<PAGE>
Exhibit 10.1
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
================================================================================
RESEARCH COLLABORATION AND LICENSE AGREEMENT
BY AND BETWEEN
NOVARTIS INSTITUTES FOR BIOMEDICAL RESEARCH, INC.
AND
ALNYLAM PHARMACEUTICALS, INC.
================================================================================
<PAGE>
RESEARCH COLLABORATION AND LICENSE AGREEMENT
This RESEARCH COLLABORATION AND LICENSE AGREEMENT (this
"Agreement"),
effective as of October 12, 2005 (the
"Effective Date"), by and between Novartis
Institutes for BioMedical Research, Inc., a
corporation organized and existing
under the laws of Delaware, with its
principal place of business at 250
Massachusetts Avenue, Cambridge,
Massachusetts 02139 ("Novartis"), and Alnylam
Pharmaceuticals, Inc., a corporation
organized and existing under the laws of
Delaware, with its principal place of
business at 300 Third Street, 3rd Floor,
Cambridge, Massachusetts 02142
("Alnylam").
RECITALS:
WHEREAS, Novartis is engaged in the business of Discovering,
Developing, Commercializing and
Manufacturing products in the Field (each as
defined below);
WHEREAS, Alnylam has developed, acquired and licensed
technology
useful for the Discovery, Development,
Manufacture, characterization and use of
therapeutic products that function through
the mechanism of RNA interference
("RNAi"); and
WHEREAS, Novartis and Alnylam desire to enter into a research
collaboration, upon the terms and
conditions set forth in this Agreement, to
identify and optimize RNAi Compounds
directed against Selected Targets (each as
defined below).
NOW, THEREFORE, in consideration of the respective
representations,
warranties, covenants and agreements
contained herein, and for other valuable
consideration, the receipt and adequacy of
which are hereby acknowledged,
Alnylam and Novartis agree as follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement, the following terms, whether
used
in singular or plural form, shall have the
respective meanings set forth below:
"A List" shall have the meaning set forth in Section 2.1(a).
"Abandoned Program" shall have the meaning set forth in Section
2.3(b).
"Accounting Standards" shall mean, with respect to Alnylam,
United
States Generally Accepted Accounting
Principles, and with respect to Novartis,
International Financial Reporting
Standards.
"Active Program" shall have the meaning set forth in Section
2.3(a).
<PAGE>
"Adoption Consideration" shall have the meaning set forth in
Section
4.2(a).
"Adoption Date" shall have the meaning set forth in Section
3.1(c).
"Adoption Fee" shall have the meaning set forth in Section
4.2(a).
"Adoption License" shall have the meaning set forth in Section
3.1(c).
"Adopted Product" shall mean any product that contains one or
more
RNAi Compound(s) that are Discovered,
Developed, Commercialized or Manufactured
pursuant to the Adoption License.
"Adopted Product Obligations" shall have the meaning set forth
in
Section 4.2(a).
"Advisory Group" shall have the meaning set forth in Section
2.5.
"Affiliate" shall mean any Person who directly or indirectly
controls
or is controlled by or is under common
control with a Party to this Agreement.
For purposes of this definition, "control"
or "controlled" shall mean ownership
directly or through one or more Affiliates,
of fifty percent (50%) or more of
the shares of stock entitled to vote for
the election of directors, in the case
of a corporation, or fifty percent (50%) or
more of the equity interest in the
case of any other type of legal entity,
status as a general partner in any
partnership, or any other arrangement
whereby a Party controls or has the right
to control the Board of Directors or
equivalent governing body of a corporation
or other entity, or the ability to cause
the direction of the management or
policies of a corporation or other entity.
The Parties acknowledge that in the
case of certain entities organized under
the laws of certain countries outside
of the US, the maximum percentage ownership
permitted by law for a foreign
investor may be less than fifty percent
(50%), and that in such case such lower
percentage shall be substituted in the
preceding sentence, provided that such
foreign investor has the power to direct
the management and policies of such
entity. Without expanding the definition of
"control", in the case of Novartis,
"Affiliate" shall also include for purposes
hereof Novartis Institute for
Functional Genomics, Inc., the Friedrich
Miescher Institute for BioMedical
Research, and Novartis Institute for
Tropical Diseases Pte. Ltd.
"Agreement" shall have the meaning set forth in the Preamble,
and
shall include, for the avoidance of doubt,
all Exhibits and Schedules attached
hereto.
"Alnylam" shall have the meaning set forth in the Preamble.
"Alnylam Intellectual Property" shall mean Alnylam Know-How and
Alnylam Patent Rights.
"Alnylam Know-How" shall mean Know-How now or in the future
Controlled
by Alnylam, including Broad RNAi
Know-How.
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<PAGE>
"Alnylam Opportunity Notice" shall have the meaning set forth
in
Section 2.6(b).
"Alnylam Opportunity Response" shall have the meaning set forth
in
Section 2.6(c)(i).
"Alnylam Opportunity Response Period" shall have the meaning set
forth
in Section 2.6(c)(i).
"Alnylam Patent Rights" shall mean Patent Rights now or in the
future
Controlled by Alnylam, including the Broad
RNAi Patent Rights.
"Alnylam Program" shall have the meaning set forth in Section
2.6(b).
"Alnylam Program Agreement" shall have the meaning set forth in
Section 2.6(c)(i)(B).
"Alnylam Property" shall have the meaning set forth in Section
7.2(a).
"Alnylam Sole Inventions" shall have the meaning set forth in
Section
6.1(a).
"Annual Net Sales" shall mean, with respect to a Licensed Product,
the
Net Sales of such Licensed Product during a
Contract Year.
"Audit Rights Holder" shall have the meaning set forth in
Section
4.9(a).
"Audit Team" shall have the meaning set forth in Section
4.9(b).
"Auditee" shall have the meaning set forth in Section 4.9(a).
"B List" shall have the meaning set forth in Section 2.1(a).
"Bankrupt Party" shall have the meaning set forth in Section
8.3.
"Bankruptcy Code" shall have the meaning set forth in Section
8.3.
"Base Royalty Amount" shall have the meaning set forth in
Section
4.4(e)(ii)(B).
"Blocked Target" shall mean any Target that either (a) is the
subject
of a Dedicated Alnylam Program as of the
date that Alnylam receives the Target
List or Supplemental Target List naming
such Target, or (b) is subject to a
contractual obligation under the terms as
of the Effective Date of a
Pre-Existing Alliance Agreement that would
be breached by the inclusion of such
Target as a Selected Target or Supplemental
Target under this Agreement.
"Blocked Target List" shall have the meaning set forth in
Section
2.1(a).
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<PAGE>
"Blocking RNAi Intellectual Property" shall have the meaning set
forth
in Section 4.5.
"Broad RNAi Intellectual Property" shall mean Broad RNAi Know-How
and
Broad RNAi Patent Rights.
"Broad RNAi Know-How" shall mean all Know-How now or in the
future
Controlled by Alnylam, that relates to RNAi
technology, products or processes,
including, (a) the general structure,
architecture, or design of nucleic acid
based molecules which engage RNAi
mechanisms in a cell; (b) chemical
modifications of nucleic acids (including
any modification to the base, sugar or
internucleoside linkage, nucleotide
mimetics, and any end modifications) which
do not abolish the RNAi activity of the
nucleic acid molecules in (a); (c)
manufacturing techniques for the nucleic
acid based molecules or chemical
modifications of (a) and (b); and (d) all
uses or applications of nucleic acid
based molecules or chemical modifications
in (a) or (b); but excluding Know-How
which relates solely to (i) a specific
Target or small group of Targets; or (ii)
delivery technologies which may be broadly
employed for delivery of nucleic acid
based molecules.
"Broad RNAi Patent Rights" shall mean the Patent Rights listed
on
Schedule 1(b), the Patents licensed to
Alnylam under the Listed Alnylam Third
Party Agreements, and all other Patents now
or in the future Controlled by
Alnylam that Cover RNAi technology,
products or processes, including, Patents
that Cover (a) the general structure,
architecture, or design of nucleic acid
based molecules which engage RNAi
mechanisms in a cell; (b) chemical
modifications of nucleic acids (including
any modification to the base, sugar or
internucleoside linkage, nucleotide
mimetics, and any end modifications) which
do not abolish the RNAi activity of the
nucleic acid molecules in (a); (c)
manufacturing techniques for the nucleic
acid based molecules or chemical
modifications of (a) and (b); and (d) all
uses or applications of nucleic acid
based molecules or chemical modifications
in (a) or (b); but excluding Patents
which relates solely to (i) a specific
Target or small group of Targets; or (ii)
delivery technologies which may be broadly
employed for delivery of nucleic acid
based molecules.
"Business Day" shall mean a day on which banking institutions
in
Boston, Massachusetts are open for
business.
"Change of Control" shall have the meaning set forth in Section
2.4(b).
"Co-Fund" or "Co-Funding" shall have the meaning set forth in
Section
4.6(b).
"Co-Fund Negotiation Period" shall have the meaning set forth
in
Section 4.6(c).
"Collaboration Product" shall mean any product that contains one
or
more Discovered RNAi Compound(s) as active
ingredient(s).
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<PAGE>
"Collaboration Success Milestone" shall mean a decision by
Novartis,
at its sole discretion, during the Research
Term that the overall progress of
the Research Collaboration is such that
Novartis wishes to significantly expand
the scope of its activities in the Field
beyond those directed to Selected
Targets.
"Commercialization" or "Commercialize" shall mean any and all
activities directed to marketing,
promoting, detailing, distributing, importing,
having imported, exporting, having
exported, selling or offering to sell a
product, whether before or after Regulatory
Approval for such product has been
obtained.
"Commercially Reasonable Efforts" shall mean, with respect to
the
efforts to be expended by a Party with
respect to any objective, reasonable,
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 Discovery, Development or
Commercialization of any Collaboration
Product, such efforts shall be
substantially equivalent to those efforts
and resources commonly used by such
Party for a 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.
Commercially Reasonable Efforts shall be
determined on a market-by-market and
product-by-product basis, and it is
anticipated that the level of effort will
change over time, reflecting changes
in the status of the Collaboration Product
and the market(s) involved.
"Confidential Information" shall mean the terms of this
Agreement
(including the list of Selected Targets and
the Targets included on any Target
List) and all Know-How or other
information, including proprietary information
and materials (whether or not patentable)
regarding a Party's technology,
products, business information or
objectives, that is treated as confidential by
the disclosing Party in the regular course
of business or is otherwise
designated as confidential by the
disclosing Party.
"Contract Quarter" shall mean a calendar quarter ending on March
31st,
June 30th, September 30th and December
31st.
"Contract Year" shall mean each calendar year ending on December
31.
"Control" or "Controlled" shall mean, with respect to any
intellectual
property right or other intangible
property, the possession by a Party (whether
by ownership, license or "control" (as
defined in the definition of "Affiliate"
above) over an Affiliate having possession
by ownership or license) of the
ability to grant access to, or a license or
sublicense of, such rights or
property.
"Controlled Contractor" shall mean either (a) a Third Party
contractor
such as a contract research organization,
contract employee, consultant and the
like who
5
<PAGE>
merely conducts activities on behalf of a
Party, is subject to Party's
supervision and control, and will not have
any rights (other than non-exclusive
research rights) in any intellectual
property created in connection with such
activities, or (b) a Third Party contract
manufacturer.
"Cover", "Covered" or "Covering" shall mean, with respect to a
Patent
Right, that, in the absence of a license
granted to a Person under a Valid Claim
included in such Patent Right, the practice
by such Person of an invention
claimed in such Patent Right would infringe
such Valid Claim (or, in the case of
a Patent Right that is a Patent
Application, would infringe a Valid Claim in
such Patent Application if it were to issue
as a Patent).
"CRT Sublicense Agreement" shall have the meaning set forth in
Section
3.1(f)(ii).
"Dedicated Alnylam Program" shall mean a bona fide Alnylam
Discovery,
Development or Commercialization program
directed towards a Target (a) that is
conducted pursuant to a written research,
Development or Commercialization plan,
and (b) to which Alnylam has dedicated at
least [**] immediately preceding
Alnylam's receipt of the Target List or
Supplemental Target List naming such
Target.
"Dedicated Novartis Program" shall mean a bona fide Novartis
Discovery, Development or Commercialization
program directed towards a Target
(a) that is conducted pursuant to a written
research, Development or
Commercialization plan, and (b) to which
Novartis has dedicated at least [**]
immediately preceding Novartis's receipt of
the Target Inquiry naming such
Target.
"Develop" or "Development" shall mean any and all preclinical
and
clinical drug development activities,
including test method development and
stability testing, toxicology, animal
efficacy studies, formulation, quality
assurance/quality control development,
statistical analysis, clinical studies,
clinical trials and testing, regulatory
affairs, product approval and
registration, chemical development and
development Manufacturing, packaging
development and Manufacturing and
development documentation efforts in support
of development activities anywhere in the
world.
"Discover" or "Discovery" shall mean any and all research or
discovery
activities.
"Discovered RNAi Compound" shall mean an RNAi Compound directed to
a
Selected Target that is Discovered during
the course of an Active Program
(excluding Abandoned Programs that do not
become Active Programs pursuant to
Sections 2.3(b) or 2.6(c)) together with
all derivatives of such RNAi Compound.
For purposes of this definition,
"derivative" shall mean a compound that may
contain modified nucleotides or may have
been modified by chemical or molecular
genetic means but which still, at least in
vitro, functions through an RNAi
mechanism against the same Target.
"Effective Date" shall have the meaning set forth in the
Preamble.
6
<PAGE>
"Encumbered Field" shall mean:
(a) Until [**], the treatment, prophylaxis and diagnosis of
ocular
microvascular disease in humans with RNAi
Products, where "ocular microvascular
disease" means age-related macular
degeneration and [**], including [**],
including [**]; but specifically excluding
[**], such as (by way of example
only) [**].
(b) Until [**], or potentially sooner under certain
circumstances:
(i) The treatment of any neurodegenerative disease, but
excluding
[**], where
"neurodegenerative disease" means a disease of the brain and/or
spinal cord in
humans that is characterized by the chronic and progressive
death of neurons
which leads to the loss of normal neural function,
including
Parkinson's disease, Huntington's disease, Alzheimer's disease,
and amyotrophic
lateral sclerosis, but excluding [**], using
(ii) [**], where "direct delivery to the human nervous system"
does not
encompass [**].
(c) After any joint decision by Alnylam and a Pre-Existing
Alliance
Party to develop a human therapeutic
product that includes siRNA(s) as active
pharmaceutical ingredient(s) to be
delivered or approved for delivery via an
implanted infusion device directly to the
human nervous system:
(i) Until [**] years after the date of such decision, or
potentially
sooner under certain circumstances, [**]; and
(ii) For so long as such therapeutic product is under
development
and until its
commercial launch, [**]; and
(iii) Following [**] until [**] such product delivered or
approved for
delivery via an implanted infusion device to the human nervous
system.
"Event of Bankruptcy" shall have the meaning set forth in Section
8.3.
"Excess Amount" shall have the meaning set forth in Section
4.4(e)(ii)(B).
"Exclusivity Term" shall mean the term commencing on the
Effective
Date and terminating upon the Exclusivity
Termination Date. The "Exclusivity
Termination Date" shall mean (a) the date
of termination of the Research Term,
if this Agreement is terminated pursuant to
Section 8.1(a)(ii); (b) the second
(2nd) anniversary following the expiration
or termination of the Research Term,
if the Selection Term is less than five (5)
years in length (except for the case
where this Agreement is terminated pursuant
to Section 8.1(a)(ii)); and (c) the
third (3rd) anniversary following the
expiration or termination of the Research
Term, if the Selection Term is at least
five (5) years in length.
7
<PAGE>
"Executive Officers" shall mean Novartis's Chief Executive Officer
(or
the officer or employee of Novartis then
serving in a substantially equivalent
capacity) or his/her designee of
substantially equivalent rank, and Alnylam's
Chief Executive Officer (or the officer or
employee of Alnylam then serving in a
substantially equivalent capacity).
"FDA" shall mean the United States Food and Drug Administration or
any
successor agency thereto.
"Field" shall mean all human, veterinary or agricultural
applications,
including processes and products directed
to the treatment, palliation,
diagnosis or prophylaxis of any or all
Indications.
"First Animal Study" shall have the meaning set forth in
Section
4.4(a).
"First Commercial Sale" shall mean the first sale of a Licensed
Product by Novartis or an Affiliate or
sublicensee of Novartis to a Third Party
in a country following Regulatory Approval
of such Licensed Product in that
country or, if no such Regulatory Approval
or similar marketing approval is
required, the date upon which such Licensed
Product is first commercially
launched in such country.
"FTE" shall mean, in case of an Abandoned Program, Active
Program,
Dedicated Alnylam Program, Dedicated
Novartis Program or Target
identification/validation services,
respectively, the equivalent of the work of
one (1) scientist, full time for one (1)
year, for or on behalf of a Party,
which equates to a total of [**] per year
of scientific work directly related to
such Abandoned Program, Active Program,
Dedicated Alnylam Program, Dedicated
Novartis Program or Target
identification/validation services, respectively, and
the direct scientific management
thereof.
"Gatekeeper" shall have the meaning set forth in Section
3.1(e)(iv).
"IND" shall mean an application submitted to a Regulatory Authority
to
initiate human clinical trials, including
(a) an Investigational New Drug
application or any successor application or
procedure filed with the FDA, or any
foreign equivalent thereof, and (b) all
supplements and amendments that may be
filed with respect to the foregoing.
"Indemnified Party" shall have the meaning set forth in Section
9.1(c)(i).
"Indemnifying Party" shall have the meaning set forth in
Section
9.1(c)(i).
"Indication" shall mean any disease or condition, sign or symptom
of a
disease or condition, or symptom associated
with a disease or syndrome.
"Infrastructure Fee" shall have the meaning set forth in
Section
4.3(c).
"Intellectual Property" shall have the meaning set forth in
Section
7.2(a).
8
<PAGE>
"Invalidity Claim" shall have the meaning set forth in Section
6.4(c).
"IP Contracts" shall have the meaning set forth in Section
7.2(b).
"Joint Intellectual Property" shall have the meaning set forth
in
Section 6.1(b).
"Joint Steering Committee" shall have the meaning set forth in
Section
2.2(a).
"Know-How" shall mean any information, inventions, trade secrets
or
technology, whether or not proprietary or
patentable and whether stored or
transmitted in oral, documentary,
electronic or other form, Controlled by a
Party that is necessary or useful to (a)
the activities contemplated by the
Research Collaboration, (b) the Discovery,
Development, Commercialization or
Manufacture of RNAi Compounds or RNAi
Products, or (c) the practice of the RNAi
mechanism or technology. Know-How shall
include ideas, concepts, formulas,
methods, procedures, designs, compositions,
plans, documents, data, discoveries,
developments, techniques, protocols,
specifications, works of authorship,
biological materials, and any information
relating to research and development
plans, experiments, results, compounds,
therapeutic leads, candidates and
products, clinical and preclinical data,
clinical trial results, and
Manufacturing information and plans (but
excluding any scientific, regulatory,
pre-clinical or clinical information or
data regarding specific Indications and
any marketing, financial, commercial,
personnel and other business information
and plans); in each case, to the extent
necessary or useful to the activities
contemplated by the Research Collaboration
or to the Discovery, Development,
Commercialization or Manufacture of the
RNAi Compounds or RNAi Products.
"Law" shall mean any law, statute, rule, regulation, ordinance
or
other pronouncement having the effect of
law of any federal, national,
multinational, state, provincial, county,
city or other political subdivision,
domestic or foreign.
"Licensed Products" shall mean: (a) the Collaboration Products,
and
(b) the Adopted Products.
"Licensed Property" shall have the meaning set forth in Section
7.2(a).
"Listed Alnylam Third Party Agreement" shall mean an agreement
listed
on Schedule 1(l).
"Listed Alnylam Third Party Payments" shall have the meaning set
forth
in Section 4.4(e)(ii)(A).
"Listed Counterparties" shall mean the Third Party counterparties
to
Listed Alnylam Third Party Agreements and
their respective successors in
interest.
"Major Market Country" shall mean, individually and collectively,
the
United Kingdom, France, Germany, Italy,
Spain and Japan.
9
<PAGE>
"Manufacture" or "Manufacturing" shall mean any and all activities
and
operations involved in or relating to the
manufacturing, quality control testing
(including in-process, release and
stability testing), releasing or packaging,
for pre-clinical, clinical or commercial
purposes.
"Minimum Quarterly Payment" shall have the meaning set forth in
Section 4.4(e)(iii).
"NDA" shall mean an application submitted to a Regulatory
Authority
for marketing approval of a product,
including (a) a New Drug Application,
Product License Application or Biologics
License Application filed with FDA or
any successor applications or procedures,
or any foreign equivalent thereof, and
(b) all supplements and amendments that may
be filed with respect to the
foregoing.
"Net Sales" shall mean, with respect to a Licensed Product, the
gross
amount invoiced by or on behalf of Novartis
or any Novartis Affiliate, licensee
or sublicensee for that Licensed Product
sold to Third Parties (other than
licensees or sublicensees) in bona fide,
arm's-length transactions, less
customary deductions, determined in
accordance with Novartis's standard
accounting methods and in accordance with
International Financial Reporting
Standards (IFRS) as generally and
consistently applied by Novartis, to the
extent included in the gross invoiced sales
price of any Licensed Product or
otherwise directly paid or incurred by
Novartis, its Affiliates or distributors
with respect to the sale of such Licensed
Product, including: (a) free goods;
(b) cash discounts; (c) direct to customer
discounts; (d) charge-backs; (e)
Medicaid rebates; (f) deductions due for
discount card programs; (g) amounts
repaid or credited by reasons of defects,
rejection recalls, returns; (h)
tariffs, duties, excise, sales, value-added
and other taxes (other than taxes
based on income); (i) delayed ship order
credits; (j) all insurance expense
included in the invoice price; (k) amounts
credited for uncollectible amounts on
previously sold products; (l) deduction of
[**] for distribution and warehousing
expenses; and (m) any other reduction or
specifically identifiable amounts
included in the Licensed Product's gross
invoice that are creditable for reasons
substantially equivalent to those listed
above. Sales between or among Novartis,
its Affiliates or their respective
licensees and sublicensees shall be
disregarded for purposes of calculating Net
Sales. Any of the items set forth
above that would otherwise be deducted from
the invoice price in the calculation
of Net Sales but which are separately
charged to Third Parties shall not be
deducted from the invoice price in the
calculation of Net Sales.
i) In the case of any sale or other disposal of a Licensed
Product
between or among Novartis and its
Affiliates, licensees and sublicensees, for
resale, Net Sales shall be calculated as
above only on the value charged or
invoiced on the first arm's-length sale
thereafter to a Third Party;
ii) In the case of any sale which is not invoiced or is
delivered
before invoice, Net Sales shall be
calculated at the time of shipment or when
the Licensed Product is paid for, if paid
for before shipment or invoice;
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<PAGE>
iii) In the case of any sale or other disposal for value, such
as
barter or counter-trade, of any Licensed
Product, or part thereof, other than in
an arm's-length transaction exclusively for
money, Net Sales shall be calculated
as above on the value of the non-cash
consideration received or the fair market
price (if higher) of the Licensed Product
in the country of sale or disposal;
iv) In the event the Licensed Product is sold in a finished
dosage
form in combination with one or more other
active ingredients (a "Combination
Product"), the Net Sales of the Licensed
Product, for the purposes of
determining royalty payments, shall be
determined by multiplying the Net Sales
(as defined above) of the Combination
Product by the fraction, 'A/(A+B)' where
'A' is the weighted (by sales volume)
average sale price in the relevant country
of the Licensed Product when sold
separately in finished form and 'B' is the
weighted average sale price in that country
of the other product(s) sold
separately in finished form. In the event
that such average sale price cannot be
determined for both the Licensed Product
and the other product(s) in the
Combination Product, Net Sales for purposes
of determining royalty payments
shall be agreed by the Parties based on the
relative value contributed by each
component, such agreement shall not be
unreasonably withheld.
"Non-Bankrupt Party" shall have the meaning set forth in Section
8.3.
"Novartis" shall have the meaning set forth in the Preamble.
"Novartis Intellectual Property" shall mean all Patent Rights
and
Know-How now or in the future Controlled by
Novartis that are necessary or
useful for the conduct of the activities
contemplated by the Research
Collaboration and all Patent Rights that
Cover the foregoing Know-How.
"Novartis Overpayment" shall have the meaning set forth in
Section
4.4(e)(ii)(B).
"Novartis Sole Inventions" shall have the meaning set forth in
Section
6.1(a).
"Owned Know-How" shall have the meaning set forth in Section
7.2(a).
"Owned Patents" shall have the meaning set forth in Section
7.2(a).
"Owned Property" shall have the meaning set forth in Section
7.2(a).
"Party" shall mean Alnylam or Novartis; "Parties" shall mean
Alnylam
and Novartis.
"Patent Offices" shall have the meaning set forth in Section
7.2(f).
"Patent Rights" shall mean utility and design patents and all
substitutions, divisions, continuations,
continuations-in-part, reissues,
reexaminations and extensions thereof and
supplemental protection certificates
relating thereto, and all counterparts
11
<PAGE>
thereof or substantial equivalents in any
country, including utility models and
industrial designs (collectively,
"Patents") and any applications or provisional
applications for any of the foregoing
("Patent Applications").
"Person" shall mean any corporation, limited or general
partnership,
limited liability company, joint venture,
trust, unincorporated association,
governmental body, authority, bureau or
agency, any other entity or body, or an
individual.
"Phase I Study" shall mean a study of a product in human volunteers
or
patients the purpose of which is
preliminary determination of safety and
tolerability of a dosing regime and for
which there are no primary endpoints (as
recognized by FDA) in the protocol relating
to efficacy.
"Phase II Study" shall mean (a) a dose exploration, dose
response,
duration of effect, kinetics, dynamic
relationship or preliminary efficacy and
safety study of a product in the target
patient population, or (b) a controlled
dose ranging clinical trial to evaluate
further the efficacy and safety of a
product in the target patient population
and to define the optimal dosing
regimen.
"Phase III Study" shall mean a controlled pivotal clinical study of
a
product that is prospectively designed to
demonstrate statistically whether such
product is effective and safe for use in a
particular Indication in a manner
sufficient to obtain Regulatory Approval to
market such product.
"Post-IND Alnylam Program" shall have the meaning set forth in
Section
2.6(c)(i)(B).
"Pre-Existing Alliance Agreements" shall mean the agreements set
forth
on Schedule 1(p).
"Pre-Existing Alliance Parties" shall have the meaning set forth
in
Section 3.1(e)(i).
"Pre-IND Alnylam Program" shall have the meaning set forth in
Section
2.6(c)(i)(A).
"Pre-Paid Adopted Product Fees" shall have the meaning set forth
in
Section 4.2(a).
"Product Liability Claim" shall have the meaning set forth in
Section
9.1(a).
"Program Data" shall have the meaning set forth in Section
6.1(d).
"Redacted Research Collaboration and License Agreement" shall have
the
meaning set forth in Section 5.1.
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"Registration Filing" shall mean an application submitted to a
Regulatory Authority to initiate human
clinical trials or for marketing approval
of a product, including an IND, NDA, a
Biologics License Application, any
equivalent of the foregoing in any
jurisdiction, and all supplements and
amendments that may be filed with respect
to the foregoing.
"Regulatory Approval" shall mean, with respect to a product in
a
country, the approval of the applicable
Regulatory Authority necessary for the
marketing and sale of such product in such
country.
"Regulatory Authority" shall mean any federal, national,
multinational, state, provincial or local
regulatory agency, department, bureau
or other governmental entity with authority
over the marketing, pricing or sale
of a pharmaceutical product in a country,
including the FDA.
"Research Collaboration" shall mean the activities of the
Parties
under Research Plans to identify and
optimize RNAi Compounds directed against
Selected Targets and develop improved RNAi
technology to enable and enhance the
utility of such RNAi Compounds, upon and
subject to the terms and conditions set
forth in this Agreement.
"Research Institution" shall mean an academic, non-profit
research
institution or hospital that conducts
Discovery or Development activities on
behalf of or in collaboration with Alnylam
and to which Alnylam does not grant
any Commercialization rights under Alnylam
Intellectual Property with respect to
any RNAi Compounds or RNAi Products
provided by Alnylam or Discovered or
Developed in the course of such Discovery
or Development activities.
"Research Plan" shall have the meaning set forth in Section
2.3(a).
"Research Term" shall have the meaning set forth in Section
8.1(a)(iii).
"RNAi" shall have the meaning set forth in the Recitals.
"RNAi Compound" shall mean any compound that in vitro or
otherwise
functions through the mechanism of RNAi and
consists of or encodes
double-stranded RNA, and which
double-stranded RNA is optionally chemically
modified to contain modified nucleotide
bases or non-RNA nucleotides, and
optionally may be administered in
conjunction with a delivery vehicle or vector.
"RNAi Product" shall mean any product that contains one or more
RNAi
Compounds as an active ingredient.
"RNAi Therapeutic Rights" shall mean the right to Discover,
Develop,
Commercialize or Manufacture RNAi Compounds
and RNAi Products for therapeutic
uses.
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<PAGE>
"Royalty Term" shall mean, separately with respect to each
Licensed
Product in each country, the period
commencing on the First Commercial Sale of
such Licensed Product in such country and
concluding on the later of (a) the
expiration of the last to expire Alnylam
Patents containing a Valid Claim
Covering the Development, Commercialization
or Manufacture of such Licensed
Product in that country, or (b) [**] after
the date of First Commercial Sale of
such Licensed Product in that country.
"Selected Target" shall have the meaning set forth in Section
2.1(a).
"Selected Target Threshold" shall have the meaning set forth in
Section 2.1(a).
"Selection Term" shall have the meaning set forth in Section
8.1(a)(i).
"Severed Clause" shall have the meaning set forth in Section
9.4.
"Significant Pharmaceutical Company" shall have the meaning set
forth
in Section 2.4(b).
"Sole Inventions" shall have the meaning set forth in Section
6.1(a).
"sPOC" shall mean the selection by Novartis, in its sole
discretion,
of a Discovered RNAi Compound for the
clinical phase of Development by Novartis.
The specific criteria used to determine
sPOC on a Discovered RNAi
Compound-by-Discovered RNAi Compound basis
shall be set forth in the applicable
Research Plan.
"Stacking Reduction" shall have the meaning set forth in
Section
4.4(e)(iii).
"Stock Purchase Agreement" shall mean that certain Stock
Purchase
Agreement, dated as of September 6, 2005,
between Alnylam and Novartis Pharma
AG, together with that certain Investor
Rights Agreement, between Alnylam and
Novartis Pharma AG, dated as of September
6, 2005.
"Successful Completion" shall mean the execution of a study
approved
by the Joint Steering Committee in material
compliance with all criteria set
forth by the Joint Steering Committee (but
without regard to results).
"Supplemental Target" shall have the meaning set forth in
Section
2.1(b)(ii).
"Supplemental Target List" shall have the meaning set forth in
Section
2.1(b)(ii).
"Supplemental Target Response Notice" shall have the meaning set
forth
in Section 2.1(b)(ii).
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"Supplemental Target Threshold" shall have the meaning set forth
in
Section 2.1(b)(ii).
"Target" shall mean: (a) a polypeptide or entity comprising a
combination of at least one polypeptide and
other macromolecules, that is a site
or potential site of therapeutic
intervention by a therapeutic agent; or a
nucleic acid which is required for
expression of such polypeptide; (b) variants
of a polypeptide, cellular entity or
nucleic acid described in clause (a); (c) a
defined non-peptide entity, including a
microorganism, virus, bacterium or
single cell parasite; provided that the
entire genome of a virus shall be
regarded as a single Target; or (d) a
naturally occurring interfering RNA or
microRNA or precursor thereof.
"Target Inquiry" shall have the meaning set forth on Section
3.1(e)(ii).
"Target List" shall have the meaning set forth in Section
2.1(a).
"Target Response Notice" shall have the meaning set forth in
Section
2.1(a).
"Third Party" shall mean any Person other than Alnylam or Novartis
and
their respective Affiliates.
"Third Party Adoption" shall have the meaning set forth in
Section
4.2(b).
"Third Party Adoption Consideration" shall have the meaning set
forth
in Section 4.2(b).
"Third Party Infringement Claim" shall have the meaning set forth
in
Section 6.4(a).
"Unblocking Amount" shall have the meaning set forth in Section
4.4(e)(iii).
"Valid Claim" shall mean a claim (a) of any issued, unexpired
Patent
that has not been revoked or held
unenforceable or invalid by a decision of a
court or governmental agency of competent
jurisdiction from which no appeal can
be taken, or with respect to which an
appeal is not taken within the time
allowed for appeal, and that has not been
disclaimed or admitted to be invalid
or unenforceable through reissue,
disclaimer or otherwise, or (b) of any Patent
Application that has not been cancelled,
withdrawn or abandoned, or been pending
for more than [**].
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ARTICLE II
RESEARCH COLLABORATION
2.1 SELECTION OF TARGETS FOR INCLUSION INTO THE RESEARCH
COLLABORATION.
(a) Initial [**] Targets. Within thirty (30) days following the
Effective Date, and from time to time
thereafter, Alnylam shall provide to the
Gatekeeper a list of Targets that are
Blocked Targets (a "Blocked Target List").
During the Selection Term, Novartis may
from time to time deliver to the
Gatekeeper one or more lists of Targets
(each such list, a "Target List") that
Novartis desires to include in the Research
Collaboration. Within two (2) days
following the Gatekeeper's receipt of the
Target List, the Gatekeeper shall
notify Novartis in writing (a "Target
Response Notice") which, if any, of the
Targets identified on such Target List are
on the Blocked Target List most
recently delivered by Alnylam to the
Gatekeeper. All of the Targets on the
Target List that are not on such Blocked
Target List shall be deemed "Selected
Targets" for the purposes of this
Agreement, and the Gatekeeper shall notify
both Parties of the identity of such
Selected Targets within the same two (2)
day time period. Selected Targets that are
or have been the subject of an Active
Program shall be deemed to be on the "A
List," and Selected Targets that are not
nor have not been the subject of an Active
Program shall be deemed to be on the
"B List." Subject to Section 2.1(b),
Novartis shall be entitled to submit
Targets for designation as Selected Targets
until an aggregate of [**] Selected
Targets (the "Selected Target Threshold")
have been identified pursuant to the
foregoing procedure. Novartis shall submit
the first Target List, which shall
contain at least [**] Targets, within [**]
after the Effective Date. Without
limiting the provisions of Sections 2.6(b)
and (c), the Parties agree that none
of the genes of respiratory syncytial virus
(RSV) shall be available as a
"Selected Target" under the provisions of
this Section 2.1.
(b) Additional Targets. In the event that the Selected Target
Threshold has been reached, Novartis may
from time to time during the Selection
Term either:
(i) upon written notice to Alnylam, withdraw (for any reason) a B
List
Target from treatment as a Selected Target.
Thereafter Novartis shall be free to
designate substitute Targets pursuant to
Section 2.1(a) at any time, up to the
Selected Target Threshold (for the
avoidance of doubt, such substitute Targets
shall not be considered "Supplemental
Targets"); or
(ii) deliver to the Gatekeeper one or more lists of additional
Target(s) (each such list, a "Supplemental
Target List"). Within two (2) days
following the Gatekeeper's receipt of a
Supplemental Target List, the Gatekeeper
shall notify Novartis in writing (a
"Supplemental Target Response Notice")
which, if any, of the Targets identified on
such Supplemental Target List are on
the Blocked Target List most recently
delivered by Alnylam to the Gatekeeper.
All of the Targets on the Supplemental
Target List that are not are on such
Blocked Target List (each such Target, a
"Supplemental Target"), shall be deemed
"Selected Target(s)" for the purposes of
this Agreement, and
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the Gatekeeper shall notify both Parties of
the identity of such Supplemental
Targets within the same two (2) day time
period. Novartis shall pay, or cause to
be paid, the payment set forth in Section
4.3(a). Novartis may designate no more
than [**] Supplemental Targets in the
aggregate (the "Supplemental Target
Threshold").
(c) In the event that a Blocked Target ceases to be a Blocked
Target,
Alnylam shall promptly advise the
Gatekeeper thereof and it shall be removed
from the Blocked Target List. In the event
that (i) Novartis was unable to
select a Target as a Selected Target under
Section 2.1(a) or a Supplemental
Target under Section 2.1(b) because such
Target was on the Blocked Target List
as of the date such Target List or
Supplemental Target List, as the case may be,
was received by the Gatekeeper, and (ii)
such Target subsequently ceases to be a
Blocked Target, the Gatekeeper shall
promptly notify Novartis thereof, and
Novartis shall thereafter be permitted to
select such Target subject, in the
applicable case, to the Selected Target
Threshold or the Supplemental Target
Threshold.
2.2 JOINT STEERING COMMITTEE.
(a)
Constitution; Representatives. The Parties will establish a
Joint
Steering Committee ("Joint Steering
Committee"), comprised of three (3)
representatives designated by Alnylam and
three (3) representatives designated
by Novartis, each of which representatives
shall be of the seniority and
experience appropriate for participation on
the Joint Steering Committee in
light of the functions, responsibilities
and authority of such committee. Each
Party shall make its designation of its
representatives not later than thirty
(30) days after the Effective Date. Each
Party may change any one or more of its
Joint Steering Committee representatives at
any time upon written notice to the
other Party. If a Party's representative is
unable to attend a meeting, such
Party may designate an alternate to attend
such meeting in place of the absent
representative. In addition, each Party
may, subject to the other Party's
consent (not to be unreasonably withheld or
delayed), invite non-voting
employees, and, with the consent of the
other Party, consultants or scientific
advisors (provided they are engaged as such
under obligations of confidentiality
no less protective of the Parties'
Confidential Information than as set forth in
Article V) to attend the meetings of the
Joint Steering Committee. The Joint
Steering Committee shall be dissolved and
its activities and authority
terminated upon the expiration or
termination of the Research Term.
(b) Authority. The Joint Steering Committee shall be responsible
for
overseeing, managing and auditing the
Research Collaboration. Such
responsibilities shall include:
(i) Providing general oversight of the Active Programs,
including
allocating the
appropriate number of FTEs;
(ii) Periodically reviewing the overall goals, strategy and
progress of the
Research Collaboration;
(iii) Initiating Active Programs;
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<PAGE>
(iv) Reviewing proposed Research Plans and considering
additions,
updates or
amendments to extant Research Plans;
(v) Prioritizing the allocation of resources dedicated to the
Research
Collaboration;
(vi) Determining whether and which Third Party contractors
should
be engaged in
connection with any aspect of the Research Collaboration;
(vii) Monitoring the pre-clinical Development of Discovered
RNAi
Compounds;
(viii) Resolving any disagreement between the Parties relating
to
the matters set
forth in clauses (i) through (vi) in accordance with the
decision-making
procedure set forth in Section 2.2(e); and
(ix) Discussing any other issues submitted to it by the
Parties.
(c) Meetings. The Joint Steering Committee shall meet to discuss
the
business of the Research Collaboration
within thirty (30) days after the
Effective Date and, thereafter, at least
quarterly until the end of the Research
Term. In addition, a Party may call a
meeting of the Joint Steering Committee
upon reasonable notice to the other Party,
such notice requirement being deemed
waived by a Party's attendance and
participation. The location of Joint Steering
Committee meetings, when in person, shall
alternate between Novartis's and
Alnylam's offices unless otherwise agreed
by the Joint Steering Committee. The
Joint Steering Committee may also meet by
means of a telephone or video
conference call, and may take action by
vote at a meeting or telephone or video
conference call, or pursuant to a written
vote.
(d) Project Teams. The Joint Steering Committee shall have the
authority to create project teams for the
Research Collaboration, each of which
will meet (via telephone or video
conference or in person) no less frequently
than monthly, and which will report to the
Joint Steering Committee on the
progress of the activities performed on the
Research Collaboration no less
frequently than quarterly. The Joint
Steering Committee shall also have the
authority to create additional
subcommittees as needed. Notwithstanding the
foregoing, the Joint Steering Committee
shall not have the authority to amend or
modify the terms of this Agreement.
(e) Decision-Making. All decisions of the Joint Steering
Committee
shall be made by unanimous vote of the
Joint Steering Committee representatives,
with each Party's Joint Steering Committee
representatives collectively having
one (1) vote, and the goal of all decision
making shall be to achieve consensus.
Upon thirty (30) days prior written notice,
either Party may convene a special
meeting of the Joint Steering Committee for
the purpose of resolving any failure
to reach agreement on a matter within the
scope of the authority and
responsibility of the Joint Steering
Committee. If the matter is not resolved by
the Joint Steering Committee within thirty
(30) days after referral to the Joint
Steering Committee, then: (i) if such
failure to reach agreement relates to a
matter identified in Section 2.2(b)(iv),
then Novartis shall have the right to
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<PAGE>
decide the matter, and (ii) if such failure
to reach agreement relates to a
matter identified in Sections 2.2(b)(i),
(ii), (iii), (v), (vi) or (vii), then
such matter shall be referred to the
Executive Officers for resolution. If such
matter is not resolved by the Executive
Officers within fifteen (15) days after
referral to the Executive Officers, then
Novartis shall have the right to decide
the matter. In exercising its
decision-making authority under this Section
2.2(e), Novartis shall be consistent with
the provisions of Section 2.4.
(f) Dispute Resolution. Any dispute between the Parties with
respect
to a matter not within the scope of
Sections 2.2(b)(i) through (vii) (including
whether specific milestone events have
occurred) shall be referred to the
Executive Officers for resolution. If such
matter is not resolved by the
Executive Officers within fifteen (15) days
after referral thereto, then either
Party may seek any and all remedies
available under law or equity with respect
to such dispute.
2.3 ACTIVE PROGRAMS; RESEARCH PLANS.
(a) Initiation and Modification of an Active Program. From time
to
time during the Selection Term, the Joint
Steering Committee shall initiate,
subject to Section 2.4, one or more
research programs (each such program, an
"Active Program") (i) to identify or
optimize RNAi Compounds directed to a
Selected Target, or (ii) to develop RNAi
technology to enable or enhance the
utility of Discovered RNAi Compounds in the
Field. Under the supervision of the
Joint Steering Committee, Discovery
activities to be undertaken with respect of
each such Active Program shall be set forth
in a research plan (each such plan,
a "Research Plan") that will set forth the
Parties' respective obligations with
respect to such Active Program, including,
workflow, deliverables, timelines,
and budgets, it being understood that
Novartis representatives on the Joint
Steering Committee shall be subject to
Novartis's standard budget procedures.
Any representative of the Joint Steering
Committee may, at any time or from time
to time, submit, on behalf of the Party it
represents, a proposed Research Plan,
or proposed additions, updates or
amendments to an extant Research Plan for its
review. Any such proposed Research Plans or
proposed additions, updates or
amendments shall not become effective until
approved, subject to Section 2.2(e),
in writing by the Joint Steering Committee.
The Joint Steering Committee shall
review and consider any such Research Plans
or additions, updates or amendments
of an extant Research Plan on an
expeditious basis, and all such additions,
updates and amendments approved as set
forth above shall, subject to Section
2.2(e), constitute and be deemed part of
this Agreement for all purposes and
incorporated herein.
(b) Discontinuation of an Active Program.
From time to time during the Research Term, the Joint Steering
Committee may elect to discontinue one or
more Active Programs (each such
discontinued Active Program, an "Abandoned
Program") and any such
discontinuation shall constitute a
termination of the applicable Research Plan
governing such Abandoned Program. Alnylam
shall be free to continue any
Abandoned Program on its own in accordance
with the following: (x) until such
time as Alnylam adds substantive value to
such Abandoned Program, Alnylam shall
be permitted to enter into an agreement
with a
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Third Party, not subject to Section 2.6(b)
and (c), for the Development or
Commercialization of RNAi Compounds
Discovered during the course of such
Abandoned Program, and (y) at or following
such times as Alnylam adds
substantive value to such Abandoned
Program, Alnylam may enter into an agreement
with a Third Party, subject to compliance
with the provisions of this Section
2.6(b) and Section 2.6(c), for the
Development or Commercialization of RNAi
Compounds Discovered during the course of
such Abandoned Program. From time to
time during the Selection Term, the Joint
Steering Committee may reinstate any
such Abandoned Program and Research Plan,
whereby such Abandoned Program shall
thereafter again be an "Active Program,"
unless Alnylam has initiated a bona
fide research program (pursuant to a
written research plan) with respect to such
Abandoned Program and has dedicated [**]
the Joint Steering Committee's decision
to reinstate such Abandoned Program. For
the avoidance of doubt, following the
Joint Steering Committee's election to deem
an Active Program as an Abandoned
Program, Novartis's rights under the
"Discovered RNAi Compound(s),"
"Collaboration Product(s)," and "Selected
Target(s)" that are the subject of
such Abandoned Program shall terminate
unless and until such Abandoned Program
subsequently becomes an Active Program
pursuant to Sections 2.3(b) or 2.6(c).
2.4 STAFFING; INFRASTRUCTURE.
(a) During the Research Term, the Joint Steering Committee
shall
allocate approximately [**] FTEs (the exact
number of FTEs to be determined by
the Joint Steering Committee) to staff each
Active Program. Novartis agrees that
(i) within [**] following the Effective
Date, it shall cause the Joint Steering
Committee to initiate at least [**] Active
Programs and allocate at least [**]
Alnylam-provided FTEs to Active Programs,
and (ii) for each year thereafter
during the Research Term, it shall cause
the Joint Steering Committee to
administer at least [**] Active Programs
and allocate at least [**]
Alnylam-provided FTEs to Active Programs.
Novartis or its Affiliates will fund
the FTEs provided by Alnylam at the rate
set forth in Section 4.3(b). Starting
in [**], the Joint Steering Committee will,
by [**] of each Contract Year, give
notice to Alnylam as to how many
Alnylam-provided FTEs the Joint Steering
Committee will allocate to Active Programs
for the following Contract Year, and
Novartis agrees to fund such forecasted
FTEs in the aggregate (or such higher
number as is agreed upon by the Joint
Steering Committee). Novartis or its
Affiliates will also pay Alnylam a
quarterly Infrastructure Fee in support of
each Active Program in accordance with
Section 4.3(c).
(b) In the event of a public announcement that Alnylam has
entered
into a definitive agreement to undergo a
Change of Control, Novartis shall have
the right to suspend all of Alnylam's
activities (together with Novartis's
obligations to fund such activities) under
each Active Program until such time
as either (i) Alnylam undergoes such Change
of Control, or (ii) there is a
public announcement that such Change of
Control will not occur. The duration of
the Selection Term shall be tolled for the
duration of such suspension. In the
event that Alnylam undergoes a Change of
Control, Novartis shall have the right,
upon written notice to Alnylam within
thirty (30) days after a Change of
Control, to immediately terminate
Novartis's obligations under Section 2.4(a)
and Alnylam's rights under Section 3.2
(which shall not constitute a termination
of this Agreement for purposes of Article
VIII). In the event that Novartis
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exercises such termination rights, Alnylam
shall immediately cease working on
all Active Programs and shall promptly
return all of Novartis's Know-How,
Program Data and Confidential Information.
For purposes of this Section 2.4(b),
a "Change of Control" of Alnylam shall be
deemed to occur if Alnylam is involved
in a merger, reorganization or
consolidation in which its shareholders
immediately prior to such transaction would
hold less than fifty percent (50%)
of the securities or other ownership or
voting interests representing the equity
of the surviving entity immediately after
such merger, reorganization or
consolidation, or if there is a bona fide
sale of all or substantially all of
Alnylam's assets or business relating to
this Agreement to a Third Party, or if
a "Significant Pharmaceutical Company" (as
defined below) effectively acquires
control of the management and policies of
Alnylam. A "Significant Pharmaceutical
Company" is a pharmaceutical company,
biotechnology company, or group of such
companies acting in concert, with aggregate
annual sales of pharmaceutical
products greater than [**] U.S. dollars
($[**]).
2.5 SCIENTIFIC STRATEGY AND ADVISORY GROUP.
Promptly following the Effective Date, the Parties will establish
a
scientific strategy and advisory group
("Advisory Group") to consider overall
strategy for the relevant science and
clinical applications of the Research
Collaboration and the field of RNAi. The
Advisory Group will include the
scientific founders and scientific
leadership of Alnylam, including Dr. Philip
Sharp or his successor as the chair of
Alnylam's Scientific Advisory Board,
together with at least three of the senior
scientists of Novartis, including Dr.
Mark Fishman or his successor in title. The
Advisory Group shall meet with such
frequency as may be established by the
Advisory Group (but in no event less
often than three (3) times per year), and
at such times and locations (or by
telephone or video conference call) as may
be established by the Advisory Group.
The Advisory Group will annually designate
an Advisory Group Chair, and the
Parties shall alternate responsibility for
chairing the meetings of the Advisory
Group, beginning with Novartis. The
Advisory Group shall not have any authority
over the Research Collaboration, including
any Research Plan or Active Program.
No Advisory Group member may delegate
his/her participation in the Advisory
Group.
2.6 RESTRICTIONS ON ALNYLAM.
(a) Exclusivity. Without limitation to the exclusive rights granted
to
Novartis under Section 3.1, Alnylam shall
not, and shall ensure that its
Affiliates do not (either alone or,
directly or indirectly, in conjunction with
a Third Party) conduct any activities
directed towards: (i) the Discovery
(except in connection with an Active
Program) of any RNAi Compound or RNAi
Products directed to a Selected Target
(other than Selected Targets that are the
subject of Abandoned Programs that do not
become Active Programs pursuant to
Sections 2.3(b) or 2.6(c)) during the
Selection Term, or (ii) the Discovery
(except in connection with an Active
Program), Development, Commercialization or
Manufacture of (A) Discovered RNAi
Compounds or Collaboration Products, or (B)
RNAi Compounds or RNAi Products directed to
Selected Targets that are or were
the subject of an Active Program (other
than Abandoned Programs that do not
become Active Programs pursuant to Sections
2.3(b) or 2.6(c)). For
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<PAGE>
the avoidance of doubt, Alnylam shall not,
and shall ensure that its Affiliates
do not, grant to any Third Party any rights
under Alnylam Intellectual Property
to engage in any of the foregoing
activities.
(b)
Permitted Activities Subject to Right of First Offer. So long
as
such activities do not violate the terms of
Section 2.6(a) or Novartis's
exclusive rights under Section 3.1, Alnylam
shall retain the right to Discover,
Develop, Commercialize or Manufacture RNAi
Compounds and RNAi Products directed
at one or more Targets (each, an "Alnylam
Program"); provided, however, that (x)
during the Exclusivity Term, Alnylam or its
Affiliates may enter into agreements
with Research Institutions to Discover or
Develop one or more RNAi Compounds or
RNAi Products or engage Controlled
Contractors; and (y) if, during the
Exclusivity Term, Alnylam or any of its
Affiliates seek, directly or indirectly
in conjunction with a Third Party (other
than with a Controlled Contractor or a
Research Institution or as expressly
contemplated pursuant to the terms as of
the Effective Date of a Pre-Existing
Alliance Agreement), to Discover, Develop,
Commercialize or Manufacture, or to license
any Third Party (other than with a
Controlled Contractor or a Research
Institution or as expressly contemplated
pursuant to the terms as of the Effective
Date of a Pre-Existing Alliance
Agreement) the right to Discover, Develop,
Commercialize or Manufacture any RNAi
Compounds or RNAi Products pursuant to an
Alnylam Program, Alnylam shall first
provide written notice thereof, together
with a reasonably detailed description
of such Alnylam Program (including the
relevant Target(s), Indications and data
showing the performance of the RNAi
Compounds involved (to the extent available,
but not the identity of the RNAi Compounds
involved), to Novartis (an "Alnylam
Opportunity Notice"), and the provisions of
Section 2.6(c) will apply.
(c) Right of First Offer.
(i) If Novartis
notifies Alnylam in writing within [**] after receipt of
the Alnylam Opportunity Notice (the
"Alnylam Opportunity Response Period"; such
notice, the "Alnylam Opportunity Response")
that it wishes to Discover, Develop
or Commercialize the RNAi Compounds or RNAi
Products under such Alnylam Program,
then:
(A) if such Alnylam Program is directed to a product with respect
to
which the
applicable Regulatory Authority in the United States or one of
the Major Market
Countries has not accepted a bona fide IND filing (a
"Pre-IND Alnylam
Program"), then such Alnylam Program and related RNAi
Compound,
product and Targets shall thereafter be included under this
Agreement with
each being treated as an "Active Program," "Discovered RNAi
Compound,"
"Collaboration Product," and "Selected Targets" (provided that
such Targets
shall not be treated as Selected Targets or Supplemental
Targets for the
purposes of calculating the Selected Target Threshold or
Supplemental
Target Threshold respectively) respectively; provided,
however, that
without prejudice to the binding nature of the foregoing, the
Parties [**] to
agree upon [**], provided that in no event shall such [**]
be less than the
[**], which [**] shall include all [**] (determined in
accordance with
the [**] under this Agreement) for the [**] involved in
such Alnylam
Program, all [**] with respect to such Alnylam
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<PAGE>
Program, the
Infrastructure Fees which would have been payable by Novartis
pursuant to
Section 4.3(c) if the Alnylam Program had been an Active
Program, and all
milestones which would have been payable by Novartis
pursuant to
Section 4.4(c) if the Alnylam Program had been an Active
Program; or
(B) if such Alnylam Program is directed to a product with respect
to
which the
applicable Regulatory Authority in the United States or one of
the Major Market
Countries has accepted a bona fide IND filed by Alnylam (a
"Post-IND
Alnylam Program"), the Parties shall use commercially
reasonable
efforts to
negotiate and execute a definitive agreement to reflect the
rights and
obligations of each Party with respect to such RNAi Compound
(an
"Alnylam Program
Agreement") within [**] after the date Novartis received
the Alnylam
Opportunity Notice. The Alnylam Program Agreement shall include
(i)
non-financial terms which are substantially similar to the terms
set
forth herein
applicable to "Active Programs," "Discovered RNAi Compounds"
and
"Collaboration Products," (provided that any Targets covered by
such
Alnylam Program
shall not be treated as Selected Targets or Supplemental
Targets for the
purposes of calculating the Selected Target Threshold or
Supplemental
Target Threshold, respectively) and (ii) appropriate financial
consideration
after giving effect to the maturity of Alnylam's Discovery,
Development and
Commercialization activities up through and including the
Alnylam
Opportunity Notice. During the period in which the Parties are
using
commercially reasonable efforts to negotiate and execute an
Alnylam
Program
Agreement, Alnylam shall give reasonable consideration to any
Novartis input
on any agreements that Alnylam desires to enter into with
any Research
Institution with respect to such Alnylam Program.
During the Alnylam Opportunity Response
Period, Alnylam shall provide, at
Novartis's reasonable request, information
(but not the identity of the RNAi
Compounds involved) that would be relevant
in making a decision about whether or
not to participate in such Alnylam
Program.
(ii) If: (A)
Novartis indicates during the Alnylam Opportunity Response
Period that it has no interest in a Pre-IND
Alnylam Program; or (B) with respect
to Post-IND Alnylam Programs, Novartis and
Alnylam are unable, after using
commercially reasonable efforts, to enter
into an Alnylam Program Agreement
within [**] after the date Novartis
received the Alnylam Opportunity Notice,
then Alnylam and its Affiliates shall for a
period of [**] thereafter be free,
without any further obligation to Novartis,
to enter into an agreement with a
Third Party seeking to Discover, Develop or
Commercialize, or to license any
Third Party to Discover, Develop and
Commercialize, any RNAi Compounds and RNAi
Products pursuant to such Alnylam Program
on terms no more favorable, overall,
to such Third Party than those offered to
Novartis under Section 2.6(c)(i).
(iii) If: (A)
Novartis indicates during the Alnylam Opportunity Response
Period that it has no interest in a
Post-IND Alnylam Program; or (B) Novartis
fails to provide Alnylam an Alnylam
Opportunity Response prior to the expiration
of the
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<PAGE>
Alnylam Opportunity Response Period with
respect to either a Pre-IND Alnylam
Program or a Post-IND Alnylam Program, then
Alnylam and its Affiliates shall be
free, without any further obligation to
Novartis, to enter into an agreement
with a Third Party seeking to Discover,
Develop or Commercialize, or to license
any Third Party to Discover, Develop and
Commercialize, any RNAi Compounds and
RNAi Products pursuant to such Alnylam
Program.
(d) Alnylam's Acquisition of Third Party Intellectual Property.
Alnylam may enter into agreements with
Third Parties to acquire or license
rights from such Third Parties so long as
Alnylam complies with the provisions
of Sections 2.6(b) and (c), as applicable,
in connection therewith.
2.7 TECHNOLOGY TRANSFER.
(a) Information. On a periodic basis as agreed by the Parties,
and
promptly following Novartis's reasonable
request from time to time, Alnylam
shall deliver to Novartis or its designated
Affiliate, for no additional
consideration, (i) all Alnylam Intellectual
Property specifically relating to
the Discovered RNAi Compounds, (ii) all
Alnylam Intellectual Property relating
to the Research Collaboration (including
each of the Active Programs), and (iii)
all Alnylam Intellectual Property necessary
or useful to the Discovery,
Development, Commercialization or
Manufacture of Discovered RNAi Compounds or
Collaboration Products. Following the
Adoption Date, on a periodic basis as
agreed by the Parties, and promptly
following Novartis's reasonable request from
time to time, Alnylam shall deliver to
Novartis, for no additional
consideration, all Broad RNAi Intellectual
Property that is necessary or useful
to the exercise of Novartis's rights under
the Adoption License. The information
to be delivered pursuant to the foregoing
provisions of this Section 2.7 shall
include copies of all Patent Rights,
Know-How documentation, copyright
registrations, and applications thereof,
Program Data, and all other
documentation relating to the intellectual
property embodied in the Discovered
RNAi Compounds, whether in human or machine
readable form (such form to be
acceptable to Novartis), and un-redacted
copies of agreements that directly or
indirectly grant or restrict rights in
Alnylam Intellectual Property subject to
compliance with applicable documented
confidentiality obligations and provided
that Alnylam may redact terms that do not
relate to Novartis's rights or
obligations under this Agreement; provided,
that, until the earlier of (x) the
expiration of the Selection Term or (y)
such time as Novartis acquires the
Adoption License, Alnylam will use
commercially reasonable efforts to ensure
that Novartis is granted access to
un-redacted copies of agreements thereafter
entered into directly or indirectly
granting or restricting rights in Alnylam
Intellectual Property (provided that
Alnylam may redact terms that do not relate
to Novartis's rights or obligations under
this Agreement). Additionally, with
respect to each Licensed Product that is
not directed to the same Indication as
an Alnylam product that is the subject of a
Dedicated Alnylam Program, Alnylam
shall deliver to Novartis or its designated
Affiliate, for no additional
consideration, all scientific, regulatory,
pre-clinical or clinical information
or data regarding specific Indications and
all marketing, financial, commercial,
personnel and other business information
and plans that are necessary or useful
to the Discovery, Development,
Commercialization or Manufacture of such Licensed
Product and its related RNAi
Compound(s).
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<PAGE>
(b) Technology. On a periodic basis as agreed by the Parties,
and
promptly following Novartis's reasonable
request from time to time, Alnylam
shall deliver to Novartis or its designated
Affiliate, for no additional
consideration, physical embodiments of (i)
the Discovered RNAi Compounds, (ii)
all Know-How now or in the future
Controlled by Alnylam that is used in the
course of the Research Collaboration
(including each of the Active Programs),
and (iii) all Know-How now or in the future
Controlled by Alnylam that is
necessary or useful to the Discovery,
Development, Commercialization or
Manufacture of Discovered RNAi Compounds or
Collaboration Products. Following
the Adoption Date, on a periodic basis as
agreed by the Parties, and promptly
following Novartis's request from time to
time, Alnylam shall deliver to
Novartis, for no additional consideration,
all Know-How Controlled by Alnylam
that is necessary or useful to the exercise
of Novartis's rights under the
Adoption License.
(c) Without limiting the generality of any other provision of
this
Agreement, Alnylam shall, until the fifth
(5th) anniversary of the termination
or expiration of the Research Term, make
its relevant scientific and technical
personnel available to Novartis to answer
any questions or provide instruction
as reasonably requested by Novartis
concerning the items delivered pursuant to
Section 2.7, in connection with Novartis's
Development, Commercialization and
Manufacture of the Discovered RNAi
Compounds and the Licensed Products.
ARTICLE III
GRANT OF RIGHTS
3.1 ALNYLAM GRANTS.
(a) Research Term. Subject to the terms and conditions of this
Agreement (including Sections 3.1(e) and
(f)), Alnylam hereby grants to Novartis
and its Affiliates a worldwide,
royalty-free, non-sublicensable right and
license under Alnylam Intellectual Property
to, during the Research Term, (i)
perform Novartis's obligations under the
Research Collaboration, (ii) engage in
the Discovery of RNAi Compounds in the
Field, and (iii) Discover RNAi Compounds
directed at the Selected Targets (other
than Selected Targets that are the
subject of Abandoned Programs that do not
become Active Programs pursuant to
Sections 2.3(b) or 2.6(c)). The rights
granted under clauses (i) and (ii) shall
be non-exclusive, and the rights granted
under clause (iii) shall be exclusive,
subject to Alnylam's right (itself or
through its Affiliates) to perform its
obligations under the Research
Collaboration or to pursue Abandoned Programs
that do not become Active Programs pursuant
to Sections 2.3(b) or 2.6(c).
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<PAGE>
(b) Collaboration Products. Subject to the terms and conditions
of
this Agreement (including Sections 3.1(e)
and (f)), Alnylam hereby grants to
Novartis and its Affiliates an exclusive
(subject to Alnylam's right (itself or
through its Affiliates) to perform its
obligations under the Research
Collaboration), worldwide, royalty-bearing,
sublicensable (subject to Section
3.1(d)) right and license under Alnylam
Intellectual Property to (i) Discover,
Develop, Commercialize or Manufacture
Collaboration Products for all
applications in the Field, and (ii) to
Develop, Commercialize or Manufacture
Discovered RNAi Compounds.
(c) Adoption. Upon Novartis's written election during the
Research
Term (following such time as the
Collaboration Success Milestone has been
achieved) and Novartis's or its Affiliate's
tender to Alnylam of the Adoption
Consideration (the date of such tender, the
"Adoption Date"), Alnylam hereby
grants, in addition to the licenses granted
in Sections 3.1(a) and (b), to
Novartis and its Affiliates a
non-exclusive, worldwide, perpetual, irrevocable,
royalty-bearing right and license, subject
to the terms and conditions of this
Agreement (including Sections 3.1(e) and
(f)), under Broad RNAi Intellectual
Property to engage in any and all
activities in the Field, including all
Discovery, Development, Commercialization
and Manufacturing activities directed
to the Field (the "Adoption License").
Novartis's rights under the Adoption
License are non-sublicensable; provided,
however, that Novartis may engage Third
Party contractors, including contract
research organizations, contract
employees, consultants, contract
manufacturers and the like.
(d) Novartis Sublicense Rights. The sublicensing of Novartis's
rights
under Section 3.1(b) will be subject to the
following provisions: (i) Novartis's
sublicensees shall have no right to grant
further sublicenses without Alnylam's
written consent, which consent shall not be
unreasonably withheld or delayed;
and (ii) Novartis shall be primarily liable
for any failure by its sublicensees
to comply with, and Novartis guarantees to
Alnylam the compliance by each of its
sublicensees with, all relevant
restrictions, limitations and obligations in
this Agreement.
(e) Reservation of Rights.
(i) Novartis acknowledges and agrees that the grants by Alnylam
under
Alnylam Intellectual Property set forth in
Sections 3.1(a) through (c) are
subject to, and are limited to the extent
of, the rights that Alnylam has
previously granted and is required to grant
under Alnylam Intellectual Property
to Third Parties (the "Pre-Existing
Alliance Parties") under the terms as of the
Effective Date of the Pre-Existing Alliance
Agreements. As and to the extent
that such rights previously or subsequently
granted to Pre-Existing Alliance
Parties under Alnylam Intellectual Property
lapse, terminate or otherwise revert
to Alnylam, they shall be automatically
included in the rights under Alnylam
Intellectual Property granted to Novartis
under Sections 3.1(a) through (c).
Without limiting the foregoing, (x) Alnylam
covenants not to amend or extend any
Pre-Existing Alliance Agreements in a
manner that would further narrow or limit
the scope of Novartis's rights under
Section 3.1(a) through (c), and (y) Alnylam
covenants not to grant any exclusive rights
or licenses under any Broad RNAi
Intellectual Property except in connection
with Alnylam Programs that are not
acquired by Novartis pursuant to
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<PAGE>
Section 2.6(c) or as expressly contemplated
pursuant to the terms as of the
Effective Date of Pre-Existing Alliance
Agreements, provided, that the
provisions of this clause (y) shall
terminate upon the expiration of the
Research Term if Novartis has not elected
to obtain the Adoption License. Until
such time as Novartis is no longer
precluded as a result of rights granted under
the terms as of the Effective Date of one
or more Pre-Existing Alliance
Agreements from engaging in Target
identification or Target validation, Alnylam
shall, at its cost and expense, allocate up
to [**] in furtherance of the
Research Collaboration.
(ii) Novartis further acknowledges that a Pre-Existing Alliance
Party
may from time to time request rights under
Alnylam Intellectual Property with
respect to a particular Target that Alnylam
is required, pursuant to the terms
as of the Effective Date of a Pre-Existing
Alliance Agreement, to grant such
rights to such Pre-Existing Alliance Party
with respect to such Target unless,
among other conditions, such Target is
already the subject of an active program
of Discovery, Development or
Commercialization of RNAi Compounds directed to
such Target by Novartis. In order for
Alnylam to fulfill its obligations under
the Pre-Existing Alliance Agreements,
following the Adoption Date, Novartis
shall, within twenty (20) days following
Novartis's receipt of a written inquiry
from Alnylam (through the Gatekeeper
mechanism described in Section 3.1(e)(iv))
with respect to a specified Target (a
"Target Inquiry"), notify Alnylam (through
the Gatekeeper mechanism described in
Section 3.1(e)(iv)) in writing whether or
not such Target is the subject of a
Dedicated Novartis Program. If Novartis so
notifies Alnylam that such Target is the
subject of a Dedicated Novartis
Program, Alnylam shall not grant to such
Pre-Existing Alliance Party the
requested rights under the Broad RNAi
Intellectual Property with respect to such
Target. If Novartis so notifies Alnylam
that such Target is not the subject of a
Dedicated Novartis Program, then Alnylam
may grant to such Pre-Existing Alliance
Party the relevant rights under Broad RNAi
Intellectual Property with respect to
such Target, and Novartis's rights under
Sections 3.1(a) or (c) shall be subject
to such Pre-Existing Alliance Party's
rights with respect to such Target.
Notwithstanding the foregoing, in no event
will Alnylam directly or indirectly
notify or communicate to any Third Party
the contents or the existence of
Novartis's response hereunder without
Novartis's prior written consent, which
may be withheld at Novartis's sole
discretion.
(iii) From time to time during the Research Term, and after the
Adoption Date, following an affirmative
decision by Novartis to initiate a
program directed to the Discovery,
Development or Commercialization of RNAi
Compounds directed to a particular Target,
Novartis may inquire of the
Gatekeeper in writing whether or not such
Target is on the Blocked Target List
by virtue of being subject to a
then-current exclusive or co-exclusive grant
under a Pre-Existing Alliance Agreement or
subject of an option, right of first
refusal or similar right under a
Pre-Existing License Agreement in the
Encumbered Field. The Gatekeeper shall,
within two (2) days following the
Gatekeeper's receipt of such written
request from Novartis, notify Novartis in
writing whether or not such Target is or
may be excluded; provided, however,
that in no event will the Gatekeeper
directly or indirectly notify or
communicate to Alnylam the contents or the
existence of Novartis's inquiry
hereunder without Novartis's prior written
consent, which may be withheld at
Novartis's sole discretion. In the event
that such
27
<PAGE>
Target is not on such Blocked Target List,
Novartis shall be free to Discover,
Develop, Commercialize or Manufacture RNAi
Compounds and Licensed Products
directed to such Targets. Notwithstanding
the foregoing, a Pre-Existing Alliance
Party may subsequently request exclusive or
co-exclusive rights from Alnylam
with respect to a particular Target as
described in Section 3.1(e)(ii) and the
provisions of Section 3.1(e)(ii) shall
control.
(iv) Gatekeeper. The inquiries and responses made by one Party to
the
other in connection with Sections 2.1 and
3.1(e)(ii) through (iii) shall be made
in writing to the attention of an
independent attorney registered to practice
before the United States Patent and
Trademark Office mutually agreeable to both
Parties (the "Gatekeeper") who will be
bound by confidentiality obligations to
both Parties. The Gatekeeper's
responsibility shall be to ensure that each Party
complies on an ongoing basis with the terms
and conditions of Sections 2.1 and
3.1(e)(ii) through (iii). Each Party agrees
to provide the Gatekeeper with full
and complete copies of all records and
information (including un-redacted copies
of the relevant Third Party agreements)
that are necessary for the Gatekeeper to
render its determination. In the event that
the Gatekeeper determines that, in
connection with an inquiry or response made
by either Party in connection with
Sections 2.1 or 3.1(e)(ii) through (iii),
such Party may not have complied with
the provisions of one or more of those
Sections, the Gatekeeper shall issue a
written report to both Parties stating with
specificity such actual or suspected
non-compliance, and each Party hereby
consents to the disclosure to the other
Party of any confidential information
included in such report (provided that
such information shall be treated by the
Parties' as Confidential Information
pursuant to Article V). The Parties shall
share equally the fees, costs and
expenses of the Gatekeeper's
appointment.
(f) Contractual Obligations under Listed Alnylam Third Party
Agreements.
(i) For the avoidance of doubt, the grants by Alnylam under
Alnylam
Intellectual Property set forth in Sections
3.1(a) through (c) include, subject
to Section 3.1(f)(ii), the sublicense of
all Alnylam Intellectual Property that
is not owned by Alnylam, and the license
and sublicense of Alnylam Intellectual
Property acquired or licensed after the
Effective Date. Novartis's rights and
licenses under such Alnylam Intellectual
Property are limited to the rights
granted to Alnylam under Third Party
agreements granting Alnylam rights
thereunder and Novartis shall comply, and
cause its Affiliates and sublicensees
to comply, with those restrictions and
other terms applicable to sublicensees
under such agreements. In the event that
Alnylam or its Affiliates acquires or
licenses any rights under additional
Alnylam Intellectual Property such
additional Alnylam Intellectual Property
shall be automatically included in the
scope of the rights under Alnylam
Intellectual Property granted to Novartis
pursuant to Sections 3.1(a) through (c);
provided, however, that in the event
that such rights thereunder subject
Alnylam's or its Affiliates' sublicensees to
restrictions and other terms, Alnylam shall
deliver a copy of such agreement
(provided that Alnylam may redact terms
that do not relate to Novartis's rights
or obligations under this Agreement).
Novartis shall comply, and cause its
Affiliates and sublicensees to comply, with
those restrictions and other terms
applicable to sublicensees under such
agreements. In the course of acquiring or
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<PAGE>
licensing additional Broad RNAi
Intellectual Property or any other Alnylam
Intellectual Property Covering a
Collaboration Product, Alnylam shall use its
best efforts to ensure that such rights
include the right to sublicense to
Novartis such Broad RNAi Intellectual
Property or any other Alnylam Intellectual
Property Covering a Collaboration Product.
Notwithstanding the foregoing, it
shall not be deemed a breach of this
Section 3.1(f)(i) for Novartis to fail to
comply with a provision of any such Third
Party agreement that Novartis has not
received from Alnylam.
(ii) Notwithstanding Sections 3.1(a) through (c), the grants by
Alnylam under Alnylam Intellectual Property
set forth in Sections 3.1(a) through
(c), shall not include licenses to Patent
Rights licensed to Alnylam or its
Affiliates under the License Agreement
between Cancer Research Technologies
Limited and Alnylam U.S., Inc. (formerly
Alnylam Pharmaceuticals, Inc.) dated
July 18, 2003. The Parties shall
simultaneously with the execution of this
Agreement enter into the agreement
substantially in the form set forth in
Schedule 3.1(f)(ii) (the "CRT Sublicense
Agreement").
(g) Alnylam shall not assign, license or otherwise grant any rights
or
dispose of (collectively, a "disposition")
with respect to any Broad RNAi
Intellectual Property or other Alnylam
Intellectual Property Covering a
Collaboration Product without making such
disposition expressly subject to
Novartis's rights under this Agreement.
3.2 NOVARTIS GRANT.
Novartis hereby grants to Alnylam and its Affiliates a
worldwide,
royalty-free, non-exclusive,
non-sublicensable right and license under Novartis
Intellectual Property to perform Alnylam's
obligations under an Active Program
during the Research Term.
3.3 AFFILIATES.
For the avoidance of doubt, in granting the rights under Sections
3.1
and 3.2, Alnylam and Novartis are granting,
on behalf of their current and
future Affiliates (other than a Third Party
that becomes an Affiliate of Alnylam
as a result of a Change of Control), such
Affiliates' respective rights under
the Alnylam Intellectual Property and
Novartis Intellectual Property, as the
case may be, that are owned or licensed by
such Affiliates. For the purposes of
this Section 3.3, Novartis's "Affiliates"
shall not include Novartis Institute
for Functional Genomics, Inc., the
Friedrich Miescher Institute for BioMedical
Research or Novartis Institute for Tropical
Diseases Pte. Ltd.
3.4 NOVARTIS FREEDOM TO OPERATE; COMMITMENTS.
Alnylam acknowledges that Novartis is in the business of
Discovering,
Developing, Commercializing and
Manufacturing processes and products in the
Field and nothing in this Agreement or any
duties which may be imposed under
applicable Law shall be construed as
restricting such business or imposing on
Novartis a duty to Discover, Develop,
Commercialize or Manufacture the
Discovered RNAi Compounds or
29
<PAGE>
any Licensed Products to the exclusion of,
or in preference to, any other
process or product, or in any way other
than in accordance with its normal
commercial practices, or to disclose
information to Alnylam not specifically
required hereunder; provided, however, that
Novartis shall, itself or through
its Affiliates, use Commercially Reasonable
Efforts to Develop and Commercialize
Collaboration Products.
ARTICLE IV
FINANCIAL PROVISIONS
4.1 EQUITY INVESTMENT; UP-FRONT CONSIDERATION.
(a) Equity Investment. In addition to the monetary payments
described
in this Article IV, the Parties have
entered into the Stock Purchase Agreement
and, in connection with the Closing (as
defined in the Stock Purchase
Agreement), Alnylam shall simultaneously
with the execution of this Agreement
issue shares of Alnylam capital stock to
Novartis Pharma AG or its designee upon
payment therefor.
(b) Up-Front Consideration. In consideration of the rights granted
to
Novartis under this Agreement as of the
Effective Date, Novartis shall pay, or
cause to be paid, to Alnylam ten million
dollars ($10,000,000) within ten (10)
Business Days following the Effective Date,
of which [**] dollars ($[**]) shall
represent retrospective reimbursement of
Alnylam's expenses to date incurred in
the development of in vivo RNAi technology,
and [**] dollars ($[**]) shall
represent an upfront license fee. The
foregoing payments shall be deemed to
include the following amounts: (i) $[**]
for a sublicense of the rights licensed
by Alnylam under the Agreement between the
[**] and Alnylam Pharmaceuticals,
Inc. dated September 17, 2003; and (ii) the
payments made in respect of Section
3.1 of the [**] Sublicense Agreement.
4.2 ADOPTION.
(a) In the event that Novartis elects, pursuant to the terms of
Section 3.1(c), to exercise its right to
acquire the Adoption License, Novartis
shall, or shall cause one of its Affiliates
to, (i) pay to Alnylam a one-time
technology adoption fee of [**] dollars
($[**]) (the "Adoption Fee"), and (ii)
advance to Alnylam, in one disbursement,
the amount of [**] dollars ($[**])
(such amount, the "Pre-Paid Adopted Product
Fees," and together with the
Adoption Fee, the "Adoption
Consideration"). The Pre-Paid Adopted Product Fees
shall be credited against the unpaid
balance of any and all of Novartis's future
payment obligations with respect to Adopted
Products under Section 4.4 (such
future payment obligations, "Adopted
Product Obligations") by applying the
then-current uncredited balance to [**]
percent ([**]%) of the Adopted Product
Obligation owed with respect to each
Contract Quarter following the Adoption
Date, and then reducing the uncredited
balance of the Pre-Paid Adopted Product
Fees by the amount so applied, until the
entire amount of the uncredited balance
has been so credited. The foregoing
payments shall be deemed to include the
following amounts: (i) $[**] for a
sublicense of the rights licensed by Alnylam
under the Agreement between the [**]
and
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<PAGE>
Alnylam Pharmaceuticals, Inc. dated
September 17, 2003; and (ii) the payments
made in respect of Section 3.2 of the [**]
Sublicense Agreement.
(b) Notwithstanding the provisions of Section 4.2(a), in the
event
that, during the period of time beginning
on the Effective Date and continuing
until [**] after the Adoption Date, (x)
Alnylam or one of its Affiliates
directly or indirectly grants (by license,
option, covenant not to sue, waiver,
settlement or otherwise) to a Third Party
rights that are substantially similar
to those which may be or have been granted
to Novartis under Section 3.1(c) (a
"Third Party Adoption"), and (y) the
aggregate consideration payable by such
Third Party or obtained by Alnylam or its
Affiliates in respect of such rights
(whether by payment, loan, exercise price,
forgiveness of debt, success
milestones due before such rights may be
granted, or otherwise, or any
combination of the foregoing, or the fair
market value thereof, the "Third Party
Adoption Consideration") is less than the
Adoption Consideration plus the
Collaboration Success Milestone or more
favorable to such Third Party than the
Adoption Consideration plus the
Collaboration Success Milestone, then (A)
Alnylam shall notify Novartis in writing of
such Third Party Adoption
Consideration, and (B) the Adoption
Consideration plus the Collaboration Success
Milestone shall, from time to time, be
reduced to the lowest Third Party
Adoption Consideration then in effect. In
the event that the Third Party
Adoption occurs following Novartis's
acquisition of the Adoption License,
Novartis shall be entitled to deduct the
amount of any excess of the Adoption
Consideration plus the Collaboration
Success Milestone over the Third Party
Adoption Consideration against payment(s)
due under Section 4.4. Compliance with
the terms of this Section 4.2(b) shall be
verified by Alnylam's principal
external auditors (or, if such auditors
cannot perform such verification, a
mutually agreed upon independent Third
Party valuation services firm) who shall,
on an annual basis within ninety (90) days
following the end of each Contract
Year, provide Novartis with written
confirmation that shall either confirm that
the above requirements have been observed
in full or, in the case of
non-compliance, provide full details of the
lowest Third Party Adoption
Consideration.
4.3 RESEARCH COLLABORATION PAYMENTS.
(a) Supplemental Selected Target Fee. Upon Novartis's election
pursuant to the terms of Section 2.1(b)(ii)
to treat a Supplemental Target as a
Selected Target, Novartis shall pay, or
cause to be paid, a one-time payment of
[**] dollars ($[**])-per-Supplemental
Target within [**] following the receipt
by Novartis of an invoice therefor in
accordance with Section 4.7.
(b) FTE Funding. During the first [**] of the Selection Term,
Novartis
or its Affiliates will fund the FTEs
provided by Alnylam pursuant to Section 2.4
at an annual rate per FTE of [**] dollars
($[**]), pro-rated to the duration
that such FTEs perform work in an Active
Program. After the [**] of the
Selection Term, the Parties shall enter
into good faith negotiations to adjust
the annual FTE rate applicable to FTEs
provided by Alnylam, it being understood
that the Research Collaboration shall
continue during such negotiations.
Novartis shall pay, or cause to be paid,
such reimbursement quarterly, in
arrears, in accordance with Section
4.7.
31
<PAGE>
(c) Infrastructure Fee. During the Research Term, Novartis shall
pay,
or cause to be paid, to Alnylam an
infrastructure fee (the "Infrastructure Fee")
of [**] dollars ($[**]) per Contract
Quarter for each Active Program meeting
both of the following criteria: (i) such
Active Program was active for at least
[**] during such Contract Quarter, and (ii)
Alnylam provided at least [**]
within such Contract Quarter for such
Active Program. Novartis shall pay, or
cause to be paid, the Infrastructure Fee
quarterly, in arrears, in accordance
with Section 4.7.
4.4 MILESTONE AND ROYALTY PAYMENTS.
(a) Research Milestone Payments. In connection with the research
and
preclinical Development of Discovered RNAi
Compounds directed against Selected
Targets, Novartis shall pay, or cause to be
paid, to Alnylam the following
one-time payments with respect to each
Selected Target upon the achievement of
the milestone events set forth below:
<TABLE>
<CAPTION>
Milestone Event:
Payment Amount:
----------------
---------------
<S>
<C>
Successful Completion of a first study of a
Discovered RNAi
$[**]
Compound in animals to evaluate
pharmacokinetics/
biodistribution or mechanism of action
(e.g., evidence of
knock-down) ("First Animal Study"):
Determination by Novartis to nominate a
Discovered RNAi
$[**]
Compound for sPOC:
</TABLE>
Each of the milestone payments under this
Section 4.4(a) shall be payable only
once in relation to each Selected Target.
By way of example, in the event that
Novartis elects not to proceed with the
Development or Commercialization of an
RNAi Compound directed to a Selected Target
for which one or both of the
foregoing milestone payments have been
paid, Novartis shall not be required to
make any milestone payments previously paid
under this Section 4.4(a) with
respect to any back-up RNAi Compound(s)
directed at such Selected Target.
(b) Program Milestone Payments. In connection with the research
and
preclinical Development of Discovered RNAi
Compounds, Novartis shall pay, or
cause to be paid, to Alnylam the following
one-time payments upon the
achievement of the milestone events set
forth below:
<TABLE>
<CAPTION>
Milestone Event:
Payment Amount:
----------------
---------------
<S>
<C>
Successful Completion of First Animal
Studies for Discovered
$[**]
RNAi Compounds directed at a cumulative
total of [**] Selected
Targets:
Successful Completion of First Animal
Studies for
$[**]
</TABLE>
32
<PAGE>
<TABLE>
<S>
<C>
Discovered RNAi Compounds directed at a
cumulative total of
[**] Selected Targets:
Successful Completion of First Animal
Studies for Discovered
$[**]
RNAi Compounds directed at a cumulative
total of [**] Selected
Targets:
</TABLE>
(c) Collaboration Success Milestone. In connection with the
achievement of the Collaboration Success
Milestone, Novartis shall pay, or cause
to be paid, to Alnylam the amount of [**]
dollars ($[**]).
(d) Clinical Milestone Payments. In connection with the
clinical
Development of each Licensed Product
against a Target, Novartis shall pay, or
cause to be paid, to Alnylam the following
payments upon the achievement of the
milestone events set forth below:
<TABLE>
<CAPTION>
Payment for Payment for
Collaboration Adopted
Milestone Event:
Products:
Products:
----------------
-------------
-----------
<S>
<C>
<C>
The earlier of: (i) initiation of Phase
$[**]
See below
I Studies (first human, first visit) in
the United States, or (ii) initiation
of
Phase I Studies in the first Major
Market Country:
The earlier of: (i) initiation of Phase
$[**]
See below
II Studies (first patient, first visit)
in the United States, or (ii)
initiation
of Phase II Studies in the first Major
Market Country:
The earlier of: (i) initiation of Phase
$[**]
See below
III Studies (first patient, first
visit)
in the United States, or (ii)
initiation
of Phase III Studies in the first Major
Market Country:
The earlier of: (i) acceptance of the
$[**]
See below
dossier for the first submission of a
bona fide NDA by the FDA, or (ii)
acceptance of the dossier for the first
submission of a bona fide NDA by the
applicable Regulatory Authorities in at
least [**] of the Major Market
Countries:
The earlier of: (i) Regulatory Approval
$[**]
See below
in the United States, or (ii)
Regulatory
Approval in at least [**] of the Major
Market Countries:
</TABLE>
33
<PAGE>
The payments required to be made under this
Section 4.4(d) for Adopted Products
shall be as follows:
(1) in the event
that the Selection Term continues for [**], or in the
event that this
Agreement is terminated by Novartis pursuant to Sections
8.2 or 8.3, or
in the event that Alnylam undergoes a Change of Control
during the
Selection Term, then the amounts payable in respect of Adopted
Products under
this Section 4.4(d) shall be [**] percent ([**]%) of the
amounts payable
in respect of Collaboration Products;
(2) in the event
that the Selection Term continues for [**], then the
amounts payable
in respect of Adopted Products under this Section 4.4(d)
shall be [**]
percent ([**]%) of the amounts payable in respect of
Collaboration
Products; and
(3) in the event
that the Selection Term continues for [**], then the
amounts payable
in respect of Adopted Products under this Section 4.4(d)
shall be [**]
percent ([**]%) of the amounts payable in respect of
Collaboration
Products.
Each of the milestone payments under this
Section 4.4(d) shall be payable only
once in relation to each Target for the
first Indication only. By way of
example, in the event that Novartis elects
not to proceed with the Development
or Commercialization of a Licensed Product
directed to a Target for which one or
more of the foregoing milestone payments
have been paid, Novartis shall not be
required to make any milestone payments
previously paid under this Section
4.4(d) with respect to any back-up Licensed
Product(s) directed at such Target.
In addition, in the event that, with
respect to the clinical Development of a
Licensed Product, Novartis satisfies a
clinical milestone under this Section
4.4(d), Novartis shall pay to Alnylam all
earlier milestone payments under this
Section 4.4(d) that have not otherwise been
paid with respect to such Target
(regardless of whether such earlier
milestones have been satisfied).
(e) Product Royalties.
(i) Base Rate. During each relevant Royalty Term, Novartis shall
pay,
or cause to be paid, to Alnylam the
following royalties on Annual Net Sales of
each Licensed Product:
34
<PAGE>
<TABLE>
<CAPTION>
Incremental Annual Net Sales of a Licensed
Royalty Rate Royalty Rate
Product (on a Licensed Product-by-Licensed
Applicable
to Applicable
to
Product basis) during the applicable
Contract
Collaboration
Adopted
Year:
Products:
Products:
--------------------------------------------- ------------- -------------
<S>
<C>
<C>
Less than or equal to $[**]:
[**]%
See below
Greater than $[**], but less than or equal
to
[**]%
See below
$[**]:
Greater than $[**]:
[**]%
See below
</TABLE>
The royalty rate applicable to Adopted
Products under the chart set forth above
shall be as follows:
(1) in the event
that the Selection Term continues for [**], or in the
event that this
Agreement is terminated by Novartis pursuant to Sections
8.2 or 8.3, or
in the event that Alnylam undergoes a Change of Control
during the
Selection Term, then the royalty rate in respect of Adopted
Products under
this Section 4.4(e)(i) shall be [**] percent ([**]%) of the
royalty rate
applicable to Collaboration Products;
(2) in the event
that the Selection Term continues for [**], then the
royalty rate in
respect of Adopted Products under this Section 4.4(e)(i)
shall be [**]
percent ([**]%) of the royalty rate applicable to
Collaboration
Products; and
(3) in the event
that the Selection Term continues for [**], then the
royalty rate in
respect of Adopted Products under this Section 4.4(e)(i)
shall be [**]
percent ([**]%) of the royalty rate applicable to
Collaboration
Products.
Notwithstanding the foregoing:
(A) if a
compulsory license is granted to a Third Party with respect to
a
Licensed Product
in any country, Novartis shall pay to Alnylam the
foregoing
percentages on amounts it receives from compulsory licensees in
such
country;
(B) (x) upon the
abandonment or withdrawal of a claim of a published Patent
Application of
Alnylam Patent Rights in a country, or
(y) if the validity of a Valid Claim of an issued Alnylam Patent
Right
in a country is
the subject of administrative or legal action and is later
revoked or held
unenforceable or invalid by a decision of a court or
governmental
agency of competent jurisdiction or is disclaimed or admitted
to be invalid or
unenforceable through reissue, disclaimer or otherwise,
that, in the
case of clauses (x) or (y), was the sole basis for the payment
of royalties by
Novartis pursuant to this Section 4.4(e)(i), Novartis shall
be entitled
35
<PAGE>
to credit such
paid amounts against any future royalties or payments to be
made to Alnylam
pursuant to this Section 4.4(e)(i) with respect to such
country. If such
claim is the last claim of any Alnylam Patent Rights in
such country
upon which a payment under this Section 4.4(e)(i) would be
owed, Novartis
shall be entitled to a refund of any payments made in
respect thereof
(for the avoidance of doubt, this clause (B) shall not
apply with
respect to sales of a Licensed Product in a country made during
the first [**]
after the date of First Commercial Sale of such Licensed
Product in such
country); and
(C) with respect
to each Contract Quarter during any part of the Royalty
Term remaining
after the expiration of the last to expire Alnylam Patent
Rights
containing a Valid Claim Covering the Development,
Commercialization
or Manufacture
of the relevant Licensed Product in the United States or
Japan, the
foregoing royalties shall, solely with respect to such
country's(ies')
proportionate share of the worldwide Annual Net Sales of
such Licensed
Product in each tier, be reduced to [**] percent ([**]%) of
the rate
otherwise applicable pursuant to the foregoing.
For the
avoidance of doubt, Novartis's obligation to pay royalties
under
this Section
4.4(e)(i) is imposed only once with respect to the same unit
of Licensed
Product, including by reason of such Licensed Product being
Covered by more
than one Valid Claim of Alnylam Patent Rights. The amounts
payable under
this Section 4.4(e)(i) shall also be adjusted in accordance
with Sections
4.4(e)(ii) and (iii).
(ii) (A) Payments in Respect of Alnylam In-Licenses. In addition
to
any royalty set forth in Section 4.4(e)(i),
during the Royalty Term, Novartis
shall, subject to Section 4.4(e)(ii)(B),
reimburse Alnylam for the clinical
milestones and royalty payments payable
(each such payment, a "Listed Alnylam
Third Party Payment," collectively, the
"Listed Alnylam Third Party Payments")
to Third Parties pursuant to Listed Alnylam
Third Party Agreements in respect of
Licensed Products. Without limiting the
provisions of Section 6.5, the Parties
shall cooperate to coordinate such
reimbursements by Novartis in a manner that
ensures all amount
