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 e
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