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Exhibit
10.32
RESEARCH
COLLABORATION OPTION AND LICENSE AGREEMENT
BY AND
BETWEEN
EMISPHERE
TECHNOLOGIES, INC.
AND
NOVARTIS
PHARMA AG
*** - indicates material
omitted pursuant to a Confidential Treatment Request and filed
separately with the Securities and Exchange Commission.
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This Research
Collaboration Option and License Agreement (the “
Agreement ”), dated and effective as of December 1,
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”.
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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
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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
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WHEREAS, subject to the
exercise by Novartis of the Option set forth herein, 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
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WHEREAS, Emisphere desires
to grant to Novartis certain options to obtain license rights as
set forth herein to develop and commercialize Novartis’
products using the Emisphere Technology.
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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:
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ARTICLE 1 DEFINED
TERMS
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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”).
1.3
“ 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
2.
*** - indicates material
omitted pursuant to a Confidential Treatment Request and filed
separately with the Securities and Exchange Commission.
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 3.3.
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 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).
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.
3.
*** - indicates material
omitted pursuant to a Confidential Treatment Request and filed
separately with the Securities and Exchange Commission.
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 parathyroid 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, subject to
the termination of the Lilly Agreement as contemplated in Section
2.1.
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.
1.20
“ Development Costs ” shall mean the direct and
indirect costs actually incurred by Emisphere or its Affiliates
after the commencement by Emisphere of participation in Development
and in accordance with the applicable approved Development Plan and
Development Budget, with respect to the Back-up Carrier and
including:
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(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;
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(b) any
subcontract costs, including, the following:
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(i) clinical
and pre-clinical studies performed by Third Party investigators
engaged by Emisphere and/or Novartis;
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4.
*** - indicates material
omitted pursuant to a Confidential Treatment Request and filed
separately with the Securities and Exchange Commission.
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(ii) Out-of-Pocket
Costs for other outside professional services;
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(c) the
costs of bulk material and other clinical materials, including the
Product, to the Parties.
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(d) the
costs of regulatory filings to the extent that such costs are to be
considered Development Costs in accordance with the Accounting
Standards;
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(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);
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(f) any
other costs directly related to the Development of the
Product;
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in each case incurred by
either Party in accordance with the Development Plan and supported
by invoices and actual payments or other appropriate
documentation.
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1.21
“ Development Plan” shall mean 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.
1.22
“ Development Plan Carriers ” has the meaning
provided in Article 3.1.
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.
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
5.
*** - indicates material
omitted pursuant to a Confidential Treatment Request and filed
separately with the Securities and Exchange Commission.
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 as
defined in Section 10.2 (including, without limitation, upon the
termination of the Lilly Agreement as contemplated in Section 2.1),
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 Development Plan 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 Development Plan 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 (including, without limitation, upon the
termination of the Lilly Agreement as contemplated in Section 2.1),
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.
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.
6.
*** - indicates material
omitted pursuant to a Confidential Treatment Request and filed
separately with the Securities and Exchange Commission.
1.34
“ Formulation ” shall mean any pharmaceutical
composition containing the Compound in combination with a
Development Plan Carrier.
1.35
“ FTE ” shall mean a full-time equivalent
scientific person year directly related to the Development
Plan.
1.36
“ FTE Rate ” shall mean the annual rate to be
payable at US$*** and calculation of the rate of payment for such
FTE to be pro-rated on a daily basis (per annum amount to be
divided by 200 to produce the rate per whole day consisting of
eight hours) if necessary, such rate ($*** per FTE-hour) 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.
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 3.4.
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
7.
*** - indicates material
omitted pursuant to a Confidential Treatment Request and filed
separately with the Securities and Exchange Commission.
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
“ Invention ” shall mean any invention, whether
or not patentable, or other Know-How, conceived in the course and
as part of the Development, together with all Patent Rights and
other intellectual property rights therein.
1.45
“ 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.
1.46
“ 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.
1.47
“ 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.
1.48
“ Laws ” shall mean all laws, statutes, rules,
regulations, orders, judgments, injunctions and/or ordinances of
any Governmental Authority in the Territory.
1.49
“ Lead Carrier ” has the meaning provided in
Article 3.1.
1.50
“ License ” has the meaning provided in
Article 2.1.
1.51
“ Lilly ” shall mean Eli Lilly and
Company.
8.
*** - indicates material
omitted pursuant to a Confidential Treatment Request and filed
separately with the Securities and Exchange Commission.
1.52
“ Lilly Agreement ” shall mean, collectively,
the research collaboration and option agreement between Emisphere
and Lilly dated June 8, 2000 and the license agreement between
Emisphere and Lilly dated April 9, 1998.
1.53
“ 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.
1.54
“ 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.
1.55
“ Major Market Country ” shall mean each of
Japan, China, France, Germany, Italy, Spain, the United Kingdom and
the United States.
1.56
“ 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.
1.57
“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.
1.58
“ 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:
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(i) normal
and customary trade and quantity discounts actually allowed and
properly taken directly with respect to sales of the
Product;
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(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;
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9.
*** - indicates material
omitted pursuant to a Confidential Treatment Request and filed
separately with the Securities and Exchange Commission.
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(iii) chargebacks
and other amounts paid on sale or dispensing of such
Product;
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(iv) amounts
payable resulting from Governmental (or agency thereof) mandated
rebate programmes;
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(v) Third-Party
cash rebates and chargebacks related to sales of the finished
Product, to the extent actually allowed;
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(vi) tariffs,
duties, excise, sales, value-added and other taxes (other than
taxes based on income);
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(vii) retroactive
price reductions that are actually allowed or granted;
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(viii) cash
discounts for timely payment;
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(ix) delayed
ship order credits;
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(x) discounts
pursuant to indigent patient programmes and patient discount
programmes, including, without limitation, “Together
Rx” and coupon discounts;
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(xi) all
freight, postage and insurance included in the invoice price;
and
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(xii) amounts
repaid or credited for uncollectible amounts on previously sold
Products.
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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.
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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.
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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.
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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.
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10.
*** - indicates material
omitted pursuant to a Confidential Treatment Request and filed
separately with the Securities and Exchange Commission.
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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.
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1.59
“ Novartis Know-How ” shall mean, to the extent
Controlled by Novartis on the Effective Date or during the Term,
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.
1.60
“ Novartis Patents ” shall mean, to the extent
Controlled by Novartis as of the Effective Date or during the Term,
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 [
].
1.61
“ Option ” has the meaning provided in
Article 2.1.
1.62
“ Option Fee ” has the meaning provided in
Article 2.2.
1.63
“ Option Period ” has the meaning provided in
Article 2.1 .
1.64
“ 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.
1.65
“ 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.
11.
*** - indicates material
omitted pursuant to a Confidential Treatment Request and filed
separately with the Securities and Exchange Commission.
1.66
“ 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.
1.67
“ 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.
1.68
“ 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.
1.69
“ 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.
1.70
“ 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 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
12.
*** - indicates material
omitted pursuant to a Confidential Treatment Request and filed
separately with the Securities and Exchange Commission.
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.
1.71
“ 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 *** and the
like of Compound in combination with the Commercial
Carrier.
1.72
“ 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.
1.73
“ 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 Development Plan
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 Development Plan Carrier
or which does not claim any aspect of Emisphere’s Carrier
technology generally.
1.74
“ Product Trademark ” shall mean such
trademark(s) 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.
1.75
“ 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.
1.76
“ Regulatory Authority ” shall mean the FDA,
EMEA or any other counterpart or additional governmental or
regulatory agencies responsible for applicable Regulatory
Approvals.
13.
*** - indicates material
omitted pursuant to a Confidential Treatment Request and filed
separately with the Securities and Exchange Commission.
1.77
“ Regulatory Status Update ” shall mean
Novartis’ updates of the regulatory status of the Product in
the countries of the Territory.
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.
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ARTICLE
2 OPTION AND LICENSE GRANT
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2.1
The Option
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As of the Effective Date,
and for the period ending *** after Novartis receives notice from
Emisphere of the occurrence of the later of either:
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(i)
receipt by Emisphere of the *** legal judgment in its favour
allowing it to terminate, or affirming its prior termination of,
the Lilly Agreement; or
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(ii)
*** settlement or reversion of rights to Emisphere from the Lilly
Agreement such that Emisphere is able to grant the License (as
defined below) to Novartis without infringing the rights of a third
party,
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(the “Option
Period”), Emisphere hereby grants to Novartis an option (the
“Option”), exercisable solely at any time during the
Option Period, to obtain an exclusive worldwide license with the
ability to sublicense ***, 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 ”). The Option may
be exercised at any time within the Option Period. For
purposes of clarification, the Option Period shall not begin, and
Novartis shall not have the right to exercise the Option, until the
first to occur of the following: (a) receipt by Novartis of
notification from Emisphere of the receipt by Emisphere of the ***
legal judgment in its favour allowing it to terminate, or affirming
its prior termination of, the Lilly Agreement; or (b) receipt
by Novartis of notification from Emisphere of *** or settlement or
reversion of rights to Emisphere from the Lilly Agreement such that
Emisphere is able to grant the License (as defined below) to
Novartis without infringing the rights of a third party.
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If Novartis exercises the
Option, and without further consideration, Emsiphere will, both
before and after the end of the Option Period (but following
exercise of the Option by Novartis), do, execute, acknowledge and
deliver or cause to be done, executed, acknowledged or delivered
all such further acts, deeds, documents, assignments, transfers,
conveyances, powers of attorney
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14.
*** - indicates material
omitted pursuant to a Confidential Treatment Request and filed
separately with the Securities and Exchange Commission.
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and assurances as may be
reasonably necessary to effect complete consummation of the
transactions contemplated by this Agreement 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 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).
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Novartis may sublicense
the License or any part of it 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 where the
sublicence agreement with that sublicensee has been entered into by
Novartis. 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.
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2.2
The Option Fee . In consideration of the grant of the
Option, Novartis shall pay US$10,000,000 (ten million dollars) to
Emisphere governed by the terms of the convertible promissory note
between Novartis and Emisphere dated of even date herewith (the
“Option Fee”). In the event that this Agreement
shall terminates pursuant to Article 10.4:
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(a)
The Option Fee shall be fully refundable by Emisphere to Novartis
as set forth in the convertible promissory note between the parties
of even date;
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(b)
***
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(c)
***
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Such amounts payable by
Emisphere pursuant to this Article 2.2 shall be paid within thirty
(30) Business Days of delivery of notice from Novartis by
wire transfer in immediately available funds to an account or
accounts designated in writing by Novartis in such
notice.
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2.3
Exercise of the Option . Novartis may exercise the
Option by the delivery of a written notice to Emisphere prior to or
by the expiration of the Option Period.
2.4
The provisions of Articles 3 – 8 (inclusive) of this
Agreement shall come into force and effect only in the event that
Novartis exercises the Option set forth in this Article
2.
15.
*** - indicates material
omitted pursuant to a Confidential Treatment Request and filed
separately with the Securities and Exchange Commission.
3.1
Development
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In the event that Novartis
exercises its Option pursuant to Article 2, 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.
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3.2
Carriers
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Emisphere will make fully
available to Novartis such of the Emisphere Technology as is
necessary for Novartis to fully exploit the License consistent with
this Agreement. 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 “ Development Plan Carriers
”). The initial Lead Carrier and initial Back-Up
Carrier as of the Effective Date are described 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.
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3.3
Alliance Management Representatives .
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Each Party shall appoint a
central contact person (the “Alliance Manager”) who
shall be a senior representative having a general
understanding of development, regulatory, and manufacturing
issues. During the conduct of Development by Novartis, each
Alliance Manager shall be primarily responsible for facilitating
the flow of information and otherwise promoting communications and
collaboration between the Parties and internally within the
Parties.
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16.
*** - indicates material
omitted pursuant to a Confidential Treatment Request and filed
separately with the Securities and Exchange Commission.
3.4
Supply of Materials
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In order to facilitate
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
Development. 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 Development 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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3.5
Carrier Characterization .
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As part of Development,
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 Development Plan Carrier at such
time as it requests including conducting ***. Novartis shall be
solely responsible for selecting which Development Plan Carrier
(whether the Lead Carrier or Back-up Carrier or a replacement
Development Plan 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 ”).
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3.6
Carrier Process Development .
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(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
Development Plan 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
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17.
*** - indicates material
omitted pursuant to a Confidential Treatment Request and filed
separately with the Securities and Exchange Commission.
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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.
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(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 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 Development Plan 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.
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(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.
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18.
*** - indicates material
omitted pursuant to a Confidential Treatment Request and filed
separately with the Securities and Exchange Commission.
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(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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ARTICLE
4 DEVELOPMENT RESPONSIBILITIES
4.1
Emisphere Participation .
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(a)
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 *** anniversary of the exercise of the Option by Novartis,
Novartis shall be permitted to make requests to Emisphere for up to
*** Carriers to replace the Back-up Carrier 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. After the
earlier of (i) the *** anniversary of the exercise of the
Option by Novartis or (ii) Emisphere’s provision
to Novartis of *** Carriers after Novartis’ request,
Emisphere shall not be obligated to propose any additional Carriers
to Novartis.
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(b)
The Development Plan for the Back-up Carrier shall include time
lines, key decision points, deliverables, responsible parties and
priorities for the various Development activities, associated costs
and shall designate which Party, or whether a Third Party
contractor, is to be responsible for each activity. In
addition to the detailed Development Plan and Development Budget
for a given calendar year, each such Development Plan and
Development Budget shall include an outline of the projected plan
and estimated budget for the next calendar year. In the case
of Development activities to be performed by a Third Party for the
Back-up Carrier, Novartis shall decide on which Party shall
supervise the Third Party’s activities.
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19.
*** - indicates material
omitted pursuant to a Confidential Treatment Request and filed
separately with the Securities and Exchange Commission.
4.2
Reporting Obligations . Novartis shall use
Commercially Reasonable Efforts to keep Emisphere informed about
all relevant studies, investigations, or tests to the extent
related to the Development of the Development Plan Carrier or the
Product, on a quarterly basis.
4.3
Development Costs – Lead Carrier . Novartis
shall be responsible for all of the development costs incurred by
it in respect of the Formulation including the Lead Carrier after
the exercise of the Option by Novartis.
4.4
Reimbursement. In the event that Emisphere
participates in the Development of a Back-up Carrier,
Novartis shall reimburse Emisphere for Development Costs incurred
by Emisphere in connection therewith at the FTE Rate within thirty
(30) Business Days of the receipt by Novartis of an invoice for
such Development Costs as previously agreed by the
Parties.
4.5
Regulatory
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(a)
Ownership of Approvals . All Approval Applications,
Approvals, supporting documentation and data relating to the
Product shall be the solely owned property of Novartis and shall be
treated by the Parties as Confidential Information.
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(b)
Regulatory Status Updates . Novartis shall be
responsible for preparation of the registration dossier (including
without limitation the expert reports, as well as any foreign
language translations of the dossier) to be used for Approval
Applications in the Territory. On a semi-annual basis
following the date of exercise of the Option, Novartis shall
prepare a Regulatory Status Update which shall set forth the status
of all Approval Applications to be submitted to Regulatory
Authorities in connection with the Commercialization of the
Product, including time lines for such submissions. Each such
Regulatory Status Update shall be treated by the Parties as
Confidential Information in accordance with Article
13.1(a).
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(c)
Novartis shall have the sole authority and responsibility for (i)
submitting Approval Applications for the Product, (ii) obtaining
and maintaining Approvals for the Product, and (iii) complying with
all regulatory requirements and reporting obligations to
Governmental Authorities relating to the Approvals for and
commercialization of the Product in each country.
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(d)
Emisphere shall co-operate and provide to Novartis any assistance
reasonably required for the purposes of obtaining Regulatory
Approvals for the Product.
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4.6
Co-operation between the Parties
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(a)
Data Sharing . Emisphere shall provide to Novartis
within one month of its generation or sooner if reasonably
requested by Novartis, copies of all data generated by Emisphere
relating to or intended to support any Approval Application for the
Product or any
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20.
*** - indicates material
omitted pursuant to a Confidential Treatment Request and filed
separately with the Securities and Exchange Commission.
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Product Improvement in the
Territory (including information related to GMP, GLP and/or GCP
compliance, and health, safety and environmental data concerning
manufacturing plants, in each case to the extent related
to
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