LICENSE AGREEMENT

Exhibit 10.4

 

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.

 

LICENSE AGREEMENT

 

by and between

 

ACHILLION PHARMACEUTICALS, INC.

 

and

 

THE UNIVERSITY OF MARYLAND, BALTIMORE COUNTY

TABLE OF CONTENTS

 

 

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Exhibit A – Certain Licensed Patent Rights

 

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LICENSE AGREEMENT

 

This agreement (the “Agreement”), dated the 15th day of November, 2002 (the “Effective Date”), is by and between Achillion Pharmaceuticals, Inc. , a corporation organized and existing under the laws of the State of Delaware (“ACHILLION”), and The University of Maryland, Baltimore County, a constituent institution of the University System of Maryland, which is an agency of the State of Maryland (“UMBC”).

 

INTRODUCTION

 

1. By assignment from the Howard Hughes Medical Institute (“HHMI”), UMBC is the owner of certain technology and intellectual property relating to the N-terminal portion of the immature HIV-1 gag polyprotein, which protein regulates maturation and infectivity of the human immunodeficiency virus (“HIV”) (UMBC Ref. 2392MS; HHMI Ref. 02368), and a number of compounds which bind to the HIV-1 gag polyprotein and interfere with its maturation, and therefore, replication of HIV (UMBC Ref. 2398MS; HHMI Ref. 02457).

 

2. ACHILLION possesses scientific talent, know-how and resources, including the ability to utilize assays to screen and identify compounds, necessary to establish a research program to develop for commercial exploitation drug products for the diagnosis, prevention and/or treatment of diseases associated with infection by HIV.

 

3. ACHILLION wishes to obtain, and UMBC is willing to grant, certain rights and licenses to develop and commercialize diagnostic, prophylactic and therapeutic drug products, subject to the terms set forth below.

 

NOW, THEREFORE, ACHILLION and UMBC agree as follows:

 

Article I

Definitions

 

When used in this Agreement, each of the following terms shall have the meanings set forth in this Article I:

 

Section 1.1 “ Affiliate ”. Affiliate means, with respect to a Party, any Person that controls, is controlled by, or is under common control with such Party. For purposes of this Section 1.1, “control” shall refer to (a) in the case of a Person that is a corporate entity, direct or indirect ownership of fifty percent (50%) or more of the stock or shares having the right to vote for the election of directors of such Person and (b) in the case of a Person that is an entity but not a corporate entity, the possession, directly or indirectly, of the power to direct, or cause the direction of, the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

 

Section 1.2 “ Commercialization” or “Commercialize ”. Commercialization or Commercialize means any activities directed to producing, manufacturing, marketing, promoting, distributing, importing or selling a product.

 

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Section 1.3 “ Confidential Information ”. Confidential Information means all Know-How, including without limitation proprietary information and materials (whether or not patentable), regarding a Party’s technology, products, business operations or objectives, which is designated as confidential in writing by the disclosing Party, whether by letter or by the use of an appropriate stamp or legend, prior to or at the time any such Know-How is disclosed by the disclosing Party to the other Party. Notwithstanding anything in the foregoing to the contrary, Know-How disclosed orally, electronically or visually by a Party, or disclosed in writing without an appropriate letter, stamp or legend, shall constitute Confidential Information of the disclosing Party if the disclosing Party, within thirty (30) days after such disclosure, delivers to the other Party a written document or documents describing the Know-How and referencing the place and date of such oral, electronic, visual or written disclosure and the names of the persons to whom such disclosure was made. For clarity, all reports submitted by ACHILLION to UMBC pursuant to Article IV and Article III, Section 3.2 hereof shall constitute Confidential Information of ACHILLION.

 

Section 1.4 “ Control” or “Controlled ”. Control or Controlled means, with respect to any (a) Know-How or (b) intellectual property right, the possession (whether by license or ownership) by a Party or its Affiliates of the ability to grant to the other Party access and/or a license as provided herein without violating the terms of any agreement with any Third Party existing on the Effective Date.

 

Section 1.5 “ Cover”, “Covering” or “Covered ”. Cover, Covering or Covered means, with respect to a product or technology, that, but for a license granted to a Party or its Affiliates under a Valid Claim included in the Patent Rights under which such license is granted, the Development or Commercialization of such product or the practice of such technology in the Territory by such Party or its Affiliates would infringe such Valid Claim.

 

Section 1.6 “ Development” or “Develop ”. Development or Develop means research, discovery and development activities.

 

Section 1.7 “ Executive Officers ”. Executive Officers means the Chief Executive Officer of ACHILLION (or an executive officer of ACHILLION designated by ACHILLION’s Chief Executive Officer) and the Provost of UMBC (or a representative of UMBC designated by such Provost).

 

Section 1.8 “ FDA ”. FDA means the United States Food and Drug Administration.

 

Section 1.9 “ IND ”. IND means a “Notice of Claimed Investigational Exemption for a New Drug” filed with the FDA, as defined in 21 CFR Part 312, or an equivalent application filed with an applicable regulatory authority outside of the United States.

 

Section 1.10 “ Know-How ”. Know-How means any information, data or materials in a tangible form, including without limitation documented ideas, concepts, formulas, methods, procedures, protocols, designs, compositions, plans, applications, technical data, samples, inventions, chemical compounds and biological materials.

 

Section 1.11 “ Licensed Intellectual Property ”. Licensed Intellectual Property means Licensed Know-How and Licensed Patent Rights.

 

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Section 1.12 “ Licensed Know-How ”. Licensed Know-How means any Know-How that (a) is necessary or useful for the practice by ACHILLION of inventions claimed in the Licensed Patent Rights, (b) is Controlled by UMBC, and (c) is provided to ACHILLION by UMBC as of the Effective Date of this Agreement.

 

Section 1.13 “ Licensed Patent Rights ”. Licensed Patent Rights means (a) the patent applications set forth in Exhibit A , (b) United States patents issued from the applications listed in Exhibit A and from divisionals and continuations of these applications and any reissues of such United States patents, (c) claims of continuation-in-part applications and patents directed to subject matter specifically described in the applications listed in Exhibit A , and (d) claims of all foreign patent applications, patents, and other intellectual property which are directed to the subject matter specifically described in the United States patents and/or patent applications listed in Exhibit A .

 

Section 1.14 “ Licensed Product ”. Licensed Product means a diagnostic, prophylactic or therapeutic drug product the Development, Commercialization or other use of which is Covered by a Valid Claim of any of the Licensed Patent Rights in the country where such product is manufactured, used, sold or imported.

 

Section 1.15 “ Net Sales ”. Net Sales means, with respect to a Licensed Product, the gross amounts received by ACHILLION, its Affiliates and/or sublicensees in respect of sales of such Licensed Product (excluding any such sales among ACHILLION, its Affiliates and/or sublicensees), less the following deductions:

 

(a) Trade, cash and/or quantity discounts actually allowed and taken with respect to such sales;

 

(b) Tariffs, duties, excises, sales taxes or other taxes imposed upon and paid with respect to the production, sale, delivery or use of the Licensed Product (excluding national, state or local taxes based on income);

 

(c) Amounts repaid or credited by reason of rejections, defects, recalls or returns or because of charge backs, refunds, rebates or retroactive price reductions;

 

(d) To the extent separately stated on purchase orders, invoices or other documents of sale, insurance and other outbound transportation charges incurred in shipping the Licensed Product; and

 

(e) Gross amounts received at or below ACHILLION’s cost in respect of sales for clinical trial purposes or compassionate or similar use.

 

Such amounts shall be determined from the books and records of ACHILLION, its Affiliates and/or sublicensees, maintained in accordance with generally accepted accounting principles, consistently applied.

 

In the event the Licensed Product is sold as part of a Combination Product (as defined below), the Net Sales from the Combination Product, for the purposes of determining royalty payments, shall be determined by multiplying the Net Sales (as determined above) of the Combination.

 

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Product, during the applicable royalty reporting period, by the fraction, A/A+B, where A is the average sale price of the Licensed Product when sold separately and B is the average sale price of the other active ingredient(s) included in the Combination Product when sold separately, in each case during the applicable royalty reporting period or, if sales of both the Licensed Product and the other active ingredient(s) did not occur in such period, then in the most recent royalty reporting period in which sales of both occurred.

 

In the event that such average sale price cannot be determined for both the Licensed Product and the other active ingredient(s) included in such Combination Product, Net Sales for the purposes of determining royalty payments shall be calculated by multiplying the Net Sales of the Combination Product by the fraction of C/C+D where C is the fair market value of the Licensed Product and D is the fair market value of all other active ingredient(s) included in the Combination Product as determined by ACHILLION in good faith and reasonably acceptable to UMBC.

 

As used above, the term “Combination Product” means any product that includes both (x) a Licensed Product and (y) one or more other active ingredients.

 

In order to insure UMBC the full royalty payments contemplated under this Agreement, ACHILLION agrees that in the event any Licensed Product is sold to any Person with which ACHILLION has any agreement, understanding or arrangement with respect to consideration (such as, among other things, an option to purchase stock or actual stock ownership, or an arrangement involving division of profits or special rebates or allowances), or otherwise at less than arms length, Net Sales shall be determined as may be mutually agreed by the parties in good faith.

 

Section 1.16 “ Party ”. Party means ACHILLION or UMBC; “Parties” means ACHILLION and UMBC.

 

Section 1.17 “ Patent Rights ”. Patent Rights means patents and patent applications and all substitutions, divisions, continuations, continuations-in-part, reissues, reexaminations and extensions thereof.

 

Section 1.18 “ Person ”. Person means any natural person or any corporation, company, partnership, joint venture, firm or other entity, including without limitation a Party.

 

Section 1.19 “ Regulatory Approval ”. Regulatory Approval means the approvals (including any applicable governmental price and reimbursement approvals), licenses, registrations or authorizations necessary for the Commercialization of a product in a country.

 

Section 1.20 “ Required Third Party Payments ”. Required Third Party Payments means, with respect to a Licensed Product, payments by ACHILLION and/or its Affiliates to Third Parties to (a) license Patent Rights Covering such Third Parties’ technology if, in the absence of such license, the Development and/or Commercialization of such Licensed Product by ACHILLION, its Affiliates or sublicensees in the Territory would or is likely to, in the good faith judgment of ACHILLION, infringe such Patent Rights or (b) settle claims by such Third Parties in accordance with Section 5.1.

 

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Section 1.21 “ Sublicense Income ”. Sublicense Income means all amounts received by ACHILLION and/or its Affiliates from sublicensees in consideration for sublicenses under the license granted by UMBC to ACHILLION in Section 3.1 of rights to Develop and Commercialize Licensed Products, less actual, reasonable third-party costs incurred by ACHILLION in negotiating and entering into such sublicenses, excluding:

 

(a) royalties received by ACHILLION and/or its Affiliates from sublicensees in respect of sales of Licensed Products by such sublicensees;

 

(b) amounts received by ACHILLION and/or its Affiliates from such Third Parties at the fair market value purchase price for ACHILLION’s and/or its Affiliates’ debt or equity securities; and

 

(c) amounts received by ACHILLION and/or its Affiliates for future research and development activities undertaken for, or in collaboration with, such sublicensees provided such development activities are detailed in a written research and development plan and corresponding budget.

 

Section 1.22 “ Territory ”. Territory means all countries of the world.

 

Section 1.23 “ Third Party ”. Third Party means any person or entity other than a Party or any of its Affiliates.

 

Section 1.24 “ Valid Claim ”. Valid Claim means a claim of any pending, issued, and unexpired United States patent application or patent and any foreign equivalent, which shall not have been donated to the public, disclaimed, nor held invalid or unenforceable by a court of competent jurisdiction in an unappealed or unappealable decision.

 

Section 1.25 “ Additional Definitions ”. Each of the following definitions is set forth in the section of this Agreement indicated below:

 

 

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Article II

Scientific Cooperation; Diligence

 

Section 2.1 Discussions of Scientific and Technical Matters . To the extent that the inventors of the Licensed Patent Rights and the providers of Licensed Know-How are willing to cooperate, the Parties may discuss scientific and technical matters relating to Licensed Products from time to time as mutually agreed by the Parties with the goal of improving such Licensed Products.

 

Section 2.2 Diligence . ACHILLION shall use commercially reasonable efforts to Develop and Commercialize at least one Licensed Product and, in particular, shall (together with its Affiliates and sublicensees) achieve the following diligence milestones within the following time periods:

 

 

provided , however , that if ACHILLION does not achieve such diligence milestones within the time periods specified above, but ACHILLION notifies UMBC that it is actively and diligently pursuing the achievement of such diligence milestones and provides to UMBC a written development plan detailing the steps ACHILLION will take to achieve such diligence milestones, including a detailed timetable for completing such steps and such development plan is reasonably acceptable to UMBC, then the deadlines for achieving such diligence milestones shall be extended during all periods in which ACHILLION, its Affiliates and/or its sublicensees are actively and diligently pursuing the achievement of such diligence milestones in accordance with such development plan. UMBC’s sole and exclusive remedy and ACHILLION’s sole and exclusive liability for any failure to achieve the diligence milestones above shall be for UMBC to terminate this agreement in accordance with Section 8.3.

 

Section 2.3 Other Products . In the event that evidence is provided, in writing by UMBC or by another party, to ACHILLION, demonstrating the practicality and commercial feasibility of a particular market which is not being developed or commercialized by ACHILLION; ACHILLION shall either provide UMBC with a reasonable development plan and start development or attempt to reasonably sublicense the particular technology to a third party. If within [**] of such notification by UMBC, ACHILLION has not initiated such development efforts or sublicensed that particular market, UMBC may terminate this license for such

 

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particular market. This Paragraph shall not be applicable if ACHILLION reasonably demonstrates to UMBC that commercializing a Licensed Product or granting such a sublicense in said particular market would have a potentially adverse commercial effect upon marketing or sales of the Licensed Products developed and being sold by ACHILLION or its sublicensees.

 

Section 2.4 U.S. Manufacture . To the extent required by applicable United States laws and regulations, ACHILLION agrees that Licensed Products will be manufactured in the United States or its territories, subject to such waivers as may be required by or obtained from the United States Department of Health and Human Services, or any successor agency or designee.

 

Section 2.5 Diligence Reporting . Until ACHILLION or its Sublicensee has achieved a first commercial sale of a Licensed Product, a report shall be submitted at the end of every December following the Effective Date of this Agreement and will include a full written report describing ACHILLION’s or its sublicensee ‘s technical efforts towards meeting its obligations under the terms of this Agreement as set forth in this Article II.

 

Article III

Grant of License

 

Section 3.1 Development and Commercialization License . Subject to the retained rights of UMBC, HHMI, and the United States Government as set forth in Section 3.3, below, and ACHILLION’s compliance with the terms and conditions of this Agreement, UMBC hereby grants to ACHILLION and its Affiliates an exclusive, royalty-bearing license, with the right to grant sublicenses, under the Licensed Intellectual Property, to Develop and Commercialize Licensed Products in the Territory.

 

Section 3.2 Sublicenses . ACHILLION shall have the right to grant sublicenses under the license granted by UMBC to ACHILLION in Section 3.1, which sublicenses shall include, without limitation, a provision binding sublicensees to all reporting and record-keeping obligations hereunder with respect to sales of Licensed Products. ACHILLION further agrees to deliver to UMBC for information purposes (and under the obligation of confidentiality) a copy of each sublicense granted by ACHILLION within [**] after the execution of such sublicense. Such copy may be redacted to exclude confidential scientific information and other information required by a Sublicensee to be kept confidential, provided that all relevant financial terms and information and any terms related to indemnity and insurance shall be retained. Any sublicense granted by Achillion, an Affiliate, or a sublicensee pursuant to this Section 3.2 shall be consistent with the terms and scope of this Agreement and shall contain terms that require the sublicensee to grant UMBC and HHMI the same protections granted to UMBC and HHMI by Achillion in Article X and Section 11.14 of this Agreement. Any grant of a sublicense by Achillion, an Affiliate, or a sublicensee that is inconsistent with the foregoing sentence shall be invalid unless Achillion obtains prior written consent from UMBC.

 

Section 3.3 Retained Rights . Notwithstanding anything to the contrary in Section 3.1: (i) UMBC retains the right under the Licensed Intellectual Property to make and use Licensed Products solely for educational and research purposes; (ii) HHMI retains the right to use Licensed Intellectual Property solely for educational and research purposes and (iii) the exclusive

 

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license granted in Section 3.1 shall be subject to the retained rights of the United States Government in accordance with Public Law 96-517, as amended by Public Law 98-620.

 

Section 3.4 Section 365(n) of the Bankruptcy Code . All rights and licenses granted under or pursuant to any section of this Agreement are, and otherwise shall be deemed to be, for purposes of Section 365(n) of the Bankruptcy Code, licenses of rights to “intellectual property” as defined under Section 101 (35A) of the Bankruptcy Code. ACHILLION shall retain and may fully exercise all of its respective rights and elections under the Bankruptcy Code.

 

Article IV

Financial Provisions

 

Section 4.1 License Milestone Payments . ACHILLION shall make the following license milestone payments to UMBC on or before the dates specified; provided that ACHILLION shall not be required to make any such payment that otherwise would become due after any termination of this Agreement:

 

 

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All payments made by ACHILLION to UMBC under this Section 4.1 shall be creditable against any amounts payable by ACHILLION to UMBC under Section 4.2(c) of this Agreement.

 

Section 4.2 Royalties; Sublicense Income Payments .

 

(a) Royalties on Net Sales of Licensed Products . ACHILLION shall pay royalties to UMBC on Net Sales of each Licensed Product made during the periods set forth in Section 4.2(d), on a Licensed Product-by-Licensed Product basis, at the following rates:

 

 

The royalty rates set forth in this Section 4.2(a) shall be reduced by [**] percent ([**]%) for any Licensed Product sold that is not Covered by an issued claim included in Licensed Patent Rights. In the event that ACHILLION pays royalties to UMBC pursuant to this Paragraph 4.2(a) for the sale of a Licensed Product, which is not Covered by any issued claim and never becomes Covered by an issued claim included within Licensed Patent Rights, and all pending claims Covering said Licensed Product become finally rejected in an unappealed or unappealable decision, then ACHILLION may deduct royaltie