LICENSE AGREEMENT

EXHIBIT 10.17

LICENSE AGREEMENT

License (this “Agreement”) made as of April 13, 2006, by and between  Acuity Pharmaceuticals, Inc., a Delaware corporation, with its principal offices at 3701 Market Street, Philadelphia, PA, 19104 (“ Acuity ”) and Pathogenics, Inc ., a Delaware Corporation with its principal offices at 99 Derby Street, Suite 200, Hingham, MA 02043 (“ Pathogenics ”) . (Acuity and Pathogenics are sometimes referred to herein individually as a “ Party ” and collectively as the “ Parties ”).

BACKGROUND

WHEREAS, Acuity is engaged in the research, development and commercialization of ophthalmic pharmaceutical products;

WHEREAS, Pathogenics is a biopharmaceutical company engaged in the acquisition, development and commercialization of novel therapeutics that have potential significant commercial viability and that target certain unmet market needs;

WHEREAS, Pathogenics has exclusively licensed rights to N-Chlorotaurine, a chemical substance produced within the body by white blood cells during an inflammatory reaction (“ N-Chlorotaurine ”), initially developed by researchers at the University Hospital of Innsbruck and the Institute of Hygiene and Social Medicine, Leopold-Franzens-University of Innsbruck, Austria (the “ Institute ”);

WHEREAS, Acuity and Pathogenics believe that N-Chlorotaurine could be developed into an efficacious treatment for conjunctivitis and other related ocular conditions;

WHEREAS, researchers at the Institute are preparing to conduct clinical trials in Austria (the “Austrian Clinical Trials”) to determine if N-Chlorotaurine can be used as an efficacious treatment for conjunctivitis and other related ocular conditions;

WHEREAS, Acuity desires to obtain from Pathogenics, and Pathogenics desires to grant to Acuity, an exclusive worldwide license to all of Pathogenics’ rights in and to N-Chlorotaurine for the development and commercialization of ophthalmic pharmaceutical products for use in humans in accordance with the terms of this Agreement.

NOW, THEREFORE, in consideration of the mutual promises, covenants, agreements, representations and warranties hereinafter set forth, and intending to be legally bound, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

“Affiliate” means any entity that directly or indirectly Owns, is Owned by, or is under common Ownership with a Party to this Agreement. “Owns” or “Ownership” means direct or

 

indirect possession of more than fifty percent (50%) of the votes of holders of a corporation’s voting securities or a comparable equity interest in any other type of entity.

“Agency” means the FDA or any governmental regulatory authority responsible for granting approvals for the sale of Licensed Products in the United States or any foreign country.

“Agreement” means this Agreement, together with all exhibits and attachments.

“Clinical Trials” means all trials and studies of the application of Licensed Products in humans or clinical studies performed by Acuity for any purpose including without limitation for purposes of obtaining regulatory approval in the United States or any foreign country and marketing Licensed Products in the United States or any foreign country.

“Commercially Reasonable Efforts” means, with respect to the efforts to be expended by a Party with respect to any objective, diligent, good faith efforts to accomplish such objective as such Party would normally use to accomplish a similar objective under similar circumstances, it being understood and agreed that with respect to the development and commercialization of Licensed Products, such efforts shall be substantially equivalent to those efforts and resources commonly used by a bio-pharmaceutical company for a similar pharmaceutical product owned by it or to which it has rights, which product is at a similar stage in its development or product life and is of similar market potential taking into account efficacy, safety, approved labeling, the competitiveness of alternative products in the marketplace, the patent and other proprietary position of the product, the likelihood of regulatory approval given the regulatory structure involved, the profitability of the product, alternative products and other relevant factors.

“Confidential Information” has the meaning set forth in Section 6.1.

“ Effective Date ” means the day and year first indicated above.

“EMEA” means the European Medicines Evaluation Agency, or any successor thereto.

“FDA” means the United States Food and Drug Administration, or any successor thereto.

“ Field of Use ” means the treatment of ophthalmic diseases or infection, such as but not limited to, viral conjunctivitis, bacterial conjuctivitis and herpetic keratitis.

“Fiscal Quarter” means each period of three (3) months ending on March 31, June 30, September 30, or December 31.

“GAAP” means generally accepted accounting principles as in effect from time to time in the United States.

“ IND ” means an “investigational new drug application” as defined by the United States Food, Drug, and Cosmetic Act, as amended (the “Act”), and applicable FDA rules and regulations or a foreign equivalent.

“ Licensed Products ” means products whose manufacture, use or sale would, but for the existence of this Agreement, infringe a valid claim of the Pathogenics Patent Rights.

 

“MHW” means the Ministry of Health and Welfare of Japan, or any successor thereto.

“NDA” means a “new drug application,” as defined in the Act and applicable FDA rules and regulations, including an application of the type described in section 505(b)(2) of the Act.

“Net Sales” means the total gross proceeds to Acuity on sales to Third Parties representing sales actually collected by Acuity and its Affiliates, less deductions for the following to the extent actually paid or allowed with respect to the such sales:

(a)   sales and excise taxes and duties (including import duties) paid or allowed by a selling party and any other governmental charges imposed upon the manufacture or sale, after giving effect to any rebates or refunds relating to such taxes or duties received by Acuity;

(b)   rebates and chargebacks (including rebates to social and welfare systems) actually paid;

(c)   allowances, chargebacks, and credits to Third Parties on account of rejected, damaged, outdated, returned, withdrawn, or recalled product or on account of retroactive price reductions affecting such product; and

(d)   amounts paid to Third Parties on account of rebate payments, including Medicaid rebates.

Taxes, the legal incidence of which is on the purchaser and separately shown on Acuity’s or its Affiliates’ invoices, and transportation, insurance and postage charges, if prepaid by Acuity or its Affiliates and billed on Acuity’s or its Affiliates’ invoices as a separate item, shall not be considered a component of Net Sales. Components of Net Sales shall be determined in the ordinary course of business in accordance with Acuity’s historical practice and using the accrual method of accounting in accordance with GAAP.

The supply of a product as commercial samples or for use in clinical trials or studies shall not be included within the computation of Net Sales.

Where (i) a product is sold by Acuity or an Affiliate as one of a number of items without a separate price; or (ii) the consideration for a product shall include any non-cash element; or (iii) the product is transferred by Acuity or an Affiliate in any manner other than an invoiced sale, the Net Sales price applicable to any such transaction shall be deemed to be Acuity’s average Net Sales price for the applicable quantity of a product to the relevant class of customers at that time.

“ Net Sublicense Payments ” means (a) cash payments made to Acuity in consideration of the sublicense; and (b) the fair market value of any non-cash consideration received by Acuity from a sublicense in consideration of the sublicense other than; provided, however that the following shall not be included in the calculation of Net Sublicense Payments (i) reasonable amounts received in exchange for equity investments in Acuity by a sublicensee, (ii) sponsored research funding paid to Acuity by a sublicensee in a bona fide transaction for future research to be performed by Acuity; (iii) payments for consulting services actually performed by Acuity in a bona fide transaction at arms length rates; and (iv) intellectual property rights received by Acuity from a sublicensee, including, but not limited to, licenses or sublicenses to intellectual property

 

rights, covenants not to compete against Acuity, or agreements not to assert claims against Acuity.

“Patents” means all valid claims in all patent applications, and all foreign patents and patent applications based thereon, including any continuations, divisionals, continuations-in-part, extensions, reissues and re-examinations of any of the foregoing and all patents issuing from any of the foregoing applications.

“Pathogenics Improvements” means any improvements to the Pathogenics Patent Rights and Pathogenics Know-how, in each case owned by Pathogenics as of the date hereof, that are conceived, created, developed, and/or otherwise invented by Pathogenics, by Acuity.

“Pathogenics Intellectual Property” means the Pathogenics Patent Rights, Pathogenics Improvements, and the Pathogenics Know-how.

“Pathogenics Know-how” means Technical Information owned, developed, or controlled by Pathogenics as of the date of this Agreement or during the Term of this Agreement.

“Pathogenics Patent Rights” means any valid claim of any Patent issued based on a patent application previously or hereafter filed by or on behalf of Pathogenics or previously or subsequently assigned, licensed, or granted to, or acquired by, Pathogenics, including without limitation Patents and patent applications based on Pathogenics Improvements. Exhibit A lists all the patents and patent applications giving rise to Pathogenics Patent Rights as of the date of this Agreement.

“Technical Information” means all techniques and data and other know-how and technical information, including inventions (including patentable inventions), practices, methods, concepts, know-how, trade secrets, documents, computer data, source code, apparatus, clinical and regulatory strategies and data, test data, analytical and quality control data, manufacturing data or descriptions, development information, drawings, specifications, designs, plans, proposals and technical data and manuals and all other proprietary information concerning the development, manufacture, production, quality control, storage, distribution and sale of N-Chlorotaruine or and any of its derivatives or analogs.

“Third Party” means any entity other than Pathogenics or Acuity or their Affiliates.

ARTICLE II

LICENSE GRANT; Diligence Obligation

2.1. License Grants to Acuity .   Pathogenics hereby grants to Acuity, and Acuity hereby accepts from Pathogenics, a sole and exclusive (even as to Pathogenics) irrevocable right and license, including the right to sublicense, under and to Pathogenics Intellectual Property to make, have made, use, sell, offer for sale, import or otherwise commercialize N-Chlorotaurine and Licensed Products in the Field of Use with any territory.

2.2. Technology Transfer and Assistance . Pathogenics shall provide reasonable assistance to Acuity to effect the orderly transfer to Acuity of Pathogenics Know-How, including the transfer to Acuity of all Pathogenics Materials. Pathogenics will use

 

reasonable efforts to provide this assistance to Acuity as soon as practicable. Pathogenics shall cooperate with Acuity in connection with efforts to develop and commercialize N-Chlorotaurine in the Field of Use.

2.3. No Restrictions on Business . Pathogenics agrees that Acuity is in the business of developing, and selling ophthalmic pharmaceutical products and that, subject to Section 3.2, nothing in this Agreement shall be construed as restricting such business or imposing on Acuity the duty to develop, register, market, and/or to sell Licensed Products hereunder to the exclusion of or in preference to any other product or otherwise preclude Acuity from developing other pharmaceutical products. Correspondingly, except as set forth herein, nothing herein shall be construed as restricting the business of Pathogenics.

2.4. Diligence: Development and Commercialization . Acuity shall use Commercially Reasonable Efforts to develop and commercialize the Licensed Product. The obligations set forth in this Section 2.4 are expressly conditioned upon the absence of any serious adverse conditions or event relating to the safety or efficacy of the Technology or Product including the absence of any action by any regulatory authority limiting the development or commercialization of the Technology or Product.

2.5. Sublicenses . Acuity shall have the right to grant sublicenses to any Third Party to develop, make, have made, use, import, offer for sale, market, commercialize, distribute and sell and otherwise dispose of the Technology or Product for use in the Field-of-Use and the Territory; provided, however that any such sublicense shall be consistent with the terms of this Agreement. In the event that Acuity proposes to grant a sublicense to any Third Party, Acuity shall give Pathogenics a written notice prior to entering into the sublicense describing the proposed sublicense, including the specific rights proposed to be sublicensed and the material commercial and professional terms of the proposed sublicense. Acuity shall also provide Pathogenics with a copy of any sublicense agreements. Upon any termination of this Agreement pursuant to Section 9.2, Pathogenics may elect to have any existing sublicense agreement(s) survive and be assigned by Acuity to Pathogenics provided that (i) the sublicensee is not in breach of its sublicense agreement at the time of such termination of this Agreement, and (ii) any sublicensee who desires its sublicense to survive shall promptly agree in writing to be bound by the applicable terms of and assume all obligations of Acuity under this Agreement.

ARTICLE III

AUSTRIA DEVELOPMENT PROGRAM

3.1. Austrian Clinical Trials . Acuity will have non-exclusive rights to all data resulting from the Austrian Clinical Trials. Pathogenics will use its best efforts to cause the researchers at the Institute and any person participating in the Austrian Clinical Trials to provide Acuity with all data resulting from such trials. Acuity shall treat all information disclosed to it under this Section 3.1 as Confidential Information (as herein defined).

3.2. Austrian Trial Acceleration Funding.

(a)   Upon the completion of a Phase I clinical trial in Austria to study N-Chlorotaurine in the Field of Use, Pathogenics will use its best efforts to cause the researchers

 

at the Institute and any person participating in the Austrian Clinical Trials to prepare, or cause to be prepared, and deliver to Acuity a final report for the Phase I clinical trial (the “ Final Report ”). Acuity shall treat all information disclosed to it under this Section 3.2 as Confidential Information (as herein defined).

(b)   The scope and form of the Final Report shall be mutually agreed upon by Pathogenics and Acuity prior to its delivery.

(c)   Acuity shall have thirty (30) days from the delivery of the Final Report to determine, in Acuity’s sole reasonable discretion, if the Final Report justifies the initiation of a Phase II clinical trial in Austria.

(d)   If Acuity determines that the Final Report justifies the initiation of a Phase II clinical trial in Austria:

(i)   Acuity shall make available to the Institute and or the Phase II clinical investigators, up to $ [ ^{*   Confidential material which has been omitted and filed separately with the Securities and Exchange Commission.} **] to be used to accelerate the Phase II clinical trial. Acuity, Pathogenics, and the researchers Institute and or the Phase II clinical investigators will jointly determine how this money will be utilized.

(ii)   Acuity shall use its Commercially Reasonable Efforts to initiate chemistry, manufacturing and pre-clinical activities as are necessary to file an IND with the FDA to initiate a phase I clinical trial in the United States using N-Chlorotaurine as a treatment for an ophthalmic indication. Acuity shall own all right, title, and interest in any data generated in the course of such activities and all applications and data submitted to the any Agency. Acuity will provide Pathogenics with any data generated in the course of such activities and all applications and data submitted to any Agency, and Pathogenics will have non-exclusive rights to this information for research and development activities outside the Field of Use. Pathogenics shall treat all information disclosed to it under this Section 3.2 as Confidential Information (as herein defined).

(e)   If Acuity determines that the Final Report fails to justify the initiation of a Phase II clinical trial in Austria and Pathogenics reasonably disagrees with this conclusion, Pathogenics shall have the right to terminate this Agreement upon thirty (30) days notice to Acuity of this determination if Acuity fails to reverse its determination during this thirty-day period.

ARTICLE IV

MILESTONES, FEES, AND ROYALTY PAYMENTS; ACCOUNTING

4.1. Austrian Phase I Clinical Trial Completion Fee . In consideration of the license grant provided by Pathogenics to Acuity, Acuity agrees to pay to Pathogenics a one time $ [***] payment upon the successful completion of the Austrian Phase I clinical trial.

 

4.2. Milestone Payments . In consideration of the license grant provided by Pathogenics to Acuity, and conditioned upon Acuity having determined that the Final Report justifies the initiation of a Phase II clinical trial in Austria, Acuity agrees to pay to Pathogenics, the following milestone payments upon the successful completion of the milestones set forth below for the first Licensed Product hereunder:

(a)   Each of the foregoing payments shall be made only once. Thereafter, no additional Milestone Payments shall be due or payable by Acuity to Pathogenics for License Products.

4.3. License Fee . In consideration for the license granted to Acuity under Section 2.1 of this Agreement, Acuity agrees to pay to Pathogenics a one time $ [***] license fee (“ License Fee ”) within 2 business days of the execution of this Agreement.

4.4. Royalty Payments . During the Term, Acuity will pay to Pathogenics a royalty on all Net Sales of Licensed Products sold by Acuity and its Affiliates equal to [***] percent ( [***] %) of Net Sales of Licensed Products.

4.5. Sublicense Fees. During the Term, Acuity will pay to Pathogenics a sublicense fee in a decreasing range as set forth above in Section 4.2 from a maximum of [***] percent ( [***] %) to a minimum of [***] percent ( [***] %) of the Net Sublicense Payments received by Acuity from sublicensees who sell Licensed Products pursuant to a sublicense agreement with Acuity, the sublicense fee depending upon what milestone stage has been successfully completed. Prior to the successful completion of the first milestone as set forth above in Section 4.2, any Third Party sublicensee shall be treated for the purpose of this section as [***] of Acuity, and Acuity shall pay Pathogenics a [***] royalty on all Net Sales of Licensed Products sold by its [***] equal to [***] percent ( [***] %) of Net Sales of Licensed Products as set forth above in Section 4.4.

4.6. Withholding Taxes . Acuity shall be entitled to deduct from its payments to Pathogenics the amount of any withholding taxes, value-added taxes or other taxes, levies or charges with respect to such amounts payable by Acuity, or any taxes in each case required to be withheld by Acuity to the extent Acuity pays the appropriate governmental authority on behalf of Pathogenics such taxes, levies or charges. Acuity shall deliver to Pathogenics, upon reasonable request, proof of payment of all such taxes, levies and other charges and appropriate documentation which is necessary to obtain a tax credit, to the extent such tax credit can be obtained.

4.7. Timing of Payments

(a)   Acuity shall provide written notice to Pathogenics the satisfaction of such milestone trigger.

(b)   Acuity will pay the applicable milestone payments within thirty (30) days of written notice of the achievement of the applicable milestone.

(c)   Royalties and Sublicense Fees payable under Section 4.4 or Section 4.5 will be paid not later than sixty (60) days following the end of each Fiscal Quarter, or not later than sixty (60) days from the date that is as soon thereafter as may be practicable in order for Acuity to determine the royalty payable. All payments shall be accompanied by a report in writing showing for the quarter for which such royalty payment applies: (i) the Net Sales of Licensed Products for which royalties are required pursuant to Section 4.4 (along with a reasonably detailed description of the calculation thereof) in United States dollars; (ii) the Sublicense Fees payable pursuant to Section 4.5 in United States dollars; and (iii) the withholding taxes, if any, required by law to be deducted with respect to such royalties and Sublicense Fees and the amounts paid to the appropriate governmental authority with respect to such royalties and Sublicense Fees.

4.8. Minimum Annual License Fee . If total payments (including any payments required pursuant to Section 3.2 or Sections 4.1 through 4.5) required to paid to Pathogenics for the annual periods set forth below are less than the minimum amount set forth below, Acuity shall pay Pathogenics an amount (the “Annual Minimum Payment”) for that annual period equal to the difference between the total payments required for such annual period and the Annual