SEMI-EXCLUSIVE BNP DIAGNOSTIC LICENSE AGREEMENT

 

NOW, THEREFORE, Scios and Biosite agree as follows:

 

1. DEFINITIONS

 

1.1                                  “ Affiliate ” means, as to a party to this Agreement, any corporation, company, partnership, joint venture or other entity which controls, is controlled by, or is under common control with, such party. For purposes of this Section 1.1, control shall mean, without limitation: (a) in the case of corporate entities, the direct or indirect ownership of at least fifty percent (50%) of the stock or participating shares entitled to vote for the election of directors; and (b) in the case of a partnership, the power customarily held by a general partner to direct the management and policies of such partnership.

 

1.2                                  “ Expanded Field ” means the testing of biological samples to determine BNP levels, which testing is carried out using [***], including without limitation [***] for use on [***] and [***], excluding the Field.

 

1.3                                  “ Field ” means the testing of biological samples to determine BNP levels, which testing is carried out using [***] or [***] and [***], [***], and whether [***].

 

1.4                                  “ Know-how ” means information and data of any type whatsoever, which is not generally known, including but not limited to formulae, processes, protocols, techniques, results of experimentation, amino acid and DNA sequences and testing and biological materials, reagents and organisms (including monoclonal antibodies and hybridoma cells) in the possession or control of Scios which relate to BNP and/or assays for determining BNP levels in biological materials and which are necessary or useful for the development, manufacture, use, regulatory approval or sale of Licensed Product.

 

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1.5                                  “ Licensed Product ” means any diagnostic test, reagent(s) or kit that (a) is useful for carrying out [***] to determine levels of BNP in biological materials, which assay [***] or a [***] of the [***] within the Territory, if [***]; and (b) (i) if made, used, offered for sale, sold or imported, absent the license granted hereby, would infringe the valid claims of the Patent Rights (if in an issued patent), or (ii) contains, incorporates, uses or was developed using the Know how. As used herein, a “valid claim” is a claim which has not been dedicated to the public or held invalid or unenforceable by a non-appealed or non-appealable decision of a court of competent jurisdiction.

 

1.6                                  “ Net Sales ” means the sum (without duplication) of:

 

(a)           invoiced sales price of Licensed Products sold by Biosite and its sublicensees, if any, to independent customers who are not Affiliates, less the following to the extent paid or accrued by Biosite or its sublicensees, if any, and not reimbursed (separate from the invoiced sales price) by or credited to the independent customer: (i) credits, allowances, discounts and rebates to, and chargebacks from the account of, such independent customers for spoiled, damaged, out-dated, rejected or returned Licensed Products; (ii) actual freight and insurance costs incurred in transporting Licensed Products to such independent customers; (iii) reasonable and customary cash, quantity and trade discounts, and other price reduction programs, actually given to the independent customer; (iv) sales, use, value-added and other direct taxes, and (v) customs duties, surcharges and other governmental charges incurred in connection with the exportation or importation of Licensed Products;

 

(b)          any other monetary consideration received by Biosite and its sublicensees, if any, from independent customers for the use of Licensed Product where such consideration is based upon the number of diagnostic tests carried out by the independent customer to determine BNP levels in samples, including without limitation charges designated as use, rental or installment purchase payments for

 

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automated diagnostic testing equipment provided to the independent customer by Biosite or its sublicensees or Affiliates; and

 

(c)           any amounts received by Biosite and its sublicensees from independent customers who are not Affiliates as fees for carrying out diagnostic tests to determine levels of BNP in samples using Licensed Product, less the following to the extent paid or accrued by Biosite or its sublicensees, if any, and not reimbursed (separate from the invoiced sales price) by or credited to the independent customers (i) reasonable and customary cash, quantity and trade discounts, and other price reduction programs, actually given to the independent customer, and (ii) sales, use, value-added and other direct taxes.

 

1.7                                  “ Patent Rights ” means, collectively, (a) those existing patents and patent applications listed on Appendix A attached hereto, (b) any patents which have issued or in the future issue therefrom, (c) all substitutions, extensions, reissues, renewals, divisions, continuations, or continuations-in-part for or of the foregoing, (d) all foreign counterparts of the foregoing, and (e) any additional patent applications or patents in the Territory that Scios owns during the term of this Agreement and that claim compositions of matter or methods useful in developing, making or using Licensed Products.

 

1.8                                  “ PMA ” means an application to the United States Food and Drug Administration (“FDA”) for premarketing approval of diagnostic product filed pursuant to 21 U.S.C. §513(f).

 

1.9                                  “ 510K ” means an application to the FDA seeking approval to market a Licensed Product that is filed pursuant to 21 U.S.C. §510(k).

 

1.10                            “ Territory ” means all countries of the world except Japan.

 

1.11                            “ Third Party ” means a party other than Scios, its other licensees under the Know-how and Patent Rights, Biosite and its sublicensees.

 

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2. RIGHTS GRANTED

 

2.1                                  Grant . Scios hereby grants to Biosite, subject to the terms and conditions set forth herein, the semi-exclusive right and license under the Patent Rights and Know-how to develop and seek regulatory approval for any diagnostic test, reagent(s) or kit that is useful for carrying out [***] to determine levels of BNP in [***] materials, and to [***] Licensed Products in the Field within the Territory. Specifically excluded is any product containing BNP which is used or intended for use or administered for therapeutic purposes, as to which Scios shall have complete freedom to develop such therapeutic product itself or with others in any manner.

 

2.2                                  Option for Expanded Field . Scios hereby grants to Biosite, subject to the terms and conditions set forth herein, an option, which may be exercised by Biosite upon notice to Scios and payment of the option fee set forth in Section 3.3, to modify the semi-exclusive right and license granted in Section 2.1 to additionally include the Expanded Field. Such modification shall apply prospectively from the date of notice and payment of the option fee by Biosite. The modified semi-exclusive right and license shall be subject to all other terms and conditions of this Agreement.

 

2.3                                  Sublicenses . In any country within the Territory, Biosite may grant [***] under the rights granted in Section 2.1 and Section 2.2 to [***] (which may, but need not be, [***] Biosite), provided [***] or [***]. Any sublicense shall be consistent in all respects with the license provisions of this Agreement. A copy of each sublicense (with any financial, technical or other confidential information redacted) shall be sent to Scios within [***] days of signature. [***]  Upon any termination of this Agreement between Biosite and Scios prior to its full term, all sublicenses shall terminate; provided

 

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that, if Biosite has granted any sublicense in the [***], Scios agrees to allow the sublicensee to continue its activity as [***] under this Agreement in the territory of its sublicense from Biosite.

 

2.4                                  Additional Licenses . Scios reserves the right to grant as to the Territory additional licenses under the Patent Rights and Know-how permitting the creation of competing diagnostic products; provided, however, that Scios agrees that a maximum of three entities (inclusive of Biosite [***]) shall be authorized at any time under licenses granted by Scios under the Patent Rights and Know-how within the Territory to [***] Licensed Products in any country.

 

3. PAYMENTS AND ROYALTIES

 

3.1                                  Initial Payment . In consideration of the license rights set forth herein, Biosite shall pay to Scios an initial payment of [***] ($[***]) upon execution of this Agreement. The foregoing amount shall not be refundable or creditable against any other amount payable hereunder.

 

3.2                                  Milestone Payments . Biosite shall make the following payments to Scios, [***] shall be [***] against any other amount payable hereunder, within [***] of the date or event indicated:

 

(a)                                   [***] ($[***]) upon [***] of a Licensed Product or [***] from the Effective Date, whichever occurs first;

 

(b)                                  [***] ($[***]) upon the first commercial sale of a Licensed Product in any country within the Territory,

 

(c)                                   [***] ($[***]) upon approval by the FDA to market a Licensed Product for [***].

 

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3.3                                  Option Payment . In the event that Biosite exercises the option to modify the semi-exclusive right and license to additionally include the Expanded Field, as provided for in Section 2.2, Biosite shall pay Scios an option exercise fee of [***] ($[***]) [***] notifies Scios that it is exercising the option. Such option exercise fee shall [***] against any other amount payable hereunder.

 

3.4                                  Royalties . Within [***] following the end of each calendar quarter during the term of this Agreement, Biosite shall pay to Scios earned royalties based on Net Sales of Licensed Products during the previous calendar quarter. Royalties shall be paid at the following rate, [***]:

 

(a)	[***]		[***]%
(b)	[***]		[***]%
(c)	[***]		[***]%

 

3.5                                  Term of Royalty Obligation . Subject to the termination provisions of Sections 11.2 and 11.3 below, Biosite’s obligation to pay royalties will expire, on a country-by-country basis, on [***] (a) the date when the last Patent Right in such country expires, lapses or is invalidated, or (b) [***] on which sales of Licensed Product [***], unless applicable law requires that the obligation expire sooner, in which case the obligation shall continue for the maximum period allowed by law.

 

3.6                                  Most Favored Licensee . In the event that Scios grants a license to a Third Party to sell Licensed Product under the Patent Rights and Know-how having a more favorable royalty rate than that set forth in Section 3.4 of this Agreement, this Agreement shall be modified by replacing the royalty rates in Section 3.4 with the royalty rates in such Third Party agreement. Biosite shall not have the right to require modification of any other financial terms of this Agreement to conform to any terms of any agreement between Scios and a Third Party relating to the subject matter of this Agreement.

 

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3.7                                  Place of Payment; Currency Conversion . All royalty payments due Scios shall be payable in United States dollars at Scios’ office in Mountain View, California, or such other place as may be designated by Scios from time to time. For sales made in a currency other than United States dollars, royalties payable under this Agreement shall be determined by converting the total royalty on Net Sales computed in the currency of sale for a calendar quarter into United States dollars using the closing spot exchange rate between the two currencies quoted in The Wall Street Journal (United States edition) on the last day of the applicable calendar quarter.

 

3.8                                  Taxation of Royalties .

 

(a)                                   Scios shall be solely responsible for and shall bear all withholding, value-added or other taxes, levies or charges (other than United States taxes) with respect to any royalties owing to Scios hereunder which are required by any governmental authority to be paid or withheld by Biosite or its sublicensees. Scios hereby authorizes Biosite to withhold such taxes from the payments which are payable to Scios in accordance with this Agreement if Biosite is either required to do so under the tax laws of the country of sale or the United States or directed to do so by an agency of either such government. Whenever Biosite deducts such tax from any payments due Scios, then Biosite shall furnish Scios with an original or copy of tax certificate, as required by the United States Internal Revenue Service, showing the payment of such tax.

 

(b)                                  In the event any royalty payments which are due to Scios under this Agreement are subject to any tax other than specified in Section 3.8(a), Biosite shall bear such tax.

 

3.9                                  Restrictions on Remittance . lf, at any time, legal restrictions prevent the prompt remittance of part or all royalties with respect to any country in the Territory where Licensed Product is sold, Biosite shall have the right to make such payments by depositing the amount thereof in local currency to Scios’ account in a bank or other depository institution in such country.

 

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3.10                            [***]. Without the prior consent of Scios, Biosite shall not [***] any [***] in [***] for the [***] other than as would be [***] of such [***] at the [***] thereof.

 

4. REPORTS

 

4.1                                  Milestones . Biosite shall report to Scios within [***] of its occurrence (a) the date on which any event listed in Section 3.2 occurred and (b) the date of [***] of each Licensed Product in each country.

 

4.2                                  Quarterly Sales Reports . With each quarterly payment made under Section 3.4, Biosite shall deliver a full and accurate accounting of all [***] of Licensed Products by Biosite for the quarterly calendar period. Each such report shall include at least the following information: (a) gross invoiced [***] from sales of Licensed Products and [***]; (b) any [***] from gross [***] used to arrive at [***] as defined in Section 1.6; and (c) Biosite’s computation of the aggregate [***] payable to Scios.

 

5. DILIGENCE

 

5.1                                  Responsibility of Biosite . Biosite shall have the full responsibility for the development of Licensed Products, including all testing and filings required to seek regulatory approval to market such Licensed Products, the manufacture of Licensed Product (subject to Scios’ right to supply BNP for use in Licensed Product as set forth in Section 8.1) and distribution of Licensed Product. Biosite shall bear the expense for all such activities.

 

5.2                                  Diligence Milestones . Biosite shall use commercially reasonable efforts consistent with sound business judgment to develop and market Licensed Products within

 

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the Territory and to accomplish each of the following objectives [***]:

 

(a)           [***] with a [***] or [***] from [***]

 

(b)          [***] from the [***].

 

(c)           [***] Licensed Product in [***], other than [***], [***] from the [***];

 

(d)          [***] (if a [***] for [***] in the [***]) or a [***] (if a [***] for [***] in the [***]) [***] from the [***].

 

If Biosite does not achieve either of the objectives stated in (a) or (b) [***], then Scios shall have the right to terminate this Agreement effective upon [***] prior written notice to Biosite; provided, however, if during such [***] period, Biosite provides Scios with reasonably satisfactory evidence that the delay in achieving the objective was not due to a lack of diligence on the part of Biosite and was due to [***] beyond the reasonable control of Biosite, then [***] of such objectives shall be extended for such [***] as the parties mutually agree, which shall not be [***]. If, at the end of such additional period, Biosite shall not have achieved the objective(s) due to be completed, or Scios and Biosite have not agreed on a [***] for completion of such objectives, Scios shall have the right to terminate the Agreement, which termination shall take effect upon [***] prior written notice from Scios to Biosite. Scios’ right to terminate this Agreement shall be its sole and exclusive remedy for any breach by Biosite of the diligence obligations under this Section 5.2.

 

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5.3                                  Diligence Reports . Within [***] after each anniversary of the Effective Date until the [***], Biosite shall provide Scios with a written report summarizing Biosite’s development activities during the [***] period preceding the anniversary date. Such reports shall constitute confidential information which shall be treated as provided in Section 10.1. In addition, if requested by Scios, Biosite shall meet with Scios annually to review progress in the development of Licensed Products.

 

6. BOOKS AND RECORDS

 

6.1                                  Books and Records; Audits . Biosite shall keep full and accurate accounting records containing all particulars that may be necessary for the purpose of calculating all royalties accrued to Scios. Upon the written request of Scios and not more than once in each calendar year, Biosite shall permit an independent certified public accounting firm of nationally recognized standing, selected by Scios and reasonably acceptable to Biosite, to have access during normal business hours to such of the records of Biosite as may be reasonably necessary to verify the accuracy of the royalty repo