LICENSE, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

 

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                                                                  EXECUTION COPY

 

                                                                    Exhibit 10.2

 

          Confidential Materials omitted and filed separately with the

        Securities and Exchange Commission. Asterisks denote omissions.

 

                   LICENSE, DEVELOPMENT AND COMMERCIALIZATION

 

                                    AGREEMENT

 

                                 by and between

 

                                 HYBRIDON, INC.

 

                                       and

 

                   NOVARTIS INTERNATIONAL PHARMACEUTICAL LTD.

 

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                                                                  EXECUTION COPY

 

              LICENSE, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

 

      This License, Development and Commercialization Agreement (this "License

Agreement") is made this 31st day of May, 2005 by and between Hybridon, Inc.

("Hybridon"), a Delaware corporation with principal offices at 345 Vassar

Street, Cambridge, Massachusetts 02139 USA, and Novartis International

Pharmaceutical Ltd. ("Novartis"), a Bermuda corporation with principal offices

at Hurst Holme, 12 Trott Road, Hamilton, HM LX, Bermuda. Hybridon and Novartis

are sometimes referred to herein individually as a "Party" and together as the

"Parties." This License Agreement shall take effect on the Effective Date

pursuant to Section 2.1 hereof.

 

      Capitalized terms used but not defined in this License Agreement shall

have the meanings provided in the Research Collaboration and Option Agreement by

and between Hybridon and Novartis of even date herewith (the "Collaboration

Agreement").

 

                                  INTRODUCTION

 

      WHEREAS, pursuant to the Collaboration Agreement, the Parties are entering

into a collaboration with the objective of identifying and generating IMO Leads;

and

 

      WHEREAS, Novartis may exercise its Commercialization Option (as defined

herein) to license exclusively the Licensed IMOs (as defined herein) for

worldwide development and commercialization of Products (as defined herein) in

the Commercial Field of Use (as defined herein);

 

      NOW THEREFORE, in consideration of the foregoing premises, the Parties

agree as follows:

 

                                     ARTICLE I

 

                                   DEFINITIONS

 

         1.1. "AAA" shall have the meaning set forth in Section 14.3.1 hereof.

 

         1.2. "ACCOUNTING STANDARDS" with respect to Hybridon shall mean that

Hybridon shall maintain records and books of accounts in accordance with United

States Generally

 

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Accepted Accounting Principles and with respect to Novartis shall mean that

Novartis shall maintain records and books of accounts in accordance with IFRS

(International Financial Reporting Standards).

 

         1.3. "ACQUISITION INTELLECTUAL PROPERTY" shall mean (a) Patents or

Know-How held or otherwise controlled by an Acquisition Affiliate immediately

prior to the Acquisition Event between Hybridon and such Acquisition Affiliate

(as defined in Section 1.4 below), other than Patents that do not specifically

relate to drug delivery or formulation technology held or otherwise controlled

by any such Acquisition Affiliate that would, but for a license granted

hereunder, be infringed by the development or commercialization of IMO

Candidates or IMO Leads and (b) Patents or Know-How developed or acquired and

controlled by an Acquisition Affiliate after the Acquisition Event between

Hybridon and such Acquisition Affiliate that specifically relate to drug

delivery or formulation technology, which Patents or Know-How are not developed

or acquired through the use of, or as an improvement to, any Hybridon

Intellectual Property or Hybridon Background Intellectual Property Controlled

(other than through an Acquisition Affiliate) by Hybridon.

 

         1.4. "ACQUISITION EVENT" shall mean any merger or other acquisition

between Hybridon and a Third Party occurring after the Effective Date and

pursuant to which such Third Party becomes an Affiliate of Hybridon, so long as

following such merger or acquisition Hybridon does not control and is not merged

with or into such Affiliate (an "Acquisition Affiliate").

 

         1.5. "ADDITIONAL INDICATION" shall have the meaning set forth in

Section 4.1 hereof.

 

          1.6. "AFFILIATE" means any Person who directly or indirectly controls

or is controlled by or is under common control with a Party. For purposes of

this definition, "control" or "controlled" means ownership directly or through

one or more Affiliates, of fifty percent (50%) or more of the shares of stock

entitled to vote for the election of directors, in the case of a corporation, or

fifty percent (50%) or more of the equity interest in the case of any other type

of legal entity, status as a general partner in any partnership, or any other

arrangement whereby a Party controls or has the right to control the Board of

Directors or equivalent governing body of

 

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a corporation or other entity, or the ability to cause the direction of the

management or policies of a corporation or other entity. The Parties acknowledge

that in the case of certain entities organized under the laws of certain

countries outside of the United States, the maximum percentage ownership

permitted by law for a foreign investor may be less than fifty percent (50%),

and that in such case such lower percentage shall be substituted in the

preceding sentence; provided, that such foreign investor has the power to direct

the management and policies of such entity.

 

         1.7. "ARBITRATORS" shall have the meaning set forth in Section 14.3.1

hereof.

 

         1.8. "BANKRUPT PARTY" shall have the meaning set forth in Section 10.4

hereof.

 

         1.9. "CHEMICALLY MODIFY" OR "CHEMICAL MODIFICATION" shall mean the

modification of an IMO that [**], but specifically excluding [**].

 

         1.10. "COLLABORATION AGREEMENT" shall have the meaning set forth in the

preamble.

 

         1.11. "COMMERCIAL FIELD OF USE" shall mean prophylaxis, palliation,

diagnosis and treatment of the Initial Indications and Additional Indications

added pursuant to Article IV hereof by Products via any route of administration.

 

         1.12. "COMMERCIALIZATION OPTION" shall have the meaning set forth in

Section 4.2.1 of the Collaboration Agreement.

 

         1.13. "CONFIDENTIAL INFORMATION" shall have the meaning set forth in

Section 7.1 hereof.

 

         1.14. "CONTROLLED" shall mean, with respect to intellectual property,

the legal authority of a Party (either directly or through an Affiliate) to

grant the licenses or sublicenses of intellectual property rights as and to the

extent provided herein, or to otherwise disclose proprietary or trade secret

information as and to the extent provided herein, without breaching the terms of

any agreement with a Third Party, knowingly infringing upon the intellectual

property rights of a Third Party, or misappropriating the proprietary or trade

secret information of a Third Party.

 

         1.15. "COST OF GOODS SOLD" shall mean the total Product cost (standard

cost of

 

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goods), variances, inventory re- / devaluation costs, non-Product-related

production costs, write-offs and Third Party royalties other than Section 5.6.2

royalties. The total Product cost is the total of material costs and processing

costs pertaining to the Products. Material costs relate to costs of devices used

to administer the Product, raw materials and intermediates needed for the

manufacturing process and costs of packaging material for these raw materials

and intermediates. Processing costs shall mean costs for direct labor, costs of

equipment, costs of production area overhead, costs of quality assurance, costs

of material handling overhead, costs of general factory overhead, costs for

utilities and costs for ecology. These costs are to be established on a regular,

standard basis. In this standard setting process all relevant costs as mentioned

above are determined. Costs of equipment shall be based on a planned utilization

of equipment. Idle capacity costs are not to be included in processing costs.

Costs of equipment are costs of depreciation or rent of the building

accommodating that equipment plus repair and maintenance for the building, and

costs for equipment depreciation, and other equipment costs such as costs for

repair and maintenance. The building costs shall be allocated to the equipment

using an appropriate key such as space occupied by the equipment. Production

area overhead costs are costs for personnel which typically embraces a

controlling and supervisory function, costs of indirect space such as costs for

a break room, costs of in-process control, costs of microbiological monitoring

of production environment, costs of training of process personnel, costs for

utilities and ecology, costs for auxiliary and consumables, costs of shop floor

control systems, costs for cleaning of production buildings, and costs of

working clothes. Quality assurance costs include costs of identifying and

analyzing the raw materials and intermediates needed for the manufacturing

process, costs of finished Product control, costs of production support, costs

of cleaning validation, costs of electronic data processing for the quality

assurance ("QA") / quality control ("QC") department, costs of microbiology

department, costs of laboratory infrastructure, costs of quality systems support

and compliance, costs of overheads within the QA/QC department. Materials

handling overhead costs are costs for warehousing and internal transportation of

raw material and semi-finished goods, costs of quality control of raw and

packaging material, costs of the purchasing department. General factory overhead

("GFO") costs shall mean costs of plant and production management, costs for

ensuring sufficient levels of safety, health and environment such as fire

brigade, medical services, documentation for transportation of hazardous goods.

Other GFO costs include costs for the scheduling of

 

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production, costs of the maintenance of the bills of materials, costs for the

technical support, expenses of the plant administration and general services,

costs of information technology ("IT") for non-dedicated IT systems such as SAP.

Utility costs are costs associated with the consumption of supportive media such

as electricity, water, nitrogen, steam, and air. Ecology costs are costs

associated with the deposition of solid or liquid waste, purification of

effluent water, and purification of waste air. Variance costs attribute to the

following circumstance: Standard Cost of Goods include cost elements which are

set at so-called standard costs. They serve as a norm on how much typically a

Product costs. Deviations from such standard costs are captured in variances.

Inventory re- / devaluation shall mean the gain or loss as a result of the

inventory value adjustment due to changes in the standard costs. Non-

Product-related production costs shall contain Technical Operations Corporate

Headquarter overhead costs, non-Product-allocated QA costs, validation costs,

directly expensed IT project costs, and other costs that cannot be attributed to

specific Products. Write-offs are captured for the destruction of Products that

cannot be used anymore due to expiration of shelf-life, spoilage in the

production process, and transportation mishaps. Third Party royalties are

manufacturing- and/or supply royalties paid to Third Parties other than Section

5.6.2 royalties. Costs of Goods Sold shall be determined in accordance with

Novartis' usual and customary accounting methods, which are in accordance with

the Accounting Standards.

 

         1.16. "EFFECTIVE DATE" shall have the meaning set forth in Section 2.1

hereof.

 

         1.17. "EMEA" shall mean the European Medical Evaluation Agency, and any

successor agency serving the same function.

 

         1.18. "EPIGENESIS" shall mean EpiGenesis Pharmaceuticals, Inc.

 

         1.19. "EPIGENESIS AGREEMENT" shall mean that certain Development and

License Agreement, dated as of August 9, 2000, between Hybridon and EpiGenesis.

 

         1.20. "EUROPEAN MARKETING APPROVAL" shall mean Marketing Approval by

(i) the EMEA or (ii) the regulatory authorities in no fewer than three of the

Major Market Countries.

 

         1.21. "EVENT OF BANKRUPTCY" shall have the meaning set forth in Section

10.4 hereof.

 

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         1.22. "EXCLUDED ANTISENSE IP" shall mean oligonucleotides or

oligonucleotide analogs or mimics thereof that (a) are targeted to a specific

sequence of RNA and (b) the primary mechanism of action of which is to hybridize

to such sequence of RNA and through such hybridization to modulate the

production of the targeted gene product, provided, that such oligonucleotides or

oligonucleotide analogs or mimics thereof [**] proprietary to Hybridon, [**].

 

         1.23. "FDA" shall mean the United States Food and Drug Administration,

and any successor agency serving the same function.

 

          1.24. "FIRST COMMERCIAL SALE" shall mean the first shipment of a

Product to a Third Party (other than to licensees or sublicensees for resale

rather than their own use) by Novartis or its Affiliate or sublicensee in a

country following applicable Regulatory Approval of the Product in such country

or, if no Regulatory Approval is required in a country, the first sale of the

Product in an arm's-length for-profit transaction to a Third Party (other than

to licensees or sublicensees for resale rather than their own use) by Novartis

or its Affiliate or sublicensee in such country.

 

         1.25. "FPFV" shall mean the first visit of the first patient or first

healthy human volunteer participating in a clinical trial with respect to a

Licensed IMO.

 

         1.26. "HYBRIDON BACKGROUND INTELLECTUAL PROPERTY" shall mean all

Patents and Know-How Controlled by Hybridon as of the Effective Date or at any

time during the term of this License Agreement that are necessary or useful for

the Parties or their Affiliates, contractors, agents or sublicensees to exploit

the licenses contemplated or to carry out the activities contemplated hereunder

and that are not otherwise Hybridon Intellectual Property or Joint Intellectual

Property. Notwithstanding the foregoing, "Hybridon Background Intellectual

Property" shall exclude any Acquisition Intellectual Property.

 

         1.27. "HYBRIDON INTELLECTUAL PROPERTY" shall mean Hybridon Know-How and

Hybridon Patent(s), but explicitly excluding Joint Intellectual Property and any

Acquisition Intellectual Property.

 

         1.28. "HYBRIDON KNOW-HOW" shall have the meaning set forth in Section

1.27 of the Collaboration Agreement.

 

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         1.29. "HYBRIDON PATENTS" shall have the meaning set forth in Section

1.28 of the Collaboration Agreement. Upon Novartis' exercise of the

Commercialization Option, a list of Hybridon Patents shall be appended hereto as

Schedule 1.29, which will be updated periodically to reflect additions thereto

during the course of this License Agreement.

 

         1.30. "IMO" shall have the meaning set forth in Section 1.29 of the

Collaboration Agreement.

 

         1.31. "IMO CANDIDATE" shall have the meaning set forth in Section 1.30

of the Collaboration Agreement.

 

         1.32. "IMO LEAD" shall have the meaning set forth in Section 1.31 of

the Collaboration Agreement.

 

         1.33. "IMPROVEMENTS" shall have the meaning set forth in Section 1.32

of the Collaboration Agreement.

 

         1.34. "INDEMNIFYING PARTY" shall have the meaning set forth in Section

13.3 hereof.

 

         1.35. "INDEMNIFIED PERSON" shall have the meaning set forth in Section

13.3 hereof.

 

         1.36. "INITIAL INDICATIONS" shall mean all human allergic and/or

respiratory diseases, but specifically excluding oncology and infectious

diseases (other than cystic fibrosis, asthma and chronic obstructive pulmonary

disease pathologies, in each case resulting from infectious diseases) and

systemic autoimmune diseases.

 

         1.37. "JOINT INTELLECTUAL PROPERTY" shall mean Joint Know How and Joint

Patent(s).

 

         1.38. "JOINT KNOW-HOW" shall have the meaning set forth in Section 1.39

of the Collaboration Agreement.

 

         1.39. "JOINT PATENTS" shall have the meaning set forth in Section 1.40

of the Collaboration Agreement. Upon Novartis' exercise of the Commercialization

Option, a list of Joint Patents shall be appended hereto as Schedule 1.39, which

list will be updated periodically

 

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to reflect additions thereto during the course of this License Agreement.

 

         1.40. "LICENSED IMOS" shall mean the IMO Candidates and IMO Leads.

 

         1.41. "LOSS" shall have the meaning set forth in Section 13.1 hereof.

 

         1.42. "MAJOR MARKET COUNTRIES" shall mean the United Kingdom, France,

Germany, Italy and Spain.

 

         1.43. "MARKETING APPROVAL" shall mean the final Regulatory Approval

that ultimately enables Novartis, its Affiliates or sublicensees, directly or

through intermediaries, to sell a Product commercially to the ultimate consumer

in a particular country.

 

         1.44. "MHLW" shall mean the Japanese Ministry of Health, Labor and

Welfare, and any successor agency serving the same function.

 

         1.45. "NET SALES" shall mean, with respect to any Product, the gross

amount invoiced by or on behalf of Novartis or its Affiliates or sublicensees

for that Product sold to Third Parties (other than to licensees or sublicensees

for resale rather than their own use) in bona fide, arm's-length transactions,

less the following deductions, determined in accordance with Novartis' standard

accounting methods as generally and consistently applied by Novartis and its

Affiliates in determining net product sales, to the extent included in the gross

invoiced sales price of any Product or otherwise directly paid or incurred by

Novartis, its Affiliates, or sublicensees with respect to the sale of such

Product:

 

                  (a) Normal and customary trade and quantity discounts actually

         allowed and properly taken directly with respect to sales of the

         Product;

 

                   (b) Amounts repaid or credited by reason of defects, rejection

         recalls, returns, rebates and allowances of goods, or because of

         retroactive price reductions specifically identifiable to the Product;

 

                  (c) Chargebacks and other amounts paid on the sale or

         dispensing of such Product;

 

                  (d) Amounts payable resulting from governmental (or agency

         thereof) mandated rebate programs;

 

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                  (e) Tariffs, duties, excise, sales, value-added, and other

         taxes (other than taxes based on income);

 

                  (f) Retroactive price reductions that are actually allowed or

         granted;

 

                  (g) Cash discounts for timely payment;

 

                  (h) Delayed ship order credits;

 

                  (i) Discounts pursuant to indigent patient programs and

         patient discount programs, including, without limitation, "Together Rx"

         and coupon discounts;

 

                  (j) All freight, postage and insurance included in the invoice

         price;

 

                  (k) Uncollectible amounts on previously sold Products that are

         written off for financial reporting purposes (provided that if any such

         amounts are subsequently collected, such amounts shall be included in

         Net Sales upon such collection);

 

                  (l) [**] percent ([**]%) for distribution and warehousing

         expenses; and

 

                  (m) Any other specifically identifiable amounts included in

         the gross invoice of the Product that should be credited for reasons

         substantially equivalent to those listed above;

 

      all as determined in accordance with Novartis' usual and customary

      accounting methods, which are in accordance with the Accounting Standards.

      Sales from Novartis to its Affiliates and sublicensees shall be

      disregarded for the purpose of calculating Net Sales. Any of the items set

      forth above that would otherwise be deducted from the invoice price in the

      calculation of Net Sales but which are separately charged to Third Parties

      (other than licensees or sublicensees) shall not be deducted from the

      invoice price in the calculation of Net Sales.

 

      Furthermore:

 

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                   (i) In the case of any sale or other disposal of a Product

         between or among Novartis and its Affiliates, licensees and

         sublicensees for resale, Net Sales shall be calculated as above only on

         the value charged or invoiced on the first arm's-length sale thereafter

         to a Third Party (other than licensees or sublicensees);

 

                  (ii) In the case of any sale which is not invoiced or is

         delivered before invoice, Net Sales shall be calculated at the time of

         shipment or when the Product is paid for, if paid for before shipment

         or invoice;

 

                  (iii) In the case of any sale or other disposal for value,

         such as barter or countertrade, of any Product, or part thereof, other

         than in an arm's-length transaction exclusively for money, Net Sales

         shall be calculated as above on the value of the non-cash consideration

         received or the fair market price (if higher) of the Product in the

          country of sale or disposal; and

 

                  (iv) In the event that the Product is sold in a finished

         dosage form containing the Licensed IMO in combination with one or more

         other active ingredients (a "Combination Product"), the Net Sales of

         the Product, for the purpose of determining royalty payments, shall be

         determined by multiplying the Net Sales (as defined above in this

         Section) of the Combination Product by the fraction A/(A+B), where A is

          the weighted (by sales volume) average sales price in a particular

         country of the Product when sold separately in finished form and B is

         the weighted average sales price in that country of the other

         product(s) sold separately in finished form. In the event that such

         average sales price cannot be determined for both the Product and the

         other product(s) in the combination, Net Sales for purposes of

         determining royalty payments shall be agreed by the Parties based on

         the relative value contributed by each component, and such agreement

         shall not be unreasonably withheld.

 

         1.46. "NON-SECTION 5.2 PRODUCTS" shall have the meaning set forth in

Section 5.3.2 hereof.

 

         1.47. "NON-VALID CLAIM COUNTRY" shall mean a country in which no Valid

Claim with respect to the applicable Hybridon Patent, Patent that is part of the

Hybridon Background

 

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Intellectual Property, or Joint Patent in which Hybridon retains an interest has

existed during the term of this License Agreement.

 

         1.48. "PATENTS" shall mean all existing patents and patent applications

and all patent applications hereafter filed, including any continuation,

continuation-in-part, divisional, provisional or any substitute applications,

any patent issued with respect to any such patent applications, any reissue,

reexamination, renewal or extension (including any supplementary protection

certificate) of any such patent, and any confirmation patent or registration

patent or patent of addition based on any such patent, and all foreign

counterparts of any of the foregoing.

 

         1.49. "PERSON" shall mean, any individual, corporation, partnership,

association, joint-stock company, trust, unincorporated organization or

government or political subdivision thereof.

 

         1.50. "PHASE IIB CLINICAL TRIAL" shall mean a human clinical trial, the

principal purpose of which is to allow selection of the particular doses to be

applied in a Phase III Clinical Trial.

 

         1.51. "PHASE III CLINICAL TRIAL" shall mean a human clinical trial, the

principal purpose of which is to establish safety and efficacy of one or more

particular doses in patients being studied, and which will (or are intended to)

satisfy the requirements of a pivotal trial for purposes of preparing and

submitting a filing for Regulatory Approval in a particular country.

 

         1.52. "PRODUCT" shall mean a pharmaceutical product including,

conjugated to, or comprised of, a Licensed IMO with or without other active

ingredients in finished dosage form, ready for administration to the ultimate

consumer, and any Improvements thereto.

 

         1.53. "PROVIDING PARTY" shall have the meaning set forth in Section 7.1

hereof.

 

         1.54. "RECEIVING PARTY" shall have the meaning set forth in Section

7.1.1 hereof.

 

         1.55. "REGULATORY APPROVAL" shall mean all authorizations by the

appropriate governmental entity or entities necessary for commercial sale of a

Product in a particular country including, without limitation and where legally

necessary prior to commercial sale, approval of labeling, price, reimbursement

and manufacturing.

 

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         1.56. "RESEARCH FIELD OF USE" shall have the meaning set forth in

Section 1.60 of the Collaboration Agreement.

 

          1.57. "SALES REPORT" shall mean a written report or reports showing

each of: (a) the Net Sales of each Product in each country in the world during

the reporting period by Novartis and each Affiliate and sublicensee; (b) the

royalties, payable in United States Dollars, which shall have accrued under

Section 5.5 hereof in respect of such Net Sales and the basis of calculating

those royalties; (c) withholding taxes, if any, required by law to be deducted

in respect of any such Net Sales; and (d) dispositions of the Products other

than pursuant to sale for cash.

 

         1.58. "SECTION 5.2 PRODUCTS" shall have the meaning set forth in

Section 5.2 hereof.

 

         1.59. "SECTION 10.3 DISPUTE" shall have the meaning set forth in

Section 14.3 hereof.

 

          1.60. "THIRD PARTY" shall mean any Person that is not a Party or an

Affiliate of either Party.

 

         1.61. "VALID CLAIM" shall mean a claim of any issued, unexpired

Hybridon Patent or Joint Patent in which Hybridon retains an interest that shall

not have been withdrawn, canceled or disclaimed, nor held invalid or

unenforceable by a governmental authority or a court of competent jurisdiction

in an unappealed or unappealable decision, and which has not been admitted to be

invalid or unenforceable through reissue, disclaimer or otherwise.

 

         1.62. "VALID CLAIM COUNTRY" shall mean, with respect to a Product, a

country in which a Valid Claim with respect to the applicable Hybridon Patent or

Joint Patent in which Hybridon retains an interest has existed during the term

of this License Agreement.

 

                                   ARTICLE II

 

                       EFFECTIVENESS; RIGHTS AND LICENSES

 

         2.1. EFFECTIVENESS. Subject to Section 12.3 hereof, this License

Agreement (other than this Section 2.1, which shall become effective upon

execution by the Parties of this

 

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License Agreement) shall become effective on the date on which Hybridon is

deemed to have received the Commercialization Exercise Notice from Novartis

pursuant to Section 4.2.2 of the Collaboration Agreement or in connection with

termination of the Collaboration Agreement as set forth in Section 9.3.3 thereof

(the "Effective Date").

 

         2.2. NOVARTIS RIGHTS; LIMITATIONS.

 

            2.2.1. Subject to the other provisions of this License Agreement,

Hybridon grants to Novartis and its Affiliates a worldwide, exclusive license

(with the right to sublicense) for the term, subject only to Hybridon's retained

right to perform its obligations under the Collaboration Agreement so long as

such Collaboration Agreement is still in effect and subject to the rights

granted by Hybridon to EpiGenesis under the EpiGenesis Agreement, under the

Hybridon Intellectual Property and Hybridon's interest in the Joint Intellectual

Property, to: (i) make, have made, use, have used, research, have researched,

develop, have developed, commercialize, have commercialized, manufacture, have

manufactured, promote, have promoted, sell, have sold, distribute, have

distributed, market, have marketed, import, have imported, export and have

exported, the Licensed IMOs and Products in the Commercial Field of Use and (ii)

research, have researched, develop and have developed Licensed IMOs in the

Research Field of Use.

 

            2.2.2. Subject to the other provisions of this License Agreement,

Hybridon grants to Novartis and its Affiliates a worldwide, non-exclusive

license (with the right to sublicense) for the term under the Hybridon

Background Intellectual Property to (i) to make, have made, use, have used,

research, have researched, develop, have developed, commercialize, have

commercialized, manufacture, have manufactured, promote, have promoted, sell,

have sold, distribute, have distributed, market, have marketed, import, have

imported, export and have exported, the Licensed IMOs and Products in the

Commercial Field of Use and (ii) research, have researched, develop and have

developed Licensed IMOs in the Research Field of Use.

 

            2.2.3. Notwithstanding the foregoing and subject to Section 4.2

hereof, nothing herein shall give Novartis or its Affiliates the right to, and

Novartis shall not (and shall not permit its Affiliates to): (i) Chemically

Modify any Licensed IMO or use the Hybridon Intellectual Property to create any

immunomodulatory oligonucleotide that is the same or

 

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substantially structurally equivalent to any Licensed IMO or that is covered by

any claims in the Hybridon Patents; or (ii) conduct any clinical trial designed

to support an indication outside the Commercial Field of Use without Hybridon's

consent.

 

            2.2.4. Any sublicense granted by Novartis pursuant to this License

Agreement must be granted pursuant to a written agreement that subjects the

sublicensee to not less than the relevant restrictions, limitations and

obligations in this License Agreement. Novartis shall remain primarily

responsible for all of its obligations under this License Agreement and shall

take prompt action to enforce its rights against its sublicensees should any

such sublicensee breach its obligation to comply with the restrictions,

limitations or obligations set forth in this License Agreement. Novartis shall

designate Hybridon as a third party beneficiary if Hybridon is damaged as a

result of any breach by a sublicensee of any relevant restriction, limitation,

or obligation pertaining to this License Agreement.

 

         2.3. IMMUNITY FROM SUIT. In the event that the exercise by Novartis

and/or its Affiliates or sublicensees of the licenses and rights granted

pursuant to this License Agreement would infringe during the term of this

License Agreement a claim of an issued Patent Controlled by Hybridon, which

Patent is not otherwise covered by the grant in Section 2.2 or any Acquisition

Intellectual Property, Hybridon hereby grants to Novartis and its Affiliates or

sublicensees a worldwide, non-exclusive, royalty-free license and immunity from

suit by Hybridon and its Affiliates under such issued Patent for Novartis, its

Affiliates and or sublicensees to discover, research, develop, make, use,

import, export, distribute, market, promote, offer for sale, and sell the

Licensed IMOs and the Products in the Commercial Field of Use.

 

         2.4. TECHNOLOGY NECESSARY TO THE LICENSE. If Hybridon conceives and

reduces to practice during the term of this License Agreement any new technology

relating to a Licensed IMO or Product and such new technology is necessary to

Novartis' exercise of its licensed rights pursuant to this License Agreement,

which technology is not otherwise covered by the grant in Section 2.2, then

Hybridon hereby grants to Novartis and its Affiliates and sublicensees a

worldwide, non-exclusive, royalty-free license under such new technology to

discover and have discovered, research and have researched, develop and have

developed, make and have made, use and have used, import and have imported,

export and have exported, distribute and have

 

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<PAGE>

 

distributed, market and have marketed, promote and have promoted, offer for sale

and have offered for sale, sell and have sold such new technology in connection

with the Licensed IMO or the Product in the Commercial Field of Use.

 

                                   ARTICLE III

 

                        DEVELOPMENT AND COMMERCIALIZATION

 

         3.1. DEVELOPMENT AND COMMERCIALIZATION RIGHTS. The rights granted to

Novartis pursuant to Section 2.2 are exclusive to Novartis, even as to Hybridon,

subject to Hybridon's right to perform its obligations under the Collaboration

Agreement and subject to 35 USC Sections 200-212, 37 CFR Section 401 et seq. and

related governmental implementing regulations, as applicable.

 

         3.2. TRADEMARK AND TRADENAME RIGHTS. Novartis, its Affiliates and

sublicensees shall be entitled, in their sole discretion, to select the

trademarks and tradenames for all Products, which trademarks and tradenames for

any Product may vary by country or within a country, in Novartis' sole

discretion. Novartis shall own all right, title and interest in and to such

trademarks and tradenames, and Hybridon shall have no rights with respect to any

such trademarks and tradenames.

 

         3.3. INFORMATION TRANSFER. Within sixty (60) days after the Effective

Date, Hybridon shall promptly deliver to Novartis all information (including,

without limitation, Know-How) of Hybridon and its Affiliates that is necessary

or useful, or is reasonably requested by Novartis, for further development,

manufacture and commercial exploitation and distribution of a Licensed IMO or

Product subject to any confidentiality obligations owed by Hybridon to Third

Parties. Subject to the foregoing, such information (including, without

limitation, Know-How) shall include a summary of all material written

communications between Hybridon or its other licensees and the FDA concerning

the Licensed IMO or Product and shall also include copies of all Patents,

copyrights, copyright registrations and applications therefor and all other

manifestations of the intellectual property related to the Licensed IMO or

Product of Hybridon or its Affiliates, whether in human or machine readable

form, and, if commercially and technically reasonable, in an electronic form

compatible with Novartis' systems; provided that Novartis shall only reimburse

Hybridon's costs of providing data in a form compatible with its systems so long

 

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<PAGE>

 

as Hybridon has provided Novartis with a reasonably detailed description of such

costs and obtained Novartis' prior written approval to incur such costs.

Novartis shall reimburse such pre-approved costs actually incurred by Hybridon

within [**] days after receipt by Novartis of Hybridon's Invoice for the same.

 

         3.4. REGULATORY APPROVALS. Novartis, its Affiliates and sublicensees

will be responsible for all required Regulatory Approvals. All filings will be

made by Novartis, its Affiliates or sublicensees. All Regulatory Approvals will

be held in the name of Novartis, its Affiliates or sublicensees. Novartis, its

Affiliates or sublicensees shall have the right to, and Hybridon shall provide

the requisite notification to regulatory authorities to, cross reference any

relevant information such as but not limited to any clinical and pre-clinical

files and regulatory filings, such as but not limited to Drug Master Files of

Hybridon and its Affiliates, with respect to Licensed IMOs and Products, for the

purpose of regulatory filings hereunder.

 

         3.5. DEVELOPMENT AND COMMERCIALIZATION EFFORTS. Novartis shall use

commercially reasonable efforts, similar to those used by Novartis or its

Affiliates in the research, development and commercialization of other products

of Novartis or its Affiliates that are of similar commercial potential and at a

similar stage of development, to develop and commercialize Products hereunder.

 

                                   ARTICLE IV

 

                          ADDITIONAL INDICATION OPTION

 

         4.1. ADDITIONAL INDICATION OPTION. Subject to Section 4.2 hereof,

Novartis shall have the option (each, an "Additional Indication Option") to

include one or more additional indications (each, an "Additional Indication") in

the Commercial Field of Use. Notwithstanding the foregoing, Novartis shall not

have the right to expand the Commercial Field of Use to include oncology

indications, non-human indications, or infectious disease indications not

originally included in the Commercial Field of Use.

 

         4.2. EXERCISE OF AN ADDITIONAL INDICATION OPTION. If Novartis generates

pre-clinical data that supports the inclusion of Additional Indication(s) in the

Commercial Field of Use, Novartis may notify Hybridon that it wishes to include

such Additional Indication(s) in

 

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<PAGE>

 

the Commercial Field of Use at any time after the second anniversary of the

Effective Date of the Collaboration Agreement (the "Option Notice"). Novartis

shall provide Hybridon with a summary of the pre-clinical data that supports the

inclusion of the Additional Indication(s), which Hybridon may use only in

connection with its review of Novartis' exercise of the Additional Indication

Option. Hybridon may not withhold its consent to the expansion of the Commercial

Field of Use to include such Additional Indication(s) unless, as of the date on

which Hybridon receives such Option Notice, Hybridon: (a) has granted exclusive

rights to such Additional Indication(s) to a Third Party; (b) is actively

negotiating with a Third Party to grant such rights; or (c) has [**] such

Additional Indication(s) in which the first visit of the first patient has

occurred. If Hybridon withholds its consent to the requested expansion for the

reasons set forth above, Hybridon shall use good faith efforts to obtain for

Novartis the agreement of such Third Party to negotiate a co-commercialization

agreement with Novartis with respect to such Additional Indication(s). If

Hybridon withholds its consent to the requested expansion because, as of the

date on which Hybridon receives the Option Notice, Hybridon is actively

negotiating with a Third Party to grant exclusive rights to the Additional

Indication(s), but Hybridon does not grant such rights to such Third Party

within [**] after the receipt of the Option Notice, Hybridon shall agree to the

expansion of the Commercial Field of Use to include such Additional

Indication(s). Novartis may submit multiple Option Notices during the term of

this License Agreement; provided that Novartis may not submit an Option Notice

covering Additional Indication(s) that are closely related to any Additional

Indication(s) for which Novartis has submitted an Option Notice during the

previous [**] period. Upon the successful exercise of an Additional Indication

Option, the term "Commercial Field of Use" shall be deemed to include the

Additional Indication(s) covered by such exercise.

 

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                                    ARTICLE V

 

                         MILESTONE AND ROYALTY PAYMENTS

 

         5.1. OPTION EXERCISE FEE. Upon this License Agreement taking effect in

accordance with Section 2.1 hereof and following delivery of the certificate set

forth in Section 12.3 hereof and subject to the terms thereof, Novartis shall

pay to Hybridon the sum of [**] U.S. Dollars (US$[**]) in accordance with

Section 14.1 (Invoice Requirement).

 

         5.2. MILESTONE PAYMENTS WITH RESPECT TO PRODUCTS FOR INITIAL

INDICATIONS. Novartis shall notify Hybridon within thirty (30) business days

after the occurrence of a milestone event for which payment is due pursuant to

this Section 5.2. Each milestone payment set forth below shall be paid by

Novartis to Hybridon with respect only to the first [**] Products originally

developed for Initial Indications to achieve the related milestone ("Section 5.2

Products"). Notwithstanding the foregoing, achievement of a milestone by

[**]Products that have the same active ingredient shall only trigger separate

payments of the related milestone payment if such Products [**][**] that are

separately approved by the FDA, the EMEA (or not less than [**] of the

regulatory authorities of the Major Market Countries), or the MHLW, as

applicable. Each milestone payment shall be paid in accordance with Section 14.1

(Invoice Requirement) following notice by Novartis that the applicable milestone

has been met. The Parties agree that, if only one (1) Product is in either Phase

IIb Clinical Trials or Phase III Clinical Trials at a particular time and

Novartis, in its sole discretion, ceases development of such Product, then each

milestone payment which has previously been paid for such Product pursuant to

this Section 5.2 shall be credited as a milestone payment for the next Product

developed for any Initial Indication(s). For clarity, the milestone payments set

out in the following table shall be payable only once for each Product (and its

related substituted Product if the original Product was abandoned) and shall be

payable no more than an aggregate of [**] times as to all Products developed for

Initial Indication(s) (even if there are more than [**] Products developed for

Initial Indications). The Parties agree further that each of the [**] milestones

in the table below shall be deemed to have occurred (and, if not made

previously, the related milestone payment shall become payable) upon the

occurrence of any subsequent milestone in the table below with respect to the

same Product. Novartis may deduct from any milestone payments otherwise due to

Hybridon under this Section 5.2 the amount of any

 

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<PAGE>

 

withholding and similar taxes required under applicable United States law to be

withheld from such payments and paid to United States tax authorities.

 

<TABLE>

<CAPTION>

MILESTONE        PAYMENT

---------        -------

<S>              <C>

   [**]          US$[**]

   [**]          US$[**]

   [**]          US$[**]

   [**]          US$[**]

   [**]          US$[**]

</TABLE>

 

         5.3. MILESTONE PAYMENTS WITH RESPECT TO PRODUCTS FOR ADDITIONAL

INDICATIONS. Novartis shall notify Hybridon within thirty (30) business days

after the occurrence of a milestone event for which payment is due pursuant to

this Section 5.3. Novartis shall pay to Hybridon milestone payments as set forth

below with respect to certain Products developed for Additional Indications in

accordance with Section 14.1 (Invoice Requirement). Novartis may deduct from any

milestone payments otherwise due to Hybridon under this Section 5.3 the amount

of any withholding and similar taxes required under applicable United States law

to be withheld from such payments and paid to United States tax authorities.

 

            5.3.1. Products for Which Milestones Are Payable Under Section 5.2.

Novartis shall make the milestone payments set forth in the following table with

respect to Section 5.2 Products that are later developed for Additional

Indications. For clarity, if a Section 5.2 Product is developed for an

Additional Indication, the achievement of each milestone set forth below with

respect to the Additional Indication shall trigger payment of the related

milestone payment regardless of whether the comparable payment has already been

paid with respect to the Initial Indication. Notwithstanding the foregoing,

achievement of milestones by [**] Products that have the same active ingredient

shall only trigger separate payment of the related milestone payment if such

Products have distinct formulations and distinct labels that are separately

approved by the FDA, the EMEA (or not less than [**] of the regulatory

authorities of the Major Market Countries), or the MHLW, as applicable. The

Parties agree that, if Novartis, in its sole

 

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discretion, ceases development of a Section 5.2 Product, then all milestone

payments which have previously been paid for such Product pursuant to this

Section 5.3.1 shall be credited as milestone payments for the next Section 5.2

Product or non-Section 5.2 Product developed for the same Additional Indication.

For clarity, the milestone payments set out in the following table shall be

payable only once for each Section 5.2 Product and its related substituted

Section 5.2 Product or non-Section 5.2 Product developed for the same Additional

Indication, if the original Section 5.2 Product was abandoned.

 

<TABLE>

<CAPTION>

MILESTONE        PAYMENT

---------        -------

<S>              <C>

  [**]           US$[**]

  [**]           US$[**]

  [**]           US$[**]

</TABLE>

 

            5.3.2. Products for Which Milestones Are Not Payable Under Section

5.2. Novartis shall make the milestone payments set forth in the following table

with respect to Products, other than Section 5.2 Products, that are developed

for Additional Indications ("non-Section 5.2 Products"). Notwithstanding the

foregoing, achievement of milestones by [**] non-Section 5.2 Products that have

the same active ingredient shall only trigger separate payment of the related

milestone payment if such non-Section 5.2 Products have distinct formulations

and distinct labels that are separately approved by the FDA, the EMEA (or not

less than [**] of the regulatory authorities of the Major Market Countries), or

the MHLW, as applicable. The Parties agree that, if Novartis, in its sole

discretion, ceases development of a non-Section 5.2 Product, then all milestone

payments which have previously been paid for such non-Section 5.2 Product

pursuant to this Section 5.3.2 shall be credited as milestone payments for the

next Section 5.2 Product or non-Section 5.2 Product developed for the same

Additional Indication. For clarity, the milestone payments set out in the

following table shall be payable only once for each abandoned non-S