LICENSE AGREEMENT

Exhibit 10.3

 

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.

 

LICENSE AGREEMENT

 

BETWEEN

 

ACHILLION PHARMACEUTICALS, INC.

 

AND

 

EMORY UNIVERSITY

 

EFFECTIVE AS OF JULY 19, 2002

LICENSE AGREEMENT

 

This License Agreement (this “Agreement”) is made by and between Emory University, a Georgia non-profit corporation, with offices located at 1380 South Oxford Road, N.E., Atlanta, GA 30322 (“Emory”), and Achillion Pharmaceuticals, Inc., a Delaware corporation, with its principal offices at 300 George Street, New Haven, CT 06511 (“Achillion”). The Agreement is effective as of July 19, 2002 (the “Effective Date”).

 

BACKGROUND

 

A. Emory owns certain intellectual property developed by Drs. Raymond F. Schinazi and Dennis C. Liotta at Emory relating to the treatment of Human Immunodeficiency Virus (“HIV”) and Hepatitis B Virus (“HBV”), as described more fully in the Attachment;

 

B. Emory owns the United States letters patents and/or applications including foreign counterparts listed in the Attachment to this Agreement relating to the intellectual property as described above;

 

C. Achillion desires to obtain the exclusive right and license to use and exploit the intellectual property described in the Attachment and further defined below; and

 

D. Emory has determined that the exploitation of this intellectual property is in the best interest of Emory and is consistent with its educational and research missions and goals.

 

NOW, THEREFORE, in consideration of the promises and covenants contained in this Agreement and intending to be legally bound, the Parties agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

1.1 “Affiliate” means any legal entity directly or indirectly controlling, controlled by or under common control with a Party, and in the case of Achillion that has also executed (a) this Agreement or (b) a written joinder agreement, in a form satisfactory to Emory, agreeing to be

 

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bound by all of the terms and conditions of this Agreement as if such Affiliate were an original Party to this Agreement. For purposes of this Agreement, “controlling,” “controlled by,” and “under common control” means the direct or indirect ownership of more than fifty percent (50%) of the outstanding voting securities of a legal entity, or the right to receive more than fifty percent (50%) of the profits or earnings of a legal entity, or the right to control the management policy decisions of a legal entity.

 

1.2 “Agreement” shall have the meaning given in the first paragraph hereof.

 

1.3 “Calendar Quarter” means each three-month period, or any portion thereof, beginning on January 1, April 1, July 1 and October 1.

 

1.4 “Confidential Information” means all know-how or other information, including, without limitation, proprietary information and materials (whether or not patentable) regarding a Party’s technology, products, business information 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 material, trade secret or other information is disclosed by the disclosing Party to the other Party. Notwithstanding the foregoing to the contrary, (a) all Emory Subject Technology shall constitute Confidential Information of Emory, and (b) materials, know-how or other information which is orally, electronically or visually disclosed by a Party, or is disclosed in writing without an appropriate letter, stamp or legend, shall constitute Confidential Information of a Party (i) if the disclosing Party, within thirty (30) days after such disclosure, delivers to the other Party a written document or documents describing the materials, know-how or other information and referencing the place and date of such oral, visual, electronic or written disclosure and the names of the persons to whom such disclosure was made, or (ii) such information is of the type that is customarily considered to be

 

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confidential information by persons engaged in activities that are substantially similar to the activities being engaged in by the Parties pursuant to this Agreement.

 

1.5 “Emory Subject Technology” shall mean all technology, trade secrets, know-how, methods of treatment, documents, materials, tests, all improvements thereto, and all proprietary information pertaining to the compound b -L-FD4C (2’,3’-dideoxy-2’,3’-didehydro- b -L-5-fluorocytidine) or any 5’- or N ⁴ derivatives or prodrugs thereof, in each case either (a) owned or controlled by Emory as of the Effective Date or (b) owned or controlled by Emory and covered by any patent or patent application described in the immediately following sentence, other than the combination of b -L-FD4C with (i) FTC (2-hydroxymethyl-5-(5-fluorocytosin-1-y1)-1,3-oxathiolane) or (ii) 3TC (2-hydroxymethyl-5-(cytosine-1-y1)-l,3-oxathiolane) or (iii) other compounds on which Emory holds composition of matter patent rights (each such other compound an “Emory Compound”). Emory Subject Technology shall specifically include claims to the extent they relate to b -L-FD4C in U.S. Patent No. 5,703,058, which issued on December 30, 1997, entitled “Compositions Containing 5-Fluoro-2’,3’-didehydro-2’,3’-dideoxycytidine or a Mono-, Di-, or Triphosphate thereof and a Second Antiviral Agent” together with all claims to the extent they relate to b -L-FD4C in patent applications and patents claiming priority from U.S. Patent No. 5,703,058 owned or controlled by Emory whether in the U.S. or any other country and all substitutions, divisions, continuations, continuations-in-part, renewals, reissues, reexaminations and extensions on such patent applications and patents, whether owned or controlled by Emory as of the Effective Date or thereafter. A list of Emory’s U.S. and foreign patent applications and patents claiming Emory Subject Technology (“Licensed Patents”) as of the Effective Date is provided in the Attachment. Any patent application or patent claiming Emory Subject Technology that is owned or controlled by Emory as of the

 

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Effective Date and is, through inadvertence or otherwise, not listed in the Attachment shall nonetheless be deemed to be included in such Attachment. For avoidance of doubt, it is hereby confirmed that no license, right or immunity is granted by Emory to make, import, use, sell or offer to sell b -D-D4FC ( b -D-2’,3’-dideoxy-2’,3’-didehydro-5-fluorocytidine) or any 5’- or N ⁴ derivatives or prodrugs thereof owned or controlled by Emory or to make, import, use, sell or offer to sell b -L-FD4C in physical combination with any Emory Compound, wherein physical combination means a pharmaceutical product in any dosage form that contains b -L-FD4C and an Emory Compound.

 

1.6 “Field” means all human prophylactic and therapeutic applications with respect to HIV and HBV.

 

1.7 “FDA” means (a) the United States Food and Drug Administration or any successor agency thereto, and (b) except where otherwise specifically provided in this Agreement, any foreign agency or commission performing comparable functions.

 

1.8 “License” shall mean the license granted by Emory to Achillion pursuant to Section 2.1.

 

1.9 “Licensed Product(s)” means a product containing b -VL-FD4C that is developed, made, used, marketed, imported, Sold, or offered for Sale by Achillion, its Affiliates or any Sublicensees in any country of the Territory where Emory owns or controls at least one Valid Claim covering Emory Subject Technology.

 

1.10 “NDA” means (a) a New Drug Application filed with the U.S. FDA or any successor application or procedure and (b) except where otherwise specifically provided in this Agreement, any foreign equivalent of a U.S. NDA.

 

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1.11 “Net Sales” means with respect to a Licensed Product, the gross amounts received by Achillion and its Affiliates (or, for purposes of Section 3.7 only, by a Sublicensee that is not an Affiliate) for the Sale of the Licensed Product to unrelated third party purchasers, less the following deductions to the extent actually paid or allowed:

 

1.11.1

Repayments, allowances or credits actually given to such third parties for returned or defective Licensed Products;

 

1.11.2

Freight, transportation, delivery, taxes and insurance costs incurred in transporting such Licensed Products to such third parties if separately itemized on the invoice paid by the third party;

 

1.11.3

Quantity and other trade discounts actually allowed and taken in connection with the Licensed Products;

 

1.11.4

Rebates or chargebacks attributable to the Licensed Products;

 

1.11.5

Sales, value-added, use and other direct taxes (other than income) to the extent separately stated on purchase orders, invoices or other documents of sale; and

 

1.11.6

Customs and tariff duties and surcharges and other governmental charges incurred in connection with the exportation or importation of the Licensed Products.

 

The term “Net Sales” in the case of non-cash Sales (i.e., in-kind dispositions of Licensed Products for consideration other than a selling price stated in cash) shall mean all in-kind consideration received by Achillion or any Affiliate (or, for purposes of Section 3.7, its Sublicensees that are not Affiliates) for the Licensed Products.

 

In addition, the calculation of “Net Sales” as provided above shall be adjusted as provided in Section 3.4.4.

 

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1.12 “Party” means Achillion or Emory; “Parties” means Achillion and Emory. As used in this Agreement, references to “third parties” do not include a Party or its Affiliates.

 

1.13 “Sale,” “Sell” or “Sold” means the sale, lease, transfer, exchange, or other disposition of Licensed Products by Achillion, its Affiliates or Sublicensees. Sales of Licensed Products shall be deemed consummated upon the first to occur of: (a) receipt of payment from the purchaser; (b) delivery of Licensed Products to the purchaser or a common carrier; (c) if deemed Sold by use, when first put to such use; or (d) if otherwise transferred, exchanged, or disposed of when such transfer, exchange, or other disposition occurs. For avoidance of doubt, transfer of Licensed Product by Achillion, its Affiliates or Sublicensees to a third party for the purpose of conducting a clinical trial or for compassionate, humanitarian or similar use for which Achillion, its Affiliates or Sublicensees do not receive payment in excess of the manufacturing and distribution cost for such transfer is not a Sale.

 

1.14 “Sublicense” shall have the meaning given in Section 2.3.

 

1.15 “Sublicensee” shall have the meaning given in Section 2.3.

 

1.16 “Territory” means the entire world.

 

1.17 “Valid Claim” means a claim included in the Emory Subject Technology (a) of any issued, unexpired United States or foreign patent, which shall not have been donated to the public, disclaimed, nor held invalid or unenforceable against the other Party by a court of competent jurisdiction in an unappealed or unappealable decision, or (b) of any United States or foreign patent application, which shall not have been cancelled, withdrawn, abandoned nor been pending for more than seven (7) years.

 

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ARTICLE 2

 

LICENSE GRANT

 

2.1 License Grant . Subject to the terms and conditions of this Agreement, Emory hereby grants to Achillion an exclusive, royalty-bearing, worldwide, right and license under the Emory Subject Technology to develop, make, have made, use, market, import, have imported, Sell, offer for Sale and have Sold any and all Licensed Products in the field and in the Territory during the Term of the Agreement. Emory grants to Achillion only the qualified right to grant sublicenses as more fully described in Section 2.3. No other rights or licenses are granted.

 

2.2 Retained Rights . The License is exclusive, except that Emory retains, on behalf of itself and any academic research collaborators, the right and license to, and may permit other nonprofit organizations to, make and use Licensed Products and practice Emory Subject Technology for educational and research purposes only, it being understood that the provisions of this Section 2.2 do not imply, and Achillion does not grant, any right or license to use or practice any technology that is proprietary to Achillion or third parties.

 

2.3 Sublicense Rights . Achillion shall have the right to enter into sublicenses (each a “Sublicense”) relating to the license granted in Section 2.1 with third parties (each a “Sublicensee”) with which Achillion has agreed to develop and/or commercialize Licensed Products, provided however, that for each Sublicense grant (a) to a Sublicensee having a market capitalization of greater than [**] dollars ($[**]), Achillion shall give prompt written notice to Emory, and (b) to a Sublicensee having a market capitalization of less than [**] dollars ($[**]), Achillion shall first obtain Emory’s prior written approval, which approval shall not be unreasonably withheld or delayed. Each such Sublicense shall be subject and subordinate to, and consistent with, the terms and conditions of this Agreement, and shall provide that any such Sublicensees shall not further sublicense except on terms consistent with this Agreement. Achillion shall include in any Sublicense agreement provisions requiring the Sublicensee to abide by the confidentiality obligations herein, indemnify Emory and maintain

 

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insurance to the same extent that Achillion is so required pursuant to Sections 4.1, 8.4.1 and 8.6 of this Agreement. Achillion shall provide Emory with a copy of any Sublicense granted pursuant to this Section 2.3 within thirty (30) days after the execution thereof. 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 shall be retained. Achillion shall remain responsible for the performance of its Sublicensees (including, without limitation, the payment of all fees and royalties due hereunder regardless of whether or not a Sublicensee pays Achillion such amounts), and shall ensure that any such Sublicensees comply with the relevant provisions of this Agreement. In the event of a material default by any Sublicensee under a Sublicense agreement, Achillion will inform Emory and take such action, after consultation with Emory, which in Achillion’s reasonable business judgment will address such default. Achillion shall not grant any rights which are inconsistent with the rights granted to and obligations of Achillion hereunder. Any act or omission of a Sublicensee which would be a breach of this Agreement if performed or made by Achillion shall be deemed to be a breach by such Sublicensee. In addition, if Achillion grants a Sublicense to any third party (other than an Affiliate) with which Achillion also enters into a distribution agreement relating to a Licensed Product, the economic terms of the Sublicense agreement and the distribution agreement must each reflect arm’s-length pricing and Emory shall have the right to withhold its approval of such Sublicense if such agreements do not reflect arm’s-length pricing.

 

2.4 Section 365(n) of the Bankruptcy Code . All rights and licenses granted under or pursuant to any section of this Agreement are, and shall otherwise 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. The Parties shall retain and may fully exercise all of their respective rights and elections under the Bankruptcy Code.

 

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2.5 No Implied License . The License shall not be construed to confer any rights upon Achillion by implication, estoppel, or otherwise as to any technology not specifically identified in this Agreement as Emory Subject Technology.

 

2.6 Government Rights . The license granted in Section 2.1 above is conditional upon and subject to the U.S. Government Licenses and other rights retained by the United States in inventions developed by nonprofit institutions with the support of federal funds. These rights are set forth in 35 USCA §201 et seq. and 37 CFR 401 et seq., which may be amended from time to time by the Congress of the United States or through administrative procedures.

 

ARTICLE 3

 

FEES AND ROYALTY

 

3.1 Initial License Payment . In partial consideration of the grant by Emory of the License set forth in Section 2.1, Achillion shall pay Emory a non-refundable, non-creditable, initial License fee of one hundred thousand dollars ($100,000), payable within thirty (30) days of the Effective Date.

 

3.2 Clinical Milestones . Achillion shall make the following clinical milestone payments on or prior to the date [**] after the achievement of the following milestones for a License Product developed by Achillion, its Affiliates or Sublicensees:

 

 

Should a Licensed Product be abandoned by Achillion, its Affiliates or Sublicensees for any reason following achievement of one or more, but not all, of the clinical milestones above and

 

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should Achillion, its Affiliates or Sublicensees subsequently develop another Licensed Product, then the remaining unpaid clinical milestone payments achieved with respect to subsequent Licensed Product under this Section 3.2 shall be payable to Emory upon achievement of such clinical milestones with respect to such subsequent Licensed Product; provided that the clinical milestone payments above shall never be payable more than once, regardless of how many Licensed Products are developed.

 

Achillion shall be entitled to credit any amounts paid by Achillion under this Section 3.2 against all payments payable by Achillion under the first sentence of Section 3.7.

 

3.3 License Maintenance Payments . To ensure Achillion’s continued development and commercialization of Licensed Products, Achillion shall make license maintenance payments to Emory as provided in this Section 3.3 in the event that none of the clinical milestones described in Section 3.2 are achieved. Beginning with the second anniversary of Effective Date of the Agreement and continuing each year thereafter during the term of the Agreement, Achillion shall pay Emory a license maintenance payment in accordance with the schedule set forth below, unless and until a clinical milestone described in Section 3.2 has occurred prior to the applicable anniversary and, on or prior to the date [**] thereafter, Achillion has paid Emory the amount set forth above in Section 3.2 for such clinical milestone. Upon the satisfaction of the conditions set forth in the immediately preceding sentence, the license maintenance payment obligation under this Section 3.3 shall terminate.

 

 

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For example, the payment in the table above for Year 3 shall (if payable as set forth above in this Section 3.3) be payable on or before the second anniversary of the Effective Date.

 

3.4 Royalty.

 

3.4.1

Royalty Rate . Achillion shall pay to Emory royalty on Net Sales of any Licensed Product Sold by Achillion or its Affiliates according to the following schedule:

 

 

3.4.2

Length of Payments . The royalty payable under this Section 3.4 and the payments payable under Section 3.7 shall be paid on a country-by-country basis on each Licensed Product during the Term.

 

3.4.3

Required Third Party Payments . In the event that Achillion’s outside patent counsel together with Emory’s outside patent counsel agree that the development, making, having made, use, marketing, importation, having imported, Selling, offering for Sale or having Sold of a Licensed Product in a country by Achillion, its Affiliates and/or Sublicensees is covered by claims of third party patent rights (including pending patent applications), then Achillion shall be entitled to deduct [**] percent ([**]%) of any license fees incurred by Achillion to obtain a license under such third party patent rights with respect to such Licensed Product in such country

 

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(other than fees paid to Yale University or Vion Pharmaceuticals, Inc., which shall not be deductible) from the Calendar Quarterly royalty payments made by Achillion in respect of Net Sales of the Licensed Product in such country; provided that in no event shall a deduction under this Section 3.4.3 reduce any Calendar Quarterly royalty payment made by Achillion in respect of Net Sales of a Licensed Product in a country by more than [**] percent ([**]%). Any deduction that is not usable pursuant to the final clause of the immediately preceding sentence may be carried forward for use in a future period.

 

3.4.4

Combination Product Royalties . In the event a 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 of the Combination Product (as defined in the standard Net Sales definition), 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 in finished form and B is the average sale price of the other product(s) included in the Combination Product when sold separately in finished form, in each case during the applicable royalty reporting period or, if sales of both the Licensed Product and the other product(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 all other products(s)

 

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included in the 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 pharmaceutical product(s) included in the Combination Product. In such event, Achillion shall in good faith make a determination of the respective fair market values of the Licensed Product and all other pharmaceutical products included in the Combination Product, and shall notify Emory of such determination and provide Emory with data to support such determination.

 

As used above, the term “Combination Product” means any pharmaceutical product which consists of a Licensed Product and other active compounds and/or active ingredients.

 

3.4.5

Royalties Payable Only Once . The obligation to pay royalties is imposed only once with respect to the same unit of a Licensed Product Except as specifically provided in this Agreement, it is understood and agreed that there shall be no deductions from the royalties payable under this Agreement.

 

3.4.6

Sales to Affiliates . Sales of Licensed Products between Achillion and its Affiliates, or among such Affiliates, shall not be subject to royalties under this Section 3.4, but in such cases the royalties shall be calculated on the Net Sales by such Affiliates to a third party purchaser.

 

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3.4.7

Reports and Accounting .

 

3.4.7.1

Reports; Payment