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Exhibit 10.2
SUBLICENSE AGREEMENT
between
Novartis Pharma AG
and
Vanda Pharmaceuticals, Inc.
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CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE
OMITTED PORTIONS.
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SUBLICENSE AGREEMENT
THIS SUBLICENSE AGREEMENT effective as of the 4th day of June,
2004, ("Effective
Date") between Vanda Pharmaceuticals, Inc., a corporation organized
and existing
under the laws of the State of Delaware and having its principal
office at 47
Hulfish Street, Suite 310, Princeton, NJ 08542, The United States
("Vanda") and
Novartis Pharma AG, a corporation organized under the laws of
Switzerland and
having its principal office at Lichtstrasse 35, CH-4056 Basel,
Switzerland
("Novartis")
WITNESSETH THAT:
WHEREAS Novartis is the exclusive worldwide licensee of Titan
Pharmaceuticals,
Inc. ("Titan") under a sublicense agreement between Novartis and
Titan having an
Effective Date of 20th November, 1997 and as amended by two
Amendments between
the parties dated 30th November 1998 and 10th April, 2001 (the
"Titan
Agreement"); and
WHEREAS Titan is the exclusive worldwide licensee of Hoechst Marion
Roussel Inc.
("HMRI") under a license agreement between Titan and HMRI having an
Effective
Date of 31st December, 1996 (the "HMRI Agreement"); and
WHEREAS as a result of corporate restructuring, Aventis
Pharmaceuticals Inc., a
corporation organized under the laws of the State of Delaware and
with offices
at 200 Crossing Boulevard, Bridgewater, NJ 08807-0890 ("Aventis")
acquired
substantially all of the tangible operating assets of HMRI and, as
a result, the
HMRI Agreement has been assigned to Aventis; and
WHEREAS under such Titan Agreement and the Novartis Patents,
Novartis has rights
with respect to certain patents and patent applications, identified
in APPENDIX
A hereto, and know-how relating to a compound known as Iloperidone;
and
WHEREAS Vanda desires to obtain certain exclusive licenses from
Novartis under
the Titan Agreement and the Novartis Patents, and Novartis is
willing to grant
to Vanda such licenses;
NOW, THEREFORE, in consideration of the covenants and obligations
expressed
herein, and intending to be legally bound, the parties agree as
follows:
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1. DEFINITIONS
1.1 "Affiliate" shall mean any corporation, firm, partnership or
other entity,
whether de jure or de facto, which directly or indirectly owns, is
owned by or
is under common ownership with a party to this Sublicense
Agreement, to the
extent of more than fifty percent (50%) of the equity (or such
lesser percentage
which is the maximum allowed to be owned by a foreign corporation
in a
particular jurisdiction) having the power to direct the affairs of
the entity
and any person, firm, partnership, corporation or other entity
actually
controlled by, controlling or under common control with a party to
this
Sublicense Agreement.
1.2 "Commercially Reasonable Efforts" shall mean efforts and
resources
customarily used in the pharmaceutical business for a product of a
market
potential similar to the market potential of Product under
evaluation, at a
similar stage of its product life, taking into account the
establishment of the
product in the marketplace, the competitiveness of the marketplace,
the
proprietary position of the product, regulatory status involved,
and the
profitability of the product.
1.3 "Competitive Industry Standard Level" shall mean the level to
which the
Product shall be marketed by or on behalf of Vanda, its Affiliates
or
Sublicensees in the countries of the Territory where Patents are
issued and
enforced with at least the same diligence that Vanda would use in
marketing its
own products in such countries, in a manner consistent with the
effort devoted
by the pharmaceutical industry to products having the same or
similar potential
value of the Product in those countries when the Product is
launched.
1.4 "Compound" shall mean the chemical compound known as
Iloperidone, whose
specific chemical name is [*], including any salts, hydrates,
solvates, and/or
stereoisomers thereof, and only the metabolites listed in APPENDIX
B hereto,
including any salts, hydrates, solvates and/or stereoisomers of
such
metabolites.
1.5 "EEA" shall mean the European Economic Area, which consists of
the European
Union and Iceland, Liechtenstein and Norway.
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1.6 "European Union" shall mean the member states of the European
Union, as may
exist from time to time, which as of the date hereof include
Austria, Belgium,
Denmark, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, the
Netherlands, Portugal, Spain, Sweden and the United Kingdom and all
other
countries which accede to the European Union during the term of
this Sublicense
Agreement.
1.7 "Exclusive" shall have the meaning specified in Section 2.1
hereof.
1.8 "FDA" shall mean the United States Food and Drug
Administration.
1.9 "FD&C Act" shall mean the Federal Food, Drug and Cosmetic
Act (21 U.S.C.
301ff), as amended from time to time.
1.10 "Field" shall mean application to all conditions, disorders
and diseases in
humans.
1.11 "IND" shall mean an Investigational New Drug Application.
1.12 "Know-How" shall mean all technical information and know-how:
(a) presently
developed and owned or controlled by HMRI or Titan and their
Affiliates and made
available to Novartis, (b) developed and owned or controlled by
Novartis and its
Affiliates after the date of the Titan Agreement, and (c) developed
and owned or
controlled by HMRI, Titan or Novartis and their respective
Affiliates, after the
date hereof and included within this definition of "Know-How" by
operation of
Section 2.3 hereof, which relates to the Compound or Product in the
Field and
which constitutes a proprietary "trade secret" or other valid
intellectual
property right under U.S. or other applicable law which is
substantial, secret
and identifiable, including, without limitation, all biological,
chemical,
pharmacological, toxicological, clinical, regulatory, analytical,
quality
control and manufacturing data and any other information (whether
technical or
commercial) relating to the Compound or Product that may be useful
for the
development, regulatory approval, manufacture and commercialization
of the
Compound or Product.
1.13 "Major Market Country" shall mean each of France, Germany,
Italy, Spain and
the United Kingdom.
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1.14 "NDA" shall mean any and all applications (new drug
applications) submitted
to the FDA under Sections 505, 507 or 512 of the FD&C Act and
applicable
regulations related to the Product, including without limitation,
full NDAs,
"paper" NDAs and abbreviated NDAs (ANDAs) and all amendments and
supplements
thereto or equivalent applications in the European Union.
1.15 "Net Sales" shall be calculated as follows: From the gross
invoice price of
the Product sold by Vanda or its Affiliates or Sub-licensees to
independent
third parties in bona fide, arms-length transactions there shall be
subtracted,
if not previously deducted in the amount invoiced or received, (i)
quantity and
cash discounts actually allowed or taken, (ii) freight, postage and
shipping
insurance allocated in accordance with Vanda's standard allocation
procedure,
(iii) customs duties and taxes, if any, directly related to the
sale, (iv)
amounts repaid or credited by reason of rejections, return of goods
and
retroactive price reductions mandated by or granted in response to
state,
provincial or federal law or regulation and specifically
identifiable as
relating to the Product, (v) amounts incurred as a result of
governmental (or
governmental agency) mandated rebate programmes, (vi) third party
rebates and
wholesale chargebacks related to the sale of the Product to the
extent actually
allowed and (vii) as agreed by the parties in writing, any other
specifically
identifiable amounts included in the Product's gross sales that
were or
ultimately will be credited and that are substantially similar to
those listed
above. The computation of Net Sales shall not include sales between
or among a
party and its Affiliates or Sub-licensees, except where such
Affiliates or
Sub-licensees are end users. For the purposes of this Sublicense
Agreement,
sales of the Product to independent distributors, wholesalers or
other parties
who purchase and take title to the Product are considered to be
sales to third
parties. If the Product is sold through intermediaries such as
agents or
co-promoters who do not purchase and take title to the Product,
royalties shall
be due on Net Sales to third parties who purchase the Product
through such
intermediaries. It is agreed that there shall be no sales of the
Compound to
Third Parties by or on behalf of Vanda, its Affiliates or
Sub-licensees. In the
event there are sales of Compound to Third Parties by or on behalf
of Vanda, its
Affiliates or Sub-licensees, such sales shall be subject to the
payment of
royalties by Vanda to Novartis (as the case may be) to the same
extent as
payments of royalties are due on sales of the Product pursuant to
this
Sublicense Agreement.
In the event that the Product is sold as part of a combination
product, the Net
Sales of the Product, for the purposes of determining royalty
payments, shall be
determined by
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multiplying the Net Sales (as defined above in this Section) of the
combination
product by the fraction A/(A+B), where A is the weighted (by sales
volume)
average sale price of Product when sold separately in finished form
and B is the
weighted average sale price of the other product(s) sold separately
in finished
form. In the event that such average sale price cannot be
determined for both
Product and the other product(s) in combination, Net Sales for
purposes of
determining royalty payments shall be mutually agreed by the
parties within a
reasonable period of time prior to the first commercial sale of
such combination
product based on all relevant factors including relative cost and
the relative
value contributed by each component, and such agreement shall not
be
unreasonably withheld.
1.16 "Patents" shall mean all patents and patent applications set
forth in
APPENDIX A, including continuations, continuations-in-part,
divisions, patents
of addition, reissues, re-examinations, renewals or extensions
thereof, along
with supplementary protection certificates and other administrative
protection
of any kind in the Territory owned by or licensed to Novartis or
its Affiliates
to the extent that such patents claim the Compound or Product, or
use,
formulations or manufacture thereof, for use in the Field, but not
any other
compound or use outside of the Field disclosed or claimed in those
patents or
patent applications. Any Patent having claims covering the Compound
or Product
or its use formulation and manufacture thereof for use in the Field
which is
issued during the term of this Sublicense Agreement in any Country
of the
Territory shall automatically be deemed as of the date of such
issuance to be
included in the Patent, as defined hereunder.
1.17 "Product" shall mean any bulk or finished pharmaceutical
composition
containing the Compound as a pharmaceutically active ingredient for
use in the
Field, whether as a sole active ingredient or in combination with
another active
ingredient.
1.18 "SEC" shall mean the United States Securities and Exchange
Commission.
1.19 "Sub-licensee" shall mean a Third Party (as defined below) to
whom a party
sublicenses rights to manufacture and sell (or have manufactured
and sold) the
Compound under Patents, but shall not include any Third Parties to
whom rights
to manufacture the Compound have not been granted. Unless such
party grants to
such Third Party the right to manufacture Compound, the following
Third Parties
shall not be considered Sublicensees under this Sublicense
Agreement: agents,
distributors, wholesalers, subcontractors, co-marketers,
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co-promoters, partners or joint venturers. Sub-licensees shall not
include
compulsory licensees as described in Section 4.1(a).
1.20 "Territory" shall mean all countries and territories of the
world provided
that any country(ies) in which this Sublicense Agreement is
terminated shall be
removed from the scope of this definition.
1.21 "Third Party" shall mean any party other than a party to this
Sublicense
Agreement, HMRI, Titan or an Affiliate of any of these.
2. GRANT
2.1 Novartis hereby grants to Vanda an Exclusive sublicense in the
Field under
the Patents (to the extent, but only to the extent, that such
patents or patent
applications claim the Compound or Product or the manufacture,
formulation, or
use thereof) and Know-How to develop, have developed, make, have
made, use,
import, sell, offer for sale and have sold the Compound and Product
in the
Territory, subject to the terms and conditions of this Sublicense
Agreement. All
rights granted by Novartis to Vanda in this Sublicense Agreement
shall remain
subject to the rights and obligations of HMRI and Titan within the
HMRI
Agreement. The sublicense granted to Vanda by Novartis shall
include the right
of Vanda to sublicense its rights under this Sublicense Agreement,
but only upon
Novartis', HMRI's and Titan's prior written consent, which consent
shall not be
unreasonably withheld. Any such sublicensee(s) shall impose upon
a
Sublicencee(s) of Vanda substantially the same terms and conditions
as Vanda
assumes in this Sublicense Agreement. As used in this Sublicense
Agreement, the
term "Exclusive" shall mean that neither Novartis, nor its
Affiliates shall
grant any other license to, nor themselves exploit, the Patents and
Know-How
with respect to the Compound and Product in the Field (unless
otherwise
specified herein) and be limited as follows:
(a) With respect to all geographic areas outside of the EEA, such
sublicense
shall be exclusive for the duration and validity of the
intellectual property
rights constituting the Patents and/or Know-How.
(b) With respect to all geographic areas within the EEA, such
sublicense shall
be exclusive for the following time periods:
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(i)
For each of the countries within the EEA where only Patents (and
not
Know-How) exist and are sublicensed to Vanda hereunder, the period
of
exclusivity for each such country shall be limited to the duration
of the
relevant Patents in such country, provided that "Patents" for the
purposes
of
the interpretation of this paragraph shall be limited to
patents
existing, and patents issuing from patent applications existing,
and
patents issuing from patent applications covering inventions
existing as of
the
date of the Titan Agreement;
(ii)
For each of the countries within the EEA where Patents and
Know-How
exist and are sublicensed to Vanda hereunder, the period of
exclusivity for
each
such country shall be limited to the duration of the relevant
Patents
in
such Country, provided that "Patents" for purposes of the
interpretation
of
this paragraph shall be limited to patents existing, and patents
issuing
from
patent applications existing, as of the date of the Titan
Agreement
and,
provided, further, that if the duration of such Patents is less
than
ten
(10) years from the date of first marketing of the Product in the
EEA
but
the Know-How continues to be sublicensed hereunder, the duration
of
exclusivity shall be for ten (10) years from the date of first
marketing of
the
Product in the EEA; and
(iii) For each of the countries within the EEA where Know-How (and
not
Patents) exists and is sublicensed to Vanda hereunder, the period
of
exclusivity for each such country shall be limited to ten (10)
years from
the
date of first marketing of the Product in the EEA. Thereafter,
such
sublicense within the EEA shall be on a non-exclusive basis.
(c) deleted
(d) Novartis and its Affiliates and licensed Third Parties and
Sub-licensees
shall also be entitled to utilise the Patents and Know-How in the
Field within
the Territory for the development and manufacture of the Compound
and Product
for marketing, distribution and sale where Vanda's rights under
this
Sublicense Agreement have been terminated. The duration of the
sublicense
granted by this Section 2.1 shall be limited to the duration, on
a
country-by-country basis, of the intellectual property rights which
comprise the
Patents and Know-How with respect to a relevant country, provided
that the
termination of any portion of any sublicense shall be without
prejudice to the
requirement of Vanda to pay royalties pursuant to the terms of this
Sublicense
Agreement. Notwithstanding the foregoing but subject to Sections
3.4 and 3.5
hereof, Novartis acknowledges and agrees that Vanda shall have the
right to
continue to use on a royalty-free, non-exclusive basis the
information which
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constitutes the Patents and Know-How on a country-by-country basis
in the
Territory for the Field after the Patents expire or cease to be
valid or
enforceable and/or Know-How has entered into the public domain.
2.2 deleted
2.3 deleted.
2.4 Novartis grants to Vanda a non-exclusive, worldwide sublicense
to make or
use any analytical reference standards, intermediate or metabolite
of the
Compound or Product not listed in Appendix B hereto which may be
claimed in
Patents limited solely to making or using the Compound or Product.
The foregoing
sublicense shall include the right to sublicense, but only upon the
prior
written consent of each of HMRI, Titan and Novartis which consent
shall not be
unreasonably withheld. Any such sublicense shall impose upon the
Sublicensee(s)
substantially the same terms and conditions as Vanda assumes in
this Sublicense
Agreement.
2.5 Vanda shall promote, market and sell the Product under a
registered
trademark(s) approved by HMRI, Titan and Novartis. Vanda will
promptly inform
HMRI, Titan and Novartis of the selected trademark(s) and each of
the three
parties will have twenty (20) business days in which to either
approve or reject
the selection(s). Vanda shall be responsible for the selection and
registration
of such trademark(s) in all countries of the Territory at its own
cost. In the
event the sublicense granted hereunder is terminated in a
particular country,
other than pursuant to Section 10.3 or as a result of Vanda's
termination of
this Sublicense Agreement for breach pursuant to Section 10.5, and
Novatis
exercises the right to promote, market or sell the Product in such
country then
upon Novartis' request (a) Vanda shall grant to Novartis or its
designee(s) a
trademark license at a royalty to be negotiated in good faith
(which royalty
shall not be less than [*] percent ([*]%) and no more than [*]
percent ([*]%) on
Net Sales of the Product by Novartis and/or its designees) at such
time to use
such trademark in connection with marketing the Product in such
country, subject
to reasonable quality control by Vanda with respect to the Product
sold under
this Section 2.5(a), or (b) Novartis or its designee(s) shall
select and
register at Novartis' cost a trademark of its own in connection
with the
marketing of the Product in such country, provided such Novartis
trademark is
not in any way confusingly similar to the Vanda trademark. Novartis
shall use
the trademark that
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that party acting alone has chosen as a trademark (rather than a
Vanda
trademark) in promoting, marketing or selling the Product in any
country that is
a member of a free trade union or other economic grouping (e.g.,
the European
Union, EEA, NAFTA, ASEAN and ANDEAN Pact countries) where Vanda is
promoting,
marketing or selling the Product under a Vanda trademark.
2.6 If Vanda notifies Novartis in writing that Vanda (and/or its
Affiliate(s))
is not willing or does not have the capability itself or cannot
enter into a
Sublicense or other agreement (providing the necessary expertise
and resources)
in country(ies) outside those covered by NAFTA and the European
Union to:(a)
develop the Compound or Product (as the case may warrant), and (b)
manufacture
the Compound and/or market the Product (as the case may warrant) at
a
Competitive Industry Standard Level at the date of Product approval
in such
country(ies), then Novartis shall have the right to terminate the
sublicense
granted by this Sublicense Agreement but only with respect to such
country(ies),
unless the parties agree in writing to extend such time frame.
2.7 If the Product is not launched in the United States or a Major
Market
Country at a Competitive Industry Standard Level by Vanda, its
Affiliate and/or
Sublicensee within [*] after the date of receiving the approvals
necessary to
commercialise the Product in the United States or a Major Market
Country Vanda
and Novartis shall review the progress of launch efforts, it being
understood
that the parties, at the request of a party, may review the
progress of launch
efforts prior to the end of such [*] period, and Vanda shall keep
Novartis and
HMRI informed on a regular basis of the status of its launch
efforts after
receiving the approvals necessary to commercialize the Product in
the United
States or a Major Market Country until such time that launch is
achieved in the
United States or a Major Market Country. If launch in the United
States or a
Major Market Country is not achieved within one (1) year after the
date of
receiving the approvals necessary to commercialize the Product in
such
country(ies) (circumstances shall not include events of force
majeure as defined
in Section 13), or in any event within two (2) years after Product
approval then
the sublicense granted by this Sublicense Agreement shall
terminate, but only
with respect to the particular country where launch was not
achieved within such
one (1) year or two (2) year time frame, as the case may be, unless
the parties
agree in writing to extend such time frame (the parties shall
discuss in such
event, factors including but not limited to the necessity to obtain
approval of
Product for its target indication(s)).
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2.8 If an NDA or equivalent ex-U.S. regulatory approval in the
European Union
(Marketing Authorization Application via the Centralized Procedure
or marketing
approvals for the member countries of the European Union via the
mutual
recognition procedure) for the Product not obtained within three
(3) years of
Vanda's or its Affiliate's or Sub-licensee's filing of an NDA or
such other
equivalent ex-U.S. filing, and such failure is solely due to
circumstances
within Vanda's reasonable control, then the parties shall discuss
the reasons
and proposed remedies (or such failure in good faith; provided,
however, that if
the parties are unable to agree on any such remedies, Novartis
shall have the
right to terminate the sublicense granted by this Sublicense
Agreement, but only
with respect to the United States or the European Union where such
approval was
not obtained, unless the parties agree in writing to extend such
time frame. If,
however, Novartis determines that such failure is due to
circumstances beyond
the reasonable control of Vanda (including without limitation
delays on the part
of the regulatory agencies), the three (3) year period shall be
extended to take
into account such circumstances, the duration of any such extension
to be
mutually agreed.
2.9 Subject to the provisions of Section 2.9(d), Novartis shall not
be obligated
to refund any up front license fees and milestone payments paid by
Vanda with
respect to any country(ies) which cease to be included within the
Territory, and
in the event that (i) Novartis or its Affiliate(s) or
Sub-licensee(s) elects to
commercialise the Product or Compound in such country(ies) and (ii)
Vanda, its
Affiliate(s) or Sublicensee(s) has an NDA filing in the United
States or an
equivalent filing in the European Union, then in consideration for
the use of
any IND, NDA or other governmental approval or associated
developmental work
held or owned by Vanda related to the Compound or Product:
(a) At Novartis' request, and subject to Sections 6.3 and 11.5
hereof, Vanda
shall license or otherwise make available under applicable law the
benefit of
such approvals or work to Novartis or an Affiliate or Third Party
designated by
Novartis (which third party could be HMRI or Titan), who shall
thereafter have
the rights to develop, register, manufacture, market and sell the
Compound and
Product in such country(ies) utilizing such approvals or work, and
Novartis (or
such Affiliate or Third Party) shall pay to Vanda a royalty to be
negotiated in
good faith at the time that Novartis exercises such option, on Net
Sales of the
Product by Novartis or its designees in such country to equitably
recognize the
value added by Vanda to the Compound and/or Product through its
development
efforts. Such royalty shall not be greater than [*] percent ([*]%)
on net sales
of Product by Novartis or its
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designees. Upon expiration of the Patent in such country, only the
royalty paid
to Vanda for the use of the Vanda trademark under Section 2.5 shall
be paid to
Vanda for so long as such trademark is utilized. If a trademark
license has not
been granted to HMRI, Titan or Novartis in such country, no royalty
shall be
paid to Vanda upon the expiration of the Patent.
(b) Novartis shall share [*] with Vanda any up front license fees,
milestone
payments or other payments such as prepaid royalties received from
a Third Party
in connection with the exercise of such option only. If Vanda has
not paid to
Novartis the up front license fee and all of the milestone payments
provided for
in Sections 3.1(a) through (c), then Vanda's share of the amount
shall be
multiplied by a fraction, the numerator of which is equal to the
total of the
payments that have been made by Vanda to Novartis under Sections
3.1(a) through
(c), and the denominator of which is equal to the total of the
payments that
Vanda otherwise would have been required to pay to Novartis under
Sections
3.1(a) through (c) had the sublicense not been terminated.
(c) Notwithstanding anything contained herein to the contrary,
Novartis shall
not be required to pay to Vanda a royalty on sales of the Product
that, when
added to the royalty payments for a license under the Vanda
trademark payable
under Section 2.5, exceeds in the aggregate [*] percent ([*]%).
(d) If the circumstances leading up to the termination of the
Sublicense
Agreement pursuant to Section 2.8 are due to any
misrepresentations, omissions
(of information owned or controlled by Novartis or its Affiliates;
as of the
date hereof) or falsifications with respect to such Know-How,
information or
data or fraud by Novartis or its Affiliates, then subject to the
following
sentence, Novartis shall repay to Vanda, within ninety-five (95)
days of such
termination, that portion of the up front license fee and milestone
payments
Novartis had received from Vanda up to the date of such
termination. In the
case of misrepresentations, omissions (of information owned or
controlled by
HMRI, Titan or their Affiliates as of the date hereof) or
falsifications with
respect to such Know-How, information or data or fraud only by
HMRI, Titan or
their Affiliates, and a termination of the HMRI Agreement pursuant
to Section
2.5 of the HMRI Agreement, Novartis shall be obligated to make the
foregoing
repayments to Vanda if, and only if, Titan has repaid the up front
license fee
and milestone payments to Novartis under Section 2.9(d) of the
Titan Agreement.
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2.10 In the event that Vanda or a Sublicensee intends to seek a
co-promotion or
co-marketing partner for the Product in the United States, Vanda
shall notify
Novartis thereof in writing. Novartis shall then notify Titan
thereof, and HMRI
shall have a right of first negotiation with Vanda or the
Sublicensee on such a
collaboration. If HMRI exercises its right of first negotiation,
then HMRI and
Vanda or the Sublicensee shall negotiate in good faith for a period
of ninety
(90) days from the date of notification by Novartis to HMRI. If the
negotiating
parties are unable to enter into a separate definitive written
agreement
regarding such collaboration by the end of such ninety (90) day
period, first
Novartis and then Titan will have the right to negotiate with Vanda
in good
faith for a single period of ninety (90) days. In the event that
Vanda or its
Sublicensee is unable to enter into a separate definitive written
agreement
regarding such collaboration by the end of such ninety (90) day
period with
Novartis or Titan, Vanda or the Sublicensee shall be free to enter
into a
collaboration with any Third Party subject to all other terms of
this Sublicense
Agreement and shall have no further obligation to negotiate with
HMRI. For the
purposes of this Section 2.10, the term "co-promotion or
co-marketing
partner" will not include an independent contract field sales force
that may be
engaged by Vanda or a Sublicensee.
3. PAYMENTS AND ROYALTIES.
3.1 As consideration for the sublicenses granted to Vanda by
Novartis under this
Sublicense Agreement, Vanda shall make the following payments to
Novartis:
(a) An up front license fee of Five Hundred Thousand United States
Dollars
(U.S.$500,000) shall be paid by Vanda to Novartis in cash within
ten (10)
business days of both parties' execution of this Sublicense
Agreement.
(b) A first development milestone payment of [*] be payable by
Vanda to Novartis
one time only upon [*] for the Product in the Field [*]. As used in
this
Section, [*].
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Such milestone payment shall be paid in cash by Vanda directly to
Novartis
within seven (7) business days of the date of [*]. The [*] payment
provided for
herein shall, unless otherwise expressly provided for herein, be
non-refundable.
(c) A second development milestone payment of [*] which shall be
payable one
time only by Vanda to Novartis on [*].
(d) Vanda shall notify Novartis in writing thirty (30) business
days prior to
Vanda's estimated achievement of each milestone event described in
Sections
3.1(b) and 3.1(c)(i) above and Vanda shall make each such payment
within seven
(7) business days of the achievement of the milestone event for
which such
payment is due.
3.2 (a) Unless Novartis instructs Vanda in writing otherwise, all
cash payments
by Vanda to Novartis (including, without limitation, up front
payments,
milestone payments, and royalties) shall be made by bank wire
transfer as
follows:
Bank: [*]
Swift: [*]
Correspondent Bank for USD: [*]
USD Account Novartis AG, Basel / Switzerland: [*]
USD Account Novartis Pharma AG, Basel / Switzerland: [*]
(b) At least two (2) business days prior to the planned wire
transfer to either
of the above accounts, Vanda shall notify Novartis of the amount
and date the
cash shall be transferred.
(c) In the event of a late payment hereunder by Vanda to Novartis,
Vanda shall
pay to Novartis interest [*] ([*]%) on the outstanding balance
until such
balance, including interest, is paid in full to Novartis. The
acceptance of such
late
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payment shall act as a waiver of any rights Novartis may have
hereunder due to a
breach by Vanda relating solely to such payment being made
late.
3.3 As consideration for the sublicense granted to Vanda in this
Sublicense
Agreement, Vanda shall pay to Novartis, in those countries where,
and for the
period, Patents claiming a priority date of May 19, 1989 and
December 29, 1989
or Patents owned by Novartis AG in a particular country in the
Territory for
which a patent had been granted validly claiming Iloperidone or the
manufacture,
formulation or the use thereof for use in the Field:
(a) [*] per cent ([*]%) royalty on annual Net Sales of the Product
of Vanda, its
Affiliates' and Sublicensees' annual Net Sales of the Product in
the Territory.
(b) Vanda shall also pay to Novartis the following milestone
payments:
<TABLE>
<CAPTION>
Net Sales Milestone Milestone
payment from Vanda to Novartis
-------------------
----------------------------------------
<S>
<C>
(A) Achievement of [*]
[*]
(B) [*]
[*]
(C) [*]
[*]
</TABLE>
No [*] shall be payable by Vanda within one calendar year. In the
event that a
[*] becomes due and payable [*]. Milestone (C) shall be payable at
the earliest
on [*].
3.4 (a) In order to spread royalty payments hereunder over a
sufficient period
of time, in each of those countries in the Territory where the
Patents claiming
a priority date of May 19, 1989 and December 29, 1989 or Patents
owned by
Novartis AG in a particular country for which a patent had been
granted validly
claiming Iloperidone or the manufacture, formulation or use hereof
for use in
the Field have expired, Vanda's obligations to pay royalties for
use of Patents
in such country shall cease, and Vanda and/or any of its
Sublicensees shall pay
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directly to HMRI a royalty for Know-How not relating to
manufacturing (whether
or not such Know-How continues as a valid intellectual property
right or is in
the public domain) of [*] percent ([*]%) on Vanda's, its
Affiliates' and any
Sublicensees' annual Net Sales of the Product in each such country
for a period
of ten (10) years after the expiration of the final remaining
Patent claiming a
priority date of May 19, 1989 and December 29, 1989 or Patents
owned by Novartis
AG in each such country. After the end of such ten (10) year
period, no further
royalties arising from sales of the Product in such country shall
be due to HMRI
and Vanda shall be entitled to continue to use the Know-How on a
fully-paid,
irrevocable basis in accordance with Section 10.3.
(b) In the event that a Third Party's generic version of
Iloperidone is actively
marketed in a process patent country (that is, any country in which
the only
protection in relation to processes for the manufacture of
Iloperidone has been
obtained and not protection for Iloperidone as a new chemical
entity per se) in
the Territory where a Patent(s) has been granted validly claiming
Iloperidone or
the manufacture, formulation or use thereof for use in the Field
exists, then
subject to Sections 3.4(c) and (d) below, the royalty rate that
Vanda shall pay
to Novartis on Vanda's or its Affiliate's or Sublicensees annual
Net Sales of
the Product in that process patent country shall be [*] percent
([*]%) until
such Patent(s) expires, provided; (i) Vanda has obtained, or has
made every
effort to obtain, the maximum allowable period of exclusivity to
which it is
entitled based on the Product's registration data in that process
patent country
to the extent such exclusivity in available; and (ii) The parties
in accordance
with Article 8 of this Sublicense Agreement, will implement an
appropriate
strategy for addressing the commercialization of Iloperidone by
said Third
Party. Unless otherwise agreed to by the parties, Vanda shall at
its sole cost
be obligated to diligently enforce the Patent(s) until there is a
binding,
unappealable judicial determination as to whether the manufacture,
formulation
or use of such generic version of Iloperidone infringes Patent(s)
or until it is
demonstrated to the satisfaction of both Parties that such
Patent(s) are not
being infringed in such country.
(c) If it is demonstrated to the satisfaction of both Parties or
the binding
unappealable judicial determination under Section 3.4(b)(ii) holds
that
Patent(s) are not being infringed in such process patent country,
the royalty
rate that Vanda shall pay to Novartis on Vanda's or its Affiliate's
or
Sublicensee's annual Net Sales of Product in that process patent
country shall
continue to be [*] percent ([*]%) until such Patent(s) expires.
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(d) If the binding, unappealable judicial determination under
Section
3.4(b)(ii) holds that Patent(s) are being infringed in such process
patent
country, Vanda shall take reasonable steps to have enforced such
determination.
If as a result, the commercialization of Iloperidone by the Third
Party in that
country is discontinued:
(i)
the royalty rate(s) that Vanda shall pay to Novartis on Vanda's or
its
Affiliate's or Sublicensee's annual Net Sales of the Product in
that
process patent country shall be, commencing on the later of: (A)
the date
such
binding, unappealable judicial determination is rendered, and (B)
the
date
(if any) specified in such determination that commercialization
of
such
Third Party generic version of the Product is to be
discontinued,
those royalty rates provided for in Section 3.3 until such
Patent(s)
expires; and
(ii)
Vanda shall repay to Novartis, within thirty (30) days after the
later
of:
(A) the date such binding, unappealable judicial determination
was
rendered, and (B) the date (if any) specified in such determination
that
commercialization of such Third Party generic version of the
Product is to
be
discontinued, an amount equal to the difference between the
royalties
that
Vanda would have paid to Novartis under Section 3.3, and the amount
of
royalties that Vanda actually paid to Novartis at the [*] percent
([*]%)
rate, for the period commencing on the date the royalty rate for
that
process patent country was reduced to [*] percent ([*]%) pursuant
to
Section 3.4(b), and ending on the later of: (A) the date such
binding,
unappealable judicial determination was rendered, and (B) the date
(if any)
specified in such determination that commercialization of such
Third Party
generic version of the Product is to be discontinued.
(e) After a Patent(s) in any process patent country expires, Vanda
and/or its
Sublicensee shall pay directly to Novartis royalties as provided
for in Section
3.4(a).
3.5 As consideration for the sublicense granted to Vanda under this
Sublicense
Agreement in those countries in the Territory for which (a) a
Patent application
for the Compound or Product is pending or (b) no Patent application
has been
filed or (c) Patents have been abandoned or been held invalid or
unenforceable
by a decision of a court or tribunal of competent jurisdiction from
which no
appeal is or can be taken (collectively, "Non-Patent Countries"),
Vanda shall
pay to Novartis, on a country-by-country basis, a [*] percent
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([*]%) royalty for Know-How not relating to manufacturing (whether
or not such
Know-How continues as a valid intellectual property right or is in
the public
domain) on Vanda's, its Affiliates' and any Sublicensees' annual
Net Sales of
the Product in the Non-Patent Countries for a period of five (5)
years from the
date of the first commercial sale of the Product in each such
country by Vanda,
its Affiliates or Sublicensees. After the end of such five (5) year
period, no
further royalties arising from the sales of the Product in such
country shall be
due. However, with respect to Section 3.5(a) or (b), if at any time
during or
after such five (5) year period a Patent for Compound or Product is
issued in
such country, subject to Section 3.4, Vanda shall pay to Novartis,
from the date
the Patent was issued, the same royalties as provided for in
Sections 3.3(a) and
(b) above. Upon expiration of Vanda's obligation to pay a royalty
under such
Patent, notwithstanding Section 3.4, a [*] percent ([*]%) royalty
for Know-How
not relating to manufacturing (whether or not such Know-How
continues as a valid
intellectual property right or is in the public domain), on Net
Sales of the
Product in such country, shall be paid by Vanda and/or any of its
Sublicensees
directly to HMRI for a period of five (5) years after which Vanda
shall be
entitled to continue to use the Know-How on a fully-paid,
irrevocable basis in
accordance with Section 10.3.
4. COMPULSORY LICENSES AND THIRD PARTY LICENSES
4.1. (a) in the event that during the term of this Sublicense
Agreement a
governmental agency in the Territory grants or compels HMRI and/or
Titan and/or
Novartis to grant a license to any Third Party for the Compound or
Product in a
country(ies), it is the intent of the parties that Vanda not be
placed at a
competitive disadvantage as a result of a lower royalty rate being
granted to a
Third Party compulsory licensee. Therefore, in the event that
Novartis, Titan or
HMRI is compelled to grant a license to a Third Party, Novartis,
Titan and HMRI
will meet to discuss in good faith equitable arrangements, which
could include
adjustments to Vanda's original royalty rates in Section 3.3 of
this Sublicense
Agreement which are to be paid on Net Sales of Product in such
country, to
accomplish the intent of Novartis and Vanda set forth above. In
such
discussions, consideration will be given to Novartis' obligations
to HMRI and
Titan under Section 4.l (d) of the Titan Agreement.
(b) If a governmental authority in a country in the Territory
imposes a maximum
royalty rate, such that lower royalty rates than would otherwise
apply under
this Sublicense Agreement are mandated in such country, then the
royalty rates
provided for herein shall be reduced to
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equal such lower rates for sales of the Product in such country for
the period
such lower royalty rate is required by any governmental authority
and shall
cease when Vanda's royalty payment obligations cease under this
Sublicense
Agreement.
4.2 If, during the term of this Sublicense Agreement, HMRI and
Vanda agree that
patent(s) of a Third Party exists in the Territory covering the
manufacture, use
or sale of the Compound or Product, and if it should prove, in the
reasonable
judgment of Vanda and HMRI, impractical or impossible for Vanda or
its
Affiliates or Sublicensees to continue the activity or activities
sublicensed
hereunder in the Field without obtaining a royalty-bearing license
from such
Third Party under such patent(s) or if Vanda and HMRI otherwise
agree it is
desirable for HMRI to acquire any Third Party patent or license in
connection
with the development or manufacture of Compound or Product covered
by Patents in
the Territory, then in either case the provisions of Section 8.8(c)
shall apply.
4.3 If, after attempting in good faith to resolve the issue
relating to
licensing Third Party patents in Section 4.2 between themselves,
Vanda and HMRI
are unable to agree within ninety (90) days as to whether it is
impracticable or
impossible for Vanda, its Affiliates or Sublicensees to continue
the activity or
activities sublicensed hereunder without obtaining a
royalty-bearing license
from a Third Party, the issue shall be submitted to a
disinterested, competent
and experienced patent attorney reasonably acceptable to both Vanda
and HMRI for
resolution. If Vanda and HMRI cannot agree on the selection of such
patent
attorney, then each party shall select a patent attorney and the
selected patent
attorneys shall select a mutually acceptable patent attorney who
will determine
whether such Third Party rights materially inhibit Vanda's ability
to
manufacture, distribute or sell the Compound or Product. The
compensation to,
and expense of such patent attorney shall be borne by the party
whose position
is not upheld by such patent attorney (that is, for example, if the
patent
attorney determines that such Third Party rights do not materially
inhibit
Vanda's ability to manufacture, distribute or sell the Compound or
Product, then
the costs of such patent attorney shall be borne by Vanda).
5. DEVELOPMENT
5.1 Upon the signing of this Sublicense Agreement, Vanda shall have
full legal
and financial responsibility for all costs that are incurred and
all activities
that are undertaken after the
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signing of this Sublicense Agreement, which are related to
development, safety
and required periodic reporting to the FDA and equivalent ex-U.S.
regulatory
agencies, marketing, regulatory approvals, price registrations, and
other
activities required by Vanda or its Sublicensee(s) (or their
respective agents
or distributors) to obtain appropriate government approvals for,
and to
commercialize, the Compound and Product in the Territory. Other
than as
expressly provided for in Section 5.4, Vanda shall not assume, nor
shall Vande
be liable for, any costs or activities (whether scientific,
financial or
otherwise) relating to the Compound or Product that were incurred
or undertaken
prior to the signing of this Sublicense Agreement (including
without limitation
any costs, expenses, damages, losses, fines, penalties or the like
that may be
awarded or assessed after the signing of this Sublicense Agreement,
but which
arise out of events and activities that occurred prior to the
signing of this
Sublicense Agreement).
5.2 Provided that the Affiliates, Sublicensees and other Third
Parties agree to
substantially the same terms of confidentiality in Section 6.4
hereof, Vanda may
appoint such Affiliates, Sublicensees(s) and other Third Parties to
perform any
and all development activities necessary to obtain government
approvals for the
Product in the Territory. The appointment of any Sublicensee shall
require
HMRI's prior written consent, which consent shall not be
unreasonably withheld.
5.3 Vanda shall, in a manner consistent with the effort Vanda
devotes to its own
products having the same or similar potential value as Product,
exercise its
Commercially Reasonable Efforts and diligence in conducting
clinical trials and
commercializing the Product alone or in collaboration with a Third
Party, and in
undertaking those investigations and actions required to obtain
appropriate
governmental approvals to manufacture the Compound and market the
Product in the
Territory. All such activity shall be undertaken at Vanda's
expense. Novartis
shall arrange with HMRI to provide assistance or consultation at
Vanda's expense
in support of the development of the Compound or Product, but HMRI
in its
discretion may limit such assistance and consultation.
5.4 The parties further agree that:
(a) Novartis will be informed by Vanda on a timely and regular
basis of the
development, registration and commercialisation of the Compound and
Product in
the Territory, and will
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have an opportunity to regularly meet with Vanda and provide input
into the
development and registration process, and
(b) all of Novartis' contractual obligations to Third Parties
involved in the
development and registration process for the Compound and Product
(including
Contract Research Organizations (CROs) existing as of the date of
this
Sublicense Agreement, which CROs are identified in APPENDIX E),
will be
considered by Vanda to the extent they are not inconsistent with
Vanda's
Standard Operating Procedures.
(c) Vanda shall be solely responsible for the negotiation of
contracts with any
CROs and other organisations it desires to work on development
activities
relating to the Compound and/or Product and Vanda shall bear all
legal and
financial responsibility under such contracts.
5.5 Any inventions or discoveries or improvements which arise from
Vanda's, its
Affiliates' or Sublicensees work relating to the development and/or
manufacture
of the Compound and/or Product shall be owned by Vanda, but shall
be licensed to
HMRI, Titan and Novartis at their option on a worldwide,
non-exclusive,
perpetual basis, at a license fee and/or royalty to be negotiated
at such time.
In the case of any inventions or discoveries or improvements
arising in areas
outside of the original field, which was defined in the HMRI
Agreement and the
Titan Agreement, shall be owned by Vanda, but shall only be
licensed to HMRI, at
HMRI's option on a worldwide, non-exclusive, perpetual basis, at a
license fee
and/or royalty to be negotiated at such time. Notwithstanding
anything to the
contrary in this Sublicense Agreement, in the event that this
Sublicense
Agreement between Novartis Pharma AG and Vanda Pharmaceuticals,
Inc. expires or
terminates, in its entirety or with respect to any country, (except
as a result
of material breach of the Agreement by Novartis), any inventions or
discoveries
or improvements which arise from Vanda's, its Affiliates' or
Sublicensees' work
relating to development and/or manufacture of the Compound and/or
Product (the
"Vanda IP") shall be disclosed to HMRI and be owned by and become
the property
of HMRI (or assignees or successors, as the case may be), but shall
be licensed
to Titan under Section 2.1(a) of the HMRI- Agreement and
subsequently to
Novartis under the Titan Agreement. Vanda shall promptly undertake
any and all
actions necessary to effectuate such ownership in and assignment to
HMRI. If the
Vanda Sublicense Agreement expires or terminates with
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respect to a particular country, then the requirements of this
Section 5.5 and
Aventis' rights to the Vanda IP shall be limited to such
country.
5.6 deleted.
5.7 In addition to that which is required under Section 5.4(a),
Vanda shall
provide to Novartis regular written reports at least every six (6)
months
setting forth significant develop
