LICENSE AND CO-DEVELOPMENT AGREEMENT

 

 

TABLE OF CONTENTS

 

Article 1. DEFINITIONS								1
Article 2. LICENSES								19
2.1.					Product License			19
2.2.					Limited Right to Sublicense			19
2.3.					Additional Rights after Prior Agreement Execution Date			19
2.4.					Follow-On Compound			20
2.5.					Retained Rights			21
2.6.					Isis’ Right of First Negotiation			21
2.7.					Third Party Agreements			22
2.8.					No Implied License			23
Article 3. EXCLUSIVITY								23
3.1.						Non-Compete		23
3.2.						[**] Technology		23
Article 4. JOINT COMMITTEES								23
4.1.						Joint Development Committee		23
4.2.						Joint Patent Committee		24
4.3.						Expenses		25
Article 5. DEVELOPMENT								25
5.1.						Development Plan and Development Budget		25
5.2.						Roles and Responsibilities		26
5.3.						Clinical and Launch Supplies		26
5.4.						Know-How Transfer		27
5.5.						Subcontracting		28
Article 6. COMMERCIALIZATION AND REGULATORY MATTERS								28
6.1.							Commercialization Responsibilities	28
6.2.							Regulatory Matters and Filings	28
6.3.							Commercial Manufacture	31
6.4.							Isis Safety Database	31
6.5.							Safety Reporting	32

 

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6.6.				Commercial Forecasts & Plans				32
Article 7. RESEARCH RELATED TO THE PRODUCT								33
7.1.						Research Programs		33
7.2.						Research Funding		33
7.3.						Research Efforts		33
Article 8. FINANCIAL PROVISIONS								34
8.1.							Upfront License Fee	34
8.2.							Milestones	34
8.3.							Financial Provisions Relating to Development Activities	37
8.4.							Sharing of Net Revenue	38
8.5.							Sharing of Net Profits	39
8.6.							Periodic Reporting and Reconciliation	40
8.7.							Accounting and Allocation Methods	41
8.8.							Audits and Interim Reviews	42
8.9.							Withholding Taxes	43
8.10.							Interest on Late Payments	43
8.11.							Currency; Payment	43
8.12.							Material Safety Warnings	44
Article 9. INTELLECTUAL PROPERTY MATTERS								44
9.1.					Product-Specific Patents			44
9.2.					Program IP			45
9.3.					Manufacturing Improvements			46
9.4.					Filing, Prosecution and Maintenance of Patents			49
9.5.					Enforcement of Patents and Know-How			52
9.6.					Claimed Infringement of Third Party Rights			56
9.7.					Other Infringement Resolutions			57
9.8.					Patent Term Extensions			57
9.9.					Orange Book Listings			58
9.10.					Cooperative Research and Technology Act Acknowledgement			58
9.11.					Common Interest			58
9.12.					Product Trademarks			58

 

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Article 10. REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION										59
10.1.						Representations and Warranties of Both Parties				59
10.2.						Isis’ Representations and Warranties				59
10.3.						Indemnification				62
10.4.						Insurance				64
Article 11. TERM AND TERMINATION										64
11.1.							Term			64
11.2.							Termination			64
11.3.							Consequences of Termination			67
11.4.							Remedies for Isis’ Material Breach			69
Article 12. CONFIDENTIALITY; PUBLIC DISCLOSURE										70
12.1.								Non-Disclosure		70
12.2.								Authorized Disclosure and Use		71
12.3.								Terms of Agreement		71
12.4								Public Disclosures		71
Article 13. DISPUTE RESOLUTION										73
13.1.								Escalation		73
13.2.								Mediation		74
13.3.								Jurisdiction; Venue; Service of Process		75
Article 14. MISCELLANEOUS										76
14.1.									Change of Control of Isis	76
14.2.									Specific Performance	77
14.3.									Governing Law	78
14.4.									Waiver; Remedies Cumulative	78
14.5.									Notices	78
14.6.									Entire Agreement	79
14.7.									Binding Effect; Assignment	79
14.8.									Severability	79
14.9.									Further Assurances	79
14.10.									Independent Contractors	79
14.11.									Interpretation	80

 

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14.12.		Counterparts	80
14.13.		Rights in Bankruptcy	80

 

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Schedules and Exhibits
Schedule 1.35	Isis Methodology for Determining its Cost of Manufacture
Schedule 1.49	Example of Calculation of Internal Development Expenses
Schedule 1.52	Isis Core Technology Patents
Schedule 1.56	Isis Manufacturing and Analytical Patents
Schedule 1.99	Product-Specific Patents
Schedule 1.113	Special Isis Core Technology Patents
Schedule 2.1	Licenses to Third Parties
Schedule 10.2.2	Third Party Agreements
Exhibit A	Development Plan
Exhibit B	Development Budget
Exhibit C	Form of Supply Agreement
Exhibit D	Form of Quality Agreement
Exhibit E	Form of Patent Assignment
Exhibit F	Disclosure Schedule

 

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not have control of Regulus.

 

1.4.                               “ API ” means the active pharmaceutical ingredient of the Product.

 

1.5.                               “ apoB ” means apolipoprotein B.

 

1.6.                              “ Approval ” means, with respect to any Product in any regulatory jurisdiction, approval from the applicable Regulatory Authority sufficient for the manufacture, distribution, use and sale of the Product in such jurisdiction in accordance with Applicable Laws. In jurisdictions where the applicable Regulatory Authority sets the pricing authorizations for a Product, Approval will not be deemed to have occurred until the earlier of (a) Genzyme or its Sublicensee and the Regulatory Authority have determined pricing, or (b) ninety (90) days after approval (whether national or centralized) is received for the applicable Regulatory Authority sufficient for the manufacture, distribution, use and sale of the Product in such jurisdiction (other than pricing authorization for the Product) in accordance with Applicable Laws.

 

1.7.                              “ Applicable Law ” or “ Law ” means all applicable laws, statutes, rules, regulations and other pronouncements having the effect of law of any federal, national, multinational, state, provincial, county, city or other political subdivision, agency or other body, domestic or foreign, including but not limited to any applicable rules, regulations, guidelines, or other requirements of the Regulatory Authorities that may be in effect from time to time, but excluding patent and copyright laws.

 

1.8.                              “ ASO Product ” any preparation in final form for sale by prescription, over-the-counter or any other method for any indication, including human or animal use, which contains one or more oligonucleotides or an analog thereof that [**].

 

1.9.                              “ Bankruptcy Code ” has the meaning set forth in Section 14.13 (Rights in Bankruptcy).

 

1.10.                        “ Calendar Quarter ”1.11.      means the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 or December 31.

 

1.10.                        “ Change of Control ” means, with respect to a Party, (a) a merger or consolidation of such Party with a Third Party which results in the voting securities of such Party outstanding immediately prior thereto ceasing to represent at least fifty percent (50%) of the combined voting power of the surviving entity immediately after such merger or consolidation, or (b) except in the case of a bona fide equity financing in which a Party issues new shares of its capital stock, a transaction or series of related transactions in which a Third Party, together with its Affiliates, becomes the beneficial owner of fifty percent (50%) or more of the combined voting power of the outstanding securities of such Party, or (c) the sale or other transfer to a Third Party of all or substantially all of such Party’s business to which the subject matter of this Agreement relates, but excluding any financial factoring arrangements.

 

1.12.                        “ Commercially Reasonable Efforts ” means, (a) with respect to the research, development or commercialization by Genzyme of a Product, at any given time as the case may be,

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

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efforts reasonably used by Genzyme or its Affiliates (giving due consideration to relevant industry standards) for Genzyme’s own products (including internally developed, acquired and in-licensed products) with similar commercial potential at a similar stage in their lifecycle (assuming continuing development of such product), taking into consideration their safety, tolerability and efficacy, the profitability (taking into account any payments payable under this Agreement), the extent of market exclusivity, patent protection, cost to develop the product, promotable claims and health economic claims and (b) with respect to the research and development by Isis of a Product, at any given time as the case may be, efforts reasonably used by an entity in the biotechnology/pharmaceutical industry of similar resources and expertise as Isis, for such similar entity’s own products (including internally developed, acquired and in-licensed products) with similar commercial potential at a similar stage in their lifecycle (assuming continuing development of such product), taking into consideration their safety, tolerability and efficacy, the profitability (taking into account any payments payable under this Agreement), the extent of market exclusivity, patent protection, cost to develop the product, promotable claims and health economic claims.

 

1.13.                        “ Commercial Scale Manufacturing IP ” means any confidential or patented scientific or technical data, information, method, technique, protocol, invention or processes that has been found to be useful for commercial scale manufacturing facility but is not generally useful for manufacturing oligonucleotides on a non-commercial scale, including all manufacturing plant designs, plans diagrams and descriptions and also including all regulatory filings.

 

(a)                                   For illustrative purposes only and not as a limitation, the following would be considered to be Commercial Scale Manufacturing IP:

 

(i)            Piping and Instrumentation Diagrams (P&ID) for a Genzyme manufacturing facility;

 

(ii)           Design plans and schematics for a Genzyme manufacturing facility (including tank farms, synthesis and purification suites, and analytical testing laboratories);

 

(iii)          Operating Documents, for example batch records, SOPs, validation master plans;

 

(iv)          Floor plans and equipment layout drawings for a Genzyme manufacturing facility; and

 

(v)           Regulatory filings.

 

(b)                                  For illustrative purposes only and not as a limitation, the following would not be considered to be Commercial Scale Manufacturing IP:

 

(i)            Discovery that a particular side reaction leads to an unexpected impurity;

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

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(ii)           Discovery regarding how to avoid the impurity or how to remove it.

 

(iii)          Development of the use of alternative reagents;

 

(iv)          Discovery of recycle possibilities;

 

(v)           Discovery to enhance yields;

 

(vi)          Discovery of the Mipomersen oxidant;

 

(vii)         Development and validation of QbD/Design Space filing strategy.

 

(viii)        Development and validation of PAT measures.

 

1.14.                         “ Confidential Information ” has the meaning set forth in Section 12.1 (Non-Disclosure).

 

1.15.                        “ Control ” or “ Controlled ” means, with respect to any Know-How, Patent or other intellectual property right or Regulatory Materials, possession by a Party (including its Affiliates) of the right (whether by ownership, license or otherwise) to grant to the other Party a license or a sublicense under such Know-How, Patent or other intellectual property right or access to Regulatory Materials without violating the terms of any agreement or other arrangement with any Third Party.

 

1.16.                        “ Cover ,” “ Covered ” or “ Covering ” means, with respect to a Patent and the subject matter at issue, that, but for a license granted under an issued claim included in such Patent, the manufacture, use, sale, offer for sale or importation of the subject matter at issue would infringe such claim or, in the case of a Patent that is a patent application, would infringe a claim in such patent application if it were to issue as a patent.

 

1.17.                        “ Development Budget ” means the initial written development budget attached hereto as Exhibit B setting forth, for the time period covered by the Development Plan, the budget for the development of the Product during the applicable time period, as it may be updated and amended by the JDC or the Parties during the Term in accordance with this Agreement.

 

1.18.                        “ Development Expenses ” means internal or external expenses incurred in accordance with the Development Plan and the Development Budget, including the costs of all clinical trials and preclinical studies, including post-marketing trials. The types of expenses included in this category are investigator grants, laboratory services, clinical PK assays, carcinogenicity studies, CMC studies, CRO services and pass-throughs, pharmacovigilence and risk management activities, costs for packaging, distribution and reconciliation (including labels and translations, inventory control, IVRS, off-site storage and destruction), data management (including EDC), clinical study reports, drug costs (API & DP), investigator meetings, monitoring, SAB costs, DSMB costs, key opinion leader costs, program specific travel, metabolomics assays, courier services and clinical trial liability insurance costs. Development Expenses include quality assurance costs for auditing clinical trial activities and preclinical studies support (report reviews and CMC

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

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review). When a Party is a manufacturer of the Product under development, Development Expenses include such Party’s Fully Absorbed Cost of Goods.

 

1.19.                        “ Development Plan ” means the initial written development and regulatory plan attached hereto as Exhibit A for the Product as it may be updated and amended during the Term by the JDC or the Parties in accordance with this Agreement.

 

1.20.                        “ Development Program ” means the program to be conducted by the Parties in accordance with an approved Development Plan to develop and obtain Approval of the Product in the Territory, all as more fully described in Article 5 (Development).

 

1.21.                        “ Disclosure Schedule ” means the schedule delivered by Isis to Genzyme that includes exceptions to Isis’ representations and warranties in Section 10.2 (Isis Representations and Warranties) hereof.

 

1.22.                        “ Dispute ” has the meaning set forth in Section 13.1 (Dispute Resolution Mechanism).

 

1.23.                        “ Effective Date ” means January 30, 2008.

 

1.24.                        “ Execution Date ” has the meaning set forth in the preamble.

 

1.25.                        “ EMEA ” means the European Regulatory Authority known as the European Medicines Agency and any successor agency thereto.

 

1.26.                        “ Encumbered Follow-On Compound ” has the meaning set forth in Section 2.4 (Follow-On Compound).

 

1.27.                        “ Executives ” has the meaning set forth in Section 13.1 (Escalation to Senior Management).

 

1.28.                        “ External Development Expenses ” means Development Expenses other than Internal Development Expenses. For clarity, External Development Expenses include the manufacturing Party’s Fully Absorbed Cost of Goods.

 

1.29.                        “ External Sales & Marketing Expenses ” means Sales & Marketing Expenses other than Internal Sales & Marketing Expenses.

 

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

 

1.31.                        “ FH ” means familial hypercholesterolemia.

 

1.32.                        “ Fixed Costs ” means the cost of facilities, utilities, insurance (including any accrual for self-insurance), facility and equipment depreciation, and other fixed costs directly attributable to the applicable activity, allocated based upon the proportion of such costs directly attributable to the support or performance of the applicable activity in accordance with the Development Plan or the Product’s manufacturing or commercialization plan, as

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

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the case may be. Fixed Costs will be determined in accordance with GAAP.

 

1.33.                        “ Follow-On Compound ” means all pharmaceutical compositions, formulations, dosage forms, delivery systems and presentations that contain [**] apoB (alone or with other active ingredients) other than Mipomersen.

 

1.34.                        “ Follow-On Compound Encumbrance s” has the meaning set forth in Section 2.4.2 .

 

1.35.                        “ Fully Absorbed Cost of Goods ” means:

 

(a)           with respect to units of Product produced by Genzyme, the Variable Costs and Fixed Costs incurred by Genzyme to the extent associated with the manufacture (inclusive of finishing processes including filling, packaging, labeling and other preparation), quality assurance, quality control and other testing, storage and shipping of batches of such units of Product;

 

(b)           with respect to units of Product manufactured by Isis, the costs incurred by Isis as determined using the methodology set forth in Schedule 1.35 , which Schedule will be updated by Isis on an annual basis in advance of each fiscal year (with material changes to such methodology subject to Genzyme’s prior agreement); and

 

(c)           with respect to units or components of Product that are not manufactured by the Parties, the amounts paid to the vendor plus costs associated with acquisition from such vendor.

 

If a facility that is used to manufacture Product has the capacity to manufacture products for other programs of either Genzyme or Isis outside of the activities contemplated by this Agreement, the Fixed Costs component of the Fully Absorbed Cost of Goods will be allocated in proportion to the actual use of such facility for the manufacture of Product pursuant to this Agreement and the capacity to manufacture products for such other programs outside of this Agreement in a manner that is mutually agreeable to the Parties. No idle capacity of a manufacturing facility, or a proportionate use thereof, will be included in Fully Absorbed Cost of Goods unless such capacity or facility was built specifically to manufacture Product and is not being used to manufacture any other products, in which case the depreciation associated with such idle capacity will be included in Fully Absorbed Cost of Goods to the extent that such facility is in service. Fully Absorbed Cost of Goods will exclude all costs otherwise reimbursed pursuant to this Agreement. Fully Absorbed Costs of Goods will be determined in accordance with GAAP. Genzyme will use commercially reasonable efforts to minimize and mitigate circumstances that would result in idle capacity being included in Fully Absorbed Cost of Goods.

 

1.36.                        “ G&A Costs ” will mean the costs of general and administration services (including legal, finance, accounting, human resources and other general and administrative support services) as reasonably required to support the activities of the Parties under this

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

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Agreement, which costs will be determined and reported in accordance with GAAP and in good faith by each Party.

 

1.37.                         “ GAAP ” means then-current United States generally accepted accounting principles, consistently applied.

 

1.38.                         “ Genzyme ” has the meaning set forth in the preamble.

 

1.39.                         “ Genzyme Indemnitees ” has the meaning set forth in Section 10.3.2 (Indemnification by Isis).

 

1.40.                         “ Genzyme Manufacturing Improvements ” has the meaning set forth in Section 9.3.2(b) (Terms of Sharing Program).

 

1.41.                        “ Genzyme Program IP ” means the Genzyme Program Patents, Genzyme Program Know-How and any work-of-authorship authored in the performance of the Development Program or Research Programs solely by Genzyme’s employees or Third Parties acting on Genzyme’s behalf.

 

1.42.                        “ Genzyme Program Know-How ” means any and all Know-How which is made or conceived during and in connection with the conduct of the Development Program or the Research Programs or commercializing the Product solely by Genzyme’s employees or Third Parties acting on Genzyme’s behalf.

 

1.43.                         “ Genzyme Program Patents ” means any and all Patents Controlled by Genzyme that Cover Genzyme Program Know-How.

 

1.44.                        “ IND ” means an Investigational New Drug Application, as defined in the US Federal Food, Drug, and Cosmetic Act, as amended from time to time (21 U.S.C. Section 301 et seq.), together with any rules and regulations promulgated thereunder, or similar application or submission that is required to be filed with any Regulatory Authority before beginning clinical testing of a Product in human subjects.

 

1.45.                         “ Indemnitee ” has the meaning set forth in Section 10.3.3 (Indemnification Procedure).

 

1.46.                         “ Indemnifying Party ” has the meaning set forth in Section 10.3.3 (Indemnification Procedure).

 

1.47.                         “ Infringement Claim ” has the meaning set forth in Section 9.6.1 (Notice).

 

1.48.                        “ In-Licensed Third Party IP ” means Patents or Know-How Controlled by Isis that are licensed to Isis pursuant to a Third Party Agreement.

 

1.49.                        “ Internal Development Expenses ” means Development Expenses attributable to the internal costs of base salary plus a factor for reasonable and customary employee benefits and payroll taxes for those employees and temporary employees directly responsible for performing the development activity, plus program specific travel for such employees

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

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and temporary employees, plus G&A Costs, or other overhead costs; provided , however , that where the Product is being manufactured by a Party, Internal Development Expenses will not include such Party’s Fully Absorbed Cost of Goods. A hypothetical example illustrating the methodology Genzyme currently uses to calculate its Internal Development Costs is set forth in Schedule 1.49 .

 

1.50.                       “ Internal Sales & Marketing Expenses ” means Sales & Marketing Expenses attributable to the internal costs of base salary and commissions payable to employees plus a factor for reasonable and customary employee benefits and payroll taxes for those employees directly responsible for performing the sales and marketing activity, plus sales and marketing specific travel for such employees, plus G&A Costs or other overhead costs.

 

1.51.                         “ Isis ” has the meaning set forth in the preamble.

 

1.52.                       “ Isis Core Technology Patents ” means all Patents Controlled by Isis or any of its Affiliates as of the Prior Agreement Execution Date or during the Term, including Isis Program Patents and Joint Patents, that are necessary or useful for the development and commercialization of Product, including the Patents identified on Schedule 1.52, in each case other than Product-Specific Patents, Licensed Product Patents and Isis Manufacturing and Analytical Patents.

 

1.53.                       “ Isis Database ” has the meaning set forth in Section 6.4 (Isis Safety Database).

 

1.54.                       “ Isis Indemnitees ” has the meaning set forth in Section 10.3.1 (Indemnification by Genzyme).

 

1.55.                       “ Isis Manufacturing and Analytical Know-How ” means Know-How other than Product Know-How Controlled by Isis or its Affiliates as of the Prior Agreement Execution Date or during the Term, including Isis Program Know-How and Joint Know-How, that relates to the synthesis or analysis of Products independent of sequence or chemical modification.

 

1.56.                       “ Isis Manufacturing and Analytical Patents ” means Patents Controlled by Isis or its Affiliates as of the Prior Agreement Execution Date or during the Term, including Isis Program Patents and Joint Patents, that claim methods and materials used in the synthesis or analysis of Products independent of sequence or chemical modification, including the Patents identified on Schedule 1.56. Isis Manufacturing and Analytical Patents do not include the Product-Specific Patents, Licensed Product Patents and the Isis Core Technology Patents.

 

1.57.                       “ Isis Manufacturing and Analytical IP ” means the Isis Manufacturing and Analytical Know-How and Isis Manufacturing and Analytical Patents solely to the extent necessary or useful to manufacture a Product.

 

1.58.                       “ Isis Manufacturing Improvements ” has the meaning set forth in Section 9.3.2(c) (Terms of Sharing Program).

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

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1.59.                       “ Isis Program IP ” means the Isis Program Patents and Isis Program Know-How and any works-of-authorship authored in the performance of the Development Program or Research Programs solely by Isis’ employees or Third Parties acting on Isis’ behalf.

 

1.60.                       “ Isis Program Know-How ” means any and all Know-How which is made or conceived in the performance of the Development Program or the Research Programs solely by Isis’ employees or Third Parties acting on Isis’ behalf.

 

1.61.                       “ Isis Program Patents ” means any and all Patents Controlled by Isis that Cover Isis Program Know-How.

 

1.62.                       “ Joint Development Committee ” or “ JDC ” has the meaning set forth in Section 4.1.1 (Establishment of JDC).

 

1.63.                       “ Joint Know-How ” means any and all Know-How that is made or conceived in the performance of the Development Program or the Research Programs jointly by Isis’ and Genzyme’s employees or others acting on Isis’ and Genzyme’s behalf.

 

1.64.                       “ Joint Patent Committee ” or “ JPC ” has the meaning set forth in Section 4.2.1 (Establishment of the JPC).

 

1.65.                       “ Joint Patents ” means any and all Patents that Cover Joint Know-How.

 

1.66.                       “ Joint Program IP ” means Joint Patents, Joint Know-How and any works-of-authorship authored in the performance of the Development Program or Research Programs jointly by Isis’ and Genzyme’s employees or others acting on their behalf.

 

1.67.                       “ Know-How ” means inventions, technical information, know-how and materials, including technology, software, instrumentation, devices, data, compositions, formulas, biological materials, assays, reagents, constructs, compounds, discoveries, procedures, processes, practices, protocols, methods, techniques, results of experimentation or testing, knowledge, trade secrets, skill and experience, in each case whether or not patentable or copyrightable.

 

1.68.                       “ Licensed IP ” means the Licensed Patents, the Product Know-How, the Isis Manufacturing and Analytical Know-How; provided , however , that (a) for any such Know-How or Patent that becomes Controlled by Isis after the Prior Agreement Execution Date pursuant to an Additional Third Party Agreement, the provisions of Section 2.3 (Additional Rights after Prior Agreement Execution Date) will govern whether such Know-How or Patent will be included as Licensed IP and (b) with respect to any Follow-On Compound, the provisions of Section 2.4 (Follow-On Compound) will govern the extent to which In-Licensed Third Party IP will be included in Licensed IP.

 

1.69.                       “ Licensed Patent(s) ” means the Licensed Product Patents, Isis Core Technology Patents and Isis Manufacturing and Analytical Patents.

 

1.70.                       “ Licensed Product Patents ” means (i) the [**] Patent, and (ii) any Patent Controlled by

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

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Isis during the Term, including any Isis Program Patents and Joint Patents, claiming (a) [**] apoB, (b) the sequence of apoB, (c) the specific composition of matter of a Product, or (d) methods of using Product as a therapeutic, methods of using Product to modulate apoB, and methods of using the Product to inhibit expression of apoB; and also claiming or describing (x) [**], or (y) methods of using such nucleic acids as a therapeutic or to modulate a gene target [**]. Notwithstanding the foregoing, a Patent that has been issued for at least two years that claims (a), (b), (c) or (d) above and that also describes, but does not claim, (x) or (y) above, will be a Product-Specific Patent, not a Licensed Product Patent

 

1.71.                         [**].

 

1.72.                         “ [**] Manufacturing Improvements ” has the meaning set forth in Section [**].

 

1.73.                       “ MAA ” means a marketing authorization application filed with (a) the EMEA under the centralized EMEA filing procedure or (b) a Regulatory Authority in any Major European Country if the centralized EMEA filing procedure is not used, after completion of clinical trials to obtain marketing approval.

 

1.74.                         “ MAA Approval ” means the Approval of a MAA for the applicable Product in any of the Major European Countries.

 

1.75.                         “ Major European Country ” means France, Germany, Italy, Spain, or the United Kingdom.

 

1.76.                         “ Major Market Countries ” means Canada, the United States, Japan and each Major European Country.

 

1.77.                       “ Manufacturing Improvements ” means any and all scientific and technical data, information, methods, techniques, protocols, inventions, and processes that have been found to be useful in the manufacture of ASO Products, excluding Commercial Scale Manufacturing IP.

 

1.78.                       “ Mipomersen ” means mipomersen sodium, formerly known as ISIS 301012, including all pharmaceutically acceptable salts, solvates, hydrates, hemihydrates, metabolites, pro-drug forms, stereoisomers, enantiomers, racemates and all optically active forms thereof.

 

1.79.                       “ NDA ” means a New Drug Application filed with the FDA after completion of clinical trials to obtain marketing approval for the applicable Product in the United States.

 

1.80.                         “ NDA Approval ” means the Approval of an NDA by the FDA for the applicable Product in the U.S.

 

1.81.                         “ NDA Filing ” means the acceptance by the FDA of the filing of an NDA for the applicable Product.

 

1.82.                         “ Net Profits or Losses ” means Net Revenues less Program Costs. To the extent Net

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

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Revenues exceed Program Costs for the relevant period, the amount of such difference will be deemed “ Net Profits ,” and, to the extent Program Costs exceed Net Revenues for the relevant period, the amount of such difference will be deemed “ Net Losses .”

 

1.83.                       “ Net Revenue ” during the relevant period means the sum of (a) Net Sales, if any, of Products in the Territory during such period, plus (b) all revenue received by either Party or their respective Affiliates from a Third Party in consideration for the grant of a right to make, use, sell, offer for sale or import a Product in the Territory, including monies received pursuant to a license with a Third Party such as upfront fees, milestones and royalties, and monies received for marketing rights or distribution rights. If Genzyme or its Affiliates receives non-cash consideration for the grant of a right to make, use, sell, offer for sale or import a Product in the Territory, the Parties will agree in good faith on the valuation of such consideration to be included in Net Revenue.

 

1.84.                       “ Net Sales ” means the gross invoiced sales amount of the Product billed by Genzyme or its Affiliates or Sublicensees, in each case to independent Third Parties, including to distributors and end-users, for the sale or other commercial disposition of the Product in the Territory, less the following items (“ Net Sales Adjustments ”) as applicable to such Product to the extent actually taken or incurred with respect to such sale:

 

(a)                                   credits or allowances for returns, rejections or recalls (due to spoilage, damage, expiration of useful life or otherwise), retroactive price reductions or billing corrections;

 

(b)                                  invoiced freight, postage, shipping and insurance, handling and other transportation costs;

 

(c)                                   sales, use, value added and other similar taxes (excluding income taxes), tariffs, customs duties, surcharges and other governmental charges levied on the production, sale, transportation, delivery or use of the Product in the Territory that are incurred at time of sale or are directly related to the sale (which in all cases will be the direct responsibility of the selling Party); and

 

(d)                                  quantity, cash or other trade discounts, rebates, refunds, charge backs, fees, credits or allowances (including amounts incurred in connection with government-mandated rebate and discount programs, Third Party rebates and charge backs, and hospital buying group/group purchasing organization administration fees and payor organizations), distribution fees, sales commissions, and commissions paid to Third Parties;

 

all in accordance with standard allocation procedures, allowance methodologies and accounting methods consistently applied, in accordance with GAAP.

 

Notwithstanding the foregoing, the following will not be included in Net Sales: (1) Genzyme’s transfer of Product to an Affiliate, (2) Product provided by Genzyme or an Affiliate for administration to patients enrolled in clinical trials or distributed through a not-for-profit foundation at no charge to eligible patients, provided , however , that

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

11

 

Genzyme or its Affiliate receive no consideration from such clinical trials or not-for-profit foundation for such use of Product and (3) Product used as samples to promote additional Net Sales, in amounts consistent with normal business practices of Genzyme.

 

1.85.                         “ [**] ” has the meaning set forth in Section [**].

 

1.86.                         “ [**] Process ” has the meaning set forth in Section [**].

 

1.87.                       “ Participating Isis Partner ” means any Third Party that has a then-current contractual relationship with Isis pursuant to which (i) such Third Party is required to disclose to Isis on at least an annual basis any Manufacturing Improvements invented or developed by such Third Party, and (ii) Isis has the right to license such Third Party’s Manufacturing Improvements to Genzyme under this Agreement and in accordance Section 9.3.2 (Terms of Sharing Arrangement), and (iii)  such Third Party is either (A) [**] or [**], (B) manufacturing at least 50% of its requirements for the active pharmaceutical ingredient for an ASO Product under license from Isis on its own behalf or through Isis (i.e., it is not using a Third Party manufacturer to manufacture such portion of such active ingredient) or (C) maintaining an ongoing and substantial internal process development program related to the manufacture of ASO Products.

 

1.88.                       “ Party and Parties ” has the meaning set forth in the preamble.

 

1.89.                       “ Patent(s) ” means (a) patents, patent applications and similar government-issued rights protecting inventions in any country or jurisdiction however denominated, (b) all priority applications, divisionals, continuations, substitutions, continuations-in-part of and similar applications claiming priority to any of the foregoing and (c) all patents and similar government-issued rights protecting inventions issuing on any of the foregoing applications, together with all registrations, reissues, renewals, re-examinations, confirmations, supplementary protection certificates, and extensions of any of (a), (b) or (c).

 

1.90.                       “ Permitted Licenses ” means licenses granted by Isis after the Effective Date to any Third Party under the Isis Core Technology Patents or the Isis Manufacturing and Analytical IP (but not under the Licensed Product Patents or for use of the [**]) to (a) use oligonucleotides (or supply oligonucleotides to end users) in quantities not to exceed [**] per oligonucleotide per end user solely to conduct Pre-Clinical Research, or (b) enable such Third Party to [**], where such Third Party is primarily engaged in providing contract manufacturing or services and is not engaged in drug discovery, development or commercialization. Notwithstanding the foregoing, Permitted Licenses do not include any licenses that allow (i) a Third Party to make, use or sell an oligonucleotide having the same [**] as a Product or Isis’ preferred [**]; (ii) a Third Party to manufacture any nucleic acid that (A) is designed to [**] apoB or (B) acts predominantly by [**] apoB, in each case ((A) or (B)), that will be incorporated into a therapeutic product for use in human clinical trials or for commercial sale; or (iii) Isis to directly supply to any Third Party any nucleic acid that any nucleic acid that (i) is designed to [**] apoB or (ii) acts predominantly by [**] apoB.

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

12

 

1.101.      “ Program Costs ” during the relevant period means all actual costs and expenses (including accruals chargeable against profits under GAAP) incurred (a) by either Party in the conduct of the Development Program (including all Development Expenses) (or the Research Program to the extent permitted under Section 7.2) and (b) by Genzyme, its Affiliates or Sublicensees pursuant to the manufacturing, sale, promotion and marketing of the Product in the Territory.

 

Program Costs will be determined and accounted for in accordance with Section 8.7.1 (Accounting).  Each component of Program Costs will be allocated according to the allocation method mutually agreed to by the Parties under Section 8.7.2 (Allocation Methods).  Program Costs will include:

 

(a)            direct, out-of-pocket external costs and expenses, including clinical grants, clinical laboratory fees, positive controls and the cost of pre-clinical and clinical studies conducted and services provided by contract research organizations;

 

(b)            Fully Absorbed Cost of Goods associated with the manufacture of preclinical, clinical and commercial grade materials;

 

(c)            depreciation and/or amortization relating to (i) capital investments, (ii) process improvements or, (iii) any other capital expenditure for the construction or renovation of any manufacturing facility for the production of the Product;

 

(d)            costs and expenses related to the conduct of clinical studies, including costs and expenses associated with data management, statistical designs and studies, document preparation and other expenses associated with the clinical testing program for the Product;

 

(e)            costs and expenses associated with pharmacovigilence and risk management activities associated with the Product;

 

(f)             costs and expenses of samples (without any mark-up) of Product provided by Genzyme to Isis;

 

(g)            costs and expenses of preparing, submitting, reviewing or developing data or information for the purpose of submission of applications to obtain Approvals for the Product or maintenance of such Approvals (including user fees, establishment fees, product fees, or similar international maintenance fees);

 

(h)            all royalties, milestones and license fees payable to Third Parties, including (i) those owed by Isis to [**] and [**] under the existing Third Party Agreements set forth on Schedule 10.2.2 , and (ii) Genzyme’s allocable portion of amounts due under any Additional Third Party Agreement in accordance with to Section 2.3 (Additional Rights after Prior Agreement Execution Date); provided , however that royalties, milestones and license fees payable under any Additional Third Party Agreement entered into in violation of Section 2.3 (Additional Rights After Prior Agreement Execution) will not be included in Program Costs;

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

14

 

(i)             Sales and Marketing Expenses;

 

(j)             costs and expenses associated with shipping, storage and distribution of the Product in the Territory, including (i) invoice, freight, postage, shipping, insurance, handling and other transportation charges to fulfill orders and not otherwise accounted for as Net Sales Adjustments, (ii) customer services, including collection of data about sales to hospitals, prescribers and end users, order entry, billing and adjustments, inquiry, credit and collection, (iii) cost of labor utilized for the distribution of the Product, (iv) duties and other monies paid to Third Parties pursuant thereto and (v) amounts paid to Third Parties with respect to storage or distribution of the Product;

 

(k)            G&A Costs to the extent they are attributable to a Product;

 

(l)             bad debt expense as calculated in accordance with GAAP;

 

(m)           costs and expenses associated with any write-offs relating to (i) inventory, (ii) manufacturing costs and expenses, if applicable, (iii) product failures or (iv) associated regulatory compliance costs and expenses (each such write-off will be deemed Program Costs in the period in which they are incurred);

 

(n)            damages (including out-of-court settlements) and out-of-pocket legal expenses (collectively “ Damages ”) reasonably incurred by a Party or its Affiliates with respect to a Third Party claim or action arising out of the research, development, manufacture, use, distribution, marketing or sale of the Product within the scope of this Agreement (including Third Party Infringement Claims); provided , however , that such Damages (i) do not arise out of a claim or action that is subject to any indemnification obligation of Genzyme under Section 10.3.1 (Indemnification by Genzyme) or Isis under Section 10.3.2 (Indemnification by Isis), and (ii) are not incurred by either Party for activities conducted after the Term or conducted outside the scope of this Agreement;

 

(o)            costs and expenses incurred in challenging Patents owned by Third Parties in accordance with Section 9.6.2 (Defense of Infringement Claim; Declaratory Judgment Actions) or 9.6.3 (Other Challenges);

 

(p)            costs and expenses incurred enforcing intellectual property rights against Third Parties to the extent provided in Section 9.5.4 (Procedures and Expenses);

 

(q)            costs and expenses relating to the filing, prosecution, maintenance and enforcement of Joint Patents and as provided in Section 9.4.2 (Election Not to Continue Prosecution; Abandonment), in each case in the Territory; and

 

(r)             costs and expenses of insurance (including any product liability insurance or accrual for self-insurance).

 

For clarity, the following costs will not be considered Program Costs:

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

15

 

(a)            the license fee or milestone payments payable by Genzyme to Isis pursuant to Section 8.1 or Section 8.2 , respectively;

 

(b)            Isis’ costs and expenses of prosecuting and maintaining the Isis Core Technology Patents and Isis Manufacturing and Analytical Patents (other than as provided in Section 9.6.3 (Other Challenges));

 

(c)            Genzyme’s costs and expenses of prosecuting and maintaining the Product-Specific Patents and the Licensed Product Patents (other than as provided in Section 9.6.3 (Other Challenges));

 

(d)            the costs and expenses of the mutually agreed upon Research Programs as described in Article 7 (Research Related to the Product);

 

(e)            costs and expenses associated with stock-based compensation expenses or other pro forma adjustments to either Party’s financials determined in accordance with U.S. GAAP;

 

(f)             any costs and expenses of corporate overhead expenses, other than G&A Costs;

 

(g)            unless otherwise deemed necessary for activities under this Agreement and mutually agreed by the Parties:

 

(A)          amortization and depreciation expenses (unless consistent with Section 1.32 (Fixed Costs) hereof), deductions, credits, expenses including taxes and extraordinary or nonrecurring losses customarily deducted by a Party in calculating and reporting consolidated net income, manufacturing facility capital costs, capital expenditures, including purchases of facilities, property or equipment; and

 

(B)           property taxes and any other taxes not related to the research, development, manufacture, commercialization or distribution of a Product in the Territory.

 

In addition, in no event will any amounts deducted from gross sales (Net Sales Adjustments) for the purpose of calculating Net Sales also be counted toward the amount of Program Costs.

 

Each of the following will be accounted for as a credit against Program Costs:

 

(a)            to the extent provided in Section 9.5.5 (Recoveries), amounts recovered from an infringer of the Licensed IP;

 

(b)            amounts received as insurance payments for damages, losses, costs or expenses previously included in the calculation of Program Costs; and

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

16

 

(c)            tax refunds received to the extent they relate to tax payments previously deducted from Net Sales as a Net Sales Adjustment or Program Costs.

 

1.102.      “ Program IP ” means Genzyme Program IP, Isis Program IP and Joint Program IP, collectively.

 

1.103.      “ Regulatory Authority ” means any governmental authority, including the FDA, EMEA or Koseisho ( i.e., the Japanese Ministry of Health and Welfare, or any successor agency thereto), that has responsibility for granting any licenses or approvals or granting pricing and/or reimbursement approvals necessary for the marketing and sale of a Product in any country.

 

1.104.      “ Regulatory Materials ” means any regulatory submissions, notifications, registrations, approvals and/or other filings and correspondence made to or with a Regulatory Authority in any country or jurisdiction in the Territory, and any other records required by Applicable Law to be maintained that may be necessary or useful to develop, manufacture, market, sell or otherwise commercialize Product in the Territory.

 

1.105.      “ Reporting Period ” has the meaning set forth in Section 8.6.1 (Reports).

 

1.106.      “ Research Programs ” has the meaning set forth in Section 7.1 (Research Programs).

 

1.107.      “ Responsible Party ” has the meaning set forth in either Section 9.4.1(b)(i)  or 9.4.1(d)  as the context requires.

 

1.108.      “ Reversion ” has the meaning set forth in Section 11.3.5(a)(iii)  (Isis Reversion Rights).

 

1.109.      “ Sales & Marketing Expenses ” means sales and marketing costs and expenses (including labor costs) incurred in connection with the sale, promotion and marketing of the Product in the Territory including (i) costs and expenses related to performing market research, post-marketing studies, advertising, producing promotional literature, sponsoring seminars and symposia, sales training meetings and seminars, originating sales, providing reimbursement, and other similar sales, marketing, and patient support services and (ii) all costs and expenses incurred for the sales force and sales force management by Genzyme, including costs and expenses related to salaries, commissions, current period reasonable and customary employee benefits and payroll taxes, sales incentive payments, sales training expenses, and travel expenses, all in accordance with GAAP.

 

1.110.      “ Sharing Agreement ” means an agreement between Isis and a Participating Isis Partner pursuant to which (i) the Participating Isis Partner is required to disclose to Isis on at least an annual basis any Manufacturing Improvements invented or developed by such Third Party, and (ii) Isis has the right to license such Participating Partner’s Manufacturing Improvements to Genzyme under this Agreement and in accordance Section 9.3.2 (Terms of Sharing Arrangement).

 

1.111.      “ Sharing Period ” has the meaning given to it in Section 9.3.2(a) (Terms of Sharing Arrangement).

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

17

 

1.112.      “ [**] Patent ” means Patent No. PCT/US[**].

 

1.113.      “ Special Isis Core Technology Patents ” means (a) the Isis Core Technology Patents identified on Schedule 1.113 and all divisionals, continuations, substitutions, continuations-in-part of and similar applications claiming priority to any of the foregoing and all patents and similar government-issued rights protecting inventions issuing on any of the foregoing applications, together with all registrations, reissues, renewals, re-examinations, confirmations, supplementary protection certificates, and extensions of any of the foregoing, and (b) any other Isis Core Technology Patent that is similar to the Patents identified on Schedule 1.113 that Isis or its Affiliates come to Control after the Execution Date during the Term that Genzyme reasonably requests in writing be designated as a Special Isis Core Technology Patent.

 

1.114.      “ Sublicensee ” means a Third Party who receives a sublicense of the Product License in accordance with Section 2.2 (Limited Right to Sublicense).

 

1.115.      “ Supply Agreement ” means the Supply Agreement entered into between Genzyme and Isis pursuant to Section 5.3 (Clinical and Launch Supplies).

 

1.116.      “ Territory ” means worldwide.

 

1.117.      “ Term ” has the meaning set forth in Section 11.1 (Term).

 

1.118.      “ Third Party ” means a person or entity other than the Parties, their respective Affiliates and their employees.

 

1.119.      “ Third Party Agreement ” means any agreement with a Third Party now existing or entered into during the Term pursuant to which Isis obtains rights applicable to the development or commercialization of a Product.

 

1.120.      “ Third Party Claim ” has the meaning set forth in Section 10.3.3 (Indemnification Procedure).

 

1.121.      “ Third Party Services Agreement ” has the meaning set forth in Section 6.2.2 (Third Party Services Agreements).

 

1.122.      “ Variable Costs ” means the cost of labor (which includes salaries and wages plus a factor for reasonable and customary employee benefits and payroll taxes for the applicable employees), raw materials, scrap, obsolescence, supplies, services, fees and other resources directly consumed or used in the conduct of the applicable activity in accordance with the Development Plan, or Genzyme’s manufacturing or commercialization plan, as the case may be.  All such cost determinations will be made in accordance with GAAP.

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

18

 

Article 2.
LICENSES

 

2.1.           Product License .  Isis hereby grants to Genzyme an exclusive license, with the limited right to sublicense as set forth in Section 2.2 (Limited Right to Sublicense), under the Licensed IP to research, develop, make, have made, use, sell, offer for sale, have sold, import and export Products in the Territory for therapeutic purposes.  Notwithstanding the foregoing, (a) the exclusive license to the Isis Core Technology Patents will be subject to the licenses granted by Isis to Third Parties identified on Schedule 2.1 and Isis’ right to grant Permitted Licenses and (b) with respect to any Follow-On Compound, the provisions of Section 2.4 (Follow-On Compound) will govern the extent to which In-Licensed Third Party IP is included within Licensed IP.

 

2.2.           Limited Right to Sublicense .

 

2.2.1.        The Product License is sublicensable only in connection with a sublicense of a Product to any Affiliate of Genzyme or to any Third Party, in each case for the continued research, development or commercialization of such Product in accordance with the terms of the Product License.

 

2.2.2.        Notwithstanding the foregoing, the licenses granted to Genzyme under the Isis Manufacturing and Analytical IP are sublicensable to a Third Party [**] only in accordance with Section 6.3.1 (Manufacture).

 

2.3.           Additional Rights after Prior Agreement Execution Date .  After the Prior Agreement Execution Date, Isis may wish to in-license or acquire rights to Know-How or Patents Controlled by Third Parties (such a Third Party in-license or acquisition agreement being an “ Additional Third Party Agreement ”) which, if so licensed or acquired, may be included in the Licensed IP licensed to Genzyme under Section 2.1 .  In such event (and to the extent permitted by Isis’ confidentiality agreement with the applicable Third Party), Isis will notify Genzyme regarding the nature of the technology and status of negotiations related to the Additional Third Party Agreement through the JDC.  Once Isis has executed such Additional Third Party Agreement, Isis will offer such Third Party Patents or Know-How to Genzyme (which offer will include a description of the payments paid or potentially payable by Isis thereunder).  At such time, if Genzyme wishes to include such Third Party Patents or Know-How under the license granted under Section 2.1 , Genzyme will notify Isis of its desire to do so and the Parties will fairly and in good faith allocate upfront payments or ongoing payment obligations between Products and compounds that are not Products, if any, and other Isis licensees, if appropriate.  As part of this allocation process, Isis will share with Genzyme, in reasonable detail, the assumptions and methodology Isis used to create the proposed allocation.  If Genzyme does not agree to reimburse Isis for the amount of any upfront or similar acquisition payments fairly allocated to Product, and to be responsible for the payment of its share of any upfront, milestone, and royalty payments, then the Know-How or Patents acquired or in licensed by Isis under the Additional Third Party Agreement will not be considered Licensed IP licensed to Genzyme under the Product License.  When Genzyme pays its share of any upfront, milestone, and royalty payments assumed by Genzyme under this Section 2.3 , such payments will be considered Program Costs for the applicable Product.  Except for Patents acquired by Isis as part of an acquisition of a Third Party’s business,

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

19

 

before Isis in-licenses or acquire rights to any Patent Controlled by Third Parties which, if acquired, would be a Product-Specific Patent, Isis will first notify Genzyme in writing and allow Genzyme to license or acquire such Patent on the terms offered Isis.  If Genzyme informs Isis that Genzyme is not interested in licensing or acquiring such Patent or does not license or acquire such Patent within 180 days of Isis’ notice to Genzyme, then Isis will be free to in-license or acquire such Patent.

 

2.4.           Follow-On Compound .  The Parties contemplate that after the Effective Date Genzyme, either on its own or in collaboration with Isis, may wish to research, develop, and commercialize Follow-On Compounds.  The scope of the In-Licensed Third Party IP included in Licensed IP under the Product License with respect to such Follow-On Compounds will be determined in accordance with the procedures set forth in this Section 2.4 .  At the time Genzyme intends to designate a Follow-On Compound as a development candidate, Genzyme will notify Isis in writing of such intention and will describe in reasonable detail the applicable Follow-On Compound.  Subject to Section 2.3 (Additional Rights after Prior Agreement Execution Date), if a Follow-On Compound utilizes any In-Licensed Third Party IP (an “ Encumbered Follow-On Compound ”), such In-Licensed Third Party IP will be included in Licensed IP only to the extent set forth below:

 

2.4.1.        If the applicable Third Party Agreement contains a contractual obligation that would preclude Isis from including such In-Licensed Third Party IP in Licensed IP with respect to such Encumbered Follow-On Compound, then the In-Licensed Third Party IP that is the subject of such Third Party Agreement will not be included in Licensed IP.

 

2.4.2.        If the applicable Third Party Agreement contains any potential encumbrances known by Isis and related to the potential Follow-On Compound, including field or territory restrictions, covenants, or milestones, royalty, sublicense revenue, or other payments (“ Follow-On Compound Encumbrances ”), Isis will fully disclose to Genzyme such Follow-On Compound Encumbrances and, if Genzyme agrees in writing to assume the Follow-On Compound Encumbrances (with any payments being included in Program Costs for such Encumbered Follow-On Compound), then the In-Licensed Third Party IP that is the subject of such Third Party Agreement will be included in Licensed IP.

 

2.4.3.        If the applicable Third Party Agreement does not contain the obligations or encumbrances described in Sections 2.4.1 and 2.4.2 above, the In-Licensed Third Party IP that is the subject of such Third Party Agreement will automatically be included in Licensed IP.

 

2.4.4.        If the applicable Third Party Agreement is or was also applicable to Mipomersen, then the In-Licensed Third Party IP that is the subject of such Third Party Agreement will automatically be included in the Licensed IP to the extent that (a) the terms of such Third Party Agreement do not preclude Isis from including it and (b) Genzyme agrees in writing to assume any applicable Follow-On

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

20

 

Compound Encumbrances associated with such Third Party Agreement.

 

2.4.5.        Each time the Parties complete the process set forth above, Isis will update the schedules relating to Licensed Patents and Third Party Agreements, and Schedule 2.1 as appropriate.

 

2.5.           Retained Rights .  Subject to the terms and conditions of this Agreement, Isis retains the non-exclusive, non-transferable, non-licensable right under the Licensed IP only to the extent necessary for Isis to perform its obligations under this Agreement and the Supply Agreement.

 

2.6.           Isis’ Right of First Negotiation .  With respect to any Genzyme Program IP that would be relevant to antisense therapies as a whole, including but not limited to, manufacturing, formulation and delivery technologies or oligonucleotide chemical modifications or the design of antisense therapeutics generally, then Genzyme hereby grants to Isis a right of first negotiation with respect to any exclusive license that Genzyme may elect to grant under such Genzyme Program IP (each, an “ Antisense License ”) on the following terms and conditions:

 

2.6.1.        General .  Genzyme will not grant an Antisense License to any Third Party (or enter into discussions with, or solicit interest from, any Third Party regarding an Antisense License) unless and until:

 

(a)           Genzyme gives written notice (the “ Antisense License Notice ”) to Isis of Genzyme’s interest in granting an Antisense License, which notice will identify in reasonable detail the proposed scope and terms and conditions of the license Genzyme proposes to grant; and

 

(b)           (i) Isis notifies Genzyme that it declines the opportunity to negotiate with Genzyme regarding such a license, (ii) Isis does not indicate to Genzyme a desire to proceed with negotiations within forty-five (45) days after receipt of the Antisense License Notice, or (iii) Genzyme is otherwise permitted to enter into an Antisense License with a Third Party pursuant to Section 2.6.3 (Look Back).

 

2.6.2.        Negotiation Period .  If Isis notifies Genzyme, within forty-five (45) days after receipt of the Antisense License Notice, that it desires the opportunity to negotiate with Genzyme regarding such an Antisense License, the Parties will negotiate exclusively with each other for ninety (90) days (or such longer period as mutually agreed by the Parties) (the “ Exclusive Negotiation Period ”) and will use commercially reasonable efforts to reach agreement regarding a mutually satisfactory Antisense License on commercially reasonable terms.  During the Exclusive Negotiation Period, Genzyme will not enter into negotiations regarding an Antisense License with any Third Party.

 

2.6.3.        Look Back .  In the event that the Exclusive Negotiation Period expires before Genzyme and Isis have entered into an Antisense License, Genzyme will have no further obligation to negotiate with Isis with respect to any Antisense License in

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

21

 

any country in the Territory, and Genzyme will be free to grant one or more Antisense Licenses to one or more Third Parties in any country or countries in the Territory at Genzyme’s sole discretion; provided , however , that for a period equal to the longer of (i) the Term plus one (1) year or (ii) three (3) years following the expiration of the Exclusive Negotiation Period, Genzyme will not offer any Third Party an Antisense License containing a license scope and financial terms that are more favorable to the Third Party than the license scope and financial terms that Genzyme last offered to Isis during the Negotiation Period unless Genzyme first offers an Antisense License with such more favorable scope and terms to Isis in writing and Isis fails to accept such offer within fourteen (14) days after receiving it.

 

2.6.4.        Non-Exclusive License .  If Genzyme grants any Third Party a non-exclusive license under any Genzyme Program IP that would be relevant to antisense therapies as a whole, including but not limited to, manufacturing, formulation and delivery technologies or oligonucleotide chemical modifications or the design of antisense therapeutics generally, then Genzyme will promptly notify Isis of such license and will offer Isis a non-exclusive license under such licensed Genzyme Program IP with substantially similar scope and financial terms.

 

2.7.           Third Party Agreements .

 

2.7.1.        Exercise of Rights .  Isis will exercise its rights under the Third Party Agreements in a manner that is as consistent as possible with the terms of this Agreement and in consultation with and as reasonably requested by Genzyme.  Isis covenants that it will not, without Genzyme’s prior written consent, agree, consent or acquiesce to any amendment, supplement or other modification to any Third Party Agreement or take any action under such Third Party Agreement or with respect to the intellectual property licensed thereunder that would adversely affect the rights granted to Genzyme under this Agreement, including under the Product License.  Isis will immediately notify Genzyme of (a) any event that adversely affects the rights granted to Isis under a Third Party Agreement that are, in turn, sublicensed to Genzyme pursuant to this Agreement or (b) receipt by Isis of any notice of breach or termination of any Third Party Agreement.  Isis will take all reasonable actions necessary, or permit Genzyme to take such actions, to maintain and enforce its rights under the Third Party Agreements in a manner that is consistent with the terms of this Agreement.

 

2.7.2.        Sublicense Survival .  Isis covenants that it will use good faith and Commercially Reasonable Efforts to enter into any necessary amendments or side agreements to its Third Party Agreements to ensure that (a) sublicenses under each Third Party Agreement will survive termination of such Third Party Agreement or (b) Genzyme will receive a direct license from the counterparty to each Third Party Agreement upon termination of such Third Party Agreement.

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

22

 

(c)           Perform any other activities related to the Development Plan as jointly requested by both Parties from time to time;

 

(d)           Review and approve a scientific and medical publication plan and medical affairs plan for the Product;

 

(e)           Appoint one or more working group(s) to oversee particular activities to be performed under the Development Plan or create the scientific and medical publication plan and medical affairs plan for the Product, which working group(s) will dissolve no later than the date of the dissolution of the JDC.

 

For the avoidance of doubt, the JDC will have no authority to amend this Agreement.

 

4.1.3.        Meetings; Minutes .  During the course of implementing the Development Plan, the JDC will meet at least once each Calendar Quarter, and more frequently as the Parties mutually agree is appropriate, on such dates, in such places and at such times as the Parties will agree.  The JDC will be chaired by Genzyme as of the Effective Date.  The role of the chairperson will be to convene and preside at meetings of the JDC, but the chairperson will not be entitled to prevent items from being discussed or to cast any tie-breaking vote.  Reasonably detailed written minutes will be kept of all JDC meetings and will reflect without limitation material decisions made at such meetings.  The chairperson of the JDC will have responsibility for keeping minutes.  Draft meeting minutes will be sent to each member of the JDC for review and approval within ten (10) business days after a meeting.  Minutes will be deemed approved unless a member of the JDC objects to the accuracy or completeness of such minutes within thirty (30) calendar days of receipt.

 

4.1.4.        Decision-Making and Dispute Resolution .  The JDC will act by unanimous consent.  The representatives of each Party will have collectively one vote on behalf of such Party; provided , however , that no such vote taken at a meeting will be valid unless at least one representative of each Party is present and participating in the vote.  In the case of any matter which cannot be resolved unanimously by the JDC, at the written request of either Party, the dispute will be referred to senior management of the Parties in accordance with Section 13.1 (Escalation to Senior Management).

 

4.2.           Joint Patent Committee .

 

4.2.1.        Establishment of JPC . The Parties will establish a Joint Patent Committee (the “ JPC ”) to discuss the continued prosecution of the Licensed Patents and Product-Specific Patents, (including Joint Patents).  The JPC will be comprised of at least one (1) senior patent attorney from each Party.   Each Party will be free to change its members at its sole discretion.  The JPC will exist for so long as the JDC exists.  Thereafter, the Parties will meet from time to time as necessary, or as may

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

24

 

be mutually agreed by the Parties, to discuss patent related issues.

 

4.2.2.        Responsibilities of the JPC .  At least once per Calendar Quarter, the JPC will meet (in person or by phone) to discuss prosecution strategy for the Licensed Patents and Product-Specific Patents (including Joint Patents) with the goal of maintaining the broadest coverage for the Product in accordance with Section 9.3 (Filing, Prosecution and Maintenance of Patents).  Subject to Section 9.5 (Enforcement of Patents and Know-How) and Section 9.6 (Claimed Infringement by Third Parties), the JPC will also discuss any (a) potential Third Party infringement of the Licensed Patents and Product-Specific Patents (including Joint Patents) that might affect the Product and (b) Third Party intellectual property right that the Parties may want to license or challenge.

 

4.2.3.        Decision-Making and Dispute Resolution .  Subject to Section 9.3 (Filing, Prosecution and Maintenance of Patents), in the event a dispute relates to the prosecution or maintenance of a Patent, Genzyme will have the ultimate sole decision-making authority with respect to the Product-Specific Patents and Licensed Product Patents and Isis will have the ultimate sole decision-making authority with respect to the Isis Core Technology Patents and the Isis Manufacturing and Analytical Patents.  Any other dispute at the JPC will be referred to the JDC for resolution.

 

4.3.           Expenses .  Each Party will be responsible for all of its own travel and related costs and expenses for its members (or designees) of the JDC and JPC and such expenses will not be treated as Program Costs.

 

Article 5.
DEVELOPMENT

 

5.1.           Development Plan and Development Budget .  The initial Development Plan and Development Budget through the end of 2009 that have been agreed to by the Parties as of the Execution Date are attached to this Agreement as Exhibit A and Exhibit B , respectively.  The Parties acknowledge and agree that the Development Plan and Development Budget as of the Execution Date will need to be updated and augmented by the JDC on a quarterly basis and also from time to time in the discretion of the JDC.  The purpose of the Development Plan is to (a) set forth a strategy and plan for development, manufacturing and Approval for the Product, (b) detail the responsibilities and activities of Isis and Genzyme with respect to the development of the Product and (c) specify the expected timing of such activities, including the estimated dates of the initiation and completion of such activities.  The Development Budget contains the estimated costs associated with the tasks outlined in the Development Plan.  The JDC (or directly by the written mutual agreement of the authorized representatives of the Parties) may amend the Development Plan and Development Budget at any time, but, in any event, the JDC will review and update the Development Plan and Development Budget by agreeing to a Development Budget for each calendar year during the Term not later than November 15 ^th of the prior calendar year and prior to the commencement of each successive

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

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calendar quarter during such calendar year.  Any update or amendment to the Development Plan or Development Budget must be in writing.  After the JDC has disbanded, if requested by either Party, Genzyme and Isis will meet as necessary at least annually on a mutually agreed schedule to review and evaluate progress under the Development Plan and expenditures relative to the Development Budget and to develop updates or amendments to the Development Plan and Development Budget, with decisions made by the Parties consistent with the principles contemplated for JDC decision making in Section 4.1.4 (Decision Making and Dispute Resolution).

 

5.2.           Roles and Responsibilities .

 

5.2.1.        Clinical Trials .  The Development Budget includes the preclinical work and clinical trials to be conducted in and initiated in calendar year 2008 and classifies each item of preclinical work and clinical trials as “Isis Funded” or “Non Isis Funded.”  The JDC will assign specific responsibilities with respect to the conduct of such work and trials and will develop a written plan for transitioning responsibility between the Parties; provided , however , that such transition plan will not delegate the JDC’s decision making authority to a Party.  Except as otherwise determined by the JDC, Genzyme will conduct all clinical trials and all preclinical work for Mipomersen initiated in calendar year 2009 and thereafter.  If pursuant to Section 4.1.4 (Decision-Making and Dispute Resolution) the JDC amends the Development Plan so as to increase the size or scope of a clinical study designated as “Isis Funded” (such as by increasing the number of patients or increasing the dosing period of a clinical study) and as a result of such increase the actual expenses associated with such study exceed [**]% of the amount budgeted for such study in the Development Budget as of the Execution Date, then the incremental cost and expenses for such study in excess of [**]% of such Development Budget amount will be considered “Non Isis Funded” (i.e. not “Isis Funded”) for purposes of Section 8.3 (Financial Provisions Related to Development Activities).

 

5.2.2.        Performance of the Development Program .  Each Party will use Commercially Reasonable Efforts to conduct all activities and responsibilities assigned to it under the Development Plan and in accordance with the Development Budget and to cooperate with and provide reasonable support to the other Party in such other Party’s conduct of activities under the Development Plan.  Each Party will undertake its respective development activities, including its obligation to conduct clinical trials, in accordance with all Applicable Laws.

 

5.2.3.        Responsibility .  Except for those certain clinical trial responsibilities allocated to Isis as set forth in the Development Plan or other written document approved by the JDC, Genzyme will be responsible for all other aspects of the development of the Product.

 

5.3.           Clinical and Launch Supplies .  Isis will be responsible for manufacturing and supplying API for the Phase II clinical trials, the Pivotal Trial(s) and the initial commercial launch

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

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of the Product, pursuant to a Supply Agreement the form of which is set forth on Exhibit C and a Quality Agreement the form of which is set forth on Exhibit D .  In accordance with Section 8(a) and (b) of the Supply Agreement, the transfer price for the Product under the Supply Agreement will be Isis’ Fully Absorbed Cost of Goods, and all amounts paid by Genzyme to Isis under the Supply Agreement will be Program Costs under this Agreement.  The quantity of API that Isis will be required to supply for commercial launch will be mutually agreed by the Parties and set forth in the Supply Agreement.  If Isis cannot manufacture as set forth above, upon written request by Genzyme, Isis will transfer to Genzyme all documentation and information, and permit Genzyme to reference and use any regulatory filings, and otherwise fully cooperate with Genzyme to enable Genzyme to make or have made the API for use by Genzyme in accordance with the Agreement.  Genzyme will be responsible for all finished drug product and placebo needed for clinical trials of Product and finished drug product for commercial sale.

 

5.4.           Know-How Transfer .

 

5.4.1.        Transfer to Genzyme .  During the existence of the JDC (or after the dissolution of the JDC at Genzyme’s request), Isis will transfer to Genzyme and its representatives all material Product Know-How and Isis Manufacturing and Analytical Know-How within the possession or Control of Isis or any of its Affiliates, including all Regulatory Materials related to the Product; provided, however, that Isis will be required to deliver Isis Manufacturing and Analytical Know-How only to Genzyme or a Third Party manufacturer approved by Isis in accordance with Section 6.3 (Commercial Manufacture).  Without limiting the generality of the foregoing:

 

(a)            Before or promptly following the Execution Date, Isis will transfer any preclinical pharmacology and safety data, clinical data that then exists and any other information related to the Product that Genzyme may reasonably request.  Thereafter during the Term, Isis will provide copies of all data from Isis’ clinical or preclinical activities undertaken pursuant to the Development Plan.

 

(b)            Isis will promptly disclose in reasonable detail and in a reasonable manner specified by Genzyme the Product Know-How and Isis Manufacturing and Analytical Know-How learned, discovered, developed, acquired or otherwise coming within the Control of Isis during the Term.

 

(c)            At Genzyme’s request from time to time during the Term, Isis will deliver to Genzyme copies (for documents and information) and samples (for materials) of any documents, files, diagrams, plans, specifications, designs, recipes, schematics, reports, models, prototypes, chemical or biologic materials, assays, reagents, or other tangible documentation or material in Isis’ possession recording or embodying the Product Know-How and Isis Manufacturing and Analytical Know-How in Isis’ or its Affiliate’s possession.

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

27

 

(d)            At Genzyme’s request from time to time during the Term, and on a commercially reasonable schedule and at a commercially reasonable venue to be agreed on by the Parties, technically qualified personnel from each Party (and, if applicable, any Third Party manufacturer approved by Isis in accordance with Section 6.3 (Commercial Manufacture)) will meet and/or participate in telephone conference calls as reasonably necessary to exchange knowledge necessary to fully transfer all such Know-How.

 

(e)            Section 2.2 (Limited Right to Sublicensee) and Article 12 (Confidentiality and Public Disclosures) will apply to any transfer of such Know How by Genzyme to a Third Party.

 

5.4.2.        Transfer from Genzyme to Isis .  Upon Isis’ reasonable request, Genzyme will provide to Isis copies of any and all data from Genzyme’s clinical or preclinical studies with the Product.

 

5.5.           Subcontracting .  Each Party may contract with one or more Third Party contractors to perform any or all of its obligations under the Development Plan; provided , however , that (a) except as otherwise agreed to by the JDC, each Third Party contractor will be approved by the JDC for the proposed work, such approval not to be unreasonably withheld, delayed or conditioned; and (b) the contracting Party provides the other Party with a true and accurate copy of each agreement pursuant to which such Third Party contractor is engaged promptly after execution thereof.

 

Article 6.
COMMERCIALIZATION AND REGULATORY MATTERS

 

6.1.           Commercialization Responsibilities .  Genzyme will have the exclusive right to commercialize any Product itself or through one or more Affiliates or Third Parties selected by Genzyme in the Territory and will have sole discretion, authority and responsibility in all matters relating to the commercialization of any Product in the Territory; provided , however , that Genzyme must use Commercially Reasonable Efforts to commercialize at least one Product in each of the Major Market Countries upon obtaining Approval in such country.

 

6.2.           Regulatory Matters and Filings .

 

6.2.1.        Regulatory Responsibility .  Genzyme will be responsible for all regulatory matters relating to the Product in the Territory.  Isis will transfer to Genzyme (or to a Genzyme Affiliate designated by Genzyme) the IND(s), orphan drug designation(s) and other existing Regulatory Materials for Mipomersen within thirty (30) days of the Execution Date.  Between the Execution Date and the transfer to Genzyme of the IND related to the Product, Isis will not file or send any Regulatory Material related to the Product with or to any Regulatory Authority without Genzyme’s prior written consent, which consent will not unreasonably withheld or delayed.  Genzyme will prepare and file, in its own name, all NDAs, MAAs and other Regulatory Materials for the Product in the

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

28

 

Territory.  Genzyme will have sole authority with respect to (a) obtaining Approvals for the Product and subsequently maintaining such Approvals, (b) communicating with Regulatory Authorities about the Product and (c) preparing and submitting supplements, communications, annual reports, adverse event reports, manufacturing changes, supplier designations and other related regulatory filings and Regulatory Materials.  Isis will provide Genzyme with reasonable access to and copies of any documents or other materials Controlled by Isis that are useful for such regulatory filings and correspondence and maintenance of Approvals for the Product in the Territory and will otherwise cooperate with Genzyme’s efforts to obtain and maintain Approval for the Product.

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

29

 

6.2.2.        Third Party Services Agreements.

 

(a)           Isis will exercise its rights under any agreement with a Third Party now existing or entered into during the Term pursuant to which Isis obtains services applicable to the pre-clinical or clinical development of a Product, including without limitation any agreement with a contract research organization (each a “ Third Party Services Agreement ”) in a manner that is as consistent as possible with the terms of this Agreement and in consultation with and as reasonably requested by Genzyme.  Isis covenants that it will not, without Genzyme’s prior written consent, (i) agree, consent or acquiesce to any amendment, supplement or other modification to any Third Party Services Agreement or (ii) take any action under any Third Party Services Agreement, in each case that may adversely affect Genzyme as the holder of the Regulatory Materials related to the Product.  Isis will take all reasonable actions necessary, or permit Genzyme to take such actions, to maintain and enforce its rights under the Third Party Services Agreements in a manner that is consistent with the terms of this Agreement.

 

(b)           In connection with the transfer of the Regulatory Materials for Mipomerson and Genzyme’s assumption of responsibility for regulatory matters related to the Product, at Genzyme’s written request Isis will use commercially reasonable efforts to promptly assign and transfer to Genzyme any Third Party Services Agreements solely related to the pre-clinical or clinical development of the Products.  If the terms of any Third Party Services Agreement requires the consent of the other party thereto to effect such assignment, then upon Genzyme’s request for an assignment, Isis will use commercially reasonable efforts to obtain such consent.  In the event of any assignment to Genzyme under this Section 6.2.2 , Genzyme will assume full responsibility for satisfying all obligations of Isis under any assigned agreement to the extent arising after such assignment and assumption, and Isis will remain responsible for satisfying all obligations under any assigned agreement to the extent arising prior to such assignment and assumption.  If a Third Party Services Agreement relates both to the pre-clinical or clinical development of the Product and to the development of some other Isis product not licensed to Genzyme under this Agreement, then at Genzyme’s request, the Parties will use commercially reasonable efforts to enter into such amendment(s) or new agreement(s) with the Third Party service provider to effect the transfer to Genzyme of all rights and obligations related to the Product under such Third Party Services Agreement.

 

6.2.3.        Regulatory Audit .  If a Regulatory Authority desires to conduct an inspection or audit of a Party’s facility, or a facility under contract with a Party, with regard to a Product, then such Party will promptly notify the other Party and permit and cooperate with such inspection or audit, and will cause the contract facility to permit and cooperate with such Regulatory Authority and such other Party during such inspection or audit.  Genzyme will have the right to have a representative observe such inspection or audit of a facility operated by Isis or under contract with Isis.  Following receipt of the inspection or audit observations of such Regulatory Authority (a copy of which the audited Party will immediately provide to the other Party), the audited Party will prepare the response to any such

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

30

 

observations, and will provide a copy of such response to the other Party.

 

6.2.4.        Class Generic Label Claims .  Notwithstanding the foregoing, to the extent Genzyme intends to make any claims in a Product label that are of general applicability to antisense oligonucleotides, Genzyme will provide such claims to Isis in advance and will consider any proposals and comments made by Isis.

 

6.3.           Commercial Manufacture .

 

6.3.1.        Manufacture .  Subject to Isis’ obligation to manufacture and supply API for the commercial launch of the Product pursuant to Section 5.3 (Clinical and Launch Supplies) and the Supply Agreement, Genzyme will be responsible for securing commercial quantities of API and finished drug product for the Product.  If Genzyme chooses not to manufacture the API for Product itself, then prior to using any Third Party manufacturer to supply commercial quantities of the API for Product, Genzyme must obtain Isis’ prior written consent to the identity of the Third Party manufacturer and the material terms and conditions on which such Third Party manufacturer will supply commercial quantities of the API for Product, which consent will not be unreasonably withheld, conditioned or delayed; provided , however , that Isis will not withhold its consent to a Third Party manufacturer if its basis for doing so is an objection to the country in which such manufacturing will take place and the country in question is a member country of the European Union or Switzerland.  In any event, Isis will cooperate with and provide commercially reasonable assistance to Genzyme and any approved Third Party manufacturer, including by transferring relevant Know-How in accordance with Section 5.4 (Know-How Transfer).

 

6.3.2.        Assignment of Agreements With Third Parties .  At Genzyme’s written request in connection with the transfer of responsibility for manufacture, Isis will use commercially reasonable efforts to promptly assign and transfer to Genzyme any existing supply or other agreements solely related to the manufacture of the Products.  Concurrent with the Execution of this Agreement, Isis will assign and transfer to Genzyme its agreement with [**] related to the preparation and packaging of drug product.  If the terms of any of the agreements referred to in the previous two sentences require the consent of the other party thereto to effect such assignment, then upon Genzyme’s request for an assignment, until Isis is able to obtain such consent and effect such assignment, Isis will exercise its rights under such agreements for the benefit of Genzyme and as reasonably requested by Genzyme.  In the event of any assignment to Genzyme under this Section 6.3.2 , Genzyme will assume full responsibility for satisfying all obligations of Isis under any assigned agreement to the extent arising after such assignment and assumption, and Isis will remain responsible for satisfying all obligations under any assigned agreement to the extent arising prior to such assignment and assumption.

 

6.4.           Isis Safety Database .  Isis maintains a database that includes information regarding the

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

31

 

tolerability of its drug compounds, individually and as a class, including information discovered during pre-clinical and clinical development (the “ Isis Database ”).  In an effort to maximize understanding of the safety profile and pharmacokinetics of Isis’ drug compounds, Genzyme will reasonably cooperate in providing information to Isis to populate the Isis Database by providing Isis with copies of toxicology, pharmacokinetic and serious adverse event final reports related to the Product, as well as any supporting data reasonably requested by Isis.  Genzyme’s obligation under this Section 6.4 will be subject to Applicable Law, any necessary informed consents and obligations to Third Parties.

 

6.5.           Safety Reporting .  Each Party will designate a primary contact person for the receipt of all reports called for in this Section 6.5 (the “ Primary Safety Contact Person ”) and promptly notify the other Party of such designation or any change thereto.  Each Party will notify the other Party’s Primary Safety Contact Person of (a) all available information concerning any serious adverse event (SAE) occurring in patients treated with the Product, for any indication, (b) any information, regardless of source, which is relevant to known or potential human safety risks associated with the Product, (c) signals of human risk including information from in vitro or animal studies which may suggest a significant hazard to humans, including any findings from tests in laboratory animals that suggest a significant risk to human beings, including reports of mutagenicity, teratogenicity or carcinogenicity, and (d) information related to other products that are chemically similar to the Product or that have a pharmacologically similar mechanism of action (e.g., antisense oligonucleotides) that suggests a significant hazard for humans related to the Product.  For purposes of this Section 6.5, a “serious adverse event (SAE)” is one which has an outcome which (i) is fatal or life threatening, (ii) requires or prolongs in-patient hospitalization, (iii) is a persistent or significant disability/incapacity, (iv) is a congenital anomaly/birth defect, or (v) is an important medical event, e.g., required medical or surgical intervention to prevent one of the other serious outcomes listed above.  Each Party will promptly (but no later than twenty-four (24) hours after it becomes aware of the serious adverse event (SAE) or such other information and as necessary for compliance with regulatory requirements) provide the other Party with all such safety information through the receiving Party’s Primary Safety Contact Person.  Isis will conduct all safety reporting for the Product in accordance with Genzyme standard operating procedures communicated to Isis in writing.  Upon transfer of the IND(s) to Genzyme and assumption by Genzyme of regulatory responsibilities under the IND(s), Genzyme will assume responsibility for the global safety database related to the Product.  Genzyme will be solely responsible for reporting to Regulatory Authorities in accordance with the Applicable Law for expeditable adverse events and for periodic safety reporting relating to the safety of the Product and will furnish copies of such reports to Isis.

 

6.6.           Commercial Forecasts & Plans .

 

6.6.1.        In addition to the reports required under Section 8.6 (Periodic Reporting and Reconciliation), beginning on the last year in which the JDC is in place and each calendar year thereafter (1) not later than October 1st of the applicable year, Isis

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

32

 

will provide Genzyme with a non-binding, good-faith forecast of Isis’ aggregate Program Costs for the following calendar year if any; and (2)  not later than November 15th of the applicable year (i) Genzyme will provide Isis with a non-binding, good-faith forecast of Genzyme’s aggregate Program Costs for the following calendar year, (ii) Isis will provide Genzyme with an updated non-binding, good-faith forecast of Isis’ aggregate Program Costs for the following calendar year, if any, and (iii) based upon the Parties’ non-binding forecasts of aggregate Program Costs, Genzyme will provide Isis with a non-binding, good-faith forecast of the Net Sales, Net Revenue and Net Profit for such year.  Each Party’s forecasts will include sufficient supporting detail to allow the other Party an opportunity to review and understand the forecasts.

 

6.6.2.        Prior to the initial commercial launch of the Product and on an annual basis thereafter, Genzyme will provide Isis with a reasonably detailed written summary of its marketing plan and budget and will consider in good faith all comments and suggestions provided by Isis on such plans and budgets.

 

Article 7.
RESEARCH RELATED TO THE PRODUCT

 

7.1.           Research Programs .  The Parties will agree to conduct research programs related to the Product that may include, but are not limited to, the following research topics:  (a) [**], (b) [**], (c) [**] and (d) [**]  (collectively, the “ Research Programs ”).  The nature and scope of the Research Programs will be determined within sixty (60) days of the Execution Date by a subcommittee to be appointed the JDC.

 

7.2.           Research Funding .  Isis will fund all external research expenses incurred in calendar years [**] in connection with the Research Programs.  Genzyme will fund all external research expenses incurred in connection with the Research Programs in calendar year [**].  Thereafter, the Parties will agree upon allocation of any external research expenses incurred in connection with the Research Programs.  Each Party will be responsible for their own internal research expenses incurred in connection with the Research Programs, and, unless otherwise agreed in writing by the Parties, internal and external research expenses incurred in connection with the Research Program will not be included as Program Costs.  For the purposes of this Section 7.2 , “ internal research expenses ” means costs and expenses incurred in connection with the Research Programs attributable to the internal costs of base salary plus a factor for reasonable and customary employee benefits and payroll taxes for those employees directly responsible for performing the research activity plus G&A Costs and other overhead expenses reasonably required to support the activities of the Parties under the Research Programs as allocated consistent with the methodologies agreed to under Section 8.7.2.  Meanwhile, “ external research expenses ” means expenses incurred in connection with the Research Programs other than internal research expenses.

 

7.3.           Research Efforts .  If at any time during the Term no Product has received Approval in any Major Market Country and no Product is being developed pursuant to a Development

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

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MAA Approval for the use of Mipomersen to treat patients who have polygenic hypercholesterolemia or any patient population of a size comparable to the patient population deemed to be at “high risk” as determined in accordance with the National Cholesterol Education Program’s clinical practice guidelines on cholesterol management with LDL-C greater than or equal to [**] mg/dL		$[**]
Approval of a Japanese New Drug Application for the use of Mipomersen to treat patients who have polygenic hypercholesterolemia or any patient population of a size comparable to the patient population deemed to be at “high risk” as determined in accordance with the National Cholesterol Education Program’s clinical practice guidelines on cholesterol management with LDL-C greater than or equal to [**] mg/dL		$[**]

 

The Parties acknowledge that the current Development Plan contemplates [one or more] Pivotal Trials, that, if successful, are currently intended to achieve the milestones set forth in Section 8.2.1(b).  To minimize the likelihood of any disagreement between the Parties around whether an Approval based upon a successful Pivotal Trial is sufficient to satisfy any of the milestones set forth in Section 8.2.1(b), the Parties agree to adopt the following process:

 

(1)    Prior to final approval of any Pivotal Trial protocol or any material change to the protocol of an ongoing Pivotal Trial by the JDC, Genzyme will notify the JDC in writing if Genzyme believes, were a Regulatory Authority to grant an Approval for the treatment of a patient population that is co-extensive with the patient population(s) included for enrollment in such Pivotal Trial, that such approval will not qualify to meet the milestones set forth in Section 8.2.1(b).

 

(2)    If Genzyme fails to provide the JDC with the notice contemplated by subsection (1) above, an Approval in the relevant jurisdiction for the treatment of a patient population that is co-extensive with the patient population(s) included for enrollment in the Pivotal Trial will be deemed to satisfy the applicable milestone in Section 8.2.1(b).

 

(3)    In addition, in the event a Regulatory Authority proposes a limitation that would, in Genzyme’s view, preclude the achievement of one of the milestones in Section 8.2.1(b), Genzyme will notify the JDC and in good faith attempt to avoid such restriction, to the extent practical under the circumstances. In such event, Genzyme will also reasonably consult with Isis regarding the best strategy to attempt to avoid such restrictions.

 

(c)           Follow-On Compound .  Within thirty (30) days after the achievement of the following indicated events by Genzyme, its Affiliate or its Sublicensee, Genzyme will pay Isis the following development milestone payments:

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

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Milestone Event		Milestone Payment
NDA Approval for the Follow-On Compound		$[**]
MAA Approval for the Follow-On Compound		$[**]
Approval of a Japanese New Drug Application for the Follow-On Compound		$[**]

 

8.2.2.        Commercial Milestones .  Within thirty (30) days after the achievement of the following indicated events by Genzyme, its Affiliate or its Sublicensee, Genzyme will pay Isis the following commercial milestone payments:

 

Milestone Event		Milestone Payment
Annual Net Revenues for all Products equals or exceeds three billion dollars ($3,000,000,000) in each of any two consecutive calendar years		$	250,000,000
Annual Net Revenues for all Products equals or exceeds four billion dollars ($4,000,000,000) in each of any two consecutive calendar years		$	250,000,000
Annual Net Revenues for all Products equals or exceeds five billion dollars ($5,000,000,000) in each of any two consecutive calendar years		$	250,000,000

 

In the event that more than one of the above commercial milestones is achieved simultaneously, Genzyme will make only one milestone payment, which will be for the milestone requiring the highest Annual Net Revenues.  The Annual Net Revenues in any calendar year may be counted toward only one consecutive two calendar year period, except that if Annual Net Revenues for all Products equals or exceeds five billion dollars ($5,000,000,000) in any calendar year, that year may be counted as both the last year of one two consecutive year period and the first year of a second two consecutive year period.  For the purpose of illustration, it will require at least five (5) years before Genzyme has been required to pay Isis the total of the seven hundred and fifty million dollars ($750,000,000) in milestone payments pursuant to this Section 8.2.2 (Commercial Milestone) unless Annual Net Revenue exceeds five billion dollars ($5,000,000,000) for three (3) or more consecutive years, in which case it would require four (4) years (assuming there was at least three billion dollars ($3,000,000,000) in sales in the first or fourth year during the four year period).

 

8.2.3.        Hybrid Milestones .  Within thirty (30) days after the achievement of the following indicated events by Genzyme, its Affiliate or its Sublicensee, Genzyme will pay Isis the following milestone payments:

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

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Milestone Event*		Milestone Payment
The earlier to occur of (A) NDA Approval for the use of Mipomersen to treat patients who have heterozygous FH or an otherwise comparably sized eligible patient population; or (B) annual Net Revenues for all Products equals or exceeds two hundred and fifty million dollars ($250,000,000) in any calendar year		$[**]
The earlier to occur of (A) NDA Approval for the use of Mipomersen to treat patients who have heterozygous FH or an otherwise comparably sized eligible patient population; or (B) annual Net Revenues for all Products equals or exceeds five hundred million dollars ($500,000,000) in any calendar year		$[**]

 

* For purposes of clarification, if the first hybrid milestone above had not already been payable, and annual Net Revenues for all Products equals or exceeds five hundred million dollars ($500,000,000) in a calendar year, then both hybrid milestones would be triggered.

 

8.2.4.        Milestones Payable Only Once .  Once Genzyme has made any particular milestone payment under this Section 8.2 , Genzyme will not be obligated to make any payment under this Section 8.2 with respect to the re-occurrence of same milestone, whether or not such re-occurrence is with respect to a different or the same Product or indication.

 

8.2.5.        Indications of Mipomersen Approval .  If Mipomersen receives an Approval for a label indication that is sufficiently broad to include the entire patient population contemplated by one or more development milestone(s) set forth in Sections 8.2.1(a) (Mipomersen in FH) or 8.2.1(b) (Mipomersen in Other Indications) or 8.2.3 (Hybrid Milestones), then Genzyme will pay Isis the milestone payment(s) for such development milestone(s), even though the indication for which Mipomersen is approved is not identical to the indication(s) of such development milestone(s).

 

8.3.           Financial Provisions Relating to Development Activities .

 

8.3.1.        Isis Funding of External Development Expenses .

 

(a)           Subject to Section 5.2.1 (Clinical Trials), Isis will fund the clinical studies described as “Isis Funded” in the Development Budget.

 

(b)           In addition to its funding obligations under Section 8.3.1(a) above, Isis will fund the first one hundred and twenty-five million dollars ($125,000,000) of the External Development Expenses for the Product that will be incurred by the Parties in accordance with the Development Plan starting as of January 1, 2008, including expenses for (a) the clinical studies described as “Non Isis Funded” in the Development Budget, (b) future clinical studies undertaken in accordance with the Development Plan, (c) toxicology studies undertaken in accordance with the Development Plan (except for those described as “Isis Funded” in the Development Budget), (d) pharmacokinetic studies undertaken in accordance with

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

37

 

the Development Plan, (e) the manufacturing of API, as well as the packaging and distribution of the final Product and (f) the scientific advisory board and drug safety monitoring board.  Any External Development Expenses that are recouped by Isis pursuant to Section 8.4 (Sharing of Net Revenue) will not be counted toward the fulfillment of this $125 million funding commitment.  For purposes of clarity, in the event that Net Profit is achieved prior to the exhaustion of the Isis $125 million funding commitment set forth in this section 8.3.1, then for so long as Net Profit is maintained, Isis will not be obligated to fund External Development Expenses and the provisions of Section 8.5 (Sharing of Net Profits) will apply.

 

8.3.2.        Shared Funding of External Development Expenses .  After one hundred and twenty-five million dollars ($125,000,000) of External Development Expenses for the Product have been funded as described in Section 8.3.1(b)  above, and after the sharing of Net Revenue in accordance with Section 8.4 (Sharing of Net Revenue), the Parties will share equally (on a 50/50 basis) all remaining External Development Expenses in any calendar year in which Net Profit is not achieved.  In any calendar year in which Net Profit is achieved, the External Development Expenses will be included as Program Costs.

 

8.3.3.        Internal Development Expenses .  Each Party will be responsible for their own Internal Development Expenses with respect to development of the Product in any calendar year in which Net Profit is not achieved.  In any calendar year in which Net Profit is achieved, the Parties’ Internal Development Expenses will be included as Program Costs.

 

8.4.           Sharing of Net Revenue .  In any calendar year in which there is not a Net Profit, the Parties will share Net Revenue as follows:

 

8.4.1.        Costs of Goods .   Net Revenue first will be allocated between the Parties to reimburse them for the Fully Absorbed Cost of Goods incurred by the Parties in such calendar year.

 

8.4.2.        External Sales & Marketing Expenses .  Once the Parties have each been fully reimbursed for the Fully Absorbed Cost of Goods, Net Revenue next will be allocated between the Parties to reimburse them for External Sales & Marketing Expenses incurred by the Parties in such calendar year.

 

8.4.3.        Internal Sales & Marketing Expenses .  Once the Parties have each been fully reimbursed for the Fully Absorbed Cost of Goods and External Sales & Marketing Expenses, Net Revenue next will be allocated between the Parties to compensate them for Internal Sales & Marketing Expenses incurred by the Parties in such calendar year.

 

8.4.4.        External Development Expenses . Once the Parties have each been fully reimbursed for the Fully Absorbed Cost of Goods, External Sales & Marketing Expenses and Internal Sales & Marketing Expenses, Net Revenue next will be

 

[**] = Portions of this exhibit have been omitted pursuant to a confidential treatment request.  An unredacted version of this exhibit has been filed separately with the Commission.

 

38

 

allocated between the Parties to compensate them for External Development Expenses incurred by the Parties in such calendar year (other than Fully Absorbed Cost of Goods already reimbursed under Section 8.4.1 above).

 

8.4.5.        Internal Development Expenses .  Once the Parties have each been fully reimbursed for the Fully Absorbed Cost of Goods, External Sales & Marketing Expenses, Internal Sales & Marketing Expenses and External Development Expenses, Net Revenue next will be allocated between the parties to compensate them for Internal Development Expenses incurred by the Parties in such calendar year.

 

8.4.6.        Revenue Sharing Proportional to Expenses . For each category of cost or expense set forth in this Section 8.3, if Net Revenue is sufficient to only partially compensate the Parties for particular category of cost or expense, then the Parties will allocate the Net Revenue that may be allocated for such category between the Parties on a pro rata basis in proportion to the relative amounts of such category of cost or expense incurred by each Party.

 

8.5.           Sharing of Net Profits .

 

8.5.1.        Responsibility for Net Loss .  Except as set forth in Section 8.4 (Sharing of Net Revenue), in any calendar year in which there is a Net Loss, Genzyme’s share of Net Revenue will be one hundred percent (100%) and, subject to Section 8.3 (Financial Provisions Related to Development Activities), Genzyme will be solely responsible for all Program Costs.  Isis will not be required to compensate Genzyme for any Net Loss.

 

8.5.2.        Sharing of Net Profits .  In any calendar year in which there is a Net Profit, the Parties will share such Net Profit in accordance with the following allocation based on Net Revenue for such calendar year:

 

Annual Net Revenue		Genzyme Percentage		Isis Percentage
$1 to < $200 M		70%		30%
[**]		[**]		[**]
[**]		[**]		[**]
[**]		[**]		[**]
[**]		[**]		[**]
[**]		[**]		[**]
[**]		[**]		[**]
[**]		[**]		[**]
[**]		[**]