CONFIDENTIAL TREATMENT REQUESTEDUNDER 17 C.F.R 200.80(B)4, AND 240.24B-2 Exhibit 10.1ConfidentialExecution CopyLicense Agreement Between Isis Pharmaceuticals, Inc., And Bayer Pharma AG

ISIS PHARMACEUTICALS, INC.

 

For purposes of this Agreement, the following capitalized terms will have the following meanings:

 

“Additional Core IP” means Third Party intellectual property that is necessary to [***]. For clarity, Additional Core IP does not include any Patent Rights claiming (or intellectual property related to) [***].

 

“Additional Indication” means any indication in addition to the First Indication.

 

“Affiliate” of an entity means any corporation, firm, partnership or other entity which directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with a Party to this Agreement. An entity will be deemed to control another entity if it (i) owns, directly or indirectly, at least 50% of the outstanding voting securities or capital stock (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) of such other entity, or has other comparable ownership interest with respect to any entity other than a corporation; or (ii) has the power, whether pursuant to contract, ownership of securities or otherwise, to direct the management and policies of the entity. For clarity, Regulus Therapeutics Inc. will not be deemed an “Affiliate” of Isis for the purposes of this Agreement under any circumstances.

 

“Agreement” has the meaning set forth in the Preamble of this Agreement.

 

“Agreement Term” has the meaning set forth in Section 11.1.

 

“Alliance Manager” has the meaning set forth in Section 3.1.

 

“Annual” or “Annually” means the period covering a Calendar Year or occurring once per Calendar Year, as the context requires.

 

“API” means the bulk active pharmaceutical ingredient manufactured in accordance with cGMP (unless expressly stated otherwise) for a Product. The quantity of API will be the as-is gross mass of the API after lyophilization (i.e., including such amounts of water, impurities, salt, heavy, metals, etc. within the limits set forth in the API specifications).

 

“Applicable Law” or “Law” means all applicable laws, statutes, rules, regulations and other pronouncements having the effect of law of any federal, national, multinational, state, provincial, county, city or other political subdivision, agency or other body, domestic or foreign, including any applicable rules, regulations, guidelines, or other requirements of the Regulatory Authorities that may be in effect from time to time.

 

“Approval” means approval sufficient for the manufacture, distribution, use, marketing and sale of such Product in such jurisdiction in accordance with Applicable Laws.

 

“ASO” means a single-stranded or double-stranded oligonucleotide compound, or analog, variant, mimic, or mimetic thereof, having a sequence that is at least six bases long and is designed to hybridize to a nucleic acid transcript via the binding, partially or wholly, of such compound to the nucleic acid transcript.

 

“Audit Report” has the meaning set forth in Section 7.15.

 

 

“Average U.S. Price” has the meaning set forth in Section 7.9.2(b).

 

“Bankruptcy Code” has the meaning set forth in Section 8.12.

 

“Bayer” has the meaning set forth in the Preamble of this Agreement.

 

“Bayer-Acquirer” has the meaning set forth in Section 13.5.1.

 

“Bayer Base Royalty Rate” has the meaning set forth in Section 7.9.1.

 

“Bayer’s Cost of Goods Sold” has the meaning set forth in Appendix 10.

 

“Bayer Excluded Indication” has the meaning set forth in Section 5.5.1.

 

“Bayer Indemnitees” has the meaning set forth in Section 10.2.

 

“Bayer Know-How” means any Know-How owned, used, developed by, or licensed to Bayer or its Affiliates, in each case to the extent Controlled by Bayer or its Affiliates on the Effective Date or at any time during the Agreement Term, but specifically excluding the Bayer Program Know-How.

 

“Bayer Marks” means any proprietary Bayer name, logotype, Trade Dress (including the name “Bayer” and the “Bayer Cross”) other than the Trademark.

 

“Bayer Opt-In Technology” has the meaning set forth in Section 2.2.2.

 

“Bayer Patents” means any Patent Rights included in the Bayer Technology.

 

“Bayer Product-Specific Patents” means all Product-Specific Patents owned, used, developed by, or licensed to Bayer or its Affiliates, in each case to the extent Controlled by Bayer or its Affiliates on the Effective Date or at any time during the Agreement Term.

 

“Bayer Program Know-How” has the meaning set forth in Section 8.1.2.

 

“Bayer Program Patents” has the meaning set forth in Section 8.1.2.

 

“Bayer Program Technology” has the meaning set forth in Section 8.1.2.

 

“Bayer-Prosecuted Patents” has the meaning set forth in Section 8.2.3(b).

 

“Bayer Supported Pass-Through Costs” means [***].

 

“Bayer Technology” means the Bayer Program Technology, Bayer’s interest in Jointly-Owned Program Technology, Bayer Product-Specific Patents, owned, used, developed by, or licensed to Bayer or its Affiliates that are necessary or useful to Develop, register, Manufacture or Commercialize a Product.

 

“Breaching Party” means the Party that is believed by the Non-Breaching Party to be in material breach of this Agreement.

 

“Business Day” means any day other than a Saturday or Sunday on which banking institutions in New York, New York, Berlin, Germany and Leverkusen, Germany are open for business.

 

“Calendar Quarter” means a period of three consecutive months ending on the last day of March, June, September, or December, respectively, and will also include the period beginning on the Effective Date and ending on the last day of the Calendar Quarter in which the Effective Date falls.

 

 

“Carryover Development Candidate” has the meaning set forth in Section 2.5.2.

 

“Carryover Option” has the meaning set forth in Section 2.5.2.

 

“Carryover Option Deadline” has the meaning set forth in Section 2.5.2.

 

“cGMP” means current Good Manufacturing Practices as specified in the United States Code of Federal Regulations, ICH Guideline Q7A, or equivalent laws, rules, or regulations of an applicable Regulatory Authority at the time of manufacture.

 

“Change of Control Event” means any (a) direct or indirect acquisition of all or substantially all of the assets of a Party, (b) direct or indirect acquisition by a Person, or group of Persons acting in concert, of 50% or more of the voting equity interests of a Party, (c) tender offer or exchange offer that results in any Person, or group of Persons acting in concert, beneficially owning 50% or more of the voting equity interests of a Party, or (d) merger, consolidation, other business combination or similar transaction involving a Party, pursuant to which any Person owns all or substantially all of the consolidated assets, net revenues or net income of such Party, taken as a whole, or which results in the holders of the voting equity interests of such Party immediately prior to such merger, consolidation, business combination or similar transaction ceasing to hold 50% or more of the combined voting power of the surviving, purchasing or continuing entity immediately after such merger, consolidation, other business combination or similar transaction, in all cases where such transaction is to be entered into with any Person other than Isis, Bayer or their respective Affiliates.

 

“Clinical Study” or “Clinical Studies” means, with respect to a Product (or, in the case of Section 4.2 only [***]), a Phase I Clinical Trial, Phase II Clinical Trial, Phase III Clinical Trial or Registration-Directed Trial, Phase IV Clinical Trial or such other study in humans that is conducted in accordance with good clinical practices and is designed to generate data in support or maintenance of an NDA, MAA, JNDA or other similar marketing application.

 

“CMO” means a Third Party contract manufacturer Manufacturing API, clinical supplies or Finished Drug Product for any purpose under this Agreement.

 

“Combination Product” means the combination of the Product and any separately packaged drug or biological product, administered either sequentially or concurrently, whether or not such separately packaged drug or biological product is approved for marketing and sale under Applicable Law.

 

“Commercialize,” “Commercialization” or “Commercializing” means any and all activities directed to registering, marketing, promoting, detailing, distributing, importing, having imported, exporting, having exported, selling or offering to sell a product containing an ASO (including a Product) following receipt of Approval for such ASO-product in the applicable country, including conducting pre-and post-Approval activities, including studies reasonably required to increase the market potential of such ASO-product and studies to provide improved formulation and ASO-product delivery, and launching and promoting the ASO-product in each country.

 

“Commercially Reasonable Efforts” means the level of effort, budget and resources normally used by a company in the pharmaceutical industry of similar size as the respective Party or in case there is no such industry standard, the level of effort, budget and resources normally used by the respective Party for a product owned or controlled by it, which is of similar profitability and at a similar stage in its development or product life, taking into account with respect to a product inter alia any issues of patent coverage, safety and efficacy, pricing, product profile, the proprietary position of the product, the competitive environment for the product and the likely timing of the product(s) entry into the market, the regulatory environment of the product and other relevant scientific, technical and commercial factors. Commercially Reasonable Efforts shall be determined on a Product-by-Product and country-by-country basis.

 

“Competing Product” has the meaning set forth in Section 13.5.2.

 

“Competitive Infringement” has the meaning set forth in Section 8.5.1.

 

“Complete,” “Completed,” or “Completion” means, with respect to a Clinical Study, the point in time at which the primary database lock for such study has occurred and, if such study has a statistical analysis plan, the data generated based on that primary database lock under the statistical analysis plan for such study are available.

 

“Completion Notice” means, with respect to the CS IV Study for ISIS-FXI_Rx, a written notice containing the tables, listings and figures in a CDISC format to be sent to Bayer within [***] Business Days following database lock in accordance with Isis’ standard operating procedures.

 

“Compound” means any ASO that is designed to bind to the RNA that encodes the applicable Exclusive Target, where such ASO is discovered by Isis prior to or in the performance of the applicable Development Candidate Identification Plan.

 

“Confidential Information” means any confidential or proprietary information or materials, patentable or otherwise, in any form (written, oral, photographic, electronic, magnetic, or otherwise) which is disclosed by the Disclosing Party or otherwise received or accessed by the Receiving Party in the course of performing its obligations or exercising its rights under this Agreement, including trade secrets, Know-How, inventions or discoveries, proprietary information, formulae, processes, techniques and information relating to the past, present and future marketing, financial, and research and development activities of any product or potential product or useful technology of the Disclosing Party or its Affiliates and the pricing thereof. “Confidential Information” does not include information that:

 

(a)

was in the lawful knowledge and possession of the Receiving Party or its Affiliates prior to the time it was disclosed to, or learned by, the Receiving Party or its Affiliates, or was otherwise developed independently by the Receiving Party or its Affiliates, as evidenced by written records kept in the ordinary course of business, or other documentary proof of actual use by the Receiving Party or its Affiliates;

 

(a)

was generally available to the public or otherwise part of the public domain at the time of its disclosure to the Receiving Party or its Affiliates;

 

(b)

became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the Receiving Party or its Affiliates in breach of this Agreement; or

 

(c)

was disclosed to the Receiving Party or its Affiliates, other than under an obligation of confidentiality, by a Third Party who had no obligation to the Disclosing Party or its Affiliates not to disclose such information to others.

 

“Conjugate Technology” means chemistry designed to enhance targeting of antisense drugs to specific tissues and cells. Conjugate Technology includes N-acetylgalactosamine (GalNAc) ligand conjugates capable of binding to the asialoglycoprotein receptor (ASGP-R) and enhancing the targeting of antisense drugs.

 

“Control” or “Controlled” means possession of the ability to grant a license or sublicense hereunder without violating the terms of any agreement with any Third Party; provided, however, that if a Party has a right to grant a license or sublicense, with respect to an item of intellectual property to the other Party only upon payment of compensation (including milestones or royalties) to a Third Party (“Third Party Compensation”) (other than Isis Supported Pass-Through Costs in the case of Isis, and other than Bayer Supported Pass-Through Costs in the case of Bayer), then the first Party will be deemed to have “Control” of the relevant item of intellectual property only if the other Party agrees to bear the cost of such Third Party Compensation unless the first Party is obliged to pay such costs under this Agreement. Notwithstanding anything to the contrary under this Agreement, with respect to any Third Party that becomes an Affiliate of a Party after the Effective Date (including a Third Party acquirer), no intellectual property of such Third Party owned or controlled by such Third Party immediately prior to the date such Third Party becoming an Affiliate of a Party hereunder will be included in the licenses granted hereunder by virtue of such Third Party becoming an Affiliate of such Party.

 

“Cover,” “Covered” or “Covering” means, with respect to a patent, that, but for rights granted to a Person under such patent, the act of making, using or selling by such Person would infringe a Valid Claim included in such patent, or in the case of a patent that is a patent application, would infringe a Valid Claim in such patent application if it were to issue as a patent.

 

“CS IV Study” means the Phase II Clinical Trial Isis is conducting to assess the pharmacokinetics and pharmacodynamics of ISIS-FXI_Rx in patients on dialysis in accordance with the Strategic Plan.

 

“Develop,” “Developing” or “Development” means, with respect to a product containing an ASO (including a Product) after such ASO-product is designated as the development candidate, any and all non-clinical, clinical or regulatory activity with respect to such ASO-product to seek approval by a regulatory authority to market and sell such ASO-product (including the submission of all necessary filings with applicable Regulatory Authorities to support such preclinical and clinical activities and Approval), including pharmacokinetic and toxicology studies required to meet the requirements for filing an IND and filing an IND with any regulatory authority, human clinical trials conducted after Approval of such ASO-product to seek approval by a regulatory authority to market and sell such ASO-product for additional indications.

 

“Development Candidate” means a Compound that Bayer has determined meets Bayer’s internal criteria for, and which Bayer selects as ready to start, IND-Enabling Toxicology Studies as provided herein.

 

“Development Candidate Identification Plan” has the meaning set forth in Section 2.2.1.

 

“Disclosing Party” has the meaning set forth in Section 12.1.

 

“Discontinued Product” means a Product for which Bayer was granted a license under Section 5.1, and which Product is the subject of a termination under this Agreement.

 

“Dispute” has the meaning set forth in Section 13.1.1.

 

“Divestiture Period” has the meaning set forth in Section 13.5.2.

 

“DOJ” means the Antitrust Division of the United States Department of Justice.

 

“Domain Names” means any Domain Name identical or similar with the Trademarks under any ccTLD (country code Top Level Domain) and gTLD (generic Top Level Domain) address area.

 

“Drug Discovery” means, with respect to a product containing an ASO (including a Product), a scope of work that includes human clinical lead optimization with the goal of identifying a development candidate.

 

“Drug Discovery Request Notice” has the meaning set forth in Section 2.1.

 

“Drug Safety Information Agreement” has the meaning set forth in Section 1.8.1.

 

 “Effective Date” means the date that all necessary authorizations, consents, orders or approval of, or declarations or filings with, or expirations of waiting periods under the HSR Act, as applicable to the consummation of the transactions contemplated by this Agreement, shall have been received, authorized, permitted or expired.

 

“EMA” means the European Medicines Agency and any successor entity thereto.

 

“European Union” or “EU” means each and every country or territory that is officially part of the European Union.

 

“[***]” has the meaning set forth in [***].

 

“Excluded Payments” means [***].

 

“Exclusive Target” means (i) Factor XI, and (ii) [***] during the period [***] is the subject of a New Drug Option Program and, after the applicable Option exercise, so long as Bayer is Developing and/or Commercializing [***] under this Agreement.

 

“Execution Date” has the meaning set forth in the Preamble of this Agreement.

 

“Executives” has the meaning set forth in Section 13.1.3.

 

“Factor XI” means the gene coagulation factor XI (NCBI Gene ID: 2160; example identifier NCBI RefSeq NM_000128), or any alternative splice variants, mutants, polymorphisms and fragments thereof.

 

[***].

 

“FDA” means the United States Food and Drug Administration and any successor entity thereto.

 

“Field” means any use or form of administration in humans or non-humans of a Product for any indication.

 

“Finished Drug Product” means any drug product containing API as an active ingredient, in finished form for the Development or Commercialization by a Party under this Agreement.

 

“First Commercial Sale” means the first sale of a Product by Bayer, its Affiliate or its Sublicensee to a Third Party in a country after Approval of such Product has been obtained in such country, provided that where such a first commercial sale has occurred in a country for which Pricing Approval is necessary for widespread sale, then such sale shall not be deemed a First Commercial Sale until such Pricing Approval has been obtained. For the avoidance of doubt, supply of Product as samples or to patients for compassionate use, named patient use, Clinical Trials or other similar purposes shall not be considered a First Commercial Sale.

 

“First Indication” has the meaning set forth in Section 1.1

 

 “Formulation Technology” means technology designed to enhance the stability or delivery of an oligonucleotide where such technology is not an Oligonucleotide Modification. “Oligonucleotide Modification” means [***]. Conjugate Technology is an example of an “Oligonucleotide Modification,” but does not represent “Formulation Technology.” Lipid nanoparticle technology is an example of “Formulation Technology.”

 

 “FTC” the Antitrust Division of the United States Department of Justice.

 

“Full Royalty Period” has the meaning set forth in Section 7.9.3(a).

 

“[***]” has the meaning set forth in Section 4.2.

 

“[***]” has the meaning set forth in Section 4.2.

 

“Generic Country” means a country in which a Generic Product is sold.

 

“Generic Product” means, with respect to a particular Product, one or more Third Party product(s) (i) having the same active pharmaceutical ingredient as such Product, and (ii) such Third Party product(s) when taken in the aggregate have a market share (measured in number of prescriptions with the numerator of such fractional share being such Third Party product(s) taken in the aggregate, and the denominator being the total of such Third Party product(s) taken in the aggregate plus such Product taken in the aggregate, as provided by IMS or calculated using such other data as mutually agreed by the Parties (such agreement not to be unreasonably withheld, conditioned or delayed)) during the applicable Calendar Quarter in such country of at least [***]%; provided, however, [***].

 

 “Generic Royalty Quotient” has the meaning set forth in Section 7.9.3(b).

 

“Gross Margin” means [***].

 

“HSR Act” means the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended from time to time.

 

“IND” means an Investigational New Drug Application (as defined in the Food, Drug and Cosmetic Act, as amended) filed with the FDA or its foreign counterparts.

 

“Indemnitee” has the meaning set forth in Section 10.3.

 

“IND-Enabling Toxicology Studies” means the pharmacokinetic and toxicology studies required to meet the requirements for filing an IND.

 

“Initial Supply” has the meaning set forth in Section 1.9.2(a)(i).

 

“Initiation” or “Initiate” means, with respect to any Clinical Study, dosing of the first human subject in such Clinical Study.

 

“Isis” has the meaning set forth in the Preamble of this Agreement.

 

“Isis-Acquirer” has the meaning set forth in Section 13.5.2.

 

“Isis Completion Activities” has the meaning set forth in Section 1.7.

 

“Isis Core Technology Patents” means any necessary or useful Patent Rights owned, used, developed by, or licensed to Isis or its Affiliates, in each case to the extent Controlled by Isis or its Affiliates on the Effective Date or at any time during the Agreement Term, claiming subject matter generally applicable to ASOs, other than Isis Product-Specific Patents or Isis Manufacturing and Analytical Patents. A list of Isis Core Technology Patents as of the Effective Date is set forth on Appendix 5 attached hereto. Appendix 5 will be updated during the Agreement Term with any additional Isis Core Technology Patents claiming technology incorporated into a Product.

 

“Isis Excluded Indication” has the meaning set forth in Section 5.5.2.

 

“Isis’ Fully Absorbed Cost of Good Methodology” means the costs incurred by Isis as determined using the methodology set forth in Appendix 9 fairly applied and as employed on a consistent basis throughout Isis’ operations.

 

“ISIS-FXI_Rx” means the Compound known as ISIS 416858 having the following sequence and chemistry: 5′-A^MeCGG^MeCATTGGTG^MeCA^MeCAG^MeU^MeU^MeU- 3′. The underlined residues are 2'-O-(2-methoxyethyl) ribose (2'-MOE nucleosides). The residues are arranged so that there are five 2'-MOE nucleosides at the 5' and 3'-ends of the molecule flanking a gap of ten 2'-deoxynucleosides. All of the cytosine bases are methylated at the 5-position (5-methylcytosine). Each of the 19 internucleoside linkages is a 3'-O to 5'-O phosphorothioate diester. It should be noted that 2'-(2-methoxyethyl)-5-methyluridine (2'-MOE ^MeU) nucleosides are sometimes referred to as 2'-(2-methoxyethyl)ribothymidine (2'-MOE T). ISIS-FXI_Rx does not include any product containing Conjugate Technology.

 

“ISIS-FXI_Rx-2” has the meaning set forth in Section 2.1.1. ISIS-FXI_Rx-2 in its finished form is the finished drug product containing the Development Candidate designated under the ISIS-FXI_Rx-2 Program as an active pharmaceutical ingredient.

 

“ISIS-FXI_Rx-2 Program” has the meaning set forth in Section 2.1.1.

 

“[***].

 

“[***].

 

“Isis Indemnitees” has the meaning set forth in Section 10.1.

 

 “Isis Internal ASO Safety Database” has the meaning set forth in Section 6.6(a).

 

“Isis Know-How” means any Know-How, including Isis’ interest in any Jointly-Owned Program Know-How, owned, used, developed by, or licensed to Isis or its Affiliates, in each case to the extent Controlled by Isis or its Affiliates on the Effective Date or at any time during the Agreement Term. Isis Know-How does not include the Isis Manufacturing and Analytical Know-How.

 

“Isis Manufacturing and Analytical Know-How” means Know-How, including Isis’ interest in any Jointly-Owned Program Know-How, that relates to the synthesis or analysis of a Product regardless of sequence or chemical modification, owned, used, developed by, or licensed to Isis or its Affiliates, in each case to the extent Controlled by Isis or its Affiliates on the Effective Date or at any time during the Agreement Term. Isis Manufacturing and Analytical Know-How do not include the Isis Know-How.

 

“Isis Manufacturing and Analytical Patents” means Patent Rights, including Isis’ interest in any Jointly-Owned Program Patents, that claim Manufacturing Technology owned, used, developed by, or licensed to Isis or its Affiliates, in each case to the extent Controlled by Isis or its Affiliates on the Effective Date or at any time during the Agreement Term. A list of Isis Manufacturing and Analytical Patents as of the Effective Date is set forth on Appendix 6 attached hereto. Appendix 6 will be updated during the Agreement Term with any additional Isis Manufacturing and Analytical Patents claiming technology incorporated into a Product. Isis Manufacturing and Analytical Patents do not include the Isis Product-Specific Patents or the Isis Core Technology Patents.

 

“Isis Owned Patents” has the meaning set forth in Section 9.2.2.

 

“Isis Product” has the meaning set forth in Section 4.1.2.

 

“Isis Product-Specific Patents” means all Product-Specific Patents, in each case to the extent Controlled by Isis or its Affiliates on the Effective Date or at any time during the Agreement Term. A list of Isis Product-Specific Patents as of the Effective Date is set forth on Appendix 7 attached hereto. Appendix 7 will be updated during the Agreement Term with any additional Isis Product-Specific Patents claiming technology incorporated into a Product.

 

“Isis Program Know-How” has the meaning set forth in Section 8.1.2.

 

“Isis Program Patents” has the meaning set forth in Section 8.1.2.

 

“Isis Program Technology” has the meaning set forth in Section 8.1.2.

 

“Isis Supported Pass-Through Costs” means [***].

 

“Japan NDA” or “JNDA” means the Japanese equivalent of an NDA filed with the Koseisho (i.e., the Japanese Ministry of Health and Welfare, or any successor agency thereto).

 

“[***]” has the meaning set forth in [***].

 

“Joint Patent Committee” or “JPC” has the meaning set forth in Section 8.1.3(a).

 

“Jointly-Owned Program Know-How” has the meaning set forth in Section 8.1.2.

 

“Jointly-Owned Program Patents” has the meaning set forth in Section 8.1.2.

 

“Jointly-Owned Program Technology” has the meaning set forth in Section 8.1.2.

 

“Know-How” means inventions, technical information, know-how and materials, including technology, data, compositions, formulas, biological materials, assays, reagents, constructs, compounds, discoveries, procedures, processes, practices, protocols, methods, techniques, results of experimentation or testing, knowledge, trade secrets, skill and experience, in each case whether or not patentable or copyrightable, and in each case that are unpatented.

 

“Knowledge” means – with respect to their respective directors, executives and/or employees – a Party’s and its Affiliates’ good faith, actual understanding of the facts and information as of the Effective Date; provided that, with respect to information regarding the status of Patent Rights or other intellectual property rights, “Knowledge” means – with respect to their respective directors, executives and/or employees – such Party’s or its Affiliate’s good faith, actual understanding of the facts and information as of the Effective Date after performing a diligent investigation with respect to such facts and information as is customary in the conduct of its business with respect to such Patent Rights or other intellectual property rights (and not, for clarity, a diligent investigation solely in connection with this Agreement).

 

“Lead Candidate” means a Compound that is reasonably determined by Isis’ Research Management Committee in accordance with Isis’ standard procedures for designating development candidates as [***]. The checklist Isis uses as of the Effective Date when reviewing potential development candidates for approval is attached hereto as Appendix 3 [***].

 

“Lead Candidate Data Package” means, with respect to a Lead Candidate, [***].

 

“Licensed Know-How” means Isis Manufacturing and Analytical Know-How, Isis Program Know-How and Isis Know-How. For clarity, Licensed Know-How does not include any Know-How covering formulation technology or delivery devices.

 

“Licensed Patents” means the Isis Product-Specific Patents, Isis Core Technology Patents, Isis Manufacturing and Analytical Patents, Isis Program Patents and Isis’ interest in Jointly-Owned Program Patents. For clarity, Licensed Patents do not include any Patent Rights claiming formulation technology or delivery devices except to the extent such Patent Rights are Jointly-Owned Program Patents.

 

“Licensed Technology” means, on a Product-by-Product basis, any and all Licensed Patents and Licensed Know-How to the extent necessary or useful to Research, Develop, Manufacture, have Manufactured and Commercialize a Product in the Field.

 

“Losses” has the meaning set forth in Section 10.1.

 

“MAA” means a marketing authorization application filed with the EMA after completion of Clinical Studies to obtain Approval for a Product under the centralized European filing procedure or, if the centralized EMA filing procedure is not used, filed using the applicable procedures in any European Union country.

 

“MAA Approval” means the Approval of an MAA by the EMA for a Product in any country in the EU.

 

“Major Indication” means, with respect to ISIS-FXI_Rx-2, [***].

 

“Major Market” means any of the following countries: [***].

 

“Manufacture” or “Manufactured” or “Manufacturing” means any activity involved in or relating to the manufacturing, quality control testing (including in-process, release and stability testing), releasing or packaging, for pre-clinical and clinical purposes, of API or a Product in finished form.

 

“Manufacturing Technology” means (i) methods and materials used in the synthesis or analysis of an oligonucleotide regardless of sequence or chemical modification, and (ii) methods of making components of an oligonucleotide.

 

“Material Change” has the meaning set forth in Section 1.3.2.

 

“Minimum Third Party Payments” means [***].

 

“NDA” means a New Drug Application filed with the FDA after completion of Clinical Studies to obtain Approval for a Product in the United States.

 

“Net Sales” means, with respect to any Product sold by Bayer, its Affiliates or Sublicensees to any unaffiliated Third Party, the gross amount invoiced by Bayer, its Affiliates or Sublicensees to such unaffiliated Third Party and calculated using Bayer’s internal audited system used to report such sales, less the following items:

 

(i)

[***] percent ([***]%) of gross amount for transportation, freight insurance, distribution, packing and handling,

 

(ii)

sales and excise taxes or customs duties paid by Bayer, its Affiliates or Sublicensees or any other governmental charges imposed upon the sale of a Product and paid by Bayer, its Affiliates or Sublicensees;

 

(iii)

rebates and premiums granted or allowed by Bayer, its Affiliates or Sublicensees in connection with the sale of a Product;

 

(iv)

allowances or credits granted by Bayer, its Affiliates or Sublicensees to customers on account of governmental requirements, rejections, outdating, returns, billing errors or recalls of a Product;

 

(v)

trade, cash and quantity discounts, bonuses or chargebacks granted by Bayer, its Affiliates or Sublicensees in connection with the sale of a Product;

 

(vi)

costs of customer programs such as cost effectiveness or patient assistance studies or programs designed to aid in patient compliance with medication schedules in connection with the sales of Products;

 

(vii)

[***] percent ([***]%) of gross amount for bad debts; and

 

(viii)

any item substantially similar in character and/or substance to the above.

 

For the purpose of calculating Net Sales, the Parties recognize that customers may include persons in the chain of commerce who enter into agreements with Bayer, its Affiliates or Sublicensees as to price even though title to the Product does not pass directly from Bayer, its Affiliates or Sublicensees to such customers and even though payment for such Product is not made by such customers directly to Bayer, its Affiliates or Sublicensees; and in such cases, chargebacks paid by Bayer, its Affiliates or Sublicensees to or through a Third Party (such as a wholesaler) that are not described in items (iii) or (v) listed above, can be deducted by Bayer, its Affiliates or Sublicensees from gross revenue in order to calculate Net Sales.

 

In the event that a Product is sold in the form of a Combination Product, Net Sales for such Combination Product will be adjusted by multiplying actual Net Sales of such Combination Product by the fraction A/(A+B) where A is the invoice price of the Product if sold separately and B is the invoice price of any other active ingredient(s) in the Combination Product, if sold separately. If, on a country-by-country basis, the other active ingredient(s) in the Combination Product are not sold separately in that country, Net Sales shall be calculated by multiplying actual Net Sales of such Combination Product by the fraction A/C where A is the invoiced price of the Product if sold separately and C is the invoiced price of the Combination Product. If, on a country-by-country basis, neither the Product nor the other active ingredient(s) of the Combination Product is sold separately in such country, then the value of the active ingredient(s) for the purpose of determining Net Sales shall be determined between the Parties in good faith.

 

With respect to Net Sales as it applies to royalties payable by Isis, the Parties agree that any reasonable definition of “net sales” that is (x) customarily used in pharmaceutical industry technology licensing or collaboration contracts and (y) consistent with generally accepted accounting principles in the United States (“GAAP”) or International Financial Reporting Standards and is subsequently agreed to by Isis (or a Third Party acquirer or assignee) and Isis’ sublicensee or commercialization partner in an arms-length transaction under a particular sublicense or commercialization agreement will replace the definition of Net Sales in this Agreement and will be used in calculating the royalty payment to Bayer on sales of products sold pursuant to such agreement. If Isis uses such an alternate definition of “net sales” in a particular sublicense, (A) Isis will include such “net sales” definition in the applicable royalty reports to assist Bayer with verifying royalty payments and (B) if such definition is not consistent with GAAP or International Financial Reporting Standards, upon Bayer’s request, Isis will reconcile the royalties calculated under such definition with GAAP or International Financial Reporting Standards.

 

“New Drug Option Program” has the meaning set forth in Section 2.1.

 

“New Drug Option Program Term” has the meaning set forth in Section 2.3.

 

“Non-Breaching Party” means the Party that believes the Breaching Party is in material breach of this Agreement.

 

“Option” has the meaning set forth in Section 2.4.

 

“Option Deadline” has the meaning set forth in Section 2.4.

 

“Orange Book Patents” means the Patent Rights that are listed with, and/or are required to be listed with, applicable Regulatory Authorities Covering any Product being Developed by Bayer, its Affiliates or Sublicensees hereunder that Bayer, its Affiliate or Sublicensee intends to, or has begun to, Commercialize, and that have become the subject of an NDA submitted to any applicable Regulatory Authority, such listings to include, without limitation, all so-called “Orange Book” listings required under the Hatch-Waxman Act and all so-called “Patent Register” listings as required in Canada.  For purposes of determining royalties payable under Section 7.9, Orange Book Patents will include any and all foreign equivalent and counterpart Patent Rights to the Patent Rights described above.

 

“Party” or “Parties” means Bayer and Isis individually or collectively.

 

“Patent Costs” means the reasonable fees and expenses paid to outside legal counsel, and filing, maintenance and other reasonable out-of-pocket expenses paid to Third Parties, incurred in connection with the Prosecution and Maintenance of Patent Rights.

 

“Patent Rights” means (a) patents, patent applications and similar government-issued rights protecting inventions in any country or jurisdiction however denominated, (b) all priority applications, divisionals, continuations, substitutions, continuations-in-part of and similar applications claiming priority to any of the foregoing, and (c) all patents and similar government-issued rights protecting inventions issuing on any of the foregoing applications, together with all registrations, reissues, renewals, re-examinations, confirmations, supplementary protection certificates, and extensions of any of (a), (b) or (c).

 

“Permitted Licenses” means (1) licenses granted by Isis before or after the Effective Date to any Third Party under the Isis Core Technology Patents, the Isis Manufacturing and Analytical Patents, or the Isis Manufacturing and Analytical Know-How (but not under the Isis Product-Specific Patents) to (a) use oligonucleotides (or supply oligonucleotides to end users) solely to conduct Research, or (b) enable such Third Party to manufacture or formulate oligonucleotides, where (i) such Third Party is primarily engaged in providing contract manufacturing or services and is not primarily engaged in drug discovery, development or commercialization of therapeutics; and (ii) Isis does not assist such Third Party to identify, discover or make an ASO designed to bind to an Exclusive Target; and (2) material transfer, collaboration, or sponsored research agreements with academic collaborators or non-profit institutions solely to conduct non-commercial Research.

 

“Person” means any corporation, limited or general partnership, limited liability company, joint venture, trust, unincorporated association, governmental body, authority, bureau or agency, any other entity or body, or an individual.

 

“Phase I Clinical Trial” means, with respect to a Product, a human clinical trial that is intended to initially evaluate the safety, metabolism and pharmacokinetics of such Product that would otherwise satisfy the requirements of 21 C.F.R. 312.21(a) or an equivalent clinical trial in a country in the Territory other than the United States.

 

“Phase II Clinical Trial” means, with respect to a Product, a human clinical trial for which the primary endpoints include a determination of safety, dose ranges or an indication of efficacy of such Product in patients being studied as described in 21 C.F.R. §312.21(b), or an equivalent clinical trial in a country in the Territory other than the United States, and that is prospectively designed to generate sufficient data (if successful) to commence pivotal clinical trials.

 

“Phase III Clinical Trial” or “Registration-Directed Trial” means, with respect to a Product, a human clinical trial (regardless of whether actually designated as “Phase III”) that is prospectively designed, along with other Phase III Clinical Trials, to demonstrate statistically whether such Product is safe and effective for use in humans in the indication being investigated as described in 21 C.F.R. §312.21(c), or an equivalent clinical trial in a country in the Territory other than the United States.

 

“Phase IV Clinical Trial” means, with respect to a Product, (a) any Clinical Study conducted to satisfy a requirement of a Regulatory Authority in order to maintain an Approval for such Product or (b) any Clinical Study conducted after the first Approval in the same disease state for which such Product received Approval other than for purposes of obtaining Approval.

 

 “Pre-Clinical Studies” means in vitro and in vivo studies of a Product or its animal surrogate molecule, not in humans, including those studies conducted in whole animals and other test systems, designed to determine the pharmacology, toxicity, bioavailability, metabolism and pharmacokinetics of such Product and whether such Product has a desired effect.

 

“Preliminary Royalty Report” has the meaning set forth in Section 7.14.2(a).

 

“Pricing Approval” means all applicable governmental pricing and reimbursement approvals required from the relevant Regulatory Authority to market and sell, and/or obtain reimbursement for, the Product in a particular country or jurisdiction.

 

“Prior Agreements” means the agreements listed on Appendix 8 attached hereto.

 

“Proceeding” means an action, suit or proceeding.

 

“Product” means, as applicable (i) ISIS-FXI_Rx, (ii) ISIS-FXI_Rx-2, and/or (iii) [***].

 

“Product-Specific Patents” means Patent Rights Controlled by a Party or any of its Affiliates on or after the Effective Date, including any Program Patents, claiming (i) the specific composition of matter of a Product, or (ii) methods of using a Product as a prophylactic or therapeutic; provided however, Patent Rights Controlled by Isis or any of its Affiliates that include claims that are (x) directed to subject matter applicable to ASOs in general, (y) directed to an ASO, the sequence of which targets an RNA that does not encode an Exclusive Target, or (z) directed to an RNA that is not an Exclusive Target, will not be considered Product-Specific Patents, and in the case of (x), (y) and (z), such Patent Rights will be considered Isis Core Technology Patents.

 

“Program Patents” has the meaning set forth in Section 8.1.2.

 

“Prosecution and Maintenance” or “Prosecute and Maintain” means, with regard to a Patent Right, the preparing, filing, prosecuting and maintenance of such Patent Right, as well as handling re-examinations, reissues, and requests for patent term extensions with respect to such Patent Right, together with the conduct of interferences, the defense of oppositions and other similar proceedings with respect to the particular Patent Right. For clarification, “Prosecution and Maintenance” or “Prosecute and Maintain” will not include any other enforcement actions taken with respect to a Patent Right.

 

“Receiving Party” has the meaning set forth in Section 12.1.

 

“Reconciled Royalty Report” has the meaning set forth in Section 7.14.2(b).

 

“Reduced Royalty Period” has the meaning set forth in Section 7.9.3(d).

 

“Region” has the meaning set forth in Section 7.9.2.

 

“Regional Adjustment” has the meaning set forth in Section 7.9.2.

 

“Regional Royalty Rate” has the meaning set forth in Section 7.9.2.

 

“Regulatory Authority” means any governmental authority, including the FDA, EMA or Koseisho (i.e., the Japanese Ministry of Health and Welfare, or any successor agency thereto), that has responsibility for granting any licenses or approvals or granting pricing or reimbursement approvals necessary for the marketing and sale of a Product in any country.

 

“Research” means, with respect to a product containing an ASO (including a Product), pre-clinical research, including gene function, gene expression, target validation research, and investigating inhibition of a target in therapeutic models, but specifically excludes Drug Discovery, Development and Commercialization.

 

“Reverse Royalties” has the meaning set forth in Section 7.10.1.

 

“RMC” means Isis’ Research Management Committee, or any successor committee.

 

“[***]” has the meaning set forth in [***].

 

“Royalty Quotient” has the meaning set forth in Section 7.9.3(c).

 

“Specific Performance Milestone Events” has the meaning set forth in Section 1.6.2.

 

“Strategic Plan” has the meaning set forth in Section 1.1. The initial Strategic Plan agreed to by the Parties as of the Effective Date is attached hereto as Appendix 2.

 

“Sublicensee” means a Third Party to whom a Party or its Affiliates or Sublicensees has granted a sublicense or license under any Licensed Technology or Bayer Technology, as the case may be, licensed to such Party in accordance with the terms of this Agreement.

 

“[***]” has the meaning set forth in [***].

 

“Territory” means worldwide.

 

“Third Party” means a Person other than the Parties or their respective Affiliates.

 

“Third Party Claims” has the meaning set forth in Section 10.1.

 

“Third Party Obligations” means any financial and non-financial encumbrances, obligations, restrictions, or limitations imposed by an agreement between a Party and a Third Party that relate to a Product or an Exclusive Target, including field or territory restrictions, covenants, milestone payments, diligence obligations, sublicense revenue, royalties, or other payments.

 

“Trade Dress” means any package design of Bayer such as Bayer’s wave design.

 

“Trademark” means any trademark owned and controlled by Bayer and used by Bayer in connection with the marketing of the Product.

 

“United States” or “U.S.” means the fifty states of the United States of America and all of its territories and possessions and the District of Columbia.

 

“[***]” has the meaning set forth in [***].

 

“Valid Claim” means a claim (i) of any issued, unexpired United States or foreign Patent Right, which will not, in the country of issuance, have been donated to the public, disclaimed, nor held invalid or unenforceable by a court of competent jurisdiction in an unappealed or unappealable decision, or (ii) of any United States or foreign patent application within a Patent Right, which will not, in the country in question, have been cancelled, withdrawn, abandoned nor been pending for more than seven years, not including in calculating such seven-year period of time in which such application is in interference or opposition or similar proceedings or time in which a decision of an examiner is being appealed. Notwithstanding the foregoing, on a country-by-country basis, a patent application pending for more than seven years will not be considered to have any Valid Claim for purposes of this Agreement unless and until a patent meeting the criteria set forth in clause (i) above with respect to such application issues.

 

Bayer’s Cost of Goods Soldor Bayer’s COGS shall mean:

[***]

 

If, within 10 days after first discussing the matter in good faith, the Parties cannot mutually agree on any Material Change (or whether a proposed change constitutes a Material Change) to the Strategic Plan, the Parties will, as promptly as possible (but no later than 45 days thereafter), convene a meeting of a group of subject matter experts (the “Group of Experts”) to discuss the matter.

At such meeting each Party will have the right to present its position to the Group of Experts regarding the proposed Material Change. The meeting will be held in person or telephonically as mutually agreed by the Parties and will allow for sufficient time to allow the Parties to each present their views regarding the dispute and for the Group of Experts to express their views on the proposed Material Change. The Group of Experts may comprise, at its core, any standing advisory group Bayer has in place to advise on the Strategic Plan, and each Party will have the unilateral right to choose at least one expert to attend the meeting. Each Party will bear its own costs relating to the meeting.

At the end of such meeting, after considering the Strategic Plan and the value of making the proposed Material Change, with both Parties and the Group of Experts participating in appropriate presentations and discussions, each member of the Group of Experts will provide his or her recommendation regarding the value of making the proposed Material Change.

If, following the meeting of the Group of Experts, the Parties still disagree, then within 15 days thereafter, the Executives will meet in person or telephonically at a date, time and location as mutually agreed. At such meeting, the Executives will use their good faith efforts to mutually agree on a resolution acceptable to both Parties. If, after discussing in good faith, such Executives cannot reach an amicable agreement within two Business Days following the end of such meeting, then Bayer will have the final decision making authority regarding such Material Change, provided however, that a Material Change regarding a change of the First Indication shall require the prior written approval of Isis which shall not be unreasonably withheld, conditioned, or delayed.

 

(a)	Promoting the overall health of the relationship between the Parties;

 

(b)	Developing a mutually agreed alliance launch plan covering any major activities and systems that the Parties need to implement within the first 100 days after the Effective Date to support the Strategic Plan;

 

(c)	Organizing each meeting of the Parties, including agendas, drafting minutes, and publishing final minutes;

 

(d)	Preparing status and progress reports on the above as determined necessary by the Parties;

 

(e)	Ensuring compliance in maintaining the Isis Internal ASO Safety Database as outlined in Section 6.6; and

 

(f)	Ensuring proper approval of publications prior to submission as required in Section 12.4.