Exhibit 10.3
SECOND EXCLUSIVE PATENT LICENSE AGREEMENT
BETWEEN
BIOMIMETIC PHARMACEUTICALS, INC.
AND
ZYMOGENETICS, INC.
This Exclusive Patent License Agreement (the "Agreement") is made
on January 21,
2003 ("Effective Date") between BioMimetic Pharmaceuticals, Inc.
("Licensee") a
Delaware corporation having a principal place of business at 330
Mallory
Station. Suite A-l, Franklin, Tennessee 37067, and ZymoGenetics,
Inc.
("Licensor") a Washington corporation having a principal place of
business at
1201 Eastlake Avenue East, Seattle, Washington 98102.
WITNESSETH
WHEREAS, Licensor owns the "Licensed Patent Rights" as hereinafter
defined;
WHEREAS, Licensee desires to obtain an exclusive worldwide license
for the
Licensed Patent Rights in the Field of Use in accordance with the
terms of this
Agreement;
WHEREAS, Licensor is willing to grant an exclusive worldwide
license for
the Licensed Patent Rights in the Field of Use to Licensee on the
terms and
conditions set forth herein;
NOW THEREFORE, in consideration of the mutual covenants contained
herein,
it is agreed by the parties as follows:
1. DEFINITIONS
1.1 Affiliate means any company, corporation, business or entity
controlled by,
controlling, or under common control with either Licensee or
Licensor. "Control"
means direct or indirect beneficial ownership of at least fifty
percent (50%)
interest in the voting stock (or the equivalent) of such
corporation or other
business or having the right to direct, appoint or remove a
majority or more of
the members of its board of directors (or their equivalent)
1.2 Biologically Active Substance means any product other than
Licensed Product
which has intrinsic biological or cell stimulatory activity related
to the
presence of growth factors, such as insulin-like growth factors
(e.g.,
IGF-I, IGF-I etc), transforming growth factor family (e.g.
TGF-beta, etc),
epidermal growth factor (EGF), fibroblast growth factors (aFGF,
bFGF, etc),
keratinocyte growth factor (KGF) and growth factor like proteins or
morphogens.
Such product will not include substances or compounds whose primary
function is
to act as a vehicle for the delivery of PDGF (eg. synthetic bone
powder such as
hydroxyapatites, natural bone powder or bone matrix, fibrin glue,
collagen,
gelatin, or synthetic polymers such as polyactides or
polyglycolides).
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1.3 Bundled Product means a Licensed Product sold or bundled
together with other
products.
1.4 Combination Product means a Licensed Product which includes one
or more
Biologically Active Substance(s) to achieve the desired therapeutic
response.
1.5 Field of Use means the treatment and healing of bone,
cartilage, tendon and
ligaments of the skeletal tissue system. For the avoidance of
doubt, the parties
agree that the Field of Use specifically excludes the treatment and
healing of
soft tissue wounds.
1.6 First Commercial Sale means the first sale of any Licensed
Product by
Licensee or its Affiliates or Sublicensees following approval by
the appropriate
governmental agency.
1.7 Improvement means any modification, alteration, enhancement or
improvement
to Licensed Patents that Licensee shall own or control solely or as
joint Owner
with Licensor, with such ownership or control determined by the
U.S. laws of
inventorship.
1.8 Licensed Patents means: (a) the patents and the patent
applications, short
particulars of which are set out in Exhibit A (attached hereto and
made part of
this Agreement); and (b) any patents and patent applications of
Licensor arising
from the patent families listed in Exhibit A to the extent any
Valid Claim of
these patents or patent applications would, in the absence of the
licenses
contemplated hereunder, bar the use or exploitation within the
Field of Use of
a product developed by or for Licensee pursuant to this Agreement
(treating for
this purpose any Valid Claim in pending applications as if they had
been
issued), and (c) all patents issued or hereafter issuing therefrom
throughout
the world, whether national or regional, and including any
divisions, renewals,
reexaminations, continuations, continuations-in-part, extensions or
reissues
thereof, and any supplementary protection certificates. Exhibit A
will be
updated on at least an annual basis.
1.9 Licensed Patent Rights means all rights within the Field of Use
under the
Licensed Patents.
1.10 Licensed Product(s) means: (a) any product or part thereof
which is covered
by any Licensed Patent Rights; or (b) any product developed through
the use of a
process which is covered by the Licensed Patent Rights.
1.11 Net Sales in major market countries, defined as North America
(U.S.,
Canada, Mexico), the EU, Scandinavia, Oceania (Australia and New
Zealand), China
and Japan means the amounts invoiced by Licensee or its Affiliates
or its
Sublicensees during the Term of this Agreement for the sale of
Licensed Products
to bona fide independent third parties in such major market
countries, less to
the extent included in such amount: (i) normal and customary
rebates, and cash
and trade discounts, actually taken; (ii) sales, use and/or other
excise taxes,
custom duties or other governmental charges (other than taxes
imposed on or
measured by net income) actually paid in connection with sales of
Licensed
Products; (iii) the cost of any bulk packages and packing, prepaid
freight
charges and insurance; (iv) amounts actually allowed or credited
due to returns
paid; **. In the case of (i) and (iv), such amounts
**
REPRESENTS MATERIAL WHICH HAS BEEN REDACTED AND SEPARATELY FILED
WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL
TREATMENT PURSUANT TO RULE 406 UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
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shall be deductible only to the extent the same are separately
identified on the
invoice to the customer or other documentation maintained in the
ordinary course
of business.
Net Sales in minor market countries, defined as countries other
than the major
market countries, means ** less to the extent included in such
amount: (i)
normal and customary rebates, and cash and trade discounts,
actually taken; (ii)
sales, use and/or other excise taxes, custom duties or other
governmental
charges (other than taxes imposed on or measured by net income)
actually paid in
connection with sales of Licensed Products; (iii) the cost of any
bulk packages
and packing, prepaid freight charges and insurance; (iv) amounts
actually
allowed or credited due to returns paid; **. In the case of (i) and
(iv), such
amounts shall be deductible only to the extent the same are
separately
identified on the invoice to the customer or other documentation
maintained in
the ordinary course of business.
1.12 Single Agent Product means a Licensed Product which contains
no additional
Biologically Active Substance(s) to achieve the desired therapeutic
response.
1.13 Sublicensee means any non-Affiliate to whom Licensee grants a
sublicense of
some or all of the rights granted to Licensee under this Agreement.
As used in
this Agreement, "Sublicensee" shall also include a third party to
whom Licensee
has granted the right to distribute a Licensed Product.
1.14 Territory, means worldwide.
1.15 Valid Claim means with respect to the Licensed Patents (i) a
claim of a
pending patent application; or (ii) a claim of an issued patent
which has not
lapsed or become abandoned or been declared invalid or
unenforceable by a court
of competent jurisdiction or an administrative agency from which no
appeal has
been taken after ninety (90) days.
1.16 PDGF means Platelet Derived Growth Factor.
2. GRANT
2.1 Exclusive License. Licensor hereby grants to Licensee and
Licensee hereby
accepts from Licensor, upon the terms and conditions herein
specified, a sole
and exclusive license under the Licensed Patent Rights in the
Territory, and in
the Field of Use to develop, make, have made, import, have
imported, use, offer
to sell, sell and otherwise commercialize Licensed Product(s).
2.2 Sublicenses. Licensor hereby grants to Licensee and Licensee
hereby accepts
from Licensor, upon the terms and conditions herein specified the
right to grant
sublicenses under the Licensed Patent Rights to the extent
necessary to develop,
make, have made, import, have imported, use, offer for sale, sell
and otherwise
commercialize Licensed Products; provided, within ten (10) days of
the date such
sublicense is executed, Licensee shall provide Licensor with at
least the
following information with respect to each such Sublicensee: (i)
the identity of
the
**
REPRESENTS MATERIAL WHICH HAS BEEN REDACTED AND SEPARATELY FILED
WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL
TREATMENT PURSUANT TO RULE 406 UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
-3-
Sublicensee; (ii) a description of the Licensed Product, and the
rights being
granted to the Sublicensee; and (iii) the territory in which the
Licensed
Product will be sold by Sublicensee. Each sublicense granted by
Licensee shall
be consistent with all the terms and conditions of this Agreement,
and Licensee
shall remain responsible to Licensor for the compliance of each
such Sublicensee
with the financial and other obligations under this Agreement.
2.3 Due Diligence Milestones. Licensee shall proceed diligently
with the
development of Licensed Products. Licensee shall be deemed to
satisfy the
foregoing obligation if Licensee achieves the following milestones
within the
time frame indicated:
(a) Within thirty (30) months from Effective Date, Licensee shall
file an
Investigational New Drug Application ("IND") or its equivalent for
a Licensed
Product; and
(b) Within the later of forty-eight (48) months from the filing of
an IND
under Section 2.3(a) hereinabove or seventy-eight (78) months from
the
Effective Date, Licensee shall file a Biologics License Application
("BLA") or
its equivalent for A Licensed Product.
(c) Licensee agrees: (i) to exert all continuing reasonably
diligent
efforts to register one or more Licensed Products for commercial
sale for
administration in humans in the Field of Use throughout the
Territory and; (ii)
to promote and market the Licensed Product(s) in such areas with
all continuing
reasonable commercial efforts so that the sales thereof may be
maximized.
A milestone shall be deemed to be achieved by Licensee if achieved
by
Licensee or any Sublicensee or Affiliate of Licensee.
2.4 Extensions. If Licensee anticipates it will fail to achieve the
milestone
provided in 2.3(a) above, Licensee will provide written notice of
such failure
to Licensor at least thirty (30) days prior to the end of the
diligence period.
Upon receipt of such notice by Licensor, Licensee will be entitled
to a maximum
of ** extensions in exchange for payment to Licensor of ** per
extension, with
such payment being made by Licensee to Licensor within thirty (30)
days of
failing to achieve any such milestone. If Licensee anticipates it
will fail to
achieve the milestone provided in 2.3(b) above, Licensee will
provide written
notice of such failure to Licensor at least thirty (30) days prior
to the end of
the diligence period. Upon receipt of such notice by Licensor,
Licensor, in its
sole discretion, may provide Licensee a ** extension for a fee to
be agreed upon
in good faith between Licensor and Licensee. If the milestones are
not met
within the periods provided and an extension has not been obtained
pursuant to
this Section 2.4, Licensor may, at its sole discretion, terminate
this Agreement
or render the License granted in Section 2.1 nonexclusive.
3. TERM AND TERMINATION
3.1 Term. The term of this Agreement shall be for a period
beginning with the
Effective Date and extending, on a country-by-country basis, until
the
expiration of the last to expire Valid
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**
REPRESENTS MATERIAL WHICH HAS BEEN REDACTED AND SEPARATELY FILED
WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL
TREATMENT PURSUANT TO RULE 406 UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
Claim that covers a Licensed Product in that country. Licensee's
obligation to
pay royalties shall expire on a country-by-country basis.
3.2
Termination.
(1) Except as described in Section 2.4, in the event that Licensee
commits
any material breach of this Agreement, unless this Agreement
provides a
different remedy, the Licensor at its option, may terminate this
Agreement by
giving the breaching party written notice of its election to
terminate as of a
stated date, not less than ** from such stated termination date.
Such notice
shall state the nature of the defaults claimed by the non-breaching
party. The
breaching party during said ** period may cure any default stated
in said
notice, and if such default is cured, or, if such default will take
longer than
** to cure and the breaching party is diligently pursuing such
cure, Licensor
may at its sole discretion on a case-by-case basis allow or not
allow a
reasonable extension of the cure period and this Agreement shall
continue in
full force and effect as if such notice had not been given.
(2) In the event either party shall become insolvent or shall cease
business, or shall file a voluntary petition or an answer admitting
the
jurisdiction of the court and the material allegations of, or shall
consent to,
involuntary petition pursuant to or purporting to be pursuant to
any
reorganization or insolvency law of any jurisdiction, or shall make
an
assignment for the benefit of creditors, or shall apply for or
consent to the
appointment of a receiver or trustee of a substantial part of its
property, at
the option of the other party, this Agreement may be terminated by
the other
party effective as of a date ten (10) days following written notice
by the party
intending to terminate.
3.3 Effect of Termination. If this Agreement is terminated prior to
its
expiration, upon such termination Licensee shall cease all
production and sale
of Licensed Products except for the production and sale of Licensed
Products on
which production is complete prior to the notice of such
termination. Licensee
may continue to sell such Licensed Products for up to ** after such
notice and
shall pay to Licensor any royalties, milestones or sublicense fees
that may
accrue on such sales.
3.4 Survivability. Articles 1, 6, 7, 9, 10 and 11, and Sections
3.3, 3.4, and,
with respect to amounts accruing prior to expiration or
termination, Sections
4.2, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8 and 4.9 hereof shall survive
termination or
expiration of this Agreement.
4. FEES AND ROYALTIES
4.1 License Issue Fees. Upon execution of this Agreement, Licensee
shall be
obligated to pay Licensor the sum of **, in partial consideration
for the rights
granted to Licensee under this Agreement. Such payment may be made,
at the
election of Licensee, either (a) in cash on the date of this
Agreement, or (b)
in fully paid and nonassessable shares of such equity security of
Licensee as
are issued in the next Qualified Financing (as defined below), at
the price paid
by the investors in such Qualified Financing and issued on the
closing date of
such Qualified Financing. If payment is made pursuant to Section
-5-
**
REPRESENTS MATERIAL WHICH HAS BEEN REDACTED AND SEPARATELY FILED
WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL
TREATMENT PURSUANT TO RULE 406 UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
4.1(b), Licensor shall be entitled to the same rights provided in
the purchase
agreement and related agreements entered into with respect to the
Qualified
Financing. For the purpose of this Section 4, a "Qualified
Financing" means an
equity financing in the amount of at least **, of which no less
than ** is
purchased by investors who were not previously shareholders (or
related to
previous shareholders) of Licensee. If Licensor has not been issued
shares in a
Qualified Financing by way of payment pursuant to Section 4.1(b)
within ** days
after the date of this Agreement, then Licensor, at its option and
on demand,
shall be entitled to immediate payment in cash.
4.2 Royalties. Licensee, in exchange for the rights granted to
Licensee under
this Agreement, shall also pay or cause to be paid to Licensor
royalties at the
rates and in accordance with the terms below:
(a) Licensee shall pay royalties to Licensor equal to ** of Net
Sales in
major market countries and Net Sales in minor market countries of
all Single
Agent Products.
(b) Licensee shall pay royalties to Licensor equal to ** of Net
Sales in
major market countries and Net Sales in minor market countries of
all
Combination Products.
4.3 Minimum Royalties. Licensee will provide written notice to
Licensor within
thirty (30) days of making the First Commercial Sale of each
Licensed Product.
In the first full calendar year of sales following the First
Commercial Sale of
a Licensed Product, the royalties payable by Licensee to Licensor
pursuant to
Section 4.2 shall not be less than **. In the second full calendar
year
following the First Commercial Sale of a Licensed Product, the
royalties payable
by Licensee to Licensor pursuant to Section 4.2 shall not be less
than **. In
the third full calendar year following the First Commercial Sale of
a Licensed
Product, the royalties payable by Licensee to Licensor pursuant to
Section 4.2
shall not be less than **.
4.4 Bundled Products. In the event that a Licensed Product is sold
as part of a
Bundled Product the Net Sales of the Licensed Product, for the
purposes of
determining royalty payments, shall be determined by multiplying
the Net Sales
of the Bundled Product by the fraction, A/(A+B) where A is the
average sale
price of the Licensed Product when sold separately in finished
form, provided A
is sold thusly, and B is the average sale price of the other
product(s) in the
Bundled Product sold separately in finished form.
In the event the Licensed Product is not sold separately in
finished form,
Licensor and Licensee will mutually agree on a value for the
average sale price
of the Licensed Product if it were to be sold separately in
finished form and
that average sale price will be incorporated into the calculation
above.
4.5 Milestone Payments. Licensee shall provide Licensor written
notice within
thirty (30) days of the achievement of each of the milestone events
set forth
below, whether achieved by the Licensee, Affiliate or Sublicensee.
All such
milestone events will be subject to the corresponding
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**
REPRESENTS MATERIAL WHICH HAS BEEN REDACTED AND SEPARATELY FILED
WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL
TREATMENT PURSUANT TO RULE 406 UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
Due Diligence Milestone clause(s) in Section 2.3. With each such
notice,
Licensee shall pay to Licensor the corresponding amount set forth
below:
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MILESTONE
AMOUNT
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1. IND filing or equivalent foreign filing for a Licensed
**
Product; and
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2. Initiation of Phase III or pivotal clinical trials, as "Phase
**
III" is defined by Title 21: Chapter l-Food and Drug
Administration, Department of Health and Human Services for a
Licensed Product; and
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3. Filing of a BLA or equivalent foreign filing for a Licensed
**
Product; and
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4. First marketing approval by the United States Food and Drug
**
Administration for a Licensed Product.
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5. One year following first marketing approval by the United
**
States Food and Drug Administration for a Licensed Product
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6. Two years following first marketing approval by the United
**
States Food and Drug Administration for a Licensed Product
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Milestones 1-4 may be paid in either cash or Licensee stock, or a
combination
thereof, at the election of Licensee, and milestones 5-6 may be
paid in either
cash or Licensee stock, or a combination thereof, at the election
of Licensor,
provided, however, that a milestone may not be paid in Licensee
stock if
Licensee has sold its stock under the Securities Act of 1933, as
amended,
pursuant to a public offering prior to the date on which the
applicable
milestone event is achieved. In the case of payment in Licensee
stock under this
Section 4.5 or under Section 4.6 hereinbelow, such payment shall be
made in
fully paid and nonassessable shares of such equity security of
Licensee as are
issued in the next Qualified Financing (as defined in Section 4.1
hereinabove)
occurring after the applicable milestone event or SB Payment Date
(as defined in
Section 4.6), at the price paid by the investors in such Qualified
Financing and
issued on the closing date of such Qualified Financing.
Notwithstanding, the
foregoing, if no Qualified Financing takes place within ** days
after the
applicable milestone event or SB Payment Date, then payment shall
be made in
fully paid and nonassessable shares of such equity security of
Licensee as were
issued in the last Qualified Financing occurring prior to the
applicable
milestone event or SB Payment Date, at the price paid by the
investors in such
Qualified Financing. If payment is made in Licensee stock under
this Section 4.5
or Section 4.6 hereinbelow, Licensor shall be entitled to the s
