

5.3 Transfer of Regulatory Filings . Promptly after the Effective Date, Nuvelo will transfer to Bayer ownership of all Regulatory Filings and Regulatory Approvals in the Bayer Territory for Licensed Product that are Controlled by Nuvelo as of the Effective Date.

5.4 Drug Approval Applications in the Bayer Territory . Bayer will have full responsibility for filing all Drug Approval Applications and seeking Regulatory Approvals for Licensed Product in all countries in the Bayer Territory. Bayer will provide Nuvelo with a reasonable opportunity to review and comment on all such applications prior to submission.

5.5 Adverse Event Reporting; Customer Complaints . Consistent with the terms of the Pharmacovigilance Agreement (defined in Section 5.6):

(a) Bayer will maintain a record of all non-medical and medical product-related complaints and reports of adverse events that it receives with respect to Licensed Product in the Bayer Territory. Bayer will notify Nuvelo of any safety-related complaint received by it and, within seven (7) days (but, in the event of serious adverse events, three (3) days) of the initial receipt, provide Nuvelo with a copy of such safety-related complaint(s) and adverse event reports.

(b) Bayer will be responsible for reporting to Regulatory Authorities in all countries in the Bayer Territory any adverse experience and safety issues for Licensed Product in compliance with Bayer Territory Drug Laws. Bayer will promptly provide Nuvelo with a copy of such report.

(c) Nuvelo will maintain a record of all non-medical and medical product-related complaints and reports of adverse events that it receives with respect to Licensed Product in the United States. Nuvelo will notify Bayer of any safety-related complaint received by it and, within seven (7) days (but, in the event of serious adverse events, three (3) days) of the initial receipt, provide Bayer with a copy of such safety-related complaint(s) and adverse event reports.

(d) Nuvelo will be responsible for reporting to Regulatory Authorities in the United States any adverse experience and safety issues for Licensed Product in compliance with US Drug Laws. Nuvelo will promptly provide Bayer with a copy of such report.

5.6 Drug Safety Information . Notwithstanding anything to the contrary in this Agreement, the Parties shall execute a pharmacovigilance agreement (“Pharmacovigilance Agreement”) within ninety (90) days after the Effective Date. Unless otherwise agreed by the Parties, Nuvelo shall have the sole right to create and maintain a master drug safety database that shall cross-reference any Adverse Event (as such term shall be defined in the Pharmacovigilance Agreement) relating to Licensed Product occurring anywhere in the Territory. Nuvelo shall be the sole owner of this master drug safety database and Clinical Trial registry. Bayer shall submit to Nuvelo all data collected by it with respect to Adverse Events relating to Licensed Product in accordance with the timelines set forth in the Pharmacovigilance Agreement.

5.7 Regulatory Communications in the Bayer Territory .

(a) Bayer will have exclusive responsibility for all correspondence and for any official communication (except as Nuvelo may be required by applicable laws or regulations or a

Regulatory Authority to communicate) regarding Development of Licensed Product in the Bayer Territory with applicable Regulatory Authorities in the Bayer Territory. Nuvelo will have the right to be present (and to participate at the request of the Regulatory Authority) at all teleconference, videoconference, or face-to-face meetings scheduled with Regulatory Authorities in the Bayer Territory. To the extent practicable, Bayer will give Nuvelo at least ten (10) business days’ advance notice of any planned communication for Nuvelo’s planning purposes.

(b) Nuvelo, or its designated Third Party(ies) responsible for manufacturing Licensed Product, will cooperate with Bayer regarding communications with Regulatory Authorities in the Bayer Territory directed to the manufacture of Licensed Product by Nuvelo or its Third Party(ies) for supply to Bayer; provided however, that Nuvelo’s obligation to provide Bayer or Regulatory Authorities with Nuvelo Material and Manufacturing Information is limited to the extent the information is reasonably required for Bayer to carry out its Development responsibilities as those responsibilities relate to Regulatory Filings or Regulatory Approval, or is required by law, rule, regulation or a Regulatory Authority having jurisdiction in the Bayer Territory, to have access. Bayer will only be entitled to use the Nuvelo Material and Manufacturing Information to the extent required by such law, rule, regulation or Regulatory Authority or to the extent required to carry out its Development activities. For so long as Nuvelo or its Third Party(ies) is supplying Bayer with Licensed Product hereunder, Nuvelo will have the right to be present at all meetings and to participate in telephone calls with all Regulatory Authorities in the Bayer Territory having jurisdiction in the Bayer Territory wherein the chemistry, manufacturing and control section ( “CMC” ) contained in any Regulatory Filing is to be discussed.

(c) Bayer will have exclusive responsibility for all correspondence and for any official communications (except as Nuvelo may be required by applicable laws or regulations or a Regulatory Authority to communicate) with Regulatory Authorities in the Bayer Territory (e.g., annual reports, filing of Promotional Materials) consistent with Bayer Territory Drug Laws.

(d) Bayer will promptly notify Nuvelo of and provide Nuvelo with a copy of any correspondence or other reports or complaints submitted to or received from any Regulatory Authority, or other Third Party claiming that any Promotional Materials are inconsistent with the product labeling or are otherwise in violation of any Bayer Territory Drug Laws.

5.8 Regulatory Communications in the United States .

(a) Nuvelo will have exclusive responsibility for all correspondence and for any official communication (except as Bayer may be required by applicable laws or regulations or a Regulatory Authority to communicate) regarding Development of Licensed Product in the Nuvelo Territory with applicable Regulatory Authorities in the Nuvelo Territory. Bayer will have the right to be present (and to participate at the request of the Regulatory Authority) at all teleconference, videoconference, or face-to-face meetings scheduled with Regulatory Authorities in the Nuvelo Territory. To the extent practicable, Nuvelo will give Bayer at least ten (10) business days’ advance notice of any planned communication for Bayer’s planning purposes.

(b) Nuvelo will have exclusive responsibility for all correspondence and for any official communications (except as Bayer may be required by applicable laws or regulations or a Regulatory Authority to communicate) with Regulatory Authorities in the United States (e.g., annual reports, filing of Promotional Materials) consistent with US Drug Laws.

(c) Nuvelo will promptly notify Bayer of and provide Bayer with a copy of any correspondence or other reports or complaints submitted to or received from any Regulatory Authority in the United States, or other Third Party claiming that any Promotional Materials are inconsistent with the product labeling or are otherwise in violation of any US Drug Laws.

5.9 Applications for Regulatory Exclusivity . The Parties recognize the commercial value of exclusivity rights to Licensed Product granted or provided for under regulatory laws of the countries in the Bayer Territory. To the extent permitted by law, Bayer will have the exclusive right to file for, request and maintain any regulatory exclusivity rights for Licensed Product in the Bayer Territory (including without limitation regulatory exclusivity rights based upon an orphan drug designation of Licensed Product) and to conduct and prosecute any proceedings or actions to enforce the regulatory exclusivity rights.

5.10 Recalls .

(a) The Parties will exchange their internal standard operating procedures, if any, as to Licensed Product Recalls ( “SOPs” ) reasonably promptly after the Effective Date and thereafter reasonably promptly after such SOPs are approved or modified. If either Party becomes aware of information about quantities of Licensed Product which may not conform to the specifications for the Licensed Product, or for which there are potential adulteration, misbranding and/or other issues regarding safety or effectiveness, or for which the Licensed Product itself is alleged or proven to be the subject of a Recall in any country in the Territory, it will promptly so notify the other Party. Either Party may take immediate action, with notice to the JDC, with respect to a Recall in such Party’s portion of the Territory when regulatory timeframes or public safety considerations so require. The JDC will meet (in person, by telephone or otherwise) to discuss other circumstances of a Recall in the Territory and to consider appropriate courses of action with respect such Recall, which courses of action will be consistent with the internal SOPs of Bayer or Nuvelo, as applicable. Each Party shall provide all pertinent records and such other assistance to the other Party as such other Party reasonably may request to assist in effecting any Recall. In addition, Each Party will maintain all records relating to the Recall for the period required by legal requirements, but for no less than three (3) years. Nuvelo shall bear the cost of recalls that are a result of any Licensed Product manufactured by Nuvelo that does not conform to the specifications in the Manufacturing Agreement (as defined in Section 7.1) at the time of delivery to Bayer.

(b) If Bayer elects not to conduct a Recall of Licensed Product in the Bayer Territory when, in the good faith opinion of Nuvelo, a Recall of the Licensed Product should be undertaken to address specific issues of Licensed Product safety due to manufacturing defect or Product design that have been identified by Nuvelo in writing to Bayer ( “Safety Issues” ), then Nuvelo shall have no obligation to defend or indemnify Bayer under Section 14.1 or 14.3 for any Product Liability Claims arising in connection with the Safety Issues, and Bayer will defend and indemnify Nuvelo under Section 14.2 for any such Product Liability Claims.

5.11 Manufacturing Documents . In order to help preserve the proprietary nature of Nuvelo’s manufacturing information (e.g., the CMC section contained in any Regulatory Filings), Nuvelo will have the right, to the extent permitted by Regulatory Authorities, to file a drug master file with a Regulatory Authority to make the information regarding such manufacturing information available directly to the Regulatory Authority; provided however, for all countries in the Bayer Territory, Bayer will have the right to access and reference the Regulatory Filing, including the CMC section and documentation, to the extent required by law, rule, regulation or a Regulatory Authority having jurisdiction in each country in the Bayer Territory. Bayer will only be entitled to use the manufacturing information to the extent reasonably required by local law, rule, regulation or Regulatory Authority and to carry out its Development responsibilities.

ARTICLE 6

COMMERCIALIZATION

6.1 Diligence . Throughout the term of this Agreement, Bayer will use Commercially Reasonable Efforts to Commercialize the Licensed Product throughout the Bayer Territory for all indications agreed upon by the JSC and Nuvelo will use Commercially Reasonable Efforts to Commercialize the Licensed Product throughout the United States for all indications agreed upon by the JSC for the benefit of both Bayer and Nuvelo. Without limiting the generality of the previous sentence, Bayer will endeavor to commence selling Licensed Product within[    *    ][    *    ] [    *    ] of obtaining Regulatory Approval in each country in the Bayer Territory in which it files a Drug Approval Application. In addition, in Commercializing Licensed Product in Major Countries, Japan and Canada, Bayer will apply Field Force resources comparable to or greater than those applied by Bayer in those countries for its own specialty pharmaceutical products on an indication-by-indication basis.

6.2 Joint Commercial Committee . Within ten (10) days of the Effective Date, the Parties will establish a Joint Commercial Committee (the “ JCC ”) comprised of at least three (3) members representing each Party, all of whom shall have appropriate expertise and seniority to enable them to make decisions on behalf of the Parties with respect to the issues falling within the jurisdiction of the JCC. The JCC will follow the organizational and meeting procedures set forth in Section 6.4.

6.3 JCC Responsibilities . The JCC will be responsible for reviewing and developing a plan for the overall worldwide strategy for the Commercialization of Licensed Product, including, without limitation, the following functions:

(a) recommending to the JSC whether a single brand will be used for Commercialization of Licensed Product for one or more indications throughout the United States, Major Countries, Japan, and Canada (“ Global Brand ”). If the JCC agrees that a Global Brand(s) for the Licensed Product is desirable, the JCC will diligently outline and implement a process to define the architecture of the Global Brand(s). If there is agreement on that process and architecture, the JCC will proceed to develop the Global Brand. If the JCC does not agree on a Global Brand(s) or the associated process or architecture and such disagreement is not resolved in accordance with Section 3.6 or Section 3.7, each Party will use a separate brand for the Commercialization of Licensed Product;

 

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

(b) reviewing and recommending to the JSC strategic launch plans for Commercialization of each indication of Licensed Product in the Territory and country specific plans for the United States, Major Countries, Japan and Canada, including size and composition of the Bayer Field Force in each of those countries (other than the United States) as well as marketing plans, advertising campaigns, and other efforts to launch the Licensed Product;

(c) if a Global Brand is pursued, then ensuring that country specific launch plans in the Territory are consistent with (a), above;

(d) reviewing and recommending to the JSC forecasts for commercial supply of Licensed Product in the Bayer Territory;

(e) recommending to the JSC a recommended annual minimum budget and three-year projection for Bayer’s Commercialization activities under this Article 6 for each year that this Agreement in force;

(f) to the extent permissible by law, recommending to the JSC suggested pricing bands;

(g) together with the JDC, recommending to the JSC Phase 4 Clinical Trials and target product profiles for Licensed Product, including acute peripheral arterial occlusion, catheter occlusion, stroke, deep vein thrombosis, and other indications for Licensed Product as they are identified as potential indications for which the Parties intend to Develop Licensed Product; and

(h) performing such other functions as appropriate to further Commercialization of Licensed Product in the Territory.

6.4 Decision Making; Administrative Matters .

(a) The JCC will operate by consensus. The representatives from each Party will have collectively one vote on behalf of that Party. If the members of the JCC cannot reach consensus on a matter, the matter will be referred to the JSC for resolution as provided in Section 3.6, and a special meeting of the JSC may be called for such purpose.

(b) The JCC will establish its own procedural rules for its operation, consistent with the terms of this Article 6. The chairperson for each meeting of the JCC will be a representative of the Party hosting that meeting. The chairperson of each JCC meeting will alternate between the Parties. The chairperson will be responsible for calling regular meetings of the JCC and for leading the meetings. The regular meetings will be held at least once per calendar quarter either by phone, videoconference or in person. A JCC member of the Party hosting the JCC meeting will serve as secretary of that meeting. Within ten (10) business days following each meeting, the secretary of the meeting will prepare and distribute to all members of the JCC the written minutes of the meeting. The minutes will provide a reasonably detailed description of the meeting discussions and a list of any actions, decisions or determinations approved by the JCC. The minutes of each JCC meeting will be approved or disapproved by each member within ten (10) business days of receipt, and revised as necessary, at the next meeting. Final minutes of each meeting will be distributed to the members of the JCC by the chairperson prior to commencement of the next meeting. Each Party shall bear its own costs associated with its participation on the JCC, including all travel and living expenses.

(c) If a Party’s representative is unable to attend a meeting, that Party may designate an alternate representative with decision making authority for that Party to attend the meeting. Any decision made by that attendee will be considered to be a decision made by the absent representative. In addition, each Party may, at its discretion (and with the consent of the other Party), invite additional employees, consultants or scientific advisors to attend any JCC meetings. A quorum for each JCC meeting will consist of at least two (2) members from each Party.

6.5 Exchange of Information . Bayer will use reasonable efforts to provide Nuvelo with full access to Bayer information relating to the Commercialization of the Licensed Product in the Bayer Territory, including without limitation information relating to the development of sales targets by customer segment and territory, key market metrics (e.g. awareness, usage, therapy change), market research, sales forecasting and modeling, sales, prescription and patient data, reimbursement, and Field Force plans, goals, incentives and training. Nuvelo will use reasonable efforts to provide Bayer with access to the following information of Nuvelo relating to the Commercialization of the Product in the United States: key market metrics, market research, prescription and patient data, and sales goals.

6.6 Pricing and Reimbursement . Each Party and its Sublicensees will have sole authority for determining and establishing the price of Licensed Product for each country in such Party’s portion of the Territory; provided that pricing shall optimize the economic value of the Licensed Product in such Territory. Each Party will provide the other Party with drafts of all submissions relating to pricing and reimbursement approvals in, with respect to Nuvelo, the United States, and, with respect to Bayer, the Major Countries, Canada and Japan for the other Party’s review and comment, which comments shall be considered in good faith prior to the submission. Each Party will also provide the other Party with copies of any material documents or other material correspondence pertaining to pricing and reimbursement approvals in, with respect to Nuvelo, the United States and, with respect to Bayer, the Major Countries, Canada and Japan.

6.7 Medical and Other Inquiries . Each Party will have responsibility for all correspondence and communication with physicians and other health care professionals and customers in such Party’s portion of the Territory regarding product complaints (e.g., quality) and all adverse drug experience information and all other correspondence and communication with physicians and other health care professionals and customers in such Party’s portion of the Territory. Each Party will keep such records and make such reports as will be reasonably necessary to document such communications in compliance with all applicable regulatory requirements. Upon request, each Party will make all information under this Section 6.7 available to the other Party for inspection.

6.8 Promotional Materials .

(a) Bayer will be responsible, consistent with the guidelines agreed upon by the JSC, for the creation, preparation, production and reproduction of all Promotional Materials and

for filing, as appropriate, all Promotional Materials with all Regulatory Authorities in the Bayer Territory. Upon request, Nuvelo will have the right to review and comment on all major Promotional Materials for use in a Major Country, Canada or Japan prior to their distribution by Bayer for use in such Major Country, Canada or Japan, as applicable. Nuvelo will be responsible, consistent with the guidelines agreed upon by the JSC, for the creation, preparation, production and reproduction of all Promotional Materials and for filing, as appropriate, all Promotional Materials with all Regulatory Authorities in the Nuvelo Territory. Upon request, Bayer will have the right to review and comment on all major Promotional Materials prior to their distribution by Nuvelo.

(b) Each Party shall use its own corporate name and/or logo on Promotional Materials and Licensed Product labels in connection with Commercialization of Licensed Product in such Party’s portion of the Territory, unless otherwise mutually agreed by the Parties.

(c) In order to maintain the value of each Party’s Product Trademarks and each Party’s corporate name and logo, when using the other Party’s Product Trademarks, corporate name or logo, each Party will maintain the reasonable quality standards as it maintains for its own corporate name and/or logo and will comply with the other Party’s then-current policies regarding use of its Product Trademarks, corporate name and logo. Prior to a Party’s use thereof in the United States, a Major Country, Canada or Japan, such Party will provide to the other Party a prototype of any Promotional Materials or product labeling for use in the United States, a Major Country, Canada or Japan which contains the other Party’s Product Trademarks, corporate name or logo, so that the other Party may review the manner in which they are used therein. Within ten (10) business days after delivery of such prototype, the other Party will notify such Party whether the other Party approves or disapproves of the manner of use and, in the case of disapproval, the specific reasons therefor and an acceptable alternative. All Promotional Materials used in the Bayer Territory will state that Licensed Product is sold under license from Nuvelo.

6.9 Compliance with Laws, Regulations and Guidelines . Bayer agrees to comply with all Bayer Territory Drug Laws and in all material respects to conform its practices and procedures with, as applicable, the European Federation of Pharmaceutical Industries Associations and the equivalent thereof in each country in the Bayer Territory, as the same may be amended from time to time, with respect to the Commercialization of Licensed Product in the Bayer Territory. Nuvelo agrees to comply with all US Drug Laws and in all material respects to conform its practices and procedures with applicable industry guidelines and codes with respect to Commercialization of Licensed Product in the Nuvelo Territory, including without limitation the PhRMA Code on Interactions with Healthcare Professionals. Each Party will conduct its business operations and cause each of its employees, representatives and agents to refrain from activities that such Party knows or reasonably should know would undermine the good will or reputation of the other Party or the Licensed Product. Neither Party will undertake any activity relating to the Commercialization of Licensed Product that it believes, in good faith, may violate any law or regulations. Each Party will promptly notify the other Party of and provide to the other Party a copy of any correspondence or other reports with respect to the Commercialization of Licensed Product submitted to or received by Bayer from the IFPMA or equivalent organizations in the Bayer Territory. Bayer will in all material respects conform its practices and procedures relating to educating the medical community in the Bayer Territory with respect to

Licensed Product to any applicable EMEA regulations or guidelines, as the same may be amended from time to time, and, as applicable, equivalent guidelines throughout the Bayer Territory.

6.10 Reports/Audits .

(a) Beginning on the calendar quarter in which Regulatory Authorities grant Regulatory Approval for the Licensed Product in each Major Country, Canada or Japan, Bayer will provide Nuvelo with quarterly reports of the activity within its Field Force in each such country, which will include reasonable data from reports created by Bayer for its internal management purposes. Beginning on the calendar quarter in which the Regulatory Authority grants Regulatory Approval for the Licensed Product in the Nuvelo Territory, Nuvelo will provide Bayer with quarterly reports of the activity within its Field Force in the United States, which will include reasonable data from reports created by Nuvelo for its internal management purposes.

(b) Beginning on the calendar quarter in which Regulatory Authorities grant Regulatory Approval for the Licensed Product in the Bayer Territory, Nuvelo will have the right to audit and review, no more than once in each calendar year, the total money spent that year on pre- and post-launch activities for Licensed Product, and the Field Force allocation and efforts on pre- and post-launch efforts of Licensed Product. Nuvelo shall conduct such audits upon reasonable notice to Bayer and during normal business hours.

ARTICLE 7

MANUFACTURE AND SUPPLY

7.1 Supply of Licensed Product . Nuvelo shall supply, free of charge, all of Bayer’s requirements for clinical supplies of Licensed Product for Global Development Programs, the manufacturing costs of which shall be included in Development Expenses. In addition, the Parties will use diligent efforts to negotiate and complete a manufacturing, supply and quality agreement within six (6) months after the Effective Date, pursuant to which Nuvelo will supply Bayer with, and Bayer will purchase from Nuvelo, all of Bayer’s requirements for Licensed Product for use in Country Specific Trials in the Bayer Territory and commercial sales of Licensed Product in the Bayer Territory (the “Manufacturing Agreement” ). Among other items, the Manufacturing Agreement will provide the following:

(a) Subject to Section 7.2, Nuvelo will supply Bayer with unlabeled Licensed Product FOB the manufacturing facility of Nuvelo or its contract manufacturer in sufficient quantities for Bayer’s use in connection with the Development and Commercialization of Licensed Product in the Bayer Territory.

(b) Subject to Section 7.1(c), Nuvelo will have the right to make all decisions with respect to manufacturing in its sole discretion, including without limitation, decisions relating to process development and manufacturing procedures, work to support quality assurance, improving manufacturing/cost efficiency and commercial scale-up manufacturing, provided that Nuvelo will manufacture or have the Licensed Product manufactured in conformity with all applicable laws and regulations in the Major Countries and will use Commercially

Reasonable Efforts to manufacture or have manufactured the Licensed Product in conformity with all applicable laws and regulations in all other countries in the Bayer Territory and in conformity with all Licensed Product specifications set forth in the Manufacturing Agreement. Nuvelo shall timely notify Bayer of any manufacturing change that may have an impact on Bayer’s ability to timely receive Regulatory Approval or jeopardize current status of the Licensed Product in the Bayer Territory and in connection with any such change Nuvelo shall supply any information or documents or support any actions required to facilitate Bayer’s commercialization efforts.

(c) Unless otherwise agreed by the Parties, Bayer will have final decision making authority to fulfill all regulatory responsibilities over all subsequent steps of the manufacturing process for Licensed Product in the Bayer Territory (including finish and fill, labeling and packaging, lot release and management of subcontractors).

(d) In cases of shortages of Licensed Product, available supplies will be allocated, as between the Parties pro rata based on their forecasted requirements for Licensed Product over the relevant period.

(e) Nuvelo will agree to manufacture or have Licensed Product manufactured in accordance with applicable GMP requirements in the United States and the Major Countries, and will provide reasonable warranties regarding its transfer of title to Licensed Product to Bayer and the compliance of Licensed Product with applicable specifications, subject to customary limitations of liability. If Bayer notifies Nuvelo in writing of additional or different GMP requirements in other countries in the Bayer Territory, Nuvelo and Bayer will use reasonable efforts to identify a mechanism to address any such country-specific requirements, including any financial consequences thereof and Nuvelo will use Commercially Reasonable Efforts to manufacture or have Licensed Product manufactured in accordance with such requirements.

(f) If (i) Nuvelo supplies Bayer with materially reduced quantities of its requirements for Licensed Product, as compared with amounts forecast and ordered by Bayer, on time frames established in the Manufacturing Agreement, for a period of twelve (12) consecutive months, (ii) the Licensed Product is subject to a Recall in the Bayer Territory, the cause of which is attributed to the manufacturing process, or (iii) a Regulatory Authority notifies Nuvelo or Bayer in writing that the manufacturing process does not comply with applicable laws, rules or regulations in the Bayer Territory, and Nuvelo is unable to cure such noncompliance within a twelve (12) month period to the satisfaction of the applicable Regulatory Authority, then Nuvelo will grant to Bayer a nonexclusive license to manufacture or have manufactured Licensed Product in the Bayer Territory solely to meet the requirements of Bayer and its Sublicensees for Development and Commercialization of Licensed Product in the Bayer Territory. If Bayer selects a contract manufacturer to manufacture Licensed Product, Nuvelo will have the right to approve the contract manufacturer, such approval not to be unreasonably withheld. Nuvelo will use Commercially Reasonable Efforts to support the transfer of manufacturing information to the approved manufacturer of Licensed Product under this Section 7.1(e), including, without limitation, transfer of the then-current manufacturing technology with respect to Licensed Product.

(g) Bayer shall supply the Canadian and Mexican markets with Licensed Product in quantities that are appropriate to the size of each such market (not including cross-border sales).

(h) The Manufacturing Agreement will also set forth all other terms and conditions applicable to the manufacture, distribution, forecast, supply and the like of Licensed Product for Development and Commercialization in the Bayer Territory.

7.2 Transfer Price . Pursuant to the Manufacturing Agreement described in Section 7.1, Nuvelo will sell Licensed Product to Bayer at a price equal to Nuvelo’s direct cost for Licensed Product plus [    *    ] percent [    *    ]%). The Parties agree that such transfer price shall not be included in Development Expenses.

ARTICLE 8

CONSIDERATION

8.1 Upfront Payment . Within five (5) business days of the Effective Date, Bayer will pay to Nuvelo the non-refundable, non-creditable amount of Fifty Million Dollars ($50,000,000.00).

8.2 Milestones .

(a) Within thirty (30) days following the first achievement or occurrence with the Licensed Product of each of the following milestone events (“ Regulatory Milestone Event(s) ”) by performance of Bayer or an Affiliate or Sublicensee of Bayer, Bayer will pay to Nuvelo the corresponding one-time, non-creditable, non-refundable milestone payments (“ Regulatory Milestone Payment(s) ”) set forth herein:

 

 

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

 

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

(b) Within thirty (30) days following the achievement or occurrence of each of the following milestone events ( “Sales Milestone Event(s)” ) by performance of Bayer or an Affiliate or Sublicensee of Bayer, Bayer will pay to Nuvelo the corresponding one-time, non-creditable, non-refundable milestone payments ( “Sales Milestone Payment(s)” ) set forth herein:

 

(c) Each of the Royalty Milestone Payments and Sales Milestone Payments (each a “Milestone Payment”) shall be paid only once upon achievement of each corresponding Royalty Milestone Event and Sales Milestone Event; provided, however, that Bayer shall make only one Sales Milestone Payment per year. If two Sales Milestone Payments would have been payable in a single year under Section 8.2(b) except for the previous sentence, then Nuvelo will be entitled to the larger of those Sales Milestone Payments in that year, and will be entitled to receive the smaller of those Sales Milestone Payments in a subsequent year if Net Sales reach the required amount for such smaller Sales Milestone Payment. For purposes of clarification, each Milestone Payment is in addition to any other Milestone Payment set forth above and each Milestone Payment will be nonrefundable and noncreditable against Royalties payable pursuant to Section 8.3 and any other fees, other Milestone Payments or other payments due Nuvelo with respect to Licensed Product(s) under this Agreement or under the Manufacturing Agreement described in Article 7.

 

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

8.3 Royalties . Subject to Sections 4.7, 8.4 and 8.5, Bayer will pay to Nuvelo a Royalty, based on the following Royalty rates, for annual Net Sales of Licensed Product by Bayer, its Affiliates, or its Sublicensees in the Bayer Territory:

(a) a Royalty rate of fifteen percent (15.0%) of that portion of annual Net Sales in the Bayer Territory of Licensed Product that is less than or equal to [    *    ] Dollars ($[    *    ]);

(b) a Royalty rate of [    *    ] percent ([*]%) of that portion of annual Net Sales in the Bayer Territory of Licensed Product that is greater than [    *    ] Dollars ($[    *    ]) and less than or equal to [    *    ] Dollars ($[    *    ]);

(c) a Royalty rate of [    *    ] percent ([*]%) of that portion of annual Net Sales in the Bayer Territory of Licensed Product that is greater than [    *    ] Dollars ($[    *    ]) and less than or equal to [    *    ] Dollars ($[    *    ]);

(d) a Royalty rate of [    *    ] percent ([*]%) of that portion of annual Net Sales in the Bayer Territory of Licensed Product that is greater than [    *    ] Dollars ($[    *    ]) and less than or equal to [    *    ] and

(e) a Royalty rate of thirty seven and a half percent (37.5%) of that portion of annual Net Sales in the Bayer Territory of Licensed Product that is greater than [    *    ] Dollars ($[    *    ]).

8.4 Third Party Royalty Reduction . Nuvelo will be responsible for paying any and all amounts due to Amgen, Inc. under the Amgen-Nuvelo Agreement. Bayer will be responsible for obtaining any other licenses, and for making any Third Party Payments thereunder, or making any then-due Third Party Payments to Nuvelo (for forwarding to the licensing Third Party) under any license granted by Nuvelo hereunder, for rights to any Third Party intellectual property required to develop, use, sell, lease, offer to sell or lease, have sold, import, export or otherwise exploit, or transfer physical possession of or title in, Licensed Product in one or more countries in the Bayer Territory. If Bayer is required to pay Third Party royalties for any license (other than royalties payable by Nuvelo to Amgen, Inc.), ([    *    ] percent [    *    ]%) of such Third Party royalties which are payable by Bayer will be creditable by Bayer against any Royalties due to Nuvelo under Section 8.3 above for the Net Sales of Licensed Product in that country, but Bayer’s Royalty rate set forth in Section 8.3 in any given year will not be reduced in excess of [    *    ] percent [    *    ]% ( e.g., [    *    ]%, [    *    ]%, [    *    ]%, [    *    ]% and [    *    ]% respectively) as a consequence of any royalties being creditable against the Royalties to be paid to Nuvelo by Bayer hereunder Bayer will have sole discretion, authority and right with respect to determining whether to enter into an agreement for a license or other rights and to incur an obligation for any Third Party Payments.

8.5 Term of Royalties . Nuvelo’s right to receive Royalties under Section 8.3 will expire, on a country-by-country basis, upon the later of: (a)[    *    ]([    *    ]) years after the date of First Commercial Sale of Licensed Product in that country; or (b) the earlier of (i) the date of expiration of regulatory exclusivity for the Licensed Product as described in Section 5.8 in that country; or (ii) the date of expiration of the last-to-expire of the Nuvelo Patent Rights and Joint

 

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

Patent Rights containing an issued Valid Claim that, but for the license granted by Nuvelo to Bayer hereunder, would be directly or contributorily infringed by the use or sale by Bayer, its Affiliates and permitted Sublicensees of such Licensed Product in that country. Where the Joint Patent Rights described in subparagraph (b)(ii) subsist after expiration of the Nuvelo Patent Rights, then upon expiration of the Nuvelo Patent Rights, the Royalties payable pursuant to this Article 8 will be further reduced by [    *    ] percent ([    *    ]%) of the amount payable immediately before expiry of the Nuvelo Patent Rights, and will continue to be payable by Bayer.

ARTICLE 9

INTELLECTUAL PROPERTY

9.1 Technology Ownership . Ownership of inventions made during the Term will be determined in accordance with the rules of inventorship under United States patent laws. Subject to the licenses granted in Section 2.1, as between the Parties, Nuvelo owns or Controls all right, title and interest in and to Nuvelo Know-How and Nuvelo Patent Rights, and any Confidential Information contained therein is Confidential Information of Nuvelo. As between the Parties, all right and interest in and to Joint Know-How (which will be considered the joint Confidential Information of the Parties) and Joint Patent Rights is owned jointly by Bayer and Nuvelo, and is subject to the license granted by Nuvelo to Bayer in Section 2.1 and the license granted by Bayer to Nuvelo in Section 2.3.

9.2 Prosecution .

(a) At its own cost and expense, Bayer will be responsible (using mutually acceptable outside counsel) for the filing, prosecution, defense and maintenance of the Nuvelo Patent Rights listed in Exhibit C hereto (the “Existing Nuvelo Patent Rights”) before all patent authorities in the Bayer Territory. Nuvelo has the right to review and comment on the filing, prosecution and defense of the Existing Nuvelo Patent Rights and if outside counsel concludes that taking any specific action(s) may likely have an adverse effect on the scope or validity of any Existing Nuvelo Patent Rights, then Bayer will not take the specific action(s) without the prior, express written consent of Nuvelo and, if Nuvelo does not give its consent to the action, Bayer will propose an alternative strategy for Nuvelo’s consideration. To that end, Bayer will instruct outside counsel to furnish Nuvelo with a reasonably complete draft of each potential submission to a patent authority in the Bayer Territory regarding the Existing Nuvelo Patent Rights no later than thirty (30) days (or if given less than thirty (30) days to respond as soon as practicable) prior to the date such submission is proposed to be made, and will reasonably consider any of Nuvelo’s timely comments thereon. Additionally, Bayer will instruct outside counsel to provide Nuvelo with a copy of each submission made to and document received from a patent authority in the Bayer Territory regarding any Existing Nuvelo Patent Rights reasonably promptly after making such filing or receiving each document. If Bayer decides not to file, prosecute, defend or maintain any claim or patent application or patent within the Existing Nuvelo Patent Rights in any country in the Bayer Territory, then Bayer will provide Nuvelo with thirty (30) days prior written notice of the decision, and Nuvelo will have the right to file, prosecute and maintain the claim or patent application or patent on behalf of Nuvelo (at Nuvelo’s sole cost and expense).

 

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

(b) At its own cost and expense, Bayer will be responsible (using mutually acceptable outside counsel) for the filing, prosecution, defense and maintenance of Joint Patent Rights before all patent authorities in the Bayer Territory. Nuvelo will have the right to review and comment on the filing, prosecution and defense of the Joint Patent Rights by Bayer and if outside counsel concludes that taking any specific action(s) may likely have an adverse effect on the scope or validity of any Joint Patent Rights, then Bayer will not take the specific action(s) without the prior express written consent of Nuvelo and, if Nuvelo does not give its consent to such action, Bayer will propose an alternative strategy for Nuvelo’s consideration. To that end, Bayer will instruct outside counsel to furnish Nuvelo with a reasonably complete draft of each potential submission to a patent authority regarding Joint Patent Rights no later than thirty (30) days (or if given less than thirty (30) days to respond, as soon as practicable) prior to the date the submission is proposed to be made, and will reasonably consider any of Nuvelo’s timely comments thereon. Additionally, Bayer will instruct such outside counsel to provide Nuvelo with a copy of each submission made to and document received from a patent authority in the Bayer Territory regarding any Joint Patent Rights reasonably promptly after making the filing or receiving such document. If Bayer decides to not file, prosecute, defend or maintain or any claim or patent application or patent within Joint Patent Rights in any country in the Bayer Territory, then Bayer will provide Nuvelo with thirty (30) days prior written notice of the decision. Nuvelo will have the right and opportunity to file, prosecute, defend and maintain the claim or patent application or patent (at Nuvelo’s sole cost and expense), and Bayer will assign its complete interest in the claim or patent application or patent to Nuvelo.

(c) Nuvelo and Bayer will each provide to the other any invention disclosures submitted to its respective outside or in-house patent counsel in the normal course of its business that disclose an invention within Nuvelo Know-How and Joint Know-How, respectively. Nuvelo and Bayer will cooperate with each other and render all reasonable assistance in prosecuting and maintaining all intellectual property licensed to Bayer under this Agreement. Both Parties will meet regularly, either in person or by telephone or videoconference, but not less than on a quarterly basis, to discuss the prosecution (and other related proceedings, such as interferences and oppositions) of all intellectual property licensed to Bayer under this Agreement. Nuvelo and Bayer will cooperate with each other in these matters, and will sign any necessary legal papers and provide the Party responsible for prosecution with data or other information in support thereof (and use their best efforts to ensure the cooperation of any of their respective personnel and, in the case of Bayer, it’s Affiliates and licensee(s) as might reasonably be requested).

(d) At its own cost and expense, Bayer will be responsible (using mutually acceptable outside counsel) for the filing, prosecution, defense and maintenance of the Product Trademarks before all trademark authorities in the Bayer Territory. For the Product Trademarks solely or jointly owned by Nuvelo, Nuvelo will have the right to review and comment on the filing, prosecution and defense of the Product Trademarks by Bayer and if outside counsel mutually acceptable to Bayer and Nuvelo concludes that taking any specific action(s) may likely have an adverse effect on the scope or validity of any Product Trademarks, then Bayer will not take such specific action(s) without the prior express written consent of Nuvelo, and Bayer will propose an alternative strategy for Nuvelo’s consideration. To that end, Bayer will instruct outside counsel to furnish Nuvelo with a reasonably complete draft of each submission to a trademark authority regarding the Product Trademarks no later than thirty (30) days prior to the

date the submission is proposed to be made, or if given less than thirty (30) days to respond as soon as practicable, and Bayer will reasonably consider any of Nuvelo’s timely comments thereon. Additionally, Bayer will instruct outside counsel to provide Nuvelo with a copy of each submission made to or document received from a trademark authority regarding any Product Trademarks reasonably promptly after making the filing or receiving the document. If Bayer decides to not file, prosecute, defend or maintain a Product Trademark in any country, then Bayer will provide Nuvelo with thirty (30) days prior written notice of the decision. Nuvelo will have the opportunity to file, prosecute, defend and maintain the Product Trademark at its sole expense, and Bayer will assign its complete interest, if any, in the Product Trademark to Nuvelo.

9.3 Infringement of Patents and Trademarks by Third Parties .

(a) At its own expense, Bayer may, but will not be obligated to, elect to enforce Nuvelo Patent Rights against any actual, alleged or threatened infringement by Third Parties in the Bayer Territory and may also elect to defend the Nuvelo Patent Rights against any challenges in the Bayer Territory. If Bayer so elects to enforce Nuvelo Patent Rights against Third Party infringement which may in any way affect the rights conferred to Bayer