RESEARCH COLLABORATION LICENSE AGREEMENT BY AND BETWEEN EMISPHERE TECHNOLOGIES, INC. AND NOVARTIS PHARMA AG

Exhibit 10.30

RESEARCH COLLABORATION LICENSE AGREEMENT

BY AND BETWEEN

EMISPHERE TECHNOLOGIES, INC.

AND

NOVARTIS PHARMA AG

 

This Research Collaboration License Agreement (the “ Agreement ”), dated and effective as of September __, 2004 (the “ Effective Date ”) is between Emisphere Technologies, Inc., a Delaware corporation with offices at 765 Old Saw Mill River Road, Tarrytown, New York 10591, USA (“ Emisphere ”), and Novartis Pharma AG, a company registered in Switzerland with offices at Lichtstrasse 35, CH 4056 Basel, Switzerland (“ Novartis ”) and Novartis and Emisphere shall each be a “Party” and together the “Parties”.

WHEREAS, Emisphere is engaged in the research and development of proprietary synthetic chemical compounds that enable the delivery of therapeutic macromolecules and other compounds that are not currently deliverable by oral means; and

WHEREAS, Novartis produces, or is engaged in research to produce, therapeutic macromolecules and other compounds some of which are not currently deliverable by oral means; and

WHEREAS, Emisphere and Novartis desire to collaborate in research regarding the applicability and development of the Emisphere Technology (as defined below) to a Novartis development project, and to provide for certain rights and obligations of Emisphere and Novartis in the event that such research produces a commercially viable product; and

WHEREAS, Emisphere desires to grant certain license rights to Novartis to develop and commercialize Novartis’ products using the Emisphere Technology.

NOW, THEREFORE, in consideration of the mutual promises and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE 1 DEFINED TERMS

1.1                     “ Acceptance ” shall mean the receipt by the relevant Regulatory Authority of an appropriate application seeking a Regulatory Approval from any Regulatory Authority.

1.2                     “ Accounting Standards ” with respect to Emisphere shall mean that Emisphere shall maintain records and books of accounts in accordance with United States Generally Accepted Accounting Principles (“US GAAP”) and with respect to Novartis, shall mean that Novartis shall maintain records and books of accounts in accordance with International Financial Reporting Standards (“IFRS”).

1.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

 

1.3                     “ Affiliate ” shall mean, with respect to any Person, any other Person which directly or indirectly controls, is controlled by or is under common control with such Person.  A Person shall be deemed to control another Person if such Person possesses the power to direct or cause the direction of the management, business and policies of such Person, whether through the ownership of fifty percent (50%) or more of the voting securities of such Person, voting capacity at management meetings, by contract or otherwise.

1.4                     “ Alliance Manager ” shall have the meaning set forth in Article 3.4(a).

1.5                     “ Approval ” shall mean any approval (including Price Approvals), registration, license or authorization from any Governmental Authority required for the manufacture, Development, Commercialization, distribution, sale, storage or transport of the Product in any country of the Territory, and shall include, without limitation, an approval, registration, license or authorization granted in connection with any Approval Application.

1.6                     “ Approval Application ” shall mean the submission to the relevant Governmental Authority of an appropriate application seeking any approval (including Price Approval), registration, license or authorization from any Governmental Authority required for the manufacture, Development, Commercialization, distribution, sale, storage or transport of the Product in any country of the Territory, and shall include, without limitation, a marketing authorization application, supplementary application or variation thereof, NDA, or any equivalent applications in any country of the Territory.

1.7                     “ Back-up Carrier ” has the meaning provided in Article 3.1.

1.8                     “ Business Day ” shall mean a day which is not a Saturday, Sunday or public holiday in Basel, Switzerland or New York.

1.9                     “ Carrier ” means any synthetic chemical compound that allows a drug molecule to be transported within the body and for the avoidance of doubt, shall include *** and other Back-up Carriers as supplied by Emisphere to Novartis during the term of the Agreement and without limitation, as set out in Annex B.

1.10                   “ Carrier Improvement ” shall mean an Invention made pursuant to this Agreement solely by employees or contractors of a Party or jointly by employees or contractors of both Parties that specifically relates to Carriers alone (but for the avoidance of doubt, not to any *** Compound/Carrier combination).

2.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

 

1.11                     “ Clinical Trials ” shall mean those clinical trials carried out by the Parties in support of the application for Regulatory Approval.

1.12                     “ Commercial Carrier ” has the meaning provided in Article 3.5.

1.13                     “ Commercialize ” or “ Commercialization ” shall mean activities conducted by a Party either by itself or through a Third Party and directed to marketing, promoting, distributing, importing, exporting, offering for sale and selling a Product, which may include pre-launch market preparation, sampling and conducting Phase IIIB clinical trials or Phase IV clinical trials, whether undertaken by a Party alone or with a partner or a sub-licensee.  When used as a verb, “Commercialize” means to engage in Commercialization.

1.14                      “ Commercially Reasonable Efforts ” shall mean the efforts and resources customarily used in the pharmaceutical industry for a compound which is of similar market potential and at a similar stage in its product life.

1.15                      “ Compound ” shall mean synthetic, natural or recombinant human growth hormone and/or any of its active fragments, analogues, *** mimetics, derivatives and/or other variants.

1.16                     “ Confidential Information ” shall have the meaning set out in Article 13.1(a).

1.17                     “ Control ” in the context of intellectual property, shall mean possession of the ability to grant the license or other access provided for herein without violating the terms of any agreement or other arrangement with a Third Party.

1.18                     “ Develop ” shall mean to engage in research or development activities (including, without limitation, clinical trials) for the Product or to have any of those activities performed, and “Development” shall have a corresponding meaning.

1.19                     “ Development Budget ” shall  mean the budget(s) included in the Development Plan drafted by Novartis for the Development of the Back-up Carrier and approved by the Steering Committee, excluding any and all expenses incurred by either Party during the Programme.

1.20                     “ Development Commencement Fee ” shall have the meaning set out in Article 4.1.

3.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

 

1.21                    “ Development Costs ” shall mean the direct and indirect costs actually incurred by Emisphere or its Affiliates after payment of the Development Commencement Fee by Novartis and in accordance with the applicable approved Development Plan and Development Budget, with respect to the Back-up Carrier and including:

(a)          the direct and indirect internal costs of each Party’s personnel, computed at the FTE Rate of each Party at cost by those categories of such personnel included in the Development Plan employed to perform the obligations set out in the Development Plan;

(b)          any subcontract costs, including, the following:

               (i)          clinical and pre-clinical studies performed by Third Party investigators engaged by Emisphere and/or Novartis;

               (ii)        Out-of-Pocket Costs for other outside professional services;

 (c)          the costs of bulk material and other clinical materials, including the Product, to the Parties.

(d)          the costs of regulatory filings to the extent that such costs are to be considered Development Costs in accordance with the Accounting Standards;

(e)          the costs for identification, synthesis, qualification and/or validation of bulk material (details of such costs will be specified in a separate manufacturing and supply agreement which may be negotiated between the Parties);

(f)          any other costs directly related to the Development of the Product;

in each case incurred by either Party in accordance with the Development Plan or otherwise approved by the Steering Committee and supported by invoices and actual payments or other appropriate documentation.

1.22                    “ Development Plan ” shall mean after payment of the Development Commencement Fee, each development plan including the related Development Budget developed by Novartis, and Emisphere if necessary, and approved by Novartis for the Development of the Product with a Back-Up Carrier.

1.23                     “ Effective Date ” shall mean the earliest date on which this Agreement has been executed by both Parties.

1.24                     “ EMEA ” shall mean the European Agency for the Evaluation of Medicines or any successor agency thereto.

4.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

 

1.25                     “ Emisphere Change of Control ” shall mean any of the following events:  (i) the acquisition by a Third Party (other than a Third Party controlling Emisphere as of the Effective Date) of more than fifty percent (50%) of the shares of Emisphere’s capital stock the holders of which have general voting power under ordinary circumstances to elect at least a majority of Emisphere’s board of directors (the “ Voting Stock ”), but excluding any such acquisition that is a bona fide equity financing of Emisphere with arm’s-length financial investors where such an investor is not within the top 20 globally ranked pharmaceutical companies (as ranked by annual sales); (ii) the approval by Emisphere’s stockholders of a merger, share exchange, reorganization, consolidation or similar transaction of Emisphere (a “ Transaction ”), other than a Transaction which would result in the Voting Stock of Emisphere outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the Voting Stock of Emisphere or such surviving entity immediately after such Transaction; or (iii) approval by Emisphere’s stockholders of a complete liquidation of Emisphere or a sale or disposition of all or substantially all of the assets of Emisphere. 

1.26                     “ Emisphere Know-How ” shall mean, to the extent Controlled by Emisphere on the Effective Date or during the term of this Agreement, Know-How that is necessary for the manufacture, use, Development, sale, offer for sale or importation of the Product, including, without limitation, Inventions owned solely by Emisphere or jointly by Emisphere and a Third Party and for the avoidance of doubt, the production process for a Programme Carrier consisting of those chemical transformations, synthetic pathways, operating conditions, solvents, raw materials, intermediates, in-process controls, methods, vendors, and polymorph and salt forming procedures, that have been identified designed, used, developed, made or invented by Emisphere or its subcontractors, which can be used to produce a Programme Carrier or its various *** (the “Emisphere Process”) and all Know-How Controlled by Emisphere in relation to the Compound.

1.27                     “ Emisphere Patents ” shall mean, to the extent Controlled by Emisphere as of the Effective Date or during the term of this Agreement, all Patent Rights that claim the manufacture, use, Development, sale, offer for sale or import of Product, including, without limitation, Inventions owned solely by Emisphere or jointly by Emisphere and a Third Party.

1.28                     “ Emisphere Process ” has the meaning provided in the definition of Emisphere Know-How.

1.29                     “ Emisphere Technology ” shall mean the Emisphere Patents and Emisphere Know-How.

5.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

 

1.30                     “ EU ” shall mean the then current member states of the European Union.

1.31                     “ FDA ” shall mean the United States Food and Drug Administration and any successor agency thereto.

1.32                     “ Field ” shall mean all indications and uses in the treatment or prevention of human and animal diseases.

1.33                     “ Final Approval ” shall mean, (i) in relation to the United States, receipt by Novartis of the official approval letter from the FDA approving the marketing and sale of the Product in the United States under an NDA or supplemental NDA, as applicable, or (ii) in relation to the EU, receipt by Novartis of the EMEA’s or relevant national regulatory authority’s written decision granting marketing authorization for the Product in one or more countries in the EU, or (iii) in relation to any other countries in the Territory, receipt of an equivalent approval to distribute, market and sell the Product in such country(ies) by Novartis.

1.34                     “ Formulation ” shall mean any pharmaceutical composition containing the Compound in combination with a Programme Carrier.

1.35                     “ FTE ” shall mean a full-time equivalent scientific person year directly related to the Programme.

1.36                     “ FTE Rate ” shall mean the annual rate to be payable at *** and calculation of the rate of payment for such FTE to be pro-rated on a daily basis (per annum amount to be divided by 200 to produce the rate per whole day consisting of eight hours) if necessary, such rate *** to include all travel expenses and for the avoidance of doubt, excluding managerial and scientific leading time.

1.37                     “ Fully Burdened Manufacturing Costs ” shall mean the total of Material Costs and Processing Costs.

1.38                     “ Good Clinical Practices ” or “ GCP ” shall mean the then current Good Clinical Practices as such term is defined from time to time by the FDA or other relevant Governmental Authority having jurisdiction over the development, manufacture or sale of the Product in the Territory pursuant to its regulations, guidelines or otherwise.

1.39                     “ Good Laboratory Practices ” or “ GLP ” shall mean the then current Good Laboratory Practices as such term is defined from time to time by the FDA or other relevant Governmental Authority having jurisdiction over the development, manufacture or sale of the Product in the Territory pursuant to its regulations, guidelines or otherwise.

6.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

 

1.40                     “ Good Manufacturing Practices ” or “GMP” shall mean the then current Good Manufacturing Practices as such term is defined from time to time by the FDA or other relevant Governmental Authority having jurisdiction over the development, manufacture or sale of the Product in the Territory pursuant to its regulations, guidelines or otherwise.

1.41                     “ Governmental Authority ” shall mean any court, agency, authority, department, regulatory body or other instrumentality of any government or country or of any national, federal, state, provincial, regional, county, city or other political subdivision of any such government or any supranational organization of which any such country is a member.

1.42                     “ Impurity Profiling ” has the meaning provided in Article 3.5.

1.43                     “ Independent Research ” means: (a) research by employees or licensees of Novartis who have had no access to Emisphere Know-How; and/or (b) research by employees or licensees of Novartis based on information corresponding to Emisphere Know-How, but only to the extent Novartis can demonstrate that such Emisphere Know-How: (i) is now, or hereafter becomes, through no act or failure to act on the part of Novartis, generally known or available to the public; (ii) is known by Novartis at the time of receiving such information from Emisphere, as evidenced by its records; or (iii) is hereafter furnished to Novartis, as a matter of right and without restriction on disclosure, by a Third Party who is under no obligation of non disclosure to Emisphere. 

1.44                     “ Interest Rate ” shall mean for a date on which a payment is due, the annual US Dollar London Inter-Bank Offer Rate (“LIBOR”) ***, fixed on the date of payment of such amount to which this rate applies.

1.45                     “ Invention ” shall mean any invention, whether or not patentable, or other Know-How, conceived in the course and as part of the Programme or Development, together with all Patent Rights and other intellectual property rights therein.

1.46                     “ Joint Patent Rights ” shall mean all patents and patent applications which, for the purposes of this Agreement, shall include without limitation, continuations, divisionals, continuations-in-part, re-examinations, reissues, substitutions, confirmations, re-registrations, re-validations, patents of addition, patent term extensions, supplementary protection certificates, and the like, which are licensed jointly to, or owned jointly by, Novartis or its Affiliates and Emisphere or its Affiliates on the Effective Date or during the Term and that contain at least one claim that encompasses a Formulation or any Product Improvement.

7.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

 

1.47                     “ Know-How ” shall mean any and all proprietary unpatented technical information, data, ideas, test results, inventions, instructions, processes, knowledge, techniques, discoveries, formulae, specifications, designs, regulatory filings, and biological or other materials (including, without limitation, biological, chemical, toxicological, physical and analytical, safety, manufacturing and quality control data and information) and other information (whether or not patentable) which are now or hereafter during the Term of this Agreement are owned, licensed (with the right to sublicense) or otherwise held by a Party or its Affiliates related to the Carrier, the Formulation, the Product (including any Product Improvement), or the Development, manufacture, use, or sale thereof.

1.48                     “ Launch ” shall mean, with respect to any country in the Territory, the first date of commercial sale of a Product to unaffiliated Third Parties in such country.

1.49                     “ Laws ” shall mean all laws, statutes, rules, regulations, orders, judgments, injunctions and/or ordinances of any Governmental Authority in the Territory.

1.50                     “ Lead Carrier ” has the meaning provided in Article 3.1.

1.51                     “ License ” has the meaning provided in Article 2.1.

1.52                     “ Litigation Expenses ” shall mean those expenses incurred by Novartis in prosecuting its rights under this Agreement in the event of the application of applicable bankruptcy Laws due to Emisphere’s bankruptcy.

1.53                     “ Loss ” or “ Losses ” shall mean all losses, obligations, liabilities, penalties and damages (including but not limited to compensatory damages), settlements, costs and expenses, including, without limitation, reasonable attorneys’ fees, of whatever kind or nature, in each case incurred by a Novartis Indemnitee or Emisphere Indemnitee, as the case may be, and paid to a Third Party, before and without giving effect to any insurance proceeds.

1.54                     “ Major Market Country ” shall mean each of Japan, China, France, Germany, Italy, Spain, the United Kingdom and the United States. 

1.55                     “ Material Costs ” shall mean those costs of raw materials and intermediates needed for the manufacturing process of the Commercial Carrier and costs of packaging material for these raw materials and intermediates.

8.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

 

1.56                     “ NDA ” shall mean a new drug application and all amendments and supplements thereto filed with the EMEA, the FDA or an equivalent Governmental Authority, requiring such filing, and including all documents, data and other information concerning a pharmaceutical product which are necessary for the gaining of Approval seeking permission to market and sell the applicable Product in a country.

1.57                     “ Net Sales ” with respect to any Product shall mean the gross amount invoiced by or on behalf of Novartis and any Novartis Affiliate, licensee or sublicensee for that Product sold to Third Parties other than licensees or sublicensees in bona fide, arms-length transactions, less the following deductions, determined in accordance with Novartis’ standard accounting methods as generally and consistently applied by Novartis, to the extent included in the gross invoiced sales price of any Product or otherwise directly paid or incurred by Novartis, its Affiliates or Distributors with respect to the sale of such Product:

 (i)         normal and customary trade and quantity discounts actually allowed and properly taken directly with respect to sales of the Product;

(ii)        amounts repaid or credited by reasons of defects, rejection recalls, returns, rebates and allowances of goods or because of retroactive price reductions specifically identifiable to the Product;

(iii)       chargebacks and other amounts paid on sale or dispensing of such Product;

(iv)       amounts payable resulting from Governmental (or agency thereof) mandated rebate programmes;

(v)        Third-Party cash rebates and chargebacks related to sales of the finished Product, to the extent actually allowed;

(vi)       tariffs, duties, excise, sales, value-added and other taxes (other than taxes based on income);

(vii)      retroactive price reductions that are actually allowed or granted;

(viii)     cash discounts for timely payment;

(ix)       delayed ship order credits;

(x)        discounts pursuant to indigent patient programmes and patient discount programmes, including, without limitation, “Together Rx” and coupon discounts;

9.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

 

(xi)       all freight, postage and insurance included in the invoice price; and

(xii)      amounts repaid or credited for uncollectible amounts on previously sold Products.

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. 

a)         Sales from Novartis to its Affiliates shall be disregarded for purposes of calculating Net Sales.  In the case of any sale or other disposal of a 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.

b)         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 Product is paid for, if paid for before shipment or invoice.

c)         In the case of any sale or other disposal for value, such as barter or counter-trade, of any 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 Product in the country of sale or disposal.

d)         In the event the Product is sold in a finished dosage form containing the Compound in combination with one or more other active ingredients, and Novartis has obtained a license to use the Emisphere Technology with the other ingredients (a “Combination Product”), the Net Sales of the Product, for the purposes of determining royalty payments, shall be determined by ***.  In the event that such average sale price cannot be determined for both the Product and the other product(s) in combination, Net Sales for the 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. 

1.58                     “ Novartis Know-How ” shall mean, to the extent Controlled by Novartis on the Effective Date or during the term of this Agreement, Know-How that is necessary for the manufacture, use, sale, offer for sale or import of the Product, including, without limitation, Inventions owned solely by Novartis or jointly by Novartis and a Third Party.

1.59                     “ Novartis Patents ” shall mean, to the extent Controlled by Novartis as of the Effective Date or during the term of this Agreement, any and all Patent Rights that claim the manufacture, use, sale, offer for sale or import of the Compound or the Product, including, without limitation, Inventions owned solely by Novartis and Product Improvements of Novartis and shall include, without limitation, the specific patents and patent applications listed in Schedule [ ].

10.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

 

1.60                     “ Out-of-Pocket Costs ” shall mean in accordance with the Accounting Standards, with respect to any Party or any of its Affiliates, recognized costs and expenses paid or accrued as owing by such Party or any such Affiliate to Third Parties, other than Affiliates, or employees and related to the conduct of the Development Plan or the grant of the License pursuant to article 2.1(a) and for the avoidance of doubt, not including pre-paid amounts, capital expenditure, travel or accommodation.

1.61                     “ Patent Rights ” shall mean (a) United States patents and patents of other countries, including, without limitation, re-examinations, reissues, renewals, extensions, term restorations, confirmations, registrations, re-validations, patents of addition, supplementary protection certificates and the like, and (b) pending applications for United States and patents of other countries, including, without limitation, provisional applications, continuations, continuations-in-part, divisional and substitute applications, including, without limitation, inventors’ certificates.

1.62                     “ Person ” shall mean any individual, partnership, joint venture, limited liability company, corporation, firm, trust, association, unincorporated organization, governmental authority or agency, or any other entity not specifically listed herein.

1.63                     “ Phase II ” means any study conducted in any country to determine, among other things, dose response, duration of effect, preliminary efficacy and safety of a Product in a target patient population.

1.64                     “ Phase III ” means any study conducted in any country to confirm, with statistical significance, the efficacy and safety of a Product in a large, targeted population, performed to obtain Regulatory Approval of such Product.

1.65                     “ Price Approval ” shall mean, in countries in the Territory where Governmental Authorities may approve or determine pricing or pricing reimbursement for pharmaceutical products, such approval or determination.

1.66                     “ Processing Costs ” shall mean those costs for direct labor, costs of equipment, costs of production area overhead, costs of quality assurance, costs of material handling overhead, costs of general factory overhead, costs for utilities and costs for ecology, each to be established on a regular, standard basis. In this standard setting process all relevant costs as mentioned above are determined and all costs shall be based on a standard utilization of

11.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

 

equipment. Costs of underutilization or idle capacity costs are not to be included in Processing Costs. Costs of equipment shall be those costs of depreciation or rent of the building accommodating that equipment plus repair and maintenance for the building, and costs for equipment depreciation, and other equipment costs such as costs for repair and maintenance. The building costs shall be allocated to the equipment using an appropriate key such as space occupied by the equipment. Production area overhead costs shall be those costs for personnel who have a controlling and supervisory function, costs of indirect space shall include those costs for a break room, costs of in-process control, costs of microbiological monitoring of production environment, costs of training of process personnel, costs for utilities and ecology, costs for auxiliary and consumables, costs of shop floor control systems, costs for cleaning of production buildings, and costs of working clothes.  Quality assurance costs shall include those costs of identifying and analyzing the raw materials and intermediates needed for the manufacturing process, costs of finished product control, costs of production support, costs of cleaning validation, costs of EDP for the quality assurance/quality control department, costs of the microbiology department, costs of laboratory infrastructure, costs of quality systems support and compliance, costs of overheads within the quality assurance/quality control department. Materials handling overhead costs are costs for warehousing and internal transportation of raw material and semi-finished goods, costs of quality control of raw and packaging material, costs of the purchasing department. General factory overhead (“GFO”) costs shall mean costs of plant and production management, costs for ensuring sufficient levels of safety, health and environment such as fire brigade, medical services, documentation for transportation of hazardous goods. Other GFO costs include costs for the scheduling of production, costs of the maintenance of the bills of materials, costs for the technical support, expenses of the plant administration and general services, costs of IT for non-dedicated IT systems such as SAP. Utility costs are costs associated with the consumption of supportive media such as electricity, water, nitrogen, steam, and air. Ecology costs are costs associated with the deposition of solid or liquid waste, purification of effluent water, and purification of waste air.

1.67                     “ Product ” shall mean a pharmaceutical product, for oral administration only (including translingual, sublingual and buccal forms), containing Compound as the sole pharmaceutical active in combination with the Commercial Carrier, and all *** and the like of Compound in combination with the Commercial Carrier. 

1.68                     “ Product Improvement ” shall mean any enhancement to the Compound in combination with the Commercial Carrier, ingredients, preparation, presentation, dosage, packaging of, manufacture or any new or expanded therapeutic indication for the Product.

1.69                     “ Product-Specific Emisphere Patent ” means an Emisphere Patent that claims the composition of matter of, or a method of use or method of manufacture of, a Programme Carrier or Emisphere’s Carrier technology generally.  For purposes of clarification, the Product-Specific Emisphere Patents shall exclude any Emisphere Patent that claims the composition of matter of, or a method of use or method of manufacture of, any Carrier other than a Programme Carrier or which does not claim any aspect of Emisphere’s Carrier technology generally.

12.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

 

1.70                     “ Product Trademark ” shall mean such trademark(s) as may be approved by the Steering Committee for use in connection with the distribution, marketing, promotion and sale of the Product in the Territory and/or accompanying logos, trade dress and/or indicia of origin.

1.71                     “ Programme ” has the meaning provided in Article 3.1.

1.72                     “ Programme Carriers ” has the meaning provided in Article 3.1.

1.73                     “ Programme Fee ” shall have the meaning provided in Article 2.2.

1.74                     “ Regulatory Approval ” in the United States shall mean Final Approval of a new drug application pursuant to United States code as published at 21 CFR ss.  314, permitting marketing of the applicable Product in interstate commerce in the United States, in the European Union shall mean Final Approval of the marketing authorization application pursuant to Council Directive 75/319/EEC, as amended, or Council Regulation 2309/93/EEC or such approval as granted by a relevant national Regulatory Authority, as amended, or with respect to any other country not included in the foregoing, all authorizations by the appropriate Governmental Authority necessary for the commercial sale of a Product in that country including, without limitation and where applicable, approval of labeling, price, reimbursement and manufacturing.

1.75                     “ Regulatory Authority ” shall mean the FDA, EMEA or any other counterpart or additional governmental or regulatory agencies responsible for applicable Regulatory Approvals.

1.76                     “ Regulatory Status Update ” shall mean Novartis’ updates of the regulatory status of the Product in the countries of the Territory.

1.77                     “ Steering Committee ” has the meaning provided in Article 3.4(a).

1.78                     “ Territory ” shall mean all the countries in the world.

1.79                     “ Third Party ” shall mean any Person other than Novartis or Emisphere or any Affiliate of either Party.

13.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

 

ARTICLE 2 LICENSE GRANT

2.1                        The Grant .  As of the Effective Date   Emisphere hereby grants to Novartis the exclusive worldwide license with the ability to sublicense without Emisphere’s prior consent, under the Emisphere Technology and Emisphere’s interest in any Inventions owned jointly by the Parties and Joint Patent Rights, to Develop or have Developed, Commercialize, have Commercialized, make, have made, use, or have used Products (the “License”).  

(a)                               Emisphere shall execute all documents and give all declarations regarding the License granted hereunder and reasonably co-operate with Novartis, at the cost of Novartis with respect to Emisphere’s documented Out-Of-Pocket Costs  to the extent that such documents, declarations and/or co-operation are required for the recording or registration of the License granted hereunder at the various government offices, including but not limited to, relevant regulatory agencies and patent offices for the benefit of Novartis, its Affiliates, its marketing or co-marketing partner(s), or any of its sublicensee(s).

(b)                               Novartis may sublicense the License or any part of either of the foregoing in accordance with the terms and conditions of this Agreement, and provided, however, that the terms and conditions of any such sublicense agreement shall not be in conflict with the terms of this Agreement. Novartis shall use Commercially Reasonable Efforts to enforce the provisions of such sublicense agreement and shall remain responsible to Emisphere for the performance of the sublicensee’s obligations. Novartis shall cause each sublicensee to execute any and all additional documents to reflect the conditions set forth in this Agreement and Emisphere shall execute any and all additional documents reasonably requested by Novartis or a sublicensee to reflect the conditions set forth in this Agreement.

2.2                         The Programme Fee .  In consideration of the grant of the Licence, Novartis shall pay Emisphere a non creditable  fee of US$1,000,000 by wire transfer within thirty (30) Business Days of the Effective Date upon receipt by Novartis of an invoice from Emisphere (the “Programme Fee”).  Emisphere shall issue to Novartis an invoice for such amount on the Effective Date.

ARTICLE 3   RESEARCH PROGRAMME

3.1                         Programme .  For twelve (12) months from the Effective Date, and as may be extended by mutual agreement of the Parties, Novartis shall conduct Development on the Compound in combination with the Programme Carriers in the form of the Development programme described in Annex A hereto, which is an integral part of this Agreement, to research the use of the Emisphere Technology for the oral delivery of Compound (the “ Programme ”).  Emisphere will make fully available to Novartis all of the Emisphere Technology 

14.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

 

consistent with this Agreement for use in connection with the Programme.  This shall include all information and Know-how with respect to one lead Carrier (the “ Lead Carrier ”) and one back-up Carrier (the “ Back-Up Carrier ”) that may be used to facilitate transport of the Compound through membranes (collectively, with the Commercial Carrier, the “ Programme Carriers ”).  The initial Lead Carrier and initial Back-Up Carrier as of the Effective Date are identified in Annex B hereto, and the Parties may amend Annex B by mutual written agreement from time to time  to substitute for the Lead Carrier or the Back-Up Carrier one or more different Carriers.  At any time during the term of this Agreement, Novartis may, by written notice to Emisphere, designate the then-current Back-Up Carrier as the Lead Carrier (or Commercial Carrier), in which event the replaced Lead Carrier (or Commercial Carrier, as applicable) shall be deemed the Back-Up Carrier, subject to replacement in accordance with Article 4.1(a).  In the event of any conflict between the operative terms of this Agreement and Annex A, the operative terms of this Agreement shall prevail.

3.2                         Responsibilities of the Parties during the Programme .  During the Programme, Emisphere and Novartis shall make Commercially Reasonable Efforts to conduct the Programme in accordance with Annex A hereto, and all such work of Emisphere under the Programme, if any, shall be carried out by Emisphere solely at Novartis’ invitation and direction.  Novartis shall reimburse Emisphere for the Out of Pocket Costs paid by Emisphere to Third Parties used in the Programme, the amount of which shall have been previously agreed to by Novartis prior to such Out of Pocket Costs being incurred by Emisphere (such approval not to be unreasonably withheld).

3.3                         Duration .  Novartis in its sole discretion shall determine prior to the first anniversary of the Effective Date whether the objectives of the Programme have been achieved. 

                            (a)          In the event that in Novartis’ sole discretion, the objectives of the Programme have been achieved by the first anniversary of the Effective Date, Novartis shall deliver to Emisphere written notice of Novartis’ intention to continue Development within thirty (30) Business days of the first anniversary of the Effective Date (the “Continuation Letter”).

                            (b)          If in Novartis’ sole discretion, the objectives of the Programme have not been or will not be achieved before the first anniversary of the Effective Date, then the Parties may, upon mutual written agreement, extend the duration of the Programme for such time and upon such other terms as may be mutually agreed by the Parties. 

                            (c)          If Novartis has not delivered to Emisphere written notice of Novartis’ intention to continue Development within thirty (30) Business days of the first anniversary of the Effective Date, and the Parties have not extended the Programme, then the Programme and this Agreement (including without limitation the License granted hereunder shall terminate).

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*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

 

3.4                        Management of Development Activities . 

(a)                               Within twenty (20) Business Days of the Effective Date, Novartis and Emisphere shall establish a steering committee (the “ Steering Committee ”) for the purpose of keeping each other informed of the progress of the Programme.  The Steering Committee shall ensure that the Programme proceeds in a timely, coordinated, and well-planned fashion.  It shall be made up of up to a maximum of six (6) members including one member from Novartis acting as chairman, with an equal number appointed by each of Novartis and Emisphere. Each Party shall appoint a central contact person (the “Alliance Manager”).  In the event of deadlock on a vote of the Steering Committee, the chairman shall have the deciding vote; provided, however, that in no event shall Novartis have the right, without Emisphere’s prior written consent to determine any such issue in a manner that would require Emisphere to incur expenses or assume obligations not contemplated by this Agreement.  Novartis shall be responsible for the drafting of a detailed work plan within sixty (60) Business Days from the execution of this Agreement to assure the timely completion of the Programme. 

(b)                               Every three months during the conduct of the Programme, the Steering Committee shall meet or conduct a telephone or video conference to review the results of the Programme and to modify the work plan as necessary.  The presence of at least two (2) Steering Committee members representing each Party shall constitute a quorum.  The Steering Committee shall cease to meet after cessation of the Programme. The Steering Committee shall keep minutes of its meetings, and the minutes shall be reviewed and approved by the chairman of the Steering Committee.  The minutes shall include, without limitation, a review of the status of the Programme, a summary of the results and the progress to date, the issues requiring resolution, and the agreed resolution of previously reported issues.  Novartis shall be solely responsible for the administration, setting of the agenda and production of minutes for each meeting of the Steering Committee.  Emisphere shall have the right to comment on such minutes, and said comments shall be recorded with such minutes.  The Steering Committee shall be responsible only for the review of work carried out under the work plan. Novartis shall be solely responsible for the implementation of the Programe and the monitoring of the progress of the Programme.

(c)                               Meetings of the Steering Committee will alternate between Emisphere’s designated facility and Novartis’ designated facility.  Each Party will bear all expenses associated with attendance of its own employees at face to face meetings held at the other Party’s designated facility where such face to face meetings are necessary.

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(d)                                Alliance Management Representatives .  Each of Novartis and Emisphere shall appoint a senior representative having a general understanding of development, regulatory, and manufacturing issues to act as its Alliance Manager.  During the conduct of the Programme and Development by Novartis, each Alliance Manager shall be primarily responsible for facilitating the flow of information and otherwise promoting communications and collaboration within and among the Steering Committee, between the Parties and internally within the Parties. 

(e)                               The Alliance Managers shall be entitled to attend all meetings of the Steering Committee, but shall not be deemed, or have any rights or responsibilities of, a member of the Steering Committee, unless an Alliance Manager has been named by its company to the Steering Committee.  Subject to appropriate confidentiality undertakings where applicable, additional participants may be invited by any member of the Steering Committee to attend meetings where appropriate (e.g., representatives of regulatory affairs, intellectual property, technical development, technical operations or Third Party consultants).  Such additional participants shall not be deemed, or have any rights or responsibilities of, a member of the Steering Committee. In the event that such an additional participant is a Third Party engaged by either Novartis or Emisphere, such Third Party may only attend after its execution of a confidentiality agreement in a form as agreed by the non-engaging Party.

(f)                               In order to facilitate the Programme or Development, either Party may provide to the other Party certain biological materials or chemical compounds controlled by a supplying Party for use by the other Party in furtherance of the Programme.  Except as otherwise provided under this Agreement, all such materials delivered to the other party will remain the sole property of the supplying party, will be used only in furtherance of the Programme in accordance with this Agreement, will not be used or delivered to or for the benefit of any third party without the prior written consent of the supplying party, and will be used in compliance with all applicable laws, rules and regulations.  The materials supplied under this Agreement must be used with prudence and appropriate caution in any experimental work because not all of their characteristics may be known.  Except as expressly set forth herein, THE MATERIALS ARE PROVIDED “AS IS” AND WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY  OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE. 

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*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

 

3.5                         Carrier Characterization . 

As part of the Programme, and in the event of a decision by Novartis in its sole discretion not to proceed with the Development of the Lead Carrier or Back-up Carrier, Novartis shall be responsible for characterizing in its sole discretion each replacement Programme Carrier at such time as it requests including conducting polymorph identification, salt form selection and synthesis.   Novartis shall be solely responsible for selecting which Programme Carrier (whether the Lead Carrier or Back-up Carrier or a replacement Programme Carrier as selected by Novartis in its sole discretion as per section 4.1a) is to be Developed for commercial use in Products after the performance by Novartis of proof of concept clinical trials in humans (the “ Commercial Carrier ”). Novartis shall promptly notify Emisphere of its selection of the Commercial Carrier. Novartis shall be solely responsible for the profiling of impurities and the separation, identification and characterization of impurities present in the Commercial Carrier, including stress impurity profiling of the Commercial Carrier in combination with the Compound (the “ Impurity Profiling ”).  

3.6                         Carrier Process Development . 

(a)                               As part of the Programme, as identified in attached Annex A, Novartis may at its sole discretion be solely responsible for the process research, Development and manufacture of the Programme Carriers, including the final quality of any required salts.  Novartis shall be solely responsible for Developing and implementing manufacturing processes, which shall yield materials of appropriate purity, morphology and stability as required by Novartis to commercialize the Product. In the event that Novartis does not elect to be responsible for such activities pursuant to this Article 3.6(a), it shall notify Emisphere within thirty (30) Business Days of taking such a decision and request that Emisphere shall be responsible for all such activities pursuant to this Article 3.6(a).  In the event that Emisphere elects to assume responsibility for such activities and provided that Emisphere has received such technical information deemed necessary by both Parties, Emisphere shall provide to Novartis within thirty (30) Business Days of receiving the Novartis request and technical information, a non-binding budget and plan for the conduct of such activities, such budget to be fully paid if agreed to by Novartis on the basis of invoices or reasonable estimates received (the “Emisphere Proposal”).  Novartis shall provide all reasonably available information necessary for Emisphere to prepare such budget.  Novartis shall have thirty (30) Business Days after receipt of such plan to consider the Emisphere Proposal and in the event that Novartis does not accept the terms of the Emisphere Proposal, Novartis may enter into an agreement with a Third Party for the conduct of such activities.

(b)                               Novartis shall be responsible for scale-up engineering and optimization of the Development of the Emisphere Process in Novartis facilities. Emisphere will assist in the physical transfer of the Emisphere Process from Emisphere’s facilities to Novartis’ facilities.  Emisphere shall provide fully detailed written documentation on the Emisphere Process to

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Novartis and will make its staff fully available to assist in the physical  transfer of the Emisphere Process as Novartis reasonably requires.  Novartis may conduct reactions using all steps of the Emisphere Process (including the *** selected by Emisphere) to validate the technical feasibility of scale-up of the Emisphere Process solely for the manufacture of the Lead Carrier and Commercial Carrier.  Novartis shall be responsible for process development of the Emisphere Process in large scale equipment ***. Novartis shall make commercially reasonable efforts to minimize the changes to the Emisphere Process wherever possible during process scale-up.  However, Emisphere recognizes that in order to develop an economically viable process on the large scale in Novartis equipment, process development efforts by Novartis may include, without limitation, making changes in ***  In no event shall Novartis use or modify the Emisphere Process for the purpose of manufacturing any Carrier other than a Programme Carrier, except with the prior written approval of Emisphere, nor shall Novartis use the Emisphere Process for any purpose other than the Development and Commercialization of Products in accordance with this Agreement.  The Parties shall share equally the costs incurred in transferring the Emisphere Process from Emisphere’s facilities to Novartis’ facilities.

(c)                               Emisphere agrees that the *** may need to be changed should scale-up problems arise using the solvents specified by the Emisphere Process. If such *** or *** issues should arise, Novartis agrees to discuss proposed changes with Emisphere in advance of any process development effort. If possible, all proposed changes to the Emisphere Process are to be discussed with Emisphere in advance of the experimentation. When such discussion is not possible, then all changes, improvements and process development efforts made by Novartis will be communicated in a written report to Emisphere in a timely manner. Novartis shall make Commercially Reasonable Efforts to avoid changes that may negatively impact the impurity profile of the Emisphere Process. Each quarter, Novartis agrees to provide Emisphere with a detailed summary of activities involving process development and a schedule of the process optimization and scale-up efforts or production planned for the next calendar quarter. Novartis shall grant to Emisphere a royalty-free perpetual non-exclusive license with right to sublicense to all Inventions generated by Novartis in respect of the Emisphere Process for the purpose of manufacturing Carriers.

(d)                               Further, it is recognized that in order to achieve scale-up in a timely manner, Novartis may generate batches of Lead Carrier or Commercial Carrier or its salt forms containing new impurities.  Samples from batches of Lead Carrier or Commercial Carrier or its salt forms will be sent within ten (10) Business Days to a designated person at Emisphere for analysis.  However, Novartis will be permitted to also test for impurities in these batches and will communicate with Emisphere the results of its impurity analysis.  Novartis will not use any *** for any purpose other than to *** the *** of the *** it generates.  *** of any *** shall be communicated to Emisphere by Novartis within twenty (20) Business Days of their identification.

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*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

 

ARTICLE 4   DEVELOPMENT AND PRODUCT IMPROVEMENTS

4.1                        In the event that Novartis delivers the Continuation Letter pursuant to either of Articles 3.3(a) or 3.3(c) an upfront payment (the “Development Commencement Fee”) shall be payable by Novartis pursuant to Article 6. Novartis shall be solely responsible for all Development of the Compound in combination with the Commercial Carrier, including without limitation all pre-clinical and clinical Development activities.  Novartis (and its local Affiliates where appropriate) shall retain authority and responsibility for ensuring and maintaining compliance with applicable Laws.  Emisphere and its Affiliates shall co-operate and provide to Novartis and its Affiliates any assistance reasonably required by Novartis for the purposes of obtaining Regulatory Approvals for the Product without further compensation, but with the understanding that reasonable expenses that are incurred by Emisphere and as are previously agreed by Emisphere and Novartis in connection therewith will be reimbursed by Novartis.

(a)                               In the event that the Development Commencement Fee is paid by Novartis to Emisphere, Novartis may invite Emisphere, to participate at Emisphere’s own election in the conduct of further Development on the Back-up Carrier. In such an event, Novartis shall deliver to Emisphere a Development Plan within sixty (60) Business Days of such invitation. Any changes to the approved Development Plan for the Development of the Back-up Carrier that would require a change in the approved Development Cost must be reviewed and approved by Emisphere. The Development Budget shall set forth the estimated Development Costs that are likely to be incurred in the applicable calendar year for the Back-up Carrier.  At any time prior to the *** of the payment of the Development Commencement Fee, Novartis shall be permitted to make requests to Emisphere for up to ***  Carriers to replace the Back-up Carrier pursuant to the work conducted by Novartis *** described in Article 3.5 in the e