Exhibit 10.7
EXCLUSIVE SUBLICENSE AGREEMENT
This Exclusive Sublicense Agreement ("Agreement") is entered into
on
December 9, 2003 ("Effective Date") between BioMimetic
Pharmaceuticals, Inc.
("BMPI"), a Delaware corporation and Luitpold Pharmaceuticals, Inc.
("Luitpold"), a New York corporation (each, individually, a "Party"
and,
collectively, the "Parties").
RECITALS
BMPI has licensed the Licensed Patent Rights, as hereinafter
defined, from
each of Harvard University and Zymogenetics, Inc. (each a
"Licensor" and
collectively, the "Licensors");
Luitpold desires to obtain an exclusive worldwide sublicense for
the
Licensed Patent Rights in accordance with the terms of this
Agreement;
BMPI is willing to grant an exclusive worldwide sublicense for the
Licensed
Patent Rights in the Field of Use and the Field of Extended Use, as
hereinafter
defined, to Luitpold on the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the mutual covenants contained
herein,
it is agreed by the Parties as follows:
1. DEFINITIONS
1.1 "Affiliate" means any company, corporation, business or entity
controlled by, controlling, or under common control with either
Luitpold or
BMPI. "Control" means direct or indirect beneficial ownership of at
least fifty
percent (50%) interest in the voting stock (or the equivalent) of
such
corporation or other business or having the right to direct,
appoint or remove a
majority or more of the members of its board of directors (or their
equivalent),
or having the power to control the general management of such
company,
corporation, business or entity, by contract, law or otherwise.
1.2 "Approval Date" means the date BMPI obtains approval from the
FDA or is
granted a "CE" mark or another form of marketing authorization in
the European
Union, whichever occurs first, to market and sell Licensed Products
anywhere in
the Territory in the Field of Use for humans only.
1.3 "Distributor" means any non-Affiliate to whom Luitpold both
sells
Licensed Products and grants a right to distribute (but not to make
or have
made) such Licensed Products in a defined territory.
1.4 "FDA" means the United States Food and Drug Administration or
its
successor.
1.5 "Field of Use" means all uses related to the treatment, cure,
or relief
of mammals for periodontal diseases and/or the repair, restoration
or
reconstruction of oral and cranio-maxillofacial osseous defects.
1.6 "Field of Extended Use" shall mean all uses outside the Field
of Use
that are related to the treatment and healing of bone, cartilage,
tendon and
ligaments of the skeletal tissue system in animals (excluding
humans), excluding
the treatment and healing of soft tissue wounds.
1.7 "Improvement" means any modification, alteration, enhancement
or
improvement to the Licensed Technology or any Licensed Product.
1.8 "Know-how" means BMPI's technical and other information related
to the
Licensed Patent Rights including, without limitation, ideas,
concepts,
inventions, discoveries, data, formulae, specifications, processes,
procedures
for experiments and tests and other protocols, results of
experimentation and
testing, media formulations, fermentation, recovery and
purification techniques
and assay protocols whether or not covered by any patent, copyright
design,
trademark or other industrial or intellectual property rights.
1.9 "Licensed Patents" means the Valid Claims of (a) the patents
and the
patent applications listed on Exhibit A (attached hereto and made
part of this
Agreement); and (b) any patents and patent applications owned or
licensed by
BMPI arising from the patents listed on Exhibit A to the extent any
Valid Claim
of such patents or patent applications would, in the absence of the
licenses
contemplated hereunder, bar the use or sale within the Field of Use
or the Field
of Extended Use of a product by Luitpold (treating for this purpose
any Valid
Claim in pending patent applications as if they had been issued);
and (c) all
patents hereafter issuing from the patents and patent applications
described in
the immediately preceding clauses (a) and (b) throughout the world,
whether
national or regional, and including any divisions, renewals,
reexaminations,
continuations, continuations-in-part, extensions or reissues
thereof, and any
supplementary protection certificates. Exhibit A will be updated by
BMPI on at
least an annual basis.
1.10 "Licensed Patent Rights" means all rights under the Licensed
Patents
that are granted to Luitpold by BMPI in Section 2.
1.11 "Licensed Product(s)" means any product consisting essentially
of
rhPDGF-BB in the absence of other growth-promoting proteins and in
combination
with a synthetic or natural matrix, or any part thereof, which (a)
is covered by
the Licensed Technology; (b) is developed through the use of a
process which is
covered by the Licensed Technology; or (c) could not be
manufactured, used or
sold without the incorporation or use in whole or in part of some
or all of the
Licensed Technology.
1.12 "Licensed Technology" means Know-how and the Licensed Patent
Rights.
1.13 "Net Sales" means the amounts invoiced by Luitpold or any of
its
Affiliates or Distributors during the term of this Agreement for
the worldwide
sale of Licensed Products to bona fide independent third parties,
including any
amounts that may be invoiced for samples, less: (a) normal and
customary
rebates, trade, or quantity and cash discounts, including credit
card fees,
actually taken or incurred; (b) sales, use and/or excise taxes,
custom duties or
other governmental charges (other than taxes imposed on Luitpold's,
an
Affiliate's or a Distributor's net income) actually paid in
connection with
sales of Licensed Products; (c) amounts actually allowed or
credited due to
refunds, returns and replacements; (d) up to 2% of gross sales,
2
representing an estimate of the cost actually paid by Luitpold, an
Affiliate or
a Distributor, as applicable, for any bulk packages and packing,
freight charges
and insurance which amount will, at the request of BMPI, be
reconciled to actual
costs annually; and (e) amounts written off for bad debt. In the
case of (a) and
(c), such amounts shall be deductible only to the extent the same
are identified
on the invoice to the customer or other documentation maintained in
the ordinary
course of business. Net Sales also includes the fair market value
of any
non-cash consideration received by Luitpold, its Affiliates or
Distributors for
the sale, lease or transfer of Licensed Products.
1.14 "Territory" means worldwide.
1.15 "Valid Claim" means with respect to the Licensed Patents (a) a
claim
of a pending patent application; or (b) a claim of an issued patent
which has
not lapsed or become abandoned or been declared invalid or
unenforceable by a
court of competent jurisdiction or an administrative agency from
which no appeal
has been taken after ninety (90) days.
2. GRANT
2.1 Exclusive License. BMPI hereby grants to Luitpold, and Luitpold
hereby
accepts from BMPI, subject to the terms and conditions herein
specified, an
exclusive worldwide license under the Licensed Technology to use,
offer to sell,
sell, and otherwise commercialize, solely in the Field of Use and
the Field of
Extended Use, Licensed Product(s) purchased from BMPI.
Notwithstanding the
foregoing exclusive sublicense, BMPI reserves the right to use the
Licensed
Products for purposes of conducting trials and other tests with
respect to the
treatment and healing of bone, cartilage, tendon and ligaments of
the skeletal
tissue system on animals in studies related to development of
safety and
efficacy information needed for the technology for human use and
applications
provided BMPI will share all such information with Luitpold. Any
rights not
expressly granted pursuant to this Agreement shall be reserved to
BMPI. Except
pursuant to the terms of this Agreement, BMPI will not exercise any
rights under
the Licensed Patent Rights.
2.2 Sublicenses. BMPI hereby grants to Luitpold, and Luitpold
hereby
accepts from BMPI, upon the terms and conditions herein specified,
the right to
grant sublicenses under the Licensed Technology to Distributors to
use, offer to
sell and sell, in the Field of Use and the Field of Extended Use,
Licensed
Products purchased from BMPI; provided, however, that before any
such sublicense
is executed, Luitpold shall provide BMPI with at least the
following information
with respect to the proposed Distributor: (a) the identity of the
proposed
Distributor; (b) a description of the Licensed Product and the
scope of the
sublicense being granted; and (c) the territory in which the
proposed
Distributor will have rights under the sublicense. In the event
that the
proposed Distributor is not an Affiliate of Luitpold, Luitpold
shall obtain the
prior written consent of BMPI to such sublicense, which shall not
be
unreasonably withheld, conditioned or delayed after approval to
market by the
appropriate agency. Luitpold will be responsible for the payment of
any
royalties or other payments provided for hereunder, regardless of
whether the
terms of any sublicense provide for such amount to be paid by a
Distributor
directly to BMPI. Each sublicense granted by Luitpold shall be
consistent with
and subordinate to the terms and conditions of this Agreement. This
Agreement,
in the event BMPI's License Agreement with Harvard University
through which BMPI
is licensing any
3
Patent Rights thereunder is terminated, will be terminated or
assigned to
Harvard University, only with respect to the patents licensed from
Harvard
University, exclusively at Harvard University's option. BMPI agrees
not to take
any action or omit to take any action that would cause the License
Agreement
with Harvard University to be terminated.
2.3 Due Diligence Milestones. Luitpold shall proceed diligently to
bring
Licensed Products into commercial use in the Field of Use for
humans as quickly
as is reasonably possible after the Approval Date. Luitpold shall
be deemed to
satisfy the foregoing obligation if Luitpold has made at least one
sale of the
Licensed Products to a Distributor or another third party solely
for use in the
Field of Use ("First Sale") within ** days after the Approval Date.
2.4 Regulatory Approvals.
(a) Subject to Section 6.4, BMPI shall obtain, at its sole expense,
regulatory approvals required by the FDA, and in Canada and the CE
mark in
the European Union for Luitpold to exercise the rights granted in
Sections
2.1 and 2.2 above in the Field of Use for humans (but not animals)
in the
United States, the European Union and Canada. BMPI shall have the
exclusive
right to communicate with the FDA and counterpart agencies in the
European
Union and Canada regarding regulatory or other approval of the
Licensed
Products in the Field of Use for humans, and Luitpold shall not
initiate
any communication with any such agency except for purposes of
Section 6.4.
If Luitpold is contacted directly by the FDA or any counterpart
agency or
body in the European Union and Canada, Luitpold shall promptly
notify BMPI
and shall cooperate with BMPI in responding to any such
communication.
(b) Upon regulatory approval of applications for uses outside the
Field of Use and the Field of Extended Use, BMPI will assign all
regulatory
approvals within the Field of Use and the Field of Extended Use to
Luitpold. BMPI will retain the right to review and approve all
related
regulatory or other filings made by Luitpold.
3. TERM AND TERMINATION
3.1 Term. The term of this Agreement shall be for a period
beginning on the
Effective Date and extending, on a country by country basis, until
the later of
(a) the last to expire Valid Claim that covers a Licensed Product
in that
country, or (b) December 31, 2014. Luitpold's obligation to pay
royalties shall
expire on a country-by-country basis. The Agreement may be extended
by mutual
consent of the parties. If extended, Section 4.3, among other
provisions,
survives for so long as Luitpold relies upon Know-how, trademarks,
trade secrets
and/or other proprietary technology or information developed by
BMPI.
3.2 Termination.
(a) In the event that one Party commits any material breach of this
Agreement, unless this Agreement provides a different remedy, the
non-breaching Party may terminate this Agreement at its option by
giving
the breaching Party not less than sixty (60) days written notice of
its
election to terminate as of a stated date. In addition to its
option to
terminate, BMPI shall have the right to convert this Agreement to a
non-exclusive sublicense. Such notice shall state the nature of the
defaults claimed by the
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**
REPRESENTS MATERIAL WHICH HAS BEEN REDACTED AND SEPARATELY FILED
WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL
TREATMENT PURSUANT TO RULE 406 UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
non-breaching Party. The breaching Party during said sixty (60) day
period
may cure any default stated in said notice and if such default is
cured or,
if such default is not a failure to pay an amount due and will
reasonably
take longer than sixty (60) days to cure and the breaching Party is
diligently pursuing such cure, this Agreement shall continue in
full force
and effect as if such notice had not been given. Additionally, in
the event
Luitpold commits a material breach of that certain Research,
Development
and Marketing Agreement by and between BMPI and Luitpold dated
December 9,
2003 or that certain Manufacturing and Supply Agreement by and
between BMPI
and Luitpold dated December 9, 2003, this entire Agreement shall
terminate,
or, at BMPI's option, Luitpold's rights under this Agreement may
become
non-exclusive.
(b) In the event either Party shall become insolvent or shall cease
business, or shall file a voluntary petition or an answer admitting
the
jurisdiction of the court and the material allegations of, or shall
consent
to, an involuntary petition pursuant to or purporting to be
pursuant to any
reorganization or insolvency law of any jurisdiction, or shall make
an
assignment for the benefit of creditors, or shall apply for or
consent to
the appointment of a receiver or trustee for a substantial part of
its
property then, at the option of the other Party, this Agreement
shall
terminate effective as of a date ten (10) days following written
notice by
the Party intending to terminate.
3.3 Effect of Termination. Upon termination or expiration of this
Agreement, BMPI shall have the option to repurchase from Luitpold
any Licensed
Products that are in Luitpold's inventory on the effective date of
such
termination. The repurchase price for License Products in good
condition in
unopened, undamaged packaging shall be the price paid by Luitpold;
the price for
Licensed Products in damaged or opened packaging or otherwise not
in good
condition shall be subject to mutual agreement by the Parties in
good faith.
Luitpold may continue to sell any Licensed Products that are not
repurchased by
BMPI for up to one hundred eighty (180) days after the effective
date of
expiration or termination and shall pay to BMPI any royalties which
may accrue
on such sales.
3.4 Survival. Article 1, Sections 3.3 and 3.4, and Articles 4, 6,
7, 10,
and 11 shall survive termination or expiration of this Agreement.
4. FEES AND ROYALTIES
4.1 Royalties. Luitpold, in exchange for the rights granted to
Luitpold
under this Agreement, shall pay or cause to be paid to BMPI
royalties equal to
** of Net Sales of any Licensed Product. In addition, in the event
that
aggregate royalties BMPI must pay to its respective licensors
exceed the ** that
Luitpold is paying BMPI, Luitpold will pay such excess up to an
additional ** of
Net Sales; however, in such case, upon the last to expire of the
Valid Claims
under the Licensed Patents identified with an asterisk (*) on
Exhibit A.
Luitpold shall be entitled to a non-refundable royalty credit
effective on such
date which may be applied solely against future royalty payments
from Luitpold
to BMPI. The total amount of the credit shall be equal to all prior
royalties
paid by Luitpold to BMPI under this Agreement but only to the
extent such
royalties exceeded ** of total Net Sales and provided further that
such credit
will not reduce any royalties then due and payable by Luitpold for
a given
quarter by more than fifty percent (50%). Upon expiration of this
5
**
REPRESENTS MATERIAL WHICH HAS BEEN REDACTED AND SEPARATELY FILED
WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL
TREATMENT PURSUANT TO RULE 406 UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
Agreement on or after 2014, one-half of any remaining credit shall
be refunded
by BMPI to Luitpold.
4.2 Minimum Royalties. In the first twelve (12) months following
the First Sale,
the royalties payable by Luitpold to BMPI pursuant to Section 4.1
shall not be
less than Six Hundred Thousand Dollars ($600,000). In the second
twelve (12)
months following the First Sale, the royalties payable by Luitpold
to BMPI
pursuant to Section 4.1 shall not be less than One Million Two
Hundred Thousand
Dollars ($1,200,000). In the third through the sixth twelve (12)
month period
following the First Sale, the royalties payable by Luitpold to BMPI
pursuant to
Section 4.1 shall not be less than Two Million Four Hundred
Thousand Dollars
($2,400,000). The payment of minimum royalties will be contingent
upon adequate
supply of the Licensed Products by BMPI to Luitpold. So long as
BMPI is required
to provide such supply, if BMPI does not or cannot supply an
adequate supply of
Licensed Product to Luitpold, the minimum royalties for the
calendar year(s)
shall be reduced on a prorated basis to reflect the amount that
could not be
supplied; however, if Luitpold is able to obtain an alternative
supply, this
exception shall not apply and Luitpold will be obligated to pay the
minimum
royalties.
4.3 Royalty Reduction. Upon and after the expiration of the last to
expire
of the Valid Claims under the Licensed Patents, the royalty rate
set forth in
Section 4.1 shall be reduced for the remaining term of the
Agreement to ** of
Net Sales in consideration for use by Luitpold and the Distributors
of BMPI's
Know-how, trade secrets, trademarks and/or other proprietary
technology
independent of any Licensed Patent Rights.
4.4 Additional Royalties. In addition to the royalties set forth in
Section
4.1, Luitpold agrees to pay to BMPI ** of any license fees and
milestone
payments other than payments in respect of or measured by Net
Sales, received by
Luitpold or any Affiliate from ** for rights to distribute the
Licensed Products
to U.S. hospitals and surgical centers for the repair, restoration
or
reconstruction of cranio-maxillofacial osseous defects.
4.5 Milestone Payments. BMPI will provide Luitpold written notice
of the
achievement of each of the milestone events (a) and (b) set forth
below and
Luitpold shall pay the relevant milestone amounts within thirty
(30) days of
such notice. Luitpold shall provide BMPI written notice within
thirty (30) days
of the achievement of each of the milestone events (c)-(h) set
forth below and
Luitpold shall pay the relevant amounts to BMPI as milestone
payments with such
notice; provided, however, that Luitpold shall be required to pay
such amounts
if, and only if, its achievement of the applicable milestone
obligates BMPI to
make a milestone payment to any Licensor:
(a) Fifteen Million Dollars ($15,000,000) within thirty (30) days
after the date on which regulatory approval is first received in
the United
States to market the Licensed Products in the Field of Use, of
which **
shall be payable for the rights granted under the Licensed Patents
identified with an asterisk (*) on Exhibit A and ** shall be
payable for
the rights granted under the Licensed Patents not identified with
an
asterisk (*) on Exhibit A;
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**
REPRESENTS MATERIAL WHICH HAS BEEN REDACTED AND SEPARATELY FILED
WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL
TREATMENT PURSUANT TO RULE 406 UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
(b) Five Million Dollars ($5,000,000) on the second anniversary of
the
Approval Date of which ** shall be payable for the rights granted
under the
Licensed Patents identified with an asterisk (*) on Exhibit A and
** shall
be payable for the rights granted under the Licensed Patents not
identified
with an asterisk (*) on Exhibit A;
(c) ** upon filing an Investigational New Drug Application or an
equivalent foreign filing for regulatory approval of a Licensed
Product in
the Field of Extended Use;
(d) ** upon initiation of a Phase III or pivotal clinical trial, as
"Phase III" is defined by Title 21: chapter 1 - Food and Drug
Administration, Department of Health and Human Services for a
Licensed
Product in the Field of Extended Use;
(e) ** upon filing a Biologies License Application or an equivalent
foreign filing for a Licensed Product in the Field of Extended Use;
(f) ** upon receipt of FDA approval to market a Licensed Product in
the Field of Extended Use;
(g) ** on the first anniversary of receipt of FDA approval to
market a
Licensed Product in the Field of Extended Use; and
(h) ** on the second anniversary of receipt of FDA approval to
market
a Licensed Product in the Field of Extended Use.
Luitpold shall provide BMPI with written notice of the achievement
of any
milestone, accompanied by the applicable milestone payment, within
thirty (30)
days after the achievement of such milestone. Milestones (c)
through (h) shall
be deemed achieved by Luitpold if achieved by Luitpold, an
Affiliate of
Luitpold, a Distributor, or an agent or contractor of Luitpold, an
Affiliate or
a Distributor. In the event Luitpold pays for any milestone payment
described in
(c) through (e) above, BMPI will be obligated to refund such
individual
milestone payment(s) to Luitpold if BMPI subsequently achieves any
or all of the
same milestones that, but for Luitpold's previous payment of the
same milestone,
would have triggered a milestone payment obligation from BMPI to a
Licensor.
4.6 Sale Bonus Payment. No later than March 15th of the year
following the
first (but only the first) calendar year in which worldwide Net
Sales by
Luitpold and its Affiliates or Distributors of the Licensed
Products for use in
the Field of Extended Use, combined with BMPI's sales in human
orthopedic
related indications, exceeds ** Luitpold will pay a sales bonus,
not to exceed
**, to BMPI equal to its pro rata share of ** based on Luitpold's
sales in the
Field of Extended Use and BMPI's sales in human orthopedics.
Luitpold shall pay
a Sales Bonus Payment if, and only if, its sales
7
**
REPRESENTS MATERIAL WHICH HAS BEEN REDACTED AND SEPARATELY FILED
WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL
TREATMENT PURSUANT TO RULE 406 UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
alone in the Field of Extended Use, or in total with BMPI's sales
in human
orthopedics, trigger a ** sales bonus payment to Zymogenetics, Inc.
4.7 Non-Cash Payments. If any payment for which Luitpold owes BMPI
a
payment pursuant to this Section 4 is made other than in cash,
Luitpold shall
pay BMPI pursuant to this Section 4 in cash based on the fair
market value of
the non-cash payment received by Luitpold, and BMPI shall have no
obligation to
accept any non-cash payment from Luitpold.
4.8 Schedule and Form of Payment/Taxes. Luitpold shall pay
royalties on a
calendar quarter basis and payments shall be due and payable with
the reports
required by this Section 4.8 thirty (30) days following the close
of the
relevant accounting period. Each such payment shall be accompanied
by a report
for the period covered showing the total number or volume of
Licensed Products
sold and total Net Sales, each on a country-by-country basis, the
exchange rate
used to convert any payments into United States dollars, and total
royalties
due, if any. All royalties and other amounts payable to BMPI
hereunder shall be
payable in United States dollars. Luitpold shall, when required to
do so by
appl
