Amendment No. 2 to Form S-1/A
As filed with the Securities and Exchange Commission on
September 25, 2006
Registration
No. 333-135821
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2
to
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
CADENCE PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
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Delaware |
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2834 |
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41-2142317 |
(State or other jurisdiction of
incorporation or organization) |
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(Primary Standard Industrial
Classification Code Number) |
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(I.R.S. Employer
Identification Number) |
12481 High Bluff Drive, Suite 200
San Diego, CA 92130
(858) 436-1400
(Address, including zip code, and telephone number, including
area code, of Registrants principal executive offices)
Theodore R. Schroeder
President and Chief Executive Officer
Cadence Pharmaceuticals, Inc.
12481 High Bluff Drive, Suite 200
San Diego, CA 92130
(858) 436-1400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
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Faye H. Russell, Esq.
Cheston J. Larson, Esq.
Ali D. Fawaz, Esq.
Latham & Watkins LLP
12636 High Bluff Drive, Suite 400
San Diego, CA 92130
(858) 523-5400 |
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Mark B. Weeks, Esq.
Ross L. Burningham, Esq.
Ryan A. Murr, Esq.
Heller Ehrman LLP
4350 La Jolla Village Drive, 7th Floor
San Diego, CA 92122
(858) 450-8400 |
Approximate date of commencement of proposed sale to the
public: As soon as practicable after the effective date of
this Registration Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the
following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
The information
contained in this prospectus is not complete and may be changed.
We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and we are not soliciting offers to buy these
securities in any jurisdiction where the offer or sale is not
permitted.
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Subject to Completion
Preliminary Prospectus dated
September 25, 2006
P R O S P E C T U S
Shares
Common Stock
This is our initial public offering. We are
offering shares
of common stock.
We expect the initial public offering price to be between
$ and
$ per
share. Currently, no public market exists for our common stock.
After pricing of the offering, we expect that our common stock
will be quoted on the Nasdaq Global Market under the symbol
CADX.
Investing in our common stock involves risks that are
described in the Risk Factors section beginning on
page 8 of this prospectus.
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Per Share | |
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Total | |
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Public offering price
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$ |
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$ |
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Underwriting discount
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$ |
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$ |
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Proceeds, before expenses, to us
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$ |
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The underwriters may also purchase up to an
additional shares
of common stock from us at the public offering price, less the
underwriting discount, within 30 days from the date of this
prospectus to cover overallotments.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The shares of common stock will be ready for delivery on or
about ,
2006.
Merrill Lynch & Co.
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Pacific Growth Equities, LLC |
The date of this prospectus
is ,
2006.
TABLE OF CONTENTS
You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not,
authorized anyone to provide you with information different from
or in addition to that contained in this prospectus. If anyone
provides you with different or inconsistent information, you
should not rely on it. We are offering to sell, and seeking
offers to buy, shares of our common stock only in jurisdictions
where offers and sales are permitted. The information contained
in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock. Our business,
financial condition, results of operations and prospects may
have changed since that date.
For investors outside the United States: Neither we nor any of
the underwriters have done anything that would permit this
offering or possession or distribution of this prospectus in any
jurisdiction where action for that purpose is required, other
than in the United States. You are required to inform yourselves
about and to observe any restrictions relating to this offering
and the distribution of this prospectus.
PROSPECTUS SUMMARY
This summary does not contain all of the information you
should consider before buying shares of our common stock. You
should read the entire prospectus carefully, especially the
Risk Factors section and our financial statements
and the related notes appearing at the end of this prospectus,
before deciding to invest in shares of our common stock. Unless
the context requires otherwise, references in this prospectus to
Cadence, we, us and
our refer to Cadence Pharmaceuticals, Inc.
Cadence Pharmaceuticals, Inc.
Our Company
We are a biopharmaceutical company focused on in-licensing,
developing and commercializing proprietary product candidates
principally for use in the hospital setting. Since our inception
in 2004, we have in-licensed rights to two Phase III
product candidates, both of which have been studied in prior
Phase III clinical trials conducted by our licensors. We
have in-licensed the exclusive U.S. and Canadian rights
to IV APAP, an intravenous formulation of acetaminophen
that is currently marketed in Europe for the treatment of acute
pain and fever by Bristol-Myers Squibb Company, or BMS. We
believe that IV APAP is the only stable,
pharmaceutically-acceptable intravenous formulation of
acetaminophen. We have also in-licensed the exclusive North
American and European rights to omiganan pentahydrochloride 1%
aqueous gel, or
OmigardTM,
for the prevention and treatment of device-related, surgical
wound-related and burn-related infections. We believe that the
hospital setting is a concentrated, underserved market for
pharmaceuticals and anticipate building our own,
hospital-focused sales force as our product candidates approach
potential U.S. Food and Drug Administration, or FDA,
approval. We intend to build a leading franchise in the hospital
setting, continuing to focus on products that are in late-stages
of development, currently commercialized outside the United
States, or approved in the United States but with significant
commercial potential for proprietary new uses or formulations.
The Hospital Market
Large, multinational pharmaceutical companies have generally
decreased marketing efforts focused on hospital-use drugs,
instead focusing on drugs that can be marketed in the larger
outpatient setting. We believe this reduced emphasis on the
hospital marketplace presents us with an excellent opportunity
to in-license, acquire, develop and commercialize products that
address unmet medical needs in the hospital setting. We believe
the concentrated nature of the hospital marketplace will allow
for our expansion into other therapeutic areas without
substantial investment in additional commercial infrastructure.
According to data from IMS Health Inc., or IMS, an independent
marketing research firm, approximately $28 billion was
spent on promotional activities by the pharmaceutical industry
in 2004. Of this amount, IMS estimates that only $1 billion
was directed towards hospital-based physicians and directors of
pharmacies. In contrast, U.S. hospitals and clinics
accounted for approximately $54 billion or 21% of
U.S. pharmaceutical sales in 2005, according to IMS.
Furthermore, we believe pharmaceutical sales to acute care
hospitals are highly concentrated among a relatively small
number of large institutions. For example, according to Wolters
Kluwer Health, an independent marketing research firm, only
2,000 of the approximately 5,000 acute care hospitals in the
United States represent more than 80% of injectable analgesic
sales. We believe the relative lack of promotional efforts
directed toward the highly concentrated hospital marketplace
makes it an underserved and compelling opportunity, especially
for a biopharmaceutical company commercializing its products
directly through its own dedicated sales force.
Our Product Candidates
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IV APAP for the Treatment of Acute Pain and Fever |
We are developing IV APAP in the U.S. market for the
treatment of acute pain and fever. According to IMS, over
500 million units of injectable analgesics, typically used
to treat acute pain, were sold in the United States in 2005.
Opioids represent the majority of unit volume in the market but
are
1
associated with a variety of unwanted side effects including
sedation, nausea, vomiting, constipation, cognitive impairment
and respiratory depression. Ketorolac, a non-steroidal
anti-inflammatory drug, or NSAID, is the only
non-opioid injectable
analgesic available in the United States for the treatment of
acute pain. However, ketorolac carries strong warnings from the
FDA for various side effects, including an increased risk of
bleeding a particularly troubling side-effect in the
surgical setting.
Acetaminophen was first available for sale in the United States
in 1955 when it was introduced under the brand name Tylenol.
Acetaminophen is the most widely used drug for pain relief and
the reduction of fever in the United States and is currently
available in over 600 pharmaceutical products. Historically,
poor stability in aqueous solutions and inadequate solubility of
acetaminophen prevented the development of an intravenous dosage
form. The patent protection for IV APAP extends through
various dates in 2017 to 2021. Our patent protection for IV APAP
is limited to a specific intravenous formulation of
acetaminophen and extends through various dates in 2017 to 2021.
There are currently no patents covering the acetaminophen
molecule itself in the territories licensed to us, which include
the United States and Canada.
IV APAP has previously been studied in six completed
Phase III trials by BMS principally to support a Marketing
Authorization Application in Europe for multiple indications,
including pain and fever in both adults and children. Since its
introduction in Europe in mid-2002, over 100 million doses
of IV APAP have been administered to patients, and it has
become the market share leader among injectable analgesics, with
2005 sales of more than $140 million according to IMS. In
the fourth quarter of 2006, we expect to initiate the remaining
Phase III clinical trial requirements for potential
approval in the United States. We expect these Phase III
clinical trial results to be available in the first half of 2008
and, if positive, to subsequently submit a new drug application,
or NDA, for IV APAP in the second half of 2008. However, we
cannot be certain that the FDA will not require additional
trials or that IV APAP will ever receive regulatory approval in
the United States.
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Omigard for the Prevention of Intravascular
Catheter-Related Infections |
We are currently developing Omigard for the prevention of
intravascular catheter-related infections. According to the
February 2004 Catheter: Global Markets &
Technologies report from Theta Reports, eight million
central venous catheters, or CVCs, were sold in the United
States in 2003, and unit sales are projected to grow to
11 million by 2007. Although CVCs have become an important
part of medical care, they can give rise to dangerous and costly
complications, including: local catheter site infections, or
LCSIs, which are infections at the catheter insertion site;
catheter colonization, which is the growth of microorganisms on
the portion of the catheter below the skin surface; and
catheter-related bloodstream infections, or CRBSIs, which are
infections in the bloodstream caused by microorganisms
associated with the catheter. The Centers for Disease Control
and Prevention estimates that there are 250,000 CRBSIs each year
in the United States. The attributable mortality rate of CRBSIs
is approximately 12% to 25% with an average marginal cost to the
healthcare system of $25,000 per infection. Currently,
topical antiseptics are the primary agent used to cleanse the
skin surface around the catheter insertion site prior to
insertion. However, the utility of these antiseptics is limited,
principally due to their short duration of antimicrobial
activity.
Omigard is a topical antimicrobial that has been demonstrated to
be rapidly bactericidal and fungicidal with prolonged duration
of activity against microorganisms commonly found on the skin
surface, including multi-drug resistant microorganisms such as
methicillin-resistant staphylococcus aureus, or MRSA.
Importantly, resistance to Omigard has not been induced in the
laboratory after extensive study, nor has Omigard demonstrated
potential to induce cross-resistance to other antimicrobial
therapeutics. We have in-licensed the patents and the exclusive
development and commercialization rights to Omigard in North
America and Europe for the prevention of device-related,
surgical wound-related and burn-related infections from Migenix
Inc. The patent protection for Omigard extends through various
dates in 2017 to 2022.
2
Omigard has previously been studied in a large, completed
Phase III trial that demonstrated statistically significant
outcomes for the prevention of LCSI and catheter colonization.
The presence of an LCSI may result in replacement of the
catheter and/or administration of antibiotics, both of which
create additional costs to hospitals and have the potential for
adverse safety outcomes. In addition, catheter colonization is
well correlated with CRBSIs, according to a published review of
clinical trials. However, despite the favorable, statistically
significant results for prevention of LCSI and catheter
colonization, the study did not show statistical significance
for the primary endpoint, the prevention of CRBSIs. After
in-licensing Omigard, we reached agreement with the FDA through
the special protocol assessment, or SPA, process on the trial
design, endpoints and statistical analysis plan for a single
confirmatory Phase III clinical trial with a primary
endpoint of prevention of LCSIs. The SPA process provides for
official FDA evaluation of a proposed Phase III clinical
trial protocol and generally provides a product sponsor with a
binding agreement from the FDA that the design and analysis of
the trial are adequate to support a license application
submission if the trial is performed according to the SPA. We
initiated this Phase III clinical trial in August 2005
and expect the results to be available in the second half of
2007 and, if positive, to subsequently submit an NDA for Omigard
in the first half of 2008.
Our Strategy
Our goal is to be a leading biopharmaceutical company focused on
the development and commercialization of proprietary
pharmaceuticals principally for use in the hospital setting.
Specifically, we intend to:
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Obtain regulatory approval for our Phase III hospital
product candidates. We have designed our Phase III
clinical programs in an effort to reduce clinical development
risk, facilitate regulatory approval and optimize marketing
claims. To that end, we plan to resume a
U.S. Phase III program later this year for IV
APAP previously initiated by BMS, and we expect to submit an NDA
in the second half of 2008 based on the previously completed
trials and any further trials that may be required by the FDA.
In addition, we have reached a written agreement with the FDA
through the SPA process for a single confirmatory Phase III
study of Omigard for the prevention of LCSIs. |
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Build a highly leverageable sales organization targeting
hospitals. We intend to build a commercial organization
focused on promoting our products principally to hospitals in
the United States. We believe that both IV APAP and Omigard
can be effectively promoted by our own sales force targeting key
hospitals in the United States. Importantly, we believe the
number of institutions in the hospital marketplace is relatively
limited and a small number of these institutions account for a
substantial portion of the prescribing activity. The
concentrated nature of this market creates the opportunity for
significant marketing synergies as we intend to leverage our
sales force across multiple therapeutic categories in the
hospital. Outside the United States, we intend to establish
strategic partnerships for the commercialization of our products
where we have commercialization rights. |
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Expand our product portfolio through acquiring or
in-licensing additional late-stage, hospital-focused products
with well-understood risk profiles. We will seek additional
opportunities to acquire or in-license products to more fully
exploit our clinical, regulatory, manufacturing, sales and
marketing capabilities. We believe that our focus on the
hospital market enables us to evaluate a broader range of
products across multiple therapeutic areas for possible
acquisition. We focus on products that are in late-stages of
development, currently commercialized outside the United States,
or approved in the United States but with significant commercial
potential for proprietary new uses, including new indications,
dosage forms or delivery systems. |
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Pursue additional indications and commercial opportunities
for our product candidates. We will seek to maximize the
value of IV APAP, Omigard and any other product candidates
we may in-license, acquire or develop by pursuing other
indications and commercial |
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opportunities for such candidates. For example, we have rights
to develop and commercialize Omigard for additional indications
related to the prevention and treatment of device-related,
surgical wound-related and burn-related infections. |
Risk Factors
We are a development stage company with no revenues, and our
operations to date have generated substantial and increasing
needs for cash. Our net loss was $7.5 million in 2005, and
as of June 30, 2006, we had an accumulated deficit of
$45.5 million. Our business and our ability to execute on
our business strategy are subject to a number of risks that you
should be aware of before you decide to buy our common stock. In
particular, you should consider the following risks, which are
discussed more fully in Risk Factors beginning on
page 8:
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we are largely dependent on the success of our only two product
candidates, IV APAP and Omigard, and we cannot be certain that
our planned clinical development programs will be sufficient to
support NDA submissions or that either product candidate will
receive regulatory approval or be successfully commercialized; |
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delays in the commencement, enrollment or completion of clinical
testing for either of our product candidates could result in
increased costs to us and delay or limit our ability to obtain
regulatory approval; |
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even if our product candidates are approved by regulatory
authorities, we expect intense competition in the hospital
marketplace for our targeted indications; |
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the patent rights that we have in-licensed covering IV APAP are
limited to a specific intravenous formulation of acetaminophen,
and our market opportunity for this product candidate may be
limited by the lack of patent protection for the active
ingredient itself and other formulations that may be developed
by competitors; and |
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we will require substantial additional funding and may be unable
to raise capital when needed, which would force us to delay,
reduce or eliminate our development programs and
commercialization efforts. |
Corporate Information
We were incorporated in Delaware on May 26, 2004. Our
principal executive offices are located at 12481 High Bluff
Drive, Suite 200, San Diego, California 92130, and our
telephone number is
(858) 436-1400.
Prior to November 2004, we were named Strata Pharmaceuticals,
Inc. Our website address is http://www.cadencepharm.com. The
information on, or accessible through, our website is not part
of this prospectus.
The U.S. Patent and Trademark Office has issued a Notice of
Allowance in connection with our
intent-to-use trademark
application for the mark
CADENCEtm,
covering pharmaceutical preparations for the treatment or
prevention of diseases or infections of the bodys major
organs, including the heart, lungs, liver and kidneys;
pharmaceutical preparations for the treatment or prevention of
diseases of the bodys systems, including the immune system
and the cardiovascular system; and pharmaceutical preparations
to treat or manage pain, anesthesia, surgical and medical
procedures. A Notice of Allowance is a notice issued by the U.S.
Patent and Trademark Office to an
intent-to-use
application once all steps of the application process have been
completed. Once the Notice of Allowance has been issued, the
applicant has six months to file a statement of use or an
extension, showing that it is using the mark in commerce, in
order for the U.S. Patent and Trademark Office to issue a
certificate of registration. We are developing commercial names
for our product candidates, and have applied for
U.S. trademark registration for
Omigardtm.
This prospectus also contains trademarks of others, including
Bactroban®,
Betadine®,
BioPatch®,
DepoDur®,
Dermagraft®,
Habitrol®,
Lotensin®,
Neosporin®,
Perfalgan®,
Pro-Dafalgan®,
Toradol®
and
Tylenol®.
4
THE OFFERING
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Common stock offered |
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shares |
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Common stock to be outstanding after this offering |
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shares |
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Use of proceeds |
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We expect to use the net proceeds from this offering to fund
clinical trials and other research and development activities,
and to fund working capital, capital expenditures and other
general corporate purposes. We may also use a portion of the net
proceeds to in-license, acquire or invest in complementary
businesses or products. |
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Risk factors |
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See Risk Factors and other information included in
this prospectus for a discussion of factors you should carefully
consider before deciding to invest in shares of our common stock. |
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Proposed Nasdaq Global Market symbol |
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CADX |
The number of shares of common stock to be outstanding after
this offering is based on 88,182,195 shares outstanding as
of June 30, 2006, and excludes:
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5,769,471 shares of common stock issuable upon the exercise
of options outstanding as of June 30, 2006 at a weighted
average exercise price of $0.38 per share; |
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385,000 shares of common stock issuable upon the exercise
of warrants outstanding as of June 30, 2006 at a weighted
average exercise price of $1.00 per share; and |
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shares
of common stock reserved for future issuance under our 2006
equity incentive award plan, which will become effective on the
day prior to the day on which we become subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended,
or the Exchange Act (including 1,678,789 shares of common
stock reserved for future grant or issuance under our 2004
equity incentive award plan, which shares will be added to the
shares to be reserved under our 2006 equity incentive award plan
upon the effectiveness of the 2006 equity incentive award plan). |
Except as otherwise indicated, all information in this
prospectus assumes:
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no exercise by the underwriters of their option to purchase up
to an
additional shares
of common stock to cover over-allotments; |
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the filing of our amended and restated certificate of
incorporation and amended and restated bylaws upon completion of
this offering; |
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the conversion of all outstanding shares of our preferred stock
into 79,630,455 shares of common stock upon completion of
this offering; and |
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a
one-for- reverse
stock split of our common stock to be effected before the
completion of this offering. |
5
SUMMARY FINANCIAL DATA
The following table summarizes certain of our financial data.
The summary financial data are derived from our audited
financial statements for the period from May 26, 2004
(inception) through December 31, 2004, and the year
ended December 31, 2005. Data are also derived from our
unaudited financial statements for the six-month periods ended
June 30, 2005 and 2006, and for the period from
May 26, 2004 (inception) through June 30, 2006.
The data should be read together with our financial statements
and related notes, Selected Financial Data, and
Managements Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere in
this prospectus. The pro forma as adjusted balance sheet data
gives effect to the conversion of all outstanding shares of our
preferred stock into 79,630,455 shares of our common stock
and our sale
of shares
of our common stock in this offering at the initial offering
price of
$ per
share, after deducting the estimated underwriting discounts and
commissions and estimated offering costs payable by us.
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Period from | |
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Period from | |
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May 26, 2004 | |
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May 26, 2004 | |
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(Inception) | |
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Six Months Ended | |
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(Inception) | |
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Through | |
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Year Ended | |
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June 30, | |
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Through | |
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December 31, | |
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December 31, | |
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June 30, | |
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2004 | |
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2005 | |
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2005 | |
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2006 | |
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2006 | |
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(In thousands, except per share amounts) | |
Statement of Operations Data:
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Operating expenses:
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Research and development
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$ |
2,233 |
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$ |
6,126 |
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$ |
2,402 |
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$ |
33,574 |
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$ |
41,934 |
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Marketing
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41 |
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240 |
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142 |
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317 |
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598 |
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General and administrative
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877 |
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1,412 |
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540 |
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1,488 |
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3,777 |
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Total operating expenses
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3,151 |
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7,778 |
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3,084 |
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35,379 |
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46,309 |
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Loss from operations
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(3,151 |
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(7,778 |
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(3,084 |
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(35,379 |
) |
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(46,309 |
) |
Other income (expense):
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Interest income
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9 |
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255 |
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14 |
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553 |
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818 |
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Interest expense
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(44 |
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(44 |
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Total other income
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9 |
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255 |
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14 |
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509 |
|
|
|
774 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(3,142 |
) |
|
$ |
(7,523 |
) |
|
$ |
(3,070 |
) |
|
$ |
(34,870 |
) |
|
$ |
(45,535 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share(1)
|
|
$ |
(0.86 |
) |
|
$ |
(1.63 |
) |
|
$ |
(0.68 |
) |
|
$ |
(7.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute basic and diluted net loss per share(1)
|
|
|
3,658 |
|
|
|
4,624 |
|
|
|
4,527 |
|
|
|
4,974 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic and diluted net loss per share(1)
|
|
|
|
|
|
$ |
(0.36 |
) |
|
|
|
|
|
$ |
(0.59 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute pro forma basic and diluted net loss per
share(1)
|
|
|
|
|
|
|
20,649 |
|
|
|
|
|
|
|
58,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
See Note 1 of Notes to Financial Statements for an
explanation of the method used to compute the historical and pro
forma net loss per share and the number of shares used in the
computation of the per share amounts. |
6
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2006 | |
|
|
| |
|
|
|
|
Pro Forma | |
|
|
Actual | |
|
As Adjusted(1) | |
|
|
| |
|
| |
|
|
(In thousands) | |
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
42,881 |
|
|
$ |
|
|
Working capital
|
|
|
37,476 |
|
|
|
|
|
Total assets
|
|
|
46,355 |
|
|
|
|
|
Long-term debt, less current portion
|
|
|
5,968 |
|
|
|
|
|
Deficit accumulated during the development stage
|
|
|
(45,535 |
) |
|
|
|
|
Total stockholders equity
|
|
|
34,428 |
|
|
|
|
|
|
|
(1) |
Each $1.00 increase or decrease in the assumed initial public
offering price of
$ would
increase or decrease, respectively, the amount of cash and cash
equivalents, working capital, total assets and total
stockholders equity by
$ ,
assuming the number of shares offered by us, as set forth on the
cover page of this prospectus, remains the same and after
deducting the estimated underwriting discounts and commissions
and estimated offering costs payable by us. |
7
RISK FACTORS
Investing in our common stock involves a high degree of risk.
You should carefully consider the following risk factors, as
well as the other information in this prospectus, before
deciding whether to invest in shares of our common stock. The
occurrence of any of the following risks could harm our
business, financial condition, results of operations or growth
prospects. In that case, the trading price of our common stock
could decline, and you may lose all or part of your
investment.
Risks Related to Our Business and Industry
We are largely dependent on the success of our two product
candidates, IV APAP and Omigard, and we cannot be certain that
either of these product candidates will receive regulatory
approval or be successfully commercialized.
We currently have no drug products for sale and we cannot
guarantee that we will ever have marketable drug products. The
research, testing, manufacturing, labeling, approval, selling,
marketing and distribution of drug products are subject to
extensive regulation by the U.S. Food and Drug
Administration, or FDA, and other regulatory authorities in the
United States and other countries, which regulations differ from
country to country. We are not permitted to market our product
candidates in the United States until we receive approval of a
new drug application, or NDA, from the FDA. We have not
submitted an NDA or received marketing approval for either of
our product candidates. Obtaining approval of an NDA is a
lengthy, expensive and uncertain process. We currently have only
two product candidates, and our business success currently
depends entirely on their successful development and
commercialization.
We have not developed either of our product candidates
independently. We recently in-licensed exclusive rights
to IV APAP, an intravenous formulation of acetaminophen
that is currently marketed in Europe for the treatment of acute
pain and fever by Bristol-Myers Squibb Company, or BMS. We
intend to conduct six clinical trials to provide the FDA with
data to support multiple dose efficacy for soft tissue surgery,
efficacy for fever and safety in adults and children, based on
the preliminary feedback we received from the FDA in our meeting
in August 2006. In July 2004, we in-licensed the rights to our
only other product candidate, omiganan pentahydrochloride 1%
aqueous gel, or Omigard, which is currently being evaluated in a
single Phase III clinical trial for the prevention of local
catheter site infections, or LCSIs, and will require the
successful completion of this Phase III clinical trial
before we are able to submit an NDA to the FDA for approval. Our
clinical development programs for IV APAP and Omigard may
not lead to commercial products if we fail to demonstrate that
the product candidates are safe and effective in clinical trials
and we may therefore fail to obtain necessary approvals from the
FDA and similar foreign regulatory agencies, or because we may
have inadequate financial or other resources to advance these
product candidates through the clinical trial process. Any
failure to obtain approval of IV APAP or Omigard would have
a material and adverse impact on our business.
If clinical trials of our current or future product
candidates do not produce results necessary to support
regulatory approval in the United States or elsewhere, we will
be unable to commercialize these products.
To receive regulatory approval for the commercial sale
of IV APAP, Omigard or any other product candidates that we
may in-license or acquire, we must conduct, at our own expense,
adequate and well controlled clinical trials to demonstrate
efficacy and safety in humans. Clinical testing is expensive,
takes many years and has an uncertain outcome. Clinical failure
can occur at any stage of the testing. Our clinical trials may
produce negative or inconclusive results, and we may decide, or
regulators may require us, to conduct additional clinical and/or
non-clinical testing. For example, Migenix Inc., or Migenix, the
licensor for our Omigard product candidate, together with its
former collaborator, Fujisawa Healthcare, Inc., or Fujisawa,
completed enrollment in a Phase III trial in February 2003
that demonstrated statistically significant results for the
secondary endpoints of the trial: the prevention of LCSIs and
catheter colonization, which is the growth of microorganisms on
the portion of the catheter below the skin
8
surface. However, the trial did not show statistical
significance for the primary endpoint, the prevention of
catheter-related bloodstream infections, or CRBSIs.
After the termination of the collaboration between Migenix and
Fujisawa in January 2004, we in-licensed the rights to Omigard
from Migenix in July 2004 and subsequently reached an agreement
under the special protocol assessment, or SPA, process with the
FDA concerning the protocol for our own Phase III clinical
trial for Omigard. In connection with the SPA for Omigard, the
FDA agreed that a single confirmatory Phase III trial will
be required for approval of Omigard and that the prevention of
LCSIs will be the sole primary efficacy endpoint. However, we
cannot be certain that our ongoing Phase III trial for
Omigard will demonstrate statistical significance or otherwise
demonstrate sufficient efficacy and safety to support the filing
of an NDA or ultimately lead to regulatory approval.
Furthermore, despite having completed the SPA process, the
FDAs agreement with us on the trial protocol remains
subject to future public health concerns unrecognized at the
time of the FDAs protocol assessment.
Our failure to adequately demonstrate the efficacy and safety
of IV APAP, Omigard or any other product candidates that we
may in-license or acquire would prevent receipt of regulatory
approval and, ultimately, the commercialization of that product
candidate.
Because the results of earlier clinical trials are not
necessarily predictive of future results, IV APAP, Omigard or
any other product candidate we advance into clinical trials may
not have favorable results in later clinical trials or receive
regulatory approval.
Success in clinical testing and early clinical trials does not
ensure that later clinical trials will generate adequate data to
demonstrate the efficacy and safety of the investigational drug.
A number of companies in the pharmaceutical industry, including
those with greater resources and experience, have suffered
significant setbacks in Phase III clinical trials, even
after promising results in earlier clinical trials.
In March 2006, we in-licensed the rights to IV APAP from
BMS, which is currently marketing IV APAP in Europe and
other parts of the world under the brand name Perfalgan. BMS has
completed nine clinical trials, mostly in Europe, primarily in
support of European regulatory approvals for this product
candidate. However, we do not know at this time what regulatory
weight, if any, the U.S. and Canadian regulatory agencies will
give to these clinical data in supplementing clinical data
generated by us for potential regulatory approval of IV
APAP in the United States and Canada. The FDA and foreign
regulatory agencies may reject these clinical trial results if
they determine that the clinical trials were not conducted in
accordance with requisite regulatory standards and procedures.
Furthermore, we have not audited or verified the accuracy of the
primary clinical data provided by BMS and cannot determine their
applicability to our regulatory filings. Even though BMS has
obtained marketing approval in Europe and other territories
for IV APAP, we must conduct additional adequate and well
controlled clinical trials in the United States to
demonstrate IV APAPs safety and efficacy in specific
indications to gain regulatory approval in the United States. We
may not be able to demonstrate the same safety and efficacy
for IV APAP in our planned Phase III clinical trial as
was demonstrated previously by BMS.
Our other product candidate, Omigard, is a novel antimicrobial
peptide and is not yet approved in any jurisdiction. No
antimicrobial peptide has been approved by the FDA, including
two antimicrobial peptides with mechanisms of action similar to
Omigard that were studied in Phase III clinical trials.
Although Omigard has been studied in more than
750 patients, all of the patients studied were enrolled in
trials conducted or sponsored by Migenix or Fujisawa. Since
in-licensing rights to Omigard from Migenix in July 2004, we
have initiated a Phase III clinical trial in which we are
still seeking to enroll the target patient population. We do not
expect to complete enrollment in this Phase III clinical
trial until the second half of 2007. Similar to IV APAP, we
have obtained electronic databases from the completed
Phase III trials sponsored by Migenix and Fujisawa, and are
currently analyzing these data. We have not audited or verified
the accuracy of the primary clinical data provided by our
licensor and its former collaborator and cannot determine their
applicability to our regulatory filings. Although the
Phase III clinical trial for Omigard conducted by Migenix
and Fujisawa demonstrated favorable, statistically significant
results for the prevention of LCSIs and catheter colonization,
secondary endpoints in their trial,
9
we may not observe similar results in our ongoing Phase III
clinical trial. Furthermore, the earlier Phase III clinical
trial failed to show statistical significance for the primary
endpoint of that trial, the prevention of CRBSIs. While we will
measure the prevention of CRBSIs as a secondary endpoint in our
ongoing Phase III clinical trial for Omigard, our trial is
not designed to demonstrate statistical significance for this
secondary endpoint. Although we are targeting a different
primary endpoint in our trial, the prevention of LCSIs, it is
possible that we will experience similar, unexpected results.
Failure to satisfy a primary endpoint in a Phase III
clinical trial would generally mean that a product candidate
would not receive regulatory approval without a further
successful Phase III clinical trial.
The data collected from our clinical trials may not be adequate
to support regulatory approval of IV APAP, Omigard or any
other product candidates that we may in-license or acquire.
Moreover, all clinical data reported is taken from databases
that may not have been fully reconciled against medical records
kept at the clinical sites. Despite the results reported by
others in earlier clinical trials for our product candidates, we
do not know whether any Phase III or other clinical trials
we may conduct will demonstrate adequate efficacy and safety to
result in regulatory approval to market our product candidates.
Delays in the commencement or completion of clinical testing
could result in increased costs to us and delay or limit our
ability to obtain regulatory approval for our product
candidates.
Delays in the commencement or completion of clinical testing
could significantly affect our product development costs. We do
not know whether planned clinical trials for IV APAP will
begin on time or be completed on schedule, if at all. Similarly,
we may not complete enrollment for our ongoing Phase III
clinical trial for Omigard on schedule, or at all. The
commencement and completion of clinical trials requires us to
identify and maintain a sufficient number of trial sites, many
of which may already be engaged in other clinical trial programs
for the same indication as our product candidates or may not be
eligible to participate in or may be required to withdraw from a
clinical trial as a result of changing standards of care. The
commencement and completion of clinical trials can be delayed
for a variety of other reasons, including delays related to:
|
|
|
|
|
reaching agreements on acceptable terms with prospective
clinical research organizations, or CROs, and trial sites, the
terms of which can be subject to extensive negotiation and may
vary significantly among different CROs and trial sites; |
|
|
|
obtaining regulatory approval to commence a clinical trial; |
|
|
|
obtaining institutional review board approval to conduct a
clinical trial at a prospective site; |
|
|
|
recruiting and enrolling patients to participate in clinical
trials for a variety of reasons, including competition from
other clinical trial programs for the same indication as our
product candidates; and |
|
|
|
retaining patients who have initiated a clinical trial but may
be prone to withdraw due to the treatment protocol, lack of
efficacy, personal issues, side effects from the therapy or who
are lost to further follow-up. |
In addition, a clinical trial may be suspended or terminated by
us, the FDA or other regulatory authorities due to a number of
factors, including:
|
|
|
|
|
failure to conduct the clinical trial in accordance with
regulatory requirements or our clinical protocols; |
|
|
|
inspection of the clinical trial operations or trial sites by
the FDA or other regulatory authorities resulting in the
imposition of a clinical hold; |
|
|
|
unforeseen safety issues or any determination that a trial
presents unacceptable health risks; or |
10
|
|
|
|
|
lack of adequate funding to continue the clinical trial,
including the incurrence of unforeseen costs due to enrollment
delays, requirements to conduct additional trials and studies
and increased expenses associated with the services of our CROs
and other third parties. |
Additionally, changes in regulatory requirements and guidance
may occur and we may need to amend clinical trial protocols to
reflect these changes. Amendments may require us to resubmit our
clinical trial protocols to institutional review boards for
reexamination, which may impact the costs, timing or successful
completion of a clinical trial. If we experience delays in the
completion of, or if we terminate, our clinical trials, the
commercial prospects for our product candidates will be harmed,
and our ability to generate product revenues will be delayed. In
addition, many of the factors that cause, or lead to, a delay in
the commencement or completion of clinical trials may also
ultimately lead to the denial of regulatory approval of a
product candidate. Even if we are able to ultimately
commercialize our product candidates, other therapies for the
same indications may have been introduced to the market and
established a competitive advantage.
We expect intense competition in the territories in which we
have rights to our product candidates, and new products may
emerge that provide different or better therapeutic alternatives
for our targeted indications.
The biotechnology and pharmaceutical industries are subject to
rapid and intense technological change. We face, and will
continue to face, competition in the development and marketing
of our product candidates from academic institutions, government
agencies, research institutions and biotechnology and
pharmaceutical companies. There can be no assurance that
developments by others will not render our product candidates
obsolete or noncompetitive. Furthermore, new developments,
including the development of other drug technologies and methods
of preventing the incidence of disease, occur in the
pharmaceutical industry at a rapid pace. These developments may
render our product candidates obsolete or noncompetitive.
We intend to develop IV APAP for the treatment of acute
pain in the hospital setting, which will compete with well
established injectable drugs for this and similar indications,
including opioids such as morphine, fentanyl, meperidine and
hydromorphone, each of which is available generically from
several manufacturers, as well as an extended release injectable
formulation of morphine, DepoDur, currently marketed by an
affiliate of Endo Pharmaceuticals Holdings Inc. Ketorolac, an
injectable non-steroidal anti-inflammatory drug, or NSAID, is
also available generically from several manufacturers and used
to treat acute pain. During the time that it will take us to
obtain regulatory approval for IV APAP, if at all, we
anticipate that several additional products may be developed for
the treatment of acute pain, including other injectable NSAIDs,
novel opioids, new formulations of currently available opioids,
long-acting local anesthetics and new chemical entities as well
as alternative delivery forms of various opioids and NSAIDs.
We are also developing our Omigard product candidate for the
prevention of intravascular catheter-related infections in the
hospital setting. If approved, Omigard will compete with well
established topical products that are currently used in practice
to prevent these infections as well as BioPatch, a device
marketed by Johnson & Johnson, which has been approved
for wound dressing and prevention of catheter-related
infections. Other competitive products may be under development.
In addition, competitors may seek to develop alternative
formulations of our product candidates that address our targeted
indications that do not directly infringe on our in-licensed
patent rights. For example, we are aware of several U.S. and
Canadian patents and patent applications covering various
potential injectable formulations of acetaminophen, including
intravenous formulations, as well as methods of making and using
these potential formulations. Furthermore, analogs of Omigard
have been developed by others that are not covered by patents
licensed to or owned by us. The commercial opportunity for our
product candidates could be significantly harmed if competitors
are able to develop alternative
11
formulations outside the scope of our in-licensed patents.
Compared to us, many of our potential competitors have
substantially greater:
|
|
|
|
|
capital resources; |
|
|
|
development resources, including personnel and technology; |
|
|
|
clinical trial experience; |
|
|
|
regulatory experience; |
|
|
|
expertise in prosecution of intellectual property rights; and |
|
|
|
manufacturing, distribution and sales and marketing experience. |
As a result of these factors, our competitors may obtain
regulatory approval of their products more rapidly than we are
able to or may obtain patent protection or other intellectual
property rights that limit our ability to develop or
commercialize our product candidates. Our competitors may also
develop drugs that are more effective, useful and less costly
than ours and may also be more successful than us in
manufacturing and marketing their products. We also expect to
face similar competition in our efforts to identify appropriate
collaborators or partners to help develop or commercialize our
product candidates in markets outside the United States.
If any of our product candidates for which we receive
regulatory approval do not achieve broad market acceptance, the
revenues that we generate from their sales will be limited.
The commercial success of our product candidates for which we
obtain marketing approval from the FDA or other regulatory
authorities will depend upon the acceptance of these products by
the medical community and coverage and reimbursement of them by
third-party payors, including government payors. The degree of
market acceptance of any of our approved products will depend on
a number of factors, including:
|
|
|
|
|
limitations or warnings contained in a products
FDA-approved labeling, including potential limitations or
warnings for IV APAP that may be more restrictive than oral
formulations of acetaminophen; |
|
|
|
|
changes in the standard of care for the targeted indications for
either of our product candidates could reduce the marketing
impact of any superiority claims that we could make following
FDA approval; |
|
|
|
|
|
limitations inherent in the approved indication for either of
our product candidates compared to more commonly-understood or
addressed conditions, including, in the case of Omigard, the
ability to promote Omigard to hospitals and physicians who may
be more focused on an indication specifically for the prevention
of CRBSIs compared to the prevention of LCSIs, the primary
endpoint in our ongoing Phase III clinical trial; and |
|
|
|
|
|
potential advantages over, and availability of, alternative
treatments, including, in the case of IV APAP, a number of
products already used to treat acute pain in the hospital
setting, and in the case of Omigard, a number of competitive
topical products as well as a device that has been approved for
wound dressing and prevention of catheter-related infections. |
|
Our ability to effectively promote and sell our product
candidates in the hospital marketplace will also depend on
pricing and cost effectiveness, including our ability to produce
a product at a competitive price and our ability to obtain
sufficient third-party coverage or reimbursement. Since many
hospitals are members of group purchasing organizations, which
leverage the purchasing power of a group of entities to obtain
discounts based on the collective buying power of the group, our
ability to attract customers in the hospital marketplace will
also depend on our ability to effectively promote our product
candidates to group purchasing organizations. We will also need
to demonstrate acceptable evidence of safety and efficacy as
well as relative convenience and ease of administration. Market
acceptance could be further limited
12
depending on the prevalence and severity of any expected or
unexpected adverse side effects associated with our product
candidates. If our product candidates are approved but do not
achieve an adequate level of acceptance by physicians, health
care payors and patients, we may not generate sufficient revenue
from these products, and we may not become or remain profitable.
In addition, our efforts to educate the medical community and
third-party payors on the benefits of our product candidates may
require significant resources and may never be successful.
The decreasing use of the comparator product in our clinical
trial for Omigard may limit our ability to complete the trial in
a timely manner and hinder the competitive profile of this
product candidate.
The SPA that we agreed to with the FDA for our ongoing
Phase III clinical trial for Omigard requires that Omigard
be compared to 10% povidone-iodine, a topical antiseptic used to
sterilize catheter insertion sites. Although the SPA generally
provides us with a binding agreement from the FDA that, assuming
positive results, the design and analysis of our ongoing Omigard
trial are adequate to support an NDA filing, all SPAs are
subject to future public health concerns unrecognized at the
time of protocol assessment.
After we established the SPA and commenced our clinical trial,
many hospitals, particularly in the United States, began
increasing use of another topical antiseptic, chlorhexidine, as
the standard of care to sterilize catheter insertion sites.
Although we believe 10% povidone-iodine continues to be used by
a sufficient number of hospitals to support continued enrollment
of patients in our Phase III clinical trial for Omigard,
this changing standard of care limits the number of potential
clinical trial sites available to us. Accordingly, it may be
difficult for us to maintain the clinical trial sites that we
have already retained for the Omigard trial if any of these
institutions elects to replace our comparator product with
chlorhexidine, and it may take us longer than anticipated to
identify and reach terms with additional hospitals to serve as
clinical trial sites for the trial. Delays in the completion of
enrollment or clinical testing for our ongoing Phase III
clinical trial for Omigard and any other studies we may conduct
to compare Omigard to chlorhexidine or another topical
antiseptic could significantly affect our product development
costs, our prospects for regulatory approval and our ability to
compete. Furthermore, the decreasing use of 10% povidone-iodine
in favor of chlorhexidine could reduce the marketing impact of
any superiority claims that we could make following FDA
approval. For example, hospitals and physicians may be reluctant
to adopt the use of Omigard as a single agent for the prevention
of local catheter site infections. Even if Omigard is approved
by the FDA, if this product candidate does not achieve an
adequate level of acceptance by physicians, health care payors
and patients, we may be unable to generate sufficient revenues
to recover our development costs or otherwise sustain and grow
our business.
Even if our product candidates receive regulatory approval,
they may still face future development and regulatory
difficulties.
Even if U.S. regulatory approval is obtained, the FDA may
still impose significant restrictions on a products
indicated uses or marketing or impose ongoing requirements for
potentially costly post-approval studies. Any of these
restrictions or requirements could adversely affect our
potential product revenues. For example, the label ultimately
approved for IV APAP, Omigard or any other product
candidates that we may in-license or acquire, if any, may
include a restriction on the term of its use, or it may not
include one or more of our intended indications.
Our product candidates will also be subject to ongoing FDA
requirements for the labeling, packaging, storage, advertising,
promotion, record-keeping and submission of safety and other
post-market information on the drug. In addition, approved
products, manufacturers and manufacturers facilities are
subject to continual review and periodic inspections. If a
regulatory agency discovers previously unknown problems with a
product, such as adverse events of unanticipated severity or
frequency, or problems with the facility where the product is
manufactured, a regulatory agency may impose restrictions on
that product or us, including requiring withdrawal of the
product from the market. If our product candidates
13
fail to comply with applicable regulatory requirements, such as
current Good Manufacturing Practices, or cGMPs, a regulatory
agency may:
|
|
|
|
|
issue warning letters or untitled letters; |
|
|
|
require us to enter into a consent decree, which can include
imposition of various fines, reimbursements for inspection
costs, required due dates for specific actions and penalties for
noncompliance; |
|
|
|
impose other civil or criminal penalties; |
|
|
|
suspend regulatory approval; |
|
|
|
suspend any ongoing clinical trials; |
|
|
|
refuse to approve pending applications or supplements to
approved applications filed by us; |
|
|
|
impose restrictions on operations, including costly new
manufacturing requirements; or |
|
|
|
seize or detain products or require a product recall. |
Even if our product candidates receive regulatory approval in
the United States, we may never receive approval or
commercialize our products outside of the United States.
Our rights to IV APAP are limited to the United States and
Canada, and our rights to Omigard are limited to North America
and Europe. In order to market any products outside of the
United States, we must establish and comply with numerous and
varying regulatory requirements of other countries regarding
safety and efficacy. Approval procedures vary among countries
and can involve additional product testing and additional
administrative review periods. The time required to obtain
approval in other countries might differ from that required to
obtain FDA approval. The regulatory approval process in other
countries may include all of the risks detailed above regarding
FDA approval in the United States as well as other risks.
Regulatory approval in one country does not ensure regulatory
approval in another, but a failure or delay in obtaining
regulatory approval in one country may have a negative effect on
the regulatory process in others. Failure to obtain regulatory
approval in other countries or any delay or setback in obtaining
such approval could have the same adverse effects detailed above
regarding FDA approval in the United States. As described above,
such effects include the risks that our product candidates may
not be approved for all indications requested, which could limit
the uses of our product candidates and have an adverse effect on
product sales and potential royalties, and that such approval
may be subject to limitations on the indicated uses for which
the product may be marketed or require costly, post-marketing
follow-up studies.
We have never marketed a drug before, and if we are unable to
establish an effective sales and marketing infrastructure, we
will not be able to successfully commercialize our product
candidates.
In the United States, we plan to build our own sales force to
market our products directly to physicians, nurses, hospitals,
group purchasing organizations and third-party payors. We
currently do not have significant internal sales, distribution
and marketing capabilities. In order to commercialize any of our
product candidates, we must either acquire or internally develop
sales and marketing capabilities, or enter into collaborations
with partners to perform these services for us. The acquisition
or development of a hospital-focused sales and marketing
infrastructure for our domestic operations will require
substantial resources, will be expensive and time consuming and
could negatively impact our commercialization efforts, including
delay any product launch. Moreover, we may not be able to hire a
sales force that is sufficient in size or has adequate
expertise. If we are unable to establish our sales and marketing
capability or any other capabilities necessary to commercialize
any products we may develop, we will need to contract with third
parties to market and sell our products. If we are unable to
establish adequate sales and marketing capabilities, whether
independently or with third parties, we may not be able to
generate any product revenue, may generate increased expenses
and may never become profitable.
14
Our product candidates may have undesirable side effects that
could delay or prevent their regulatory approval or
commercialization.
Undesirable side effects caused by our product candidates could
interrupt, delay or halt clinical trials and could result in the
denial of regulatory approval by the FDA or other regulatory
authorities for any or all targeted indications, and in turn
prevent us from commercializing our product candidates and
generating revenues from their sale. For example, the adverse
events related to IV APAP observed in clinical trials completed
to date include transient liver enzyme evaluations, nausea or
vomiting and pain or local skin reactions at the injection site.
When used outside the current guidelines for administration,
acetaminophen has the potential to cause liver toxicity. While
administration of acetaminophen in intravenous form is not
expected to result in an increased risk of toxicity to the liver
compared with an equivalent dose of acetaminophen administered
orally, we cannot be certain that increased liver toxicity or
other drug-related side effects will not be observed in future
clinical trials or that the FDA will not require additional
trials or impose more severe labeling restrictions due to liver
toxicity or other concerns. Drug-related adverse events observed
in clinical trials completed to date for Omigard have been
limited to local skin reactions, including redness, swelling,
bleeding, itching, bruising and pain. In addition, while these
drug-related adverse events have all been related to the skin,
including the catheter insertion site, we cannot be certain that
other drug-related side effects will not be reported in clinical
trials or thereafter.
If either of our product candidates receives marketing approval
and we or others later identify undesirable side effects caused
by the product:
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regulatory authorities may require the addition of labeling
statements, specific warnings or a contraindication; |
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regulatory authorities may withdraw their approval of the
product; |
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we may be required to change the way the product is
administered, conduct additional clinical trials or change the
labeling of the product; and |
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our reputation may suffer. |
Any of these events could prevent us from achieving or
maintaining market acceptance of the affected product or could
substantially increase our commercialization costs and expenses,
which in turn could delay or prevent us from generating
significant revenues from its sale.
If the government or third-party payors fail to provide
coverage and adequate coverage and payment rates for our future
products, if any, or if hospitals choose to use therapies that
are less expensive, our revenue and prospects for profitability
will be limited.
In both domestic and foreign markets, our sales of any future
products will depend in part upon the availability of coverage
and reimbursement from third-party payors. Such third-party
payors include government health programs such as Medicare,
managed care providers, private health insurers and other
organizations. In particular, many U.S. hospitals receive a
fixed reimbursement amount per procedure for certain surgeries
and other treatment therapies they perform. Because this amount
may not be based on the actual expenses the hospital incurs,
hospitals may choose to use therapies which are less expensive
when compared to our product candidates. Accordingly, IV APAP,
Omigard or any other product candidates that we may in-license
or acquire, if approved, will face competition from other
therapies and drugs for these limited hospital financial
resources. We may need to conduct post-marketing studies in
order to demonstrate the cost-effectiveness of any future
products to the satisfaction of hospitals, other target
customers and their third-party payors. Such studies might
require us to commit a significant amount of management time and
financial and other resources. Our future products might not
ultimately be considered cost-effective. Adequate third-party
coverage and reimbursement might not be available to enable us
to maintain price levels sufficient to realize an appropriate
return on investment in product development.
15
Governments continue to propose and pass legislation designed to
reduce the cost of healthcare. In the United States, we expect
that there will continue to be federal and state proposals to
implement similar governmental controls. For example, in
December 2003, Congress enacted a limited prescription drug
benefit for Medicare beneficiaries in the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003. Under this
program, drug prices for certain prescription drugs are
negotiated by drug plans, with the goal to lower costs for
Medicare beneficiaries. In some foreign markets, the government
controls the pricing of prescription pharmaceuticals. In these
countries, pricing negotiated with governmental authorities can
take six to 12 months or longer after the receipt of
regulatory marketing approval for a product. Cost control
initiatives could decrease the price that we would receive for
any products in the future, which would limit our revenue and
profitability. Accordingly, legislation and regulations
affecting the pricing of pharmaceuticals might change before our
product candidates are approved for marketing. Adoption of such
legislation could further limit reimbursement for
pharmaceuticals.
If we breach any of the agreements under which we license
rights to our product candidates from others, we could lose the
ability to continue the development and commercialization of our
product candidates.
In March 2006, we entered into an exclusive license agreement
with BMS relating to our IV APAP product candidate for the
United States and Canada, and in July 2004, we entered into an
exclusive license agreement with Migenix relating to our Omigard
product candidate for North America and Europe. Because we have
in-licensed the rights to our two product candidates from third
parties, if there is any dispute between us and our licensors
regarding our rights under these license agreements, our ability
to develop and commercialize these product candidates may be
adversely affected. Any uncured, material breach under these
license agreements could result in our loss of exclusive rights
to the related product candidate and may lead to a complete
termination of our product development efforts for the related
product candidate.
If BMS breaches the underlying agreement under which we
sublicense the rights to our IV APAP product candidate, we could
lose the ability to develop and commercialize IV APAP.
Our license for IV APAP is subject to the terms and conditions
of a license from SCR Pharmatop to BMS, under which BMS
originally licensed the intellectual property rights covering
IV APAP. If BMS materially breaches the terms or conditions
of this underlying license from SCR Pharmatop, and neither BMS
nor we adequately cure that breach, or BMS and SCR Pharmatop
otherwise become involved in a dispute, the breach by BMS or
disputes with SCR Pharmatop could result in a loss of, or other
material adverse impact on, our rights under our license
agreement with BMS. While we would expect to exercise all rights
and remedies available to us, including seeking to cure any
breach by BMS, and otherwise seek to preserve our rights under
the patents licensed by SCR Pharmatop, we may not be able to do
so in a timely manner, at an acceptable cost or at all. Any
uncured, material breach under the license from SCR Pharmatop to
BMS could result indirectly in our loss of exclusive rights to
our IV APAP product candidate and may lead to a complete
termination of our product development and any commercialization
efforts for IV APAP.
We rely on third parties to conduct our clinical trials,
including our planned Phase III clinical program
for IV APAP and our ongoing Phase III clinical trial
for Omigard. If these third parties do not successfully carry
out their contractual duties or meet expected deadlines, we may
not be able to obtain regulatory approval for or commercialize
our product candidates on our anticipated timeline or at all.
We intend to rely primarily on third-party CROs to oversee our
clinical trials for our IV APAP and Omigard product
candidates, and we depend on independent clinical investigators,
medical institutions and contract laboratories to conduct our
clinical trials. Although we rely on CROs to conduct our
clinical trials, we are responsible for ensuring that each of
our clinical trials is conducted in accordance with its
investigational plan and protocol. Moreover, the FDA requires us
to comply with regulations and standards, commonly referred to
as good clinical practices, or GCPs, for conducting, monitoring,
recording
16
and reporting the results of clinical trials to ensure that the
data and results are scientifically credible and accurate and
that the trial subjects are adequately informed of the potential
risks of participating in clinical trials. Our reliance on CROs
does not relieve us of these responsibilities and requirements.
CROs and investigators are not our employees, and we cannot
control the amount or timing of resources that they devote to
our programs. If our CROs or independent investigators fail to
devote sufficient time and resources to our drug development
programs, or if their performance is substandard, it will delay
the approval of our FDA applications and our introductions of
new products. The CROs with which we contract for execution of
our clinical trials play a significant role in the conduct of
the trials and the subsequent collection and analysis of data.
Failure of the CROs to meet their obligations could adversely
affect clinical development of our product candidates. Moreover,
these independent investigators and CROs may also have
relationships with other commercial entities, some of which may
have competitive products under development or currently
marketed. If independent investigators and CROs assist our
competitors, it could harm our competitive position. If any of
these third parties do not successfully carry out their
contractual duties or obligations or meet expected deadlines, or
if the quality or accuracy of the clinical data is compromised
for any reason, our clinical trials may be extended, delayed or
terminated, and we may not be able to obtain regulatory approval
for IV APAP, Omigard or future product candidates.
If the manufacturers upon whom we rely fail to produce our
product candidates in the volumes that we require on a timely
basis, or to comply with stringent regulations applicable to
pharmaceutical drug manufacturers, we may face delays in the
development and commercialization of, or be unable to meet
demand for, our products and may lose potential revenues.
We do not manufacture any of our product candidates, and we do
not currently plan to develop any capacity to do so. We do not
yet have agreements established regarding commercial supply of
either of our product candidates and may not be able to
establish or maintain commercial manufacturing arrangements on
commercially reasonable terms for IV APAP, Omigard or any
other product candidates that we may in-license or acquire. Any
problems or delays we experience in preparing for
commercial-scale manufacturing of a product candidate may result
in a delay in FDA approval of the product candidate or may
impair our ability to manufacture commercial quantities, which
would adversely affect our business. For example, our
manufacturers will need to produce specific batches of our
product candidates to demonstrate acceptable stability under
various conditions and for commercially viable lengths of time.
We and our contract manufacturers will need to demonstrate to
the FDA and other regulatory authorities this acceptable
stability data for our product candidates, as well as validate
methods and manufacturing processes, in order to receive
regulatory approval to commercialize IV APAP, Omigard or
any other product candidate. Furthermore, if our commercial
manufacturers fail to deliver the required commercial quantities
of bulk drug substance or finished product on a timely basis and
at commercially reasonable prices, we would likely be unable to
meet demand for our products and we would lose potential
revenues.
We currently have what we believe are adequate clinical supplies
of our Omigard product candidate. We entered into a clinical
supply agreement with Lawrence Laboratories, an affiliate of
BMS, under which Lawrence Laboratories has manufactured a single
batch of clinical supplies of IV APAP and a single batch of
placebo. With these batches, we believe we will have adequate
clinical supplies of our IV APAP product candidate and placebo.
The term of the clinical supply agreement generally extends
until the earlier of the receipt by us of regulatory approval
for IV APAP or December 31, 2008. In addition, the clinical
supply agreement could terminate upon mutual written consent of
the parties, the termination of the IV APAP agreement or our
dissolution. The clinical supply agreement may also be
terminated by either party upon written notice to the other
party of an uncured, material breach. We are currently
negotiating with suppliers for the potential commercial supply
of the finished drug product for IV APAP. We do not have
any long-term commitments from our suppliers of clinical trial
material or guaranteed prices for our product candidates or
placebos. The manufacture of pharmaceutical products requires
significant expertise and capital investment, including the
development of advanced manufacturing techniques and process
controls. Manufacturers of pharmaceutical products often
encounter difficulties in production, particularly in scaling up
initial production. These problems include difficulties with
production
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costs and yields, quality control, including stability of the
product candidate and quality assurance testing, shortages of
qualified personnel, as well as compliance with strictly
enforced federal, state and foreign regulations. Our
manufacturers may not perform as agreed. If our manufacturers
were to encounter any of these difficulties, our ability to
provide product candidates to patients in our clinical trials
would be jeopardized.
In addition, all manufacturers of our product candidates must
comply with cGMP requirements enforced by the FDA through its
facilities inspection program. These requirements include
quality control, quality assurance and the maintenance of
records and documentation. Manufacturers of our product
candidates may be unable to comply with these cGMP requirements
and with other FDA, state and foreign regulatory requirements.
We have little control over our manufacturers compliance
with these regulations and standards. A failure to comply with
these requirements may result in fines and civil penalties,
suspension of production, suspension or delay in product
approval, product seizure or recall, or withdrawal of product
approval. If the safety of any quantities supplied is
compromised due to our manufacturers failure to adhere to
applicable laws or for other reasons, we may not be able to
obtain regulatory approval for or successfully commercialize our
product candidates.
Our future growth depends on our ability to identify and
acquire or in-license products and if we do not successfully
identify and acquire or in-license related product candidates or
integrate them into our operations, we may have limited growth
opportunities.
We in-licensed the rights to each of our two current product
candidates, IV APAP and Omigard, from third parties who
conducted the initial development of each product candidate. An
important part of our business strategy is to continue to
develop a pipeline of product candidates by acquiring or
in-licensing products, businesses or technologies that we
believe are a strategic fit with our focus on the hospital
marketplace. Future in-licenses or acquisitions, however, may
entail numerous operational and financial risks, including:
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exposure to unknown liabilities; |
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disruption of our business and diversion of our
managements time and attention to develop acquired
products or technologies; |
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incurrence of substantial debt or dilutive issuances of
securities to pay for acquisitions; |
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higher than expected acquisition and integration costs; |
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increased amortization expenses; |
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difficulty and cost in combining the operations and personnel of
any acquired businesses with our operations and personnel; |
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impairment of relationships with key suppliers or customers of
any acquired businesses due to changes in management and
ownership; and |
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inability to retain key employees of any acquired businesses. |
We have limited resources to identify and execute the
acquisition or in-licensing of third-party products, businesses
and technologies and integrate them into our current
infrastructure. In particular, we may compete with larger
pharmaceutical companies and other competitors in our efforts to
establish new collaborations and in-licensing opportunities.
These competitors likely will have access to greater financial
resources than us and may have greater expertise in identifying
and evaluating new opportunities. Moreover, we may devote
resources to potential acquisitions or in-licensing
opportunities that are never completed, or we may fail to
realize the anticipated benefits of such efforts.
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We will need to increase the size of our organization, and we
may experience difficulties in managing growth.
As of June 30, 2006, we had 24 full-time employees. We
will need to continue to expand our managerial, operational,
financial and other resources in order to manage and fund our
operations and clinical trials, continue our development
activities and commercialize our product candidates. To support
this growth, we expect to hire approximately 20 additional
employees within the next 12 months at an estimated cost of
$2.5 million. We are not in a position to provide a
meaningful estimate of our staffing needs beyond the next
12 months. Our management, personnel, systems and
facilities currently in place may not be adequate to support
this future growth. Furthermore, our staffing estimates are
based on assumptions that may prove to be wrong. Our need to
effectively manage our operations, growth and various projects
requires that we:
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manage our clinical trials effectively, including our planned
Phase III clinical program for IV APAP, which will be
conducted at numerous clinical trial sites, and our ongoing
Phase III clinical trial for Omigard, which is being
conducted at numerous clinical sites; |
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manage our internal development efforts effectively while
carrying out our contractual obligations to licensors and other
third parties; and |
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continue to improve our operational, financial and management
controls, reporting systems and procedures. |
We may be unable to successfully implement these tasks on a
larger scale and, accordingly, may not achieve our development
and commercialization goals.
We may not be able to manage our business effectively if we
are unable to attract and retain key personnel.
We may not be able to attract or retain qualified management and
scientific and clinical personnel in the future due to the
intense competition for qualified personnel among biotechnology,
pharmaceutical and other businesses, particularly in the
San Diego, California area. If we are not able to attract
and retain necessary personnel to accomplish our business
objectives, we may experience constraints that will
significantly impede the achievement of our development
objectives, our ability to raise additional capital and our
ability to implement our business strategy.
Our industry has experienced a high rate of turnover of
management personnel in recent years. We are highly dependent on
the product acquisition, development, regulatory and
commercialization expertise of our senior management,
particularly Theodore R. Schroeder, our President and Chief
Executive Officer, James B. Breitmeyer, M.D., Ph.D., our
Executive Vice President, Development and Chief Medical Officer,
and William R. LaRue, our Senior Vice President, Chief Financial
Officer, Treasurer and Secretary. If we lose one or more of
these key employees, our ability to implement our business
strategy successfully could be seriously harmed. Replacing key
employees may be difficult and may take an extended period of
time because of the limited number of individuals in our
industry with the breadth of skills and experience required to
develop, gain regulatory approval of and commercialize products
successfully. Competition to hire from this limited pool is
intense, and we may be unable to hire, train, retain or motivate
these additional key personnel. Although we have employment
agreements with Mr. Schroeder, Dr. Breitmeyer and
Mr. LaRue, these agreements are terminable at will at any
time with or without notice and, therefore, we may not be able
to retain their services as expected.
In addition, we have scientific and clinical advisors who assist
us in our product development and clinical strategies. These
advisors are not our employees and may have commitments to, or
consulting or advisory contracts with, other entities that may
limit their availability to us, or may have arrangements with
other companies to assist in the development of products that
may compete with ours.
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We face potential product liability exposure, and if
successful claims are brought against us, we may incur
substantial liability for a product candidate and may have to
limit its commercialization.
The use of our product candidates in clinical trials and the
sale of any products for which we obtain marketing approval
expose us to the risk of product liability claims. Product
liability claims might be brought against us by consumers,
health care providers or others using, administering or selling
our products. If we cannot successfully defend ourselves against
these claims, we will incur substantial liabilities. Regardless
of merit or eventual outcome, liability claims may result in:
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withdrawal of clinical trial participants; |
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termination of clinical trial sites or entire trial programs; |
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decreased demand for our product candidates; |
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impairment of our business reputation; |
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costs of related litigation; |
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substantial monetary awards to patients or other claimants; |
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loss of revenues; and |
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the inability to commercialize our product candidates. |
We have obtained limited product liability insurance coverage
for our clinical trials with a $10 million annual aggregate
coverage limit and additional amounts in selected foreign
countries where we are conducting clinical trials. However, our
insurance coverage may not reimburse us or may not be sufficient
to reimburse us for any expenses or losses we may suffer.
Moreover, insurance coverage is becoming increasingly expensive,
and, in the future, we may not be able to maintain insurance
coverage at a reasonable cost or in sufficient amounts to
protect us against losses due to liability. We intend to expand
our insurance coverage to include the sale of commercial
products if we obtain marketing approval for our product
candidates in development, but we may be unable to obtain
commercially reasonable product liability insurance for any
products approved for marketing. On occasion, large judgments
have been awarded in class action lawsuits based on drugs that
had unanticipated side effects. A successful product liability
claim or series of claims brought against us could cause our
stock price to fall and, if judgments exceed our insurance
coverage, could decrease our cash and adversely affect our
business.
Recent proposed legislation may permit re-importation of
drugs from foreign countries into the United States, including
foreign countries where the drugs are sold at lower prices than
in the United States, which could materially adversely affect
our operating results and our overall financial condition.
Legislation has been introduced in Congress that, if enacted,
would permit more widespread re-importation of drugs from
foreign countries into the United States, which may include
re-importation from foreign countries where the drugs are sold
at lower prices than in the United States. Such legislation, or
similar regulatory changes, could decrease the price we receive
for any approved products which, in turn, could materially
adversely affect our operating results and our overall financial
condition. For example, BMS markets IV APAP in Europe and other
countries principally under the brand name Perfalgan. Although
Perfalgan is not labeled for sale in the United States and we
have an exclusive license from BMS and its licensor to develop
and sell our product candidate in the United States, it is
possible that hospitals and other users may in the future seek
to import Perfalgan rather than purchase IV APAP in the
United States for
cost-savings or other
reasons. We would not receive any revenues from the importation
and sale of Perfalgan into the United States.
Our business involves the use of hazardous materials and we
and our third-party manufacturers must comply with environmental
laws and regulations, which can be expensive and restrict how we
do business.
Our third-party manufacturers activities and, to a lesser
extent, our own activities involve the controlled storage, use
and disposal of hazardous materials, including the components of
our product
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candidates and other hazardous compounds. We and our
manufacturers are subject to federal, state and local laws and
regulations governing the use, manufacture, storage, handling
and disposal of these hazardous materials. Although we believe
that the safety procedures for handling and disposing of these
materials comply with the standards prescribed by these laws and
regulations, we cannot eliminate the risk of accidental
contamination or injury from these materials. In the event of an
accident, state or federal authorities may curtail our use of
these materials and interrupt our business operations.
Our business and operations would suffer in the event of
system failures.
Despite the implementation of security measures, our internal
computer systems are vulnerable to damage from computer viruses,
unauthorized access, natural disasters, terrorism, war and
telecommunication and electrical failures. Any system failure,
accident or security breach that causes interruptions in our
operations could result in a material disruption of our drug
development programs. For example, the loss of clinical trial
data from completed or ongoing clinical trials for IV APAP
or Omigard could result in delays in our regulatory approval
efforts and significantly increase our costs to recover or
reproduce the data. To the extent that any disruption or
security breach results in a loss or damage to our data or
applications, or inappropriate disclosure of confidential or
proprietary information, we may incur liability and the further
development of our product candidates may be delayed.
Risks Related to Intellectual Property
The patent rights that we have in-licensed covering IV
APAP are limited to a specific intravenous formulation of
acetaminophen, and our market opportunity for this product
candidate may be limited by the lack of patent protection for
the active ingredient itself and other formulations that may be
developed by competitors.
The active ingredient in IV APAP is acetaminophen. There
are currently no patents covering the acetaminophen molecule
itself in the territories licensed to us, which include the
United States and Canada. As a result, competitors who obtain
the requisite regulatory approval can offer products with the
same active ingredient as IV APAP so long as the
competitors do not infringe any process or formulation patents
that we have in-licensed from BMS and its licensor, SCR
Pharmatop. We are aware of a number of third-party patents in
the United States that claim methods of making acetaminophen. If
a supplier of the active pharmaceutical ingredient, or API, for
our IV APAP product candidate is found to infringe any of
these method patents covering acetaminophen, our supply of the
API could be delayed and we may be required to locate an
alternative supplier. We are also aware of several U.S. and
Canadian patents and patent applications covering various
potential injectable formulations of acetaminophen as well as
methods of making and using these potential formulations. In
addition, Injectapap, a formulation of acetaminophen for
intramuscular injection was approved by the FDA for the
reduction of fever in adults in March 1986 but was withdrawn
from the market by McNeil Pharmaceutical in July 1986. Although
we are not aware of any announcement regarding the reasons for
Injectapaps withdrawal, we believe it was likely withdrawn
from the market due to product-related concerns either related
to the intramuscular injection mode of administration or the
sodium bisulfite in the formulation.
The number of patents and patent applications covering products
in the same field as IV APAP indicates that competitors
have sought to develop and may seek to market competing
formulations that may not be covered by our licensed patents and
patent applications. In addition, the Canadian patent
applications that we have in-licensed have yet to be examined by
the Canadian Patent Office. Thus, they may issue with claims
that cover less than the corresponding in-licensed
U.S. patents, or simply not issue at all. The commercial
opportunity for our IV APAP product candidate could be
significantly harmed if competitors are able to develop an
alternative formulation of acetaminophen outside the scope of
our in-licensed patents.
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The patent rights that we have in-licensed covering Omigard
are limited in scope and limited to specific territories.
We have an exclusive license from Migenix for Omigard in North
America and Europe for the licensed field, although currently
there are issued patents only in the United States and certain
European countries. Canadian applications are pending; however,
the claims that ultimately issue in Canada may be narrower than
the protection obtained in the United States and Europe or may
simply not issue at all. In addition, no patent protection has
been sought in Mexico. Accordingly, the manufacture, sale and
use of Omigard in Mexico by a competitor cannot be prevented.
Furthermore, analogs of Omigard have been developed by others
that are not covered by patents licensed to us. At least some of
these analogs are covered by third-party patents. It is possible
that competitors having rights to these third-party patents may
develop competing products having the same, similar or better
efficacy compared to Omigard.
Furthermore, our license agreement with Migenix may be construed
to cover only the use of Omigard for the licensed field, which
is the treatment of burn-related, surgical wound-related, or
device-related infections. Thus, Migenix or third-party
licensees of Migenix may be able to market Omigard for other
uses, including treatment of non-surgery related wound
infections. We may be unable to prevent physicians from using
any such competitive Omigard product off-label for the field
licensed to us. Furthermore, the license covers only omiganan
pentahydrochloride and its pharmaceutical formulations. Although
the license agreement may prevent Migenix from developing a
competing product for use in the licensed field, the agreement
may not prevent Migenix from licensing a competing product, such
as another salt of omiganan, to a third-party for use in the
licensed field. Accordingly, we may face competition from a
third-party licensee of Migenix using a different salt form of
omiganan than our Omigard product candidate.
We depend on our licensors for the maintenance and
enforcement of our intellectual property and have limited
control, if any, over the amount or timing of resources that our
licensors devote on our behalf.
We depend on our licensors, BMS and Migenix, to protect the
proprietary rights covering IV APAP and Omigard.
Regarding IV APAP, either BMS or its licensor, SCR
Pharmatop, depending on the patent or application, is
responsible for maintaining issued patents and prosecuting
patent applications. Regarding Omigard, Migenix is responsible
for maintaining issued patents and prosecuting patent
applications. We have limited, if any, control over the amount
or timing of resources that our licensors devote on our behalf
or the priority they place on maintaining these patent rights
and prosecuting these patent applications to our advantage. SCR
Pharmatop is under a contractual obligation to BMS to diligently
prosecute their patent applications and allow BMS the
opportunity to consult, review and comment on patent office
communications. However, we cannot be sure that SCR Pharmatop
will perform as required. Should BMS decide it no longer wants
to maintain any of the patents licensed to us, BMS is required
to afford us the opportunity to do so at our expense. However,
we cannot be sure that BMS will perform as required. If BMS does
not perform, and if we do not assume the maintenance of the
licensed patents in sufficient time to make required payments or
filings with the appropriate governmental agencies, we risk
losing the benefit of all or some of those patent rights. For
patents and applications licensed from Migenix, Migenix is
obligated to use commercially reasonable efforts to obtain and
maintain patent rights covering Omigard in North America and
Europe. If Migenix intends to abandon prosecution or maintenance
of any patents or applications, they are obligated to notify us,
and at that time, we will be granted an opportunity to maintain
and prosecute the patents and applications. In such a case,
Migenix is required to transfer all necessary rights and
responsibilities to facilitate our maintenance and prosecution
of the patents and applications. Similar to BMS, however, we
cannot be certain that Migenix will perform its contractual
obligations as required or that we will be able to adequately
assume the prosecution or maintenance of the Omigard-related
patents and applications.
As part of a financing transaction, Migenix has pledged as
collateral to its lenders the patents and patent applications
covering Omigard. While we believe our license agreement with
Migenix would survive any foreclosure on these patents and
patent applications, we cannot be sure that the lenders will have
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adequate expertise or resources to properly perform
Migenixs obligations to us under the license agreement,
including maintaining and prosecuting the patents and patent
applications.
While we intend to take actions reasonably necessary to enforce
our patent rights, we depend, in part, on our licensors to
protect a substantial portion of our proprietary rights. In the
case of the IV APAP patents, BMS has the first right to
prosecute a third-party infringement of the SCR Pharmatop
patents, and has the sole right to prosecute third-party
infringement of the BMS patents. We will have the ability to
cooperate with BMS in third-party infringement suits involving
the SCR Pharmatop patents. In certain instances, we may be
allowed to pursue the infringement claim ourselves. With respect
to Omigard, we have the first right to prosecute a third-party
for infringement of the in-licensed Migenix patents provided the
infringing activities are in North America or Europe and relate
primarily to the licensed field of use. Migenix is obligated to
reasonably cooperate with any such suit.
Our licensors may also be notified of alleged infringement and
be sued for infringement of third-party patents or other
proprietary rights. We may have limited, if any, control or
involvement over the defense of these claims, and our licensors
could be subject to injunctions and temporary or permanent
exclusionary orders in the United States or other countries. Our
licensors are not obligated to defend or assist in our defense
against third-party claims of infringement. We have limited, if
any, control over the amount or timing of resources, if any,
that our licensors devote on our behalf or the priority they
place on defense of such third-party claims of infringement.
Finally, Migenix is not obligated to defend or assist in our
defense of a third-party infringement suit relating to our
Omigard product candidate; however, Migenix has the right to
control the defense and settlement that relates to the validity
and enforceability of claims in the in-licensed Migenix patents.
For a third-party challenge to the SCR Pharmatop in-licensed
patents relating to IV APAP, we will have some ability to
participate in either SCR Pharmatops or BMSs defense
thereof. In the case that neither party elects to defend the
third-party challenge, then we may have the opportunity to
defend it. For a third-party challenge to the in-licensed BMS
patents relating to IV APAP, BMS has the sole right to
defend such challenge. If it chooses not to, we may have the
right to renegotiate or terminate the license regarding the
in-licensed BMS patents.
Because of the uncertainty inherent in any patent or other
litigation involving proprietary rights, we or our licensors may
not be successful in defending claims of intellectual property
infringement by third parties, which could have a material
adverse affect on our results of operations. Regardless of the
outcome of any litigation, defending the litigation may be
expensive, time-consuming and distracting to management.
Because it is difficult and costly to protect our proprietary
rights, we may not be able to ensure their protection.
Our commercial success will depend in part on obtaining and
maintaining patent protection and trade secret protection
for IV APAP, Omigard or any other product candidates that
we may in-license or acquire and the methods we use to
manufacture them, as well as successfully defending these
patents against third-party challenges. We will only be able to
protect our technologies from unauthorized use by third parties
to the extent that valid and enforceable patents or trade
secrets cover them.
The patent positions of pharmaceutical and biotechnology
companies can be highly uncertain and involve complex legal and
factual questions for which important legal principles remain
unresolved. No consistent policy regarding the breadth of claims
allowed in pharmaceutical or biotechnology patents has emerged
to date in the United States. The patent situation outside the
United States is even more uncertain. Changes in either the
patent laws or in interpretations of patent laws in the United
States and other countries may diminish the value of our
intellectual property. Accordingly, we cannot predict the
breadth of claims that may be allowed or enforced in our patents
or in third-party patents.
23
The degree of future protection for our proprietary rights is
uncertain, because legal means afford only limited protection
and may not adequately protect our rights or permit us to gain
or keep our competitive advantage. For example:
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our licensors might not have been the first to make the
inventions covered by each of our pending patent applications
and issued patents; |
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our licensors might not have been the first to file patent
applications for these inventions; |
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others may independently develop similar or alternative
technologies or duplicate any of our product candidates or
technologies; |
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it is possible that none of the pending patent applications
licensed to us will result in issued patents; |
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the issued patents covering our product candidates may not
provide a basis for commercially viable active products, may not
provide us with any competitive advantages, or may be challenged
by third parties; |
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we may not develop additional proprietary technologies that are
patentable; or |
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patents of others may have an adverse effect on our business. |
Patent applications in the United States are maintained in
confidence for at least 18 months after their earliest
effective filing date. Consequently, we cannot be certain that
our licensors were the first to invent or the first to file
patent applications on some of our product candidates. In the
event that a third party has also filed a U.S. patent
application relating to our product candidates or a similar
invention, we may have to participate in interference
proceedings declared by the U.S. Patent and Trademark
Office to determine priority of invention in the United States.
The costs of these proceedings could be substantial and it is
possible that our efforts would be unsuccessful, resulting in a
material adverse effect on our U.S. patent position.
Furthermore, we may not have identified all U.S. and foreign
patents or published applications that affect our business
either by blocking our ability to commercialize our drugs or by
covering similar technologies that affect our drug market.
In addition, some countries, including many in Europe, do not
grant patent claims directed to methods of treating humans, and
in these countries patent protection may not be available at all
to protect our drug candidates. Even if patents issue, we cannot
guarantee that the claims of those patents will be valid and
enforceable or provide us with any significant protection
against competitive products, or otherwise be commercially
valuable to us.
We also rely on trade secrets to protect our technology,
particularly where we do not believe patent protection is
appropriate or obtainable. However, trade secrets are difficult
to protect. While we use reasonable efforts to protect our trade
secrets, our licensors, employees, consultants, contractors,
outside scientific collaborators and other advisors may
unintentionally or willfully disclose our information to
competitors. Enforcing a claim that a third party illegally
obtained and is using our trade secrets is expensive and time
consuming, and the outcome is unpredictable. In addition, courts
outside the United States are sometimes less willing to protect
trade secrets. Moreover, our competitors may independently
develop equivalent knowledge, methods and know-how.
If our licensors or we fail to obtain or maintain patent
protection or trade secret protection for IV APAP, Omigard
or any other product candidate we may in-license or acquire,
third parties could use our proprietary information, which could
impair our ability to compete in the market and adversely affect
our ability to generate revenues and achieve profitability.
If we are sued for infringing intellectual property rights of
third parties, it will be costly and time consuming, and an
unfavorable outcome in any litigation would harm our
business.
Our ability to develop, manufacture, market and sell IV
APAP, Omigard or any other product candidates that we may
in-license or acquire depends upon our ability to avoid
infringing the proprietary
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rights of third parties. Numerous U.S. and foreign issued
patents and pending patent applications, which are owned by
third parties, exist in the general fields of pain treatment and
prevention of infections and cover the use of numerous compounds
and formulations in our targeted markets. For instance, we are
aware of European Patent No. 1 089 755 B1 granted in
February 2004 and assigned to N.V. Nutricia of the Netherlands.
This patent is in force in various European countries, and the
claims may be broad enough in scope to cover our Omigard product
candidate if we choose to commercialize it in Europe. We are
investigating potential invalidity defenses in Europe centered
around Migenixs earlier-filed patent application, PCT
Patent Application Publication No. WO 98/07745. However, we
cannot predict the outcome of any invalidity defense, and it is
possible that we may determine it prudent to seek a license from
N.V. Nutricia to avoid extended litigation and other disputes.
We cannot be sure that a license would be available to us on
commercially reasonable terms, or at all. Similarly, we are
aware of a patent application pending in the United States that
is the equivalent to N.V. Nutricias European patent,
specifically, U.S. Patent Application No. 09/720,278.
Because this patent application has neither published nor
issued, it is too early to tell if the claims of this
application will present similar issues for Omigard in the
United States. We are also aware of a patent application pending
in Canada that is the equivalent to N.V. Nutricias
European patent, specifically, Canadian Patent Application
No. 2332127. Because this patent application has not
issued, it is too early to tell if the claims of this
application will present similar issues for Omigard in Canada.
However, similar to the European patent, if the U.S. or Canadian
patent applications issue with a scope that is broad enough to
cover our Omigard product candidate and we and Migenix are
unable to assert successful defenses to any patent claims, we
may be unable to commercialize Omigard, or may be required to
expend substantial sums to obtain a license to the other
partys patent. While we believe there may be multiple
grounds to challenge the validity of the European patent, and
these grounds may be applicable to the U.S. and Canadian
applications should they issue as patents, the outcome of any
litigation relating to this European patent and the U.S. and
Canadian patent applications, or any other patents or patent
applications, is uncertain and participating in such litigation
would be expensive, time-consuming and distracting to
management. Because of the uncertainty inherent in any patent or
other litigation involving proprietary rights, we and Migenix
may not be successful in defending intellectual property claims
by N.V. Nutricia or other third parties, which could have a
material adverse affect on our results of operations. Regardless
of the outcome of any litigation, defending the litigation may
be expensive, time-consuming and distracting to management. In
addition, because patent applications can take many years to
issue, there may be currently pending applications, unknown to
us, which may later result in issued patents that IV APAP
or Omigard may infringe. There could also be existing patents of
which we are not aware that IV APAP or Omigard may
inadvertently infringe.
There is a substantial amount of litigation involving patent and
other intellectual property rights in the biotechnology and
biopharmaceutical industries generally. If a third party claims
that we infringe on their products or technology, we could face
a number of issues, including:
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infringement and other intellectual property claims which, with
or without merit, can be expensive and time consuming to
litigate and can divert managements attention from our
core business; |
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substantial damages for past infringement which we may have to
pay if a court decides that our product infringes on a
competitors patent; |
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a court prohibiting us from selling or licensing our product
unless the patent holder licenses the patent to us, which it is
not required to do; |
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if a license is available from a patent holder, we may have to
pay substantial royalties or grant cross licenses to our
patents; and |
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redesigning our processes so they do not infringe, which may not
be possible or could require substantial funds and time. |
25
We may be subject to claims that our employees have
wrongfully used or disclosed alleged trade secrets of their
former employers.
As is common in the biotechnology and pharmaceutical industry,
we employ individuals who were previously employed at other
biotechnology or pharmaceutical companies, including our
competitors or potential competitors. Although no claims against
us are currently pending, we may be subject to claims that these
employees or we have inadvertently or otherwise used or
disclosed trade secrets or other proprietary information of
their former employers. Litigation may be necessary to defend
against these claims. Even if we are successful in defending
against these claims, litigation could result in substantial
costs and be a distraction to management.
Risks Related to Our Finances and Capital Requirements
We have incurred significant operating losses since our
inception and anticipate that we will incur continued losses for
the foreseeable future.
We are a development stage company with a limited operating
history. We have focused primarily on in-licensing and
developing our two product candidates, IV APAP and Omigard, with
the goal of supporting regulatory approval for these product
candidates. We have financed our operations almost exclusively
through private placements of preferred stock and have incurred
losses in each year since our inception in May 2004. Net losses
were $3.1 million in 2004, $7.5 million in 2005 and
$34.9 million for the first six months of 2006. The net
loss for the first six months of 2006 was principally attributed
to our expense related to the $25.0 million licensing fee
for IV APAP paid to BMS and clinical trial and regulatory
expenses. As of June 30, 2006, we had an accumulated
deficit of $45.5 million. These losses, among other things,
have had and will continue to have an adverse effect on our
stockholders equity and working capital. We expect our
development expenses as well as clinical product manufacturing
expenses to increase in connection with our ongoing and planned
Phase III clinical trials for our product candidates. In
addition, if we obtain regulatory approval for IV APAP or
Omigard, we expect to incur significant sales, marketing and
outsourced manufacturing expenses as well as continued
development expenses. As a result, we expect to continue to
incur significant and increasing operating losses for the
foreseeable future. Because of the numerous risks and
uncertainties associated with developing pharmaceutical
products, we are unable to predict the extent of any future
losses or when we will become profitable, if at all.
We currently have no source of revenue and may never be
profitable.
Our ability to become profitable depends upon our ability to
generate revenue. To date, we have not generated any revenue
from our development-stage product candidates, and we do not
know when, or if, we will generate any revenue. Our ability to
generate revenue depends on a number of factors, including, but
not limited to, our ability to:
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successfully complete our ongoing and planned clinical trials
for IV APAP and Omigard; |
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obtain regulatory approval for either of our two product
candidates; |
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assuming these regulatory approvals are received, manufacture
commercial quantities of our product candidates at acceptable
cost levels; and |
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successfully market and sell any approved products. |
Even if one or more of our product candidates is approved for
commercial sale, we anticipate incurring significant costs
associated with commercializing any approved product. We also do
not anticipate that we will achieve profitability for at least
several years after generating material revenues, if ever. If we
are unable to generate revenues, we will not become profitable
and may be unable to continue operations without continued
funding.
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Our short operating history makes it difficult to evaluate
our business and prospects.
We were incorporated in May 2004 and have only been conducting
operations with respect to our IV APAP product candidate
since March 2006 and our Omigard product candidate since July
2004. Our operations to date have been limited to organizing and
staffing our company, in-licensing our two product candidates
and initiating product development activities for our two
product candidates. We have not yet demonstrated an ability to
obtain regulatory approval for or successfully commercialize a
product candidate. Consequently, any predictions about our
future performance may not be as accurate as they could be if we
had a history of successfully developing and commercializing
pharmaceutical products.
We will need additional funding and may be unable to raise
capital when needed, which would force us to delay, reduce or
eliminate our product development programs or commercialization
efforts.
Developing products for use in the hospital setting, conducting
clinical trials, establishing outsourced manufacturing
relationships and successfully manufacturing and marketing drugs
that we may develop is expensive. We will need to raise
additional capital to:
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fund our operations and continue to conduct adequate and
well-controlled clinical trials to provide clinical data to
support regulatory approval of marketing applications; |
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continue our development activities; |
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qualify and outsource the commercial-scale manufacturing of our
products under cGMP; and |
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commercialize IV APAP, Omigard or any other product
candidates that we may in-license or acquire, if any of these
product candidates receive regulatory approval. |
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We believe that our existing cash, cash equivalents and
short-term investments will be sufficient to meet our projected
operating requirements through at least June 30, 2007. We
have based this estimate on assumptions that may prove to be
wrong, and we could spend our available financial resources much
faster than we currently expect. Our future funding requirements
will depend on many factors, including, but not limited to:
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the rate of progress and cost of our clinical trials and other
product development programs for IV APAP, Omigard and any
other product candidates that we may in-license or acquire; |
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the costs of filing, prosecuting, defending and enforcing any
patent claims and other intellectual property rights associated
with our product candidates; |
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the cost and timing of completion of an outsourced commercial
manufacturing supply for each product candidate; |
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the costs and timing of regulatory approval; |
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the costs of establishing sales, marketing and distribution
capabilities; |
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the effect of competing technological and market developments;
and |
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the terms and timing of any collaborative, licensing,
co-promotion or other arrangements that we may establish. |
Future capital requirements will also depend on the extent to
which we acquire or invest in additional complementary
businesses, products and technologies, but we currently have no
commitments or agreements relating to any of these types of
transactions.
Until we can generate a sufficient amount of product revenue, if
ever, we expect to finance future cash needs through public or
private equity offerings, debt financings or corporate
collaboration and licensing arrangements, as well as through
interest income earned on cash balances. We cannot be certain
that additional funding will be available on acceptable terms,
or at all. If adequate funds are not available, we may be
required to delay, reduce the scope of or eliminate one or more
of our development programs or our commercialization efforts.
27
Our quarterly operating results may fluctuate
significantly.
We expect our operating results to be subject to quarterly
fluctuations. Our net loss and other operating results will be
affected by numerous factors, including:
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the timing of milestone payments required under our license
agreements for IV APAP and Omigard; |
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our execution of other collaborative, licensing or similar
arrangements, and the timing of payments we may make or receive
under these arrangements; |
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our addition or termination of clinical trials or funding
support; |
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variations in the level of expenses related to our two existing
product candidates or future development programs; |
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any intellectual property infringement lawsuit in which we may
become involved; |
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regulatory developments affecting our product candidates or
those of our competitors; and |
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if either of our product candidates receives regulatory
approval, the level of underlying hospital demand for our
product candidates and wholesalers buying patterns. |
If our quarterly operating results fall below the expectations
of investors or securities analysts, the price of our common
stock could decline substantially. Furthermore, any quarterly
fluctuations in our operating results may, in turn, cause the
price of our stock to fluctuate substantially. We believe that
quarterly comparisons of our financial results are not
necessarily meaningful and should not be relied upon as an
indication of our future performance.
Raising additional funds by issuing securities may cause
dilution to existing stockholders and raising funds through
lending and licensing arrangements may restrict our operations
or require us to relinquish proprietary rights.
To the extent that we raise additional capital by issuing equity
securities, our existing stockholders ownership will be
diluted. If we raise additional funds through licensing
arrangements, it may be necessary to relinquish potentially
valuable rights to our potential products or proprietary
technologies, or grant licenses on terms that are not favorable
to us. Any debt financing we enter into may involve covenants
that restrict our operations. These restrictive covenants may
include limitations on additional borrowing and specific
restrictions on the use of our assets as well as prohibitions on
our ability to create liens, pay dividends, redeem our stock or
make investments. For example, in February 2006, we entered into
a $7.0 million loan and security agreement with Silicon
Valley Bank and Oxford Finance Corporation which contains a
variety of affirmative and negative covenants, including
required financial reporting, limitations on the disposition of
assets other than in the ordinary course of business,
limitations on the incurrence of additional debt and other
requirements. To secure our performance of our obligations under
the loan and security agreement, we pledged substantially all of
our assets other than intellectual property assets, to the
lenders. Our failure to comply with the covenants in the loan
and security agreement could result in an event of default that,
if not cured or waived, could result in the acceleration of all
or a substantial portion of our debt.
We will incur significant increased costs as a result of
operating as a public company, and our management will be
required to devote substantial time to new compliance
initiatives.
As a public company, we will incur significant legal, accounting
and other expenses that we did not incur as a private company.
In addition, the Sarbanes-Oxley Act, as well as rules
subsequently implemented by the SEC and the Nasdaq Global
Market, have imposed various new requirements on public
companies, including requiring establishment and maintenance of
effective disclosure and financial controls and changes in
corporate governance practices. Our management and other
personnel will need to devote a substantial amount of time to
these new compliance initiatives. Moreover, these rules and
regulations will increase our legal and financial compliance
costs and will make some activities more
28
time-consuming and
costly. For example, we expect these rules and regulations to
make it more difficult and more expensive for us to obtain
director and officer liability insurance, and we may be required
to accept reduced policy limits and coverage or incur
substantially higher costs to obtain the same or similar
coverage. As a result, it may be more difficult for us to
attract and retain qualified persons to serve on our board of
directors, our board committees or as executive officers.
The Sarbanes-Oxley Act requires, among other things, that we
maintain effective internal controls for financial reporting and
disclosure controls and procedures. In particular, commencing in
fiscal 2008, we must perform system and process evaluation and
testing of our internal controls over financial reporting to
allow management and our independent registered public
accounting firm to report on the effectiveness of our internal
controls over financial reporting, as required by
Section 404 of the Sarbanes-Oxley Act. Our testing, or the
subsequent testing by our independent registered public
accounting firm, may reveal deficiencies in our internal
controls over financial reporting that are deemed to be material
weaknesses. Our compliance with Section 404 will require
that we incur substantial accounting expense and expend
significant management efforts. We currently do not have an
internal audit group, and we will need to hire additional
accounting and financial staff with appropriate public company
experience and technical accounting knowledge. Moreover, if we
are not able to comply with the requirements of Section 404
in a timely manner, or if we or our independent registered
public accounting firm identifies deficiencies in our internal
controls over financial reporting that are deemed to be material
weaknesses, the market price of our stock could decline and we
could be subject to sanctions or investigations by Nasdaq, the
SEC or other regulatory authorities, which would require
additional financial and management resources.
Risks Relating to Securities Markets and Investment in Our
Stock
There may not be a viable public market for our common
stock.
Prior to this offering, there has been no public market for our
common stock, and there can be no assurance that a regular
trading market will develop and continue after this offering or
that the market price of our common stock will not decline below
the initial public offering price. The initial public offering
price will be determined through negotiations between us and the
representatives of the underwriters and may not be indicative of
the market price of our common stock following this offering.
Among the factors considered in such negotiations are prevailing
market conditions, certain of our financial information, market
valuations of other companies that we and the representatives of
the underwriters believe to be comparable to us, estimates of
our business potential, the present state of our development and
other factors deemed relevant. See Underwriting for
additional information.
As a new investor, you will experience immediate and
substantial dilution in the net tangible book value of your
shares.
The initial public offering price of our common stock in this
offering is considerably more than the net tangible book value
per share of our outstanding common stock. Investors purchasing
shares of common stock in this offering will pay a price that
substantially exceeds the value of our assets after subtracting
liabilities. As a result, investors will:
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incur immediate dilution of
$ per
share, based on an assumed initial public offering price of
$ per
share, the midpoint of our expected public offering price range;
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contribute % of the total amount
invested to date to fund our company based on an assumed initial
offering price to the public of
$ per
share, the mid point of our expected public offering price
range, but will own only % of the
shares of common stock outstanding after the offering. |
To the extent outstanding stock options or warrants are
exercised, there will be further dilution to new investors.
29
We believe that our existing cash, cash equivalents and
short-term investments will be sufficient to meet our projected
operating requirements through at least June 30, 2007.
However, because we will need to raise additional capital to
fund our clinical development programs, among other things, we
may conduct substantial additional equity offerings. These
future equity issuances, together with the exercise of
outstanding options or warrants and any additional shares issued
in connection with acquisitions, will result in further dilution
to investors.
We expect that the price of our common stock will fluctuate
substantially.
The initial public offering price for the shares of our common
stock sold in this offering has been determined by negotiation
between the representatives of the underwriters and us. This
price may not reflect the market price of our common stock
following this offering. The price of our common stock may
decline. In addition, the market price of our common stock is
likely to be highly volatile and may fluctuate substantially due
to many factors, including:
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the results from our clinical trial programs, including our
planned Phase III clinical program for IV APAP and our
ongoing Phase III clinical trial for Omigard; |
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the results of clinical trial programs for IV APAP and
Omigard being performed by others; |
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FDA or international regulatory actions, including failure to
receive regulatory approval for any of our product candidates; |
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failure of any of our product candidates, if approved, to
achieve commercial success; |
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announcements of the introduction of new products by us or our
competitors; |
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market conditions in the pharmaceutical and biotechnology
sectors; |
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developments concerning product development results or
intellectual property rights of others; |
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litigation or public concern about the safety of our potential
products; |
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actual and anticipated fluctuations in our quarterly operating
results; |
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deviations in our operating results from the estimates of
securities analysts or other analyst comments; |
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additions or departures of key personnel; |
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third-party coverage and reimbursement policies; |
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developments concerning current or future strategic
collaborations; and |
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discussion of us or our stock price by the financial and
scientific press and in online investor communities. |
The realization of any of the risks described in these
Risk Factors could have a dramatic and material
adverse impact on the market price of our common stock. In
addition, class action litigation has often been instituted
against companies whose securities have experienced periods of
volatility in market price. Any such litigation brought against
us could result in substantial costs and a diversion of
managements attention and resources, which could hurt our
business, operating results and financial condition.
Our management team may invest or spend the proceeds of this
offering in ways in which you may not agree or in ways which may
not yield a return.
Our management will have broad discretion over the use of
proceeds from this offering. The net proceeds from this offering
will be used to fund clinical trials and other research and
development activities, and to fund working capital, capital
expenditures and other general corporate purposes. We may also
use a portion of the net proceeds to in-license, acquire or
invest in complementary businesses or products. We have no
present understandings, commitments or agreements with respect
to any such in-licenses, acquisitions or investments and no
portion of the net proceeds has been allocated for any specific
transaction. Our management will have considerable discretion in
the application of the net proceeds, and
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you will not have the opportunity, as part of your investment
decision, to assess whether the proceeds are being used
appropriately. The net proceeds may be used for corporate
purposes that do not increase our operating results or market
value. Until the net proceeds are used, they may be placed in
investments that do not produce significant income or that lose
value.
Future sales of our common stock may depress our stock
price.
Sales of a substantial number of shares of our common stock in
the public market could occur at any time. These sales, or the
perception in the market that the holders of a large number of
shares intend to sell shares, could reduce the market price of
our common stock. After this offering, we will have
outstanding shares of common stock based on the number of
shares outstanding as of June 30, 2006. This includes the
shares that we are selling in this offering, which may be resold
in the public market immediately. Of the remaining
shares, shares
are currently restricted as a result of securities laws or
lock-up agreements but
will be available for resale in the public market as described
in the Shares Eligible for Future Sale section of
this prospectus. As a result of the lock-up agreements between
our underwriters and our security holders and the provisions of
Rule 144, Rule 144(k) and Rule 701 under the
Securities Act, the shares of our common stock (excluding the
shares sold in this offering) that will be available for sale in
the public market are as follows:
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shares
will be eligible for sale on the date of this prospectus; |
|
|
|
shares
will be eligible for sale upon the expiration of the lock-up
agreements beginning 180 days after the date of this
prospectus; |
|
|
|
shares
will be eligible for sale, upon exercise of vested options, upon
the expiration of the lock-up agreements, beginning
180 days after the date of this prospectus; |
|
|
|
shares
will be eligible for sale, upon exercise of outstanding
warrants, upon the expiration of the lock-up agreements,
beginning 180 days after the date of this prospectus; and |
|
|
|
the
remaining restricted
shares will be eligible for sale from time to time thereafter
upon expiration of their respective one-year holding periods. |
Moreover, after this offering, holders of approximately
83,555,455 shares of common stock and the holders of warrants to
purchase 385,000 shares of our common stock will have rights,
subject to some conditions, to require us to file registration
statements covering their shares or to include their shares in
registration statements that we may file for ourselves or other
stockholders. These rights will continue following this offering
and will terminate seven years following the completion of this
offering, or for any particular holder with registration rights,
at such time following this offering when all securities held by
that stockholder subject to registration rights may be sold
pursuant to Rule 144 under the Securities Act. We also
intend to register all shares of common stock that we may issue
under our equity compensation plans. Once we register these
shares, they can be freely sold in the public market upon
issuance, subject to the
lock-up agreements
described in the Underwriting section of this
prospectus.
Our executive officers and directors and their affiliates
will exercise control over stockholder voting matters in a
manner that may not be in the best interests of all of our
stockholders.
Immediately following this offering, our executive officers and
directors and their affiliates will together control
approximately % of our outstanding
common stock. As a result, these stockholders will collectively
be able to significantly influence all matters requiring
approval of our stockholders, including the election of
directors and approval of significant corporate transactions.
The concentration of ownership may delay, prevent or deter a
change in control of our company even when such a change may be
in the best interests of all stockholders, could deprive our
stockholders of an opportunity to receive a premium for their
common stock as part of a sale of our company or our assets and
might affect the prevailing market price of our common stock.
31
Anti-takeover provisions under our charter documents and
Delaware law could delay or prevent a change of control which
could limit the market price of our common stock and may prevent
or frustrate attempts by our stockholders to replace or remove
our current management.
Our amended and restated certificate of incorporation and
amended and restated bylaws, which are to become effective at
the closing of this offering, contain provisions that could
delay or prevent a change of control of our company or changes
in our board of directors that our stockholders might consider
favorable. Some of these provisions include:
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a board of directors divided into three classes serving
staggered three-year terms, such that not all members of the
board will be elected at one time; |
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a prohibition on stockholder action through written consent; |
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|
|
a requirement that special meetings of stockholders be called
only by the chairman of the board of directors, the chief
executive officer, the president or by a majority of the total
number of authorized directors; |
|
|
|
advance notice requirements for stockholder proposals and
nominations; |
|
|
|
a requirement of approval of not less than
662/3%
of all outstanding shares of our capital stock entitled to vote
to amend any bylaws by stockholder action, or to amend specific
provisions of our certificate of incorporation; and |
|
|
|
the authority of the board of directors to issue preferred stock
on terms determined by the board of directors without
stockholder approval. |
In addition, we are governed by the provisions of
Section 203 of the Delaware General Corporate Law, which
may prohibit certain business combinations with stockholders
owning 15% or more of our outstanding voting stock. These and
other provisions in our amended and restated certificate of
incorporation, amended and restated bylaws and Delaware law
could make it more difficult for stockholders or potential
acquirers to obtain control of our board of directors or
initiate actions that are opposed by the then-current board of
directors, including to delay or impede a merger, tender offer
or proxy contest involving our company. Any delay or prevention
of a change of control transaction or changes in our board of
directors could cause the market price of our common stock to
decline.
We have never paid dividends on our capital stock, and we do
not anticipate paying any cash dividends in the foreseeable
future.
We have paid no cash dividends on any of our classes of capital
stock to date and we currently intend to retain our future
earnings, if any, to fund the development and growth of our
business. We do not anticipate paying any cash dividends on our
common stock in the foreseeable future. Furthermore, our loan
and security agreement with Silicon Valley Bank and Oxford
Finance Corporation restricts our ability to pay dividends. As a
result, capital appreciation, if any, of our common stock will
be your sole source of gain for the foreseeable future.
We may become involved in securities class action litigation
that could divert managements attention and harm our
business.
The stock markets have from time to time experienced significant
price and volume fluctuations that have affected the market
prices for the common stock of pharmaceutical companies. These
broad market fluctuations may cause the market price of our
common stock to decline. In the past, securities class action
litigation has often been brought against a company following a
decline in the market price of its securities. This risk is
especially relevant for us because biotechnology and
biopharmaceutical companies have experienced significant stock
price volatility in recent years. We may become involved in this
type of litigation in the future. Litigation often is expensive
and diverts managements attention and resources, which
could adversely affect our business.
32
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements, including
statements regarding the progress and timing of clinical trials,
the safety and efficacy of our product candidates, the goals of
our development activities, estimates of the potential markets
for our product candidates, estimates of the capacity of
manufacturing and other facilities to support our products,
projected cash needs and our expected future revenues,
operations and expenditures. The forward-looking statements are
contained principally in the sections entitled Prospectus
Summary, Risk Factors, Managements
Discussion and Analysis of Financial Condition and Results of
Operations and Business. These statements
relate to future events or our future financial performance and
involve known and unknown risks, uncertainties and other factors
that could cause our actual results, levels of activity,
performance or achievement to differ materially from those
expressed or implied by these forward-looking statements. These
risks and uncertainties include, among others:
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|
our ability to successfully complete clinical development of our
only two product candidates, IV APAP and Omigard, on expected
timetables, or at all, which includes enrolling sufficient
patients in our clinical trials and demonstrating the safety and
efficacy of these product candidates in such trials; |
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|
|
the content and timing of submissions to and decisions made by
the FDA and other regulatory agencies, including foreign
regulatory agencies, demonstrating to the satisfaction of the
FDA and such other agencies the safety and efficacy of our
product candidates; |
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|
intense competition in our markets and the ability of our
competitors, many of whom have greater resources than we do, to
offer different or better therapeutic alternatives than our
product candidates; |
|
|
|
market acceptance of and future development and regulatory
difficulties relating to any product candidates for which we do
receive regulatory approval; |
|
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|
our ability to develop sales, distribution and marketing
capabilities or enter into agreements with third parties to
sell, distribute and market any of our product candidates that
may be approved for sale; |
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|
our ability to obtain coverage and reimbursement for any of our
product candidates that may be approved for sale from the
government or third-party payors, and the extent of such
coverage and reimbursement, and the willingness of hospitals to
pay for our product candidates versus less expensive therapies; |
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our compliance with the agreements under which we license the
rights to our product candidates; |
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|
our reliance on third parties to conduct our clinical trials and
manufacture our product candidates; |
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our ability to grow our business by identifying and acquiring or
in-licensing new product candidates, increasing the size of our
organization and attracting and retaining key personnel; |
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our and our licensors ability to obtain, maintain and
successfully enforce adequate patent and other intellectual
property protection of our product candidates and the rights
relating thereto; and |
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|
our short operating history, our lack of revenue and
profitability, our significant historical operating losses and
our ability to obtain additional funding to continue to operate
our business, which funding may not be available on commercially
reasonable terms, or at all. |
33
Forward-looking statements include all statements that are not
historical facts. In some cases, you can identify
forward-looking statements by terms such as may,
will, should, could,
would, expect, plan,
anticipate, believe,
estimate, project, predict,
potential, or the negative of those terms, and
similar expressions and comparable terminology intended to
identify forward-looking statements. These statements reflect
our current views with respect to future events and are based on
assumptions and subject to risks and uncertainties. These
forward-looking statements represent our estimates and
assumptions only as of the date of this prospectus and, except
as required by law, we undertake no obligation to update or
revise publicly any forward-looking statements, whether as a
result of new information, future events or otherwise after the
date of this prospectus. The forward-looking statements
contained in this prospectus are excluded from the safe harbor
protection provided by the Private Securities Litigation Reform
Act of 1995 and Section 27A of the Securities Act of 1933,
as amended.
34
USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately
$ million
from the sale of the shares of common stock offered in this
offering, based on an assumed initial public offering price of
$ per
share (the mid-point of the price range set forth on the cover
page of this prospectus) and after deducting the estimated
underwriting discounts and commissions and estimated offering
costs payable by us. Each $1.00 increase or decrease in the
assumed public offering price of
$ per
share would increase or decrease, the net proceeds to us from
this offering by approximately
$ million,
assuming the number of shares offered by us, as set forth on the
cover page of this prospectus, remains the same and after
deducting the estimated underwriting discounts and commissions
and estimated offering costs payable by us.
The principal purposes for this offering are to fund clinical
trials and other research and development activities, including
with respect to our two product candidates, to fund our working
capital, to make capital expenditures, for other general
corporate purposes, to create a public market for our common
stock, to increase our ability to access the capital markets in
the future and to provide liquidity for our existing
stockholders.
We currently expect to use our net proceeds from this offering
as follows:
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|
|
|
approximately $58.0 million to fund clinical trials for
IV APAP and Omigard and other research and development
activities; |
|
|
|
|
|
approximately $4.0 million to fund capital expenditures,
primarily including equipment associated with the manufacturing
of IV APAP; and |
|
|
|
|
|
the remainder to fund working capital and other general
corporate purposes. |
|
We anticipate that the net proceeds from this offering, together
with our existing cash and cash equivalents, will allow us to
complete the clinical trials necessary to support NDA filings
for IV APAP and Omigard.
We may also use a portion of the net proceeds to in-license,
acquire or invest in complementary businesses or products.
However, we have no current understandings, commitments or
agreements to do so.
The amounts and timing of our actual expenditures will depend on
numerous factors, including the progress in, and costs of, our
clinical trials and other product development programs. We
therefore cannot estimate the amount of net proceeds to be used
for all of the purposes described above. We may find it
necessary or advisable to use the net proceeds for other
purposes, and we will have broad discretion in the application
of the net proceeds. Pending the uses described above, we intend
to invest the net proceeds in short-term, interest-bearing,
investment-grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital
stock and we do not currently intend to pay any cash dividends
on our common stock. We expect to retain future earnings, if
any, to fund the development and growth of our business. The
payment of dividends by us on our common stock is limited by our
loan and security agreement with Silicon Valley Bank and Oxford
Finance Corporation. Any future determination to pay dividends
on our common stock will be at the discretion of our board of
directors and will depend upon, among other factors, our results
of operations, financial condition, capital requirements and
contractual restrictions.
35
CAPITALIZATION
The following table sets forth our capitalization as of
June 30, 2006:
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|
|
on an actual basis; and |
|
|
|
on a pro forma as adjusted basis to reflect the conversion of
all outstanding shares of our preferred stock into
79,630,455 shares of common stock and our receipt of the
estimated net proceeds from this offering, based on an assumed
initial public offering price of
$ per
share (the mid-point of the price range set forth on the cover
page of this prospectus) and after deducting the estimated
underwriting discounts and commissions and estimated offering
costs payable by us. |
The pro forma information below is illustrative only and our
capitalization following the completion of this offering will be
adjusted based on the actual initial public offering price and
other terms of this offering determined at pricing. You should
read this table together with Managements Discussion
and Analysis of Financial Condition and Results of
Operations and our financial statements and the related
notes appearing elsewhere in this prospectus.
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As of June 30, 2006 | |
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| |
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Pro Forma | |
|
|
Actual | |
|
as Adjusted(1) | |
|
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| |
|
| |
|
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(In thousands, except share | |
|
|
and par value amounts) | |
Cash and cash equivalents
|
|
$ |
42,881 |
|
|
|
|
|
|
|
|
|
|
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|
Long-term debt, less current portion
|
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$ |
5,968 |
|
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|
|
|
Stockholders equity:
|
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|
|
|
|
|
|
|
Preferred stock, $0.0001 par value actual and pro forma as
adjusted; actual 80,015,455 shares authorized;
79,630,455 issued and outstanding; pro forma as
adjusted 10,000,000 shares authorized; no
shares issued and outstanding
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|
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|
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Series A-1 convertible preferred stock, actual
8,085,108 shares authorized, issued and outstanding; pro
forma as adjusted no shares authorized; no shares
issued and outstanding
|
|
|
1 |
|
|
|
|
|
|
Series A-2 convertible preferred stock, actual
18,060,347 shares authorized; 17,675,347 issued and
outstanding; pro forma as adjusted no shares
authorized; no shares issued and outstanding
|
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2 |
|
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|
|
|
|
Series A-3 convertible preferred stock, actual
53,870,000 shares authorized, issued and outstanding; pro
forma as adjusted no shares authorized; no shares
issued and outstanding
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|
5 |
|
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|
Common stock, $0.0001 par value; actual
100,000,000 shares authorized; 8,551,740 shares issued
and outstanding; pro forma as adjusted
100,000,000 shares
authorized; shares
issued and outstanding
|
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|
1 |
|
|
|
|
|
Additional paid-in capital
|
|
|
79,954 |
|
|
|
|
|
Deficit accumulated during the development stage
|
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|
(45,535 |
) |
|
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|
|
|
|
|
|
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|
Total stockholders equity
|
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|
34,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total capitalization
|
|
$ |
40,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Each $1.00 increase or decrease in the assumed public offering
price of
$ per
share would increase or decrease, respectively, the amount of
cash and cash equivalents, additional paid-in capital and total
capitalization by approximately
$ million,
assuming the number of shares offered by us, as set forth on the
cover page of this prospectus, remains the same and after
deducting the estimated underwriting discounts and commissions
and estimated offering costs payable by us. |
36
The number of pro forma as adjusted common shares shown as
issued and outstanding in the table is based on the number of
shares of our common stock outstanding as of June 30, 2006,
and excludes:
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|
5,769,471 shares of common stock issuable upon the exercise
of options outstanding as of June 30, 2006 at a weighted
average exercise price of $0.38 per share; |
|
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|
385,000 shares of common stock issuable upon the exercise
of warrants outstanding as of June 30, 2006 at a weighted
average exercise price of $1.00 per share; and |
|
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|
shares
of our common stock reserved for future issuance under our 2006
equity incentive award plan, which will become effective on the
day prior to the day on which we become subject to the reporting
requirements of the Exchange Act (including
1,678,789 shares of common stock reserved for future grant
or issuance under our 2004 equity incentive award plan, which
shares will be added to the shares to be reserved under our 2006
equity incentive award plan upon the effectiveness of the 2006
equity incentive award plan). |
37
DILUTION
If you invest in our common stock in this offering, your
interest will be diluted to the extent of the difference between
the public offering price per share of our common stock and the
pro forma as adjusted net tangible book value per share of our
common stock after this offering. As of June 30, 2006, our
historical net tangible book value was $34.4 million, or
$0.39 per share of common stock. Our historical net
tangible book value per share represents the amount of our total
tangible assets reduced by the amount of our total liabilities,
divided by the total number of shares of our common stock
outstanding as of June 30, 2006, after giving effect to the
conversion of all outstanding shares of our preferred stock into
79,630,455 shares of our common stock. After giving effect
to our sale in this offering
of shares
of our common stock at an assumed initial public offering price
of
$ per
share (the mid-point of the price range set forth on the cover
page of this prospectus) and after deducting estimated
underwriting discounts and commissions and estimated offering
costs payable by us, our pro forma as adjusted net tangible book
value as of June 30, 2006 would have been
$ million,
or
$ per
share of our common stock. This represents an immediate increase
of net tangible book value of
$ per
share to our existing stockholders and an immediate dilution of
$ per
share to investors purchasing shares in this offering. The
following table illustrates this per share dilution:
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Assumed initial public offering price per share
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|
$ |
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|
Historical net tangible book value per share as of June 30,
2006
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$ |
0.39 |
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|
Increase per share attributable to investors purchasing shares
in this offering
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|
Pro forma net tangible book value per share, as adjusted to give
effect to this offering
|
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|
|
|
|
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|
|
|
|
|
|
|
|
Dilution to investors purchasing shares in this offering
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|
|
|
$ |
|
|
|
|
|
|
|
|
|
Each $1.00 increase or decrease in the assumed public offering
price of
$ per
share would increase or decrease, our pro forma as adjusted net
tangible book value by approximately
$ million,
the pro forma as adjusted net tangible book value per share
after this offering by approximately
$ per
share and the dilution as adjusted to investors purchasing
shares in this offering by approximately
$ per
share, assuming the number of shares offered by us, as set forth
on the cover page of this prospectus, remains the same and after
deducting the estimated underwriting discounts and commissions
and estimated offering costs payable by us.
If the underwriters exercise their over-allotment option in
full, the pro forma net tangible book value per share after
giving effect to this offering would be
$ per
share, and the dilution in pro forma net tangible book value per
share to investors in this offering would be
$ per
share.
The following table summarizes, as of June 30, 2006, the
differences between the number of shares of common stock
purchased from us, after giving effect to the conversion of our
preferred stock into common stock, the total effective cash
consideration paid, and the average price per share paid by our
existing stockholders and by our new investors purchasing stock
in this offering at an assumed initial public offering price of
$ per
share (the mid-point of the price range set forth on the cover
page of this prospectus) before deducting the estimated
underwriting discounts and commissions and estimated offering
costs payable by us:
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|
Shares Purchased | |
|
Total Consideration | |
|
|
|
|
| |
|
| |
|
Average Price | |
|
|
Number | |
|
Percent | |
|
Amount | |
|
Percent | |
|
Per Share | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Existing stockholders before this offering
|
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|
88,182,195 |
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|
|
% |
|
$ |
79,742,641 |
|
|
|
|
% |
|
$ |
0.90 |
|
Investors purchasing shares in this offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
100.0 |
% |
|
$ |
|
|
|
|
100.0 |
% |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
38
Each $1.00 increase or decrease in the assumed public offering
price of
$ per
share would increase or decrease total consideration paid by new
investors, total consideration paid by all stockholders and the
average price per share paid by all stockholders by
$ million,
$ million
and
$ ,
respectively, assuming the number of shares offered by us, as
set forth on the cover page of this prospectus, remains the same
and after deducting the estimated underwriting discounts and
commissions and estimated offering costs payable by us.
If the underwriters exercise their over-allotment option in
full, our existing stockholders would
own % and our new investors would
own % of the total number of
shares of our common stock outstanding after this offering.
The above information assumes no exercise of stock options or
warrants outstanding as of June 30, 2006. As of
June 30, 2006, there were:
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|
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|
|
5,769,471 shares of common stock issuable upon the exercise
of options outstanding as of June 30, 2006 at a weighted
average exercise price of $0.38 per share; |
|
|
|
385,000 shares of common stock issuable upon the exercise
of warrants outstanding as of June 30, 2006 at a weighted
average exercise price of $1.00 per share; and |
|
|
|
shares
of our common stock reserved for future issuance under our 2006
equity incentive award plan, which will become effective on the
day prior to the day on which we become subject to the reporting
requirements of the Exchange Act (including
1,678,789 shares of common stock reserved for future grant
or issuance under our 2004 equity incentive award plan, which
shares will be added to the shares to be reserved under our 2006
equity incentive award plan upon the effectiveness of the 2006
equity incentive award plan). |
39
SELECTED FINANCIAL DATA
The following selected statement of operations data for the
period from May 26, 2004 (inception) through
December 31, 2004, the year ended December 31, 2005
and the balance sheet data as of December 31, 2004 and 2005
have been derived from our audited financial statements included
elsewhere in this prospectus. The statement of operations data
for the six-month periods ended June 30, 2005 and 2006, the
period from May 26, 2004 (inception) through
June 30, 2006 and the balance sheet data as of
June 30, 2006 have been derived from our unaudited
financial statements included elsewhere in this prospectus. The
unaudited financial statements have been prepared on a basis
consistent with our audited financial statements and, in the
opinion of management, contain all adjustments, consisting only
of normal recurring adjustments, we consider necessary for the
fair presentation of the financial data. The selected financial
data should be read in conjunction with Managements
Discussion and Analysis of Financial Condition and Results of
Operations and our financial statements and related notes
included elsewhere in this prospectus.
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|
|
|
|
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|
|
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|
|
Period from | |
|
|
|
|
|
|
|
Period from | |
|
|
May 26, 2004 | |
|
|
|
|
|
May 26, 2004 | |
|
|
(Inception) | |
|
|
|
Six Months Ended | |
|
(Inception) | |
|
|
Through | |
|
Year Ended | |
|
June 30, | |
|
Through | |
|
|
December 31, | |
|
December 31, | |
|
| |
|
June 30, | |
|
|
2004 | |
|
2005 | |
|
2005 | |
|
2006 | |
|
2006 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands, except per share amounts) | |
Statement of Operations Data:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$ |
2,233 |
|
|
$ |
6,126 |
|
|
$ |
2,402 |
|
|
$ |
33,574 |
|
|
$ |
41,934 |
|
|
Marketing
|
|
|
41 |
|
|
|
240 |
|
|
|
142 |
|
|
|
317 |
|
|
|
598 |
|
|
General and administrative
|
|
|
877 |
|
|
|
1,412 |
|
|
|
540 |
|
|
|
1,488 |
|
|
|
3,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
3,151 |
|
|
|
7,778 |
|
|
|
3,084 |
|
|
|
35,379 |
|
|
|
46,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(3,151 |
) |
|
|
(7,778 |
) |
|
|
(3,084 |
) |
|
|
(35,379 |
) |
|
|
(46,309 |
) |
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
9 |
|
|
|
255 |
|
|
|
14 |
|
|
|
553 |
|
|
|
818 |
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44 |
) |
|
|
(44 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
|
|
|
9 |
|
|
|
255 |
|
|
|
14 |
|
|
|
509 |
|
|
|
774 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(3,142 |
) |
|
$ |
(7,523 |
) |
|
$ |
(3,070 |
) |
|
$ |
(34,870 |
) |
|
$ |
(45,535 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share(1)
|
|
$ |
(0.86 |
) |
|
$ |
(1.63 |
) |
|
$ |
(0.68 |
) |
|
$ |
(7.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute basic and diluted net loss per share(1)
|
|
|
3,658 |
|
|
|
4,624 |
|
|
|
4,527 |
|
|
|
4,974 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic and diluted net loss per share(1)
|
|
|
|
|
|
$ |
(0.36 |
) |
|
|
|
|
|
$ |
(0.59 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute pro forma basic and diluted net loss per
share(1)
|
|
|
|
|
|
|
20,649 |
|
|
|
|
|
|
|
58,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
See Note 1 of Notes to Financial Statements for an
explanation of the method used to compute the historical and pro
forma net loss per share and the number of shares used in the
computation of the per share amounts. |
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, | |
|
As of | |
|
|
| |
|
June 30, | |
|
|
2004 | |
|
2005 | |
|
2006 | |
|
|
| |
|
| |
|
| |
|
|
(In thousands) | |
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents and securities available-for-sale
|
|
$ |
4,271 |
|
|
$ |
15,025 |
|
|
$ |
42,881 |
|
Working capital
|
|
|
4,161 |
|
|
|
14,405 |
|
|
|
37,476 |
|
Total assets
|
|
|
4,536 |
|
|
|
15,769 |
|
|
|
46,355 |
|
Long-term debt, less current portion
|
|
|
|
|
|
|
|
|
|
|
5,968 |
|
Deficit accumulated during the development stage
|
|
|
(3,142 |
) |
|
|
(10,665 |
) |
|
|
(45,535 |
) |
Total stockholders equity
|
|
|
4,422 |
|
|
|
14,623 |
|
|
|
34,428 |
|
41
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial
condition and results of operations should be read in
conjunction with Selected Financial Data and our
financial statements and related notes appearing elsewhere in
this prospectus. In addition to historical information, this
discussion and analysis contains forward-looking statements that
involve risks, uncertainties and assumptions. Our actual results
may differ materially from those anticipated in these
forward-looking statements as a result of certain factors,
including but not limited to those set forth under Risk
Factors and elsewhere in this prospectus.
Overview
We are a biopharmaceutical company focused on in-licensing,
developing and commercializing proprietary product candidates
principally for use in the hospital setting. Since our inception
in 2004, we have in-licensed rights to two Phase III
product candidates, both of which have been studied in prior
Phase III clinical trials conducted by our licensors. We
have in-licensed the exclusive U.S. and Canadian rights
to IV APAP, an intravenous formulation of acetaminophen
that is currently marketed in Europe for the treatment of acute
pain and fever by Bristol-Myers Squibb Company, or BMS. We
believe that IV APAP is the only stable,
pharmaceutically-acceptable intravenous formulation of
acetaminophen. We have also in-licensed the exclusive North
American and European rights to omiganan pentahydrochloride 1%
aqueous gel, or Omigard, for the prevention and treatment of
device-related, surgical wound-related and burn-related
infections.
We believe that the hospital setting is a concentrated,
underserved market for pharmaceuticals and anticipate building
our own, hospital-focused sales force as our product candidates
approach potential U.S. Food and Drug Administration, or
FDA, approval. We intend to build a leading franchise in the
hospital setting, continuing to focus on products that are in
late-stages of development, currently commercialized outside the
United States, or approved in the United States but with
significant commercial potential for proprietary new uses or
formulations.
We were incorporated in May 2004. During 2004, we focused on
hiring our management team and initial operating employees and
on in-licensing our first product candidate, Omigard.
Substantial operations did not commence until September 2004.
During 2005, we completed the special protocol assessment, or
SPA, for Omigard, and initiated Phase III clinical trials
for this product candidate. In March 2006, we
in-licensed rights
to IV APAP from BMS. Pending further discussions with the
FDA concerning our Phase III development program
for IV APAP, we plan to initiate the remaining
Phase III clinical trial requirements for this product
candidate in the fourth quarter of 2006.
We are a development stage company. We have incurred significant
net losses since our inception. As of June 30, 2006, we had
an accumulated deficit of $45.5 million. These losses have
resulted principally from costs incurred in connection with
research and development activities, including license fees,
costs of clinical trial activities associated with our current
product candidates and general and administrative expenses. We
expect to continue to incur operating losses for the next
several years as we pursue the clinical development and market
launch of our product candidates and acquire or in-license
additional products, technologies or businesses that are
complementary to our own.
We have not generated any revenues to date, and we do not expect
to generate any revenues from licensing, achievement of
milestones or product sales until we are able to commercialize
our product candidates ourselves or execute a collaboration
arrangement.
42
|
|
|
Research and Development Expenses |
Our research and development expenses consist primarily of
license fees, salaries and related employee benefits, costs
associated with clinical trials managed by our contract research
organizations, or CROs, and costs associated with non-clinical
activities, such as regulatory expenses. Our most significant
costs are for license fees and clinical trials. The clinical
trial expenses include payments to vendors such as CROs,
investigators, clinical suppliers and related consultants. Our
historical research and development expenses relate
predominantly to the in-licensing of IV APAP and Omigard
and clinical trials for Omigard. We charge all research and
development expenses to operations as incurred because the
underlying technology associated with these expenditures relates
to our research and development efforts and has no alternative
future uses.
We use external service providers and vendors to conduct our
clinical trials, to manufacture our product candidates to be
used in clinical trials and to provide various other research
and development related products and services. A substantial
portion of these external costs are tracked on a project basis.
We use our internal research and development resources across
several projects and many resources are not attributable to
specific projects. A substantial portion of our internal costs,
including personnel and facility related costs, are not tracked
on a project basis and are included in the
unallocated category in the table below.
The following summarizes our research and development expenses
for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from | |
|
|
|
|
|
|
|
Period from | |
|
|
May 26, 2004 | |
|
|
|
|
|
May 26, 2004 | |
|
|
(Inception) | |
|
|
|
Six Months Ended | |
|
(Inception) | |
|
|
Through | |
|
Year Ended | |
|
June 30, | |
|
Through | |
|
|
December 31, | |
|
December 31, | |
|
| |
|
June 30, | |
Product Candidate |
|
2004 | |
|
2005 | |
|
2005 | |
|
2006 | |
|
2006 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In thousands) | |
IV APAP
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
25,698 |
|
|
$ |
25,698 |
|
Omigard
|
|
|
2,001 |
|
|
|
4,802 |
|
|
|
1,850 |
|
|
|
6,238 |
|
|
|
13,041 |
|
Unallocated
|
|
|
232 |
|
|
|
1,324 |
|
|
|
552 |
|
|
|
1,638 |
|
|
|
3,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,233 |
|
|
$ |
6,126 |
|
|
$ |
2,402 |
|
|
$ |
33,574 |
|
|
$ |
41,934 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At this time, due to the risks inherent in the clinical trial
process and given the early stage of our product development
programs, we are unable to estimate with any certainty the costs
we will incur in the continued development of our product
candidates for potential commercialization. Clinical development
timelines, the probability of success and development costs vary
widely. While we are currently focused on advancing each of our
product development programs, our future research and
development expenses will depend on the determinations we make
as to the scientific and clinical success of each product
candidate, as well as ongoing assessments as to each product
candidates commercial potential. In addition, we cannot
forecast with any degree of certainty which product candidates
will be subject to future collaborations, when such arrangements
will be secured, if at all, and to what degree such arrangements
would affect our development plans and capital requirements.
We expect our development expenses to be substantial over the
next few years as we continue the advancement of our product
development programs. We initiated our Phase III clinical
trial program for Omigard in August 2005, and we have not yet
commenced our own Phase III clinical trials
for IV APAP. We expect to receive results from the
ongoing Omigard clinical trial in the second half of 2007. In
the fourth quarter of 2006, we expect to initiate the remaining
Phase III clinical trial requirements for IV APAP for
submission to the FDA and expect these Phase III clinical
trial results to be available in the first half of 2008. The
lengthy process of completing clinical trials and seeking
regulatory approval for our product candidates requires the
expenditure of substantial resources. Any failure by us or delay
in completing clinical trials, or in obtaining regulatory
approvals, could cause our research and development expense to
increase and, in turn, have a material adverse effect on our
results of operations.
43
Our marketing expenses consist primarily of market research
studies, salaries, benefits and professional fees related to
building our marketing capabilities. We anticipate increases in
marketing expenses as we add personnel and continue to develop
and prepare for the potential commercialization of our product
candidates.
|
|
|
General and Administrative |
Our general and administrative expenses consist primarily of
salaries, benefits and professional fees related to our
administrative, finance, human resources, legal, business
development and internal systems support functions, as well as
insurance and facility costs. We anticipate increases in general
and administrative expenses as we add personnel, comply with the
reporting obligations applicable to publicly-held companies, and
continue to build our corporate infrastructure in support of our
continued development and preparation for the potential
commercialization of our product candidates.
|
|
|
Interest and Other Income |
Interest and other income consist primarily of interest earned
on our cash, cash equivalents and short-term investments.
As of December 31, 2005, we had both federal and state net
operating loss carryforwards of approximately $8.7 million.
If not utilized, the net operating loss carryforwards will begin
expiring in 2024 for federal purposes and 2014 for state
purposes. As of December 31, 2005, we had both federal and
state research and development tax credit carryforwards of
approximately $0.3 million and $0.1 million,
respectively. The federal tax credits will begin expiring in
2024 unless previously utilized and the state tax credits
carryforward indefinitely. Under Section 382 of the
Internal Revenue Code of 1986, as amended, or the Internal
Revenue Code, substantial changes in our ownership may limit the
amount of net operating loss carryforwards that could be
utilized annually in the future to offset taxable income. Any
such annual limitation may significantly reduce the utilization
of the net operating losses before they expire. In each period
since our inception, we have recorded a valuation allowance for
the full amount of our deferred tax asset, as the realization of
the deferred tax asset is uncertain. As a result, we have not
recorded any federal or state income tax benefit in our
statement of operations.
Critical Accounting Policies and Estimates
Our managements discussion and analysis of our financial
condition and results of operations is based on our financial
statements, which have been prepared in conformity with
generally accepted accounting principles in the United States.
The preparation of these financial statements requires us to
make estimates and assumptions that affect the reported amounts
of assets, liabilities, expenses and related disclosures. Actual
results could differ from those estimates.
We believe the following accounting policies to be critical to
the judgments and estimates used in the preparation of our
financial statements.
|
|
|
Research and Development Expenses |
A substantial portion of our on-going research and development
activities are performed under agreements we enter into with
external service providers, including CROs, who conduct many of
our research and development activities. We accrue for costs
incurred under these contracts based on factors such as
estimates of work performed, milestones achieved, patient
enrollment and experience with similar contracts. As actual
costs become known, we adjust our accruals. To date, our
accruals have been within managements estimates, and no
material adjustments to research and development expenses have
been recognized. We expect to expand the level of research and
development activity performed by external
44
service providers in the future. As a result, we anticipate that
our estimated accruals will be more material to our operations
in future periods. Subsequent changes in estimates may result in
a material change in our accruals, which could also materially
affect our results of operations.
Effective January 1, 2006, we adopted Statement of
Financial Accounting Standards, or SFAS, No. 123(R),
Share-Based Payment, which revises
SFAS No. 123, Accounting for Stock-Based
Compensation and supersedes Accounting Principles Board, or
APB, Opinion No. 25, Accounting for Stock Issued to
Employees. SFAS No. 123(R) requires that
share-based payment transactions with employees be recognized in
the financial statements based on their fair value and
recognized as compensation expense over the vesting period.
Prior to SFAS No. 123(R), we disclosed the pro forma
effects of applying SFAS No. 123 under the minimum
value method. We adopted SFAS No. 123(R) effective
January 1, 2006, prospectively for new equity awards issued
subsequent to December 31, 2005. The adoption of
SFAS No. 123(R) in the first quarter of 2006 did not
result in the recognition of additional stock-based compensation
expense.
Under SFAS No. 123(R), we calculate the fair value of
stock option grants using the Black-Scholes option-pricing
model. The assumptions used in the Black-Scholes model were
6.06-6.08 years for the expected term, 70% for the expected
volatility, 4.36-5.08% for the risk free rate and 0% for
dividend yield for the six months ended June 30, 2006.
Future expense amounts for any particular quarterly or annual
period could be affected by changes in our assumptions.
The weighted average expected option term for 2006 reflects the
application of the simplified method set out in SEC Staff
Accounting Bulletin, or SAB, No. 107 which was issued in
March 2005. The simplified method defines the life as the
average of the contractual term of the options and the weighted
average vesting period for all option tranches.
Estimated volatility for fiscal 2006 also reflects the
application of SAB No. 107 interpretive guidance and,
accordingly, incorporates historical volatility of similar
public entities.
As of June 30, 2006, we had approximately $1.5 million
of unrecognized share-based compensation costs related to
nonvested equity awards. As of June 30, 2006, we had
outstanding vested options to purchase 341,768 shares of
our common stock and unvested options to purchase
5,427,703 shares of our common stock with an intrinsic
value
of and ,
respectively, based on an estimated initial public offering
price
of per
share.
Prior to January 1, 2006, we applied the
intrinsic-value-based method of accounting prescribed by APB
Opinion No. 25 and related interpretations. Under this
method, if the exercise price of the award equaled or exceeded
the fair value of the underlying stock on the measurement date,
no compensation expense was recognized. The measurement date was
the date on which the final number of shares and exercise price
were known and was generally the grant date for awards to
employees and directors. If the exercise price of the award was
below the fair value of the underlying stock on the measurement
date, then compensation cost was recorded, using the
intrinsic-value method, and was generally recognized in the
statements of operations over the vesting period of the award.
The fair value of our common stock has been established by our
board of directors and took into consideration contemporaneous
independent valuations of the Companys common stock
beginning in March 2006. We have applied the guidance in the
American Institute of Certified Public Accountants, or AICPA,
Audit and Accounting Practice Aid Series, Valuation of
Privately-Held-Company Equity Securities Issued as
Compensation, to determine the fair value of our common
stock for purposes of setting the exercise prices of stock
options granted to employees and others. This guidance
emphasizes the importance of the operational development in
determining the value of the enterprise. As a development stage
enterprise, we are at an early stage of existence, primarily
focused on development with an unproven business model. To date,
we have been funded primarily by venture capitalists with a
history of funding
start-up, high-risk
entities with the potential for high returns in the event the
investments are successful.
45
Prior to the licensing of IV APAP in March 2006, we valued
our common stock at a nominal amount when we were considered to
be in a very early stage of development (stages 1 and 2) as
defined in the AICPA guidance, where the preferences of the
preferred stockholders, in particular the liquidation
preferences, are very meaningful. We utilized an asset-based
approach for enterprise value and allocated such value to
preferred and common stock based on the current value method.
The significant estimates used in the asset-based approach
consisted of the valuation of our assets and liabilities, which
we determined were substantially the same as their fair market
values. Since the fair market value of our net assets, including
project costs incurred, was less than the liquidation value of
our preferred stock, no significant value was assigned to our
common stock under the current value method, which allocates
value based on liquidation preferences. We did not obtain a
contemporaneous independent valuation prior to 2006 as we were
focused on product development and fund raising and believed our
board of directors, all of whom are related parties, had the
requisite experience at valuing early stage companies.
Subsequent to our licensing of IV APAP but prior to the
initiation of our initial public offering process on
June 14, 2006, based on a contemporaneous independent
valuation performed by an unrelated valuation specialist, we
increased our common stock valuation to $0.34 per share.
Our valuation utilized a market-based approach for enterprise
value and allocated such value to preferred and common stock
based on an option pricing model. This approach is consistent
with the AICPA guidance based on our stage of development
following our in-licensing of rights to IV APAP. The
determination of enterprise value was based on our Series A-3
preferred stock financing, in which greater than 50% of the
investors consisted of new investors to Cadence. The increase in
our common stock valuation primarily related to the in-licensing
of IV APAP and the advancement of our business model which led
to the utilization of a market-based approach.
Subsequent to the initiation of our initial public offering
process, based on a contemporaneous independent valuation
performed by an unrelated valuation specialist, we increased our
common stock valuation to $0.80 per share. Our valuation
utilized a market-based approach for enterprise value and
allocated such value to preferred and common stock based on an
option pricing model. The determination of enterprise value was
based on an equal weighting of our Series A-3 preferred stock
financing and valuation ranges provided by the underwriters for
this offering. The valuation point selected from the
underwriters valuation ranges was discounted by 40% to
reflect the lack of marketability that was determined based on
put-option analysis and published data regarding marketability
discounts in initial public offerings. The increase in our
common stock valuation primarily related to the prospect of an
initial public offering at higher valuations than our Series A-3
preferred stock financing.
Since we utilized an asset-based approach in our very early
stage of development and moved to a market-based approach upon
the in-licensing of IV APAP, the probability of successful
development of our product candidates was not a specific
variable used in our valuation approaches. However, this
probability was considered in the price paid for our Series A-3
preferred stock and the valuation ranges provided by the
underwriters, which are specific factors included in our
valuation approaches.
Equity instruments issued to non-employees are recorded at their
fair value as determined in accordance with
SFAS No. 123(R) and Emerging Issues Task Force 96-18,
Accounting for Equity Instruments That are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling
Goods and Services, and are periodically revalued as the
equity instruments vest and are recognized as expense over the
related service period.
46
Results of Operations
|
|
|
Comparison of six months ended June 30, 2006 and
2005 |
Research and Development Expenses. Research and
development expenses increased to $33.6 million for the six
months ended June 30, 2006 from $2.4 million for the
comparable period during 2005. This increase of
$31.2 million primarily was due to:
|
|
|
|
|
an increase of $25.7 million in our IV APAP program
primarily as a result of a $25.0 million license fee which
was immediately expensed as in-process research and development; |
|
|
|
|
an increase of $4.4 million in our Omigard program as a
result of clinical trial and related costs for a Phase III
clinical trial initiated in August 2005; and |
|
|
|
|
|
an increase of $1.1 million in unallocated expenses as a
result of increased salaries and related personnel costs from
increased research and development staff to support our clinical
and regulatory efforts related to both Omigard and IV APAP. |
|
Marketing Expenses. Marketing expenses increased to
$0.3 million for the six months ended June 30, 2006
from $0.1 million for the comparable period during 2005.
This increase of $0.2 million primarily was due to higher
market research and branding and personnel costs in 2006.
General and Administrative Expenses. General and
administrative expenses increased to $1.5 million for the
six months ended June 30, 2006 from $0.5 million for
the comparable period during 2005. This increase of
$1.0 million primarily was due to legal fees related to the
IV APAP license agreement and our new facility lease, other
professional fees and consulting fees.
Interest Income. Interest income increased to $553,000
for the six months ended June 30, 2006 from $14,000 for the
comparable period during 2005. This increase of $539,000
primarily was due to the increase in average cash and investment
balances as a result of preferred stock sales and higher
interest rates in 2006.
Interest Expense. Interest expense increased to $44,000
for the six months ended June 30, 2006 from zero for the
comparable period during 2005. This increase of $44,000 was
primarily due to non-cash interest expense related to the
warrants issued to Silicon Valley Bank and Oxford Finance
Corporation in connection with their February 2006 commitment to
lend us $7.0 million.
|
|
|
Comparison of year ended December 31, 2005 to the
period from May 26, 2004 (inception) through
December 31, 2004 |
Research and Development Expenses. Research and
development expenses increased to $6.1 million for the year
ended December 31, 2005 from $2.2 million for the
period from May 26, 2004 (inception) through
December 31, 2004. This increase of $3.9 million
primarily was due to:
|
|
|
|
|
|
an increase of $2.8 million in our Omigard program as a
result of clinical trial and related costs offset by a decrease
in license fees; and |
|
|
|
|
an increase of $1.1 million in unallocated expenses as a
result of increased salaries and related personnel costs from
increased research and development staff to support our initial
clinical and regulatory efforts. |
Marketing Expenses. Marketing expenses increased to
$240,000 for the year ended December 31, 2005 from $41,000
for the period from May 26, 2004 (inception) through
December 31, 2004. This increase of $199,000 primarily was
due to market research, branding and personnel costs in 2005.
General and Administrative Expenses. General and
administrative expenses increased to $1.4 million for the
year ended December 31, 2005 from $0.9 million for the
period from May 26, 2004 (inception) through
December 31, 2004. This increase of $0.5 million
primarily was due to salaries and
47
related costs as we expanded our general and administrative
functions to support our operations, as well as legal fees,
other professional fees and consulting fees.
Interest Income. Interest income increased to $256,000
for the year ended December 31, 2005 from $9,000 for the
period from May 26, 2004 (inception) through
December 31, 2004. This increase of $247,000 primarily was
due to the increase in average cash and investment balances and
interest rates in 2005.
Liquidity and Capital Resources
Since inception, our operations have been financed primarily
through the private placement of equity securities. Through
June 30, 2006, we received net proceeds of approximately
$79.5 million from the sale of shares of our preferred and
common stock as follows:
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from July 2004 to June 2006, we issued and sold a total of
8,551,740 shares of common stock for aggregate net proceeds
of $0.6 million; |
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from July 2004 to August 2004, we issued and sold a total of
8,085,108 shares of Series A-1 preferred stock for
aggregate net proceeds of $7.5 million; |
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from June 2005 to September 2005, we issued and sold
17,675,347 shares of Series A-2 preferred stock for
aggregate net proceeds of $17.6 million; and |
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in March 2006, we issued and sold a total of
53,870,000 shares of Series A-3 preferred stock for
aggregate net proceeds of $53.8 million. |
In February 2006, we entered into a $7.0 million loan and
security agreement with Silicon Valley Bank and Oxford Finance
Corporation to provide us with growth capital. We drew down
$7.0 million in June 2006 and have no further credit
available under this agreement. We are required to make interest
only payments on the loan balance for the first six months of
the loan, and beginning February 2007, we are required to make
the first of 30 equal monthly principal and interest payments.
Interest accrues on all outstanding amounts at the fixed rate of
11.47%. The loan is collateralized by substantially all of our
assets other than intellectual property. We are subject to
prepayment penalties. Under the terms of the agreement, we are
precluded from entering into certain financing and other
transactions, including disposing of certain assets and paying
dividends, and are subject to various non-financial covenants.
In conjunction with the loan and security agreement, we issued
warrants to the lenders to purchase 385,000 shares of
Series A-2 preferred stock at an exercise price of
$1.00 per share.
As of June 30, 2006, we had $42.9 million in cash and
cash equivalents. We have invested a substantial portion of our
available cash funds in money market funds placed with reputable
financial institutions for which credit loss is not anticipated.
We have established guidelines relating to diversification and
maturities of our investments to preserve principal and maintain
liquidity.
Our operating activities used net cash in the amount of
$31.1 million in the six months ended June 30, 2006,
$6.9 million for the year ended December 31, 2005 and
$3.1 million for the period from May 26, 2004
(inception) through December 31, 2004. The increase in
net cash used in operating activities from 2004 to 2005
primarily was due to an increase in our net loss as a result of
increased expenses related to the clinical development of
Omigard and increased salaries and overhead of company
personnel. The increase in net cash used in operating activities
from 2005 to 2006 primarily was due to an increase in our net
loss as a result of increased expenses related to the license
fee paid for IV APAP. We cannot be certain if, when or to
what extent we will receive cash inflows from the
commercialization of our product candidates. We expect our
development expenses to be substantial and to increase over the
next few years as we continue the advancement of our product
development programs.
As a biopharmaceutical company focused on in-licensing,
developing and commercializing proprietary pharmaceutical
product candidates, we have entered into license agreements to
acquire the rights to develop and commercialize our two product
candidates, IV APAP and Omigard. Pursuant to
48
these agreements, we obtained exclusive licenses to the patent
rights and know-how for selected indications and territories.
Under the IV APAP agreement, we paid to BMS a
$25.0 million up-front fee and may be required to make
future milestone payments totaling up to $50.0 million upon
the achievement of various milestones related to regulatory or
commercial events. Under the Omigard agreement, we paid to
Migenix Inc. an aggregate of $2.0 million in the form of an
up-front fee, including the purchase of 617,284 shares of
Migenix common stock, and may be required to make future
milestone payments totaling up to $27.0 million upon the
achievement of various milestones related to regulatory or
commercial events. Under both agreements, we are also obligated
to pay royalties on any net sales of the licensed products.
Our future capital uses and requirements depend on numerous
forward-looking factors. These factors include but are not
limited to the following:
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the progress of our clinical trials, including expenses to
support the trials and milestone payments that may become
payable to BMS or Migenix; |
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our ability to establish and maintain strategic collaborations,
including licensing and other arrangements; |
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the costs involved in enforcing or defending patent claims or
other intellectual property rights; |
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the costs and timing of regulatory approvals; |
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the costs of establishing sales or distribution capabilities; |
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the success of the commercialization of our products; and |
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the extent to which we in-license, acquire or invest in other
indications, products, technologies and businesses. |
We believe that our existing cash, cash equivalents and
short-term investments will be sufficient to meet our projected
operating requirements through at least June 30, 2007.
Until we can generate significant cash from our operations, we
expect to continue to fund our operations with existing cash
resources generated from the proceeds of offerings of our equity
securities and our existing borrowings under our loan and
security agreement. In addition, we may finance future cash
needs through the sale of additional equity securities,
strategic collaboration agreements and debt financing. However,
we have drawn down all available amounts under our existing loan
and security agreement, and we may not be successful in
obtaining strategic collaboration agreements or in receiving
milestone or royalty payments under those strategic
collaboration agreements. In addition, we cannot be sure that
our existing cash and investment resources will be adequate,
that additional financing will be available when needed or that,
if available, financing will be obtained on terms favorable to
us or our stockholders. Having insufficient funds may require us
to delay, scale-back or eliminate some or all of our development
programs, relinquish some or even all rights to product
candidates at an earlier stage of development or renegotiate
less favorable terms than we would otherwise choose. Failure to
obtain adequate financing also may adversely affect our ability
to operate as a going concern. If we raise additional funds by
issuing equity securities, substantial dilution to existing
stockholders would likely result. If we raise additional funds
by incurring additional debt financing, the terms of the debt
may involve significant cash payment obligations as well as
covenants and specific financial ratios that may restrict our
ability to operate our business.
49
Contractual Obligations and Commitments
The following table describes our long-term contractual
obligations and commitments as of December 31, 2005:
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Payments Due by Period |
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Less Than | |
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Total | |
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1 Year | |
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1 - 3 Years |
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4-5 Years |
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After 5 Years |
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(In thousands) |
Long-term debt obligations(1)
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$ |
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$ |
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$ |
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$ |
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$ |
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Operating lease obligations(2)
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147 |
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147 |
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License obligations(3)
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Total
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$ |
147 |
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$ |
147 |
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$ |
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$ |
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$ |
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(1) |
Long-term debt obligations do not include $7.0 million of
indebtedness incurred in June 2006 under our loan and security
agreement with Silicon Valley Bank and Oxford Finance
Corporation. |
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(2) |
In May 2006, we entered into a six-year operating lease for
23,494 square feet of office space. Operating lease
obligations do not include $6.7 million of non-cancelable
operating lease payments related to this lease. Future minimum
payments under the operating lease total $0.2 million,
$1.0 million, $1.1 million, $1.1 million,
$1.2 million, $1.2 million and $0.9 million for
the years ending December 31, 2006, 2007, 2008, 2009, 2010,
2011 and 2012, respectively. |
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(3) |
License obligations do not include additional payments of up to
$77.0 million due upon the occurrence of certain milestones
related to regulatory or commercial events. We may also be
required to pay royalties on any net sales of the licensed
products. License payments may be increased based on the timing
of various milestones and the extent to which the licensed
technologies are pursued for other indications. These milestone
payments and royalty payments under our license agreements are
not included in the table above because we cannot, at this time,
determine when or if the related milestones will be achieved or
the events triggering the commencement of payment obligations
will occur. |
We also enter into agreements with third parties to manufacture
our product candidates, conduct our clinical trials and perform
data collection and analysis. Our payment obligations under
these agreements depend upon the progress of our development
programs. Therefore, we are unable at this time to estimate with
certainty the future costs we will incur under these agreements.
Related Party Transactions
For a description of our related party transactions, see the
Certain Relationships and Related Party Transactions
section of this prospectus.
50
Off-Balance Sheet Arrangements
We have not engaged in any off-balance sheet activities.
Quantitative and Qualitative Disclosures About Market Risk
Our cash and cash equivalents as of June 30, 2006 consisted
primarily of cash and money market funds. Our primary exposure
to market risk is interest income sensitivity, which is affected
by changes in the general level of U.S. interest rates,
particularly because the majority of our investments are in
short-term marketable securities. The primary objective of our
investment activities is to preserve principal while at the same
time maximizing the income we receive from our investments
without significantly increasing risk. Some of the securities
that we invest in may be subject to market risk. This means that
a change in prevailing interest rates may cause the value of the
investment to fluctuate. For example, if we purchase a security
that was issued with a fixed interest rate and the prevailing
interest rate later rises, the value of our investment will
probably decline. To minimize this risk, we intend to continue
to maintain our portfolio of cash equivalents and short-term
investments in a variety of securities including commercial
paper, money market funds and government and non-government debt
securities, all with various maturities. In general, money
market funds are not subject to market risk because the interest
paid on such funds fluctuates with the prevailing interest rate.
51
BUSINESS
Overview
We are a biopharmaceutical company focused on in-licensing,
developing and commercializing proprietary product candidates
principally for use in the hospital setting. Since our inception
in 2004, we have in-licensed rights to two Phase III
product candidates. We have in-licensed the exclusive U.S. and
Canadian rights to IV APAP, an intravenous formulation of
acetaminophen that has previously been studied in six completed
Phase III trials and is currently marketed in Europe for
the treatment of acute pain and fever by Bristol-Myers Squibb
Company, or BMS. We believe that IV APAP is the only
stable, pharmaceutically-acceptable intravenous formulation of
acetaminophen. We intend to initiate Phase III development
for the treatment of acute pain in the fourth quarter of 2006
and Phase III development for the treatment of fever in the
first half of 2007. We also in-licensed the exclusive North
American and European rights to omiganan pentahydrochloride 1%
aqueous gel, or Omigard, for the prevention and treatment of
device-related, surgical wound-related and burn-related
infections. We are currently conducting a Phase III trial
of Omigard for the prevention of local catheter site infections,
or LCSI, to confirm the results observed for the prevention of
LCSI, a secondary endpoint, in a large, completed Phase III
trial. We believe that the hospital setting is a concentrated,
underserved market for pharmaceuticals and anticipate building
our own, hospital-focused sales force as our products approach
potential U.S. Food and Drug Administration, or FDA,
approval. We intend to build a leading franchise in the hospital
setting, continuing to focus on products that are in late-stages
of development, currently commercialized outside the United
States or approved in the United States but with significant
commercial potential for proprietary new uses or formulations.
Our current portfolio consists of the following product
candidates:
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IV APAP for the treatment of acute pain and fever. We are
developing IV APAP in the U.S. market for the
treatment of acute pain and fever. According to IMS Health,
Inc., or IMS, an independent marketing research firm, over
500 million units of injectable analgesics, typically used
to treat pain, were sold in the United States in 2005. Opioids
such as morphine, meperdine, hydromorphone and fentanyl
represent the majority of unit volume in the market but are
associated with a variety of unwanted side effects including
sedation, nausea, vomiting, constipation, cognitive impairment
and respiratory depression. Ketorolac, a non-steroidal
anti-inflammatory drug, or NSAID, is the only
non-opioid injectable
analgesic available for the treatment of acute pain in the
United States. However, ketorolac carries strong warnings from
the FDA for various side effects, including an increased risk of
bleeding a particularly troubling side-effect in the
surgical setting. |
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In March 2006, we in-licensed the patents and the exclusive
development and commercialization rights to IV APAP in the
United States and Canada from BMS. IV APAP has been marketed
outside the United States for approximately four years. Since
its introduction in Europe in mid-2002, over 100 million
doses of IV APAP have been administered to patients, and it
has become the market share leader among injectable analgesics
with 2005 sales of more than $140 million according to IMS.
With approval in over 40 countries, the addition of IV APAP
to our product pipeline is consistent with our strategy to
in-license and develop pharmaceutical candidates with
well-understood risk profiles. In the fourth quarter of 2006, we
expect to initiate the remaining Phase III clinical trial
requirements. We expect these Phase III clinical trial
results to be available in the first half of 2008 and, if
positive, to subsequently submit a new drug application, or NDA,
in the second half of 2008. |
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Omigard for the prevention of intravascular catheter-related
infections. We are developing Omigard for the prevention of
intravascular catheter-related infections in the United States
and Europe. According to the February 2004 Catheter: Global
Markets & Technologies report from Theta Reports,
eight million central venous catheters, or CVCs, were sold in
the United States in 2003, and unit sales are projected to grow
to 11 million by 2007. Although |
52
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CVCs have become an important part of medical care, they can
give rise to dangerous and costly complications, including:
LCSIs, which are infections at the catheter insertion site;
catheter colonization, which is the growth of microorganisms on
the portion of the catheter below the skin surface; and
catheter-related bloodstream infections, or CRBSIs, which are
infections in the bloodstream caused by microorganisms
associated with the catheter. The Centers for Disease Control
and Prevention, or the CDC, estimates that there are 250,000
CRBSIs each year in the United States. The attributable
mortality rate of CRBSIs is approximately 12% to 25% with an
average marginal cost to the healthcare system of
$25,000 per infection. Currently, topical antiseptics are
the primary agent used to cleanse the skin surface around the
catheter insertion site prior to insertion. However, the utility
of these antiseptics is limited, principally due to the
relatively short duration of antimicrobial activity. |
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Omigard is a topical antimicrobial that has been demonstrated to
be rapidly bactericidal and fungicidal with prolonged duration
of activity against all microorganisms commonly found on the
skin surface including multi-drug resistant microorganisms such
as methicillin-resistant staphylococcus aureus, or MRSA.
Importantly, resistance to Omigard has not been induced in the
laboratory after extensive study nor has Omigard demonstrated
potential to induce cross-resistance to other antimicrobial
therapeutics. In July 2004, we in-licensed the patents and the
exclusive development and commercialization rights to Omigard in
North America and Europe for the prevention of device-related,
surgical wound-related and burn-related infections. |
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Omigard has previously been studied in a large, completed
Phase III trial that demonstrated statistically significant
outcomes for the prevention of LCSIs and catheter colonization.
The presence of an LCSI may result in replacement of the
catheter and/or administration of antibiotics, both of which
create additional costs to hospitals and have the potential for
adverse safety outcomes. In addition, catheter colonization is
well correlated with CRBSIs, according to a published review of
clinical trials. In August 2005, we initiated a confirmatory
Phase III clinical trial with a primary endpoint, the
prevention of LCSIs. We reached agreement with the FDA on the
trial design, endpoints and statistical analysis plan received
through the special protocol assessment, or SPA, process. We
expect these Phase III results to be available in the
second half of 2007 and to subsequently submit an NDA for
Omigard in the first half of 2008. |
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Other product candidates. We are also exploring the
opportunity to develop new formulations of omiganan
pentahydrochloride for the prevention and treatment of other
device-related, surgical wound-related and burn-related
infections. We are currently preparing preclinical experiments
in animal models prior to initiating human clinical trials. |
Our Strategy
Our goal is to be a leading biopharmaceutical company focused on
the development and commercialization of proprietary
pharmaceuticals principally for use in the hospital setting. Our
near-term strategy is to focus on completing the development of
and commercializing our existing product candidates. Our
long-term strategy is to in-license, acquire, develop and
commercialize additional product candidates that are in
late-stages of development, currently commercialized outside the
United States or approved in the United States but with
significant commercial potential for proprietary new uses or
formulations. Specifically, we intend to:
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Obtain regulatory approval for our Phase III hospital
product candidates, IV APAP and Omigard. We are applying the
expertise of our development teams to conduct and successfully
complete the Phase III clinical trials associated with each
product candidate. We have designed our Phase III clinical
programs in an effort to reduce clinical development risk,
facilitate regulatory approval and optimize marketing claims. To
that end, |
53
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we plan to resume a U.S. Phase III program later this
year for IV APAP previously initiated by BMS, and we expect
to submit an NDA in the second half of 2008 based on the
previously completed trials and any further trials that may be
required by the FDA. In addition, we have reached a written
agreement with the FDA through the SPA process for a single
confirmatory Phase III study of Omigard for the prevention
of LCSIs. |
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Build a highly leverageable sales organization targeting
hospitals. We intend to build a commercial organization
focused on promoting our products principally to hospitals in
the United States. We believe that both IV APAP and Omigard
can be effectively promoted by our own sales force targeting key
hospitals in the United States. Importantly, the number of
institutions comprising the hospital marketplace is relatively
limited and we believe a small number of these institutions
account for a substantial portion of the prescribing activity.
The concentrated nature of this market creates the opportunity
for significant marketing synergies as we intend to leverage our
sales force across multiple therapeutic categories in the
hospital. Outside the United States, we intend to establish
strategic partnerships for the commercialization of our products
where we have commercialization rights. |
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Expand our product portfolio through acquiring or
in-licensing additional late-stage, hospital-focused products
with well-understood risk profiles. We will seek additional
opportunities to acquire or in-license products to more fully
exploit our clinical, regulatory, manufacturing, sales and
marketing capabilities. We believe that our focus on the
hospital market enables us to evaluate a broader range of
products across multiple therapeutic areas for possible
acquisition. In addition, competition from large pharmaceutical
companies has generally diminished in the hospital marketplace
as greater emphasis has shifted toward larger opportunities in
the primary care setting. To reduce the
time-to- market and the
risks and costs of clinical development, we focus on products
that are in late-stages of development, currently commercialized
outside the United States or approved in the United States but
with significant commercial potential for proprietary new uses
or formulations. |
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Pursue additional indications and commercial opportunities
for our product candidates. We will seek to maximize the
value of IV APAP, Omigard and any other product candidates
we may in-license, acquire or develop by pursuing other
indications and commercial opportunities for such candidates.
For example, we have rights to develop and commercialize
omiganan pentahydrochloride for additional indications related
to the prevention and treatment of device-related, surgical
wound-related and burn-related infections. |
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The Hospital Market
Large, multinational pharmaceutical companies have generally
decreased marketing efforts focused on hospital-use drugs,
instead focusing on drugs that can be marketed in the larger
outpatient setting. We believe this reduced emphasis on the
hospital marketplace presents us with an excellent opportunity
to in-license, acquire, develop and commercialize products that
address unmet medical needs in the hospital setting. We believe
the concentrated nature of the hospital marketplace will allow
for our expansion into other therapeutic areas without
substantial investment in additional commercial infrastructure.
According to IMS, approximately $28 billion was spent on
promotional activities by the pharmaceutical industry in 2004.
Of this amount, IMS estimates that only $1 billion was
directed towards hospital-based physicians and directors of
pharmacies. This hospital-focused spending represents
approximately 3% of total promotional expenditures and has
declined from approximately 6% of total spending in 1996. The
significant imbalance towards the outpatient market is
highlighted by spending on
direct-to-consumer
campaigns and drug sampling which now make up close to 80% of
promotional spending for pharmaceuticals.
Despite these declining promotional expenditures,
U.S. hospitals and clinics accounted for approximately
$54 billion or 21% of U.S. pharmaceutical sales in
2005, according to IMS. Furthermore, we believe pharmaceutical
sales to acute care hospitals are highly concentrated among a
relatively small
54
number of large institutions. For example, according to Wolters
Kluwer Health, an independent marketing research firm, only
2,000 of the approximately 5,000 acute care hospitals in the
United States represent more than 80% of injectable analgesic
sales. The concentration of high-prescribing institutions
enables effective promotion of pharmaceuticals utilizing a
relatively small, dedicated sales and marketing organization. We
believe the relative lack of promotional efforts directed toward
the highly concentrated hospital marketplace makes it an
underserved and compelling opportunity, especially for a
biopharmaceutical company commercializing its products directly
through its own dedicated sales force.
We believe a typical sales representative focused on
office-based physicians can generally promote only two to three
products effectively; whereas, a typical hospital-focused sales
representative can effectively promote five to six products.
Furthermore, we believe a typical sales representative focused
on office-based physicians can effectively reach five to seven
physicians per day; whereas, a typical hospital-focused sales
representative can reach many more physicians, nurses and
pharmacy directors within a given institution. Notably, a
hospital-focused sales representative also faces significantly
less travel time between sales calls and less wait time in
physician offices as a large number of prescribers can be found
in a single location. Furthermore, drug sampling generally does
not occur in hospitals, which represents a significant cost
advantage versus marketing to office-based physicians. A single
sales representative can promote products from multiple
therapeutic categories to multiple prescribers within the
institution.
In addition to hospitals, we intend to promote our products to
certain ambulatory care centers, including ambulatory surgery
centers and dialysis clinics, which tend to be located in close
proximity to a hospital and can be targeted with our hospital
sales force. According to Verispan, there are approximately
5,000 outpatient surgery centers in the United States. We
estimate that fewer than 500 of these surgery centers represent
the high opportunity segment for our products. According to the
U.S. General Accounting Office, there are approximately
4,000 dialysis clinics in the United States, of which we believe
most are either co-located with a hospital or located in close
proximity to a hospital.
In recent years there has also been significant activity by both
government agencies and accrediting organizations to hold
hospitals accountable for improving patient outcomes across a
wide variety of areas, including infection control, pain
management, cardiovascular care and others. For example,
according to the Association for Professionals in Infection
Control and Epidemiology, there are now 13 U.S. states that
require hospitals to publicly report their infections rates and
there are more than 20 other states that have had legislative
activity related to public reporting of infection rates in 2006.
These types of initiatives support our view that significant
unmet medical needs remain in hospitals today.
55
Our Product Development Programs
Our current product development programs are focused on
late-stage development products principally for use in the
hospital setting. Our portfolio consists of the following
product candidates:
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Development | |
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Product Candidate |
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Commercial Rights | |
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IV APAP(1)
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Treatment of acute pain adults |
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Phase III |
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Marketed (by BMS) |
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United States, Canada |
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Treatment of acute pain pediatrics |
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Phase III |
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Marketed (by BMS) |
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United States, Canada |
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Treatment of fever adults |
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Phase III |
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Marketed (by BMS) |
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United States, Canada |
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Treatment of fever pediatrics |
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Phase III |
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Marketed (by BMS) |
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United States, Canada |
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Omigard
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Prevention of local catheter site infections |
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Phase III |
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Phase III |
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North America, Europe |
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(1) |
In March 2006, we in-licensed the patents and the exclusive
development and commercialization rights to IV APAP in the
United States and Canada from BMS. BMS has completed
Phase III trials with respect to the above indications,
excluding the treatment of fever in adults, for IV APAP in
Europe and the United States, which we intend to use in our NDA
filing following agreement with the FDA on additional clinical
trials needed in the United States for approval. Because the
Phase III clinical trial requirements differ in the United
States compared to Europe, we are required to complete
additional Phase III trials, particularly to demonstrate
safety and efficacy from multiple day dosing in additional
patient populations, including patients undergoing soft tissue
surgery, such as abdominal hysterectomy, and patients with
fever. In the fourth quarter of 2006, we expect to initiate the
remaining Phase III clinical trial requirements for
submission in the United States. We expect these Phase III
clinical trial results to be available in the first half of 2008
and, if positive, to submit an NDA in the second half of 2008. |
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IV APAP for the Treatment of Acute Pain and Fever |
Acute pain is generally defined as pain with relatively short
duration and recent onset with an easily identifiable cause. It
serves to warn the patient of tissue damage and is often sharp
initially and followed by aching pain. In the hospital setting,
acute pain is generally classified as post-operative or
non-operative.
Post-operative pain is a response to tissue damage during
surgery that stimulates peripheral nerves, which signal the
brain to produce a sensory and emotional response.
Post-operative pain may occur not only at the surgical site but
also in areas not directly affected by the surgical procedure.
The pain may be experienced by an inpatient or outpatient and
can be felt after surgical procedures.
Numerous studies reveal that the incidence and severity of
post-operative pain is primarily determined by the type of
surgery, duration of surgery and the treatment choice following
surgery. Post-operative pain is usually greatest with abdominal,
head-neck, orthopedic and thoracic surgery and may last up to
eight days after the surgical procedure. In comparison, surgical
procedures such as arthroscopy, breast biopsy, hernia repair and
plastic surgery tend to be less invasive and generally produce
minor surgical trauma.
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Despite major improvements in surgical techniques and the
introduction of novel drugs, the overall treatment of
post-operative pain has not substantially improved over the last
20 years. According to the industry research group
Datamonitor, up to 75% of patients report inadequate pain
relief. Such inadequate pain relief often leads to nausea,
vomiting, decreased mobilization and reduced nutritional
intake all of which impede patient
recovery and can lead to infections and blood clots
in the legs and lungs all of which jeopardize
patient safety. All of these factors have a major impact on
patient care and hospital economic outcomes, including prolonged
hospital stays.
Non-operative pain in the hospital is typically associated with
diseases, disorders, trauma and other conditions. The most
common non-operative pain types among hospitalized patients
include pain associated with cancer, trauma, burns, gallstones
and cardiovascular events. Other incidences of non-operative
pain among hospitalized patients are often related to HIV,
pancreatitis, sickle cell disease and other diseases. Inadequate
pain management in these patients also leads to poor health and
economic outcomes.
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Market for Injectable Analgesics |
Drugs used to treat pain are collectively known as analgesics.
Injectable formulations of analgesics are typically used when
patients are unable to take medications by mouth, faster onset
of analgesia is required, or it is otherwise more convenient to
administer drugs in injectable form. Hospitalized patients may
be unable to take medications by mouth for a variety of reasons
including post-anesthesia sedation, other forms of sedation,
nausea, vomiting, gastrointestinal limitations or other
conditions.
According to IMS, the U.S. market for injectable analgesics
exceeded 500 million units in 2005. Morphine is the current
market leader and accounted for more than 300 million units
in 2005. Other injectable opioids such as meperidine,
hydromorphone and fentanyl, which are all available in generic
forms, accounted for more than 135 million units in 2005.
Ketorolac (Toradol), a genericized NSAID, is the only
non-opioid injectable
analgesic for acute pain available in the United States.
According to IMS, injectable ketorolac sold more than
40 million units in 2005.
According to Datamonitor, up to 53 million patients undergo
surgical procedures each year in the United States. Datamonitor
projects the number of surgical procedures to increase as the
elderly population increases and as technological advances allow
new surgical procedures to be performed. As such, we expect that
the need for safe and effective drugs to treat pain in the
post-operative setting will continue to increase.
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Limitations of Current Therapies |
Only two classes of injectable analgesics, opioids and NSAIDs,
are currently available in the United States for the treatment
of acute pain.
Opioids have been used as analgesics for over 2,000 years
and continue to be the mainstay of post-operative pain
management. Opioids activate certain receptors in the central
nervous system, which produce analgesia, euphoria and other
positive effects. A range of opioids are available in injectable
form including morphine, fentanyl, meperidine and hydromorphone.
Opioids, however, are associated with a variety of unwanted side
effects including sedation, nausea, vomiting, constipation,
headache, cognitive impairment and respiratory depression.
Respiratory depression can lead to death if not monitored
closely. Side effects from opioids have been demonstrated to
reduce quality of life and side-effect-related dosing
limitations can result in suboptimal pain relief due to
under-dosing. All of these side effects may require additional
medications or treatments and can prolong patient stay in the
post-anesthesia care unit as well as a patients overall
stay in the hospital or in an ambulatory surgical center.
Opioid-related side effects also impose significant economic
burdens on hospitals and ambulatory surgical centers. For
example, nausea and vomiting, common opioid-related side
effects, can cause the need for administration of anti-nausea
medication, increased monitoring by nurses, increased length of
stay
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in the post-anesthesia care unit and overall length of stay in
the hospital, diverting resources that could otherwise be
utilized in revenue-generating activities. Studies have
demonstrated increased costs related to post-operative opioid
administration from not only increased personnel time and length
of stay but also increased supply and drug costs, including
drugs to manage the nausea and vomiting.
The only non-opioid
injectable analgesic for acute pain available in the United
States is the NSAID ketorolac. NSAIDs act as non-selective
inhibitors of the enzyme cyclooxygenase, inhibiting both the
cyclooxygenase-1, or
COX-1, and cyclooxygenase-2, or COX-2, enzymes. The inhibition
of COX-2 produces an anti-inflammatory effect resulting in
analgesia. Since NSAIDs do not produce respiratory depression or
impair gastrointestinal motility, they are considered to be
useful alternatives to opioids for the relief of acute pain.
Studies have also demonstrated the opioid-sparing potential of
ketorolac when used in combination with opioids, as well as
resulting decreases in hospital costs. Published studies have
shown lower overall per-patient costs ranging from $326 to
$2,031 for the patients treated with ketorolac and opioids
compared to those treated with opioids alone.
Despite these economic advantages, the use of ketorolac is
severely limited in the post-operative period. Non-specific
NSAIDs such as ketorolac block COX-1, which plays a major role
in the release of prostaglandins to regulate platelet
aggregation and protect the lining of the stomach. As a result,
bleeding, gastrointestinal and renal complications are
significant impediments to the post-operative use of ketorolac.
The product carries a black box warning for these side effects.
A black box warning is the strongest type of warning that the
FDA can require for a drug and is generally reserved for warning
prescribers about adverse drug reactions that can cause serious
injury or death. The FDA specifically warns that ketorolac
should not be used in various patient populations that are
at-risk for bleeding, as a prophylactic analgesic prior to major
surgery or for intraoperative administration when stoppage of
bleeding is critical.
The World Health Organization, or WHO, has established a
three-step analgesic ladder for the treatment of pain, which
recommends initial treatment with a non-opioid such as
acetaminophen, aspirin, or NSAIDs followed by the addition of
opioids as pain increases. The WHO analgesic ladder is
consistent with the practice of multimodal analgesia, which
involves the use of more than one class of drug for pain control
to obtain additional analgesia, reduce side effects or both. In
the United States, this recommended practice of multimodal
analgesia is not fully available to physicians given the current
lack of an intravenous formulation of acetaminophen. With the
availability of IV APAP in Europe, physicians are able to
treat post-operative pain with IV APAP as baseline therapy
and use opioids in combination as needed for increasing levels
of pain.
Fever is an increase in internal body temperature above its
normal range of 98.6 degrees Fahrenheit. A significant
fever is usually defined as an oral or ear temperature of
greater than 102 degrees Fahrenheit or a rectal temperature
of greater than 103 degrees Fahrenheit. Very high fevers
may cause hallucinations, confusion, irritability, convulsions
or death. Fever is most often an important immune system
response to a viral or bacterial infection since most viruses
and bacteria cannot thrive in hot environments. White blood
cells release substances called pyrogens that act on the
hypothalamus in the brain to raise body temperature.
Hospitalized patients are at especially high risk for developing
fever given the potential exposure to various infectious
microorganisms, invasive procedures and medications. Surgery is
the most common source of fever in the hospital setting, and
published incidence rates range from 14% to 91% of
post-operative patients. Infections such as wound infections,
urinary tract infections and pneumonia are the next most
frequent causes. However, deep venous thrombosis, pulmonary
emboli, myocardial infarction and medications are also important
potential sources of fever. Many patients also present with
fever upon arrival at the hospital due to community-acquired
infections, underlying diseases, including cancer and HIV,
severe sunburn, and often the origin of a fever is unknown.
Fever is also the most common reason parents bring their
children to the emergency rooms of hospitals. Pediatric fever is
particularly worrisome as approximately 4% of children under age
five
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experience fever-induced seizures, or febrile seizures. The
signs of febrile seizures, which occur when a childs
temperature rises or falls rapidly, include loss of
consciousness and convulsions.
Acetaminophen, ibuprofen and aspirin are the most commonly used
medications to treat fever. The use of ibuprofen, an NSAID, and
aspirin are limited due to gastrointestinal side-effects and the
risk of bleeding. Ibuprofen is not approved for children under
six months of age and is not recommended for patients that are
dehydrated or vomiting continuously. Aspirin is contraindicated
in children and teenagers with viral infections due to the risk
of acquiring Reyes syndrome, a potentially fatal disease.
In the United States, acetaminophen, ibuprofen and aspirin are
not available in intravenous dosage form. However, oral delivery
of medications is often not possible for hospitalized patients
that are unconscious, sedated, fasting, experiencing nausea and
vomiting or are otherwise unable to take medications by mouth.
Rectal delivery of medications is sometimes possible; however,
drug absorption is often erratic, resulting in unpredictable
levels of efficacy. Rectal delivery in infants is further
complicated by frequent bowel movements which may lead to
difficulty determining the amount of medication delivered. It is
often more convenient to administer medications in intravenous
dosage form, particularly for patients that currently have an
intravenous line in place. We believe that the availability
of IV APAP in the United States would offer a significant
new treatment option for hospitalized patients with fever.
IV APAP has been marketed by BMS in Europe since its launch in
France in mid-2002 and subsequent approvals in other countries
throughout Europe and other parts of the world. After obtaining
these approvals, BMS elected to seek a partner to develop and
commercialize IV APAP in the United States and Canada based
on a new corporate strategy to focus the companys research
and development on 10 specific disease areas, which do not
include the treatment of pain. In March 2006, we completed our
agreement with BMS to
in-license these rights.
Acetaminophen is the most widely used drug for pain relief and
the reduction of fever in the United States. The mechanism of
action of acetaminophen remains not well understood; however, it
is believed that acetaminophen acts in part on central COX
enzymes without the peripheral anti-inflammatory effects,
platelet inhibition or other side effects associated with
NSAIDs. Acetaminophen was discovered in the late
19th century but was not available for sale until 1955 when
it was introduced under the brand name Tylenol in the United
States. Acetaminophen is currently available in over 600
combination and single ingredient prescription and
over-the-counter
medicines, including tablet, caplet, orally-dosed liquid
suspension, powder and suppository forms for both adults and
children.
Historically, poor stability in aqueous solutions and inadequate
solubility of acetaminophen prevented the development of an
intravenous dosage form. Acetaminophen will decompose in the
presence of moisture or water. The rate of decomposition is
accelerated as the temperature is increased and upon exposure to
light. The stability is also a function of the solutions
pH, which creates a further challenge to formulate acetaminophen
in an aqueous solution suitable for intravenous administration.
We believe that IV APAP is the only stable,
pharmaceutically-acceptable intravenous formulation of
acetaminophen.
Prior to the introduction of IV APAP in Europe, BMS had
developed an intravenous formulation of propacetamol, a prodrug
that is rapidly converted in the bloodstream to acetaminophen.
This formulation was developed as an alternative approach given
the challenges associated with formulating acetaminophen itself
in solution. Available in Europe for more than 20 years,
intravenous propacetamol was marketed under the brand name
Pro-Dafalgan and was generally indicated for the treatment of
acute moderate pain and the reduction of fever. Pro-Dafalgan was
provided for use as a dried powder to be reconstituted in
solution prior to intravenous administration. In healthcare
workers reconstituting the drug, there were reported incidences
of allergic reactions, including mild allergic reactions on the
skin and severe allergic shock from inhalation. Intravenous
propacetamol was also associated with pain at the injection site
and other local reactions in approximately 50% of patients
receiving the drug.
59
IV APAP was approved in Europe based on clinical data
demonstrating that the formulation provides superior analgesic
efficacy over placebo and similar analgesic efficacy and
bioequivalence to intravenous propacetamol. Well-controlled
clinical trials have demonstrated that IV APAP has a safety
profile similar to placebo with significantly better
tolerability than intravenous propacetamol upon infusion. Pain
at the injection site has been demonstrated to be no different
than placebo.
IV APAP is the only intravenous formulation of acetaminophen
available anywhere in the world and has now been approved in
over 40 countries. BMS markets IV APAP in Europe and other
countries principally under the brand name Perfalgan. When BMS
launched IV APAP, it withdrew intravenous propacetamol from
the market. Two strengths of IV APAP are commercially
available in these countries in a
ready-to-use solution:
a 50mL bottle containing 0.5g acetaminophen and a 100mL bottle
containing 1g acetaminophen. Both are labeled for
administration via a 15-minute intravenous infusion.
In Europe, IV APAP was initially launched in France in mid-2002,
followed by Germany and Spain in 2003, the United Kingdom in
2004 and Italy in 2005. Despite this country-by-country launch,
according to IMS, IV APAP achieved a 43% dollar share (20%
of unit volume) among all injectable analgesics sold in Europe
in less than four years. In 2005, IV APAP sold more than
55 million units for total sales exceeding
$140 million (U.S. dollars) according to IMS.
We believe the United States represents a substantially larger
market opportunity for IV APAP than Europe. According to
IMS, over 500 million units of injectable analgesics were
sold in the United States in 2005 compared to approximately
320 million in Europe. More significantly, pharmaceutical
pricing continues to be higher in the United States on average.
Each country in the European Union currently employs direct and
other forms of price controls, including reference systems where
prices for new drugs are based upon the prices of existing drugs
that provide similar therapeutic benefit or prices of drugs in
other European countries. According to IMS, the average selling
price in Europe was approximately $2.50 (U.S. dollars) per
unit.
We believe that the key product attributes that will drive
adoption include the proven efficacy and established safety
profile of acetaminophen, the potential ability to reduce
concomitant use of morphine and other opioids, a more convenient
dosage form for some patients and a more rapid onset of action.
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Clinical Development History |
Clinical Overview. There have been 2,241 subjects,
including 1,780 subjects that received IV APAP, studied in
nine clinical trials completed by BMS, largely submitted to
support the Marketing Authorization Application, or MAA, that
resulted in European approval. These trials included two
Phase I trials, six Phase III trials and one large
Phase IV trial. Overall, we believe that the results of
these nine studies demonstrate that IV APAP is safe and
effective in the treatment of post-operative pain in adults and
children. These trials have also demonstrated that IV APAP
reduces the consumption of opioids when used in combination.
Clinical Studies for Post-Operative Pain in Adults. One
Phase III study evaluated 150 adult subjects with
moderate-to-severe pain
following total hip and total knee replacements. Subjects were
randomized to receive IV APAP, intravenous propacetamol or
placebo. We believe this study best demonstrates the efficacy
of IV APAP since the patients in the trial were undergoing
surgical procedures with more severe levels of pain. On the
primary efficacy endpoint, pain relief scores in the patients
treated with IV APAP were statistically higher
(p-value<0.05) than those treated with placebo and
not statistically different than those treated with intravenous
propacetamol from 15 minutes to six hours, at which point
patients received a second dose. P-values indicate the
likelihood that clinical trial results were due to random
statistical fluctuations rather than a true cause and effect.
The lower the p-value, the more likely there is a true
cause-and-effect
relationship. Therefore, p-values provide a sense of the
reliability of the results of the study in question. Typically,
the FDA requires a p-value of less than 0.05 to establish the
statistical significance of a clinical trial.
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The following graph presents the results for pain relief
reported by patients in this Phase III study for
post-operative pain in
adults following major orthopedic surgery, based on a five point
verbal scale, with four representing complete pain relief and
zero representing no pain relief:
In addition, this Phase III study demonstrated the
following results:
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Outcome Measure |
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Result |
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p-value | |
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Median time to morphine rescue
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3.0 hours for IV APAP vs. 0.8 hours for placebo |
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<0.001 |
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Reduction in morphine consumption over the 24-hour period
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33% reduction (19.1mg) for IV APAP compared to placebo |
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<0.01 |
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This Phase III study also demonstrated a statistically
significant reduction in pain intensity and a statistically
significant improvement in patient satisfaction with pain
treatment for IV APAP compared to placebo. Drug-related adverse
events in this trial were similar to placebo.
Two Phase III studies evaluated a total of 349 adult
subjects with
moderate-to-severe pain
following third molar surgery. Subjects were randomized to
receive IV APAP, intravenous propacetamol or placebo.
Statistically significant effects versus placebo
(p-value<0.01) were obtained with IV APAP for
all efficacy criteria, including pain relief, pain intensity
difference, duration of analgesia and patients global
evaluation. There were no statistically significant differences
in treatment-related adverse events between IV APAP and
placebo. IV APAP demonstrated similar results on all efficacy
parameters compared to intravenous propacetamol with
significantly lower incidence of pain at the injection site.
One Phase III study evaluated 163 adult subjects with
moderate-to-severe pain
following minor gynecologic surgery. Subjects were randomized to
receive IV APAP or intravenous propacetamol. IV APAP
demonstrated similar results on all efficacy parameters compared
to intravenous propacetamol with statistically significantly
lower incidence of pain at the injection site.
One Phase IV study evaluated 1,061 subjects with
mild-to-moderate pain
following surgery. All subjects received up to four doses
of IV APAP over a
24-hour period. This
trial provided additional data regarding the administration of
multiple-doses of IV APAP.
Clinical Studies for Post-Operative Pain in Children. One
Phase III study evaluated 183 pediatric subjects with
moderate-to-severe pain
following surgery for hernia repair. Subjects were randomized to
receive IV APAP or intravenous propacetamol. IV APAP
demonstrated similar results on all efficacy parameters compared
to intravenous propacetamol with significantly lower incidence
of pain at the injection site.
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Clinical Studies for Fever in Children. One
Phase III study evaluated 67 pediatric subjects (age one
month to 12 years) with fever of infectious origin.
Subjects were randomized to receive IV APAP or intravenous
propacetamol. IV APAP demonstrated similar results on all
efficacy parameters compared to intravenous propacetamol with
statistically significantly lower incidence of pain at the
injection site.
Safety Summary. The safety of acetaminophen has been
well-established through decades of use in oral, suppository and
intravenous formulations. The primary safety concern with
acetaminophen is hepatotoxicity, which is well-understood and
occurs rarely when acetaminophen is dosed in accordance with the
recommended guidelines. In addition, an effective antidote,
N-acetylcysteine, is available to treat acetaminophen overdose.
We believe there is no evidence that IV APAP poses an
increased risk for hepatoxicity or any other adverse event. In
fact, in the 1,780 subjects receiving IV APAP in nine
clinical trials previously completed by BMS, the product has
exhibited a safety profile consistent with published data for
oral acetaminophen. This is also consistent with observations
from the European post-marketing safety database of IV APAP
which covers a time period in which over 100 million doses
were administered to patients.
In pharmacokinetic trials, the peak plasma concentration of
acetaminophen ranged from 50% to 74% higher for IV APAP
compared to oral acetaminophen; however, total plasma
concentrations over time were not meaningfully different.
Further, these results demonstrated that urinary elimination of
acetaminophen metabolites, including metabolites with potential
to interact with the liver, was not meaningfully different
for IV APAP compared to oral acetaminophen at 12 and
24 hour measurements. Therefore, the study concluded
that IV APAP would not be expected to be associated with an
increased risk of toxicity to the liver compared with an
equivalent dose of acetaminophen administered orally.
Opioid Sparing Summary. The use of IV APAP in
clinical trials has consistently been associated with at least a
33% reduction in opioid consumption compared to placebo. In
these cases, opioids were available at the discretion of
patients utilizing patient controlled analgesia, or PCA, devices.
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Clinical Development Plan |
We are developing IV APAP based on a targeted indication
for the treatment of acute pain, usually in the post-operative
setting, and the treatment of fever. We are seeking approval for
use in both adults and children for these indications. Our
proposed development plan to support this indication integrates
the existing body of intravenous propacetamol data, IV APAP data
and the data generated by clinical studies of IV APAP to be
conducted by us. Under our agreement with BMS, we have rights to
reference these BMS data. We intend to submit a 505(b)(2) NDA
for IV APAP based on these data sets as well as references
to the extensive literature which supports the safety and
efficacy of acetaminophen in oral formulations.
Section 505(b)(2) of the Federal Food, Drug and Cosmetic
Act permits the submission of an NDA where at least some of the
information required for approval comes from studies not
conducted by or for the applicant and for which the applicant
has not obtained a right of reference.
In August 2006, we met with the FDA to discuss the clinical
trial requirements for submission of a 505(b)(2) NDA for
IV APAP. Based on the preliminary feedback from the FDA, we
intend to conduct six clinical trials to provide the FDA with
additional data to support multiple dose efficacy for soft
tissue surgery, efficacy for fever and safety in adults and
children. These trials include:
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Phase III trial in female patients with moderate-to-severe pain
following total abdominal hysterectomy: this trial will be a
randomized, placebo-controlled, double-blind, multi-center study
to assess the efficacy and safety of single and multiple doses
of IV APAP. |
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Phase III trial in adults with fever: this trial will be a
randomized, controlled, double-blind study to assess the
efficacy and safety of single and multiple doses of IV APAP. |
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Pharmacokinetic study in adult subjects: this trial will be a
randomized, single center study to assess the pharmacokinetics
of single and multiple doses of IV APAP compared to oral
acetaminophen in adults. |
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Pharmacokinetic study in pediatric subjects: this trial will be
a randomized, single center study to assess the pharmacokinetics
of single and multiple doses of IV APAP compared to oral
acetaminophen in children. |
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Safety study in adult subjects: this trial will be an
open-label, multi-center study to assess the safety of single
and multiple doses of IV APAP in adults. |
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Safety study in pediatric subjects: this trial will be an
open-label, multi-center study to assess the safety of single
and multiple doses of IV APAP in children. |
Total enrollment of the six clinical trials will be determined
based on additional input expected from the FDA. We intend to
initiate the abdominal hysterectomy Phase III trial and the
adult pharmacokinetic study in the fourth quarter of 2006. We
intend to initiate the other clinical trials in the first half
of 2007.
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Omigard for the Prevention of Intravascular
Catheter-Related Infections |
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Intravascular Catheter-Related Infections
Background |
The use of catheters for vascular access has become essential to
medical practice. Intravascular catheters are inserted through
the skin and advanced so that the tip rests in a vein or artery.
Intravascular catheters are typically classified as either
peripheral lines which access smaller veins or central lines
(such as CVCs, peripherally inserted central catheters and
arterial lines) to access larger veins (such as the jugular,
femoral and subclavian veins) and arteries. Although such
catheters provide necessary access to veins and arteries, their
use puts patients at risk for dangerous and costly
complications, including LCSIs, catheter colonization and
CRBSIs, and, to a lesser degree, infections in other organs
including the heart, lungs, brain and bones.
Based on published clinical studies, we estimate that, of
patients with a CVC, approximately 10% will develop an LCSI and
20% will develop catheter colonization. This translates into
approximately one million LCSIs and two million incidences of
catheter colonization in the United States each year. The
presence of an LSCI may result in replacement of the catheter
and/or administration of antibiotics, both of which create
additional costs to hospitals and have the potential for adverse
safety outcomes. In addition, catheter colonization is well
correlated with CRBSIs, according to a published review of
clinical trials.
The CDC estimates that there are more than 250,000 CRBSIs among
hospitalized patients and more than 75,000 CRBSIs among
hemodialysis patients in the United States each year.
Attributable mortality is estimated by the CDC to be 12% to 25%
for each CRBSI, which translates into 39,000 to 81,250 deaths
annually due to CRBSIs. Further, the CDC estimates that the
average cost per infection is estimated to be $25,000 and, for
patients in the intensive care unit, is estimated to be up to
$56,000.
The additional costs related to infectious complications from
CVCs result in an estimated annual burden to the healthcare
system exceeding $6 billion. The majority of these costs
are shouldered by hospitals due to the reimbursement system.
Adopted by Medicare in 1983, the Prospective Payment System for
acute hospital inpatient services generally establishes
pre-determined reimbursement amounts, or diagnosis-related
groups, which are classifications based on the patients
discharge diagnoses, procedures performed and other patient
factors. Similar prospective payment systems were later adopted
for certain other Medicare inpatient hospital services, such as
rehabilitation and psychiatric hospitals. When the costs of
treating a patient fall below or are above these prospective
payment amounts, the hospital reaps the respective benefit or
bears the respective cost. Therefore, there is a compelling
economic incentive for these hospitals to use all available
means to reduce infections.
The CDC estimates that hospital-acquired bloodstream infections
are the eighth leading cause of death in the United States and
that intravascular catheters are the leading cause of
hospital-acquired bloodstream infections. Furthermore, a recent
study in the New England Journal of Medicine reported that 70%
of these infections are antibiotic-resistant, making them more
difficult and costly to treat. Consumer
63
groups, the CDC and the Joint Commission on Accreditation of
Healthcare Organizations, or JCAHO, are calling for greater
scrutiny and wider reporting of data on hospital-acquired
infections. JCAHO or other recognized accreditation is necessary
for reimbursement eligibility with Medicare and most insurers.
Laws have been passed mandating public reporting of
hospital-acquired infection data in Colorado, Connecticut,
Florida, Illinois, Maryland, Missouri, New Hampshire, New York,
Pennsylvania, South Carolina, Tennessee, Vermont and Virginia.
In 2006, more than 20 other states have had some legislative
activity related to public reporting of hospital-acquired
infections. We believe that the increased scrutiny on
catheter-related infections in addition to compelling economic
incentives will drive adoption of new products which show an
ability to reduce infection rates.
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Market for Antimicrobials to Prevent Intravascular
Catheter Infections |
Theta Reports estimates that nearly 500 million
intravascular catheters will be used in the United States in
2006, including approximately 10 million CVCs. Unit sales
of CVCs are projected to grow at 9% per year. Outside the
United States, Theta Reports estimates that approximately
11 million CVCs will be used in 2006. The number of CVC
placements is increasing as the population continues to age and
hospitalized patients become increasingly compromised. We
estimate that patients with a CVC receive, on average, three to
four topical antimicrobial applications during a hospital stay.
This translates into more than an estimated 30 million
applications in the United States in 2006 for CVCs alone.
The Centers for Medicare and Medicaid Services indicate that
there were more than 321,500 patients with end-stage renal
disease receiving dialysis at the end of 2004, of which
approximately 25% had a CVC. This patient population has been
growing at an annual rate of approximately 8% due to the aging
population, rise in diabetes, shortage of organ donors and
improved technologies enabling longer survival of patients with
end-stage renal disease. Patients on hemodialysis receive, on
average, three topical antimicrobial applications per week. This
translates into more than an estimated 12 million
applications in the United States in 2006.
The use of topical antimicrobials to prevent infections
associated with other central lines, including arterial lines
and peripherally inserted central catheters, also represents a
significant market opportunity. According to Theta Reports,
there are more than 2 million peripherally inserted central
catheters inserted in the United States each year. We estimate
there are also approximately 7 million arterials lines
inserted in the United States each year.
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Limitations of Current Therapies |
Microorganisms on the skin surface have been demonstrated to be
the leading cause of intravascular device-related infections,
including LCSIs and CRBSIs. The same microorganisms on the skin
that cause LCSIs can lead to CRBSIs. Given the evidence for the
importance of killing microorganisms on the skin surface to
prevent the development of intravascular device-related
infections, the use of topical antimicrobials is critical.
However, currently available products have significant
limitations.
The standard of care for skin antisepsis prior to catheter
insertion and at dressing changes has been dominated by either
povidone-iodine, also known as Betadine, or chlorhexidine,
although usage patterns are increasingly favoring chlorhexidine.
In 2002, the CDC published guidelines that stated that although
chlorhexidine is preferred, povidone-iodine can be used. In
2002, a meta-analysis of eight heterogeneous studies comparing
various formulations of chlorhexidine to povidone-iodine for the
prevention of catheter-related infections was published. While
the meta-analysis indicated a benefit to chlorhexidine, only one
of the eight studies on its own demonstrated a statistically
significant prevention of CRBSIs. We believe that this change in
medical practice despite the lack of robust clinical evidence
underscores the desire and willingness of healthcare providers
to address this significant unmet need.
Although topical antiseptics tend to have a broad spectrum of
antimicrobial activity, duration of activity ranges from minutes
to hours after application. These products do not provide
sustained antimicrobial coverage throughout the periods between
dressing changes (typically every 72-96 hours), and
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this lack of sustained antimicrobial activity can put patients
at increased risk for acquiring an infection at the catheter
insertion site.
In order to address the limited duration of activity associated
with topical antiseptics, topical antibiotics have been used,
either alone or in combination with topical antiseptics, to
confer protection against microbial invasion. Clinical trials
have shown benefits attributable to topical antibiotics, but
these products have either been associated with increased
frequency of fungal infections or emergence of bacterial
resistance, including MRSA. These drawbacks have significantly
diminished the use of topical antibiotics for the prevention of
catheter-related infections. As a result, the market has almost
exclusively switched back to the use of topical antiseptics.
There is some limited use of BioPatch, a
chlorhexidine-impregnated foam dressing that is placed around
the catheter at the insertion site. While this product delivers
chlorhexidine to the catheter insertion site over a period of
days, it has not been widely adopted reportedly due to
difficulty in applying the dressing and the inability to visibly
inspect the insertion site through the dressing. Physicians and
nurses must lift up the BioPatch to monitor the insertion site
for redness, swelling and other leading signs of infection. Such
disruption of the dressing has the potential to interfere with
the sterility of the site and promote the spread of pathogens.
Other products either in use or in development to reduce
catheter-related infections are focused on downstream aspects of
the infectious process. Some catheters coated with antiseptics
and antibiotics have demonstrated reductions in catheter-related
infections. Other new technologies being developed include
contamination-resistant hubs, attachable cuffs, new
catheter-coatings and antiseptic catheter lock solutions. We
believe any use of these products would be in addition to the
use of antimicrobial agents on the skin surface to prevent
catheter-related infections.
Omigard was discovered by researchers at Migenix. Migenix
subsequently entered into a collaboration and license agreement
with Fujisawa Healthcare, Inc., or Fujisawa. In that agreement,
Fujisawa was granted the rights to commercialize Omigard in
North America in return for licensing payments, funding of all
remaining development costs and establishment of a joint
development committee. In January 2004, Migenix reacquired all
rights to Omigard from Fujisawa after completion of the first
Phase III trial and then, in July 2004, licensed both the
North American and European rights to us with the objective of
completing the development program and commercializing the
product.
Unlike other topical antimicrobials, Omigard exhibits a
combination of features that we believe make it an ideal product
for the prevention of catheter-related infections. Such features
include:
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broad spectrum bactericidal and fungicidal activity; |
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activity against resistant strains, including MRSA; |
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rapid and prolonged duration of effect; |
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resistance to Omigard has not been induced in the laboratory; |
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no demonstrated ability to generate cross-resistance to other
antimicrobials; |
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excellent safety profile; and |
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convenient application. |
Omigard is effective against a wide variety of bacteria and
fungi. The compound has been tested against more than 285
strains of Gram-positive and Gram-negative bacteria as well as
more than 75 fungal strains. These studies demonstrate that
Omigard has broad bactericidal and fungicidal activity against
bacteria and fungi commonly found on the surface of human skin.
Further, Omigard has also demonstrated the ability to kill
multi-drug resistant microorganisms, including MRSA, and
vancomycin-
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resistant enterococcus, or VRE. The incidence of
resistant infections is increasing, and these microorganisms
represent a potentially significant threat to the public health.
Omigard has demonstrated not only the ability to kill rapidly
but also, unlike the topical antiseptics, a prolonged duration
of effect. In preclinical studies with Omigard, most
microorganisms were killed after only six minutes of exposure.
In skin surface studies, Omigard demonstrated the ability to
kill more than 99.9% of microorganisms for at least three days.
In laboratory testing conducted by Migenix, resistance to
Omigard, unlike the topical antiseptics, has not been
demonstrated, nor has
cross-resistance to
other antimicrobials been demonstrated. A primary mechanism of
action of Omigard is believed to be depolarization of the outer
cell membrane of infectious microorganisms, resulting in cell
death. Specific receptors within the cell have not been shown to
be involved in the disruption of the cell membrane and,
therefore, this non-specific mechanism of action decreases the
likelihood of the development of resistance.
Omigard presents a benign toxicological profile when
administered topically at doses as much as 30 times the planned
human dose. The product has been demonstrated to be
non-irritating to the skin, non-sensitizing to the skin, and not
absorbed through the skin into the bloodstream (based on the
inability to detect Omigard in the bloodstream at very low
levels) and, therefore, has no meaningful systemic exposure.
Omigard is packaged in a convenient, single
unit-of-use plastic
squeeze vial. Omigard, which is formulated as a 1% clear
viscous, aqueous gel, is applied around the catheter insertion
site by squeezing the plastic vial. Unlike the topical
antiseptics, Omigard does not have to be scrubbed onto the skin
surface. Unlike povidone-iodine, Omigard does not have the
potential to stain the skin and clothes of patients and
healthcare providers.
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Clinical Development History |
Migenix completed one Phase I and two Phase II studies
of Omigard in a total of 273 subjects. These trials demonstrated
no evidence of sensitization, clinically significant irritation
or systemic absorption. In addition, the Phase I trial
exhibited killing of greater than 99.9% of bacteria and fungi on
skin and maintained this level of antimicrobial activity for at
least three days.
Migenix and Fujisawa subsequently completed a multi-center,
randomized, evaluation committee-blinded Phase III trial
that compared Omigard to 10% povidone-iodine in patients
receiving CVCs, peripherally inserted central catheters, and/or
arterial lines. The study was conducted in 1,407 patients
in 27 centers in the United States. The primary efficacy
endpoint was to demonstrate the superiority of Omigard over 10%
povidone-iodine for the prevention of CRBSIs, as determined by a
treatment-blinded evaluation committee. Secondary efficacy
endpoints included demonstrating the superiority of Omigard for
the prevention of LCSI and catheter colonization.
Treatment with Omigard resulted in a statistically significant
prevention in catheter colonization compared to 10%
povidone-iodine (p-value=0.002). The Omigard group had
21.9% fewer incidences of catheter colonization than the 10%
povidone-iodine group.
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Treatment Arm | |
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Variable |
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10% povidone-iodine | |
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Omigard | |
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p-value | |
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Catheter colonization present
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232/583 (39.8)% |
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180/578 (31.1)% |
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0.002 |
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Treatment with Omigard also resulted in a statistically
significant prevention in LCSI
(p-value=0.004).
The table below summarizes data for LCSI in the modified
intent-to-treat
analysis set, which includes only those patients who did not
have a bloodstream infection present at baseline. As shown in
the table, the Omigard group had 49.2% fewer LCSIs than the 10%
povidone-iodine group. Moreover, there was a greater than 50%
reduction in the number of patients that had an LCSI and a
catheter removed (p-value=0.002).
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Treatment Arm | |
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Variable |
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10% povidone-iodine | |
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Omigard | |
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p-value | |
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LCSI present
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48/699 (6.9)% |
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24/693 (3.5)% |
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0.004 |
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Despite these favorable, statistically significant results for
the prevention of LCSI and catheter colonization, the study did
not show statistical significance for the primary endpoint: the
prevention of CRBSI. The table below compares the incidence of
CRBSI in the modified
intent-to-treat
analysis set after treatment with Omigard or 10%
povidone-iodine. The
rates of failure (development of CRBSI) and indeterminate
response were similar for the two treatments arms. There was a
15.4% reduction in the incidence of microbiologically-proven
CRBSI in the Omigard group compared to 10% povidone iodine;
however, this outcome was not statistically significant.
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Treatment Arm | |
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Outcome |
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p-value | |
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Failure
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18/699 (2.6)% |
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15/693 (2.2)% |
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0.622 |
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Success
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635/699 (90.8)% |
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630/693 (90.9)% |
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Indeterminate
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46/699 (6.6)% |
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48/693 (6.9)% |
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The definition of CRBSI required an organism isolated from a
peripheral blood draw to be genotypically matched to an organism
isolated from the catheter tip. In this study, many catheters
were lost and the organisms could be not isolated from the
catheter tip. Similarly, many patients were administered
systemic antibiotics for suspected bloodstream infections but
were given such antibiotics prior to taking a blood draw. As a
result, the high rate of indeterminate events was observed,
which we believe was a significant factor contributing to the
lower than expected rate of CRBSI. In addition, the study
enrolled a large number of patients that were at relatively low
risk for developing a CRBSI, which we believe further decreased
the event rate to a point where, as observed, a statistically
significant difference for CRBSI between the two treatment arms
could not be detected. We believe that the CRBSI endpoint, as
defined in the previous study, is not achievable without a very
significant increase the number of patients enrolled.
Only 14 patients (2.0%) in each treatment group had adverse
events that were considered drug-related. All of these Omigard
adverse events were related to the catheter insertion site, and
none were serious. Overall, there were no statistically
significant differences between the treatment groups for any
safety variable.
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Clinical Development Plan |
In June 2005, we reached agreement on the clinical development
plan for Omigard with the FDA under the FDAs SPA process.
The SPA process provides for a formal review and written
agreement of clinical protocols that are binding on both the FDA
and the company sponsor. Through the SPA process, the FDA agreed
that a single confirmatory Phase III trial would be
required for approval and that LCSI would be the sole primary
efficacy endpoint. Secondary endpoints include catheter
colonization and other measures of infection.
The presence of an LCSI will typically result in one of several
actions being taken by a physician, including administration of
systemic or topical antimicrobials and/or removal and
replacement of the catheter. The most serious risks from
catheter replacement include bleeding from a damaged artery or
puncturing of a lung. Further, the same microorganisms on the
skin surface that cause LCSIs can cause
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CRBSIs. A published review of clinical trials found that
catheter colonization is well correlated to CRBSIs.
We have completed a market research study that indicates
physicians only modestly favor (73% vs. 65%) a profile of
Omigard that demonstrates a statistically significant prevention
in LCSIs, catheter colonization and CRBSIs compared to a profile
of Omigard that demonstrates a statistically significant
prevention in LCSIs and catheter colonization alone. The FDA has
communicated to us that LCSI is a clinically relevant indication
and, based on these market research findings, we believe that a
product indicated for the prevention of LCSIs is also a highly
relevant indication to physicians.
The confirmatory Phase III trial that we are conducting
according to the SPA, known as the Central Line Infection
Reduction Study, or CLIRS trial, is a multi-center, randomized,
evaluation committee-blinded study in patients receiving a CVC.
The primary efficacy endpoint of the study is to evaluate
whether Omigard is superior to 10% povidone-iodine in the
prevention of LCSI in patients requiring central venous
catheterization. Secondary objectives of the study are to
evaluate whether Omigard is superior to 10% povidone-iodine
treatment in preventing significant catheter colonization, CRBSI
and all-cause bloodstream infections in patients requiring
central venous catheterization.
The CLIRS trial is designed to recruit 1,250 patients
randomized to receive either Omigard or 10% povidone-iodine. The
study began enrollment in August 2005 and is currently being
conducted at centers in the United States and Europe. We expect
to complete enrollment and have results available in the second
half of 2007. Omigard for the prevention of LCSIs was awarded
fast track status by the FDA, and we intend to submit an NDA to
the FDA in the first half of 2008.
We also intend to submit an MAA to European regulatory
authorities in the first half of 2008. We have met with
regulatory authorities in several European countries and believe
that no additional clinical trials will be required for
submission if the ongoing CLIRS trial is successful.
We intend to pursue a pediatric indication for Omigard for the
prevention of catheter-related infections. As in the adult
population, CVCs are frequently used in neonates, infants and
children with wide variety of conditions. Pediatric CVCs are a
significant source of infectious complications in hospitalized
children.
We have rights to develop and commercialize omiganan
pentahydrochloride for additional indications related to the
prevention and treatment of device-related, surgical
wound-related and burn-related infections. We believe that
omiganan pentahydrochloride may have significant opportunity in
these areas. For example, the CDC estimates there are
approximately 500,000 post-operative surgical site infections in
the United States annually. The CDC also estimates that there
are 50,000 hospitalizations from burn injuries and that 10,000
people will die from burn-related infections in the United
States every year.
Commercialization Strategy
We intend to build a commercial organization in the United
States focused on promoting our products to physicians, nurses
and pharmacy directors principally in the hospital setting. We
believe that we can achieve our strategic goals by deploying an
experienced sales organization supported by an internal
marketing infrastructure that targets institutions with the
greatest use of pharmaceutical products. We will consider
opportunities to partner our products to reach markets outside
the United States or to expand our reach to other physician
groups outside the hospital where applicable. In particular, we
believe that Omigard is an excellent candidate for partnering in
countries outside the United States, and we anticipate launching
the product in those countries with a partner who has the
resources to be competitive in the hospital market.
For the launch of Omigard in the United States, we intend to
build our own commercial organization and estimate that a sales
force of approximately 75-100 people will reach the top 1,200
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institutions, which we believe represents more than 60% of the
market opportunity for the product. Sales calls will primarily
target intensive care physicians, infectious disease physicians
and infection control physicians and nurses. Other targets will
include anesthesiologists, surgeons, intensive care and other
nurses in the hospital, and physicians and nurses in outpatient
dialysis centers. Key elements in the adoption of Omigard will
include formulary acceptance followed by trial and usage and,
ultimately, adoption to standing orders and protocols within the
hospitals and specific units therein. We expect that Omigard
will initially be used in combination with topical antiseptics
but ultimately may be used as a stand-alone treatment after more
widespread use.
For the launch of IV APAP, we intend to expand the sales
force to 150-200 people to reach the top 1,800 to 2,000
institutions, which we believe represents more than 80% of the
opportunity for both products. The primary target audience will
include anesthesiologists and surgeons. Other targets will
include certified registered nurse anesthetists, emergency
medicine physicians, obstetricians and other physicians
throughout the hospital.
Licensing Agreements
In March 2006, we in-licensed the patents and the exclusive
development and commercialization rights to IV APAP in the
United States and Canada from BMS. BMS has sublicensed these
rights to us under a license agreement with SCR Pharmatop S.A.,
or Pharmatop.
As consideration for the license, we paid a $25.0 million
up-front fee and may be required to make future milestone
payments totaling up to $50.0 million upon the achievement
of various milestones related to regulatory or commercial
events. We are also obligated to pay a royalty on net sales of
the licensed products. We have the right to grant sublicenses to
our affiliates.
The term of the IV APAP agreement generally extends on a
country-by-country basis until the last licensed patent expires,
which is expected to occur in 2022. Either party may terminate
the IV APAP agreement upon delivery of written notice if
the other party commits a material breach of its obligations and
fails to remedy the breach within a specified period or upon the
occurrence of specified bankruptcy, reorganization, liquidation
or receivership proceedings. In addition, BMS may terminate
the IV APAP agreement if we breach, in our capacity as a
sublicensee, any provision of the agreement between BMS and
Pharmatop. The IV APAP agreement will automatically
terminate in the event of a termination of the license agreement
between BMS and Pharmatop. We may terminate the IV APAP
agreement at any time upon specified written notice to BMS after
the occurrence of events of default that relate to our territory
and would entitle BMS to terminate the Pharmatop license
agreement. The events of default include Pharmatops
inability to maintain specified claims under listed patents, the
marketing by a third party of a parenterally-administered
product containing acetaminophen, subject to certain conditions,
or a successful third party action that deprives Pharmatop of
its rights to specified patents. We may also terminate the
IV APAP agreement upon specified written notice after an
uncured failure by Pharmatop to perform any of its material
obligations under the Pharmatop license agreement with respect
to our territory that would permit BMS to terminate the
Pharmatop license agreement.
Either BMS or Pharmatop may terminate the license agreement
between them upon delivery of written notice after an uncured
failure by the other party to perform any of its material
obligations under the license agreement. BMS may generally
terminate the agreement upon written notice to Pharmatop within
a specified period so long as all payments due under the
agreement to Pharmatop are current. Pharmatop may terminate the
agreement upon specified written notice if BMS opposes any of
the listed patent applications or challenges the validity or
enforceability of any of the listed licensed patents. BMS is
also entitled to terminate the Pharmatop agreement upon the
occurrence of events of default that relate to the territory
described above.
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In July 2004, we in-licensed from Migenix the patents and the
exclusive development and commercialization rights to omiganan
pentahydrochloride for the prevention and treatment of
device-related, surgical wound-related and burn-related
infections in North America and Europe.
As consideration for the license, we paid a $2.0 million
up-front fee, of which $1.9 million was allocated to the
value of the acquired technology and $100,000 was attributed to
the acquisition of 617,284 shares of Migenix common stock.
We may be required to make future milestone payments totaling up
to $27.0 million upon the achievement of various milestones
related to regulatory or commercial events. We are also
obligated to pay a royalty on net sales of the licensed
products. We have the right to grant sublicenses to third
parties.
The term of the Omigard agreement generally extends until the
last licensed patent expires, which is expected to occur in
November 2022. Either party may terminate the Omigard agreement
upon specified written notice after the other party commits a
material breach of its obligations and fails to remedy the
breach or upon the cessation of operations of the other party or
occurrence of specified bankruptcy, reorganization, liquidation
or receivership proceedings involving the other party. We may
terminate the Omigard agreement upon written notice if we
determine, prior to regulatory approval in the United States,
that the product is not reasonably expected to demonstrate
safety or efficacy. We may also terminate the Omigard agreement
upon specified written notice after receipt of any interim
results or the executive summary following database lock of the
on-going Phase III trial for Omigard.
Intellectual Property
We are the exclusive licensee of two U.S. patents and two
pending Canadian patent applications from Pharmatop, under
BMSs license to these patents from Pharmatop.
U.S. Patent No. 6,028,222 (Canadian patent application
2,233,924) covers the formulation of IV APAP and expires in
August 2017. U.S. Patent No. 6,992,218 (Canadian
patent application 2,415,403) covers the process used to
manufacture IV APAP and expires in June 2021.
We have also in-licensed the non-exclusive rights to two
U.S. patents from BMS. U.S. Patent No. 6,593,331
covers a method of treating pain with acetaminophen and
concurrent administration of a hydroxyazapirone and expires in
April 2022. US Patent No. 6,511,982 covers a method of
treating pain with acetaminophen and concurrent administration
of buspirone and expires in June 2020.
We are the exclusive licensee of four U.S. patents, two
pending U.S. applications, and their international
equivalents in North America and Europe for the prevention and
treatment of device-related, surgical wound-related, and
burn-related infections. U.S. Patent No. 6,180,604 and
U.S. Patent No. 6,538,106 cover composition of matter
for certain analogues of indolicidin, including Omigard, and
expire in August 2017. U.S. Patent No. 6,503,881
covers composition of matter for additional analogues of
indolicidin (not including Omigard), pharmaceutical preparations
of certain analogues of indolicidin, including Omigard, and
methods of using the pharmaceutical preparations for treating
microbial infections (including covering routes of
administration). U.S. Patent No. 6,503,881 also
expires in August 2017. U.S. Patent No. 6,835,536
covers specific pharmaceutical preparations of certain analogues
of indolicidin, including Omigard, and methods of treatment by
applying pharmaceutical preparations to a target site, including
a target site were a medical device is inserted.
U.S. Patent No. 6,835,536 expires in November 2022.
Manufacturing
In February 2006, we entered into a clinical supply agreement
with Lawrence Laboratories, an affiliate of BMS, under which
Lawrence Laboratories has manufactured clinical supplies of IV
APAP and
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placebo. Under the terms of the agreement, Lawrence Laboratories
is obligated to supply us with this single batch of IV APAP and
a single batch of placebo at specified prices. With these
batches, we believe we will have adequate clinical supplies of
our IV APAP product candidate and placebo. The term of the
clinical supply agreement generally extends until the earlier of
the receipt by us of regulatory approval for IV APAP or
December 31, 2008. In addition, the clinical supply
agreement terminates upon mutual written consent of the parties,
the termination of the IV APAP agreement or our dissolution.
Either party may also terminate the clinical supply agreement
upon written notice of an uncured, material breach by the other
party. For commercial supply, the active pharmaceutical
ingredient, or API, acetaminophen is readily available from
multiple suppliers. We are currently negotiating with suppliers
for commercial supply of the finished drug product for IV
APAP.
We have purchased clinical supplies of the API omiganan
pentahydrochloride from UCB Bioproducts, which was recently
acquired by Lonza Group, Ltd. We have purchased clinical
supplies of the Omigard finished drug product from Cardinal
Health, Inc. Lonza and Cardinal have produced the clinical
supplies which we are using in our Phase III Omigard
program. We are currently negotiating with suppliers for
commercial supply of the API and finished drug product for
Omigard.
Competition
The pharmaceutical industry is subject to intense competition
and characterized by extensive research efforts and rapid
technological progress. Competition in our industry occurs on a
variety of fronts, including developing and bringing new
products to market before others, developing new technologies to
improve existing products, developing new products to provide
the same benefits as existing products at lower cost and
developing new products to provide benefits superior to those of
existing products. There are many companies, including generic
manufacturers as well as large pharmaceutical companies, that
have significantly greater financial and other resources than we
do, as well as academic and other research institutions that are
engaged in research and development efforts for the indications
targeted by our product candidates.
Our IV APAP product candidate is being developed for the
treatment of acute pain, usually in the hospital setting. A wide
variety of competitive products already address this target
market, including:
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Morphine is the leading product for the treatment of acute
post-operative pain, and is available generically from several
manufacturers; |
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DepoDur, currently marketed by Endo Pharmaceuticals, is an
extended release injectable formulation of morphine; and |
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other injectable opioids, including fentanyl, meperidine and
hydromorphone, each of which is available generically from
several manufacturers. |
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Ketorolac, an injectable NSAID, is available generically from
several manufacturers. |
We are also aware of a number of product candidates in
development to treat acute pain, including injectable NSAIDs,
novel opioids, new formulations of currently available opioids,
long-acting local anesthetics and new chemical entities as well
as alternative delivery forms of various opioids and NSAIDs. A
variety of pharmaceutical and biotechnology companies are
developing these new product candidates, including but not
limited to Anesiva, Inc (formerly Corgentech Inc.), CeNeS
Pharmaceuticals plc, Cumberland Pharmaceuticals
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Inc., Durect Corporation, Javelin Pharmaceuticals, Inc., Pfizer
Inc., SkyePharma Inc., St. Charles Pharmaceuticals, TheraQuest
Biosciences, LLC and Xsira Pharmaceuticals, Inc.
We are developing our Omigard product candidate for the
prevention of intravascular catheter-related infections.
Although there are no approved drugs for this specific
indication, a number of topical products are currently used in
practice and one device has been approved for wound dressing and
prevention of catheter-related infections. These competitive
products include:
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topical antiseptics such as povidone-iodine and chlorhexidine,
each of which is available generically from several
manufacturers; |
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Neosporin, a topical antibacterial ointment containing
polymyxin, neomycin and bacitracin, available generically from
several manufacturers; |
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Bactroban, a topical antibacterial containing mupirocin,
available generically from several manufacturers; and |
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BioPatch, a chlorhexidine-impregnated foam dressing, from
Johnson & Johnson that is approved both for wound
dressing and the prevention of catheter-related infections. |
Other products may be in development; however, we are not aware
of any other topical drugs being developed for the prevention of
intravascular catheter-related infections.
Government Regulation
Governmental authorities in the United States and other
countries extensively regulate the testing, manufacturing,
labeling, storage, record-keeping, advertising, promotion,
export, marketing and distribution, among other things, of
pharmaceutical products. In the United States, the FDA, under
the Federal Food, Drug and Cosmetic Act and other federal
statutes and regulations, subjects pharmaceutical products to
rigorous review. If we do not comply with applicable
requirements, we may be fined, the government may refuse to
approve our marketing applications or allow us to manufacture or
market our products, and we may be criminally prosecuted.
We and our manufacturers and clinical research organizations may
also be subject to regulations under other federal, state and
local laws, including the Occupational Safety and Health Act,
the Environmental Protection Act, the Clean Air Act and import,
export and customs regulations as well as the laws and
regulations of other countries.
To obtain approval of a new product from the FDA, we must, among
other requirements, submit data supporting safety and efficacy
as well as detailed information on the manufacture and
composition of the product and proposed labeling. The testing
and collection of data and the preparation of necessary
applications are expensive and time-consuming. The FDA may not
act quickly or favorably in reviewing these applications, and we
may encounter significant difficulties or costs in our efforts
to obtain FDA approvals that could delay or preclude us from
marketing our products.
The process required by the FDA before a new drug may be
marketed in the United States generally involves the following:
completion of preclinical laboratory and animal testing in
compliance with FDA regulations, submission of an
investigational new drug application, or IND, which must become
effective before human clinical trials may begin, performance of
adequate and well-controlled human clinical trials to establish
the safety and efficacy of the proposed drug for its intended
use, and submission and approval of an NDA by the FDA. The
sponsor typically conducts human clinical trials in three
sequential phases, but the phases may overlap. In Phase I
clinical trials, the product is tested in a small number of
patients or healthy volunteers, primarily for safety at one or
more dosages. In Phase II clinical trials, in addition to
safety, the sponsor evaluates the efficacy of the product on
targeted indications, and
72
identifies possible adverse effects and safety risks in a
patient population. Phase III clinical trials typically
involve testing for safety and clinical efficacy in an expanded
population at geographically-dispersed test sites.
Clinical trials must be conducted in accordance with the
FDAs good clinical practices requirements. The FDA may
order the partial, temporary or permanent discontinuation of a
clinical trial at any time or impose other sanctions if it
believes that the clinical trial is not being conducted in
accordance with FDA requirements or presents an unacceptable
risk to the clinical trial patients. The institutional review
board, or IRB, generally must approve the clinical trial design
and patient informed consent at each clinical site and may also
require the clinical trial at that site to be halted, either
temporarily or permanently, for failure to comply with the
IRBs requirements, or may impose other conditions.
The applicant must submit to the FDA the results of the
preclinical and clinical trials, together with, among other
things, detailed information on the manufacture and composition
of the product and proposed labeling, in the form of an NDA,
including payment of a user fee. The FDA reviews all NDAs
submitted before it accepts them for filing and may request
additional information rather than accepting an NDA for filing.
Once the submission is accepted for filing, the FDA begins an
in-depth review of the NDA. Under the policies agreed to by the
FDA under the Prescription Drug User Fee Act, or PDUFA, the FDA
has 10 months in which to complete its initial review of a
standard NDA and respond to the applicant. The review process
and the PDUFA goal date may be extended by three months if the
FDA requests or the NDA sponsor otherwise provides additional
information or clarification regarding information already
provided in the submission within the last three months of the
PDUFA goal date. If the FDAs evaluations of the NDA and
the clinical and manufacturing procedures and facilities are
favorable, the FDA may issue either an approval letter or an
approvable letter, which contains the conditions that must be
met in order to secure final approval of the NDA. If and when
those conditions have been met to the FDAs satisfaction,
the FDA will issue an approval letter, authorizing commercial
marketing of the drug for certain indications. According to the
FDA, the median total approval time for NDAs approved during
calendar year 2004 was approximately 13 months for standard
applications. If the FDAs evaluation of the NDA submission
and the clinical and manufacturing procedures and facilities is
not favorable, the FDA may refuse to approve the NDA and issue a
not approvable letter.
|
|
|
Special Protocol Assessment Process |
The special protocol assessment, or SPA, process provides for
official FDA evaluation of a proposed Phase III clinical
trial protocol and generally provides a product sponsor with a
binding agreement from the FDA that the design and analysis of
the trial are adequate to support a license application
submission if the trial is performed according to the SPA. The
FDAs guidance on the SPA process indicates that SPAs are
designed to evaluate individual clinical trial protocols
primarily in response to specific questions posed by the
sponsors. In practice, the sponsor of a product candidate may
request an SPA for proposed Phase III trial objectives,
designs, clinical endpoints and analyses. A request for an SPA
is submitted in the form of a separate amendment to an IND, and
the FDAs evaluation generally will be completed within a
45-day review period
under applicable PDUFA goals, provided that the trials have been
the subject of discussion at an
end-of-Phase II
and pre-Phase III meeting with the FDA, or in other limited
cases. All agreements and disagreements between the FDA and the
sponsor regarding an SPA, including the FDAs responses to
questions about protocol design, primary efficacy endpoints,
study conduct, data analysis and prospective labeling statements
must be documented in writing. In limited circumstances, the FDA
may agree that a specific finding, such as a particular p-value
on the primary efficacy endpoint of a study, will satisfy a
specific objective, such as demonstration of efficacy, or
support an approval decision. However, final determinations by
the FDA are made after a complete review of the applicable NDA
and are based on the entire data in the application, and any SPA
is subject to future public health concerns unrecognized at the
time of protocol assessment.
73
|
|
|
Section 505(b)(2) New Drug Applications |
As an alternate path to FDA approval for new indications or
improved formulations of previously-approved products, a company
may file a Section 505(b)(2) NDA, instead of a
stand-alone or full NDA.
Section 505(b)(2) of the Federal Food, Drug and Cosmetic
Act was enacted as part of the Drug Price Competition and Patent
Term Restoration Act of 1984, otherwise known as the
Hatch-Waxman Amendments. Section 505(b)(2) permits the
submission of an NDA where at least some of the information
required for approval comes from studies not conducted by or for
the applicant and for which the applicant has not obtained a
right of reference. For example, the Hatch-Waxman Amendments
permit the applicant to rely upon the FDAs findings of
safety and effectiveness for an approved product. The FDA may
also require companies to perform additional studies or
measurements to support the change from the approved product.
The FDA may then approve the new formulation for all or some of
the label indications for which the referenced product has been
approved, or the new indication sought by the
Section 505(b)(2) applicant.
To the extent that the Section 505(b)(2) applicant is
relying on the FDAs findings for an already-approved
product, the applicant is required to certify to the FDA
concerning any patents listed for the approved product in the
FDAs Orange Book publication. Specifically, the applicant
must certify that: (1) the required patent information has
not been filed; (2) the listed patent has expired;
(3) the listed patent has not expired, but will expire on a
particular date and approval is sought after patent expiration;
or (4) the listed patent is invalid or will not be
infringed by the manufacture, use or sale of the new product. A
certification that the new product will not infringe the already
approved products Orange Book-listed patents or that such
patents are invalid is called a paragraph IV certification.
If the applicant does not challenge the listed patents, the
Section 505(b)(2) application will not be approved until
all the listed patents claiming the referenced product have
expired. The Section 505(b)(2) application may also not be
approved until any non-patent exclusivity, such as exclusivity
for obtaining approval of a new chemical entity, listed in the
Orange Book for the referenced product has expired.
If the applicant has provided a paragraph IV certification
to the FDA, the applicant must also send notice of the
paragraph IV certification to the NDA and patent holders
once the NDA has been accepted for filing by the FDA. The NDA
and patent holders may then initiate a legal challenge to the
paragraph IV certification. The filing of a patent
infringement lawsuit within 45 days of their receipt of a
paragraph IV certification automatically prevents the FDA
from approving the Section 505(b)(2) NDA until the earliest
of 30 months, expiration of the patent, settlement of the
lawsuit or a decision in the infringement case that is favorable
to the Section 505(b)(2) applicant. For drugs with
five-year exclusivity, if an action for patent infringement is
initiated after year four of that exclusivity period, then the
30-month stay period is
extended by such amount of time so that 7.5 years has
elapsed since the approval of the NDA with five-year
exclusivity. This period could be extended by six months if the
NDA sponsor obtains pediatric exclusivity. Thus, the
Section 505(b)(2) applicant may invest a significant amount
of time and expense in the development of its products only to
be subject to significant delay and patent litigation before its
products may be commercialized. Alternatively, if the listed
patent holder does not file a patent infringement lawsuit within
the required 45-day
period, the applicants NDA will not be subject to the
30-month stay.
Notwithstanding the approval of many products by the FDA
pursuant to Section 505(b)(2), over the last few years,
certain brand-name pharmaceutical companies and others have
objected to the FDAs interpretation of
Section 505(b)(2) and one pharmaceutical company has sued
the FDA on the matter. Although the issues in that litigation
are specific to the products involved, if the FDA does not
prevail, it may be required to change its interpretation of
Section 505(b)(2), which could delay or even prevent the
FDA from approving any Section 505(b)(2) NDA that we submit.
A drug designated as a fast track product by the FDA must be
intended for the treatment of a serious or life-threatening
condition and demonstrate the potential to address unmet medical
needs for the
74
condition. Fast track designation does not apply to a product
alone, but applies to a combination of the product and specific
indication for which it is being studied. A sponsor may submit a
request for fast track designation at the time of original
submission of its IND, or at any time thereafter prior to
receiving marketing approval of its NDA. Fast track status
enables the sponsor to have more frequent and timely
communication and meetings with the FDA regarding the product
development plans. Fast track status may also result in
eligibility for NDA priority review, under which the PDUFA
review goal for the NDA is six months rather than ten months.
Under the Hatch-Waxman Act, newly-approved drugs and indications
benefit from a statutory period of non-patent marketing
exclusivity. The Hatch-Waxman Act provides five-year marketing
exclusivity to the first applicant to gain approval of an NDA
for a new chemical entity, meaning that the FDA has not
previously approved any other new drug containing the same
active moiety. Hatch-Waxman prohibits the submission of an
abbreviated new drug application, or ANDA, or a
Section 505(b)(2) NDA for another version of such drug
during the five-year exclusive period; however, as explained
above, submission of an ANDA or Section 505(b)(2) NDA
containing a paragraph IV certification is permitted after
four years, which may trigger a
30-month stay of
approval of the ANDA or Section 505(b)(2) NDA. Protection
under Hatch-Waxman will not prevent the submission or approval
of another full NDA; however, the applicant would be required to
conduct its own preclinical and adequate and well-controlled
clinical trials to demonstrate safety and effectiveness. The
Hatch-Waxman Act also provides three years of marketing
exclusivity for the approval of new and supplemental NDAs,
including Section 505(b)(2) NDAs, for, among other things,
new indications, dosages or strengths of an existing drug, if
new clinical investigations that were conducted or sponsored by
the applicant are essential to the approval of the application.
|
|
|
Other Regulatory Requirements |
We may also be subject to a number of post-approval regulatory
requirements. If we seek to make certain changes to an approved
product, such as promoting or labeling a product for a new
indication, making certain manufacturing changes or product
enhancements or adding labeling claims, we will need FDA review
and approval before the change can be implemented. While
physicians may use products for indications that have not been
approved by the FDA, we may not label or promote the product for
an indication that has not been approved. Securing FDA approval
for new indications or product enhancements and, in some cases,
for manufacturing and labeling claims, is generally a
time-consuming and expensive process that may require us to
conduct clinical trials under the FDAs IND regulations.
Even if such studies are conducted, the FDA may not approve any
change in a timely fashion, or at all. In addition, adverse
experiences associated with use of the products must be reported
to the FDA, and FDA rules govern how we can label, advertise or
otherwise commercialize our products.
There are current post-marketing safety surveillance
requirements that we will need to meet to continue to market an
approved product. The FDA also may, in its discretion, require
post-marketing testing and surveillance to monitor the effects
of approved products or place conditions on any approvals that
could restrict the commercial applications of these products.
In addition to FDA restrictions on marketing of pharmaceutical
products, several other types of state and federal laws have
been applied to restrict certain marketing practices in the
pharmaceutical industry in recent years. These laws include
anti-kickback statutes and false claims statutes. The federal
health care program anti-kickback statute prohibits, among other
things, knowingly and willfully offering, paying, soliciting or
receiving remuneration to induce or in return for purchasing,
leasing, ordering or arranging for the purchase, lease or order
of any health care item or service reimbursable under Medicare,
Medicaid or other federally financed health care programs. This
statute has been interpreted to apply to arrangements between
pharmaceutical manufacturers on the one hand and prescribers,
purchasers and formulary managers on the other. Violations of
the anti-kickback statute are punishable by imprisonment,
criminal fines, civil monetary penalties and exclusion from
participation in federal health care programs.
75
Although there are a number of statutory exemptions and
regulatory safe harbors protecting certain common activities
from prosecution or other regulatory sanctions, the exemptions
and safe harbors are drawn narrowly, and practices that involve
remuneration intended to induce prescribing, purchases or
recommendations may be subject to scrutiny if they do not
qualify for an exemption or safe harbor.
Federal false claims laws prohibit any person from knowingly
presenting, or causing to be presented, a false claim for
payment to the federal government, or knowingly making, or
causing to be made, a false statement to have a false claim
paid. Recently, several pharmaceutical and other health care
companies have been prosecuted under these laws for allegedly
inflating drug prices they report to pricing services, which in
turn were used by the government to set Medicare and Medicaid
reimbursement rates, and for allegedly providing free product to
customers with the expectation that the customers would bill
federal programs for the product. In addition, certain marketing
practices, including off-label promotion, may also violate false
claims laws. The majority of states also have statutes or
regulations similar to the federal anti-kickback law and false
claims laws, which apply to items and services reimbursed under
Medicaid and other state programs, or, in several states, apply
regardless of the payor.
In addition, we and the manufacturers on which we rely for the
manufacture of our products are subject to requirements that
drugs be manufactured, packaged and labeled in conformity with
current good manufacturing practice, or cGMP. To comply with
cGMP requirements, manufacturers must continue to spend time,
money and effort to meet requirements relating to personnel,
facilities, equipment, production and process, labeling and
packaging, quality control, record-keeping and other
requirements. The FDA periodically inspects drug manufacturing
facilities to evaluate compliance with cGMP requirements.
Also, as part of the sales and marketing process, pharmaceutical
companies frequently provide samples of approved drugs to
physicians. This practice is regulated by the FDA and other
governmental authorities, including, in particular, requirements
concerning record-keeping and control procedures.
Outside of the United States, our ability to market our products
will also depend on receiving marketing authorizations from the
appropriate regulatory authorities. The foreign regulatory
approval process includes all of the risks associated with the
FDA approval process described above. The requirements governing
the conduct of clinical trials and marketing authorization vary
widely from country to country.
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Third-Party Reimbursement and Pricing Controls |
In the United States and elsewhere, sales of pharmaceutical
products depend in significant part on the availability of
coverage and reimbursement to providers and the consumer from
third-party payors, such as government and private insurance
plans. Third-party payors are increasingly challenging the
prices charged for medical products and services. Our products
may not be considered cost effective, and coverage and
reimbursement may not be available or sufficient to allow us to
sell our products on a competitive and profitable basis.
In many foreign markets, including the countries in the European
Union, pricing of pharmaceutical products is subject to
governmental control. In the United States, there have been, and
we expect that there will continue to be, a number of federal
and state proposals to implement similar governmental pricing
control. While we cannot predict whether such legislative or
regulatory proposals will be adopted, the adoption of such
proposals could have a material adverse effect on our business,
financial condition and profitability.
Employees
As of June 30, 2006, we had 24 employees, consisting of
clinical development, regulatory affairs, manufacturing and
program management, administration, business development and
marketing. We consider our relations with our employees to be
good.
76
Facilities
We lease approximately 5,928 square feet of space in our
headquarters in San Diego, California under a sublease that
expired in September 2006. We have entered into a lease that
expires in 2012 for approximately 23,494 square feet of
space for our new headquarters in San Diego, California
which we intend to occupy in September 2006. We intend to
sublease approximately 5,800 square feet of our new
headquarters for a period of two years. We have no laboratory,
research or manufacturing facilities. We believe that our
current facilities are adequate for our needs for the immediate
future and that, should it be needed, suitable additional space
will be available to accommodate expansion of our operations on
commercially reasonable terms.
Legal Proceedings
We are not engaged in any legal proceedings.
77
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information about our
executive officers and directors as of August 31, 2006:
|
|
|
|
|
|
|
Name |
|
Age | |
|
Position |
|
|
| |
|
|
Theodore R. Schroeder
|
|
|
51 |
|
|
President, Chief Executive Officer and Director |
James B. Breitmeyer, M.D., Ph.D.
|
|
|
52 |
|
|
Executive Vice President, Development and Chief Medical Officer |
William S. Craig, Ph.D.
|
|
|
56 |
|
|
Senior Vice President, Pharmaceutical Development and
Manufacturing |
Kenneth R. Heilbrunn, M.D.
|
|
|
48 |
|
|
Senior Vice President, Clinical Development |
William R. LaRue
|
|
|
55 |
|
|
Senior Vice President, Chief Financial Officer, Treasurer and
Secretary |
Richard E. Lowenthal
|
|
|
40 |
|
|
Vice President, Regulatory Affairs and Quality Assurance |
Mike A. Royal, M.D., J.D.
|
|
|
53 |
|
|
Vice President, Clinical Development, Analgesics |
David A. Socks
|
|
|
32 |
|
|
Vice President, Business Development |
Cam L. Garner(1)
|
|
|
58 |
|
|
Chairman of the Board of Directors |
Brian G. Atwood(2)
|
|
|
53 |
|
|
Director |
Samuel L. Barker, Ph.D.
|
|
|
63 |
|
|
Director |
Michael A. Berman, M.D.(2)(3)
|
|
|
63 |
|
|
Director |
James C. Blair, Ph.D.(1)
|
|
|
67 |
|
|
Director |
Alan D. Frazier(1)(3)
|
|
|
55 |
|
|
Director |
Alain B. Schreiber, M.D.(2)
|
|
|
51 |
|
|
Director |
Christopher J. Twomey(3)
|
|
|
47 |
|
|
Director |
|
|
|
|
(1) |
Member of the Compensation Committee. |
|
(2) |
Member of the Nominating/ Corporate Governance Committee. |
|
(3) |
Member of the Audit Committee. |
Executive Officers
Theodore R. Schroeder is one of our co-founders and has
served as our President and Chief Executive Officer and as a
member of our board of directors since our inception in May
2004. From August 2002 to February 2004, he served as Senior
Vice President of North America Sales and Marketing of Elan
Pharmaceuticals, Inc., a neuroscience-based pharmaceutical
company. From February 2001 to August 2002, Mr. Schroeder
served as General Manager of the Hospital Products Business Unit
at Elan, a position he also held at Dura Pharmaceuticals, Inc.,
a specialty respiratory pharmaceutical and pulmonary drug
delivery company, from May 1999 to November 2000 until its
acquisition by Elan. Prior to joining Dura, Mr. Schroeder
held a number of hospital-related sales and marketing positions
with Bristol-Myers Squibb Company, a global pharmaceutical
company. Mr. Schroeder holds a B.S. in management from
Rutgers University.
James B. Breitmeyer, M.D., Ph.D. has served as our
Executive Vice President, Development and Chief Medical Officer
since August 2006. From December 2001 to August 2006,
Dr. Breitmeyer served as Chief Medical Officer and Vice
President, Pharmaceutical Operations of Applied Molecular
Evolution, a wholly-owned subsidiary of Eli Lilly and Company, a
global pharmaceutical company. From February 2000 to July 2001,
Dr. Breitmeyer was the President and Chief Executive
Officer of the Harvard Clinical
78
Research Institute. Prior to February 2000, Dr. Breitmeyer
held various positions of increasing responsibility including
Senior Vice President and Chief Medical Officer of Serono
International S.A., a global biopharmaceutical company. Dr.
Breitmeyer holds a B.A. in chemistry from the University of
California, Santa Cruz, and an M.D. and Ph.D. from Washington
University School of Medicine.
William S. Craig, Ph.D. has served as our Senior
Vice President, Pharmaceutical Development and Manufacturing
since November 2004. From January 2000 to November 2004,
Dr. Craig served as Vice President, Research and Product
Development of ISTA Pharmaceuticals, Inc., an
ophthalmology-focused specialty pharmaceutical company. From
1996 to December 1999, Dr. Craig served as Vice President,
Research and Development for Alpha Therapeutics Corporation, a
biotechnology company. From 1988 to 1996, he served as Senior
Director, Research and Development for Telios Pharmaceuticals,
Inc., a biotechnology company. Dr. Craig holds a B.S. in
biochemistry from the University of Michigan and a Ph.D. in
chemistry from the University of California, San Diego.
Kenneth R. Heilbrunn, M.D. has served as our Senior
Vice President, Clinical Development since April 2005.
Dr. Heilbrunn has provided us with notice of his
resignation effective September 30, 2006. From May 2002 to
April 2005, Dr. Heilbrunn served as Vice President of
Clinical Development of La Jolla Pharmaceutical Company, an
autoimmune disease-focused biopharmaceutical company. From 1998
to April 2002, he held several positions, the most recent of
which was Vice President of Clinical Research, at Advanced
Tissue Sciences, Inc., a tissue engineering company, where he
was responsible for a multicenter Phase III clinical trial
which ultimately led to the FDA approval of Dermagraft, a
bioengineered human tissue. From 1997 to 1998,
Dr. Heilbrunn served as Vice President of Medical Affairs
at Hepatix, Inc., a company engaged in the development of a
bioengineered liver. From 1994 to 1996, he served as Staff Vice
President of Medical Affairs at C.R. Bard, Inc., a manufacturer
of healthcare products. From 1989 to 1994, he held several
positions in the Medical Affairs department of Ciba-Geigy
Pharmaceuticals Division, a pharmaceutical company, the most
recent of which was Director for Cardiovascular and Pulmonary
Drugs, where he participated in the launch of the nicotine
patch, Habitrol, and the antihypertensive drug, Lotensin. From
1986 to 1989, Dr. Heilbrunn served as Staff Internist and,
ultimately, Director of the Critical Care unit at the
31st Tactical Air Force Hospital in Homestead, Florida.
Dr. Heilbrunn received a B.A. from Brown University and an
M.D. from New York Medical College.
William R. LaRue has served as our Senior Vice President,
Chief Financial Officer, Treasurer and Secretary since June
2006. From April 2001 to May 2006, Mr. LaRue served as
Senior Vice President and Chief Financial Officer of Micromet,
Inc., formerly CancerVax Corporation, a biotechnology company
focused on the treatment and control of cancer. From March 2000
to February 2001, Mr. LaRue served as Executive Vice
President and Chief Financial Officer of eHelp Corporation, a
provider of user assistance software. From January 1997 to
February 2000, Mr. LaRue served as Vice President and
Treasurer of Safeskin Corporation, a medical device company, and
from January 1993 to January 1997 he served as Treasurer of GDE
Systems, Inc., a high technology electronic systems company.
Mr. LaRue received a B.S. in business administration and an
M.B.A. from the University of Southern California.
Richard E. Lowenthal has served as our Vice President,
Regulatory Affairs and Quality Assurance since November 2004.
From November 2002 to November 2004, Mr. Lowenthal served
as Senior Director, Worldwide Regulatory Affairs and Drug Safety
of Maxim Pharmaceuticals, Inc., a biopharmaceutical company.
From December 2001 to November 2002, he served as Vice President
of Regulatory Affairs and Quality Assurance of AnGes, MG, Inc.,
a biopharmaceutical company. From June 1996 to December 2001,
Mr. Lowenthal served in various roles in regulatory affairs
at Janssen Research Foundation, a division of Johnson &
Johnson, most recently as the Global Director of Chemistry,
Manufacturing and Control Regulatory Affairs. Prior to joining
Janssen, he served as the Director of Regulatory Affairs and
Quality Assurance of Somerset Pharmaceuticals, Inc., a
proprietary research and development pharmaceutical company.
Mr. Lowenthal holds a B.S. in biochemistry and a M.S. in
organic chemistry from Florida State University.
79
Mike A. Royal, M.D., J.D. has served as our
Vice President, Clinical Development, Analgesics since April
2006. From December 2004 to March 2006, Dr. Royal served as
Chief Medical Officer of Solstice Neurosciences, Inc., a
specialty biopharmaceutical company. From May 2003 to December
2004, Dr. Royal served as Vice President, Strategic Brand
Development and Global Medical Affairs of Alpharma Inc., a
global specialty pharmaceutical company. From January 2002 to
May 2003, he served as Senior Medical Director of Elan
Pharmaceuticals, Inc., a neuroscience-based biotechnology
company. From 1994 to January 2002, he owned and managed the
largest private practice pain management clinic and research
center in Oklahoma. Dr. Royal has also served as Director
of the Acute Pain Service, Staff Anesthesiologist, and Assistant
Professor of Anesthesiology and Critical Care Medicine at the
University of Pittsburgh Medical Center. Dr. Royal is board
certified in internal medicine, anesthesiology, pain management,
and addiction medicine and has published extensively in the area
of pain management. He holds a B.S. in chemistry from the
Massachusetts Institute of Technology, an M.D. from the
University of Massachusetts, a J.D. from the University of
Maryland and an M.B.A. from New York University (TRIUM).
David A. Socks is one of our co-founders and has served
as our Vice President, Business Development since our inception
in May 2004. From May 2004 to June 2006, Mr. Socks also
served as our Chief Financial Officer, Treasurer, and Secretary.
From July 2000 to May 2004, Mr. Socks was a Venture Partner
at Windamere Venture Partners, a venture capital firm investing
in early stage life science companies. In this capacity,
Mr. Socks held management positions at two portfolio
companies of Windamere Venture Partners. These positions
included Vice President of Business Development of Kanisa
Pharmaceuticals, Inc., an oncology-focused specialty
pharmaceutical company and Vice President of Finance of CelTor
Biosystems, Inc., a drug discovery company. Mr. Socks
co-founded several pharmaceutical companies including Avera
Pharmaceuticals, Inc., Kanisa Pharmaceuticals, Inc., Somaxon
Pharmaceuticals, Inc. and Verus Pharmaceuticals, Inc. and two
medical technology companies including MiraMedica, Inc. and
SpineWave, Inc. In 1999, Mr. Socks worked in business
development at Neurocrine Biosciences, a biopharmaceutical
company. In 1998, he worked in the venture capital arm of EFO
Holdings, L.P., an investment firm. From 1995 to 1998, he worked
at Kaiser Associates, Inc., a strategic management consulting
firm, where he was most recently a Senior Manager.
Mr. Socks holds a B.S. in business administration from
Georgetown University and an M.B.A. from Stanford University.
Board of Directors
Cam L. Garner is one of our co-founders and has served as
a member of our board of directors since our inception in May
2004, and as the chairman of our board of directors since July
2004. Mr. Garner co-founded Verus Pharmaceuticals, Inc.,
Somaxon Pharmaceuticals, Inc. and Xcel Pharmaceuticals, Inc.,
which are specialty pharmaceutical companies. Since July 2004,
he has served as Chairman and Chief Executive Officer of Verus.
He served as Chairman of Xcel Pharmaceuticals, Inc. from January
2001 until it was acquired in March 2005 by Valeant
Pharmaceuticals International. From August 2001 to February
2002, he served as acting Chief Executive Officer of Favrille,
Inc., a biotechnology company, and is currently the Chairman of
its board of directors. From 1989 to 1995, he served as Chief
Executive Officer of Dura Pharmaceuticals, Inc., a specialty
respiratory pharmaceutical and pulmonary drug delivery company,
and Chairman and Chief Executive Officer from 1995 to 2000 until
it was sold to Elan in November 2000. Previously, he served as
Chairman of DJ Pharma, a specialty pharmaceutical sales and
marketing company, which was sold to Biovail Corporation in
2000. Mr. Garner also serves on the board of directors of
two publicly-held companies Somaxon Pharmaceuticals,
Inc. and Pharmion Corporation and other
privately-held pharmaceutical companies. In addition,
Mr. Garner participates on the boards of several charitable
organizations. Mr. Garner holds a B.A. in biology and an
M.B.A. from Baldwin-Wallace College and an honorary Doctor of
Science from Virginia Wesleyan College.
Brian G. Atwood has served as a member of our board of
directors since March 2006. Since 1999, Mr. Atwood has served as
a Managing Director of Versant Ventures I, LLC, Versant Ventures
II, LLC and Versant Ventures III, LLC (Versant Ventures), a
venture capital firm focusing on healthcare that he
80
co-founded. Prior to founding Versant Ventures, Mr. Atwood
served as a general partner of Brentwood Associates, a venture
capital firm. Mr. Atwood also serves on the board of directors
of Pharmion Corporation, ForteBio, FivePrime Therapeutics, Inc.,
Saegis Pharmaceuticals, Helicos Biosciences Corp. and Spaltudaq
Corporation. Mr. Atwood holds a B.S. in biological sciences from
the University of California, Irvine, an M.S. in ecology from
the University of California, Davis and an M.B.A. from Harvard
University.
Samuel L. Barker, Ph.D. has served as a member of our
board of directors since August 2006. In March 2001, Dr. Barker
co-founded Clearview Projects, Inc., a provider of partnering
and transaction services to biopharmaceutical companies, and has
served as a principal since that time. Dr. Barker also
served as President and Chief Executive Officer of Clearview
Projects from July 2003 to November 2004. Dr. Barker served in a
series of leadership positions at Bristol-Myers Squibb Company
until his retirement in 1999. His positions at Bristol-Myers
Squibb included service as Executive Vice President, Worldwide
Franchise Management and Strategy during 1998, President, United
States Pharmaceuticals from 1992 to 1997, and President,
Bristol-Myers Squibb Intercontinental Commercial Operations from
1990 to 1992. Prior to 1990, Dr. Barker held executive positions
in research and development, manufacturing, finance, business
development and sales and marketing at Squibb Pharmaceuticals.
Dr. Barker also serves on the board of directors of
AtheroGenics, Inc., a pharmaceutical company, and Lexicon
Genetics Incorporated, a biopharmaceutical company, where he
serves as chairman. Dr. Barker holds a B.S. from Henderson State
College, an M.S. from the University of Arkansas and a Ph.D.
from Purdue University.
Michael A. Berman, M.D. has served as a member of
our board of directors since April 2006. Since January 2005,
Dr. Berman has served as President and Chief Executive
Officer of the Michael A. Berman Group, Inc., a consulting firm
specializing in the healthcare industry. Since January 2005,
Dr. Berman has also served as a consultant for Stockamp and
Associates, Inc., a business process consulting firm
specializing in the healthcare industry. From October 1999 to
January 2005, Dr. Berman served as Executive Vice President
and Director of New York Presbyterian Hospital, and from
September 1997 to October 1999 as its Senior Vice President and
Chief Medical Officer. From April 1984 to September 1997, he
served as Professor and Chairman of the Department of Pediatrics
at the University of Maryland School of Medicine.
Dr. Berman holds a M.D. from the State University of New
York, Syracuse.
James C. Blair, Ph.D. has served as a member of our
board of directors since September 2005. Since 1985,
Mr. Blair has been a partner of Domain Associates, L.L.C.,
a venture capital management company focused on life sciences.
Mr. Blair also serves on the board of directors of Cell
Biosciences, Inc., Five Prime Therapeutics, Inc., GenVault
Corporation, NeuroPace, Inc., Novacea, Inc., NuVasive, Inc.,
Pharmion Corporation, Verus Pharmaceuticals, Inc. and Volcano
Corporation. Mr. Blair has over 35 years experience
with venture and emerging growth companies. In the course of
this experience, he has been involved in the creation and
successful development at the board level of over forty life
science ventures, including Amgen Inc., Aurora Biosciences
Corporation, Amylin Pharmaceuticals, Inc., Applied Biosystems
Inc., Dura Pharmaceuticals, GeneOhm Sciences, Inc. and Molecular
Dynamics Inc. A former managing director of Rothschild Inc.,
Mr. Blair was directly involved at a senior level with
Rothschild/ New Court venture capital activities from 1978 to
1985. From 1969 to 1978, he was associated with F.S. Smithers
and Co. and White, Weld and Co., two investment banking firms
actively involved with new ventures and emerging growth
companies. From 1961 to 1969, Mr. Blair was an engineering
manager with RCA Corporation, during which time he received a
David Sarnoff Fellowship. He currently serves on the board of
directors of the Prostate Cancer Foundation, a philanthropic
organization, and he is on the advisory boards of the Department
of Molecular Biology at Princeton University and the Department
of Biomedical Engineering at the University of Pennsylvania.
Mr. Blair holds a B.S.E. from Princeton University and an
M.S.E. and Ph.D. from the University of Pennsylvania.
Alan D. Frazier has served as a member of our board of
directors since March 2006. In 1991, Mr. Frazier founded
Frazier Healthcare Ventures, a venture capital firm, and has
served as the managing partner since its inception. From 1983 to
1991, Mr. Frazier served as Executive Vice President, Chief
Financial Officer and Treasurer of Immunex Corporation, a
biopharmaceutical company. From 1980 to
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1983, Mr. Frazier was a principal in the Audit Department
of Arthur Young & Company, which is now
Ernst & Young LLP. Mr. Frazier is a member of the
board of directors of Alexza Pharmaceuticals, Inc. and Rigel
Pharmaceuticals, Inc., both of which are pharmaceutical
companies. Mr. Frazier received a B.A. in economics from
the University of Washington.
Alain B. Schreiber, M.D. has served as a member of
our board of directors since July 2004. Since 2000,
Dr. Schreiber has been a General Partner of ProQuest
Investments, a venture capital firm. From May 1992 to June 2000,
Dr. Schreiber served as President, Chief Executive Officer
and a director of Vical Incorporated, a biopharmaceutical
company. From July 1985 to April 1992, he held various positions
with Rhone-Poulenc Rorer Inc., which is now Sanofi-Aventis, most
recently as Senior Vice President of Discovery Research. From
October 1982 to June 1985, Dr. Schreiber served as
Biochemistry Department Head at Syntex Research, which is now
Roche Bioscience. Dr. Schreiber currently serves on the
board of several privately held companies including BioRexis
Pharmaceutical Corporation, Concentric Medical, Inc. and Optimer
Pharmaceuticals, Inc. Dr. Schreiber holds a B.S. in
chemistry and an M.D. from the Free University in Brussels,
Belgium.
Christopher J. Twomey has served as a member of our board
of directors since July 2006. Mr. Twomey joined Biosite
Incorporated, a medical diagnostic company, in March 1990 and is
currently its Senior Vice President, Finance and Chief Financial
Officer. From 1981 to 1990, Mr. Twomey worked for
Ernst & Young LLP, where he served as an Audit Manager.
Mr. Twomey also serves on the board of directors of
Senomyx, Inc., a biotechnology company, where he serves as Chair
of the Audit Committee. Mr. Twomey holds a B.A. in business
economics from the University of California at
Santa Barbara.
Board Composition
Our board of directors is currently authorized to have eight
members, and is currently composed of seven non-employee members
and our current President and Chief Executive Officer, Theodore
R. Schroeder. Upon completion of this offering, our amended and
restated certificate of incorporation will provide for a
classified board of directors consisting of three classes of
directors, each serving staggered three-year terms. As a result,
a portion of our board of directors will be elected each year.
To implement the classified structure, prior to the consummation
of this offering, two of the nominees to the board will be
appointed to one-year terms, three will be appointed to two-year
terms and three will be appointed to three-year terms.
Thereafter, directors will be elected for three-year terms. Our
Class I directors, whose terms will expire at the 2007
annual meeting of stockholders, will be Drs. Berman and
Schreiber and Mr. Schroeder. Our Class II directors,
whose terms will expire at the 2008 annual meeting of
stockholders, will be Dr. Blair and Messrs. Frazier and Twomey.
Our Class III directors, whose terms will expire at the
2009 annual meeting of stockholders, will be Dr. Barker and
Messrs. Atwood and Garner.
Pursuant to a voting agreement originally entered into in July
2004 and most recently amended in August 2006 by and among us
and certain of our stockholders, Drs. Barker, Berman, Blair
and Schreiber and Messrs. Atwood, Frazier, Garner,
Schroeder and Twomey were each elected to serve as members on
our board of directors and, as of the date of this prospectus,
continue to so serve. The voting agreement will terminate upon
completion of this offering, and members previously elected to
our board of directors pursuant to this agreement will continue
to serve as directors until their successors are duly elected by
holders of our common stock. For a more complete description of
the voting agreement, see Certain Relationships and
Related Party Transactions Voting Agreement.
Board Committees
Our board of directors has established three committees: the
audit committee, the compensation committee and the
nominating/corporate governance committee. Our board of
directors may establish other committees to facilitate the
management of our business.
Audit Committee. Our audit committee consists of
Messrs. Twomey (chair and audit committee financial expert)
and Frazier and Dr. Berman, each of whom our board of
directors has determined is
82
independent within the meaning of the independent director
standards of the SEC and the Nasdaq Stock Market, Inc.
This committees main function is to oversee our accounting
and financial reporting processes, internal systems of control,
independent registered public accounting firm relationships and
the audits of our financial statements. This committees
responsibilities include:
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selecting and hiring our independent registered public
accounting firm; |
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evaluating the qualifications, independence and performance of
our independent registered public accounting firm; |
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approving the audit and non-audit services to be performed by
our independent registered public accounting firm; |
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reviewing the design, implementation, adequacy and effectiveness
of our internal controls and our critical accounting policies; |
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overseeing and monitoring the integrity of our financial
statements and our compliance with legal and regulatory
requirements as they relate to financial statements or
accounting matters; |
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reviewing with management and our auditors any earnings
announcements and other public announcements regarding our
results of operations; |
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preparing the report that the SEC requires in our annual proxy
statement; and |
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reviewing and approving any related party transactions and
reviewing and monitoring compliance with our code of conduct and
ethics. |
Compensation Committee. Our compensation committee
consists of Messrs. Garner (chair) and Frazier and
Dr. Blair, each of whom our board of directors has
determined is independent within the meaning of the independent
director standards of the Nasdaq Stock Market, Inc. This
committees purpose is to assist our board of directors in
determining the development plans and compensation for our
senior management and directors and recommend these plans to our
board. This committees responsibilities include:
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reviewing and recommending compensation and benefit plans for
our executive officers and compensation policies for members of
our board of directors and board committees; |
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reviewing the terms of offer letters and employment agreements
and arrangements with our officers; |
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setting performance goals for our officers and reviewing their
performance against these goals; |
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evaluating the competitiveness of our executive compensation
plans and periodically reviewing executive succession plans; and |
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preparing the report that the SEC requires in our annual proxy
statement. |
Nominating/ Corporate Governance Committee. Our
nominating/corporate governance committee consists of
Mr. Atwood (chair) and Drs. Berman and Schreiber,
each of whom our board of directors has determined is
independent within the meaning of the independent director
standards of the Nasdaq Stock Market, Inc. This committees
purpose is to assist our board by identifying individuals
qualified to become members of our board of directors,
consistent with criteria set by our board, and to develop our
corporate governance principles. This committees
responsibilities include:
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evaluating the composition, size and governance of our board of
directors and its committees and making recommendations
regarding future planning and the appointment of directors to
our committees; |
83
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administering a policy for considering stockholder nominees for
election to our board of directors; |
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evaluating and recommending candidates for election to our board
of directors; |
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overseeing our board of directors performance and
self-evaluation process; and |
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reviewing our corporate governance principles and providing
recommendations to the board regarding possible changes. |
Compensation Committee Interlocks and Insider
Participation
Prior to establishing the compensation committee, our board of
directors as a whole performed the functions delegated to the
compensation committee. None of the members of our compensation
committee has ever been one of our officers or employees. None
of our executive officers currently serves, or has served, as a
member of the board of directors or compensation committee of
any entity that has one or more executive officers serving as a
member of our board of directors or compensation committee.
Director Compensation
From September 2004 through August 2005, we paid Mr. Garner
$5,000 per month plus qualified business expenses for his
services as chairman of our board of directors under the terms
of a consulting agreement between us and a limited liability
company affiliated with Mr. Garner. The agreement expired
on August 31, 2005. From September 2005 to February 2006,
we continued to pay Mr. Garner $5,000 per month for
his services as chairman of our board of directors. In February
2006, Mr. Garners monthly compensation for his
services as chairman of our board of directors was increased to
$8,333 per month.
Other than to Mr. Garner, we have historically not provided
cash compensation to directors for their services as directors
or members of committees of the board of directors. Following
the completion of this offering, we intend to provide cash
compensation in the form of an annual retainer of $25,000 for
each non-employee director. We will also pay an additional
annual retainer to the non-employee director serving as
(i) the chairman of our Audit Committee equal to $10,000,
and (ii) the chairman of our Compensation Committee or our
Nominating/ Corporate Governance Committee equal to $4,000. We
will pay an additional annual retainer to non-employee directors
(other than the chairman) serving on the Audit Committee equal
to $5,000 and to non-employee directors (other than the
chairman) serving on the Compensation Committee or the
Nominating/Corporate Governance Committee equal to $2,000. We
will pay additional cash compensation to the non-employee
director serving as the chairman of our board of directors equal
to $100,000 per year. We have reimbursed and will continue
to reimburse our non-employee directors for their reasonable
expenses incurred in attending meetings of our board of
directors and committees of the board of directors.
Following the completion of this offering, any non-employee
director who is first elected to the board of directors will be
granted a non-qualified option to purchase 25,000 shares of
our common stock (subject to adjustment as provided in the 2006
plan described below) on the date of his or her initial election
to the board of directors. Such options will have an exercise
price per share equal to the fair market value of our common
stock on the date of grant. In addition, on the date of each
annual meeting of our stockholders following this offering, each
non-employee director will be eligible to receive a
non-qualified option to purchase 12,500 shares of common
stock (subject to adjustment as provided in the 2006 plan
described below).
The initial options granted to non-employee directors described
above will vest in thirty-six (36) equal monthly installments on
the first day of each calendar month subsequent to the date of
grant, subject to the directors continuing service on our
board of directors on those dates. The annual options granted to
non-employee directors described above will vest in twelve equal
monthly installments on the first day of each calendar month
following the date of grant, subject to the directors
continuing service on our board of directors on those dates. The
term of each option granted to a non-employee director shall be
84
ten years. The terms of these options are described in more
detail under Employee Benefit and Stock
Plans.
Executive Compensation
The following table summarizes the compensation that we paid to
our Chief Executive Officer and each of our four other most
highly compensated executive officers during the year ended
December 31, 2005. We refer to these officers in this
prospectus as our named executive officers.
Summary Compensation Table
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Long-Term | |
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Compensation | |
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Annual Compensation | |
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Other Annual | |
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Securities | |
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All Other | |
Name and Principal Position |
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Salary | |
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Bonus | |
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Compensation | |
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Underlying Options | |
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Compensation | |
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Named Executive Officers
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Theodore R. Schroeder
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$ |
250,000 |
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$ |
30,000 |
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250,000 |
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President and Chief
Executive Officer |
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Richard E. Lowenthal
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220,000 |
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25,430 |
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564,000 |
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Vice President, Regulatory Affairs and Quality Assurance |
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William S. Craig, Ph.D.
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220,000 |
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23,161 |
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350,000 |
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Senior Vice President, Pharmaceutical Development
and Manufacturing |
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Kenneth R. Heilbrunn, M.D.(1)
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206,250 |
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6,000 |
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350,000 |
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Senior Vice President,
Clinical Development |
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David A. Socks
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175,000 |
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10,000 |
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Vice President,
Business Development |
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(1) |
Dr. Heilbrunn joined us as our Senior Vice President,
Clinical Development in April 2005 and, therefore, the amounts
set forth above reflect less than a full year.
Dr. Heilbrunn has provided us with notice of his
resignation effective September 30, 2006. |
In May 2006, Dr. Mike A. Royal, M.D., J.D. joined
us as our Vice President, Clinical Development, Analgesics at an
annual salary of $275,000. In June 2006, Mr. William R.
LaRue joined us as our Senior Vice President, Chief Financial
Officer, Treasurer and Secretary at an annual salary of
$265,000. In August 2006, Dr. James B. Breitmeyer joined us
as our Executive Vice President, Development and Chief Medical
Officer at an annual salary of $330,000.
Option Grants in Last Fiscal Year
The following table sets forth certain information with respect
to stock options granted to the individuals named in the Summary
Compensation Table during the fiscal year ended
December 31, 2005, including the potential realizable value
over the ten-year term of the options, based on assumed rates of
stock appreciation of 5% and 10%, compounded annually, minus the
applicable per share exercise price.
These assumed rates of appreciation are mandated by the rules of
the SEC and do not represent our estimate or projection of our
future common stock price. We cannot assure you that any of the
values in the table will be achieved. Actual gains, if any, on
stock option exercises will be dependent on the future
performance of our common stock and overall stock market
conditions. The assumed 5% and 10% rates of stock appreciation
are based on the assumed initial public offering price of
$ per
share (the
85
mid-point of the price range set forth on the cover page of this
prospectus). The percentage of total options granted is based
upon our granting of options to employees, directors and
consultants in 2005 to purchase an aggregate of
3,077,000 shares of our common stock.
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Potential Realizable | |
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Value at Assumed | |
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Annual Rates of | |
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Stock Price | |
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Appreciation for | |
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% of | |
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Number of | |
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Total Options | |
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Underlying | |
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Exercise | |
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5% | |
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10% | |
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Theodore R. Schroeder
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250,000 |
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8.12% |
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0.10 |
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12-29-2015 |
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Richard E. Lowenthal
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300,000 |
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9.75% |
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0.10 |
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2-15-2015 |
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264,000 |
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8.58% |
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0.10 |
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12-29-2015 |
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William S. Craig, Ph.D.
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350,000 |
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11.37% |
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0.10 |
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2-15-2015 |
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Kenneth R. Heilbrunn, M.D.
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350,000 |
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11.37% |
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0.10 |
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5-19-2015 |
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David A. Socks
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Aggregate Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values
The following table describes for the named executive officers
the number and value of securities underlying exercisable and
unexercisable options held by them as of December 31, 2005.
The value realized and the value of unexercised
in-the-money options at
December 31, 2005 are based on the assumed initial public
offering price of
$ per
share (the mid-point of the price range set forth on the cover
page of this prospectus) less the per share exercise price,
multiplied by the number of shares issued or issuable, as the
case may be, upon exercise of the option. All options were
granted under our 2004 equity incentive award plan.
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December 31, 2005 | |
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December 31, 2005 | |
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Shares Acquired | |
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Value | |
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Name |
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on Exercise | |
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Realized | |
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Exercisable | |
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Unexercisable | |
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Exercisable | |
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Unexercisable | |
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Theodore R. Schroeder
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1,000,000 |
(1) |
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$ |
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Richard E. Lowenthal
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564,000 |
(2) |
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William S. Craig, Ph.D.
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350,000 |
(3) |
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Kenneth R. Heilbrunn, M.D.
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350,000 |
(4) |
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David A. Socks
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100,000 |
(5) |
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(1) |
Of these 1,000,000 shares, 765,625 were unvested as of
December 31, 2005. |
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(2) |
Of these 564,000 shares, 489,000 were unvested as of
December 31, 2005. |
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(3) |
Of these 350,000 shares, 255,208 were unvested as of
December 31, 2005. |
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(4) |
Of these 350,000 shares, 350,000 were unvested as of
December 31, 2005. |
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(5) |
Of these 100,000 shares, 68,750 were unvested as of
December 31, 2005. |
Employment Agreements
We have entered into employment agreements with Theodore R.
Schroeder, our President and Chief Executive Officer, James B.
Breitmeyer, M.D., Ph.D., our Executive Vice President,
Development and Chief Medical Officer, William S.
Craig, Ph.D., our Senior Vice President, Pharmaceutical
Development and Manufacturing, Kenneth R. Heilbrunn, M.D.,
our Senior Vice President, Clinical
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Development, William R. LaRue, our Senior Vice President, Chief
Financial Officer, Treasurer and Secretary, Richard E.
Lowenthal, our Vice President, Regulatory Affairs and Quality
Assurance, Mike A. Royal, M.D., J.D., our Vice
President, Clinical Development, Analgesics, and David A. Socks,
our Vice President, Business Development.
Pursuant to the employment agreements, each executive is
required to faithfully, industriously and to the best of his or
her ability, experience and talent perform all of the duties
that may be assigned to such executive pursuant to his or her
employment agreement, and shall devote substantially all of his
or her productive time and efforts to the performance of such
duties.
The base salaries of the executives are set forth in the
employment agreements. The employment agreements do not provide
for automatic annual increases in salary, but each employment
agreement provides for annual salary reviews. The employment
agreements provide that each executive shall participate in any
bonus plan that our board of directors or its designee may
approve for our senior executives (see
Employee Benefit and Stock Plans
Annual Bonus Plan below). Each executives employment
is at-will and may be terminated by us at any time, with or
without notice. Similarly, each executive may terminate his or
her employment with us at any time, with or without notice.
The employment agreements provide each executive with certain
severance benefits in the event his or her employment is
terminated as a result of his or her death or permanent
disability. Specifically, in the event of such a termination,
each executive will receive any accrued but unpaid base salary
as of the date of termination, a lump sum cash payment equal to
the executives annual base salary, and a lump sum cash
payment equal to the executives prorated annual bonus.
Additionally, in the event of an executives death, his or
her eligible dependents would receive 12 months healthcare
benefits continuation coverage at our expense. In the event of
an executives permanent disability, he or she will receive
12 months healthcare and life insurance benefits
continuation at our expense.
The employment agreements also provide each executive with
certain severance benefits in the event his or her employment is
terminated by us other than for cause, as defined in
the agreements and described below, or if the executive resigns
with good reason, as defined in the agreements and
described below. Specifically, if such termination occurs within
three months prior to or within 12 months following a
change of control, each executive will receive any accrued but
unpaid base salary as of the date of termination, a lump sum
cash payment equal to the executives annual base salary, a
lump sum cash payment equal to the executives prorated
annual bonus, and 12 months healthcare and life insurance
benefits continuation coverage at our expense, plus a maximum of
$15,000 towards outplacement services. If such termination
occurs more than three months prior to a change of control or
more than 12 months following a change of control, each
executive will receive the benefits described in the previous
sentence, less the prorated annual bonus.
The employment agreements provide that, in the event an
executives employment is terminated by us other than for
cause or as a result of the executives death or permanent
disability, or if the executive resigns for good reason, that
portion of the executives stock awards, and any unvested
shares issued upon the exercise of such stock awards, which
would have vested if the executive had remained employed for an
additional 12 months following the date of termination will
immediately vest on the date of termination. In addition, if an
executives employment is terminated by us other than for
cause or if an executive resigns for good reason within three
months prior to or twelve months following a change of control,
all of the executives remaining unvested stock awards, and
any unvested shares issued upon the exercise of such stock
awards, will immediately vest on the later of (1) the date
of termination or (2) the date of the change of control.
This accelerated vesting is in addition to any accelerated
vesting provided under our stock option plans.
Provided that the relevant stock award agreements do not specify
a longer exercise period, an executive may generally exercise
his or her stock awards until three months after the date of the
executives termination of employment, except that the
executive may also exercise his or her stock awards three months
after the date of a change of control, if the executives
employment is terminated by us other than for cause or if the
executive resigns for good reason within three months prior to a
change of control,
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and if such stock awards were granted on or after the effective
date of the executives employment agreement. In no event,
however, may an executive exercise any stock award later than
its original outside expiration date.
In addition, the employment agreements provide that, in
connection with a change of control, 50% of the executives
unvested stock awards, and any unvested shares issued upon the
exercise of stock awards, will immediately become vested. This
accelerated vesting is in addition to any accelerated vesting
provided under our stock option plans.
The employment agreements also include standard noncompetition,
nonsolicitation and nondisclosure covenants on the part of the
executives. During the term of each executives employment
with us, the employment agreements provide that he or she may
not compete with our business in any manner, except that an
executive may own insignificant equity positions in publicly
traded companies so long as the executive does not control such
company. During the term of each executives employment
with us and for any period during which he or she is receiving
severance, the employment agreements provide that he or she may
not solicit our employees or consultants. The employment
agreements also reaffirm the executives obligations under
our standard employee proprietary information and inventions
agreement to which each executive is a party.
For purposes of the employment agreements, cause
means, generally, the executives commission of an act of
fraud, embezzlement or dishonesty that has a material adverse
impact on us, the executives conviction of, or plea of
guilty or no contest to a felony, the executives
unauthorized use or disclosure of our confidential information
or trade secrets that has a material adverse impact on us, the
executives gross negligence, insubordination, material
violation of any duty of loyalty to us or any other material
misconduct on the part of the executive, the executives
ongoing and repeated failure or refusal to perform or neglect of
his or her duties (where such failure, refusal or neglect
continues for 15 days following the executives
receipt of written notice from our board), or a breach by the
executive of any material provision of his or her employment
agreement. Prior to any determination by us that
cause has occurred, we will provide the executive
with written notice of the reasons for such determination,
afford the executive a reasonable opportunity to remedy any such
breach, and provide the executive an opportunity to be heard
prior to the final decision to terminate the executives
employment.
For purposes of the employment agreements, good
reason means, generally, a change by us in the
executives position or responsibilities, other than a
change in the executives reporting relationship, that, in
the executives reasonable judgment, represents a
substantial and material reduction in the position or
responsibilities as in effect immediately prior thereto, our
assignment to the executive of any duties or responsibilities
that, in the executives reasonable judgment, are
materially inconsistent with such position or responsibilities,
any removal of the executive from or failure to reappoint or
reelect the executive to any of such positions, except in
connection with the termination of the executives
employment for cause, as a result of his or her permanent
disability or death, or by the executive other than for good
reason, a material reduction in the executives annual base
salary (other than in connection with a general reduction in
wages for personnel with similar status and responsibilities),
our requiring the executive (without the executives
consent) to be based at any place outside a
50-mile radius of his
or her initial place of employment with us, except for
reasonably required travel on behalf of our business, our
failure to provide the executive with compensation and benefits
substantially equivalent (in terms of benefit levels and/or
reward opportunities) to those provided for under each of our
material employee benefit plans, programs and practices as in
effect immediately prior to the date of the employment
agreement, or any material breach by us of our obligations to
the executive under the employment agreement.
Proprietary Information and Inventions Agreement
Each of our named executive officers has also entered into a
standard form agreement with respect to proprietary information
and inventions. Among other things, this agreement obligates
each named executive officer to refrain from disclosing any of
our proprietary information received during the
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course of employment and, with some exceptions, to assign to us
any inventions conceived or developed during the course of
employment.
Employee Benefit and Stock Plans
In August 2006, our board of directors approved our 2006
corporate bonus plan. Pursuant to the 2006 corporate bonus plan,
our board of directors designated for each executive officer a
target bonus amount, expressed as a percentage of his or her
base salary (40% for our chief executive officer, 30% for our
executive vice presidents and senior vice presidents and 25% for
our other executive officers). Our executive officers are
eligible to receive bonuses if certain individual and corporate
performance criteria are achieved during the 2006 fiscal year,
and such bonuses are payable as cash, stock, options, or a
combination of the foregoing. Bonus payments will be based on
the compensation committees evaluation of our achievement
of corporate performance goals for 2006, which were determined
by the compensation committee prior to the inception of the 2006
incentive plan. The use of corporate performance goals is
intended to establish a link between the executives pay
and our business performance. The individual performance of each
of the executive officers during 2006 will be evaluated
according to the achievement of individual performance goals,
which were approved by the president and chief executive officer
and the relevant vice presidents prior to the inception of the
2006 incentive plan. Our president and chief executive officer
will receive a bonus determined solely by reference to the
achievement of corporate performance goals. The compensation
committee is responsible for approving any bonuses to our
executive officers pursuant to the 2006 incentive plan.
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2006 Equity Incentive Award Plan |
In August 2006, our board of directors approved our 2006
Equity Incentive Award Plan, or the 2006 plan, which was
approved by our stockholders in August 2006. The 2006 plan
will become effective on the day prior to the day of this
offering.
We have initially
reserved shares
of our common stock for issuance under the 2006 plan. In
addition, the number of shares initially reserved under the 2006
plan will be increased by (i) the number of shares of
common stock available for issuance and not subject to options
granted under our 2004 equity incentive award plan as of the
effective date of the 2006 plan, and (ii) the number of
shares of common stock related to options granted under our 2004
equity incentive award plan that are repurchased, forfeited,
expired or are cancelled on or after the effective date of the
2006 plan. The total number of shares described in clauses (i)
and (ii) of the preceding sentence shall not
exceed shares
of our common stock. The 2006 plan contains an evergreen
provision that allows for an annual increase in the number
of shares available for issuance under the 2006 plan on January
1 of each year during the ten-year term of the 2006 plan,
beginning on January 1, 2008. The annual increase in the
number of shares shall be equal to the lesser of:
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4% of our outstanding common stock on the applicable January 1;
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a lesser amount determined by our board of directors. |
Notwithstanding the evergreen provision, the 2006
plan also provides for an aggregate limit of 20,000,000 shares
of common stock which may be issued under the 2006 plan over the
course of its ten-year term. The material terms of the 2006 plan
are summarized below. The 2006 plan is filed as an exhibit to
the registration statement of which this prospectus is a part.
Administration. The compensation committee of our board
of directors will administer the 2006 plan (except with respect
to any award granted to independent directors (as
defined in the 2006 plan), which must be administered by our
full board of directors). To administer the 2006 plan, our
compensation committee must consist of at least two members of
our board of directors, each of whom is a non-employee
director for purposes of
Rule 16b-3 under
the Securities Exchange Act of 1934, as amended, and, with
respect to awards that are intended to constitute
performance-based compensation
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under Section 162(m) of the Internal Revenue Code of 1986,
as amended, an outside director for purposes of
Section 162(m). Subject to the terms and conditions of the
2006 plan, our compensation committee has the authority to
select the persons to whom awards are to be made, to determine
the type or types of awards to be granted to each person, the
number of awards to grant, the number of shares to be subject to
such awards, and the terms and conditions of such awards, and to
make all other determinations and decisions and to take all
other actions necessary or advisable for the administration of
the 2006 plan. Our compensation committee is also authorized to
adopt, amend or rescind rules relating to administration of the
2006 plan. Our board of directors may at any time abolish the
compensation committee and revest in itself the authority to
administer the 2006 plan. The full board of directors will
administer the 2006 plan with respect to awards to non-employee
directors.
Eligibility. Options, stock appreciation rights, or SARs,
restricted stock and other awards under the 2006 plan may be
granted to individuals who are then our officers or employees or
are the officers or employees of any of our subsidiaries. Such
awards may also be granted to our non-employee directors and
consultants but only employees may be granted incentive stock
options, or ISOs. The maximum number of shares that may be
subject to awards granted under the 2006 plan to any individual
in any calendar year cannot exceed 1,000,000.
Awards. The 2006 plan provides that our compensation
committee (or the board of directors, in the case of awards to
non-employee directors) may grant or issue stock options, SARs,
restricted stock, restricted stock units, dividend equivalents,
performance share awards, performance stock units, stock
payments, deferred stock, performance bonus awards,
performance-based awards, and other stock-based awards, or any
combination thereof. The compensation committee (or the board of
directors, in the case of awards to non-employee directors) will
consider each award grant subjectively, considering factors such
as the individual performance of the recipient and the
anticipated contribution of the recipient to the attainment of
the companys long-term goals. Each award will be set forth
in a separate agreement with the person receiving the award and
will indicate the type, terms and conditions of the award.
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Nonqualified stock options, or NQSOs, will provide for the right
to purchase shares of our common stock at a specified price
which may not be less than par value of a share of common stock
on the date of grant, and usually will become exercisable (at
the discretion of our compensation committee or the board of
directors, in the case of awards to non-employee directors) in
one or more installments after the grant date, subject to the
participants continued employment or service with us
and/or subject to the satisfaction of performance targets
established by our compensation committee (or the board of
directors, in the case of awards to non-employee directors).
NQSOs may be granted for any term specified by our compensation
committee (or the board of directors, in the case of awards to
non-employee directors), but the term may not exceed ten years. |
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ISOs will be designed to comply with the provisions of the
Internal Revenue Code and will be subject to specified
restrictions contained in the Internal Revenue Code. Among such
restrictions, ISOs must have an exercise price of not less than
the fair market value of a share of common stock on the date of
grant, may only be granted to employees, must expire within a
specified period of time following the optionees
termination of employment, and must be exercised within the ten
years after the date of grant. In the case of an ISO granted to
an individual who owns (or is deemed to own) more than 10% of
the total combined voting power of all classes of our capital
stock, the 2006 plan provides that the exercise price must be
more than 110% of the fair market value of a share of common
stock on the date of grant and the ISO must expire upon the
fifth anniversary of the date of its grant. |
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Restricted stock may be granted to participants and made subject
to such restrictions as may be determined by our compensation
committee (or the board of directors, in the case of awards to
non-employee directors). Typically, restricted stock may be
forfeited for no consideration if the conditions or restrictions
are not met, and they may not be sold or otherwise transferred
to third parties until restrictions are removed or expire.
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restricted stock, unlike recipients of options, may have voting
rights and may receive dividends, if any, prior to the time when
the restrictions lapse. |
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Restricted stock units may be awarded to participants, typically
without payment of consideration or for a nominal purchase
price, but subject to vesting conditions including continued
employment or on performance criteria established by our
compensation committee (or the board of directors, in the case
of awards to non-employee directors). Like restricted stock,
restricted stock units may not be sold or otherwise transferred
or hypothecated until vesting conditions are removed or expire.
Unlike restricted stock, stock underlying restricted stock units
will not be issued until the restricted stock units have vested,
and recipients of restricted stock units generally will have no
voting or dividend rights prior to the time when vesting
conditions are satisfied. |
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SARs may be granted in connection with stock options or other
awards, or separately. SARs granted under the 2006 plan in
connection with stock options or other awards typically will
provide for payments to the holder based upon increases in the
price of our common stock over the exercise price of the related
option or other awards. Except as required by
Section 162(m) of the Internal Revenue Code with respect to
an SAR intended to qualify as performance-based compensation as
described in Section 162(m) of the Internal Revenue Code,
there are no restrictions specified in the 2006 plan on the
exercise of SARs or the amount of gain realizable therefrom. Our
compensation committee (or the board of directors, in the case
of awards to non-employee directors) may elect to pay SARs in
cash or in common stock or in a combination of both. |
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Dividend equivalents represent the value of the dividends, if
any, per share paid by us, calculated with reference to the
number of shares covered by the stock options, SARs or other
awards held by the participant. |
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Performance awards (i.e., performance share awards,
performance stock units, performance bonus awards,
performance-based awards and deferred stock) may be granted by
our compensation committee (or the board of directors, in the
case of awards to non-employee directors) on an individual or
group basis. Generally, these awards will be based upon specific
performance targets and may be paid in cash or in common stock
or in a combination of both. Performance awards may include
phantom stock awards that provide for payments based
upon increases in the price of our common stock over a
predetermined period. Performance awards may also include
bonuses that may be granted by our compensation committee (or
the board of directors, in the case of awards to non- employee
directors) on an individual or group basis, which may be paid on
a current or deferred basis and may be payable in cash or in
common stock or in a combination of both. The maximum amount of
any such bonuses to a covered employee within the
meaning of Section 162(m) of the Code shall not exceed
$1,000,000 for any fiscal year during the term of the 2006 plan. |
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Stock payments may be authorized by our compensation committee
(or the board of directors, in the case of awards to
non-employee directors) in the form of common stock or an option
or other right to purchase common stock as part of a deferred
compensation arrangement, made in lieu of all or any part of
compensation, including bonuses, that would otherwise be payable
to employees or consultants or members of our board of directors. |
Corporate Transactions. In the event of a change of
control where the acquiror does not assume awards granted under
the plan, awards issued under the 2006 plan will be subject to
accelerated vesting such that 100% of the awards will become
vested and exercisable or payable, as applicable. Under the 2006
plan, a change of control is generally defined as:
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the direct or indirect sale or exchange in a single or series of
related transactions (other than an offering of our stock to the
general public through a registration statement filed with the |
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SEC) whereby any person or entity or related group of persons or
entities (other than us, our subsidiaries, an employee benefit
plan maintained by us or any of our subsidiaries or a person or
entity that, prior to such transaction, directly or indirectly
controls, is controlled by, or is under common control with, us)
directly or indirectly acquires beneficial ownership (within the
meaning of
Rule 13d-3 under
the Exchange Act) of more than 50% of the total combined voting
power of our securities outstanding immediately after such
acquisition; |
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during any two-year period, individuals who, at the beginning of
such period, constitute our board of directors together with any
new director(s) whose election by our board of directors or
nomination for election by our stockholders was approved by a
vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the
two-year period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a
majority of our board of directors; |
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the merger, consolidation, reorganization, or business
combination in which the company is a party (whether directly
involving the company or indirectly involving the company
through one or more intermediaries, other than a merger,
consolidation, reorganization, or business combination that
results in our outstanding voting securities immediately before
the transaction continuing to represent a majority of the voting
power of the acquiring companys outstanding voting
securities or a merger, consolidation, reorganization, or
business combination after which no person or entity owns 50% of
the successor companys voting power); and |
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the sale, exchange or transfer of all or substantially all of
our assets. |
Amendment and Termination of the 2006 Plan. Our board of
directors may terminate, amend or modify the 2006 plan. However,
stockholder approval of any amendment to the 2006 plan will be
obtained to the extent necessary and desirable to comply with
any applicable law, regulation or stock exchange rule, or for
any amendment to the 2006 plan that increases the number of
shares available under the 2006 plan. If not terminated earlier
by the compensation committee or the board of directors, the
2006 plan will terminate on the tenth anniversary of the date of
its initial approval by our board of directors.
Securities Laws and Federal Income Taxes. The 2006 plan
is designed to comply with various securities and federal tax
laws as follows:
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Securities Laws. The 2006 plan is intended to conform to
all provisions of the Securities Act and the Exchange Act and
any and all regulations and rules promulgated by the SEC
thereunder, including without limitation,
Rule 16b-3. The
2006 plan will be administered, and awards will be granted and
may be exercised, only in such a manner as to conform to such
laws, rules and regulations. |
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General Federal Tax Consequences. Under current federal
laws, in general, recipients of awards and grants of NQSOs,
SARs, restricted stock, restricted stock units, dividend
equivalents, performance awards and stock payments under the
plan are taxable under Section 83 of the Internal Revenue
Code upon their receipt of common stock or cash with respect to
such awards or grants and, subject to Section 162(m) of the
Internal Revenue Code, we will be entitled to an income tax
deduction with respect to the amounts taxable to such
recipients. However, Section 409A of the Internal Revenue
Code provides certain new requirements on non-qualified deferred
compensation arrangements. Certain awards under the 2006 plan
are subject to the requirements of Section 409A, in form
and in operation, such as restricted stock unit awards. We
intend that all plan awards that are subject to
Section 409A will satisfy the requirements of
Section 409A. However, if a plan award is subject to and
fails to satisfy the requirements of Section 409A, the
recipient of that award may recognize ordinary income on the
amounts deferred under the award, to the extent vested, which
may be prior to when the compensation is actually or
constructively received. Also, if an award that is subject to
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additional 20% federal income tax on compensation recognized as
ordinary income, as well as interest on such deferred
compensation. |
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Under Sections 421 and 422 of the Internal Revenue Code,
recipients of ISOs are generally not taxed on their receipt of
common stock upon their exercises of ISOs if the ISOs and option
stock are held for specified minimum holding periods and, in
such event, we are not entitled to income tax deductions with
respect to such exercises. Participants in the 2006 plan will be
provided with detailed information regarding the tax
consequences relating to the various types of awards and grants
under the 2006 plan. |
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Section 162(m) Limitation. In general, under
Section 162(m) of the Internal Revenue Code, income tax
deductions of publicly-held corporations may be limited to the
extent total compensation (including base salary, annual bonus,
stock option exercises and non-qualified benefits paid) for
certain executive officers exceeds $1 million (less the
amount of any excess parachute payments as defined
in Section 280G of the Internal Revenue Code) in any one
year. However, under Section 162(m), the deduction limit
does not apply to certain performance-based
compensation if an independent compensation committee
determines performance goals, and if the material terms of the
performance-based compensation are disclosed to and approved by
our stockholders. In particular, stock options and SARs will
satisfy the performance-based compensation exception
if the awards are made by a qualifying compensation committee,
the 2006 plan sets the maximum number of shares that can be
granted to any person within a specified period and the
compensation is based solely on an increase in the stock price
after the grant date. Specifically, the option exercise price
must be equal to or greater than the fair market value of the
stock subject to the award on the grant date. Under a
Section 162(m) transition rule for compensation plans of
corporations which are privately held and which become publicly
held in an initial public offering, the 2006 plan will not be
subject to Section 162(m) until a specified transition
date, which is the earlier of (i) the material modification
of the 2006 plan, (ii) the issuance of all employer stock
and other compensation that has been allocated under the 2006
plan, or (iii) the first annual meeting of stockholders at
which directors are to be elected that occurs after the close of
the third calendar year following the calendar year in which the
initial public offering occurs. After the transition date,
rights or awards granted under the 2006 plan, other than options
and SARs, will not qualify as performance-based
compensation for purposes of Section 162(m) unless
such rights or awards are granted or vest upon pre-established
objective performance goals, the material terms of which are
disclosed to and approved by our stockholders. |
We have attempted to structure the 2006 plan in such a manner
that, after the transition date, the compensation attributable
to stock options and SARs which meet the other requirements of
Section 162(m) will not be subject to the $1 million
limitation. We have not, however, requested a ruling from the
Internal Revenue Service, or IRS, or an opinion of counsel
regarding this issue.
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2004 Equity Incentive Award Plan |
Our 2004 equity incentive award plan, or 2004 plan, was
initially adopted by our board of directors and approved by our
stockholders in November 2004. As amended to date, we have
reserved a total of 11,500,000 shares of common stock for
issuance under the 2004 plan. As of June 30, 2006, options
to purchase 4,081,740 shares of common stock had been
exercised (30,000 shares of which were repurchased by us),
options to purchase 5,769,471 shares of common stock
were outstanding and 1,678,789 shares of common stock
remained available for grant. As of June 30, 2006, the
outstanding options were exercisable at a weighted average
exercise price of approximately $0.38 per share. The
material terms of the 2004 plan are summarized below. The 2004
plan is filed as an exhibit to the registration statement of
which this prospectus is a part.
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No Further Grants. After the effective date of the 2006
Plan, no additional awards will be granted under the 2004 plan.
Administration. The compensation committee of our board
of directors administers the 2004 plan. Following the completion
of this offering, to administer the 2004 plan, our compensation
committee must be constituted as described above in our
description of the 2006 Plan. Subject to the terms and
conditions of the 2004 plan, our compensation committee has the
authority to select the persons to whom awards are to be made,
to determine the number of shares to be subject thereto and the
terms and conditions thereof, and to make all other
determinations and to take all other actions necessary or
advisable for the administration of the 2004 plan. Our
compensation committee is also authorized to establish, adopt,
amend or rescind rules relating to administration of the 2004
plan. Our board of directors may at any time abolish the
compensation committee and revest in itself the authority to
administer the 2004 plan. The full board of directors
administers the 2004 plan with respect to awards to non-employee
directors.
Eligibility. Options and restricted stock under the 2004
plan may be granted to individuals who are then our officers or
employees or are the officers or employees of any of our
subsidiaries. Such awards may also be granted to our
non-employee directors or consultants, but only employees may be
granted ISOs.
Awards. The 2004 plan provides that our compensation
committee may grant or issue stock options and restricted stock,
stock appreciation rights, performance share awards, restricted
stock units, dividend equivalents, stock payments or
performance-based awards or any combination thereof. Each award
will be set forth in a separate agreement with the person
receiving the award and will indicate the type, terms and
conditions of the award.
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NQSOs provide for the right to purchase shares of our common
stock at a specified price, which for purposes of the 2004 plan
prior to the date of this offering, may be no less than 85% of
the fair market value on the date of grant, and usually will
become exercisable (at the discretion of our compensation
committee (or the board of directors, in the case of awards to
non-employee directors), in one or more installments after the
grant date, subject to the participants continued
employment or service with us and/or subject to the satisfaction
of performance targets established by our compensation committee
(or the board of directors, in the case of awards to
non-employee directors). NQSOs may be granted for a maximum
10-year term. |
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ISOs are designed to comply with the provisions of the Internal
Revenue Code and will be subject to specified restrictions
contained in the Internal Revenue Code and as further described
above in connection with the 2006 Equity Incentive Award Plan. |
To date, we have only granted stock options under the 2004 plan.
Corporate Transactions. In the event of a change of
control where the acquiror does not assume awards granted under
the plan and does not substitute substantially similar awards
for those outstanding under the plan, awards issued under the
plan will be subject to accelerated vesting such that 100% of
the awards will become vested and exercisable or payable, as
applicable. Under the 2004 plan, a change of control is
generally defined as:
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a merger or consolidation of us with or into any other
corporation or other entity or person; or |
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a sale, lease, exchange or other transfer in one transaction or
a series of related transactions of all or substantially all of
our outstanding securities or all or substantially all of our
assets. |
Amendment and Termination of the 2004 plan. The
compensation committee, with the approval of the board of
directors, may terminate, amend or modify the 2004 plan.
However, stockholder approval of any amendment to the 2004 plan
will be obtained to the extent necessary and desirable to comply
with any applicable law, regulation, or stock exchange rule. If
not terminated earlier by the compensation committee, with the
approval of the board of directors, the 2004 plan will terminate
on the tenth anniversary of the date of its initial adoption by
our board of directors.
94
We provide a basic savings plan, or 401(k) plan, which is
intended to qualify under Section 401(k) of the Internal
Revenue Code so that contributions to our 401(k) plan by
employees or by us, and the investment earnings thereon, are not
taxable to employees until withdrawn from our 401(k) plan. If
our 401(k) plan qualifies under Section 401(k) of the
Internal Revenue Code, contributions by us, if any, will be
deductible by us when made.
All of our employees are eligible to participate in our 401(k)
plan. Pursuant to our 401(k) plan, employees may elect to reduce
their current compensation by up to the statutorily-prescribed
annual limit of $15,000 in 2006 and to have the amount of this
reduction contributed to our 401(k) plan. Our 401(k) plan
permits, but does not require, additional matching or
non-elective contributions to our 401(k) plan by us on behalf of
all participants in our 401(k) plan. To date, we have not made
any matching or non-elective contributions to our 401(k) plan.
Limitations of Liability and Indemnification Matters
We will adopt provisions in our amended and restated certificate
of incorporation that limit the liability of our directors for
monetary damages for breach of their fiduciary duties, except
for liability that cannot be eliminated under the Delaware
General Corporation Law. Delaware law provides that directors of
a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except
liability for any of the following:
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any breach of their duty of loyalty to the corporation or its
stockholders; |
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acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law; |
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unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware
General Corporation Law; or |
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any transaction from which the director derived an improper
personal benefit. |
This limitation of liability does not apply to liabilities
arising under the federal securities laws and does not affect
the availability of equitable remedies such as injunctive relief
or rescission.
Our amended and restated certificate of incorporation and our
amended and restated bylaws also will provide that we shall
indemnify our directors and executive officers and may indemnify
our other officers and employees and other agents to the fullest
extent permitted by law. We believe that indemnification under
our amended and restated bylaws covers at least negligence and
gross negligence on the part of indemnified parties. Our amended
and restated bylaws also permit us to secure insurance on behalf
of any officer, director, employee or other agent for any
liability arising out of his or her actions in this capacity,
regardless of whether our amended and restated bylaws would
permit indemnification.
We have entered into separate indemnification agreements with
our directors and executive officers, in addition to
indemnification provided for in our charter documents. These
agreements, among other things, provide for indemnification of
our directors and executive officers for expenses, judgments,
fines and settlement amounts incurred by this person in any
action or proceeding arising out of this persons services
as a director or executive officer or at our request. We believe
that these provisions and agreements are necessary to attract
and retain qualified persons as directors and executive officers.
95
PRINCIPAL STOCKHOLDERS
The following table sets forth information about the beneficial
ownership of our common stock at August 28, 2006, and as
adjusted to reflect the sale of the shares of common stock in
this offering, for:
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each person known to us to be the beneficial owner of more than
5% of our common stock; |
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each named executive officer and two additional executive
officers; |
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each of our directors; and |
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all of our executive officers and directors as a group. |
Unless otherwise noted below, the address of each beneficial
owner listed on the table is c/o Cadence Pharmaceuticals,
Inc., 12481 High Bluff Drive, Suite 200, San Diego, CA
92130. We have determined beneficial ownership in accordance
with the rules of the SEC. Except as indicated by the footnotes
below, we believe, based on the information furnished to us by
the stockholders, that the persons and entities named in the
tables below have sole voting and investment power with respect
to all shares of common stock that they beneficially own,
subject to applicable community property laws. We have based our
calculation of the percentage of beneficial ownership on
88,342,195 shares of common stock outstanding on
August 28, 2006, which assumes the conversion of all
outstanding shares of preferred stock into common stock
and shares
of common stock outstanding upon completion of this offering.
In computing the number of shares of common stock beneficially
owned by a person and the percentage ownership of that person,
we deemed outstanding shares of common stock subject to options
or warrants held by that person that are currently exercisable
or exercisable within 60 days of August 28, 2006. We
did not deem these shares outstanding, however, for the purpose
of computing the percentage ownership of any other person.
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Percentage of | |
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Common Stock | |
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Number of | |
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Beneficially Owned | |
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Shares | |
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Beneficially | |
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Prior to | |
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After | |
Beneficial Owner |
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Owned | |
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Offering | |
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Offering | |
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5% or Greater Stockholders:
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Funds affiliated with Domain Associates, L.L.C.(1)
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22,964,492 |
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26.0 |
% |
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One Palmer Square, Suite 515
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Princeton, NJ 08542
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ProQuest Investments III, L.P.(2)
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12,322,698 |
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13.9 |
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90 Nassau Street, 5th Floor
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Princeton, NJ 08542
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Frazier Healthcare V, LP(3)
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10,100,000 |
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11.4 |
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601 Union Street, Suite 3200
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Seattle, WA 98101
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Funds affiliated with Versant Ventures II, L.L.C.(4)
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8,100,000 |
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9.2 |
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3000 Sand Hill Road
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Building 4, Suite 210
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Menlo Park, CA 94025
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Funds affiliated with Technology Partners(5)
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8,000,000 |
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9.1 |
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100 Shoreline Highway
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Suite 282, Building B
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Mill Valley, CA 94941
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BB Biotech Ventures II, L.P.(6)
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7,000,000 |
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7.9 |
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Trafalgar Court, Les Banques
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St Peter Port, Guernsey, Channel Islands
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GY1 3QL
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96
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Percentage of | |
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Common Stock | |
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Number of | |
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Beneficially Owned | |
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Shares | |
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Beneficially | |
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Prior to | |
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After | |
Beneficial Owner |
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Owned | |
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Offering | |
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Offering | |
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Directors and Executive Officers:
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Theodore R. Schroeder(7)
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4,043,740 |
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4.5 |
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James B. Breitmeyer, M.D., Ph.D.(8)
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705,000 |
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* |
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William S. Craig, Ph.D.(9)
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705,303 |
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* |
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Kenneth R. Heilbrunn, M.D.(10)
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650,000 |
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* |
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William R. LaRue(11)
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899,000 |
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1.0 |
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Richard E. Lowenthal(12)
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564,000 |
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* |
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Mike A. Royal, M.D., J.D.(13)
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375,000 |
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* |
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David A. Socks(14)
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1,692,728 |
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1.9 |
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Cam L. Garner(15)
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4,250,123 |
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4.8 |
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Brian G. Atwood(4)
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8,100,000 |
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9.2 |
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Samuel L. Barker, Ph.D.(16)
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100,000 |
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* |
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Michael A. Berman, M.D.(17)
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100,000 |
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* |
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James C. Blair, Ph.D.(1)
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22,964,492 |
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26.0 |
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Alan D. Frazier(3)
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10,100,000 |
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11.4 |
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Alain B. Schreiber, M.D.(2)
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12,322,698 |
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13.9 |
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Christopher J. Twomey(18)
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100,000 |
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* |
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Executive officers and directors as a group (16 persons)(19)
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67,672,084 |
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71.2 |
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* |
Represents beneficial ownership of less than one percent of our
outstanding common stock. |
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(1) |
Includes 22,612,155 shares of common stock owned by Domain
Partners VI, L.P., 242,337 shares of common stock owned by
DP VI Associates, L.P. and 110,000 shares of common stock
owned by Domain Associates, L.L.C. Of the 110,000 shares
owned by Domain Associates, 86,875 will be subject to our right
of repurchase within 60 days of August 28, 2006.
Dr. Blair is a member of our board of directors and a
managing member of Domain Associates, L.L.C. and a managing
member of One Palmer Square Associates VI, L.L.C., which is the
general partner of Domain Partners VI, L.P. and DP VI
Associates, L.P. Dr. Blair disclaims beneficial ownership
of these shares except to the extent of his pecuniary interest
therein. |
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(2) |
Includes 12,212,698 shares of common stock owned by
ProQuest Investments III, L.P. and 50,000 shares of common
stock owned by ProQuest Management LLC. Of the
50,000 shares owned by ProQuest Management, 17,500 will be
subject to our right of repurchase within 60 days of
August 28, 2006. Also includes 60,000 shares
Dr. Schreiber has the right to acquire pursuant to
outstanding options which are immediately exercisable, 55,000 of
which would be subject to our right of repurchase within
60 days of August 28, 2006. Dr. Schreiber is a
member of our board of directors and a managing member of
ProQuest Management LLC and a managing member of ProQuest
Associates III LLC, the ultimate general partner of
ProQuest Investments III, L.P. |
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(3) |
Includes 100,000 shares Mr. Frazier has the right to
acquire pursuant to outstanding options which are immediately
exercisable, 87,500 of which would be subject to our right of
repurchase within 60 days of August 28, 2006. The
voting and disposition of the shares held by Frazier
Healthcare V, LP is determined by FHM V, LLC, which is
the general partner of FHM V, LP, which is the general
partner of Frazier Healthcare V, LP. Mr. Frazier is a
member of our board of directors and a managing member of
FHM V, LLC. Mr. Frazier disclaims beneficial ownership
of these shares except to the extent of his pecuniary interest
therein. |
footnotes continued on the following page
97
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(4) |
Includes 7,782,747 shares of common stock owned by Versant
Venture Capital II, L.P., 147,695 shares of common
stock owned by Versant Affiliates Fund II-A, L.P. and
69,558 shares of common stock owned by Versant Side
Fund II, L.P. Also includes 100,000 shares
Mr. Atwood has the right to acquire pursuant to outstanding
options which are immediately exercisable, 87,500 of which would
be subject to our right of repurchase within 60 days of
August 28, 2006. Mr. Atwood is a member of our board
of directors and a managing member of Versant Ventures II,
L.L.C., which is the general partner of each of these Versant
funds. Mr. Atwood disclaims beneficial ownership of shares
owned by these Versant funds except to the extent of his
pecuniary interest therein. |
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(5) |
Includes 7,520,000 shares of common stock owned by
Technology Partners Fund VII, L.P. and 480,000 shares
of common stock owned by Technology Partners Affiliates VII,
L.P. The voting and disposition of the shares held by Technology
Partners Fund VII, L.P. and Technology Partners Affiliates
VII is determined by TP Management VII, L.L.C., which is the
general partner of each of these Technology Partners funds. John
E. Ardell III, Ira Ehrenpreis, James Glasheen, Sheila Mutter and
Roger J. Quy share voting and dispositive authority over the
shares held by Technology Partners. |
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(6) |
The voting and disposition of the shares held by BB Biotech
Ventures II, L.P. is determined by its general partner, BB
Biotech Ventures GP (Guernsey) Limited. Christopher Wilfred
Cochrane, Benedict Peter Goronwy Morgan and Hans Jorg Graf, in
their capacities as directors of the general partner, share
voting and dispositive authority over the shares held by BB
Biotech Ventures. |
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(7) |
Includes 2,043,740 shares Mr. Schroeder has the right
to acquire pursuant to outstanding options which are immediately
exercisable, all of which would be subject to our right of
repurchase within 60 days of August 28, 2006. Also
includes 1,000,000 unvested shares acquired by
Mr. Schroeder upon the early exercise of stock options,
609,375 of which will be subject to our right of repurchase
within 60 days of August 28, 2006. |
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(8) |
Includes 705,000 shares Dr. Breitmeyer has the right
to acquire pursuant to outstanding options that are immediately
exercisable, all of which would be subject to our right of
repurchase within 60 days of August 28, 2006. |
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(9) |
Includes 705,303 shares Dr. Craig has the right to
acquire pursuant to outstanding options which are immediately
exercisable, 537,595 of which would be subject to our right of
repurchase within 60 days of August 28, 2006. |
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(10) |
Includes 650,000 shares Dr. Heilbrunn has the right to
acquire pursuant to outstanding options that are immediately
exercisable, 518,750 of which would be subject to our right of
repurchase within 60 days of August 28, 2006. |
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(11) |
Includes 44,000 shares acquired by Mr. LaRue upon
exercise of stock options, 30,250 of which will be subject to
our right of repurchase within 60 days of August 28,
2006. These 44,000 shares are held by a trust for the
benefit of Mr. LaRues family. Also includes
855,000 shares of common stock Mr. LaRue has the right
to acquire pursuant to outstanding options that are immediately
exercisable, all of which would be subject to our right of
repurchase within 60 days of August 28, 2006. |
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(12) |
Includes 564,000 shares acquired by Mr. Lowenthal upon
the exercise of stock options, 426,500 of which will be subject
to our right of repurchase within 60 days of
August 28, 2006. These 564,000 shares are held of
record by a trust for the benefit of Mr. Lowenthals
family. |
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(13) |
Includes 375,000 shares Dr. Royal has the right to
acquire pursuant to outstanding options which are immediately
exercisable, all of which would be subject to our right of
repurchase within 60 days of August 28, 2006. |
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(14) |
Includes 842,728 shares Mr. Socks has the right to
acquire pursuant to outstanding options which are immediately
exercisable, 790,645 of which would be subject to our right of
repurchase within 60 days of August 28, 2006. |
footnotes continued on the following page
98
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(15) |
Includes 2,293,740 shares acquired by Mr. Garner upon
the exercise of stock options, 2,058,414 of which will be
subject to our right of repurchase within 60 days of
August 28, 2006. Of these 2,293,740 shares,
2,153,740 shares are held of record by a trust for which
Mr. Garner serves as trustee and 140,000 shares are
held by a limited liability company for which Mr. Garner is
the sole member. Also includes 1,750,000 shares acquired by
Mr. Garner as one of our co-founders. Of these
1,750,000 shares, 1,600,000 shares are held by a
limited liability company for which Mr. Garner is the sole
member and 150,000 shares are held by siblings of
Mr. Garner. Also includes 206,383 shares acquired by a
limited liability company for which Mr. Garner is the sole
member. |
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(16) |
Includes 100,000 shares Dr. Barker has the right to acquire
pursuant to outstanding options which are immediately
exercisable, 91,667 of which would be subject to our right of
repurchase within 60 days of August 28, 2006. |
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(17) |
Includes 100,000 shares Dr. Berman has the right to
acquire pursuant to outstanding options which are immediately
exercisable, 90,000 of which would be subject to our right of
repurchase within 60 days of August 28, 2006. |
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(18) |
Includes 100,000 shares acquired by Mr. Twomey upon
exercise of stock options, 91,667 of which would be subject to
our right of repurchase within 60 days of August 28,
2006. These 100,000 shares are held of record by a trust
for the benefit of Mr. Twomeys family. |
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(19) |
Includes 6,636,771 shares of common stock subject to
outstanding options which are immediately exercisable, 6,237,397
of which would be subject to our right of repurchase within
60 days of August 28, 2006. Includes
4,161,740 shares of common stock acquired upon the exercise
of options, 3,320,581 of which will be subject to our right of
repurchase within 60 days of August 28, 2006. |
99
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
We describe below transactions and series of similar
transactions, since our inception, to which we were a party or
will be a party, in which:
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the amounts involved exceeded or will exceed $60,000; and |
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a director, executive officer, holder of more than 5% of our
common stock or any member of their immediate family had or will
have a direct or indirect material interest. |
We also describe below certain other transactions with our
directors, executive officers and stockholders.
Preferred Stock Issuances
In July and August 2004, we issued in a private placement an
aggregate of 8,085,108 shares of Series A-1 preferred
stock at a per share price of $0.94, for aggregate consideration
of $7,600,002. In June and September 2005, we issued in a
private placement an aggregate of 17,675,347 shares of
Series A-2 preferred stock at a per share price of $1.00,
for aggregate consideration of $17,675,347. In March 2006, we
issued in a private placement 53,870,000 shares of
Series A-3 preferred stock at a per share price of $1.00,
for aggregate consideration of $53,870,000.
The following table sets forth the aggregate number of these
securities acquired by the listed directors, executive officers
or holders of more than 5% of our common stock, or their
affiliates:
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Shares of Preferred Stock | |
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Investor |
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Series A-1 | |
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Series A-2 | |
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Series A-3 | |
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Funds affiliated with Domain Associates, L.L.C.(1)
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3,989,362 |
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6,365,130 |
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12,500,000 |
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ProQuest Investments III, L.P.(2)
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2,393,618 |
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3,819,080 |
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6,000,000 |
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Frazier Healthcare V, LP(3)
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10,000,000 |
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Funds affiliated with Versant Ventures II, L.L.C.(4)
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8,000,000 |
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Funds affiliated with Technology Partners(5)
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8,000,000 |
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BB Biotech Ventures II, L.P.(6)
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3,000,000 |
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4,000,000 |
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Cam L. Garner(7)
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106,383 |
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100,000 |
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(1) |
Includes 3,947,061 shares of Series A-1 preferred
stock, 6,297,638 shares of Series A-2 preferred stock
and 12,367,456 shares of Series A-3 preferred stock
owned by Domain Partners VI, L.P., and 42,301 shares of
Series A-1 preferred stock, 67,492 shares of
Series A-2 preferred stock, and 132,544 shares of
Series A-3 preferred stock owned by DP VI Associates, L.P.
Dr. Blair, a member of our board of directors, is a
managing member of Domain Associates, L.L.C. and a managing
member of One Palmer Square Associates VI, L.L.C., which is the
general partner of Domain Partners VI, L.P. and DP VI
Associates, L.P. |
|
(2) |
The voting and disposition of the shares held by ProQuest
Investments III, L.P. is determined by ProQuest
Associates III LLC, the ultimate general partner of
ProQuest Investments III, L.P. Dr. Schreiber, a member
of our board of directors, is a managing member of ProQuest
Associates III LLC. |
|
(3) |
The voting and disposition of the shares held by Frazier
Healthcare V, LP is determined by FHM V, LLC, which is
the general partner of FHM V, LP, which is the general
partner of Frazier Healthcare V, LP. Mr. Frazier, a
member of our board of directors, is a managing member of
FHM V, LLC. |
footnotes continued on the following page
100
|
|
(4) |
Includes 7,782,747 shares of Series A-3 preferred
stock owned by Versant Venture Capital II, L.P.,
147,695 shares of Series A-3 preferred stock owned by
Versant Affiliates Fund II-A, L.P., and 69,558 shares
of Series A-3 preferred stock owned by Versant Side
Fund II, L.P. Mr. Atwood, a member of our board of
directors, is a managing member of Versant Ventures II, L.L.C.,
which is the general partner of each of these Versant funds. |
|
(5) |
Includes 7,520,000 shares of Series A-3 preferred
stock owned by Technology Partners Fund VII, L.P. and
480,000 shares of Series A-3 preferred stock owned by
Technology Partners Affiliates VII, L.P. The voting
and disposition of the shares held by Technology Partners
Fund VII, L.P. and Technology Partners Affiliates VII is
determined by TP Management VII, L.L.C., which is the general
partner of each of these Technology Partners funds. John E.
Ardell III, Ira Ehrenpreis, James Glasheen, Sheila Mutter and
Roger J. Quy share voting and dispositive authority over the
shares held by Technology Partners. |
|
(6) |
The voting and disposition of the shares held by BB Biotech
Ventures II, L.P. is determined by its general partner, BB
Biotech Ventures GP (Guernsey) Limited. Christopher Wilfred
Cochrane, Benedict Peter Goronwy Morgan and Hans Jorg Graf, in
their capacities as directors of the general partner, share
voting and dispositive authority over the shares held by BB
Biotech Ventures. |
|
(7) |
Shares held by a limited liability company for which
Mr. Garner is the sole member. |
Common Stock Issuances
In July 2004, in connection with the inception of our company,
we issued and sold a total of 4,500,000 shares of common
stock for an aggregate consideration of $4,500. The price for
the common stock was determined through negotiations between our
board of directors and the purchasers based primarily on the
early stage of our development at the time of the transaction.
The following table sets forth the aggregate number of these
securities acquired by the listed directors and executive
officers or their affiliates:
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Investor |
|
Common Stock | |
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| |
Cam L. Garner(1)
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|
|
1,750,000 |
|
Theodore R. Schroeder(2)
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|
|
1,000,000 |
|
David A. Socks
|
|
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850,000 |
|
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|
(1) |
Of these 1,750,000 shares, 1,600,000 shares are held
by a limited liability company for which Mr. Garner is the
sole member and 150,000 shares are held by siblings of
Mr. Garner. |
|
(2) |
Shares held by a trust for the benefit of
Mr. Schroeders family. |
Investor Rights Agreement
We have entered into an agreement with purchasers of our
preferred stock that provides for certain rights relating to the
registration of their shares of common stock issuable upon
conversion of their preferred stock. The agreement also provides
these rights to shares of common stock held by
Messrs. Schroeder and Socks. These rights will continue
following this offering and will terminate seven years following
the completion of this offering, or for any particular holder
with registration rights, at such time following this offering
when all securities held by that stockholder subject to
registration rights may be sold pursuant to Rule 144 under
the Securities Act. All holders of our preferred stock are
parties to this agreement. See Description of Capital
Stock Registration Rights for additional
information.
Voting Agreement
Pursuant to a voting agreement originally entered into in July
2004 and most recently amended in March 2006 by and among us and
certain of our stockholders, the following directors were each
elected to serve as members on our board of directors and, as of
the date of this prospectus, continue to so serve: Drs.
Barker, Berman, Blair and Schreiber and
Messrs. Atwood, Frazier, Garner and Schroeder. Pursuant
101
to the voting agreement, Mr. Schroeder, as our president
and chief executive officer, and Mr. Garner were initially
selected to serve on our board of directors as representatives
of our common stock, as designated by a majority of our common
stockholders. Dr. Schreiber and Messrs. Atwood, Blair
and Frazier were initially selected to serve on our board of
directors as representatives of our preferred stock, as
designated by ProQuest Investments III, L.P., Versant
Venture Capital II, L.P., Domain Partners VI, L.P. and
Frazier Healthcare V, LP, respectively. Drs. Barker and
Berman and Mr. Twomey were selected to serve on our board of
directors as representatives of our common stock and preferred
stock, as designated by a majority of our common and preferred
stockholders.
The voting agreement will terminate upon completion of this
offering, and members previously elected to our board of
directors pursuant to this agreement will continue to serve as
directors until their successors are duly elected by holders of
our common stock.
Stock Option Grants
Certain stock option grants to our directors and executive
officers and related option grant policies are described in this
prospectus under the captions Management
Director Compensation and Management
Option Grants in Last Fiscal Year. Prior to this offering,
we granted the following options to certain non-employee
directors:
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In November 2004, we granted to Dr. Schreiber an option to
purchase 40,000 shares of our common stock at an
exercise price of $0.10 per share, vesting over 16 calendar
quarters from September 2004. |
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|
In November 2005, we granted to Dr. Blair an option to
purchase 40,000 shares of our common stock at an
exercise price of $0.10 per share, vesting over 16 calendar
quarters from September 2005. |
|
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|
In November 2005, we granted to each of Dr. Schreiber and
Mr. Garner an option to purchase 10,000 shares of
our common stock at an exercise price of $0.10 per share,
vesting over four calendar quarters from September 2005. |
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|
In December 2005, we granted to Mr. Garner an option to
purchase 1,362,000 shares of our common stock at an
exercise price of $0.10 per share, vesting over four years
from December 2005. |
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In May 2006, we granted to Mr. Garner an option to
purchase 781,740 shares of our common stock at an
exercise price of $0.34 per share, vesting over four years
from February 2006. |
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|
In May 2006, we granted to Dr. Berman an option to
purchase 40,000 shares of our common stock at an
exercise price of $0.34 per share, vesting over 16 calendar
quarters from April 2006. |
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|
In May 2006, we granted to each of Messrs. Atwood and
Frazier an option to purchase 40,000 shares of our
common stock at an exercise price of $0.34 per share,
vesting over 16 calendar quarters from March 2006. |
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|
In July 2006, we granted to Mr. Twomey an option to
purchase 100,000 shares of our common stock at an
exercise price of $0.80 per share, vesting over 12 calendar
quarters from July 2006. |
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|
In July 2006, we granted to each of Mr. Atwood,
Drs. Berman and Blair, Mr. Frazier and
Dr. Schreiber an option to purchase 60,000 shares
of our common stock at an exercise price of $0.80 per
share, vesting over 12 calendar quarters from July 2006. |
|
|
|
In August 2006, we granted to Dr. Barker an option to
purchase 100,000 shares of our common stock at an exercise price
of $0.80 per share, vesting over 12 calendar quarters from
August 2006. |
102
In addition, we granted to each of Messrs. Craig, Heilbrunn
and Socks an option in May 2006 to purchase 355,303,
300,000 and 742,728, respectively, shares of our common stock at
an exercise price of $0.34 per share. In June 2006, we
granted to each of Mr. LaRue and Dr. Royal an option
to purchase 705,000 and 300,000, respectively, shares of
our common stock at an exercise price of $0.80 per share.
In August 2006, we granted to Dr. Breitmeyer an option to
purchase 705,000 shares of our common stock at an exercise
price of $0.80 per share. Also in August 2006, we granted
to each of Mr. LaRue and Dr. Royal an option to
purchase 150,000 and 75,000 shares of our common stock at
an exercise price of $.80 per share. Each of these options vests
with respect to 25% of the shares subject to the option one year
after the applicable vesting commencement date and monthly
thereafter over the following three years.
Employment Agreements
We have entered into employment agreements with Theodore R.
Schroeder, our President and Chief Executive Officer, James B.
Breitmeyer, M.D., Ph.D., our Executive Vice President,
Development and Chief Medical Officer, William S.
Craig, Ph.D., our Senior Vice President, Pharmaceutical
Development and Manufacturing, Kenneth R. Heilbrunn, M.D.,
our Senior Vice President, Clinical Development, William R.
LaRue, our Senior Vice President, Chief Financial Officer,
Treasurer and Secretary, Richard E. Lowenthal, our Vice
President, Regulatory Affairs and Quality Assurance, Mike A.
Royal, M.D., J.D. our Vice President, Clinical
Development, Analgesics, and David A. Socks, our Vice President,
Business Development. For further information, see
Management Employment Agreements.
Indemnification of Officers and Directors
Our restated certificate of incorporation and our amended and
restated bylaws provide that we will indemnify each of our
directors and officers to the fullest extent permitted by the
Delaware General Corporation Law. Further, we have entered into
indemnification agreements with each of our directors and
officers, and we have purchased a policy of directors and
officers liability insurance that insures our directors
and officers against the cost of defense, settlement or payment
of a judgment under certain circumstances. For further
information, see Management Limitations of
Liability and Indemnification Matters.
Consulting Agreement with Mr. Cam L. Garner
From September 2004 through August 2005, we paid Mr. Garner
$5,000 per month plus qualified business expenses for his
services as chairman of our board of directors under the terms
of a consulting agreement between us and a limited liability
company affiliated with Mr. Garner. The agreement expired
on August 31, 2005.
Other Transactions
During 2004, Windamere III, LLC, a limited liability company
affiliated with our former director, Scott L. Glenn, advanced
$500,000 for pre-operating expenses and an exclusivity fee due
in connection with the Collaboration and License Agreement
between us and Migenix. The advance was settled with 531,915
shares of our Series A-1 preferred stock.
In May 2005, we executed an engagement letter with Clearview
Projects, Inc., or Clearview, a provider of partnering and
transaction services to biopharmaceutical companies.
Dr. Barker is a founder of Clearview and served as its
President and Chief Executive Officer from July 2003 until
November 2004. Under the terms of the engagement letter, we made
retainer payments and reimbursed expenses to Clearview totaling
$205,341 in 2005 and made retainer and success fee payments
totaling $375,000 from January 2006 through the conclusion of
Clearviews engagement in March 2006. The success fee was
related to our in-license of rights to IV APAP from BMS in
March 2006.
103
DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering and filing of our amended and
restated certificate of incorporation, our authorized capital
stock will consist of 100,000,000 shares of common stock,
$0.0001 par value per share, and 10,000,000 shares of
preferred stock, $0.0001 par value per share. The following
description summarizes some of the terms of our capital stock.
Because it is only a summary, it does not contain all the
information that may be important to you. For a complete
description you should refer to our amended and restated
certificate of incorporation and amended and restated bylaws,
copies of which have been filed as exhibits to the registration
statement of which the prospectus is a part.
Common Stock
On June 30, 2006, there were 8,551,740 shares of
common stock outstanding, held of record by
15 stockholders. This amount excludes our outstanding
shares of preferred stock as of June 30, 2006 which will
convert into 79,630,455 shares of common stock upon
completion of the offering. After this offering, there will
be shares
of our common stock outstanding,
or shares
if the underwriters exercise their over-allotment option in full.
The holders of our common stock are entitled to one vote for
each share held of record on all matters submitted to a vote of
the stockholders, including the election of directors, and do
not have cumulative voting rights. Accordingly, the holders of a
majority of the shares of common stock entitled to vote in any
election of directors can elect all of the directors standing
for election, if they so choose. Subject to preferences that may
be applicable to any then outstanding preferred stock, holders
of common stock are entitled to receive ratably those dividends,
if any, as may be declared by the board of directors out of
legally available funds. Upon our liquidation, dissolution or
winding up, the holders of common stock will be entitled to
share ratably in the net assets legally available for
distribution to stockholders after the payment of all of our
debts and other liabilities of our company, subject to the prior
rights of any preferred stock then outstanding. Holders of
common stock have no preemptive or conversion rights or other
subscription rights and there are no redemption or sinking funds
provisions applicable to the common stock. All outstanding
shares of common stock are, and the common stock to be
outstanding upon completion of this offering will be, fully paid
and nonassessable.
Preferred Stock
On June 30, 2006, there were 79,630,455 shares of
preferred stock outstanding, held of record by
32 stockholders. Our stockholders have agreed to convert
their shares of preferred stock to common stock in connection
with the completion of this offering. Accordingly, upon the
completion of this offering, all outstanding shares of preferred
stock as of June 30, 2006 will automatically convert into
79,630,455 shares of our common stock.
Following the offering, our board of directors will have the
authority, without any action by the stockholders, to issue from
time to time preferred stock in one or more series and to fix
the number of shares, designations, preferences, powers, and
relative, participating, optional or other special rights and
the qualifications or restrictions thereof. The preferences,
powers, rights and restrictions of different series of preferred
stock may differ with respect to dividend rates, amounts payable
on liquidation, voting rights, conversion rights, redemption
provisions, sinking fund provisions, and purchase funds and
other matters. The issuance of preferred stock could decrease
the amount of earnings and assets available for distribution to
holders of common stock or adversely affect the rights and
powers, including voting rights, of the holders of common stock,
and may have the effect of delaying, deferring or preventing a
change in control of our company. The existence of authorized
but unissued preferred stock may enable the board of directors
to render more difficult or to discourage an attempt to obtain
control of us by means of a merger, tender offer, proxy contest
or otherwise. For example, if in the due exercise of its
fiduciary obligations, the board of directors were to determine
that a takeover proposal is not in our best interests, the board
of directors could cause shares of preferred stock to be issued
without stockholder approval in one or more
104
private offerings or other transactions that might dilute the
voting or other rights of the proposed acquirer or insurgent
stockholder or stockholder group.
Warrants
In February 2006, in connection with our loan and security
agreement, we issued a warrant to purchase up to an aggregate of
192,500 shares of our Series A-2 preferred stock to
each of Silicon Valley Bank and Oxford Finance Corporation.
These warrants are immediately exercisable at an exercise price
of $1.00 per share and, excluding certain mergers or
acquisitions, expire upon the later of ten years from the date
of grant, which is February 17, 2016, or five years after
the closing of this offering. These warrants will become
exercisable for an aggregate of 385,000 shares of our
common stock, at an exercise price of $1.00 per share, upon
completion of this offering.
Each of these warrants has a net exercise provision under which
its holder may, in lieu of payment of the exercise price in
cash, surrender the warrant and receive, after this offering, a
net amount of shares of our common stock based on the fair
market value of our common stock at the time of exercise of the
warrant after deduction of the aggregate exercise price. Each of
these warrants for common stock also contains provisions for the
adjustment of the exercise price and the aggregate number of
shares issuable upon the exercise of the warrant in the event of
stock dividends, stock splits, reorganizations and
reclassifications and consolidations.
Registration Rights
After this offering, the holders of approximately
83,555,455 shares of common stock and the holders of
warrants to purchase 385,000 shares of common stock
will be entitled to rights with respect to the registration of
these shares under the Securities Act. These shares are referred
to as registrable securities. Under the terms of the agreement
between us and the holders of the registrable securities, if we
propose to register any of our securities under the Securities
Act, these holders are entitled to notice of such registration
and are entitled to include their shares of registrable
securities in our registration. Certain of these holders are
also entitled to demand registration, pursuant to which they may
require us to use our best efforts to register their registrable
securities under the Securities Act at our expense, up to a
maximum of two such registrations. Holders of registrable
securities may also require us to file an unlimited number of
additional registration statements on
Form S-3 at our
expense so long as the holders propose to sell registrable
securities of at least $1.0 million and we have not already
filed two such registration statements on
Form S-3 in the
previous twelve months.
All of these registration rights are subject to certain
conditions and limitations, among them the right of the
underwriters of an offering to limit the number of shares
included in such registration and our right not to effect a
requested registration 60 days prior to or 180 days
after an offering of our securities, including this offering.
These registration rights have been waived by all of the holders
thereof with respect to this offering.
Anti-Takeover Effects of Provisions of Our Amended and
Restated Certificate of Incorporation, Our Amended and Restated
Bylaws and Delaware Law
Some provisions of Delaware law, our amended and restated
certificate of incorporation and our amended and restated bylaws
contain provisions that could make the following transactions
more difficult: acquisition of us by means of a tender offer;
acquisition of us by means of a proxy contest or otherwise; or
removal of our incumbent officers and directors. It is possible
that these provisions could make it more difficult to accomplish
or could deter transactions that stockholders may otherwise
consider to be in their best interest or in our best interests,
including transactions that might result in a premium over the
market price for our shares.
These provisions, summarized below, are expected to discourage
coercive takeover practices and inadequate takeover bids. These
provisions are also designed to encourage persons seeking to
acquire control of us to first negotiate with our board of
directors. We believe that the benefits of increased
105
protection of our potential ability to negotiate with the
proponent of an unfriendly or unsolicited proposal to acquire or
restructure us outweigh the disadvantages of discouraging these
proposals because negotiation of these proposals could result in
an improvement of their terms.
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Undesignated Preferred Stock |
The ability to authorize undesignated preferred stock makes it
possible for our board of directors to issue preferred stock
with voting or other rights or preferences that could impede the
success of any attempt to change control of us. These and other
provisions may have the effect of deterring hostile takeovers or
delaying changes in control or management of our company.
Our charter documents provide that a special meeting of
stockholders may be called only by our chairman of the board,
chief executive officer or president, or by a resolution adopted
by a majority of our board of directors.
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Requirements for Advance Notification of Stockholder
Nominations and Proposals |
Our amended and restated bylaws establish advance notice
procedures with respect to stockholder proposals and the
nomination of candidates for election as directors, other than
nominations made by or at the direction of the board of
directors or a committee of the board of directors.
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Elimination of Stockholder Action by Written
Consent |
Our amended and restated certificate of incorporation eliminates
the right of stockholders to act by written consent without a
meeting.
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Election and Removal of Directors |
Our board of directors is divided into three classes. The
directors in each class will serve for a three-year term, one
class being elected each year by our stockholders. For more
information on the classified board, see
Management Board of Directors. This
system of electing and removing directors may tend to discourage
a third party from making a tender offer or otherwise attempting
to obtain control of us, because it generally makes it more
difficult for stockholders to replace a majority of the
directors.
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Delaware Anti-Takeover Statute |
We are subject to Section 203 of the Delaware General
Corporation Law, which prohibits persons deemed interested
stockholders from engaging in a business
combination with a publicly held Delaware corporation for
three years following the date these persons become interested
stockholders unless the business combination is, or the
transaction in which the person became an interested stockholder
was, approved in a prescribed manner or another prescribed
exception applies. Generally, an interested
stockholder is a person who, together with affiliates and
associates, owns, or within three years prior to the
determination of interested stockholder status did own, 15% or
more of a corporations voting stock. Generally, a
business combination includes a merger, asset or
stock sale, or other transaction resulting in a financial
benefit to the interested stockholder. The existence of this
provision may have an anti-takeover effect with respect to
transactions not approved in advance by the board of directors.
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Amendment of Charter Provisions |
The amendment of any of the above provisions, except for the
provision making it possible for our board of directors to issue
preferred stock, would require approval by holders of at least
662/3%
of our then outstanding common stock.
The provisions of Delaware law, our amended and restated
certificate of incorporation and our amended and restated bylaws
could have the effect of discouraging others from attempting
hostile
106
takeovers and, as a consequence, they may also inhibit temporary
fluctuations in the market price of our common stock that often
result from actual or rumored hostile takeover attempts. These
provisions may also have the effect of preventing changes in our
management. It is possible that these provisions could make it
more difficult to accomplish transactions that stockholders may
otherwise deem to be in their best interests.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock
is ,
located
at .
Nasdaq Global Market Listing
We have applied to have our common stock approved for quotation
on the Nasdaq Global Market under the symbol CADX.
107
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our
common stock. Future sales of our common stock in the public
market, or the availability of such shares for sale in the
public market, could adversely affect market prices prevailing
from time to time. As described below, only a limited number of
shares will be available for sale shortly after this offering
due to contractual and legal restrictions on resale.
Nevertheless, sales of our common stock in the public market
after such restrictions lapse, or the perception that those
sales may occur, could adversely affect the prevailing market
price at such time and our ability to raise equity capital in
the future.
Sales of Restricted Shares
Upon the closing of this offering, we will have outstanding an
aggregate of
approximately shares
of common stock. Of these shares,
the shares
of common stock to be sold in this offering will be freely
tradable without restriction or further registration under the
Securities Act, unless the shares are held by any of our
affiliates as such term is defined in Rule 144
of the Securities Act. All remaining shares of common stock held
by existing stockholders were issued and sold by us in private
transactions and are eligible for public sale only if registered
under the Securities Act or if they qualify for an exemption
from registration under Rule 144, Rule 144(k) or
Rule 701 under the Securities Act, which rules are
summarized below.
As a result of the
lock-up agreements
described below and the provisions of Rule 144,
Rule 144(k) and Rule 701 under the Securities Act, the
shares of our common stock (excluding the shares sold in this
offering) that will be available for sale in the public market
are as follows:
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shares
will be eligible for sale on the date of this prospectus; |
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shares
will be eligible for sale upon the expiration of the
lock-up agreements, as
more particularly and except as described below, beginning
180 days after the date of this prospectus; |
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shares
will be eligible for sale, upon exercise of vested options, upon
the expiration of the
lock-up agreements, as
more particularly and except as described below, beginning
180 days after the date of this prospectus; |
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shares
will be eligible for sale, upon exercise of outstanding
warrants, upon the expiration of the lock-up agreements, as more
particularly and except as described below, beginning
180 days after the date of this prospectus; and |
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the
remaining restricted
shares will be eligible for sale from time to time thereafter
upon expiration of their respective one-year holding periods. |
Lock-up
Agreements
We, each of our directors and executive officers, and all of the
holders of our common stock and holders of securities
exercisable for or convertible into shares of our common stock
have each agreed not to sell or otherwise dispose of, directly
or indirectly any shares of our common stock or any securities
convertible into or exercisable or exchangeable for shares of
our common stock for a period of not less than 180 days
from the date of this prospectus without the prior written
consent of Merrill Lynch & Co.
Merrill Lynch, in its sole discretion, at any time or from time
to time and without notice, may release for sale in the public
market all or any portion of the shares restricted by the terms
of the lock-up
agreements. The lock-up
restrictions will not apply to transactions relating to common
shares acquired in open market transactions after the closing of
this offering provided that no filing by the transferor under
Rule 144 of the Securities Act or Section 16 of the
Exchange Act is required or will be voluntarily made in
connection with such transactions. The
lock-up restrictions
also will not apply to certain transfers not involving a
disposition for value, provided that the recipient agrees to be
bound by these lock-up
108
restrictions and provided that no filing by the transferor under
Rule 144 of the Securities Act or Section 16 of the
Exchange Act is required or will be voluntarily made in
connection with such transfers.
Rule 144
In general, under Rule 144 as currently in effect,
beginning 90 days after the effective date of this
offering, a person (or persons whose shares are required to be
aggregated) who has beneficially owned restricted securities for
at least one year, including the holding period of any prior
owner other than one of our affiliates, is entitled to sell a
number of restricted shares within any three-month period that
does not exceed the greater of:
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one percent of the number of common shares then outstanding,
which will
equal shares
immediately after this offering (assuming no exercise of the
underwriters over-allotment option and no exercise of
outstanding options or warrants); or |
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the average weekly trading volume of our common shares on the
Nasdaq Global Market during the four calendar weeks preceding
the filing of a notice on Form 144 with respect to such
sale. |
Sales of restricted shares under Rule 144 are also subject
to requirements regarding the manner of sale, notice and the
availability of current public information about us.
Rule 144 also provides that affiliates that sell our common
shares that are not restricted shares must nonetheless comply
with the same restrictions applicable to restricted shares,
other than the holding period requirement.
Rule 144(k)
Under Rule 144(k), a person who is not deemed to have been
our affiliate at any time during the 90 days preceding a
sale and who has beneficially owned the shares proposed to be
sold for at least two years, including the holding period of any
prior owner other than an affiliate, may sell those shares
without complying with the manner of sale, public information,
volume limitation or notice provisions of Rule 144.
Rule 701
In general, under Rule 701 as currently in effect, any of
our employees, directors, officers, consultants or advisors who
acquires common stock from us in connection with a compensatory
stock or option plan or other written agreement before the
effective date of this offering (to the extent such common stock
is not subject to a
lock-up agreement) is
entitled to resell such shares 90 days after the effective
date of this offering in reliance on Rule 144. The SEC has
indicated that Rule 701 will apply to typical stock options
granted by an issuer before it becomes subject to the reporting
requirements of the Exchange Act, along with the shares acquired
upon exercise of such options, including exercises after the
date of this prospectus. Securities issued in reliance on
Rule 701 are restricted securities and, subject to the
lock-up agreements
described above, beginning 90 days after the date of this
prospectus, may be sold by persons other than affiliates, as
defined in Rule 144, subject only to the manner of sale
provisions of Rule 144 and by affiliates under
Rule 144 without compliance with its one-year minimum
holding period requirement.
Stock Plans
We intend to file one or more registration statements on
Form S-8 under the
Securities Act to register shares of our common stock issued or
reserved for issuance under our 2006 Equity Incentive Award
Plan. The first such registration statement is expected to be
filed soon after the date of this prospectus and will
automatically become effective upon filing with the SEC.
Accordingly, shares registered under such registration statement
will be available for sale in the open market, unless such
shares are subject to vesting restrictions with us or the
lock-up restrictions
described above.
109
Warrants
As of June 30, 2006, warrants to purchase a total of
385,000 shares of our Series A-2 preferred stock at a
price of $1.00 per share were outstanding. Upon completion
of this offering, these warrants will become exercisable for a
total of 385,000 shares of our common stock at a price of
$1.00 per share. See Description of Capital
Stock Warrants. All of these common shares are
subject to the terms of the
lock-up agreements with
the underwriters.
Stock Options
As of June 30, 2006, options to purchase a total of
5,769,471 shares of our common stock were outstanding, of
which 5,419,165 were exercisable. All of the shares subject to
options are subject to the terms of the
lock-up agreements with
the underwriters. An additional 1,678,789 shares of common
stock were available for future option grants under our stock
plan.
110
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS TO
NON-U.S. HOLDERS
This section summarizes material U.S. federal income tax
considerations relating to the ownership and disposition of
common stock to
non-U.S. holders.
This summary does not provide a complete analysis of all
potential tax considerations. The information provided below is
based on existing authorities. These authorities may change, or
the IRS might interpret the existing authorities differently. In
either case, the tax considerations of owning or disposing of
common stock could differ from those described below. For
purposes of this summary, a
non-U.S. holder
is any beneficial owner of our common stock other than a citizen
or resident of the United States, a corporation or a partnership
organized under the laws of the United States or any state, a
trust that is (i) subject to the primary supervision of a
U.S. court and the control of one of more U.S. persons
or (ii) has a valid election in effect under applicable
U.S. Treasury regulations to be treated as a
U.S. person, or an estate whose income is subject to
U.S. income tax regardless of source. If a partnership or
other flow-through entity is a beneficial owner of common stock,
the tax treatment of a partner in the partnership or an owner of
the entity will depend upon the status of the partner or other
owner and the activities of the partnership or other entity.
Accordingly, partnerships and flow-through entities that hold
our common stock and partners or owners of such partnerships or
entities, as applicable, should consult their own tax advisors.
The summary generally does not address tax considerations that
may be relevant to particular investors because of their
specific circumstances, or because they are subject to special
rules, including, without limitation, banks, insurance
companies, or other financial institutions; persons subject to
the alternative minimum tax; tax exempt organizations; dealers
in securities or currencies; traders in securities that elect to
use a mark to market method of accounting for their securities
holdings; persons that own, or are deemed to own, more than five
percent of our company (except to the extent specifically set
forth below); certain former citizens or long term residents of
the United States; persons who hold our common stock as a
position in a hedging transaction, straddle,
conversion transaction or other risk reduction
transaction; or persons deemed to sell our common stock under
the constructive sale provisions of the Internal Revenue Code.
Finally, the summary does not describe the effects of any
applicable foreign, state or local laws.
INVESTORS CONSIDERING THE PURCHASE OF COMMON STOCK ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE
U.S. FEDERAL INCOME AND ESTATE TAX LAWS TO THEIR PARTICULAR
SITUATIONS AND THE CONSEQUENCES OF FOREIGN, STATE, OR LOCAL
LAWS, AND TAX TREATIES.
Dividends
We have not made any distributions on our common stock, and we
do not plan to make any distributions for the foreseeable
future. However, if we do make distributions on our common
stock, those payments will constitute dividends for
U.S. tax purposes to the extent paid from our current and
accumulated earnings and profits, as determined under
U.S. federal income tax principles. To the extent those
distributions exceed our current and accumulated earnings and
profits, they will constitute a return of capital and will first
reduce a
non-U.S. holders
basis in our common stock, but not below zero, and then will be
treated as gain from the sale of stock. Any dividend paid to a
non-U.S. holder on
our common stock will generally be subject to
U.S. withholding tax at a 30 percent rate. The
withholding tax might not apply, however, or might apply at a
reduced rate, under the terms of an applicable income tax treaty
between the United States and the
non-U.S. holders
country of residence. A
non-U.S. holder
must demonstrate its entitlement to treaty benefits by
certifying its nonresident status. A
non-U.S. holder
can meet this certification requirement by providing a
Form W-8BEN or appropriate substitute form to us or our
paying agent. If the holder holds the stock through a financial
institution or other agent acting on the holders behalf,
the holder will be required to provide appropriate documentation
to such financial institution or the agent. The financial
institution or the agent will then be required to provide
certification to us or our paying agent, either directly or
through other intermediaries. For payments made to a foreign
partnership or other flow-through entity, the certification
requirements generally apply to the partners or other owners
rather than to the partnership or other entity, and the
partnership or other entity must provide the partners or
other owners documentation to us or our paying agent.
Special rules, described
111
below, apply if a dividend is effectively connected with a
U.S. trade or business conducted by the
non-U.S. holder.
Sale of Common Stock
Non-U.S. holders
will generally not be subject to U.S. federal income tax on
any gains realized on the sale, exchange, or other disposition
of common stock. This general rule, however, is subject to
several exceptions. For example, the gain would be subject to
U.S. federal income tax if:
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the gain is effectively connected with the conduct by the
non-U.S. holder of
a U.S. trade or business (in which case the special rules
described below apply); |
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the
non-U.S. holder is
an individual who holds our common stock as a capital asset
(generally, an asset held for investment purposes) and who is
present in the U.S. for a period or periods aggregating
183 days or more during the calendar year in which the sale
or disposition occurs and certain other conditions are met; |
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the
non-U.S. holder
was a citizen or resident of the United States and thus is
subject to special rules that apply to expatriates; or |
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the rules of the Foreign Investment in Real Property Tax Act, or
FIRPTA (described below) treat the gain as effectively connected
with a U.S. trade or business. |
An individual
non-U.S. holder
described in the second bullet point immediately above will be
subject to a flat 30% tax on the gain derived from the sale,
which may be offset by U.S. source capital losses, even
though the individual is not considered a resident of the
U.S. If a
non-U.S. holder is
described in the third bullet point above, the
non-U.S. holder
should consult its own tax advisor to determine the
U.S. federal, state, local and other tax consequences that
may be relevant to such holder.
The FIRPTA rules may apply to a sale, exchange or other
disposition of common stock if we are, or were within five years
before the transaction, a U.S. real property holding
corporation, or a USRPHC. In general, we would be a USRPHC
if interests in U.S. real estate comprised most of our
assets. We do not believe that we are a USRPHC or that we will
become one in the future. If we are or become a USRPHC, so long
as our common stock is regularly traded on an established
securities market, only a
non-U.S. holder
who, actually or constructively, holds or held (at any time
during the shorter of the five year period preceding the date of
disposition or the holders holding period) more than 5% of
our common stock will be subject to U.S. federal income tax
on the disposition of our common stock.
Dividends or Gain Effectively Connected With a
U.S. Trade or Business
If any dividend on common stock, or gain from the sale, exchange
or other disposition of common stock, is effectively connected
with a U.S. trade or business conducted by the
non-U.S. holder,
then the dividend or gain will be subject to U.S. federal
income tax at the regular graduated rates. If the
non-U.S. holder is
eligible for the benefits of a tax treaty between the United
States and the holders country of residence, any
effectively connected dividend or gain would
generally be subject to U.S. federal income tax only if it
is also attributable to a permanent establishment or fixed base
maintained by the holder in the United States. Payments of
dividends that are effectively connected with a U.S. trade
or business, and therefore included in the gross income of a
non-U.S. holder,
will not be subject to the 30 percent withholding tax. To
claim exemption from withholding, the holder must certify its
qualification, which can be done by filing a Form W-8ECI.
If the
non-U.S. holder is
a corporation, that portion of its earnings and profits that is
effectively connected with its U.S. trade or business would
generally be subject to a branch profits tax. The
branch profits tax rate is generally 30 percent, although
an applicable income tax treaty might provide for a lower rate.
112
Backup Withholding and Information Reporting
The Internal Revenue Code and the Treasury regulations require
those who make specified payments to report the payments to the
IRS. Among the specified payments are dividends and proceeds
paid by brokers to their customers. The required information
returns enable the IRS to determine whether the recipient
properly included the payments in income. This reporting regime
is reinforced by backup withholding rules. These
rules require the payors to withhold tax from payments subject
to information reporting if the recipient fails to cooperate
with the reporting regime by failing to provide his taxpayer
identification number to the payor, furnishing an incorrect
identification number, or repeatedly failing to report interest
or dividends on his returns. The withholding tax rate is
currently 28 percent. The backup withholding rules do not
apply to payments to certain exempt holders, including
corporations, whether domestic or foreign, who establish their
exempt status.
Payments to
non-U.S. holders
of dividends on common stock will generally not be subject to
backup withholding, and payments of proceeds made to
non-U.S. holders
by a broker upon a sale of common stock will not be subject to
information reporting or backup withholding, in each case so
long as the
non-U.S. holder
certifies its nonresident status. Some of the common means of
certifying nonresident status are described under
Dividends. We must report annually to
the IRS any dividends paid to each
non-U.S. holder
and the tax withheld, if any, with respect to such dividends.
Copies of these reports may be made available to tax authorities
in the country where the
non-U.S. holder
resides.
Any amounts withheld from a payment to a holder of common stock
under the backup withholding rules can be credited against any
U.S. federal income tax liability of the holder.
EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX
ADVISOR REGARDING THE PARTICULAR U.S. FEDERAL, STATE,
LOCAL, AND FOREIGN TAX CONSEQUENCES OF PURCHASING, HOLDING, AND
DISPOSING OF OUR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY
PROPOSED CHANGE IN APPLICABLE LAWS.
113
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Deutsche Bank Securities Inc., Pacific Growth Equities, LLC and
JMP Securities LLC are acting as representatives of each of the
underwriters named below. Subject to the terms and conditions
set forth in a purchase agreement among us and the underwriters,
we have agreed to sell to the underwriters, and each of the
underwriters has agreed, severally and not jointly, to purchase
from us, the number of shares of common stock set forth opposite
its name below.
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Number | |
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of Shares | |
Underwriter |
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Merrill Lynch, Pierce, Fenner & Smith
Incorporated
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Deutsche Bank Securities Inc.
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Pacific Growth Equities, LLC
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JMP Securities LLC
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Total
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Subject to the terms and conditions set forth in the purchase
agreement, the underwriters have agreed, severally and not
jointly, to purchase all of the shares sold under the purchase
agreement if any of these shares are purchased. If an
underwriter defaults, the purchase agreement provides that the
purchase commitments of the nondefaulting underwriters may be
increased or the purchase agreement may be terminated.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act, or
to contribute to payments the underwriters may be required to
make in respect of those liabilities.
The underwriters are offering the shares, subject to prior sale,
when, as and if issued to and accepted by them, subject to
approval of legal matters by their counsel, including the
validity of the shares, and other conditions contained in the
purchase agreement, such as the receipt by the underwriters of
officers certificates and legal opinions. The underwriters
reserve the right to withdraw, cancel or modify offers to the
public and to reject orders in whole or in part.
Commissions and Discounts
The representatives have advised us that the underwriters
propose initially to offer the shares to the public at the
initial public offering price set forth on the cover page of
this prospectus and to dealers at that price less a concession
not in excess of
$ per
share. The underwriters may allow, and the dealers may reallow,
a discount not in excess of
$ per
share to other dealers. After the initial public offering, the
public offering price, concession and discount may be changed.
The following table shows the public offering price,
underwriting discount and proceeds before expenses to us. The
information assumes either no exercise or full exercise by the
underwriters of their overallotment option.
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Per Share | |
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Without Option | |
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With Option | |
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| |
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Public offering price
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$ |
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$ |
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$ |
|
Underwriting discount
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$ |
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$ |
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$ |
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Proceeds, before expenses, to us
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$ |
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$ |
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$ |
|
The expenses of the offering, not including the underwriting
discount, are estimated at
$ and
are payable by us.
114
Overallotment Option
We have granted an option to the underwriters to purchase up
to additional
shares at the public offering price, less the underwriting
discount. The underwriters may exercise this option for
30 days from the date of this prospectus solely to cover
any overallotments. If the underwriters exercise this option,
each will be obligated, subject to conditions contained in the
purchase agreement, to purchase a number of additional shares
proportionate to that underwriters initial amount
reflected in the above table.
No Sales of Similar Securities
We and our officers, directors, stockholders, warrant holders
and option holders, who hold all of our shares of common stock,
on a fully diluted basis, have agreed, subject to certain
exceptions, not to sell or transfer any common stock or
securities convertible into, exchangeable for, exercisable for,
or repayable with common stock, for 180 days after the date
of this prospectus without first obtaining the written consent
of Merrill Lynch. Specifically, we and these other individuals
have agreed not to directly or indirectly
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offer, pledge, sell or contract to sell any common stock, |
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sell any option or contract to purchase any common stock, |
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purchase any option or contract to sell any common stock, |
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grant any option, right or warrant for the sale of any common
stock, |
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lend or otherwise dispose of or transfer any common stock, |
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request or demand that we file a registration statement related
to the common stock, or |
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enter into any swap or other agreement that transfers, in whole
or in part, the economic consequence of ownership of any common
stock, whether any such swap or transaction is to be settled by
delivery of shares or other securities, in cash or otherwise. |
This lockup provision applies to common stock and to securities
convertible into or exchangeable or exercisable for or repayable
with common stock. It also applies to common stock owned now or
acquired later by the person executing the agreement or for
which the person executing the agreement later acquires the
power of disposition.
Quotation on the Nasdaq Global Market
We expect the shares to be approved for quotation on the Nasdaq
Global Market, subject to notice of issuance, under the symbol
CADX.
Before this offering, there has been no public market for our
common stock. The initial public offering price will be
determined through negotiations among us and the
representatives. In addition to prevailing market conditions,
the factors to be considered in determining the initial public
offering price are
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the valuation multiples of publicly traded companies that the
representatives believe to be comparable to us, |
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our financial information, |
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the history of, and the prospects for, our company and the
industry in which we compete, |
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an assessment of our management, its past and present
operations, and the prospects for, and timing of, our future
revenues, |
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the present state of our development, and |
115
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the above factors in relation to market values and various
valuation measures of other companies engaged in activities
similar to ours. |
An active trading market for the shares may not develop. It is
also possible that after the offering the shares will not trade
in the public market at or above the initial public offering
price.
The underwriters do not expect to sell more than 5% of the
shares in the aggregate to accounts over which they exercise
discretionary authority.
Price Stabilization, Short Positions and Penalty Bids
Until the distribution of the shares is completed, SEC rules may
limit underwriters and selling group members from bidding for
and purchasing our common stock. However, the representatives
may engage in transactions that stabilize the price of the
common stock, such as bids or purchases to peg, fix or maintain
that price.
In connection with the offering, the underwriters may purchase
and sell our common stock in the open market. These transactions
may include short sales, purchases on the open market to cover
positions created by short sales and stabilizing transactions.
Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the
offering. Covered short sales are sales made in an
amount not greater than the underwriters option to
purchase additional shares in the offering. The underwriters may
close out any covered short position by either exercising their
overallotment option or purchasing shares in the open market. In
determining the source of shares to close out the covered short
position, the underwriters will consider, among other things,
the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through
the overallotment option. Naked short sales are
sales in excess of the overallotment option. The underwriters
must close out any naked short position by purchasing shares in
the open market. A naked short position is more likely to be
created if the underwriters are concerned that there may be
downward pressure on the price of our common stock in the open
market after pricing that could adversely affect investors who
purchase in the offering. Stabilizing transactions consist of
various bids for or purchases of shares of common stock made by
the underwriters in the open market prior to the completion of
the offering.
The underwriters may also impose a penalty bid. This occurs when
a particular underwriter repays to the underwriters a portion of
the underwriting discount received by it because the
representatives have repurchased shares sold by or for the
account of such underwriter in stabilizing or short covering
transactions.
Similar to other purchase transactions, the underwriters
purchases to cover the syndicate short sales may have the effect
of raising or maintaining the market price of our common stock
or preventing or retarding a decline in the market price of our
common stock. As a result, the price of our common stock may be
higher than the price that might otherwise exist in the open
market.
Neither we nor any of the underwriters make any representation
or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of
our common stock. In addition, neither we nor any of the
underwriters make any representation that the representatives
will engage in these transactions or that these transactions,
once commenced, will not be discontinued without notice.
Electronic Offer, Sale and Distribution of Shares
A prospectus in electronic format will be made available on the
websites maintained by one or more of the underwriters of this
offering. Other than the electronic prospectus, the information
on the websites of the underwriters is not part of this
prospectus. The underwriters may agree to allocate a number of
shares to underwriters for sale to their online brokerage
account holders. Internet distributions will be allocated to
underwriters that may make Internet distributions on the same
basis as other allocations.
116
Other Relationships
Some of the underwriters and their affiliates have provided from
time to time, and may provide in the future, investment and
commercial banking and financial advisory services to us in the
ordinary course of business, for which they have received and
may continue to receive customary fees and commissions.
LEGAL MATTERS
The validity of our common stock offered by this prospectus will
be passed upon for us by Latham & Watkins LLP,
San Diego, California. Latham & Watkins LLP and
certain attorneys and investment funds affiliated with the firm
collectively own an aggregate of 90,000 shares of our
preferred stock, which will convert into an aggregate of
90,000 shares of our common stock upon the completion of
this offering. Certain legal matters in connection with this
offering will be passed upon for the underwriters by Heller
Ehrman LLP, San Diego, California.
EXPERTS
Ernst & Young LLP, independent registered public accounting
firm, has audited our financial statements as of
December 31, 2004 and 2005 and for the period from
May 26, 2004 (inception) through December 31,
2004 and for the year ended December 31, 2005 as set forth
in their report. We have included our financial statements in
this prospectus and elsewhere in the registration statement in
reliance on Ernst & Young LLPs report, given on
their authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on
Form S-1 under the
Securities Act of 1933, as amended, with respect to the shares
of our common stock offered hereby. This prospectus does not
contain all of the information set forth in the registration
statement and the exhibits and schedules thereto. Some items are
omitted in accordance with the rules and regulations of the SEC.
For further information with respect to us and the common stock
offered hereby, we refer you to the registration statement and
the exhibits and schedules filed therewith. Statements contained
in this prospectus as to the contents of any contract, agreement
or any other document are summaries of the material terms of
this contract, agreement or other document. With respect to each
of these contracts, agreements or other documents filed as an
exhibit to the registration statement, reference is made to the
exhibits for a more complete description of the matter involved.
A copy of the registration statement, and the exhibits and
schedules thereto, may be inspected without charge at the public
reference facilities maintained by the SEC at 100 F Street NE,
Washington, D.C. 20549. Copies of these materials may be
obtained from the Public Reference Section of the SEC at
100 F Street NE, Washington, D.C. 20549.
Please call the SEC at
1-800-SEC-0330 for
further information on the operation of the public reference
facility. The SEC maintains a web site that contains reports,
proxy and information statements and other information regarding
registrants that file electronically with the SEC. The address
of the SECs website is http://www.sec.gov.
117
INDEX TO FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of
Cadence Pharmaceuticals, Inc.
We have audited the accompanying balance sheets of Cadence
Pharmaceuticals, Inc. (a development stage company) as of
December 31, 2004 and 2005 and the related statements of
operations, stockholders equity and cash flows for the
period from May 26, 2004 (inception) through
December 31, 2004 and for the year ended December 31,
2005. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Companys internal control over financial
reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Companys internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Cadence Pharmaceuticals, Inc. (a development stage company)
at December 31, 2004 and 2005 and the results of its
operations and its cash flows for the period from May 26,
2004 (inception) through December 31, 2004 and for the
year ended December 31, 2005 in conformity with generally
accepted accounting principles in the United States.
San Diego, California
April 21, 2006
F-2
Cadence Pharmaceuticals, Inc.
(a development stage company)
BALANCE SHEETS
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Pro Forma | |
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Stockholders | |
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|
December 31, | |
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|
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Equity at | |
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| |
|
June 30, | |
|
June 30, | |
|
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2004 | |
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2005 | |
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2006 | |
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2006 | |
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(Unaudited) | |
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(Unaudited) | |
ASSETS |
Current assets:
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Cash and cash equivalents
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|
$ |
4,271,229 |
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|
$ |
8,025,285 |
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|
$ |
42,881,305 |
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|
|
Securities available-for-sale
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|
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|
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|
|
7,000,000 |
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Prepaid expenses and other current assets
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|
|
3,854 |
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|
|
526,173 |
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|
|
438,274 |
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Total current assets
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4,275,083 |
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|
|
15,551,458 |
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|
|
43,319,579 |
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Property and equipment, net
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|
|
108,735 |
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|
|
117,740 |
|
|
|
770,693 |
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|
|
|
|
Restricted cash
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|
|
|
|
|
|
|
|
|
|
1,581,130 |
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|
|
|
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Other assets
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|
|
152,159 |
|
|
|
100,000 |
|
|
|
683,405 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
4,535,977 |
|
|
$ |
15,769,198 |
|
|
$ |
46,354,807 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
68,509 |
|
|
$ |
715,781 |
|
|
$ |
1,860,993 |
|
|
|
|
|
|
Accrued liabilities
|
|
|
45,965 |
|
|
|
430,220 |
|
|
|
2,949,955 |
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
|
|
|
|
|
|
|
|
1,032,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
114,474 |
|
|
|
1,146,001 |
|
|
|
5,843,405 |
|
|
|
|
|
Deferred rent
|
|
|
|
|
|
|
|
|
|
|
116,309 |
|
|
|
|
|
Long-term debt, less current portion
|
|
|
|
|
|
|
|
|
|
|
5,967,543 |
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A-1 convertible preferred stock,
8,085,108 shares authorized, issued and outstanding at
December 31, 2004 and 2005 and June 30, 2006
(unaudited); aggregate liquidation preference of $7,600,002; no
shares issued and outstanding pro forma (unaudited)
|
|
|
809 |
|
|
|
809 |
|
|
|
809 |
|
|
$ |
|
|
|
|
Series A-2 convertible preferred stock,
12,900,001 shares, 17,675,347 shares and
18,060,347 shares authorized at December 31, 2004 and
2005 and June 30, 2006 (unaudited), respectively; no
shares, 17,675,347 shares and 17,675,347 shares issued
and outstanding at December 31, 2004 and 2005 and
June 30, 2006 (unaudited), respectively; aggregate
liquidation preference of $17,675,347; no shares issued and
outstanding pro forma (unaudited)
|
|
|
|
|
|
|
1,767 |
|
|
|
1,767 |
|
|
|
|
|
|
|
Series A-3 convertible preferred stock,
53,870,000 shares authorized at June 30, 2006
(unaudited); 53,870,000 shares issued and outstanding at
June 30, 2006 (unaudited); aggregate liquidation preference
of $53,870,000; no shares issued and outstanding pro forma
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
5,387 |
|
|
|
|
|
|
Common stock, $0.0001 par value; 33,000,000 shares,
40,000,000 shares and 100,000,000 shares authorized at
December 31, 2004 and 2005 and June 30, 2006
(unaudited), respectively; 4,680,000 shares,
7,616,000 shares and 8,551,740 shares issued and
outstanding at December 31, 2004 and 2005 and June 30,
2006 (unaudited), respectively; 88,182,195 shares issued
and outstanding pro forma (unaudited)
|
|
|
468 |
|
|
|
762 |
|
|
|
855 |
|
|
|
8,818 |
|
|
Additional paid-in capital
|
|
|
7,562,463 |
|
|
|
25,472,308 |
|
|
|
79,953,466 |
|
|
|
79,953,466 |
|
|
Stock subscription receivable
|
|
|
|
|
|
|
(187,600 |
) |
|
|
|
|
|
|
|
|
|
Deficit accumulated during the development stage
|
|
|
(3,142,237 |
) |
|
|
(10,664,849 |
) |
|
|
(45,534,734 |
) |
|
|
(45,534,734 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
4,421,503 |
|
|
|
14,623,197 |
|
|
|
34,427,550 |
|
|
$ |
34,427,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$ |
4,535,977 |
|
|
$ |
15,769,198 |
|
|
$ |
46,354,807 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-3
Cadence Pharmaceuticals, Inc.
(a development stage company)
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from | |
|
|
|
|
|
|
|
Period from | |
|
|
May 26, 2004 | |
|
|
|
|
|
|
|
May 26, 2004 | |
|
|
(Inception) | |
|
|
|
|
|
(Inception) | |
|
|
Through | |
|
Year Ended | |
|
Six Months Ended June 30, | |
|
Through | |
|
|
December 31, | |
|
December 31, | |
|
| |
|
June 30, | |
|
|
2004 | |
|
2005 | |
|
2005 | |
|
2006 | |
|
2006 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
(Unaudited) | |
|
(Unaudited) | |
|
(Unaudited) | |
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$ |
2,233,357 |
|
|
$ |
6,126,226 |
|
|
$ |
2,401,589 |
|
|
$ |
33,573,970 |
|
|
$ |
41,933,553 |
|
|
Marketing
|
|
|
41,114 |
|
|
|
240,361 |
|
|
|
142,501 |
|
|
|
316,541 |
|
|
|
598,016 |
|
|
General and administrative
|
|
|
877,146 |
|
|
|
1,411,810 |
|
|
|
539,914 |
|
|
|
1,487,980 |
|
|
|
3,776,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
3,151,617 |
|
|
|
7,778,397 |
|
|
|
3,084,004 |
|
|
|
35,378,491 |
|
|
|
46,308,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(3,151,617 |
) |
|
|
(7,778,397 |
) |
|
|
(3,084,004 |
) |
|
|
(35,378,491 |
) |
|
|
(46,308,505 |
) |
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
9,380 |
|
|
|
255,785 |
|
|
|
13,996 |
|
|
|
552,501 |
|
|
|
817,666 |
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43,895 |
) |
|
|
(43,895 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
|
|
|
9,380 |
|
|
|
255,785 |
|
|
|
13,996 |
|
|
|
508,606 |
|
|
|
773,771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(3,142,237 |
) |
|
$ |
(7,522,612 |
) |
|
$ |
(3,070,008 |
) |
|
$ |
(34,869,885 |
) |
|
$ |
(45,534,734 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share
|
|
$ |
(0.86 |
) |
|
$ |
(1.63 |
) |
|
$ |
(0.68 |
) |
|
$ |
(7.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute basic and diluted net loss per share
|
|
|
3,658,356 |
|
|
|
4,623,517 |
|
|
|
4,526,865 |
|
|
|
4,974,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic and diluted net loss per share
|
|
|
|
|
|
$ |
(0.36 |
) |
|
|
|
|
|
$ |
(0.59 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used to compute pro forma basic and diluted net loss per
share
|
|
|
|
|
|
|
20,648,526 |
|
|
|
|
|
|
|
58,711,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-4
Cadence Pharmaceuticals, Inc.
(a development stage company)
STATEMENTS OF STOCKHOLDERS EQUITY
For the Period from May 26, 2004
(inception) through June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A-1 | |
|
Series A-2 | |
|
Series A-3 | |
|
|
|
|
|
|
|
|
|
Deficit | |
|
|
|
|
Convertible | |
|
Convertible | |
|
Convertible | |
|
|
|
|
|
|
|
Accumulated | |
|
|
|
|
Preferred Stock | |
|
Preferred Stock | |
|
Preferred Stock | |
|
Common Stock | |
|
Additional | |
|
Stock | |
|
During the | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
Paid-In | |
|
Subscription | |
|
Development | |
|
Stockholders | |
|
|
Shares | |
|
Amount | |
|
Shares | |
|
Amount | |
|
Shares | |
|
Amount | |
|
Shares | |
|
Amount | |
|
Capital | |
|
Receivable | |
|
Stage | |
|
Equity | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Issuance of common stock to founders for cash at $0.001 per
share in July
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
4,500,000 |
|
|
$ |
450 |
|
|
$ |
4,050 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
4,500 |
|
Exercise of common stock options for cash at $0.10 per
share in December
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
180,000 |
|
|
|
18 |
|
|
|
17,982 |
|
|
|
|
|
|
|
|
|
|
|
18,000 |
|
Issuance of Series A-1 preferred stock for cash at
$0.94 per share, net of $59,573 of offering costs, in July
and August
|
|
|
8,085,108 |
|
|
|
809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,539,620 |
|
|
|
|
|
|
|
|
|
|
|
7,540,429 |
|
Issuance of common stock options for consulting services in
November
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
811 |
|
|
|
|
|
|
|
|
|
|
|
811 |
|
|
Net loss and comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,142,237 |
) |
|
|
(3,142,237 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2004
|
|
|
8,085,108 |
|
|
|
809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,680,000 |
|
|
|
468 |
|
|
|
7,562,463 |
|
|
|
|
|
|
|
(3,142,237 |
) |
|
|
4,421,503 |
|
Exercise of common stock options at $0.10 per share in
February, June and December, net of the repurchase of
30,000 shares at $0.10 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,936,000 |
|
|
|
294 |
|
|
|
293,306 |
|
|
|
(187,600 |
) |
|
|
|
|
|
|
106,000 |
|
Issuance of Series A-2 preferred stock for cash at
$1.00 per share, net of $57,041 of offering costs, in June
and September
|
|
|
|
|
|
|
|
|
|
|
17,675,347 |
|
|
|
1,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,616,539 |
|
|
|
|
|
|
|
|
|
|
|
17,618,306 |
|
Net loss and comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,522,612 |
) |
|
|
(7,522,612 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
|
8,085,108 |
|
|
|
809 |
|
|
|
17,675,347 |
|
|
|
1,767 |
|
|
|
|
|
|
|
|
|
|
|
7,616,000 |
|
|
|
762 |
|
|
|
25,472,308 |
|
|
|
(187,600 |
) |
|
|
(10,664,849 |
) |
|
|
14,623,197 |
|
Exercise of common stock options for cash between $0.10 and
$0.34 per share in January through June (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
935,740 |
|
|
|
93 |
|
|
|
281,099 |
|
|
|
|
|
|
|
|
|
|
|
281,192 |
|
Collection of stock subscription receivable (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
187,600 |
|
|
|
|
|
|
|
187,600 |
|
Issuance of Series A-3 preferred stock for cash at
$1.00 per share, net of $94,987 of offering costs, in March
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,870,000 |
|
|
|
5,387 |
|
|
|
|
|
|
|
|
|
|
|
53,769,626 |
|
|
|
|
|
|
|
|
|
|
|
53,775,013 |
|
Issuance of warrants in connection with loan and security
agreement in February (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
313,572 |
|
|
|
|
|
|
|
|
|
|
|
313,572 |
|
Employee stock- based compensation recognized under SFAS
No. 123(R) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116,861 |
|
|
|
|
|
|
|
|
|
|
|
116,861 |
|
Net loss and comprehensive loss (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34,869,885 |
) |
|
|
(34,869,885 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2006 (unaudited)
|
|
|
8,085,108 |
|
|
$ |
809 |
|
|
|
17,675,347 |
|
|
$ |
1,767 |
|
|
|
53,870,000 |
|
|
$ |
5,387 |
|
|
|
8,551,740 |
|
|
$ |
855 |
|
|
$ |
79,953,466 |
|
|
$ |
|
|
|
$ |
(45,534,734 |
) |
|
$ |
34,427,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-5
Cadence Pharmaceuticals, Inc.
(a development stage company)
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from | |
|
|
|
|
|
|
|
Period from | |
|
|
May 26, 2004 | |
|
|
|
|
|
|
|
May 26, 2004 | |
|
|
(Inception) | |
|
|
|
|
|
(Inception) | |
|
|
Through | |
|
Year Ended | |
|
Six Months Ended June 30, | |
|
Through | |
|
|
December 31, | |
|
December 31, | |
|
| |
|
June 30, | |
|
|
2004 | |
|
2005 | |
|
2005 | |
|
2006 | |
|
2006 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
|
|
(Unaudited) | |
|
(Unaudited) | |
|
(Unaudited) | |
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(3,142,237 |
) |
|
$ |
(7,522,612 |
) |
|
$ |
(3,070,008 |
) |
|
$ |
(34,869,885 |
) |
|
$ |
(45,534,734 |
) |
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
8,389 |
|
|
|
36,876 |
|
|
|
15,771 |
|
|
|
28,862 |
|
|
|
74,127 |
|
|
|
Stock-based compensation
|
|
|
811 |
|
|
|
|
|
|
|
|
|
|
|
116,861 |
|
|
|
117,672 |
|
|
|
Non-cash interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,665 |
|
|
|
41,665 |
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other assets
|
|
|
(56,013 |
) |
|
|
(470,160 |
) |
|
|
(260,033 |
) |
|
|
59,799 |
|
|
|
(466,374 |
) |
|
|
|
Accounts payable, accrued liabilities and deferred rent
|
|
|
114,474 |
|
|
|
1,031,527 |
|
|
|
1,157,612 |
|
|
|
3,510,041 |
|
|
|
4,656,042 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(3,074,576 |
) |
|
|
(6,924,369 |
) |
|
|
(2,156,658 |
) |
|
|
(31,112,657 |
) |
|
|
(41,111,602 |
) |
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of marketable securities
|
|
|
(100,000 |
) |
|
|
(7,000,000 |
) |
|
|
|
|
|
|
|
|
|
|
(7,100,000 |
) |
Maturities of marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000,000 |
|
|
|
7,000,000 |
|
Restricted cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,581,130 |
) |
|
|
(1,581,130 |
) |
Purchases of property and equipment
|
|
|
(117,124 |
) |
|
|
(45,881 |
) |
|
|
(10,719 |
) |
|
|
(681,815 |
) |
|
|
(844,820 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(217,124 |
) |
|
|
(7,045,881 |
) |
|
|
(10,719 |
) |
|
|
4,737,055 |
|
|
|
(2,525,950 |
) |
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock, net
|
|
|
22,500 |
|
|
|
106,000 |
|
|
|
109,000 |
|
|
|
456,609 |
|
|
|
585,109 |
|
Proceeds from sale of preferred stock, net of issuance costs
|
|
|
7,540,429 |
|
|
|
17,618,306 |
|
|
|
13,661,958 |
|
|
|
53,775,013 |
|
|
|
78,933,748 |
|
Borrowings under debt agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000,000 |
|
|
|
7,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
7,562,929 |
|
|
|
17,724,306 |
|
|
|
13,770,958 |
|
|
|
61,231,622 |
|
|
|
86,518,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents
|
|
|
4,271,229 |
|
|
|
3,754,056 |
|
|
|
11,603,581 |
|
|
|
34,856,020 |
|
|
|
42,881,305 |
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
|
|
4,271,229 |
|
|
|
4,271,229 |
|
|
|
8,025,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$ |
4,271,229 |
|
|
$ |
8,025,285 |
|
|
$ |
15,874,810 |
|
|
$ |
42,881,305 |
|
|
$ |
42,881,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of non-cash investing and financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of warrants in connection with loan and security
agreement
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
313,572 |
|
|
$ |
313,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-6
Cadence Pharmaceuticals, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(Information as of June 30, 2006 and thereafter and for
the six months ended
June 30, 2005 and 2006 and the period from May 26,
2004 (inception)
through June 30, 2006 is unaudited)
|
|
1. |
The Company and Summary of Significant Accounting Policies |
|
|
|
The Company and Basis of Presentation |
Cadence Pharmaceuticals, Inc. (the Company) was
incorporated in the state of Delaware in May 2004. The Company
is a biopharmaceutical company focused on in-licensing,
developing and commercializing proprietary product candidates
principally for use in the hospital setting.
The Companys primary activities since incorporation have
been organizational activities, including recruiting personnel,
establishing office facilities, conducting research and
development, including clinical trials, and raising capital. To
date, the Company has in-licensed rights to two Phase III
product candidates. Since the Company has not begun principal
operations of commercializing a product candidate, the Company
is considered to be in the development stage.
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
|
|
|
Unaudited Interim Financial Statements |
The accompanying unaudited interim balance sheet as of
June 30, 2006, the statements of operations and cash flows
for the six months ended June 30, 2005 and 2006 and the
period from May 26, 2004 (inception) through
June 30, 2006 and the statement of stockholders
equity for the six months ended June 30, 2006 are
unaudited. The unaudited interim financial statements have been
prepared on the same basis as the annual financial statements
and, in the opinion of management, reflect all adjustments,
which include only normal recurring adjustments necessary to
present fairly the Companys financial position as of
June 30, 2006 and results of operations and cash flows for
the six months ended June 30, 2005 and 2006. The results of
operations for the six months ended June 30, 2006 are not
necessarily indicative of the results to be expected for the
year ending December 31, 2006 or for any other interim
period or for any other future year.
|
|
|
Unaudited Pro Forma Stockholders Equity |
The unaudited pro forma stockholders equity information in
the accompanying balance sheet assumes the conversion of the
outstanding shares of convertible preferred stock at
June 30, 2006 into 79,630,455 shares of common stock
as though the completion of the initial public offering
contemplated by the filing of this prospectus had occurred on
June 30, 2006. Common shares issued in such initial public
offering and any related estimated net proceeds are excluded
from such pro forma information.
|
|
|
Cash and Cash Equivalents |
Cash and cash equivalents consists of cash and other highly
liquid investments with original maturities of three months or
less from the date of purchase.
F-7
Cadence Pharmaceuticals, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Information as of June 30, 2006 and thereafter and for
the six months ended
June 30, 2005 and 2006 and the period from May 26,
2004 (inception)
through June 30, 2006 is unaudited)
|
|
|
Investment Securities Available-for-Sale |
The Company classifies all securities as available-for-sale, as
the sale of such securities may be required prior to maturity to
implement management strategies. These securities are carried at
fair value, with the unrealized gains and losses reported as a
component of accumulated other comprehensive loss until
realized. Realized gains and losses from the sale of
available-for-sale securities, if any, are determined on a
specific identification basis. As of December 31, 2004 and
2005 and June 30, 2006, the carrying value of the
investments approximated their fair market value.
|
|
|
Fair Value of Financial Instruments |
The carrying amount of cash and cash equivalents, accounts
payable and accrued liabilities are considered to be
representative of their respective fair values because of the
short-term nature of those instruments.
|
|
|
Concentration of Credit Risk |
Financial instruments that potentially subject the Company to a
significant concentration of credit risk consist primarily of
cash and cash equivalents and securities available-for-sale. The
Company maintains deposits in federally insured financial
institutions in excess of federally insured limits. However,
management believes the Company is not exposed to significant
credit risk due to the financial position of the depository
institutions in which those deposits are held. Additionally, the
Company has established guidelines regarding diversification of
its investments and their maturities, which are designed to
maintain safety and liquidity.
Property and equipment, including leasehold improvements, are
stated at cost. Depreciation is calculated using the
straight-line method over the estimated useful lives of the
assets, generally two to five years. Leasehold improvements are
amortized over the shorter of their useful lives or the terms of
the related leases.
|
|
|
Impairment of Long-Lived Assets |
In accordance with Statement of Financial Accounting Standards
(SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, long-lived
assets, such as property and equipment are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to estimated
undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of an asset exceeds its estimated
future cash flows, an impairment charge is recognized by the
amount by which the carrying amount of the asset exceeds the
fair value of the asset. Assets to be disposed of would be
separately presented in the balance sheet and reported at the
lower of the carrying amount or the fair value less costs to
sell, and are no longer depreciated. The assets and liabilities
of a disposed group classified as held for sale would be
presented separately in the appropriate asset and liability
sections of the balance sheet. Although the Company has
accumulated losses since inception, the Company believes the
future cash flows to be received from the long-lived assets will
exceed the assets carrying value and, accordingly, the
Company has not recognized any impairment losses through
June 30, 2006.
F-8
Cadence Pharmaceuticals, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Information as of June 30, 2006 and thereafter and for
the six months ended
June 30, 2005 and 2006 and the period from May 26,
2004 (inception)
through June 30, 2006 is unaudited)
The Company accounts for research and development costs in
accordance with SFAS No. 2, Accounting for Research
and Development Costs. SFAS No. 2 specifies that
research and development costs should be charged to expense
until technological feasibility has been established for the
product. Once technological feasibility is established, all
product costs should be capitalized until the product is
available for general release to customers. The Company has
determined that technological feasibility for its product
candidates is reached when the requisite regulatory approvals
are obtained to make the product available for sale. The
Companys research and development expenses consist
primarily of license fees, salaries and related employee
benefits, costs associated with clinical trials managed by the
Companys contract research organizations, or CROs, and
costs associated with non-clinical activities, such as
regulatory expenses. The Company uses external service providers
and vendors to conduct clinical trials, to manufacture product
candidates to be used in clinical trials and to provide various
other research and development related products and services.
Through June 30, 2006, research and development expenses
relate predominantly to the in-licensing of IV APAP and
Omigard and clinical trials for Omigard.
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss
and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the
enactment date. The Company provides a valuation allowance
against net deferred tax assets unless, based upon the available
evidence, it is more likely than not that the deferred tax
assets will be realized.
Effective January 1, 2006, the Company adopted the
provisions of SFAS No. 123(R), Share-Based
Payment, using the prospective transition method and
therefore, prior period results will not be restated.
SFAS No. 123(R) supersedes Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock
issued to Employees, and related interpretations, and
revises guidance in SFAS No. 123, Accounting for
Stock-Based Compensation. Under this transition method, the
compensation cost related to all equity instruments granted
prior to, but not yet vested as of, the adoption date is
recognized based on the grant-date fair value which is estimated
in accordance with the original provisions of
SFAS No. 123; however, those options issued prior to
but unvested on January 1, 2006 and valued using the
minimum value method are excluded from the options subject to
SFAS No. 123(R). Compensation costs related to all equity
instruments granted after January 1, 2006 is recognized at
grant-date fair value of the awards in accordance with the
provisions of SFAS No. 123(R). Additionally, under the
provisions of SFAS No. 123(R), the Company is required
to include an estimate of the number of the awards that will be
forfeited in calculating compensation costs, which is recognized
over the requisite service period of the awards on a
straight-line basis.
During the six months ended June 30, 2006, the Company
recorded $116,861, or $0.02 per share, of stock-based
compensation expense as a result of the adoption of SFAS
No. 123(R). Of this amount,
F-9
Cadence Pharmaceuticals, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Information as of June 30, 2006 and thereafter and for
the six months ended
June 30, 2005 and 2006 and the period from May 26,
2004 (inception)
through June 30, 2006 is unaudited)
the Company allocated $20,339, $84 and $96,438 to research and
development, sales and marketing and general and administrative
expenses, respectively, based on the department to which the
associated employee reports. No related tax benefits of the
stock-based compensation costs have been recognized since the
inception of the Company.
The following table shows the assumptions used to compute the
stock-based compensation costs for the stock options granted
during the six months ended June 30, 2006 using the
Black-Scholes option pricing model:
|
|
|
|
|
Employee Stock Options
|
|
|
|
|
Risk-free interest rate
|
|
|
4.36 5.08 |
% |
Dividend yield
|
|
|
0.00 |
% |
Expected life of options (years)
|
|
|
6.06 6.08 |
|
Volatility
|
|
|
70.00 |
% |
The risk-free interest rate assumption was based on the United
States Treasurys rates for U.S. Treasury zero-coupon
bonds with maturities similar to those of the expected term of
the award being valued. The assumed dividend yield was based on
the Companys expectation of not paying dividends in the
foreseeable future. The weighted average expected life of
options was calculated using the simplified method as prescribed
by Securities and Exchange Commission (SEC) Staff
Accounting Bulletin (SAB) No. 107. This
decision was based on the lack of relevant historical data due
to the Companys limited historical experience. In
addition, due to the Companys limited historical data, the
estimated volatility also reflects the application of
SAB No. 107, incorporating the historical volatility
of comparable companies whose share prices are publicly
available.
The weighted average grant-date fair values of stock options
granted during the six months ended June 30, 2006 was
$0.29 per share.
As of June 30, 2006, the Company has approximately
$1,479,000 of unrecognized stock-based compensation costs
related to the non-vested balance of the 5,549,211 stock options
granted during the six months ended June 30, 2006 and
expects to recognize such compensation over a weighted average
period of 3.71 years.
Prior to January 1, 2006, the Company applied the
intrinsic-value-based method of accounting prescribed by APB
Opinion No. 25, and related interpretations including
Financial Accounting Standards Board (FASB)
Interpretation No. 44, Accounting for Certain
Transactions involving Stock Compensation an
interpretation of APB Opinion No. 25, to account for
its equity-based awards to employees and directors. Under this
method, if the exercise price of the award equaled or exceeded
the fair value of the underlying stock on the measurement date,
no compensation expense was recognized. The measurement date was
the date on which the final number of shares and exercise price
were known and was generally the grant date for awards to
employees and directors. If the exercise price of the award was
below the fair value of the underlying stock on the measurement
date, then compensation cost was recorded, using the
intrinsic-value method, and was generally recognized in the
statements of operations over the vesting period of the award.
The effect on net loss as if the fair-value-based method had
been applied to all outstanding and unvested awards in each
period would have been less than a $10,000 increase in the net
loss for each period in the period from May 26, 2004
(inception) through December 31, 2005. For purposes of
F-10
Cadence Pharmaceuticals, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Information as of June 30, 2006 and thereafter and for
the six months ended
June 30, 2005 and 2006 and the period from May 26,
2004 (inception)
through June 30, 2006 is unaudited)
disclosures required by SFAS No. 123, the estimated
fair value of the options was amortized on a straight-line basis
over the vesting period. The fair value of these awards was
estimated using the Minimum Value pricing model, with the
following weighted-average assumptions for 2004 and 2005:
risk-free interest rate of 3.53% and 4.17%, respectively;
dividend yield of 0%; expected volatility of 0%; and a life of
four years.
Equity instruments issued to non-employees are recorded at their
fair value as determined in accordance with
SFAS No. 123(R) and Emerging Issues Task Force
(EITF) 96-18, Accounting for Equity Instruments
That are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling Goods and Services, and are
periodically revalued as the equity instruments vest and are
recognized as expense over the related service period.
Compensation expense related to the 10,000 stock options issued
to a non-employee was $811 for both the period from May 26,
2004 (inception) through December 31, 2004 and the
period from May 26, 2004 (inception) through
June 30, 2006. The fair value of these stock options was
estimated using the Black-Scholes pricing model, with the
following weighted-average assumptions: risk-free interest rate
of 4.19%; dividend yield of 0%; expected volatility of 70%; and
a life of 10 years.
The Company has applied SFAS No. 130, Reporting
Comprehensive Income, which requires that all components of
comprehensive income, including net income, be reported in the
financial statements in the period in which they are recognized.
Comprehensive income is defined as the change in equity during a
period from transactions and other events and circumstances from
non-owner sources. Net income and other comprehensive income,
including foreign currency translation adjustments and
unrealized gains and losses on investments, shall be reported,
net of their related tax effect, to arrive at comprehensive
income. The net loss and comprehensive loss were the same for
all periods presented.
Basic net loss per share is calculated by dividing the net loss
by the weighted average number of common shares outstanding for
the period, without consideration for common stock equivalents.
Diluted net loss per share is computed by dividing the net loss
by the weighted average number of common share equivalents
outstanding for the period determined using the treasury-stock
method. For purposes of this calculation, convertible preferred
stock, stock options and warrants are considered to be common
stock equivalents and are only included in the calculation of
diluted net loss per share when their effect is dilutive.
The unaudited pro forma basic and diluted net loss per share is
calculated by dividing the net loss by the weighted average
number of common shares outstanding for the period plus the
weighted average number of common shares resulting from the
assumed conversion of the outstanding shares of convertible
preferred stock. The assumed conversion is calculated using the
as-if-converted method, as if such conversion had occurred as of
the beginning of each period presented or as of the original
issuance date, if later.
F-11
Cadence Pharmaceuticals, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Information as of June 30, 2006 and thereafter and for
the six months ended
June 30, 2005 and 2006 and the period from May 26,
2004 (inception)
through June 30, 2006 is unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from | |
|
|
|
|
|
|
|
|
May 26, 2004 | |
|
|
|
|
|
|
|
|
(Inception) | |
|
|
|
|
|
|
Through | |
|
Year Ended | |
|
Six Months Ended June 30, | |
|
|
December 31, | |
|
December 31, | |
|
| |
|
|
2004 | |
|
2005 | |
|
2005 | |
|
2006 | |
|
|
| |
|
| |
|
| |
|
| |
Historical
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(3,142,237 |
) |
|
$ |
(7,522,612 |
) |
|
$ |
(3,070,008 |
) |
|
$ |
(34,869,885 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
3,680,548 |
|
|
|
5,277,468 |
|
|
|
4,770,055 |
|
|
|
7,826,825 |
|
|
Weighted average unvested common shares subject to repurchase
|
|
|
(22,192 |
) |
|
|
(653,951 |
) |
|
|
(243,190 |
) |
|
|
(2,852,825 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
3,658,356 |
|
|
|
4,623,517 |
|
|
|
4,526,865 |
|
|
|
4,974,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share
|
|
$ |
(0.86 |
) |
|
$ |
(1.63 |
) |
|
$ |
(0.68 |
) |
|
$ |
(7.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss used above
|
|
|
|
|
|
$ |
(7,522,612 |
) |
|
|
|
|
|
$ |
(34,869,885 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma basic and diluted net loss per share
|
|
|
|
|
|
$ |
(0.36 |
) |
|
|
|
|
|
$ |
(0.59 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used above
|
|
|
|
|
|
|
4,623,517 |
|
|
|
|
|
|
|
4,974,000 |
|
Pro forma adjustments to reflect assumed weighted average effect
of conversion of preferred stock
|
|
|
|
|
|
|
16,025,009 |
|
|
|
|
|
|
|
53,737,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma shares used to compute basic and diluted net loss per
share
|
|
|
|
|
|
|
20,648,526 |
|
|
|
|
|
|
|
58,711,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical weighted average anti-dilutive securities not
included in diluted net loss per share calculation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
5,661,130 |
|
|
|
16,025,009 |
|
|
|
8,085,108 |
|
|
|
53,737,140 |
|
Common stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,345,271 |
|
Common stock subject to repurchase
|
|
|
22,192 |
|
|
|
653,951 |
|
|
|
243,190 |
|
|
|
2,852,825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,683,322 |
|
|
|
16,678,960 |
|
|
|
8,328,298 |
|
|
|
57,935,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2. |
Securities Available-for-Sale |
As of December 31, 2005, the Company held $7,000,000 of
commercial paper issued by U.S. corporations and rated by
debt rating agencies.
F-12
Cadence Pharmaceuticals, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Information as of June 30, 2006 and thereafter and for
the six months ended
June 30, 2005 and 2006 and the period from May 26,
2004 (inception)
through June 30, 2006 is unaudited)
|
|
3. |
Property and Equipment |
Property and equipment are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
|
|
|
|
| |
|
June 30, | |
|
|
Useful Lives | |
|
2004 | |
|
2005 | |
|
2006 | |
|
|
| |
|
| |
|
| |
|
| |
Leasehold improvements
|
|
|
2 years |
|
|
$ |
1,146 |
|
|
$ |
1,146 |
|
|
$ |
1,146 |
|
Computer equipment and software
|
|
|
3 years |
|
|
|
55,245 |
|
|
|
63,972 |
|
|
|
186,006 |
|
Furniture and equipment
|
|
|
5 years |
|
|
|
60,733 |
|
|
|
94,982 |
|
|
|
94,982 |
|
Manufacturing equipment
|
|
|
7 years |
|
|
|
|
|
|
|
|
|
|
|
122,500 |
|
Construction in-process
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
437,281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117,124 |
|
|
|
160,100 |
|
|
|
841,915 |
|
Less accumulated depreciation
|
|
|
|
|
|
|
(8,389 |
) |
|
|
(42,360 |
) |
|
|
(71,222 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
108,735 |
|
|
$ |
117,740 |
|
|
$ |
770,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4. |
Related Party Transactions |
From September 2004 through August 2005, the Company paid
Mr. Cam L. Garner $5,000 per month plus qualified
business expenses for his services as chairman of the
Companys board of directors under the terms of a
consulting agreement between the Company and a limited liability
company affiliated with Mr. Garner. The agreement expired
on August 31, 2005. From September 2005 to February 2006,
the Company continued to pay Mr. Garner $5,000 per
month for his services as chairman of the Companys board
of directors. In March 2006, Mr. Garners monthly
compensation for his services as chairman of the Companys
board of directors was increased to $8,333 per month. For
the period from May 26, 2004 (inception) through
December 31, 2004, the year ended December 31, 2005,
the six months ended June 30, 2005 and 2006 and the period
from May 26, 2004 (inception) through June 30,
2006, the Company expensed $20,000, $60,000, $30,000, $43,333,
and $123,333, respectively for payments to Mr. Garner for
services as chairman of the Companys board of directors.
The unpaid balance as of December 31, 2004 and 2005 and
June 30, 2006 was $20,000, $10,000 and $8,333, respectively.
During 2004, a stockholder advanced $500,000 for pre-operating
expenses and an exclusivity fee due for the collaboration and
license agreement with Migenix (see Note 6). The advance
was accounted for in accordance with the SEC SAB Topic 5T
(SAB No. 79), Accounting for Expenses or Liabilities
Paid by Principal Stockholder(s), which requires the Company
to record expenses for services paid by stockholders for the
benefit of the Company as if such expenses had been paid
directly by the Company. The 531,915 shares of Series A-1
preferred stock issued in settlement of the $500,000 advance
were valued at $0.94 per share, the price paid by new
Series A-1 investors. The transaction was recorded as a $500,000
cash investment in Series A-1 preferred stock by the stockholder
and a corresponding cash payment of $500,000 for operating
expenses.
|
|
|
Loan and Security Agreement |
In February 2006, the Company entered into a $7,000,000 loan and
security agreement with Silicon Valley Bank and Oxford Finance
Corporation to provide growth capital to the Company. In
F-13
Cadence Pharmaceuticals, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Information as of June 30, 2006 and thereafter and for
the six months ended
June 30, 2005 and 2006 and the period from May 26,
2004 (inception)
through June 30, 2006 is unaudited)
June 2006, the Company drew down $7,000,000 under the loan
and security agreement with Silicon Valley Bank and Oxford
Finance Corporation and has no further credit available under
this agreement. The Company will make interest only payments on
growth capital advances until the first day of the month
following the six month anniversary of each growth capital
advance, at which date the Company will make the first of 30
equal principal and interest payments. Interest accrues on all
outstanding amounts at the fixed rate equal to the greater of
(a) 10.83% or (b) the Treasury Rate plus 6.25% as of
the date the first principal and interest payment is due. The
loans are collateralized by substantially all the assets of the
Company (excluding intellectual property) and are subject to
prepayment penalties. Under the terms of the agreement, the
Company may be precluded from entering into certain financing
and other transactions, including disposing of certain assets
and paying dividends, and is subject to certain non-financial
covenants. Upon the occurrence of an event of default, including
a Material Adverse Change (as defined in the agreement), the
lenders may declare all outstanding amounts due and payable.
In conjunction with the loan and security agreement, the Company
issued fully exercisable warrants to the lenders to purchase an
aggregate of 385,000 shares of the Companys
Series A-2 preferred stock at an exercise price of
$1.00 per share. Excluding certain mergers or acquisitions,
the warrants expire upon the later of: (a) 10 years
from issuance or (b) five years after the closing of an
initial public offering of the Companys common stock. The
$313,572 fair value of the warrants was determined using the
Black-Scholes valuation model, recorded as debt issuance costs
which are included as other long-term assets in the accompanying
balance sheets, and amortized to interest expense over the
expected term of the loan agreement. The warrants were valued
using the following assumptions: risk-free interest rate of
4.57%; dividend yield of 0%; expected volatility of 70%; and
contractual term of 10 years.
In 2004, the Company subleased its corporate headquarters under
a non-cancelable operating lease that expires in September 2006.
As of December 31, 2005 and June 30, 2006, the
sublessor held a security deposit of $50,685. In May 2006,
the Company entered into a six-year operating lease for
23,494 square feet of office space. The Company will
receive certain tenant improvement allowances and rent abatement
and has an option to extend the lease for five years. Monthly
rental payments are adjusted on an annual basis and the lease
expires in September 2012. As security for the lease, the
landlord required a letter of credit in the amount of
$1,581,130. The letter of credit is collateralized by a
certificate of deposit in the same amount that is classified as
restricted cash in the accompanying balance sheet. The required
amount subject to the letter of credit and corresponding
certificate of deposit will be reduced by 22% on each of the
first four anniversaries of the commencement of the lease. Rent
expense was $67,579, $190,911, $89,542, $274,231 and $309,174
for the period from May 26, 2004 (inception) through
December 31, 2004, the year ended December 31, 2005,
the six months ended June 30, 2005 and 2006 and the period
from May 26, 2004 (inception) through June 30,
2006, respectively. As of June 30, 2006, future minimum
payments under the operating leases total $186,999, $1,009,000,
$1,074,851, $1,112,206, $1,151,676, $1,191,851 and $917,676 for
the years ending December 31, 2006, 2007, 2008, 2009, 2010,
2011 and 2012, respectively.
|
|
6. |
License Agreements and Acquired Development and
Commercialization Rights |
In July 2004, the Company in-licensed from Migenix the
technology and the exclusive development and commercialization
rights to its omiganan pentahydrochloride product candidate for
the prevention and treatment of device-related, wound-related,
and burn-related infections in North America
F-14
Cadence Pharmaceuticals, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Information as of June 30, 2006 and thereafter and for
the six months ended
June 30, 2005 and 2006 and the period from May 26,
2004 (inception)
through June 30, 2006 is unaudited)
and Europe. As consideration for the license, the Company paid a
$2,000,000 up-front fee, of which $1,900,000 was allocated to
the value of the acquired technology and $100,000 was recorded
as other long-term assets in the accompanying balance sheet for
the 617,284 shares of Migenix common stock acquired. The
Company may also be required to make future milestone payments
totaling up to $27,000,000 upon the achievement of various
milestones related to regulatory or commercial events. The
Company is also obligated to pay a royalty on future net sales
(as defined) of the licensed products and has the right to grant
sublicenses to affiliates. The Company expects results from
Phase III clinical trials for the licensed product in the
second half of 2007 but does not expect FDA approval prior to
2008. Accordingly, all payments related to the Migenix agreement
(other than for the acquisition of common stock) have been
recorded as research and development expense.
In March 2006, the Company in-licensed the technology and the
exclusive development and commercialization rights to
its IV APAP product candidate in the United States and
Canada from Bristol-Myers Squibb Company (BMS). BMS
sublicensed these rights to the Company under a license
agreement with SCR Pharmatop S.A. As consideration for the
license, the Company paid a $25,000,000 up-front fee, and may be
required to make future milestone payments totaling up to
$50,000,000 upon the achievement of various milestones related
to regulatory or commercial events. The Company is also
obligated to pay a royalty on net sales of the licensed products
and has the right to grant sublicenses to third parties. The
Company expects to initiate Phase III clinical trials for
the licensed product in 2006 but does not expect FDA approval
prior to 2008. Accordingly, all payments related to the BMS
agreement have been recorded as research and development expense.
|
|
|
Convertible Preferred Stock |
In July and August 2004, the Company issued
8,085,108 shares of
Series A-1
preferred stock at $0.94 per share for cash of $7,600,002.
The Company incurred offering costs of $59,573 resulting in net
cash proceeds of $7,540,429.
In June and September 2005, the Company issued an aggregate of
17,675,347 shares of
Series A-2
preferred stock at $1.00 per share for cash of $17,675,347.
The Company incurred offering costs of $57,041 resulting in net
cash proceeds of $17,618,306.
In March 2006, the Company issued 53,870,000 shares of
Series A-3
preferred stock at $1.00 per share for cash of $53,870,000.
The Company incurred offering costs of $94,987 resulting in net
cash proceeds of $53,775,013.
Each holder of
Series A-1,
A-2 and
A-3 preferred stock has
the right, at the option of the holder at any time, to convert
shares of preferred stock into shares of common stock at a
conversion ratio of
one-to-one, subject to
adjustment for stock splits, certain capital reorganizations and
dilutive stock issuances. As of June 30, 2006, there have
been no adjustments to the conversion ratios of any series of
preferred stock. Each share of preferred stock will
automatically convert into shares of common stock, at the then
effective applicable conversion rate upon the earlier of:
(i) the day preceding the closing of the sale of the
Companys common stock in connection with a firmly
underwritten public offering in which the Company receives gross
proceeds of at least $30,000,000 at a price of at least
$3.00 per share (as adjusted from time to time) or
(ii) the consent of at least 60% of the then outstanding
shares of preferred stock, as a single class.
F-15
Cadence Pharmaceuticals, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Information as of June 30, 2006 and thereafter and for
the six months ended
June 30, 2005 and 2006 and the period from May 26,
2004 (inception)
through June 30, 2006 is unaudited)
Unless 60% of the
Series A-3
preferred stockholders vote otherwise, certain
Series A-3
preferred stockholders that fail to participate in future equity
financings up to specified amounts will lose their right of
first offer related to any subsequent equity financings and any
Series A-1
preferred stock held by them will automatically convert into
newly created Series A-4 preferred stock and any
Series A-2 and
A-3 preferred stock
held by them will automatically convert into newly created
Series A-5 preferred stock. Series A-4 and A-5
preferred stock shall have identical rights and preferences as
Series A-1,
A-2 and
A-3 preferred stock
with the exception of certain anti-dilution protections.
The holders of
Series A-1,
A-2 and
A-3 preferred stock are
entitled to receive, when, as and if declared by the
Companys Board of Directors out of legally available
funds, non-cumulative dividends payable to holders of the
preferred stock in an amount equal to $0.0752, $0.08 and
$0.08 per share, respectively, in preference and priority
to the payment of any dividends on common stock. As of
December 31, 2005 and June 30, 2006, no dividends have
been declared by the Board of Directors.
In the event of any liquidation, dissolution or winding up of
the Company, the holders of
Series A-1,
A-2 and
A-3 preferred stock
will be entitled to receive in preference to the holders of
common stock, the amount of their original purchase price per
share, plus declared and unpaid dividends, if any. If the assets
and funds available to be distributed among the holders of the
preferred stock shall be insufficient to permit the payment to
such holders of the full preferences, then the entire assets and
funds legally available for distribution to such holders shall
be distributed ratably based on the total due each such holder.
Any remaining assets of the Company will be distributed ratably
among the holders of the common stock and preferred stock, with
the preferred stock limited to the aggregate of three times the
original purchase price per share, based upon the number of
shares of common stock held by each stockholder, treating each
share of preferred stock as if it were converted into shares of
common stock at the then-applicable conversion rate.
Preferred stockholders are entitled to the number of votes they
would have upon conversion of their preferred shares into common
stock at the then-applicable conversion rate. The preferred
stockholders have been granted certain rights with regard to the
election of board members and various other corporate actions.
In 2004, the Company adopted the Cadence Pharmaceuticals, Inc.
2004 Equity Incentive Plan (the 2004 Plan). The 2004
Plan allows for the grant of options, restricted stock awards,
performance share awards, dividend equivalents, restricted stock
units, stock payments and stock appreciation rights to
employees, directors and consultants of the Company. As of
December 31, 2005 and June 30, 2006, respectively, the
2004 Plan had 4,500,000 and 11,500,000 shares of common
stock reserved for issuance. Options granted under the 2004 Plan
expire no later than 10 years from the date of grant.
Options generally vest over a four-year period and may be
immediately exercisable. After one year, the options generally
vest 25%. Thereafter, options generally vest monthly in 36 equal
installments. The exercise price of incentive stock options
shall not be less than 100% of the fair value of the
Companys common stock on the date of grant. The exercise
price of any option granted to a 10% stockholder may be no less
than 110% of the fair value of the Companys common stock
on the date of grant. The fair value of the Companys
common stock is established contemporaneously by the
Companys board of directors all of whom are related
parties. From May 26, 2004 (inception) through February
2006 the valuations were performed by the Companys board
of directors who have experience in valuing early stage
companies. Beginning in
F-16
Cadence Pharmaceuticals, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Information as of June 30, 2006 and thereafter and for
the six months ended
June 30, 2005 and 2006 and the period from May 26,
2004 (inception)
through June 30, 2006 is unaudited)
March 2006 the board of directors established the fair value of
the Companys common stock based on contemporaneous
independent valuations of the Companys common stock
performed by an unrelated valuation specialist.
The Company has applied the guidance in the American Institute
of Certified Public Accountants (AICPA) Audit and
Accounting Practice Aid Series, Valuation of
Privately-Held-Company Equity Securities Issued as
Compensation, to determine the fair value of its common
stock for purposes of setting the exercise prices of stock
options granted to employees and others. This guidance
emphasizes the importance of the operational development in
determining the value of the enterprise. As a development stage
enterprise, the Company is at an early stage of existence,
primarily focused on product development with an unproven
business model. To date, the Company has been funded primarily
by venture capitalists with a history of funding
start-up, high-risk
entities with the potential for high returns in the event the
investments are successful. Prior to the licensing of IV
APAP in March 2006, the Company was considered to be in a very
early stage of development as defined in the AICPA guidance
where the preferences of the preferred stockholders, in
particular the liquidation preferences, are very meaningful.
Subsequent to the Companys licensing of IV APAP but
prior to the initiation of the Companys initial public
offering process on June 14, 2006, based on a
contemporaneous independent valuation performed by an unrelated
valuation specialist, the Company allocated additional
enterprise value to its common stock with an increase in the
common stock valuation to $0.34 per share. Subsequent to
the initiation of the initial public offering process, based on
a contemporaneous independent valuation performed by an
unrelated valuation specialist, the Company increased its common
stock valuation to $0.80 per share.
At December 31, 2005 and June 30, 2006, respectively,
a total of 228,000 and 1,678,789 shares of common stock
remained available for issuance under the 2004 Plan. A summary
of the Companys stock option activity under the 2004 Plan
and related information are as follows:
|
|
|
|
|
|
|
|
|
|
|
Options | |
|
Weighted Average | |
|
|
Outstanding | |
|
Exercise Price | |
|
|
| |
|
| |
Granted
|
|
|
1,225,000 |
|
|
$ |
0.10 |
|
Exercised
|
|
|
(180,000 |
) |
|
$ |
0.10 |
|
|
|
|
|
|
|
|
Balance at December 31, 2004
|
|
|
1,045,000 |
|
|
$ |
0.10 |
|
Granted
|
|
|
3,077,000 |
|
|
$ |
0.10 |
|
Exercised
|
|
|
(2,966,000 |
) |
|
$ |
0.10 |
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
|
1,156,000 |
|
|
$ |
0.10 |
|
Granted
|
|
|
5,549,211 |
|
|
$ |
0.43 |
|
Exercised
|
|
|
(935,740 |
) |
|
$ |
0.30 |
|
|
|
|
|
|
|
|
Balance at June 30, 2006
|
|
|
5,769,471 |
|
|
$ |
0.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005 | |
|
|
| |
|
|
Options Outstanding | |
|
Options Exercisable | |
|
|
| |
|
| |
|
|
|
|
Weighted | |
|
|
|
|
|
|
|
|
Average | |
|
Weighted | |
|
|
|
Weighted | |
|
|
|
|
Remaining | |
|
Average | |
|
|
|
Average | |
Exercise |
|
Number | |
|
Contractual | |
|
Exercise | |
|
Number | |
|
Exercise | |
Price |
|
Outstanding | |
|
Life (in years) | |
|
Price | |
|
Exercisable | |
|
Price | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
$0.10
|
|
|
1,156,000 |
|
|
|
9.24 |
|
|
$ |
0.10 |
|
|
|
989,521 |
|
|
$ |
0.10 |
|
F-17
Cadence Pharmaceuticals, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Information as of June 30, 2006 and thereafter and for
the six months ended
June 30, 2005 and 2006 and the period from May 26,
2004 (inception)
through June 30, 2006 is unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2006 | |
|
|
| |
|
|
Options Outstanding | |
|
Options Exercisable | |
|
|
| |
|
| |
|
|
|
|
Weighted | |
|
|
|
|
|
Weighted | |
|
|
|
|
|
|
Average | |
|
Weighted | |
|
|
|
Average | |
|
Weighted | |
|
|
|
|
Remaining | |
|
Average | |
|
|
|
Remaining | |
|
Average | |
Exercise |
|
Number | |
|
Contractual | |
|
Exercise | |
|
Number | |
|
Contractual | |
|
Exercise | |
Price |
|
Outstanding | |
|
Life (in years) | |
|
Price | |
|
Exercisable | |
|
Life (in years) | |
|
Price | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
$0.10
|
|
|
1,017,000 |
|
|
|
8.72 |
|
|
$ |
0.10 |
|
|
|
852,394 |
|
|
|
8.69 |
|
|
$ |
0.10 |
|
$0.34
|
|
|
3,714,471 |
|
|
|
9.86 |
|
|
$ |
0.34 |
|
|
|
3,561,771 |
|
|
|
9.86 |
|
|
$ |
0.34 |
|
$0.80
|
|
|
1,038,000 |
|
|
|
9.96 |
|
|
$ |
0.80 |
|
|
|
1,005,000 |
|
|
|
9.96 |
|
|
$ |
0.80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,769,471 |
|
|
|
9.68 |
|
|
$ |
0.38 |
|
|
|
5,419,165 |
|
|
|
9.70 |
|
|
$ |
0.39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the period from May 26, 2004 (inception) through
December 31, 2004 and the quarterly periods ended
March 31, 2005, June 30, 2005, September 30,
2005, December 31, 2005, March 31, 2006, and
June 30, 2006 the Company granted options to purchase
shares of the Companys common stock in the amount of
1,225,000, 650,000, 360,000, 191,000, 1,876,000, 15,000 and
5,534,211, respectively. All such grants had both a fair value
and exercise price of $0.10 for periods through March 31,
2006. During the quarterly period ended June 30, 2006, both
the fair value and exercise price of 4,496,211 and 1,038,000
option grants was $0.34 and $0.80, respectively.
As of December 31, 2005 and June 30, 2006,
respectively, 186,813 and 341,768 of the outstanding options
under the 2004 plan were vested and 2,767,875 and 3,440,257 of
the options exercised were subject to repurchase by the Company
since they were unvested.
The aggregate fair value of options that vested during the six
months ended June 30, 2006 was approximately $12,000. The
aggregate intrinsic value of options exercised during the six
months ended June 30, 2006 was approximately $360,000.
The aggregate intrinsic value of options outstanding and options
exercisable as of June 30, 2006 was approximately
$2,421,000 and $2,235,000, respectively.
|
|
|
Shares Reserved For Future Issuance |
The following shares of common stock are reserved for future
issuance:
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
June 30, | |
|
|
2005 | |
|
2006 | |
|
|
| |
|
| |
Conversion of preferred stock
|
|
|
25,760,455 |
|
|
|
79,630,455 |
|
Common stock options granted and outstanding
|
|
|
1,156,000 |
|
|
|
5,769,471 |
|
Preferred stock warrants outstanding
|
|
|
|
|
|
|
385,000 |
|
Common stock options reserved for future issuance
|
|
|
228,000 |
|
|
|
1,678,789 |
|
|
|
|
|
|
|
|
|
|
|
27,144,455 |
|
|
|
87,463,715 |
|
|
|
|
|
|
|
|
Significant components of the Companys deferred tax assets
for federal and state income taxes at December 31, 2004 and
2005 are shown below. A valuation allowance has been established
as realization
F-18
Cadence Pharmaceuticals, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Information as of June 30, 2006 and thereafter and for
the six months ended
June 30, 2005 and 2006 and the period from May 26,
2004 (inception)
through June 30, 2006 is unaudited)
of such deferred tax assets has not met the more likely than not
threshold requirement under SFAS No. 109.
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
December 31, | |
|
|
2004 | |
|
2005 | |
|
|
| |
|
| |
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$ |
361,000 |
|
|
$ |
3,528,000 |
|
Tax credit carryforwards
|
|
|
29,000 |
|
|
|
359,000 |
|
Capitalized research and development
|
|
|
591,000 |
|
|
|
520,000 |
|
Other, net
|
|
|
157,000 |
|
|
|
111,000 |
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
1,138,000 |
|
|
|
4,518,000 |
|
Valuation allowance for deferred tax assets
|
|
|
(1,138,000 |
) |
|
|
(4,518,000 |
) |
|
|
|
|
|
|
|
Net deferred taxes
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
At December 31, 2005, the Company had federal and state net
operating loss carryforwards of approximately $8,659,000 and
$8,663,000, respectively. The federal and state tax loss
carryforwards will begin to expire in 2024 and 2014,
respectively, unless previously utilized. The Company also had
federal research and development tax credit carryforwards of
approximately $283,000 which will begin expiring in 2024 unless
previously utilized. The Company had state research and
development tax credit carryforwards of approximately $116,000,
which carryforward indefinitely.
Utilization of the net operating loss carry forwards and credits
may be subject to a substantial annual limitation due to the
ownership change limitations provided by the Internal Revenue
Code of 1986, as amended, and similar state provisions. The
annual limitation may result in the expiration of net operating
losses and credits before utilization.
Effective January 1, 2005, the Company established a 401(k)
plan covering substantially all employees. Employees may
contribute up to 100% of their compensation per year (subject to
a maximum limit prescribed by federal tax law). The Company may
elect to make a discretionary contribution or match a
discretionary percentage of employee contributions. As of
December 31, 2005 and June 30, 2006, the Company had
not elected to make any contributions to the plan.
F-19
Through and
including ,
2006 (the 25th day after the date of this prospectus), all
dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers obligation
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
Shares
Common Stock
PROSPECTUS
Merrill Lynch & Co.
Deutsche Bank Securities
Pacific Growth Equities, LLC
JMP Securities
,
2006
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
|
|
Item 13. |
Other Expenses of Issuance and Distribution |
The following table sets forth the fees and expenses, other than
underwriting discounts and commissions, payable by us in
connection with the registration of the common stock hereunder.
All amounts shown are estimates except for the SEC registration
fee, the NASD filing fee and the Nasdaq Global Market listing
fee.
|
|
|
|
|
|
|
|
Amount | |
Item |
|
to be Paid | |
|
|
| |
SEC Registration Fee
|
|
$ |
9,229 |
|
NASD Filing Fee
|
|
|
9,125 |
|
Nasdaq Global Market Listing Fee
|
|
|
100,000 |
|
Legal Fees and Expenses
|
|
|
* |
|
Accounting Fees and Expenses
|
|
|
* |
|
Printing and Engraving Expenses
|
|
|
* |
|
Blue Sky, Qualification Fees and Expenses
|
|
|
* |
|
Transfer Agent and Registrar Fees
|
|
|
* |
|
Miscellaneous Expenses
|
|
|
* |
|
|
|
|
|
|
Total
|
|
$ |
* |
|
|
|
|
|
|
|
* |
To be completed by amendment. |
|
|
Item 14. |
Indemnification of Directors and Officers |
Section 145 of the Delaware General Corporation Law permits
a corporation to include in its charter documents, and in
agreements between the corporation and its directors and
officers, provisions expanding the scope of indemnification
beyond that specifically provided by the current law.
Our amended and restated certificate of incorporation provides
for the indemnification of directors to the fullest extent
permissible under Delaware law.
Our amended and restated bylaws provide for the indemnification
of officers, directors and third parties acting on our behalf if
such persons act in good faith and in a manner reasonably
believed to be in and not opposed to our best interest, and,
with respect to any criminal action or proceeding, such
indemnified party had no reason to believe his or her conduct
was unlawful.
We are entering into indemnification agreements with each of our
directors and executive officers, in addition to the
indemnification provisions provided for in our charter
documents, and we intend to enter into indemnification
agreements with any new directors and executive officers in the
future.
The underwriting agreement (to be filed as Exhibit 1.1
hereto) will provide for indemnification by the underwriters of
us, our executive officers and directors, and indemnification of
the underwriters by us for certain liabilities, including
liabilities arising under the Securities Act of 1933, as
amended, in connection with matters specifically provided in
writing by the underwriters for inclusion in the registration
statement.
We intend to purchase and maintain insurance on behalf of any
person who is or was a director or officer against any loss
arising from any claim asserted against him or her and incurred
by him or her in that capacity, subject to certain exclusions
and limits of the amount of coverage.
II-1
|
|
Item 15. |
Recent Sales of Unregistered Securities |
Since inception, we have issued and sold the following
unregistered securities:
|
|
|
1. In July 2004, we issued 4,500,000 shares of common
stock to a limited liability company and individual investors
for aggregate consideration of $4,500. |
|
|
2. In July and August 2004, we issued and sold an aggregate
of 8,085,108 shares of
Series A-1
preferred stock to certain venture capital funds and individual
investors at a per share price of $0.94, for aggregate
consideration of $7,600,001.52. Upon completion of this
offering, these shares of
Series A-1
preferred stock will convert into 8,085,108 shares of our
common stock. |
|
|
3. In June and September 2005, we issued and sold an
aggregate of 17,675,347 shares of
Series A-2
preferred stock to certain existing and new investors at a per
share price of $1.00, for aggregate consideration of
$17,675,347. Upon completion of this offering, these shares of
Series A-2
preferred stock will convert into 17,675,347 shares of our
common stock. |
|
|
4. In February 2006, in connection with a loan and security
agreement, we issued two warrants to two lenders to purchase an
aggregate of 385,000 shares of
Series A-2
preferred stock, at an initial exercise price of $1.00 per
share, subject to adjustment. The warrants are exercisable
through the later of February 2016 or five years from the
closing of this offering. These warrants will be exercisable for
an aggregate of 385,000 shares of common stock at an
exercise price of $1.00 per share upon the completion of
this offering. |
|
|
5. In March 2006, we issued and sold an aggregate of
53,870,000 shares of
Series A-3
preferred stock to certain existing and new investors at a per
share price of $1.00, for aggregate consideration of
$53,870,000. Upon completion of this offering, these shares of
Series A-3
preferred stock will convert into 53,870,000 shares of our
common stock. |
|
|
6. Since our inception through June 30, 2006, we
granted stock options to purchase 9,851,211 shares of
our common stock at exercise prices from $0.10 to $0.80 per
share to our employees, consultants and directors under our 2004
equity incentive award plan. Since our inception through
June 30, 2006, we issued and sold an aggregate of
4,081,740 shares of our common stock to our employees,
consultants and directors at prices from $0.10 to $0.34 per
share pursuant to exercises of options granted under our 2004
equity incentive award plan. During this period, 30,000 unvested
shares were repurchased by us at $0.10 per share resulting in a
net of 4,051,740 shares issued and sold under our 2004
equity incentive award plan. |
The issuance of securities described above in
paragraphs (1) through (5) were exempt from
registration under the Securities Act of 1933, as amended, in
reliance on Section 4(2) of the Securities Act of 1933, as
amended, and Regulation D promulgated thereunder, as
transactions by an issuer not involving any public offering. The
purchasers of the securities in these transactions represented
that they were accredited investors or qualified institutional
buyers and they were acquiring the securities for investment
only and not with a view toward the public sale or distribution
thereof. Such purchasers received written disclosures that the
securities had not been registered under the Securities Act of
1933, as amended, and that any resale must be made pursuant to a
registration statement or an available exemption from
registration. All purchasers either received adequate financial
statement or non-financial statement information about the
registrant or had adequate access, through their relationship
with the registrant, to financial statement or non-financial
statement information about the registrant. The sale of these
securities was made without general solicitation or advertising.
The issuance of securities described above in
paragraph (6) was exempt from registration under the
Securities Act of 1933, as amended, in reliance on Rule 701
of the Securities Act of 1933, as amended, pursuant to
compensatory benefit plans approved by the registrants
board of directors.
All certificates representing the securities issued in these
transactions described in this Item 15 included appropriate
legends setting forth that the securities had not been offered
or sold pursuant to a
II-2
registration statement and describing the applicable
restrictions on transfer of the securities. There were no
underwriters employed in connection with any of the transactions
set forth in this Item 15.
|
|
Item 16. |
Exhibits and Financial Statement Schedules |
(a) Exhibits
|
|
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
|
1.1* |
|
|
Form of Underwriting Agreement |
|
3.1(1) |
|
|
Restated Certificate of Incorporation of the Registrant, as
currently in effect |
|
3.2(2) |
|
|
Certificate of Amendment to Restated Certificate of
Incorporation of the Registrant, as currently in effect |
|
3.3(2) |
|
|
Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be in effect upon completion of the offering |
|
3.4(1) |
|
|
Amended and Restated Bylaws of the Registrant, as currently in
effect |
|
3.5(2) |
|
|
Form of Amended and Restated Bylaws of the Registrant, to be in
effect upon completion of the offering |
|
4.1* |
|
|
Form of the Registrants Common Stock Certificate |
|
4.2(1) |
|
|
Amended and Restated Investor Rights Agreement dated
February 21, 2006 |
|
4.3(1) |
|
|
Warrant issued by Registrant in February 2006 to Silicon Valley
Bank |
|
4.4(1) |
|
|
Warrant issued by Registrant in February 2006 to Oxford Finance
Corporation |
|
5.1* |
|
|
Opinion of Latham & Watkins LLP |
|
10.1(2) |
|
|
Form of Director and Executive Officer Indemnification Agreement |
|
10.2(2) |
|
|
Form of Executive Officer Employment Agreement |
|
10.3#(1) |
|
|
2004 Equity Incentive Award Plan and forms of option agreements
thereunder |
|
10.4#(2) |
|
|
Director Equity Compensation Policy |
|
10.5#(2) |
|
|
2006 Equity Incentive Award Plan and forms of option and
restricted stock agreements thereunder |
|
10.6(2) |
|
|
Form of Amended and Restated Restricted Common Stock Purchase
Agreement |
|
10.7#(2) |
|
|
2006 Corporate Bonus Plan |
|
10.8(1) |
|
|
Sublease dated August 31, 2004 by and between the
Registrant and Townsend and Townsend and Crew, LLP |
|
10.9(1) |
|
|
Lease dated May 12, 2006 by and between the Registrant and
Prentiss/ Collins Del Mar Heights LLC |
|
10.10 |
|
|
Collaboration and License Agreement dated July 30, 2004 by
and between the Registrant and Migenix Inc. (formerly Micrologix
Biotech Inc.) |
|
10.11 |
|
|
IV APAP Agreement (US and Canada) dated February 21, 2006
by and between the Registrant and Bristol-Myers Squibb Company |
|
10.12 |
|
|
License Agreement dated December 23, 2002 by and among SCR
Pharmatop and Bristol-Myers Squibb Company |
|
10.13(1) |
|
|
Loan and Security Agreement dated February 17, 2006 by and
among the Registrant, Silicon Valley Bank and Oxford Finance
Corporation |
|
10.14 |
|
|
Clinical Supply Agreement dated February 21, 2006 by and
between the Registrant and Lawrence Laboratories |
|
10.15 |
|
|
Engagement Letter dated May 19, 2005 by and between the
Registrant and Clearview Projects, Inc. |
|
23.1 |
|
|
Consent of Ernst & Young LLP, independent registered
public accounting firm |
|
23.2* |
|
|
Consent of Latham & Watkins LLP (included in
Exhibit 5.1) |
II-3
|
|
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
|
24.1(1) |
|
|
Power of Attorney |
|
24.2(2) |
|
|
Power of Attorney |
|
|
|
|
* |
To be filed by amendment. |
|
|
(1) |
Filed with the Registrants Registration Statement on Form
S-1 on July 17, 2006. |
|
|
(2) |
Filed with Amendment No. 1 to the Registrants
Registration Statement on Form S-1 on August 30, 2006. |
|
|
|
|
|
|
Confidential treatment has been requested for portions of this
exhibit. These portions have been omitted from the Registration
Statement and submitted separately to the Securities and
Exchange Commission. |
|
|
# |
Indicates management contract or compensatory plan. |
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the
information required to be set forth therein is not applicable
or is shown in the financial statements or notes thereto.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to
directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of
1933, as amended, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act of 1933, as amended, and will be governed by
the final adjudication of such issue.
We hereby undertake that:
|
|
|
(a) We will provide to the underwriters at the closing as
specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser. |
|
|
(b) For purposes of determining any liability under the
Securities Act of 1933, as amended, the information omitted from
a form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities
Act of 1933, as amended, shall be deemed to be part of this
registration statement as of the time it was declared effective. |
|
|
(c) For the purpose of determining any liability under the
Securities Act of 1933, as amended, each post-effective
amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof. |
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, Cadence Pharmaceuticals, Inc. has duly caused this
Amendment No. 2 to Registration Statement on
Form S-1 to be
signed on its behalf by the undersigned, thereunto duly
authorized, in San Diego, California on the
25th
day of September, 2006.
|
|
|
CADENCE PHARMACEUTICALS, INC. |
|
|
|
|
By: |
/s/ Theodore R. Schroeder
|
|
|
|
|
|
Theodore R. Schroeder |
|
President and Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment No. 2 to Registration Statement on
Form S-1 has been
signed by the following persons in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
|
/s/ Theodore R.
Schroeder
Theodore
R. Schroeder |
|
President, Chief Executive Officer and Director (Principal
Executive Officer) |
|
September 25, 2006 |
|
/s/ William R. LaRue
William
R. LaRue |
|
Senior Vice President, Chief Financial Officer, Treasurer and
Secretary (Principal Financial and Accounting Officer) |
|
September 25, 2006 |
|
*
Cam
L. Garner |
|
Chairman of the Board of Directors |
|
September 25, 2006 |
|
*
Brian
G. Atwood |
|
Director |
|
September 25, 2006 |
|
*
Samuel
L. Barker, Ph.D. |
|
Director |
|
September 25, 2006 |
|
*
Michael
A. Berman, M.D. |
|
Director |
|
September 25, 2006 |
|
*
James
C. Blair, Ph.D. |
|
Director |
|
September 25, 2006 |
|
*
Alan
D. Frazier |
|
Director |
|
September 25, 2006 |
II-5
|
|
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
|
*
Alain
B. Schreiber, M.D. |
|
Director |
|
September 25, 2006 |
|
*
Christopher
J. Twomey |
|
Director |
|
September 25, 2006 |
|
*By: |
|
/s/ Theodore R. Schroeder
Theodore
R. Schroeder
Attorney-in-Fact |
|
|
|
|
II-6
EXHIBIT INDEX
|
|
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
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|
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1.1* |
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Form of Underwriting Agreement |
|
3.1(1) |
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|
Restated Certificate of Incorporation of the Registrant, as
currently in effect |
|
3.2(2) |
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|
Certificate of Amendment to Restated Certificate of
Incorporation of the Registrant, as currently in effect |
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3.3(2) |
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|
Form of Amended and Restated Certificate of Incorporation of the
Registrant, to be in effect upon completion of the offering |
|
3.4(1) |
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|
Amended and Restated Bylaws of the Registrant, as currently in
effect |
|
3.5(2) |
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|
Form of Amended and Restated Bylaws of the Registrant, to be in
effect upon completion of the offering |
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4.1* |
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Form of the Registrants Common Stock Certificate |
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4.2(1) |
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Amended and Restated Investor Rights Agreement dated
February 21, 2006 |
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4.3(1) |
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|
Warrant issued by Registrant in February 2006 to Silicon Valley
Bank |
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4.4(1) |
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|
Warrant issued by Registrant in February 2006 to Oxford Finance
Corporation |
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5.1* |
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|
Opinion of Latham & Watkins LLP |
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10.1(2) |
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Form of Director and Executive Officer Indemnification Agreement |
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10.2(2) |
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Form of Executive Officer Employment Agreement |
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10.3#(1 |
) |
|
2004 Equity Incentive Award Plan and forms of option agreements
thereunder |
|
10.4#(2 |
) |
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Director Equity Compensation Policy |
|
10.5#(2 |
) |
|
2006 Equity Incentive Award Plan and forms of option and
restricted stock agreements thereunder |
|
10.6(2) |
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|
Form of Amended and Restated Restricted Common Stock Purchase
Agreement |
|
10.7#(2 |
) |
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2006 Corporate Bonus Plan |
|
10.8(1) |
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|
Sublease dated August 31, 2004 by and between the
Registrant and Townsend and Townsend and Crew, LLP |
|
10.9(1) |
|
|
Lease dated May 12, 2006 by and between the Registrant and
Prentiss/ Collins Del Mar Heights LLC |
|
10.10 |
|
|
Collaboration and License Agreement dated July 30, 2004 by
and between the Registrant and Migenix Inc. (formerly Micrologix
Biotech Inc.) |
|
10.11 |
|
|
IV APAP Agreement (US and Canada) dated February 21, 2006
by and between the Registrant and Bristol-Myers Squibb Company |
|
10.12 |
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|
License Agreement dated December 23, 2002 by and among SCR
Pharmatop and Bristol-Myers Squibb Company |
|
10.13(1 |
) |
|
Loan and Security Agreement dated February 17, 2006 by and
among the Registrant, Silicon Valley Bank and Oxford Finance
Corporation |
|
10.14 |
|
|
Clinical Supply Agreement dated February 21, 2006 by and
between the Registrant and Lawrence Laboratories |
|
10.15 |
|
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Engagement Letter dated May 19, 2005 by and between the
Registrant and Clearview Projects, Inc. |
|
23.1 |
|
|
Consent of Ernst & Young LLP, independent registered
public accounting firm |
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23.2* |
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Consent of Latham & Watkins LLP (included in
Exhibit 5.1) |
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Exhibit |
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|
Number |
|
Description |
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|
24.1(1) |
|
|
Power of Attorney |
|
24.2(2) |
|
|
Power of Attorney |
|
|
* |
To be filed by amendment. |
|
|
(1) |
Filed with the Registrants Registration Statement on Form
S-1 on July 17, 2006. |
|
|
(2) |
Filed with Amendment No. 1 to the Registrants
Registration Statement on Form S-1 on August 30, 2006. |
|
|
|
|
Confidential treatment has been requested for portions of this
exhibit. These portions have been omitted from the Registration
Statement and submitted separately to the Securities and
Exchange Commission. |
|
# |
Indicates management contract or compensatory plan. |
Exhibit 10.10
Exhibit 10.10
CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
COLLABORATION AND LICENSE AGREEMENT
between
MICROLOGIX BIOTECH INC.
and
STRATA PHARMACEUTICALS INC.
Dated: July 30, 2004
TABLE OF CONTENTS
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Article 1 DEFINITIONS |
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1 |
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Section 1.1 |
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Acceptance for Filing |
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1 |
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Section 1.2 |
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Act |
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1 |
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Section 1.3 |
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Affiliate |
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2 |
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Section 1.4 |
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Applicable Law(s) |
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2 |
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Section 1.5 |
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Approval Letter |
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2 |
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Section 1.6 |
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Books and Records |
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2 |
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Section 1.7 |
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CFR |
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2 |
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Section 1.8 |
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cGMP |
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2 |
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Section 1.9 |
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Collaboration |
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2 |
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Section 1.10 |
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Commercially Reasonable Efforts |
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1 |
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Section 1.11 |
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Common Shares |
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1 |
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Section 1.12 |
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Competent Authority(ies) |
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1 |
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Section 1.13 |
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Compound |
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1 |
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Section 1.14 |
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Confidential Information |
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1 |
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Section 1.15 |
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Control |
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2 |
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Section 1.16 |
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Costs |
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2 |
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Section 1.17 |
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CRBSI |
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2 |
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Section 1.18 |
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Development |
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2 |
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Section 1.19 |
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Development Plan(s) |
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2 |
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Section 1.20 |
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Development Subcontract |
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2 |
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Section 1.21 |
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DMF |
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3 |
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Section 1.22 |
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Europe |
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3 |
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Section 1.23 |
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Exclusivity Fee |
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3 |
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Section 1.24 |
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Exclusivity Period |
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3 |
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Section 1.25 |
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Extended Field |
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3 |
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Section 1.26 |
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FDA |
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3 |
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Section 1.27 |
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Field |
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3 |
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Section 1.28 |
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First Commercial Sale |
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3 |
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Section 1.29 |
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First Phase III Study |
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4 |
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Section 1.30 |
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GAAP |
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4 |
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Section 1.31 |
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Good Clinical Practices or GCP |
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4 |
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Section 1.32 |
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Governmental Approval(s) |
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4 |
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Section 1.33 |
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IMS Data |
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4 |
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Section 1.34 |
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Improvements |
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4 |
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Section 1.35 |
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IND(s) |
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4 |
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Section 1.36 |
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Know-How |
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4 |
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Section 1.37 |
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knowledge or best of its knowledge |
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5 |
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Section 1.38 |
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Labelled or Labelling |
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5 |
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Section 1.39 |
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LCSI |
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5 |
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Section 1.40 |
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Major European Market Country |
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5 |
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Section 1.41 |
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manufacture(d) or manufacturing |
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5 |
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Section 1.42 |
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Manufacturing Development Costs |
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5 |
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Section 1.43 |
|
Market Price |
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5 |
|
- 2 -
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Section 1.44 |
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Marketing Authorization |
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5 |
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Section 1.45 |
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MBI 594AN |
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5 |
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Section 1.46 |
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Micrologix Know-How |
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6 |
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Section 1.47 |
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Micrologix Patent Rights or Micrologix Patent |
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6 |
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Section 1.48 |
|
Micrologix Technology |
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6 |
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Section 1.49 |
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NDA |
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6 |
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Section 1.50 |
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Negotiation Period |
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6 |
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Section 1.51 |
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Net Sales |
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6 |
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Section 1.52 |
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Notification Period |
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1 |
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Section 1.53 |
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packaging |
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2 |
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Section 1.54 |
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Patent Rights |
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2 |
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Section 1.55 |
|
Phase III Study |
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2 |
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Section 1.56 |
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Phase IV Study |
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2 |
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Section 1.57 |
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Post Marketing Commitments |
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2 |
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Section 1.58 |
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Pricing and Reimbursement Approvals |
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2 |
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Section 1.59 |
|
Prime Rate of Interest |
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2 |
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Section 1.60 |
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Product |
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3 |
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Section 1.61 |
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Promotional Material(s) |
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3 |
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Section 1.62 |
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raw materials and components |
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3 |
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Section 1.63 |
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Regulations |
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3 |
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Section 1.64 |
|
Reimbursable Costs |
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3 |
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Section 1.65 |
|
Representatives |
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3 |
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Section 1.66 |
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Royalty Term |
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3 |
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Section 1.67 |
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Second Phase III Study |
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4 |
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Section 1.68 |
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Subcontractors |
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4 |
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Section 1.69 |
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Territory |
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4 |
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Section 1.70 |
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Third Party |
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4 |
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Section 1.71 |
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Trading Day |
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4 |
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Section 1.72 |
|
U.S. or the United States |
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4 |
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Section 1.73 |
|
U.S. Dollar Equivalent |
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4 |
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Section 1.74 |
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U.S. PTO |
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4 |
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Section 1.75 |
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Valid Claim |
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4 |
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Article 2 PRODUCT DEVELOPMENT |
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5 |
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Section 2.1 |
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Objectives |
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5 |
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Section 2.2 |
|
Collaboration Guidelines; Amendments to the Development Plan(s) |
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5 |
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Section 2.3 |
|
Development |
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6 |
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Section 2.4 |
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Joint Development Management Committee |
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7 |
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Section 2.5 |
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Technology Transfer |
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8 |
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Article 3 LICENSE |
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10 |
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Section 3.1 |
|
License Terms |
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10 |
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Section 3.2 |
|
Micrologixs Reservation of Rights |
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10 |
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Section 3.3 |
|
Third Party Licensees of Micrologix |
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10 |
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Section 3.4 |
|
Work Product and Intellectual Property |
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10 |
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Section 3.5 |
|
Sublicenses |
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11 |
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- 3 -
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Section 3.6 |
|
Certain Improvements |
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12 |
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Section 3.7 |
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Exclusive Option to Extend Field |
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13 |
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Article 4 ADDITIONAL PAYMENTS |
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14 |
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Section 4.1 |
|
License Fee |
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14 |
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Section 4.2 |
|
Product Milestone Payments |
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14 |
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Section 4.3 |
|
Milestones for a Second Phase III |
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15 |
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Section 4.4 |
|
Milestones for the First Phase III |
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15 |
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Section 4.5 |
|
Burns or Surgical Infections milestones |
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15 |
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Section 4.6 |
|
Commercial Milestone Payments |
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16 |
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Section 4.7 |
|
Royalties |
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16 |
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Article 5 COMMERCIALIZATION OF THE PRODUCT |
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18 |
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Section 5.1 |
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Marketing Efforts |
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18 |
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Section 5.2 |
|
Marketing Update |
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19 |
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Section 5.3 |
|
Manufacturing |
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19 |
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Section 5.4 |
|
Patent Marking |
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23 |
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Article 6 REGULATORY COMPLIANCE |
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23 |
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Section 6.1 |
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Ownership and Maintenance of Governmental Approvals |
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23 |
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Section 6.2 |
|
Rights of Reference |
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23 |
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Section 6.3 |
|
Adverse Drug Event Reporting and Post Marketing Surveillance |
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24 |
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Section 6.4 |
|
Post Marketing Commitments |
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26 |
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Section 6.5 |
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Assistance |
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26 |
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Section 6.6 |
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Compliance |
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26 |
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Section 6.7 |
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General Regulatory Matters |
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27 |
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Article 7 PATENTS |
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28 |
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Section 7.1 |
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Maintenance of Patents or Marks |
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28 |
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Section 7.2 |
|
Cooperation and Procedures Relative
to Actions Brought Under Section 7.3 and Section 7.4 |
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29 |
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Section 7.3 |
|
Prosecution of Infringement |
|
|
30 |
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Section 7.4 |
|
Infringement Claimed by Third Parties |
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32 |
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Section 7.5 |
|
Co-operation with Other Licensees |
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32 |
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Article 8 CONFIDENTIALITY |
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33 |
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Section 8.1 |
|
Confidentiality |
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33 |
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Section 8.2 |
|
Publicity Review |
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34 |
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Article 9 REPRESENTATIONS, WARRANTIES AND COVENANTS |
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35 |
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Section 9.1 |
|
Corporate Power |
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35 |
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Section 9.2 |
|
Due Authorization |
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35 |
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Section 9.3 |
|
Binding Obligation/No Conflict |
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35 |
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Section 9.4 |
|
Ownership of Micrologix Technology |
|
|
35 |
|
- 4 -
|
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Section 9.5 |
|
Patent and Other Intellectual Property Rights Proceedings |
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36 |
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Section 9.6 |
|
Micrologixs Additional Warranties |
|
|
37 |
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Section 9.7 |
|
Stratas Additional Warranties |
|
|
37 |
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|
Section 9.8 |
|
Pre-Clinical and Clinical Studies Prior to Effective Date |
|
|
37 |
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Section 9.9 |
|
Debarment |
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|
37 |
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Section 9.10 |
|
Limitation on Warranties |
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38 |
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|
Article 10 INDEMNIFICATION AND INSURANCE |
|
|
38 |
|
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|
Section 10.1 |
|
Strata Indemnified by Micrologix |
|
|
38 |
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|
Section 10.2 |
|
Micrologix Indemnified by Strata |
|
|
39 |
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|
Section 10.3 |
|
Prompt Notice Required |
|
|
39 |
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Section 10.4 |
|
Indemnitor May Settle |
|
|
40 |
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|
Section 10.5 |
|
Insurance |
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|
40 |
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|
Article 11 ADDITIONAL COVENANTS OF THE PARTIES |
|
|
41 |
|
|
|
Section 11.1 |
|
Micrologix Covenant Not To Compete |
|
|
41 |
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|
Section 11.2 |
|
Launch of Competitive Product by Strata |
|
|
41 |
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|
Section 11.3 |
|
Limitation To The Territory |
|
|
42 |
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|
Section 11.4 |
|
Records and Audits |
|
|
42 |
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|
Section 11.5 |
|
Marketing Expenses |
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|
44 |
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|
Section 11.6 |
|
Further Actions |
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|
44 |
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|
Article 12 PRODUCT RECALL |
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|
44 |
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|
Section 12.1 |
|
Product Recalls or Withdrawal |
|
|
44 |
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|
Section 12.2 |
|
Recall Costs |
|
|
44 |
|
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|
Section 12.3 |
|
Notification Of Complaints |
|
|
45 |
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|
Section 12.4 |
|
Notification Of Threatened Action |
|
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45 |
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|
Article 13 TERM AND TERMINATION |
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|
45 |
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|
Section 13.1 |
|
Term. |
|
|
45 |
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|
Section 13.2 |
|
Termination by Either Party |
|
|
46 |
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|
Section 13.3 |
|
Termination by Strata |
|
|
46 |
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|
Section 13.4 |
|
Termination by Micrologix |
|
|
47 |
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|
Section 13.5 |
|
Effect of Termination |
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|
47 |
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Section 13.6 |
|
Remedies |
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|
51 |
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Section 13.7 |
|
License Following Expiration |
|
|
51 |
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|
Article 14 DISPUTE RESOLUTION/DAMAGES |
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|
51 |
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|
Section 14.1 |
|
Disputes |
|
|
51 |
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|
Section 14.2 |
|
Performance to Continue |
|
|
52 |
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|
Section 14.3 |
|
Determination of Patents and Other Intellectual Property |
|
|
52 |
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|
Section 14.4 |
|
Injunctive Relief |
|
|
52 |
|
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|
Section 14.5 |
|
No Consequential Damages |
|
|
53 |
|
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|
Section 14.6 |
|
Attorneys Fees |
|
|
53 |
|
- 5 -
|
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|
Article 15 MISCELLANEOUS |
|
|
53 |
|
|
|
Section 15.1 |
|
No Solicitation |
|
|
53 |
|
|
|
Section 15.2 |
|
Assignment; Binding Effect |
|
|
53 |
|
|
|
Section 15.3 |
|
Force Majeure |
|
|
54 |
|
|
|
Section 15.4 |
|
Governing Law |
|
|
54 |
|
|
|
Section 15.5 |
|
Waiver |
|
|
54 |
|
|
|
Section 15.6 |
|
Severability |
|
|
54 |
|
|
|
Section 15.7 |
|
No Right to Use Names |
|
|
54 |
|
|
|
Section 15.8 |
|
Notices |
|
|
55 |
|
|
|
Section 15.9 |
|
Independent Contractors |
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55 |
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Section 15.10 |
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Rules of Construction |
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55 |
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Section 15.11 |
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Entire Agreement; Amendment |
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56 |
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Section 15.12 |
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Counterparts; Facsimile |
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56 |
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Section 15.13 |
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Interpretation |
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56 |
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Exhibit A Development Plan |
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Exhibit B Patents |
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Exhibit C Inventory |
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Exhibit D Governmental Approvals |
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COLLABORATION AND LICENSE AGREEMENT
This Collaboration and License Agreement (this Agreement) is made as of July 30, 2004 (the
Effective Date) by and between Micrologix Biotech Inc., a British Columbia corporation having its
offices at BC Research Complex, 3650 Wesbrook Mall, Vancouver, BC, Canada V6S 2L2 (Micrologix)
and Strata Pharmaceuticals Inc., a corporation having its offices at 10923 Coverhurst Way, San
Diego, California 92130, USA (Strata). Micrologix and Strata are sometimes referred to
collectively herein as the Parties or singly as a Party.
R E C I T A L S
WHEREAS, Micrologix has developed and owns or controls certain proprietary technology, patents,
patent applications, and know-how relating to Micrologixs proprietary Compound (as defined below);
WHEREAS, on June 2, 2004, the Parties signed a term sheet (the Term Sheet), whereby Strata paid
Micrologix the Exclusivity Fee, in exchange for, among other things, Micrologixs agreement to
negotiate solely and exclusively with Strata with respect to any license to the Compound and the
Micrologix Technology for development and commercialization in the Field in the Territory (as such
terms are defined herein); and
WHEREAS, Micrologix wishes to grant to Strata, and Strata wishes to obtain from Micrologix, an
exclusive license under the Micrologix Technology to use, market, advertise, promote, distribute,
offer for sale, sell, manufacture, have manufactured, export and import, and co-develop with and/or
in addition to Micrologix, the Compound in the Field in the Territory, or have the foregoing done
on its behalf, subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants and agreements
contained herein, the Parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set forth below:
Section 1.1 Acceptance for Filing
means notification from the FDA indicating receipt of an NDA submission in the United States or
equivalent marketing application pursuant to Applicable Laws in each country in the Territory.
Section 1.2 Act
means the Federal Food Drug and Cosmetic Act (21 U.S.C. Section 301 et seq.) in the United States
and any other comparable, applicable legislation in any other country in the Territory.
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Section 1.3 Affiliate
means any company or entity controlled by, controlling or under common control with a Party. As
used in this Section 1.3, control means (a) that an entity or company owns, directly or
indirectly, fifty percent (50%) or more of the voting stock of another entity, or (b) that an
entity, person or group has the actual ability to control and direct the management of the entity,
whether by contract or otherwise.
Section 1.4 Applicable Law(s)
means the Act, Regulations and all other applicable laws, rules, regulations and guidelines within
the Territory that apply to the import, export, research and development, manufacture, marketing,
distribution or sale of the Product in the Field in the Territory or the performance of either
Partys obligations under this Agreement (including disclosure obligations as required by the
United States Securities and Exchange Commission or other comparable exchange or securities
commission having authority over a Party) to the extent applicable and relevant to such Party.
Section 1.5 Approval Letter
means a letter issued by the FDA indicating approval of a product for commercialization, as defined
in 21 CFR § 314.105 in the United States, or equivalent letter issued by the applicable Competent
Authority in any other country in the Territory, pursuant to Applicable Laws in each country in the
Territory.
Section 1.6 Books and Records
means, in whatever media, any and all books and records, documents, reports and accounts in
connection with or relative to: any Reimbursable Costs, any costs Strata or Micrologix is obligated
to reimburse or pay to the other Party under this Agreement; the Development; the Development Plan;
as well as any other books and records as may be required from time to time by Applicable Laws or
this Agreement. Books and Records shall not include any market research and competitive reports,
marketing reports and data.
Section 1.7 CFR
means the United States Code of Federal Regulations in the United States and any other comparable,
applicable code of regulations in any other country in the Territory.
Section 1.8 cGMP
means the current good manufacturing protocols as defined in 21 CFR § 210 and § 211 in the United
States or other comparable, applicable regulations in other countries in the Territory.
Section 1.9 Collaboration
means the activities of the Parties carried out in performance of, and the relationship
between the Parties established by this Agreement.
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Section 1.10 Commercially Reasonable Efforts
means, except as otherwise explicitly set forth in this Agreement, those diligent efforts
consistent with the exercise of prudent scientific and business judgment, as applied to products
having comparable market potential and comparable developmental and regulatory risks and challenges
and otherwise in accordance with generally accepted practices in the pharmaceutical industry.
Comparable market potential shall be fairly determined based upon relevant factors, including
market size, price, competition, patent rights, product liability issues and general marketing
parameters. Except as expressly set out in this Agreement, Commercially Reasonable Efforts, as
applied to development and commercialization efforts, shall be as applied to, and assessed upon,
the Territory taken as a whole, and therefore, Strata shall not be required to:
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manufacture, develop, pursue regulatory approval or commercialize the Product
in any particular country or countries in the Territory; or |
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(b) |
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obtain regulatory approval for all uses of the Product in any particular
country or countries in the Territory; |
except as may be required in respect of the Product and uses of the Product when using Commercially
Reasonable Efforts in respect of the Territory taken as a whole. In addition to the foregoing,
during the first [***] immediately following the Effective Date, when assessing whether
Commercially Reasonable Efforts have been applied by a Party to an obligation under this Agreement
other than the obligations set out in Section 2.1(b), in addition to the foregoing considerations,
the Parties shall take into account the efforts that ought to be made by companies of similar size,
financial strength, and stage of corporate development to the Party whose efforts are being
assessed.
Section 1.11 Common Shares
means common shares in the capital of Micrologix.
Section 1.12 Competent Authority(ies)
means collectively the entities in each country in the Territory responsible for: (i) the
regulation of medicinal products intended for human use, including the FDA; or (ii) the
establishment, maintenance and/or protection of rights related to the Micrologix Patent Rights, or
any other successor entities thereto.
Section 1.13 Compound
means omiganan pentahydrochloride.
Section 1.14 Confidential Information
means any and all information (including the Micrologix Technology) of a Party relating to any
trade secret, Reimbursable Costs, Books and Records, process, method, compound, research project,
work in process, future development, scientific, engineering, manufacturing, marketing, sales,
business plan, financial or personnel matter relating to the disclosing Party, its present or
future products, sales, suppliers, customers, employees, investors or business, whether in oral,
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written, graphic or electronic form. Confidential Information shall not include any information
which the receiving Party can prove by competent evidence:
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is now, or hereafter becomes, through no act or failure to act on the part of
the receiving Party, generally known or available; |
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(b) |
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is known by the receiving Party at the time of receiving such information, as
evidenced by its written records maintained in the ordinary course of business; |
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(c) |
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is hereafter furnished to the receiving Party by a Third Party, as a matter of
right and without restriction on disclosure; |
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(d) |
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is independently developed by the receiving Party, as evidenced by its written
records, without knowledge of, and without the aid, application or use of, the
disclosing Partys Confidential Information; or |
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(e) |
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is the subject of a written permission to disclose provided by the disclosing
Party. |
Section 1.15 Control
means the possession of the ability to grant a license or sublicense as provided for herein without
violating the terms of any agreement or other arrangement with any Third Party, licensee or
sublicensee or the payment of any material licensing fees or royalties to any Third Party, licensee
or sublicensee.
Section 1.16 Costs
means any and all costs, expenses, fees (including attorneys fees and costs), charges, monies,
license fees, upfront fees and royalties paid in connection with any proceeding, action, suit or
claim and/or paid to any Third Party.
Section 1.17 CRBSI
means catheter related blood stream infection.
Section 1.18 Development
means work conducted under the Development Plan(s) and as set out in Section 2.3.
Section 1.19 Development Plan(s)
means the detailed plan(s) related to the research and the development (including work to obtain
Governmental Approvals, including Marketing Authorizations), and the budget therefor as amended
from time to time pursuant to which the Parties shall conduct the Development under the terms of
this Agreement. The initial Development Plan is attached hereto as Exhibit A.
Section 1.20 Development Subcontract
has the meaning set out in Section 2.1.
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Section 1.21 DMF
means drug master file.
Section 1.22 Europe
means the European Union as of the Effective Date, European Union Candidate Countries (namely,
Bulgaria, Croatia, Romania and Turkey), and the following European Countries: Albania, Andorra,
Belarus, Bosnia-Herzegovina, Former Yugoslav Republic of Macedonia, Iceland, Liechtenstein,
Moldova, Monaco, Norway, Russia, San Marino, Serbia & Montenegro, Switzerland, Ukraine, and Vatican
City.
Section 1.23 Exclusivity Fee
means the $200,000 payment made by Strata to Micrologix under the Term Sheet which Micrologix
acknowledges it received in two $100,000 payments, the first on June 3, 2004 and the second on July
6, 2004.
Section 1.24 Exclusivity Period
has the meaning set out in Section 3.7(b).
Section 1.25 Extended Field
has the meaning set out in Section 3.7(a).
Section 1.26 FDA
means the United States Food and Drug Administration in the United States and any other comparable,
applicable administrative agency in any other country in the Territory, or any successor entity
thereto.
Section 1.27 Field
means any or all of the following: (i) the topical administration to a burn site or a surgical
wound site for the treatment or prevention in humans of burn-related or surgery-related infections;
and (ii) the topical administration to a device or the site around the device for the treatment or
prevention in humans of device-related infections, including LCSI and CRBSI. For the avoidance of
doubt, the Field specifically excludes the treatment or prevention of dermatological diseases or
disorders, including acne, psoriasis, rosacea and atopic dermatitis.
Section 1.28 First Commercial Sale
means (a) with respect to a country in the Territory, the first sale for use, consumption or resale
of the Product by Strata, its sublicensees or its Affiliates in such country (excluding any sales
for clinical trials or other non-commercial purposes) and (b) with respect to the Territory, the
First Commercial Sale in any country within the Territory. A sale to a sublicensee or an Affiliate
shall not constitute a First Commercial Sale unless the sublicensee or Affiliate is the end user of
the Product.
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Section 1.29
First Phase III Study means the Phase III Study for the Product completed prior to the Effective
Date, namely #226-98-002.
Section 1.30 GAAP
means United States generally accepted accounting principles, as consistently applied in the
Territory.
Section 1.31 Good Clinical Practices or GCP
means good clinical practices as defined in 21 CFR § 50 et seq., § 56 et seq., and § 312 et seq. in
the United States or other comparable, applicable regulations in other countries in the Territory.
Section 1.32 Governmental Approval(s)
means any and all permits, licenses and authorizations, including Marketing Authorizations required
by any Competent Authority as a prerequisite to the development, manufacturing, packaging,
marketing and selling of the Product in the Field in the Territory; excluding however import
permits.
Section 1.33 IMS Data
means the data reported from IMS Health Incorporated of Plymouth Meeting, PA, or any successor to
IMS Health Incorporated or any other independent reporting service used by Strata to provide
information related to the marketing of the Product and other pharmaceutical products.
Section 1.34 Improvements
means, subject to Section 3.6, any and all developments, derivative works, enhancements,
modifications, inventions or discoveries relating to the Compound, the Product, for use in the
Field and under the Control of Micrologix or developed, created or acquired by Micrologix at any
time during the Term, whether patentable or not, and shall include, but not be limited to,
developments, inventions or discoveries intended to enhance the safety or efficacy of the Product
and all intellectual property rights related thereto.
Section 1.35 IND(s)
means an investigational new drug application as defined in 21 C.F.R. Section 312 et seq for the
FDA in the United States or equivalent application to the Competent Authorities of other countries
in the Territory, to commence clinical testing of a drug in humans, as defined by the FDA in the
United States, or other applicable Competent Authority, as the same may be amended, supplemented or
replaced from time to time.
Section 1.36 Know-How
means any and all know-how, trade secrets, inventions, data, processes, techniques, procedures,
compositions, devices, methods, formulas, protocols, any and all pre-clinical and clinical data,
and information, whether or not patentable, which are not generally publicly known, including
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but
not limited to any and all chemical, biochemical, toxicological, and scientific research
information, whether in written, electronic, graphic or video form or any other form or format.
Section 1.37 knowledge or best of its knowledge
means, with respect to each Party, the actual knowledge of the senior officers of such Party,
without the duty of inquiry.
Section 1.38 Labelled or Labelling
means any and all labels and other written, printed or graphic matter, including artwork, upon (a)
the Product or any container utilized with the Product; (b) packaging; or (c) the package inserts.
Section 1.39 LCSI
means local catheter site infection.
Section 1.40 Major European Market Country
means France, Germany and United Kingdom.
Section 1.41 manufacture(d) or manufacturing
means the storage, handling, assembly, production, processing, Labelling, testing, disposition,
packaging and quality control of raw materials and components and the Product.
Section 1.42 Manufacturing Development Costs
has the meaning set out in Section 5.3(f).
Section 1.43 Market Price
of the Common Shares means the U.S. Dollar Equivalent of the weighted average of the trading prices
of the Common Shares on The Toronto Stock Exchange, for the five consecutive Trading Days ending on
the last Trading Day prior to the Effective Date.
Section 1.44 Marketing Authorization
means all necessary and appropriate regulatory approvals, including NDAs and Pricing and
Reimbursement Approvals, where applicable, to allow the Product to be marketed and sold in the
Field in a particular country in the Territory.
Section 1.45 MBI 594AN
means [***].
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Section 1.46 Micrologix Know-How
means any and all Know-How related to the Compound or the Product, including research and
development and clinical studies hereunder and other obligations of Micrologix hereunder, and which
is under the Control of Micrologix as of the Effective Date and any and all Improvements thereto,
which is not covered by the Micrologix Patent Rights, but is necessary or useful to the use,
development, manufacture, marketing, promotion, distribution, sale and/or commercialization of the
Product in the Territory for use in the Field.
Section 1.47 Micrologix Patent Rights or Micrologix Patent
means any and all Patent Rights that claim Micrologixs proprietary technology for the Product or
the Compound which is under the Control of Micrologix as of the Effective Date and any and all
Patent Rights covering Improvements thereto, which are necessary or useful to the use, development,
manufacture, marketing, promotion, distribution, sale and/or commercialization of the Product in
the Territory for use in the Field. The Micrologix Patent Rights as of the Effective Date are set
forth on Exhibit B. Any Micrologix Patent Rights issued after the Effective Date shall be added
to Exhibit B.
Section 1.48 Micrologix Technology
means the Micrologix Patent Rights and the Micrologix Know-How.
Section 1.49 NDA
means a New Drug Application, and all amendments and supplements thereto, for regulatory approval
by the FDA as defined in 21 CFR § 314.50 et seq., as such act or regulations may be amended,
supplemented or replaced from time to time, to commence commercial sale of the Product in the
United States and any other comparable term and act as applicable with regard to a new drug
application and all amendments, supplements or replacements to such act or regulations in any other
country in the Territory.
Section 1.50 Negotiation Period
has the meaning set out in Section 3.7(c).
Section 1.51 Net Sales
means collectively, the gross amount invoiced by Strata, its sublicensees, or its
Affiliates for sales of the Product to a Third Party (excluding sales among Strata and
a sublicensee or Affiliate of Strata for resale, but including the subsequent final
sales to Third Parties by such sublicensees or Affiliates), less the following as they
pertain to the Product:
(a) any and all normal and customary trade and quantity discounts and customary
allowances actually granted to purchasers of the Product for returns or credits,
recalls (whether in the form of a credit or free replacement actually given in place
of a returned or recalled Product), allowances to end users, which are reasonable
and customary in accordance with generally accepted practices in the pharmaceutical
industry (whether in the form of a credit or free Product), taxes (the legal
incidence of which is on the purchaser and is shown separately on a Partys
invoices) and transportation, insurance and postage charges (if billed on a Partys
invoices as a separate item), and payments and rebates (including Medicaid rebates
given pursuant to an agreement with U.S. Department of Health and Human Services and
other rebates given pursuant to a government based rebate program, including local
and state rebate programs), accrued, paid or deducted pursuant to agreements
(including managed care agreements and group purchasing agreements) or Applicable
Laws, chargebacks and reporting rebates paid to wholesalers and other distributors.
(b) Excise and value added taxes applicable to sales of the Product in finished
package from which a Party has to pay or absorb on such sales.
The Product shall be considered sold when billed out or invoiced.
No deductions shall be made from Net Sales for items (a) and (b) above except to the extent of
amounts for such items actually granted or paid with respect to the Product; provided that a Party
may reconcile all such amounts within a given calendar quarter regardless of when such amounts were
actually granted or paid.
No deductions shall be made from Net Sales for commissions paid to individuals whether they are
with independent sales agencies or are regularly employed by a Party or its Affiliates or
sublicensees and are on its or their payroll, or for the cost of collections.
Components of Net Sales shall be determined in the ordinary course of business using the accrual
method of accounting in accordance with GAAP, provided that a Party may reconcile all such amounts
within a given calendar quarter regardless of when such amounts were actually granted or paid.
In the event a Party transfers Product to a Third Party in a bona fide arms length transaction,
for consideration, in whole or in part, other than cash or to a Third Party in other than a bona
fide arms length transaction, the Net Sales price for such Product shall be deemed to be the
standard invoice price then being invoiced by a Party in an arms length transaction with similar
customers.
Notwithstanding anything herein to the contrary, the transfer of a Product to a Third Party without
consideration to Strata in connection with the development or testing of a Product shall not be
considered a sale of a Product under this Agreement.
Section 1.52 Notification Period
has the meaning set out in Section 3.7(c).
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Section 1.53 packaging
means any and all containers, cartons, shipping cases, inserts, package inserts or other similar
material used in packaging or accompanying the Product.
Section 1.54 Patent Rights
means any and all rights under patents and patent applications, and any and all patents issuing
therefrom (including utility, model and design patents and certificates of invention), together
with any and all substitutions, extensions (including supplemental protection certificates),
registrations, confirmations, reissues, divisionals, continuations, continuations-in-part,
re-examinations, renewals, and foreign counterparts of the foregoing and all supplements and
modifications thereto.
Section 1.55 Phase III Study
means that portion of the clinical development program that provides for human clinical trials,
performed after preliminary evidence suggesting dose and effectiveness of a Product has been
obtained, which is intended to gather the additional information about the effectiveness and safety
that is needed to evaluate the overall benefit-risk relationship of the Product and to provide
adequate basis for labelling, performed in accordance with the U.S.A. Federal Food, Drug and
Cosmetic Act and applicable regulations promulgated thereunder (including 21 CFR Part 312), as
amended from time to time.
Section 1.56 Phase IV Study
means, as applicable, a study or program, designed to: (a) obtain additional safety or efficacy
data in support of the Product; or (b) determine effectiveness for additional labelled indications,
in either case commenced after Governmental Approval of the Product in the subject country in the
Territory.
Section 1.57 Post Marketing Commitments
means any post-approval commitments required by the FDA in the United States or any other Competent
Authority in any other country in the Territory.
Section 1.58 Pricing and Reimbursement Approvals
means any pricing and reimbursement approvals which must be obtained before placing the Product on
the market in the Field in any country in the Territory in which such approval is required.
Section 1.59 Prime Rate of Interest
means the prime rate of interest published from time to time in The Wall Street Journal as the
prime rate; provided, however that if The Wall Street Journal does not publish the Prime Rate of
Interest, then the term Prime Rate of Interest shall mean the rate of interest publicly announced
by Bank of America, N.A., as its prime rate, base rate, reference rate or the equivalent of such
rate, whether or not such bank makes loans to customers at, above, or below said rate.
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Section 1.60 Product
means any and all pharmaceutical formulations containing any and all concentrations, sizes of
volume, configurations and combinations of the Compound.
Section 1.61 Promotional Material(s)
has the meaning set out in Section 6.6(a).
Section 1.62 raw materials and components
means any and all raw materials and components (such as bulk drug, chemicals, containers, closures,
packaging, Labelling, etc.) needed to manufacture the Product.
Section 1.63 Regulations
means regulations, statutes, rules, guidelines and procedures promulgated by the FDA or other
Competent Authority pursuant to the Act or other Applicable Laws, including current Good Clinical
Practices, current Good Manufacturing Practices, as well as those regulations currently contained
in Title 21 of the CFR.
Section 1.64 Reimbursable Costs means the fees and costs owed by Strata pursuant to Section 2.5. Reimbursable
Costs do not include [***]. Marketing Authorizations will be paid for by Strata in accordance with
Section 2.3(c).
Section 1.65 Representatives
means, in respect of a Party, its Affiliates, licensees, sublicensees, and their respective
employees, agents, consultants, Subcontractors, and other representatives.
Section 1.66 Royalty Term
means the period of time commencing on the First Commercial Sale of the Product in a particular
country in the Territory and ending on the expiration of the last to expire of the Micrologix
Patent Rights containing Valid Claims covering such Product in such country in the Territory;
provided, however, that with respect to a country in the Territory in which a Micrologix Patent has
not been issued at the time of the First Commercial Sale in that country, the Royalty Term shall
commence on the First Commercial Sale in such country and continue for the greater of (i) the
period in which a Valid Claim covering such Product exists in the United States; or (ii) if a
Micrologix Patent is subsequently issued in such country, for the period of time in which a Valid
Claim covering such Product exists in such country. The Royalty Term shall apply on a
country-by-country basis. Notwithstanding anything to the contrary provided in this Section 1.66,
if no Valid Claim covering such Product exists in a given country in the Territory,
then the Royalty Term in such country shall be for a period of ten (10) years from the date of the
First Commercial Sale in that country.
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Section 1.67 Second Phase III Study
means a Phase III Study to support a Marketing Authorization for a LCSI, and if reasonably prudent
to pursue same, for CRBSI.
Section 1.68 Subcontractors
means Third Parties engaged to perform obligations of the Parties as permitted by this Agreement.
Section 1.69 Territory
means North America (including the United States, Canada and Mexico) and Europe, and as may be
expanded or reduced pursuant to the terms of this Agreement.
Section 1.70 Third Party
means any entity, other than Micrologix or Strata.
Section 1.71 Trading Day
means any day on which the Toronto Stock Exchange is open for business.
Section 1.72 U.S. or the United States
means the 50 states of the United States of America, its territories or possessions, and the
District of Columbia and Puerto Rico.
Section 1.73 U.S. Dollar Equivalent
means the equivalent amount of U.S. dollars calculated from Canadian currency using the Bank of
Canada noon rate for such conversion as reported on the Bank of Canadas website on the business
day prior to the applicable date.
Section 1.74 U.S. PTO
means the Unites States Patent and Trademark Office or any successor entity thereto.
Section 1.75 Valid Claim
means a claim of an issued and unexpired Micrologix Patent that, with respect to a specific country
in the Territory: (i) has not been revoked, declared unenforceable or unpatentable, or held invalid
by a court or other governmental agency of competent jurisdiction that is unappealable or
unappealed within the time allowed for appeal, (ii) has not been admitted to be rendered invalid or
unenforceable through reissue, disclaimer or otherwise, and (iii) has not been finally cancelled,
withdrawn, abandoned, allowed to lapse, or rejected by any governmental agency of competent
jurisdiction.
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ARTICLE 2
PRODUCT DEVELOPMENT
Section 2.1 Objectives.
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(a) |
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Pursuant to the Development Plan(s) and under the oversight of the JDMC,
Strata, (along with the collaboration and assistance of Micrologix as described in any
applicable development subcontract (Development Subcontract)), shall use Commercially
Reasonable Efforts to obtain Marketing Authorizations for the Product in the Field in
the Territory. |
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Strata shall use Commercially Reasonable Efforts: |
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to submit a protocol and request a special protocol assessment
for the Second Phase III Study in the US, in sufficient time to obtain feedback
from the FDA, on or before the end of the [***]; and |
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(ii) |
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within [***] after receiving satisfactory feedback from the FDA
on such protocol, provided that Strata has secured an adequate supply of
Product ready for use in human trials, enrol a patient in the Second Phase III
Study; |
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(iii) |
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within [***] after filing an NDA in the US, provided that no
Competent Authority in Europe requires an additional phase III clinical study
in order to file a common technical document in Europe, file a common technical
document in Europe. |
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After receiving satisfactory feedback from the FDA on the protocol referred to
in Section 2.1(b)(ii), Strata shall use Commercially Reasonable Efforts to conduct a
financing with proceeds to Strata sufficient to obtain, at a minimum, data from the
LCSI endpoint from the Second Phase III Study. |
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In addition, in its absolute discretion, Strata may file an NDA and seek
Marketing Authorization for CRBSI based on [***]. |
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(e) |
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Strata shall use Commercially Reasonable Efforts to market and sell the Product
as contemplated hereunder. |
Section 2.2 Collaboration Guidelines; Amendments to the Development Plan(s).
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In all matters related to the Collaboration, the Parties shall strive to
balance as best they can the legitimate interests and concerns of the Parties and to
realize the economic potential of the Product. |
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Any Development Plan may only be modified by the JDMC. The Development Plan(s)
and any modifications thereto, as each may be approved by the JDMC in |
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accordance with this Section 2.2(b), shall be incorporated into this Agreement as
though fully set forth herein and without requiring formal or additional amendment
to this Agreement. |
Section 2.3 Development.
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Strata shall have responsibility for the Development under the oversight and
based on the Development Plan, including a timeline, as approved by the JDMC. In
addition to any other responsibilities as may be provided in the Development Plan(s),
Strata shall: |
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use Commercially Reasonable Efforts to develop the Product in
accordance with the Development Plan(s) and as otherwise in accordance with the
terms and conditions of this Agreement; |
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use Commercially Reasonable Efforts to secure the Marketing
Authorizations, in accordance with the Development Plan(s) and/or otherwise in
accordance with Article 6; |
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promptly advise Micrologix of any issues of which Strata
becomes aware that materially and adversely affect Stratas ability to develop
the Product or meet the timelines on the critical path set out in the
Development Plan(s); |
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use Commercially Reasonable Efforts to manufacture or have
manufactured the Compound and the Product to supply the Product to carry out
the Development Plan(s). |
|
(b) |
|
Strata may from time to time and where appropriate, engage Micrologix to
perform regulatory, clinical and other development work pursuant to a Development
Subcontract consistent with the provisions of this Article 2. |
|
|
(c) |
|
Strata shall pay one hundred percent (100%) of the Reimbursable Costs incurred
by Micrologix, including those arising under Section 2.5. Micrologix shall invoice
Strata for such Reimbursable Costs on a quarterly basis within forty-five (45) days
after the end of each calendar quarter and such invoices shall be accompanied by the
appropriate documentation, including a listing of expenditures, in reasonably specific
detail. Strata shall pay such invoices within thirty (30) days after receipt of the
invoice. Micrologix shall keep Books and Records as necessary to document the inclusion
of the out-of-pocket and internal costs within the Reimbursable Costs including time
sheets, invoices, etc. Pursuant to Section 11.4, Strata has the right to inspect such
Books and Records upon request and during normal business hours, and Micrologix shall
provide copies of such Books and Records to Strata. |
|
|
(d) |
|
Notwithstanding anything to the contrary contained in this Agreement, if the
Second Phase III Study is commenced, Strata shall not terminate such study except on
notice to Micrologix: |
- 7 -
|
(i) |
|
at any time within [***] after
Stratas receipt of any interim results or the executive summary following
database lock of the LCSI endpoint; |
|
|
(ii) |
|
if Strata elects to continue such study by enrolling patients
thereafter, at any time within [***] after Stratas receipt of any subsequent
interim results or the executive summary following database lock of the CRBSI
endpoint; |
|
|
|
unless Strata terminates this Agreement for Micrologixs breach pursuant to Section
13.2. |
Section 2.4 Joint Development Management Committee.
|
(a) |
|
Creation of JDMC; Scope. Within ten (10) days after the Effective Date, the
Parties will form a Joint Development Management Committee (JDMC), which shall
oversee, review and coordinate the Development under the Development Plan(s) and
otherwise under the terms and conditions of this Agreement. The JDMC may delegate
certain responsibilities to the Parties. The JDMC shall be responsible for (i)
coordinating the Parties respective duties and efforts under this Article 2; (ii)
overseeing the Development, including responsibility for all regulatory strategies
involving Marketing Authorizations, meetings with the FDA and other Competent
Authorities, review of draft submissions to the FDA and other Competent Authorities, as
well as shelf-life and other manufacturing issues; (iii) making all decisions related
to development, clinical trials and budgets in connection with the Development and the
Development Plan(s); (iv) managing the Development conducted under the Development
Plan(s); (v) coordinating the Parties respective obligations under Section 2.3(a) and
Section 2.3(b); (vi) managing the manufacturing development for the Compound referred
to in Section 5.3(a)(i)(C); (vii) monitoring the progress and results of such work, all
based on the principles of prompt, diligent and commercially reasonable development of
the Product consistent with generally accepted practices in the pharmaceutical
industry; and (viii) performing any Post Marketing Commitments. Any changes to any
Development Plan shall be approved in advance by the JDMC. Notwithstanding the
foregoing and anything to the contrary in this Agreement, the JDMC shall have a
consulting role only in regard to, and no right to vote upon, any matters relating to
burns and surgical infections indications for the Product. The JDMC shall not have any
responsibilities in connection with: (i) any Phase IV Study; (ii) any commercialization
or marketing activities in connection with the Product; or (iii) subject to Section
2.4(a)(vi), any manufacturing of commercial supplies of the Compound or the Product.
Subject to the obligations to make Commercially Reasonable Efforts set out in Section
2.1 and Section 2.3 of this Agreement: (i) any such commercialization, marketing and
manufacturing activities shall be the sole right and responsibility of Strata; and (ii)
any Phase IV Study(ies) shall be the sole right and responsibility, but not obligation,
of Strata. |
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*** |
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Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the omitted portions. |
- 8 -
|
(b) |
|
Membership. The JDMC shall be comprised of three (3) voting representatives of
each of Micrologix and Strata. Each Party may change its representatives on the JDMC
at any time upon written notice to the other Party. Strata shall select one (1) member
of the JDMC to act as the chairperson of the JDMC and Micrologix shall select one
member of the JDMC to act as the secretary of the JDMC. |
|
|
(c) |
|
Meetings of the JDMC. The JDMC shall meet on a quarterly basis or at such
other frequency and at such time (and place, as applicable) as agreed to by the members
of the JDMC or upon the reasonable request of either Party. Such meetings may be
conducted in person or via teleconference. The JDMC Secretary will be responsible for
calling meetings, preparing and circulating an agenda in advance of each meeting, and
preparing and issuing minutes of each meeting within thirty (30) days thereafter. Any
such agenda or minutes shall be approved by the other Party in advance of any issuance.
A reasonable number of additional representatives of a Party may attend meetings of
the JDMC in a non-voting observer capacity. |
|
|
(d) |
|
Decisions of the JDMC. A quorum of the JDMC shall be deemed to be present at
any meeting of the JDMC if at least two (2) JDMC members or their designees of each
Party are present at such meeting in person or by telephone. If a quorum exists at any
meeting, a majority vote of the members of the JDMC present at such meeting is required
to take any action on behalf of the JDMC. In the event that any vote within the JDMC
results in a tie, Strata shall have the tie-breaking vote, which shall be exercised in
good faith, and make the final determination. Such final determination shall be
binding upon the Parties. |
|
|
(e) |
|
Limitation of Powers. The JDMC shall not have the right to amend or interpret
this Agreement. Issues regarding the interpretation of this Agreement shall be
referred to the respective Chief Executive Officers of each Party, or their designees
(who must be members of a Partys senior management), as provided in Section 14.1. The
actions or decisions of the JDMC shall not substitute for either Partys ability to
exercise any right set forth herein or excuse the performance of any obligation set
forth herein. |
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|
(f) |
|
Liaisons. Each Party will designate an individual to serve as the liaison
between the Parties to undertake and coordinate any day-to-day communications as may be
required between the Parties relating to their respective activities under this
Agreement. Each Party may change such liaison from time to time during the Term upon
written notice thereof to the other Party. |
Section 2.5 Technology Transfer.
|
(a) |
|
Micrologix shall, upon Stratas request, transfer to or make available to
Strata the then most-current version of all relevant Micrologix Know-How to enable
Stratas reasonably capable personnel to understand such Micrologix Know-How as
reasonably necessary to undertake the manufacture, development and commercialization of
the Compound and generally any Product in the Field under this Agreement. Such transfer
shall include: |
- 9 -
|
(i) |
|
transfer of the results of the clinical trials conducted prior
to and as of the Effective Date relating to the Product to Strata (including
all regulatory information, clinical data, hard-copy CRFs and reports together
with any patient samples (such as blood samples, microbiology samples, and
tissue samples), if available, without regard to the condition of such
samples); |
|
|
(ii) |
|
transfer of any communications with the FDA and the minutes of
any meetings with the FDA relating to the Product to Strata; |
|
|
(iii) |
|
transfer of the data and results of any CMC related activities
incident to Section 2.5(a)(i) and Section 2.5(a)(ii); |
|
|
(iv) |
|
coordination of communication between Strata and the clinical
trial groups that conducted the clinical trials referred to in Section
2.5(a)(i) prior to and as of the Effective Date; and |
|
|
(v) |
|
providing Strata reasonable access to Micrologix personnel with
relevant clinical and regulatory expertise to explain the information
transferred pursuant to Section 2.5(a)(i), Section 2.5(a)(ii) and Section
2.5(a)(iii). |
|
(b) |
|
Micrologix shall update the Micrologix Know-How related to the Compound and
Products previously transferred to Strata regularly at JDMC meetings. |
|
|
(c) |
|
Micrologix shall work cooperatively with and provide reasonable assistance to
Strata upon Stratas request, under the oversight of the JDMC, to prepare the first NDA
filing in the United States pursuant to a Development Subcontract. |
|
|
(d) |
|
Strata shall pay for the maintenance by Micrologix of the certain Governmental
Approvals in connection with the research and development of the Product pursuant to
Section 6.7(b) and the services of Micrologix personnel provided pursuant to this
Section 2.5, as follows: |
|
(i) |
|
For the first three months from the Effective Date, Strata
shall pay to Micrologix Micrologixs documented out-of-pocket costs of
providing such services. |
|
|
(ii) |
|
Commencing after the expiry of three months from the Effective
Date, Strata shall pay to Micrologix the hourly rate of [***] ($[***]) per hour, plus the documented out-of-pocket costs of
providing such services. |
|
|
(iii) |
|
Strata is responsible for, and will pay all reasonable,
documented, actual travel and associated accommodation expenses of Micrologix
personnel who, at Stratas request, travels to provide transition support under
this Section. |
|
|
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*** |
|
Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions. |
- 10 -
ARTICLE 3
LICENSE
Section 3.1 License Terms.
Subject to the terms and conditions of this Agreement, Micrologix hereby grants to Strata an
exclusive, royalty-bearing license under the Micrologix Technology to use, market, advertise,
promote, distribute, offer for sale, sell, make, manufacture, have manufactured, export and import,
and develop the Product in the Territory for use in the Field with the right to sublicense (as
provided in Section 3.5), and/or assign (as provided Section 15.2) the foregoing.
Section 3.2 Micrologixs Reservation of Rights.
Except as otherwise licensed to Strata hereunder and subject to Section 11.1, Micrologix may
exploit the Micrologix Technology for any purpose, including to use, develop, market, advertise,
promote, distribute, offer for sale, make, manufacture, sell, export and import the Product:
|
(a) |
|
outside the Territory; and |
|
|
(b) |
|
inside the Territory but outside the Field. |
Section 3.3 Third Party Licensees of Micrologix.
In the event that Micrologix or a licensee of Micrologix develops and/or markets a Product outside
the Territory but inside the Field, Micrologix shall use Commercially Reasonable Efforts to work
cooperatively with Strata to coordinate the development and marketing activities of Micrologix or
such licensee of Micrologix with the development and marketing activities hereunder.
Section 3.4 Work Product and Intellectual Property.
|
(a) |
|
Strata acknowledges that it shall have no right, title or interest in or to the
Micrologix Technology except as set forth in this Agreement. Nothing in this Agreement
shall be construed to grant Strata any rights or license to any intellectual property
of Micrologix other than as expressly set forth in this Agreement. |
|
|
(b) |
|
Except as set forth in Section 5.2 and the termination Sections of this
Agreement |
|
(i) |
|
Micrologix acknowledges that it shall have no right, title or
interest in or to any data, inventions, discoveries, improvements, derivative
works, and/or any other work product, whether patentable or not, developed
hereunder by Strata or on behalf of Strata by its Representatives (Strata Work
Product). |
|
|
(ii) |
|
Nothing herein shall be construed to grant Micrologix any
rights or license to the Strata Work Product or any other intellectual property
of Strata (collectively, Strata Intellectual Property). Strata reserves all
rights in and to any such Strata Work Product and the Strata Intellectual
Property. |
- 11 -
Section 3.5 Sublicenses.
|
(a) |
|
Strata shall have the right to sublicense rights granted in Section 3.1 to its
Affiliates. Strata shall cause its Affiliates to comply with and be bound by those
terms and conditions of Strata under this Agreement that by their terms are intended to
obligate Strata or its Affiliates commercializing the Product as permitted hereunder,
including Section 3.4, Section 3.5, Article 5, Article 6, Article 7, Article 8, Article
9, Article 10, Article 11 (excluding however Section 11.1), Article 12 and Section
14.5. Notwithstanding the foregoing, Strata shall remain primarily responsible for
complying with such applicable terms and conditions. A breach by any such Affiliate of
any such obligation shall constitute a breach by Strata of this Agreement and shall
entitle Micrologix to exercise its rights hereunder, in addition to any other rights
and remedies to which Micrologix may be entitled. |
|
|
(b) |
|
Strata shall also have the right to sublicense rights granted in Section 3.1 to
Third Parties, subject to the following: Strata shall give Micrologix prompt notice of
the execution of any sublicense. Within ten (10) calendar days after execution of a
sublicensing agreement, Strata shall provide Micrologix with a copy thereof (provided
that Strata shall be permitted to redact the financial terms and other confidential
information in such agreement). Each sublicense shall contain covenants by the
sublicensee for such sublicensee to observe and perform materially the same terms and
conditions as those set out for Strata in this Agreement to the extent applicable. In
the event Strata grants sublicenses to others to sell Product, such sublicenses shall
include an obligation for the sublicensee to account for and report its Net Sales on
the same basis as if such sales were Net Sales by Strata, and Micrologix shall receive
royalties from Strata in the same amounts as if the Net Sales of the sublicensee were
Net Sales of Strata. In the event that Strata becomes aware of a material breach of
any such sublicense by the sublicensee, Strata shall promptly notify Micrologix of the
particulars of same and use its Commercially Reasonable Efforts to enforce the terms of
such sublicense. Upon the request of Micrologix, Strata shall act reasonably in
considering any request of Micrologix for Strata to terminate such sublicense for
cause, but Strata shall have the final and sole right and responsibility and decision
making authority with respect to any such sublicense (provided that Strata acts
reasonably in such regard). |
|
|
(c) |
|
The terms of this Section 3.5 shall apply to each subsequent sublicensee or
sub-sublicensee, as if same were Stratas original sublicensee. |
|
|
(d) |
|
Micrologix will, upon request by any sublicensee of Strata, provide such
sublicensee with a letter whereby Micrologix agrees that if Micrologix gives notice of
default to Strata pursuant to Section 13.2 or Section 13.4, then, prior to any
termination of this Agreement, Micrologix will give such sublicensee written notice of
such default or intention to terminate this Agreement, and in the event of any breach
or default by Strata, which may be cured pursuant to Section 13.2 or Section 13.4, will
for 60 days from the date of such notice to the sublicensee, give the sublicensee the
opportunity to cure such default or breach on the terms provided in Section 13.2 or
Section 13.4, mutatis mutandis. Further, such letter |
- 12 -
|
|
|
shall evidence Micrologixs agreement that if this Agreement is terminated, and
provided that the sublicense between Strata and the sublicensee is in good standing
at such time, Micrologix will then grant to the sublicensee a license of the same
rights conferred on the sublicensee by the sublicense agreement on substantially
those same terms and conditions as are contained in this Agreement as would
correspond to the sublicense rights granted in the sublicense agreement, on the
financial terms set out in the relevant sublicense agreement. |
Section 3.6 Certain Improvements.
|
(a) |
|
When Micrologix enters into any agreement or other arrangement with a Third
Party or licensee or sublicensee that may result in the development, creation or
acquisition by Micrologix of any developments, derivative works, enhancements,
modifications, inventions or discoveries relating to the Compound or the Product for
use in the Field (collectively, Certain Improvements), Micrologix will use
Commercially Reasonable Efforts not to limit or otherwise restrict Micrologixs ability
to grant a license or sublicense to any such Certain Improvements as provided for
herein without violating the terms of any such agreement or other arrangement. |
|
|
(b) |
|
If Micrologix develops, creates or acquires any developments, derivative works,
enhancements, modifications, inventions or discoveries relating to the Compound or the
Product for use in the Field, where the grant of a license or sublicense to same as
provided for herein requires the payment of material licensing fees or royalties to any
Third Party, licensee or sublicensee, then Micrologix shall in a timely fashion offer
to Strata in writing a license or sublicense to the rights to such developments,
derivative works, enhancements, modifications, inventions or discoveries. Within a
reasonable period of time (but not to exceed [***] after receipt of
Micrologixs offer), Strata shall either accept the license or sublicense of same and
pay to Micrologix the amount of such material licensing fees or royalties owed by
Micrologix to such Third Party due to Stratas activities under such license or
sublicense, or advise Micrologix that Strata does not wish to obtain such rights. |
(c) In the event that:
|
(i) |
|
Micrologix, using Commercially Reasonable Efforts, fails to
obtain the ability to grant a license or sublicense as provided for in Section
3.6(a) without violating the terms of any such agreement or other arrangement,
then the rights to any such Certain Improvements shall be excluded from the
definition of Improvements under this Agreement; or |
|
|
(ii) |
|
Strata advises Micrologix that Strata does not wish to obtain
the rights referred to in Section 3.6(b), or if Strata fails to notify
Micrologix within a reasonable period of time (not to exceed [***] as noted
above) that it |
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*** |
|
Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions. |
- 13 -
|
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accepts such license or sublicense, then such rights shall be excluded from
the definition of Improvements under this Agreement; or |
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|
(iii) |
|
Strata advises Micrologix that Strata does wish to obtain the
rights referred to in Section 3.6(b) within a reasonable period of time (not to
exceed [***] as noted above) and pays such licensing fees or royalties, then
such rights shall be included in the definition of Improvements under this
Agreement without further formality. |
Section 3.7
Exclusive Option to Extend Field.
|
(a) |
|
Subject to the terms and conditions of this Section, Micrologix hereby grants
to Strata the right of first negotiation to obtain an exclusive license under the
Micrologix Technology to use, market, advertise, promote, distribute, offer for sale,
sell, make, manufacture, have manufactured, export and import, and develop the Product
to reduce or eliminate the nasal carriage of infectious organisms (the Extended
Field) in the Territory. |
|
|
(b) |
|
From the Effective Date and for a period of [***] thereafter (the Exclusivity
Period), Micrologix shall notify Strata in writing prior to any: |
|
(i) |
|
use, marketing, advertising, promotion, distribution, offer for
sale, sale, making, manufacturing, having manufactured, exporting, importing or
developing the Product or the Compound for the Extended Field in all or any
part of the Territory for itself or through its Affiliates, or |
|
|
(ii) |
|
grant to any Third Party any rights to do any of the foregoing. |
|
(c) |
|
Strata shall have a period of [***] from its receipt of a notice
described in Section 3.7(b) (the Notification Period) to notify Micrologix in writing
if Strata is interested in obtaining such license for the Extended Field for such
territory. If, by the end of the Notification Period, Micrologix receives written
notice from Strata that it desires to obtain such a license, then Micrologix and Strata
for a period of [***] or such longer period of time as mutually agreed to by the
Parties in writing (the Negotiation Period) shall negotiate in good faith, on an
exclusive basis, a definitive license agreement(s) for an exclusive license to the
Extended Field upon such terms and conditions as are mutually agreeable to the Parties. |
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|
(d) |
|
If the Parties fail to execute such definitive license agreement(s) as
described in Section 3.7(c), by the end of the Negotiation Period or if Strata fails to
give notice of its interest in obtaining a license to the Extended Field before the
expiry of the Notification Period, then Stratas right of first negotiation with
respect to the Extended Field shall terminate; provided, however, that if Micrologix
disposes of rights to the Micrologix Technology for the Extended Field to a Third Party
prior |
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*** |
|
Certain information on this page
has been omitted and filed separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions. |
- 14 -
to the end of the Exclusivity Period, then the financial terms of such transaction
shall not be substantially less favorable to Micrologix in the aggregate than the
best terms offered to Strata by Micrologix in writing during the Negotiation Period.
If, prior to the end of the Exclusivity Period, Micrologix desires to offer a Third
Party rights to the Extended Field on financial terms substantially less favorable
to Micrologix in the aggregate than the best terms offered to Strata by Micrologix
in writing during the Negotiation Period, then Micrologix shall first offer such
terms to Strata, and if within [***] of such offer, Strata informs Micrologix that
it is prepared to enter into an agreement with Micrologix in accordance with such
terms, Micrologix shall conclude such agreement with Strata upon such terms. If no
such statement is made by Strata within said [***], Micrologix shall be free to
enter into an agreement in accordance with such terms with a Third Party.
ARTICLE 4
ADDITIONAL PAYMENTS
Section 4.1 License Fee.
|
(a) |
|
Upfront Payment to Micrologix. In partial consideration for the licenses
granted under Section 3.1, Strata shall pay to Micrologix a one-time, non-refundable
license fee equal to One and One Half Million Dollars ($1,500,000) one business day
after the Effective Date by wire transfer of immediately available funds to an account
designated in writing by Micrologix to Strata prior to the Effective Date (the Upfront
Fee). Strata may deduct the Exclusivity Fee from the Upfront Fee. |
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|
(b) |
|
Upfront Equity Investment in Micrologix. Strata shall purchase from Micrologix
on the Effective Date such number of Common Shares as equals Five Hundred Thousand
Dollars ($500,000), based on the Market Price plus a [***] ([***])
premium, and as issued pursuant to a separate stock purchase agreement. |
Section 4.2 Product Milestone Payments.
Strata shall pay to Micrologix, as licensing fees, the following non-refundable milestone payments
as follows:
|
(a) |
|
for milestones referred to in Section 4.3 and Section 4.4, |
|
(i) |
|
if Strata can make the payment respecting such milestone within
45 days of the date on which Strata receives a copy of the applicable letter or
notice from the FDA in the U.S. or from a foreign equivalent in the Territory,
Strata shall pay to Micrologix such milestone within [***] of achieving such
milestone; |
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*** |
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Certain
information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions. |
- 15 -
|
(ii) |
|
if Strata cannot make the payment respecting such milestone
within [***] of the date on which Strata receives a copy of the applicable
letter or notice from the FDA in the U.S. or from a foreign equivalent in the
Territory, Strata shall: |
|
(A) |
|
within [***] of achieving such milestone,
notify Micrologix in writing that it cannot make the payment respecting
such milestone; and |
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|
(B) |
|
provided that Micrologix receives such notice
within the period for the receipt of same, Strata shall pay to
Micrologix such milestone within [***] of achieving such milestone,
[***]. |
|
(b) |
|
for milestones referred to in Section 4.5, [***] after Strata receives a copy
of the applicable letter or notice from the FDA in the U.S. or from a foreign
equivalent in the Territory. |
Section 4.3 Milestones for a Second Phase III.
For NDA Filings and Marketing Authorizations for either LCSI or CRBSI based upon a second Phase III
trial, the following milestones shall apply:
[***]
Section 4.4 Milestones for the First Phase III.
For an NDA Filing and Marketing Authorization for CRBSI based upon the First Phase III Study, the
following milestones shall apply; provided however that notwithstanding anything in this Agreement
to the contrary, the milestone for receipt of [***] in the United States in this Section 4.4 shall
only be payable when the milestone for [***] in the United States in this Section 4.4 becomes
payable:
[***]
The CRBSI milestones set forth in Section 4.3 and Section 4.4 regarding the CRBSI indication in the
United States are alternative milestones and as such only one milestone shall be due and payable
for [***] and [***], as applicable, under Section 4.3 and Section 4.4, but not both.
Section 4.5 Burns or Surgical Infections milestones.
For Marketing Authorizations for burns or surgical infection indications, the following milestones
shall apply:
[***]
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*** |
|
Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the omitted portions. |
- 16 -
Section 4.6 Commercial Milestone Payments.
Strata shall pay to Micrologix, as additional licensing fees, the following one-time,
non-refundable milestone payments within [***] following the end of the calendar quarter in which the
relevant commercial milestone is achieved.
[***]
Section 4.7 Royalties.
|
(a) |
|
Royalty Payment. During the Royalty Term, Strata shall owe and pay to
Micrologix the following royalties on Net Sales: |
|
(i) |
|
[***]% of Net Sales, on aggregate Net Sales in each calendar
year which does not exceed [***] ($[***]); |
|
|
(ii) |
|
[***]% of Net Sales, on aggregate Net Sales in each calendar
year which is greater than [***] ($[***]) but does not exceed [***] ($[***]);
and |
|
|
(iii) |
|
[***]% of Net Sales, on aggregate Net Sales in each calendar
year which is greater than [***]($[***]). |
|
(b) |
|
Reductions in Royalty Rates. Stratas royalty obligation under Section 4.7(a)
shall be [***] in the manner herein described: |
|
(i) |
|
In the event (and for the period that) a non-proprietary
version or versions of the Product enters the market in a country in the
Territory in any calendar quarter during the Term, [***]. For the purposes of
this Section, non-proprietary means a product containing the amino acid
sequence [***] for use in the Field which does not infringe a Valid Claim. The
[***] shall be effective beginning on the first calendar quarter of the launch
of such generic product. The royalty rate shall be adjusted quarterly and
shall be reconciled quarterly at such time as the applicable IMS Data has been
made available to Strata. |
|
|
(ii) |
|
Any such [***] in Section 4.7(b)(i) shall be credited against
the next payment(s) owed Micrologix. [***]. |
|
(c) |
|
Certain Recoveries. If Micrologix owes Strata Micrologixs share of the Costs
pursuant to Section 7.3, Section 7.4 or Section 10.4, Strata shall recover such amounts
[***]. The Parties acknowledge and agree that the maximum amount of
any such [***] in accordance with Section 7.3, Section 7.4 and Section 10.4 from any
royalty payments due Micrologix hereunder in a given quarter shall not exceed [***] of
the royalty payment owed in such quarter (the [***]). Any |
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*** |
|
Certain information on this page has been
omitted and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions. |
- 17 -
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|
amounts in excess of [***] for any quarter(s) shall be [***] against subsequent
quarterly royalty payments owed to Micrologix, subject to the [***] limitation for
any such subsequent quarter, [***]. |
|
|
(d) |
|
After Royalty Term. After the expiration of the Royalty Term in any relevant
country, Strata shall have no further obligation to pay royalties to Micrologix in such
country. |
|
|
(e) |
|
Payment of Royalties and Reports. Within [***] of the end of each calendar
quarter following the First Commercial Sale, Strata shall provide Micrologix with a
written report, in a form to be agreed between the parties, acting reasonably,
accompanied by full payment of all royalties accrued and owing to Micrologix during
such quarter, of: (i) Net Sales during such quarter and cumulative Net Sales for the
current calendar year; (ii) deductions from Net Sales; (iii) withholding taxes, if any,
required by Applicable Laws to be deducted with respect to such sales; (iv) the dates
of the First Commercial Sale of the Product in any country in the Territory during the
reporting period; (v) the exchange rates, if any used to determine the amount of United
States dollars; and (vi) the calculation of the royalties owed (collectively, the
Royalty Statement). The Royalty Statement shall be in reasonably specific detail, on
a country-by-country basis, and segmented according to sales by Strata, each Affiliate
and each sublicensee. |
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(f) |
|
Exchange Rate; Manner and Place of Payment. All payments hereunder shall be
payable in United States dollars. With respect to each month in each calendar quarter,
whenever conversion of payments from any foreign currency shall be required, such
conversion shall be made at the rate of exchange reported in The Wall Street Journal on
the last business day of such month within the applicable calendar quarter. All
payments owed under this Agreement shall be made by wire transfer to a bank account
designated in writing by the receiving Party. |
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(g) |
|
Late Payments. In the event that any payments due hereunder are not made when
due, each such payment shall accrue interest from the date due until paid at the Prime
Rate of Interest. The payment of such interest shall not limit or otherwise be deemed
to be in satisfaction of a Party exercising any other rights it may have under this
Agreement arising from the other Partys failure to make such payment when due. |
|
|
(h) |
|
Taxes. All taxes levied on account of the payments accruing to either Party
(the Receiving Party) under this Agreement shall be paid by the Receiving Party for
its own account, including taxes levied thereon as income to the Receiving Party. If
provision is made under Applicable Laws for withholding, such tax shall be deducted
from the payment made by the other Party paid to the proper taxing authority and a
receipt of payment of the tax secured and promptly delivered to the Receiving Party,
provided that it is understood that if this Agreement is assigned by Strata, Micrologix
should be no worse off than if this Agreement was made and remained with a United
States company and the payments to Micrologix were made from the United States to
Canada. Each Party agrees to assist the other Party in claiming exemption from such
deductions or withholdings |
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*** |
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Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. |
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under any double taxation or similar agreement or treaty from time to time in force. |
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(i) |
|
Prohibited Payments. Notwithstanding any other provision of this Agreement, if
either Party is prevented from paying any payments by virtue of the Applicable Laws of
the country from which the payment is to be made, then such payment may be paid by
depositing funds in the currency in which it accrued to the Receiving Partys account
in a bank acceptable to the Receiving Party in the country whose currency is involved. |
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(j) |
|
Non-Monetary Consideration. In the event Strata, its sublicensee(s) or its
Affiliate(s) receive any non-monetary consideration in connection with the sale of the
Product, the Net Sales of such Product shall be calculated based on the fair market
value of such other consideration. Strata shall disclose the terms of such arrangement
to Micrologix and the Parties shall endeavour in good faith to agree on such fair
market value as promptly as possible. |
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(k) |
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Manufacturing Development Costs. Strata shall recover Manufacturing
Development Costs owed by Micrologix pursuant to Section 5.3(f) [***]. |
ARTICLE 5
COMMERCIALIZATION OF THE PRODUCT
Section 5.1 Marketing Efforts.
|
(a) |
|
Subject to Section 2.4(a) and Section 5.3(f), Strata shall: (i) have the
exclusive right, at its cost, to make, manufacture, market, advertise, promote, sell,
distribute, and commercialize the Product in the Field in the Territory; (ii) be solely
responsible using Commercially Reasonable Efforts, for the making, manufacture,
marketing, advertising promotion, sale, distribution and commercialization of the
Product in the Field in the Territory; and (iii) have the sole responsibility and
decision making authority using Commercially Reasonable Efforts with regard to any and
all aspects of the making, manufacturing, marketing, advertising, promotion, sale,
distribution and commercialization of the Product in the Field in the Territory,
including all Labelling, marketing plans, marketing strategy, pricing decisions, and
the nature and type of advertising and marketing materials, including all Promotional
Materials. |
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(b) |
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Subject to the terms of this Agreement, Strata agrees to: (i) use Commercially
Reasonable Efforts to market, advertise, promote, sell, distribute, and commercialize
the Product in the Field in the Territory; and (ii) commence commercial sales of the
Product in each country in the Territory within six (6) months after receiving a copy
of each of the relevant Marketing Authorization. |
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*** |
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Certain
information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions. |
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(c) |
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Strata shall promptly advise Micrologix of any issues of which Strata becomes
aware that materially and adversely affect Stratas ability to market or sell the
Product in the Territory. In such event, senior executives of Strata and Micrologix
shall meet and in good faith discuss what actions should be taken in light of such
issues. If the Parties cannot resolve any such issue, either Party may invoke the
dispute resolution procedure in Article 14. |
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(d) |
|
Strata shall provide Micrologix prompt notice of the following events during
the Term: (i) the First Commercial Sale of Product in each country in the Territory,
if and when such occurrence takes place; and (ii) when any milestone referred to in
Section 4.3, Section 4.4, Section 4.5, or Section 4.6 has occurred. |
Section 5.2 Marketing Update.
|
(a) |
|
Following receipt of an Approval Letter from the FDA for the Product or an
equivalent letter from a Competent Authority, Strata shall provide Micrologix on an
annual basis during the Term, through the JDMC or otherwise, with reports in reasonable
detail describing Stratas material marketing efforts with respect to the Product in
the Territory during the preceding year and forecasts and plans for such efforts for
the following year. |
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(b) |
|
Strata agrees to consider Micrologixs input and comments that Micrologix may
provide related to any such report for any applicable period; provided, however, Strata
shall have the right to either accept or reject such input and/or comments in whole or
in part in Stratas sole discretion for any reason whatsoever, and Strata shall have
the final and sole right and responsibility and decision-making authority for all
matters related to any such report(s). |
Section 5.3 Manufacturing.
|
(a) |
|
Unless Strata is prevented, restricted, interfered with or delayed in making
such sales by reason of: (i) Force Majeure; or (ii) otherwise due to any breach of this
Agreement by Micrologix; Strata shall use Commercially Reasonable Efforts to: |
|
(i) |
|
identify, select, qualify, and enter into definitive
agreement(s) with Third Party(ies) to: |
|
(A) |
|
manufacture commercial supplies of the Product
for use in the Field in the Territory; and |
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(B) |
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supply raw materials and components for such
commercial supply, including the Compound; and |
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(C) |
|
conduct manufacturing and process development
activities, including manufacturing scale up and start up process
development, and analytical and quality assurance and control method
development, and activities related to the foregoing, for the Compound;
and |
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(D) |
|
conduct manufacturing and process development
activities, including manufacturing scale up and start up process
development, and analytical and quality assurance and control method
development, and activities related to the foregoing, for the Product
(excluding the Compound) for use in the Field in the Territory; and |
|
(ii) |
|
manufacture or have manufactured adequate supplies of the
Product for use in the Field in the Territory. |
|
(b) |
|
Strata shall use its Commercially Reasonable Efforts to resolve any shelf-life,
regulatory and other manufacturing issues respecting the Product. |
|
|
(c) |
|
Strata agrees that: (i) Micrologix and its Representatives shall be entitled to
contract directly with any Third Party with whom Strata has entered into such
definitive agreement(s) under Section 5.3(a) and (ii) such definitive agreement(s)
shall not contain any contractual provision that would prohibit Micrologix and its
Representatives from contracting directly or otherwise having access to any such Third
Party(ies) as part of either manufacturing any product for use outside the Territory or
any product for use inside the Territory, but outside the Field. Strata further agrees
that, if there is any Strata Intellectual Property developed by Strata or such Third
Party(ies) in the course of the activities described in Section 5.3(a), Micrologix
shall have a non-exclusive, royalty free license to use such Strata Intellectual
Property as part of either manufacturing any product for use outside the Territory or
any product for use inside the Territory, but outside the Field. Strata will use
Commercially Reasonable Efforts not to limit or restrict Stratas ability to grant
Micrologix such license as provided for herein without violating the terms of any
agreement or other arrangement with any such Third Party. The Parties acknowledge that
if Strata is required to pay material license fees or royalties to any such Third
Party(ies) in order to grant Micrologix such license to use the Strata Intellectual
Property, then Strata shall in a timely fashion offer to Micrologix in writing a
license or sublicense to such Strata Intellectual Property. Within a reasonable period
of time (but not to exceed [***] after receipt of Stratas offer),
Micrologix shall either accept the license or sublicense of same and pay to Strata the
amount of such material licensing fees or royalties, or advise Strata that Micrologix
does not wish to obtain such rights. |
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(d) |
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In the event that: |
|
(i) |
|
Strata, using Commercially Reasonable Efforts, fails to obtain
the ability to grant a license or sublicense as provided for in Section 5.3(c)
without violating the terms of any such agreement or other arrangement, then
Strata shall have no obligation to grant such license to Micrologix under
Section 5.3(c); or |
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*** |
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Certain information on this page has been
omitted and filed separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions. |
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(ii) |
|
Micrologix advises Strata that Micrologix does not wish to
obtain the rights referred to in Section 5.3(c), or if Micrologix fails to
notify Strata within a reasonable period of time (not to exceed [***] as noted
above) that it accepts such license or sublicense, then Strata shall have no
obligation to grant such license or sublicense to Micrologix under Section
5.3(c); or |
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|
(iii) |
|
Micrologix advises Strata that Micrologix does wish to obtain
the rights referred to in Section 5.3(c) within a reasonable period of time
(not to exceed [***] as noted above) and pays such licensing fees or royalties
then Strata shall be deemed to have granted such license or sublicense to
Micrologix under Section 5.3(c) without further formality. |
|
(e) |
|
If Strata manufactures the Product itself, rather than through Third Part(ies),
Strata will provide reasonable technical assistance, at Micrologixs cost and expense
to provide Micrologix and its Representatives the technology and Know How necessary to
permit Micrologix or its Representatives to manufacture or have manufactured any
product for use outside the Territory or any product for use inside the Territory, but
outside the Field. |
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|
(f) |
|
Strata and Micrologix shall share in the manufacturing development costs for
the Compound. Strata shall recover such costs from Micrologix as set forth in Section
4.7(k) for [***] of Stratas documented out-of-pocket costs of conducting the
activities set out in Section 5.3(a)(i)(C) up to a maximum of [***] (the Manufacturing
Development Costs). |
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|
(g) |
|
Transfer of Micrologix Compound and Product Inventory. |
|
(i) |
|
Subject to Section 5.3(g)(vi), at the request of Strata, such
request to be made within six (6) months after the Effective Date, Micrologix
shall make available to Strata at Micrologixs documented out-of-pocket cost,
all or any part of Micrologixs inventory of MBI 226 GMP Inventory as set
out in Exhibit C conforming to the specifications mutually agreed upon by the
Parties to the extent such inventory has not been used or dedicated for use by
Micrologix for other purposes. |
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|
(ii) |
|
Subject to Section 5.3(g)(vi), at the request of Strata, such
request to be made within six (6) months after the Effective Date, Micrologix
shall make available to Strata at [***] of
Micrologixs documented out-of-pocket cost, all or any part of Micrologixs
inventory of MBI 266 Reference Standard as set out in Exhibit C to the
extent such inventory has not been used or dedicated for use by Micrologix for
other purposes. |
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|
(iii) |
|
At the request(s) of Strata, such request(s) to be made within
twelve (12) months after the Effective Date, Micrologix shall make available to
Strata |
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*** |
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Certain information on this
page has been omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted portions. |
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at [***] of Micrologixs documented out-of-pocket cost, all or any part of
Micrologixs inventory of MBI 226 non-GMP Inventory, all for use as
contemplated hereunder, as set out in Exhibit C. |
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|
(iv) |
|
As soon as practical, and in any event before the expiry of
three (3) months from after the Effective Date, Micrologix shall transfer to
Strata at [***], all of Micrologixs inventory of MBI 266 1.0% Gel Inventory,
on an as is basis, all for use as contemplated hereunder, as set out in
Exhibit C. |
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|
(v) |
|
Pursuant to Micrologix making Compound available to Strata in
Section 5.3(g)(i), Micrologix shall cause its Representative to release or
re-release such Compound to Strata with all release documentation including all
certificates of analyses confirming the identity, strength, quality and purity
of the lots of Compound, certificates of compliance confirming that the same
lots of Compound were manufactured, tested, stored and supplied in compliance
with cGMPs and all Applicable Laws, each such certificate signed by an
authorized signatory of Micrologixs Representative, any deviation or
discrepancy reports pertaining to Compound relating to deviations that may
require reporting to the FDA, and all such other documentation and information
as is reasonably required by Strata. |
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(vi) |
|
With respect to the inventories that are made available by
Micrologix pursuant to Section 5.3(g)(i) and Section 5.3(g)(ii), until the
expiry of three (3) months from the Effective Date, Micrologix will not use or
dedicate for use any of such inventory. Thereafter, until the expiry of six (6)
months from the Effective Date, Micrologix will not use or dedicate for use any
of such inventory without first giving Strata ten (10) days prior written
notice of same. If Strata gives notice in writing within such period of its
intention to purchase such inventory, Micrologix shall sell such inventory to
Strata and same shall not be used or dedicated for use by Micrologix. If Strata
gives notice in writing within such period that it does not intend to purchase
such inventory, or if Strata fails to give notice within such period,
Micrologix may use or dedicate such inventory, and same shall not be sold to
Strata. |
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(h) |
|
Co-negotiation for Commercial Supply of the Compound. In the event that both
Parties require commercial supplies of the Compound and it is in the best interests of
each Party to obtain a single source of supply for both Parties, the Parties
acknowledge that they intend to approach jointly and co-negotiate with Third Party
suppliers for the manufacture of commercial supplies of the Compound. Any such
co-negotiation shall be under the oversight of the JDMC. The Parties acknowledge and
agree that any benefits from any economies of scale recognized from such co-negotiation
for commercial supplies of the Compound shall be shared by the Parties. Nothing in this
Section will oblige either Party to enter into any agreement with any Third Party, or
restrict either Partys ability to enter into any agreement with a Third Party without
the other Party. |
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*** |
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Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. |
- 23 -
Section 5.4 Patent Marking.
Each Party shall use Commercially Reasonable Efforts to ensure that where permissible under
Applicable Law(s) and provided there is adequate space available on any such packaging, such Party
shall identify by number any applicable Micrologix Patent Rights and applicable patent rights
within the Strata Intellectual Property with any reasonable patent marking notification(s).
ARTICLE 6
REGULATORY COMPLIANCE
Section 6.1 Ownership and Maintenance of Governmental Approvals.
|
(a) |
|
Strata will own all Marketing Authorizations for each country in the Territory
for use in the Field. Without limiting the generality of the foregoing, Strata shall
prepare and submit in its own name and at its expense the NDA with the FDA in the U.S.
and any other equivalent application with the Competent Authorities in other countries
in the Territory. Without acting as a limitation to any other provision under this
Agreement, Strata shall maintain a current and valid DMF on the Compound and the
Product, whether as an independent document or as part of the NDA, which it shall keep
up to date at all times during the Term and shall cause any Subcontractor to similarly
maintain the same or grant the Subcontractor reference rights to Stratas DMF for the
Product. |
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|
(b) |
|
Other than those required to be maintained by Micrologix under Section 6.7(b),
Strata shall secure and maintain in good standing, at its sole cost and expense, any
and all Governmental Approvals (including, Marketing Authorizations, licenses, permits
and consents, facility licenses and permits required by Applicable Laws or by the
applicable Competent Authorities) necessary and/or required for Strata to perform its
obligations under this Agreement and use Commercially Reasonable Efforts at its cost
and expense to secure and maintain any variations and renewals thereof. |
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|
(c) |
|
Excluding Marketing Authorizations and subject to Section 6.7(b), Micrologix
shall secure and maintain, at its sole cost and expense, any and all Governmental
Approvals (including, licenses, permits and consents, facility licenses and permits
required by Applicable Laws or by the applicable Competent Authorities) necessary
and/or required for Micrologix to perform its obligations under this Agreement and any
Development Subcontract and use Commercially Reasonable Efforts, at its cost and
expense to secure and maintain any variations or renewals thereof. |
Section 6.2 Rights of Reference.
|
(a) |
|
For the Products in the Field in the Territory, Micrologix shall grant and
hereby grants to Strata and its Representatives (subject to the terms of Section 3.5),
a free-of-charge right to reference and use and have full access to all Governmental
Approvals and all other regulatory documents owned or Controlled by Micrologix to the
extent relating to the Compound, the Product, and MBI 594AN, including any IND, any NDA
and any DMF (whether as an independent document or as |
- 24 -
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part of any NDA, and all chemistry, manufacturing and controls information), and any
supplements, amendments or updates to the foregoing. |
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|
(b) |
|
For use outside the Territory, or for any Product for use inside the Territory
but outside the Field, Strata shall grant and hereby grants to Micrologix and its
Representatives a free-of-charge right to reference and use and have full access to all
Governmental Approvals and all regulatory documents owned or Controlled by Strata to
the extent relating to the Compound or the Product, including any NDA and DMF (whether
as an independent document or as part of any NDA, and all chemistry, manufacturing and
controls information), and any supplements, amendments or updates to the foregoing. |
|
|
(c) |
|
For the Products in the Field in the Territory, Micrologix shall make
Commercially Reasonable Efforts to grant or have granted to Strata (subject to the
terms of Section 3.5), a free-of-charge right of reference and use and have full access
to all Governmental Approvals and all other regulatory documents owned or Controlled by
Fujisawa Healthcare, Inc. or by any Third Party licensee of Micrologix to the extent
related to the Compound, the Product, and MBI 594AN, including any IND, any NDA and any
DMF (whether as an independent document or as part of any NDA, and all chemistry,
manufacturing and controls information), and any supplements, amendments or updates to
the foregoing. |
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|
(d) |
|
For use outside the Territory, or for any Product for use inside the Territory
but outside the Field, Strata shall make Commercially Reasonable Efforts to grant or
have granted to Micrologix and its Representatives a free-of-charge right of reference
and use and have full access to all Governmental Approvals and all other regulatory
documents owned or Controlled by any Third Party licensee of Strata to the extent
related to the Compound or the Product, including any IND, any NDA and any DMF (whether
as an independent document or as part of any NDA, and all chemistry, manufacturing and
controls information), and any supplements, amendments or updates to the foregoing.
Such rights of reference, use and access shall survive termination of this Agreement. |
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|
(e) |
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For avoidance of doubt, no transfer by a Party of Control in respect of any
Governmental Approvals or other regulatory documents referred to in this Section shall
limit the rights of the other Party to the most current version of same up to the time
of such transfer. |
Section 6.3 Adverse Drug Event Reporting and Post Marketing Surveillance.
|
(a) |
|
Each Party, on behalf of itself, its Affiliates and any permitted sublicensees,
shall advise the other Party, by telephone or facsimile, promptly but in no event later
than seventy-two (72) hours or such shorter time period as may be required by a
Competent Authority after a Party, its Affiliates and/or sublicensees becomes aware of
any serious adverse drug event (as defined in 21 CFR Section 312.32(a) or its
equivalent under Applicable Law(s) as the same may be amended, supplemented or replaced
from time to time) (a SADE) involving the Product or the Compound. Such advising
Party shall provide the other Party with a written report delivered by confirmed
facsimile of any SADE, stating the full |
- 25 -
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|
facts known to such Party, including customer name, address, telephone number,
batch, lot and serial numbers, and other information as required by Applicable Laws.
After receipt by the Parties of an Approval Letter in any country, Strata shall
have full responsibility in such country for: (i) monitoring such SADEs; (ii) data
collection activities that occur between Strata and the patient or medical
professional, as appropriate, including any follow-up inquiries which Strata deems
necessary or appropriate; and (iii) meeting the requirements of the Competent
Authorities, including the submission of SADE individual reports and periodic
reports as necessary. As the holder of the Marketing Authorizations, any reporting
(and follow-up thereto) to the Competent Authorities relating to the Compound and
the Product in the Field in the Territory shall remain the responsibility of Strata. |
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|
(b) |
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In the event either Party requires information regarding SADEs with respect to
reports required to be filed by it in order to comply with Applicable Laws, including
obligations to report SADEs to the Competent Authorities, each Party agrees to provide
such information to the other in sufficient time to enable each Party to report such
SADEs to the Competent Authorities in accordance with Applicable Laws. |
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|
(c) |
|
If the report of an SADE causes a Competent Authority to request a Labelling
revision and/or any other corrective action, or if Strata believes it is necessary to
have a Labelling revision or conduct a post marketing surveillance program as a result
of an SADE, then Strata shall determine all of the material terms and conditions of
such Labelling revision, corrective action or post marketing surveillance program in
consultation with the applicable Competent Authority. Upon Stratas request, Micrologix
will cooperate with Strata with respect to any of the foregoing. The costs of such
Labelling revision, corrective action or post marketing surveillance program shall be
borne one hundred percent (100%) by Strata. Notwithstanding the foregoing, however,
the Parties agree that if any such Labelling revision or corrective action or post
marketing surveillance program is due to the negligence or willful misconduct in the
conduct by Micrologix and/or its Representatives of the pre-clinical and clinical
research and development activities in connection with the Product prior to and after
the Effective Date, then, in such event, the costs of any such Labelling revision,
corrective action, or post marketing surveillance program, as the case may be, shall be
borne one hundred percent (100%) by Micrologix. Subject to Section 5.3 and Section 6.2,
the Parties agree that Strata shall own the results and underlying data from any Phase
IV Study. |
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|
(d) |
|
Within thirty (30) days of the filing of each report with the FDA on drug
related adverse events associated with the Compound as may be required under Applicable
Laws, each Party will provide to the other Party particulars of such adverse events. |
- 26 -
Section 6.4
Post Marketing Commitments. If the FDA or other Competent Authority requires a Post Marketing
Commitment for the Product, then Strata shall use Commercially Reasonable Efforts to implement such
Post Marketing Commitment at Stratas expense.
Section 6.5 Assistance.
Each Party shall provide reasonable assistance to the other at the others request, in connection
with their obligations pursuant to this Article 6, the requesting Party shall reimburse all of the
other Partys reasonable documented out-of-pocket costs of such assistance, subject to the
allocation of costs determined pursuant to this Article 6.
Section 6.6 Compliance.
Subject to the other terms and conditions of this Agreement, the Parties agree to the following
general compliance provisions:
|
(a) |
|
Strata shall be responsible for compliance in all material respects with
Applicable Laws and the Governmental Approvals relating to its activities under the
Development, the making, manufacturing, marketing, advertising, promoting, selling,
distributing, and commercializing the Product, including the maintenance of the
Marketing Authorizations and other requirements of a Competent Authority applicable
thereto, obtaining and holding all necessary permits and any other requirements
relating to its activities under the Development, the making, manufacture, import,
export, storage, sale and distribution of the Product. Any and all Labelling, packaging
and artwork and any and all proposed change to any such Labelling, packaging and/or
artwork shall be determined by Strata, which shall have the sole right and
decision-making authority with respect thereto. Strata shall have the sole right and
decision making authority with respect to any and all advertising, sales and marketing
materials (collectively the Promotional Material(s)) and shall be responsible for all
interactions with the Competent Authorities in connection with such Promotional
Materials. Strata shall submit any required changes to the Labelling, packaging and/or
artwork to the Competent Authorities in a timely fashion at Stratas expense. |
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|
(b) |
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Micrologix shall be responsible for compliance in all material respects with
Applicable Laws and Governmental Approvals relating to Development to be conducted by
Micrologix pursuant to any Development Subcontract. Strata shall be responsible for
compliance in all material respects with Applicable Laws and Governmental Approvals
relating to the Development to be conducted by Strata. Each Party shall cause their
respective Subcontractors to comply with this Section 6.6(b). |
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|
(c) |
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As provided in this Agreement with regard to each Partys obligations
hereunder, Strata and Micrologix (as the case may be) shall each comply in all material
respects with all Applicable Laws within the Territory, including the provision of
information by Strata and Micrologix to each other necessary for Micrologix and Strata,
as the case may be, to comply with any applicable reporting
requirements and Governmental Approvals required; and maintaining any and all licenses, permits
and consents necessary and/or required for complying with such Partys |
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obligations under this Agreement. During the Term, each Party agrees to execute and deliver to
the other Party any certifications that may be required by Applicable Laws,
including any debarment certification. |
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|
(d) |
|
Each Party shall promptly notify the other Party of any written or oral notices
received from, or inspections by, the FDA, or other Competent Authority, which
materially impact the Product, the Development and/or the Marketing Authorizations, and
shall promptly inform the other Party of any responses to such written notices or
inspections and the resolution of any issue raised by the FDA or other Competent
Authority. |
Section 6.7 General Regulatory Matters.
|
(a) |
|
Subject to Micrologixs obligations under Section 6.7(b) and Applicable Laws
during the period in which it is the IND holder, Strata shall have all regulatory
responsibility with respect to and relative to the Product and has the sole right and
decision making authority with respect to all such regulatory matters, including
without limitation reaching agreement on all regulatory matters with the FDA and/or any
other Competent Authority. |
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|
(b) |
|
The Parties acknowledge that Micrologix, as of the Effective Date, owns and
holds certain Governmental Approvals in connection with the research and development of
the Product, including without limitation the IND listed in Exhibit D. Micrologix
shall be responsible for the filing and maintenance in good standing of all such
Governmental Approvals, with costs and expenses associated therewith to be included in
Reimbursable Costs. During the time that Micrologix is the holder of the IND,
Micrologix shall comply with all Applicable Laws applicable to the holder of the IND,
including, without limitation, process, track and report all IND Safety Reports (as
defined by the FDA). Upon Stratas request, such request to be made as soon as
reasonably possible, Micrologix shall transfer to Strata, without any additional
consideration, those Governmental Approvals (including without limitation the IND)
requested by Strata. |
|
|
(c) |
|
During the time that Micrologix is the holder of such Governmental Approvals,
Strata shall be entitled to attend any and all meetings and participate in telephone
calls with the Competent Authorities, including without limitation any meeting
preparation, meeting co-ordination, preparation of minutes and pre-NDA meeting with the
FDA. During such time as Micrologix is the holder of such Governmental Approvals,
subject to Micrologixs obligations under Section 6.7(b) and Applicable Laws during the
period of time in which it is the IND holder: |
|
(i) |
|
Strata has the sole right and decision making authority for all
regulatory matters with respect to or relative to the Product. |
|
|
(ii) |
|
While it is still the holder of the IND in the United States,
Micrologix shall give Strata no less than three (3) business days notice
following the
scheduling of any such meeting and/or telephone call with the FDA and/or
other Competent Authority (or such shorter period of time, if the meeting |
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|
|
and/or telephone call is scheduled within such three (3) business days and
in such event such notice shall be in sufficient time so that Strata shall
be able to attend and/or participate in such meeting and/or telephone call). |
|
|
(iii) |
|
Micrologix shall provide Strata copies of any materials
relating to any regulatory matter prior to their presentation to the FDA or
other Competent Authority during the Development, so that Strata shall have an
opportunity to review and comment thereon. |
|
|
(iv) |
|
The JDMC shall approve all such materials prior to
presentation. |
ARTICLE 7
PATENTS
Section 7.1 Maintenance of Patents or Marks.
|
(a) |
|
Micrologix shall, at Micrologixs expense and on a timely basis in each country
in the Territory: (i) use Commercially Reasonable Efforts to obtain Micrologix Patent
Rights in all countries in the Territory; (ii) pay all fees and file all documentation
and other materials required by any Competent Authority in each applicable country to
maintain and/or renew Micrologix Patent Rights; and (iii) shall use Commercially
Reasonable Efforts to otherwise maintain the Micrologix Patent Rights in all countries
in which Strata has the right and elects to exercise any or all of its rights hereunder
related to the Product; provided however, that upon written request by Micrologix,
Strata shall, at no cost or expense to Strata, provide such reasonable assistance as
may be necessary to enable Micrologix to comply with the administrative formalities
necessary to register or maintain any Micrologix Patent Rights. |
|
|
(b) |
|
In the event Micrologix intends to abandon the prosecution or maintenance of
all or any part of Micrologix Patent Rights claiming the Product or the Compound (which
it shall only be permitted to do in the event it has a bona fide belief that obtaining
or maintaining rights are not possible using Commercially Reasonable Efforts),
Micrologix shall notify Strata no less than [***] (or such shorter period
of time if there is a shorter period of time required by a Competent Authority) prior
to the date it intends to abandon the prosecution or maintenance, as applicable, of any
such Micrologix Patent Rights. |
|
|
(c) |
|
In the event Micrologix notifies Strata within the period provided in Section
7.1(b), Strata has the right but not the obligation to assume such prosecution and/or
maintenance and shall notify Micrologix if, and when, Strata wishes to assume the
responsibility for prosecuting and maintaining such Micrologix Patent Rights, as
applicable, whereupon Micrologix shall permit Strata, at Stratas expense, to take over such prosecution and/or maintenance, as applicable, and
Micrologix shall cooperate in any such transfer of responsibilities and rights as |
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*** |
|
Certain information on this
page has been omitted and filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions. |
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|
necessary or prudent for the benefit of Strata to prosecute and/or maintain the
foregoing rights. Thereafter, Strata shall have the right but not the obligation to
prosecute or maintain any such Micrologix Patent Right, as the case may be, at its
expense; provided that Strata keep Micrologix reasonably informed of the progress of
any such prosecution. Micrologix shall have the right to review all such pending
applications and other proceedings and make recommendations to Strata concerning
them and their conduct, but the final decision with respect thereto shall rest with
Strata, provided that Strata acts reasonably. |
|
|
(d) |
|
Each Party shall make available to the other Party or its authorized attorneys,
agents or representatives, its employees, agents or consultants necessary or
appropriate to enable the other Party to file, prosecute and maintain its patent
applications covering the Product for a reasonable period of time sufficient for the
other Party to obtain the assistance it needs from such personnel. Micrologix shall
provide Strata with copies of all material correspondence, documentation and/or
submissions provided to, and received from, U.S. PTO and comparable Competent
Authorities that may materially affect Stratas rights under this Agreement. |
Section 7.2 Cooperation and Procedures Relative to Actions Brought Under Section 7.3 and
Section 7.4.
|
(a) |
|
The Parties shall reasonably cooperate with each other with respect to any
litigation, action, suit, claim or other proceeding under Section 7.3 or Section 7.4
(an Article 7 Proceeding). Without limiting the generality of the foregoing, the
Non-Litigating Party (as hereinafter defined) agrees to cooperate reasonably in any
Article 7 Proceeding, as may be requested by or necessary to the Litigating Party (as
hereinafter defined) including, joining any Article 7 Proceeding as a party, executing
all necessary documents, supplying essential documentary evidence and making available
essential witnesses then in its employment or engaged as a consultant. |
|
|
(b) |
|
The Party prosecuting any Article 7 Proceeding under Section 7.3 or controlling
the defence of any Article 7 Proceeding under Section 7.4 shall be referred to in this
context, as the Litigating Party). The other Party in this context shall be referred
to as the Non-Litigating Party. Except as provided in Section 7.2(e) or Section
7.4(b), the Litigating Party shall have the right to control any Article 7 Proceeding.
In addition, the Litigating Party shall have the right to control the settlement or
compromise of any Article 7 Proceeding and may so settle or compromise without the
Non-Litigating Partys prior written consent, provided that the terms of any such
settlement or compromise: (i) does not materially impair the Non-Litigating Partys
rights hereunder (including each Partys rights in the Micrologix Technology or the
validity or enforceability thereof); (ii) would not require the Non-Litigating Party to
be subject to an injunction or to make a monetary payment or would restrict the claims
in or admit any invalidity or unenforceability of the Micrologix Patent Rights; (iii)
provide for the unconditional release of the Non-Litigating Party; and (iv) expressly
state that
neither the fact of settlement, nor the settlement agreement shall constitute or be
construed or interpreted, as, an admission by the Non-Litigating Party of any
|
- 30 -
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|
|
issue, fact, allegation or any other aspect of the claim being settled. In all other cases,
the Litigating Party may not settle any Article 7 Proceeding without the prior
written consent of the Non-Litigating Party, which consent shall not be unreasonably
withheld or delayed. The Non-Litigating Party may not pay or voluntarily permit the
determination of any liability which is subject to any such Article 7 Proceeding
while the Litigating Party is negotiating the settlement thereof or contesting the
matter, except with the prior written consent of the Non-Litigating Party, which
consent shall not be unreasonably withheld or delayed. |
|
|
(c) |
|
Upon learning of any actual, contemplated or threatened Article 7 Proceeding
involving any of the Micrologix Patent Rights that claims the Product or the Compound,
each Party shall promptly notify the other Party of such and shall, upon request,
provide to the other Party an assessment of the status of any such proceeding. |
|
|
(d) |
|
To the extent any cooperation provided by Micrologix hereunder requires
Micrologix to disclose information that would be deemed Micrologix Confidential
Information (other than any information which shall become the property and right of
Strata under Section 3.4), Strata shall treat such information in accordance with
Section 8.1. |
|
|
(e) |
|
The Parties acknowledge and agree that circumstances may arise in which a Party
hereto may desire to protect its interests by joining or intervening in litigation or
other proceeding involving the Micrologix Patent Rights, which proceeding has neither
been brought by that Party nor levied against that Party. Accordingly, neither Party
shall object or oppose any effort by the other Party, at its own expense, to join or
intervene in such litigation or other proceedings involving the Micrologix patent
Rights. In the event the Non-Litigating Party seeks to join or intervene in any
litigation or other proceeding where such joining or intervention is neither requested
by nor necessary to the Litigating Party, then (i) the Litigating Partys right to
control the litigation under Section 7.3 or Section 7.4 (as the case may be) shall not
be extended to the conduct of the Non-Litigating Party after intervention or joining;
and (ii) notwithstanding anything to the contrary contained in Section 7.3 and Section
7.4, the Non-Litigating Party shall bear its own costs associated with its involvement
in any such litigation or other proceeding after intervening or joining. |
Section 7.3 Prosecution of Infringement.
|
(a) |
|
During the Term, each Party shall give prompt notice to the other of any Third
Party act which may infringe one or more claims of the Micrologix Patent Rights that
claims the Product or the Compound. |
|
|
(b) |
|
Infringement within the Field. |
|
(i) |
|
Strata may (but shall have no obligation to do so) prosecute
any Article 7 Proceeding under this Section 7.3 against such Third Party
infringement of
any claims of Micrologix Patent Rights where such infringement primarily
relates to such Third Party activities in the Field in the Territory in |
- 31 -
|
|
|
accordance with the terms of Section 7.2 and this Section 7.3 and in such
event Strata shall become the Litigating Party. |
|
|
(ii) |
|
In the event Strata fails to institute any Article 7 Proceeding
and terminate any Third Party infringement of the claims of Micrologix Patent
Rights that the claim the Product or the Compound within thirty (30) days of
the later of: (i) receiving notification from Micrologix of any such
infringement or (ii) sending notice to Micrologix of such action, Micrologix
may take (but shall have no obligation to do so) such action as it deems
appropriate, including the filing of a lawsuit against such Third Party. In
such event Micrologix shall promptly notify Strata of any such Article 7
Proceeding and shall become the Litigating Party. |
|
(c) |
|
Infringement outside the Field. |
|
(i) |
|
Micrologix may (but shall have no obligation to do so)
prosecute any Article 7 Proceeding under this Section 7.3 against such Third
Party infringement of any claims of Micrologix Patent Rights where such
infringement does not primarily relate to such Third Party activities in the
Field in the Territory in accordance with the terms of Section 7.2 and this
Section 7.3 and in such event Micrologix shall become the Litigating Party. |
|
|
(ii) |
|
In the event Micrologix fails to institute any Article 7
Proceeding and terminate any Third Party infringement of the claims of
Micrologix Patent Rights that claim the Product or the Compound within thirty
(30) days of the later of: (i) receiving notification from Strata of any such
infringement or (ii) sending notice to Strata of such action, Strata may take
(but shall have no obligation to do so) such action as it deems appropriate,
including the filing of a lawsuit against such Third Party. In such event
Strata shall promptly notify Micrologix of any such Article 7 Proceeding and
shall become the Litigating Party. |
|
(d) |
|
Micrologix and Strata shall share all Costs in connection with any Article 7
Proceeding under this Section 7.3, on the basis of [***]% paid by the
Litigating Party and [***]% paid by the Non-Litigating Party, provided that Micrologix
and Strata shall first recover their respective actual documented out-of-pocket Costs,
or equitable proportions thereof, associated with any Article 7 Proceeding under this
Section 7.3, or settlement thereof from any recovery made by the Litigating Party. Any
excess amount recovered by the Litigating Party shall be shared between Strata and
Micrologix on the basis of [***]% to the Litigating Party and [***]% to the
Non-Litigating Party. In the event there is no recovery from a Third Party or if any
such recovery does not cover all of the Costs of the Litigating and/or Non-Litigating Party, as the case may be, then the Parties agree to share any
such unrecovered Costs on the basis of [***]% to the Litigating Party and |
|
|
|
*** |
|
Certain information on
this page has been omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted portions.
|
- 32 -
[***]% to the Non-Litigating Party. If Strata is the Litigating Party, Strata shall recover
such amounts by [***].
Section 7.4 Infringement Claimed by Third Parties.
|
(a) |
|
In the event a Third Party commences, or threatens to commence, any Article 7
Proceeding against a Party to this Agreement alleging infringement of a Third Partys
intellectual property rights by the making, manufacture, use, sale, offer for sale,
export and/or import by Strata, its Affiliates or sublicensees of the Product, the
Party against whom such proceeding is threatened or commenced shall give prompt notice
to the other Party (Infringement Notice). |
|
|
(b) |
|
Strata shall control the defense and settlement of any such Article 7
Proceeding under this Section 7.4 in accordance with the terms of Section 7.2 and this
Section 7.4 and shall become the Litigating Party; provided that, in the event that the
validity and enforceability of the claims of Micrologix Patent Rights are in issue in
any such Article 7 Proceeding under this Section 7.4, Micrologix may (but shall have no
obligation to do so) control the defense and settlement of any such Article 7
Proceeding under this Section 7.4 in accordance with the terms of Section 7.2 and this
Section 7.4 solely to the extent that such defense and settlement relates to validity
and enforceability of the claims of the Micrologix Patent Rights. |
|
|
(c) |
|
Micrologix shall be liable for its own Costs in connection with any Article 7
Proceeding under this Section 7.4. |
Section 7.5 Co-operation with Other Licensees.
Strata acknowledges that Micrologix may grant to licensees rights in the Micrologix Technology in
the Territory in respect of fields outside the Field, and may grant to other licensees rights
outside the Territory. If Micrologix grants such rights to other licensees, in the event of any
litigation in respect of:
|
(a) |
|
fields outside of the Field that may reasonably affect Stratas use of the
Micrologix Technology in the Field or the use or sale of Products by Strata; or |
|
|
(b) |
|
the Field that may reasonably affect Micrologix or one or more of Micrologixs
licensees use of the Micrologix Technology outside the Field or the making,
manufacture, use or sale of products outside the Field by Micrologix or one or more
other such licensee(s); |
then Micrologix, Strata and such other licensee(s) will use good faith efforts to determine jointly
the course of action, if any, necessary or appropriate to prosecute or defend the litigation.
Micrologix will use Commercially Reasonable Efforts to include in its other license agreements,
provisions that allow the participation of Strata as contemplated herein. If Micrologix is unable
to include in any such other license agreement such provisions, then with respect to the licensee
under such other license agreement, Strata shall not be bound by the terms and conditions of this
Section 7.5.
|
|
|
*** |
|
Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. |
- 33 -
ARTICLE 8
CONFIDENTIALITY
Section 8.1 Confidentiality.
|
(a) |
|
During the Term and for a period of five (5) years thereafter, each Party shall
maintain all Confidential Information of the other Party as confidential and shall not
disclose any such Confidential Information to any Third Party or use any such
Confidential Information for any purpose, except (i) as expressly authorized by this
Agreement or with the prior written consent of the other Party, which consent shall not
be unreasonably withheld or delayed, (ii) as required by Applicable Laws or court order
of a court of competent jurisdiction (provided that the disclosing Party shall first
notify the other Party to afford the other Party, for a period of ten (10) business
days or such lesser period as may be provided by Applicable Law, an opportunity to seek
whatever protective relief it deems appropriate, and the disclosing Party shall use
Commercially Reasonable Efforts to obtain confidential treatment of any such
information required to be disclosed), (iii) to its Representatives to accomplish the
purposes of this Agreement, so long as such Representatives are under an obligation of
confidentiality no less stringent than as set forth herein, (iv) to bona fide potential
investors and their respective advisors during financing or an acquisition, merger or
other like reorganization, so long as such investors and advisors are under an
obligation of confidentiality no less stringent than as set forth herein, except as
otherwise provided herein, and (v) as is required to exercise its rights and perform
its obligations under this Agreement, so long as the recipients of such information are
under an obligation of confidentiality no less stringent than as set forth herein.
Each Party may use such Confidential Information only to the extent required to
accomplish the purposes of this Agreement. |
|
|
(b) |
|
Notwithstanding any provision to the contrary herein or in any confidentiality
or nondisclosure agreement between the Parties, from time to time, either Party may
disclose to bona fide potential investors and their respective advisors during
financing or an acquisition, merger or other like reorganization the following
Confidential Information: |
|
(i) |
|
[***]; |
|
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(ii) |
|
[***]; |
|
|
(iii) |
|
[***]; |
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|
(iv) |
|
[***]; |
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*** |
|
Certain information on this page has been
omitted and filed separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions. |
- 34 -
|
(v) |
|
[***]; |
|
|
(vi) |
|
[***]; |
|
|
(vii) |
|
[***]; |
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|
(viii) |
|
this Agreement, in the form as redacted and filed with the SEC and available
for disclosure, as may be modified by SEC filings, press releases or other
public disclosures, or if not filed with the SEC, as executed with the
financial particulars in Article 4 redacted to the extent not publicly
disclosed; and |
|
|
(ix) |
|
such additional information and materials as may be agreed-to
by the Parties; |
|
|
|
all without obtaining written agreement of confidence and non-use from the
recipient. The disclosing Party remains liable to the other Party for any use or
disclosure made of such information by such investors and advisors, as if such
investors and advisors were bound by the terms of this Article 8. No information
disclosed pursuant to this Section 8.1(b) that becomes generally known or available,
directly or indirectly as a result of a disclosure permitted by this Section, shall
be excluded from the definition of Confidential Information pursuant to the
exclusion set out in Section 1.14(a). |
|
|
(c) |
|
Each Party shall use at least the same standard of care as it uses to protect
its own Confidential Information to ensure that it and its Affiliates and
Representatives do not disclose or make any unauthorized use of the other Partys
Confidential Information. Each Party shall be responsible for any breach of this
Agreement by its Representatives. Each Party shall promptly notify the other Party
upon discovery of any unauthorized use or disclosure of the other Partys Confidential
Information. |
|
|
(d) |
|
Micrologix acknowledges and agrees that the Micrologix Know-How licensed to
Strata has value to Strata in being maintained as confidential. Therefore, Micrologix
shall keep the Micrologix Know-How confidential as if it were Confidential Information
of Strata as set forth in this Article 8. |
Section 8.2 Publicity Review.
The Parties agree that the public announcement of the execution of this Agreement shall be in the
form of a press release to be mutually agreed upon by the Parties on or before the Effective Date
and thereafter each Party shall be entitled to make or publish any public statement consistent with
the contents thereof. Thereafter, except as allowed in the preceding sentence, the Parties will
jointly discuss and agree, based on the principles of this Section 8.2, on any statement to the
public regarding this Agreement or any aspect of this Agreement, and the results of clinical
studies conducted as part of the Development, subject in each case to disclosure otherwise required
by Applicable Laws. When a Party elects to make any such statement or disclosure required under
Applicable Law, it will give the other Party at least five (5) business days notice to review and
comment on such statement, unless the applicable Competent Authority requires
disclosure such that a Party is prohibited by Applicable Law to provide such advance review by the
other Party (in which case it shall be disclosed according to such requirement and notice will
|
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|
*** |
|
Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions. |
- 35 -
be
provided as soon as possible). The terms of this Agreement may also be disclosed to Competent
Authorities, including the United States Securities and Exchange Commission or any other exchange
or securities commission having authority over a Party, where required by Applicable Law, with
redaction of financial information not otherwise required to be disclosed under Applicable Laws in
which event the disclosing Party shall provide in advance of submission to the other Party for
review and comment a copy of such redactions made to this Agreement.
ARTICLE 9
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 9.1 Corporate Power.
Each Party hereby represents, warrants and covenants that such Party is, and will remain through
the Term, duly organized and validly existing under the laws of the state of its incorporation and
has full corporate power and authority to enter into this Agreement and to carry out the provisions
hereof.
Section 9.2 Due Authorization.
Each Party hereby represents and warrants that such Party is duly authorized to execute and deliver
this Agreement and covenants to perform its obligations hereunder.
Section 9.3 Binding Obligation/No Conflict.
Each Party hereby represents, warrants and covenants that: (i) this Agreement is a legal and valid
obligation binding upon it and is enforceable in accordance with its terms; and (ii) the execution,
delivery and performance of this Agreement by such Party does not, and will not during the Term,
conflict with any agreement, instrument or understanding, oral or written, to which it is a party
or by which it may be bound, nor to the best knowledge of each Party as of the Effective Date,
violate any Applicable Laws.
Section 9.4 Ownership of Micrologix Technology.
Micrologix represents, warrants, and covenants, as the case may be, that:
|
(a) |
|
as of the Effective Date and during the Term, it is and shall remain the sole
owner of all right, title and interest in and to the Micrologix Technology, subject to
Micrologixs ability to license and assign as permitted hereunder; and, to the best of
the knowledge of Micrologix as of the Effective Date, no Representative of Micrologix
or any Third Party has any rights to the Micrologix Technology; |
|
|
(b) |
|
as of the Effective Date, it has not granted and will not grant after the
Effective Date any license under the Micrologix Technology for any product in the
Territory for use in the Field to any Third Party, and is under no obligation to grant
any such license, except to Strata, and there are, and will be, no rights granted to
any Third Party and/or no agreements, either written or oral, regarding
either the Micrologix Technology which are inconsistent or in conflict with this
Agreement; |
- 36 -
|
(c) |
|
as of the Effective Date, there are no outstanding liens, judgments,
injunctions, decrees, rulings, security interests, or other encumbrances on the
Micrologix Technology, and through the Term, there shall be no liens, judgments,
injunctions, decrees, rulings, security interests, or any other encumbrances (other
than security interests filed by Micrologixs lender(s) and licensee(s) in the ordinary
course of business) on the Micrologix Technology which could materially affect Stratas
interests in the Micrologix Technology; |
|
|
(d) |
|
as of the Effective Date and during the Term, it has taken and will take
Commercially Reasonable Efforts to ensure that all Micrologix Know-How has been and
will continue to be fully protected and maintained in accordance with appropriate
procedures for its protection; |
|
|
(e) |
|
(i) as of the Effective Date, Micrologix has made available to Strata all
material information in its possession or Control relating to the Product in the Field;
and (ii) as of the Effective Date, to the best of Micrologixs knowledge, all art that
Micrologix believes to be material to the patentability of any claims within the
Micrologix Patent Rights claiming the Product or the Compound has been cited by
Micrologix to the U.S. PTO for U.S. patent rights or to the comparable Competent
Authority in such other jurisdictions in the Territory that require disclosure of
material information in possession or Control of the patentee; and |
|
|
(f) |
|
Exhibit B is a true, complete and current listing of the Micrologix Patents
as of the Effective Date. |
Section 9.5 Patent and Other Intellectual Property Rights Proceedings.
As of the Effective Date, Micrologix represents and warrants that:
|
(a) |
|
to the best of its knowledge, no patent within the Micrologix Patent Rights, or
patent application with regard to the Micrologix Patent Rights, as the case may be, is
the subject of any pending interference, opposition, cancellation or other protest
proceeding, or judicial proceeding; |
|
|
(b) |
|
to the best of its knowledge, the Micrologix Technology and any process,
procedure or method used to manufacture the Compound and the Product do not infringe,
interfere with, or misappropriate the intellectual property rights of any Third Party; |
|
|
(c) |
|
to the best of its knowledge, the practice of the Micrologix Patent Rights and
any process, procedure or method used to manufacture the Compound and the Product in
the Territory do not and will not infringe, interfere with, or misappropriate any
intellectual property rights of any Third Party; |
|
|
(d) |
|
there has been no lapse of any claims within the Micrologix Patents in the
Territory; |
|
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(e) |
|
Micrologix has not received any: (i) notices or communications that the
development, making, manufacture, use, marketing, advertising, promoting,
|
- 37 -
|
|
|
distributing,
offer for sale, selling, importation or exportation of the Compound or the Product or
use of the Micrologix Technology would infringe or misappropriate any intellectual
property rights of any Third Party; or (ii) allegation regarding the legality,
enforceability, or validity of the Micrologix Technology, other than those made by the
U.S. PTO or other comparable Competent Authorities in other countries in the
prosecution of the Micrologix Patent Rights and previously disclosed to Strata; |
|
|
(f) |
|
Micrologix is not aware of any Third Party having infringed or misappropriated
the Micrologix Technology and has not sent any notices or communications to any Third
Party that the activities of such Third Party infringe or misappropriate the Micrologix
Technology. |
Section 9.6 Micrologixs Additional Warranties.
As of the Effective Date, Micrologix represents and warrants that:
|
(a) |
|
Exhibit D is a true, complete and current listing of the regulatory filings
relating to Product or Compound owned or Controlled by Micrologix as of the Effective
Date, including, all INDs; and |
|
|
(b) |
|
Micrologix has not deliberately withheld any material information or data known
to Micrologix relating to: |
|
(i) |
|
the results of preclinical and clinical studies of the Compound
and the Product conducted by or on behalf of Micrologix; |
|
|
(ii) |
|
Micrologixs ongoing clinical development activities in the
United States for the Product, including the status of all such studies; and |
|
|
(iii) |
|
the manufacturing, testing and release of the Compound and
Product, including CMC information therefor. |
Section 9.7 Stratas Additional Warranties.
As of the Effective Date, Strata represents and warrants that upon completion of transactions
related to this Agreement, which transactions are conditional only upon the execution and delivery
of this Agreement, Strata shall be entitled to receive proceeds of a financing of not less than $5
million.
Section 9.8 Pre-Clinical and Clinical Studies Prior to Effective Date.
Micrologix represents and warrants that all of the pre-clinical and clinical trials related to the
Product prior to the Effective Date have been conducted in accordance with Applicable Laws.
Section 9.9 Debarment.
During the Term, neither of the Parties shall knowingly utilize any employee, representative,
agent, assistant or associate who has been debarred by the FDA pursuant to 21 U.S.C. Section 335a
(a) or (b) of the Act in connection with any of the activities to be carried out under this
- 38 -
Agreement. Micrologix further represents and warrants that, as of the Effective Date, to the best
of its knowledge, none of the entities, laboratories or clinical sites participating in the
clinical studies prior to the Effective Date had been debarred at the relevant time.
Section 9.10 Limitation on Warranties.
|
(a) |
|
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT: |
|
(i) |
|
NOTHING HEREIN SHALL BE CONSTRUED AS A REPRESENTATION OR
WARRANTY BY MICROLOGIX TO STRATA THAT THE MICROLOGIX TECHNOLOGY IS NOT
INFRINGED BY ANY THIRD PARTY, OR THAT THE PRACTICE OF SUCH RIGHTS DOES NOT
INFRINGE ANY PUBLISHED INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY. |
|
|
(ii) |
|
NEITHER PARTY MAKES ANY WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED, WITH
RESPECT TO THE PRODUCT. |
|
(b) |
|
NEITHER PARTY MAKES ANY OTHER WARRANTIES HEREUNDER, EXPRESS OR IMPLIED,
INCLUDING WARRANTIES CONCERNING THE SUCCESS OF THE DEVELOPMENT PROGRAM, THE SUCCESS OF
THE MARKETING AND COMMERCIALIZATION OF THE PRODUCT OR THE COMMERCIAL UTILITY OF THE
PRODUCT. |
ARTICLE 10
INDEMNIFICATION AND INSURANCE
Section 10.1 Strata Indemnified by Micrologix.
|
(a) |
|
Micrologix shall indemnify, defend and hold Strata, and its Representatives (in
respect of each Party, its Indemnitees), harmless from and against any Third Party
liabilities, obligations, damages, losses, claims, encumbrances, costs or expenses
(including attorneys fees) (any or all of the foregoing herein referred to as Loss)
insofar as a Loss or actions in respect thereof, occurred subsequent to the Effective
Date (except as provided in Section 10.1(a)(iii) below), and arises out of or is based
upon: |
|
(i) |
|
any breach by Micrologix of its representations, warranties,
covenants, obligations or agreements under this Agreement; or |
|
|
(ii) |
|
the negligence or willful misconduct of Micrologix and/or any
of Micrologixs Indemnitees, including violation of Applicable Laws in their
performance under this Agreement; or |
|
|
(iii) |
|
Micrologixs (or any Subcontractors) conduct of the
pre-clinical and clinical research and development activities in connection
with the Product prior to and after the Effective Date; provided however,
Micrologixs duty to indemnify under this Section 10.1(a)(iii) shall not |
- 39 -
|
|
|
include product liability claims unless Micrologixs liability for same arises
pursuant to Section 10.1(a)(i) or Section 10.1(a)(ii). |
|
(b) |
|
Micrologixs obligations to indemnify Strata hereunder shall not apply to the
extent any such Loss arises out of or is based on the: |
|
(i) |
|
inactions or actions of Strata or its Indemnitees for which
Strata is obligated to indemnify Micrologix under Section 10.2; or |
|
|
(ii) |
|
negligence or willful misconduct of Strata and/or its Indemnitees. |
Section 10.2 Micrologix Indemnified by Strata.
|
(a) |
|
Strata shall indemnify, defend and hold harmless Micrologix and its Indemnitees
from and against any Loss insofar as such Loss or actions in respect thereof occurred
subsequent to the Effective Date, and arises out of or is based upon: |
|
(i) |
|
any breach by Strata of its representations, warranties,
covenants, obligations or agreements under this Agreement; or |
|
|
(ii) |
|
the negligence or willful misconduct of Strata and/or any of
Stratas Indemnitees, including any violation of Applicable Law in their
performance under this Agreement; or |
|
|
(iii) |
|
Stratas or its Indemnitees making, manufacture, marketing,
sale, distribution, storage or promotion of the Product, including any injury
or death to any person or damage to any property caused by any Product provided
by Strata or its Indemnitees, whether by reason of breach of warranty,
negligence, product defect or otherwise, and regardless of the form in which
any such claim is made. |
|
(b) |
|
Stratas obligations to indemnify Micrologix hereunder shall not apply to the
extent any such Loss arises out of or is based on the: |
|
(i) |
|
inactions or actions of Micrologix or its Indemnitees for which
Micrologix is obligated to indemnify Strata under Section 10.1; or |
|
|
(ii) |
|
the negligence or willful misconduct of Micrologix and/or its
Indemnitees. |
Section 10.3 Prompt Notice Required.
No claim for indemnification hereunder shall be valid unless notice of the matter which may give
rise to such claim is given in writing by the Party seeking indemnification (the Indemnified
Party) to the persons against whom indemnification may be sought (the Indemnitor) as soon as
reasonably practicable after such Indemnified Party becomes aware of such claim. Such notice shall
state that the Indemnitor is required to indemnify the Indemnified Party and its
Indemnitees for a Loss and shall specify the amount of Loss, if available, and relevant details
thereof. The Indemnitor shall notify Indemnified Party no later than thirty (30) days from such
notice of its intention to assume the defense of any such claim. Failure of the Indemnified Party
to notify Indemnitor within such notice period shall not relieve Indemnitor of any liability
- 40 -
hereunder, except to the extent the Indemnitor reasonably demonstrates that the defense of such
Third Party claim is prejudiced by such failure.
Section 10.4 Indemnitor May Settle.
The Indemnitor shall, at its expense, have the right to settle and defend any action which may be
brought in connection with all matters for which indemnification is available. In such event the
Indemnified Party shall cooperate with the Indemnitor as reasonably requested by the Indemnitor in
connection with such action; provided that the Indemnified Party shall have the right to fully
participate in such defence at its own expense. The defence by the Indemnitor of any such actions
shall not be deemed a waiver by the Indemnitor of its right to assert a claim with respect to the
responsibility of the Indemnified Party with respect to the Loss in question. The Indemnitor shall
have the right to settle or compromise any claim against the Indemnified Party without the consent
of the Indemnified Party provided that the terms of any settlement or compromise: (a) does not
materially impair the Indemnified Partys rights hereunder (including each Partys rights in the
Micrologix Technology); (b) would not require the Indemnified Party to be subject to an injunction
or to make a monetary payment or would restrict the claims in or admit any invalidity or
unenforceability of the Micrologix Patent Rights; (c) provide for the unconditional release of the
Indemnified Party; and (d) expressly state that neither the fact of settlement nor the settlement
agreement shall constitute, or be construed or interpreted as, an admission by the Indemnified
Party of any issue, fact, allegation or any other aspect of the claim being settled. In all other
cases, the Indemnitor may not settle any such action without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld or delayed. No Indemnified
Party shall pay or voluntarily permit the determination of any liability which is subject to any
such action while the Indemnitor is negotiating the settlement thereof or contesting the matter,
except with the prior written consent of the Indemnitor, which consent shall not be unreasonably
withheld or delayed. If the Indemnitor fails to give Indemnified Party notice of its intention to
defend any such action as provided herein, the Indemnified Party involved shall have the right to
assume the defence thereof with counsel of its choice and defend, settle or otherwise dispose of
such action. If Strata is the Indemnified Party in such case, Strata shall recover its Costs by
deducting its Costs from any royalty payments or any other amounts payable to Micrologix hereunder
in accordance with Section 4.7(c).
Section 10.5 Insurance.
Each Party shall, at its sole cost and expense, obtain and keep in force during the Term and for a
period of not less than three (3) years after termination, cancellation or expiration of this
Agreement the following insurance: (a) general liability insurance, including blanket contractual
liability coverage with bodily injury, death and property damage with limits of $[***] per
occurrence and $[***] in the aggregate within six months after the Effective Date; and (b) clinical
studies and product liability insurance with bodily injury death and property damage
limits of not less than $[***] per occurrence and $[***] in the aggregate; provided, however, each Partys
obligation to maintain such product liability insurance shall not commence until
|
|
|
*** |
|
Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions. |
- 41 -
immediately prior
to the First Commercial Sale of the Product in the first country in the Territory and each Partys
obligation to maintain such clinical studies insurance shall not commence until immediately prior
to the first human dosing by such Party. Upon execution of this Agreement, and upon the other
Partys request thereafter, each Party shall furnish the other with a certificate of insurance
signed by an authorized representative of such Partys insurance underwriter evidencing the
insurance coverage required by this Agreement and providing for at least thirty (30) days prior
written notice to the other Party of any cancellation, termination or reduction of such insurance
coverage. Each Party shall use its Commercially Reasonable Efforts to cause Third Parties engaged
by a Party to perform its obligations under this Agreement to maintain such types of insurance
coverages and for such period of time as are customary for such Third Parties given the nature of
the services to be provided.
ARTICLE 11
ADDITIONAL COVENANTS OF THE PARTIES
Section 11.1 Micrologix Covenant Not To Compete.
Micrologix hereby covenants and agrees, and shall cause its Affiliates to agree, not to, in whole
or in part, develop, in-license, market, make, manufacture or have manufactured, sell, promote,
distribute or have marketed, have sold or have distributed any product in the Territory in the
Field (in this Section, a Section 11.1 Competitive Product) during the Term and for a period of
[***] thereafter. Notwithstanding the foregoing, if Micrologix acquires an entity or all or
substantially all of the assets of an entity during such period of time and such entity distributes
or such assets include a Section 11.1 Competitive Product, Micrologix or its Affiliate shall have
[***] in which to divest itself of such Section 11.1 Competitive Product or to otherwise cease
distribution of such Section 11.1 Competitive Product, and Micrologix shall not be in breach of
this Section 11.1 if it so divests or ceases distribution within such [***] period. Strata and
Micrologix hereby agree that the covenants set forth in this Section 11.1 are a material and
substantial part of the transactions contemplated by this Agreement.
Section 11.2 Launch of Competitive Product by Strata.
Strata hereby agrees that in the event Strata and/or its Affiliates develop, in-license, market,
sell, promote, distribute or have marketed, or have sold any product in the Field in a particular
country in the Territory that is not a Product hereunder (in this Section, a Competitive Product)
during the Term, directly for themselves or by a Third Party, licensee or sublicensee on behalf of
Strata and/or its Affiliates, then pursuant to Section 13.4, Stratas rights with respect to such
country under this Agreement shall terminate and revert to Micrologix. No termination pursuant to
this Section shall terminate this Agreement with respect to any other country in the Territory.
Notwithstanding the foregoing, if Strata or an Affiliate acquires an entity or all or substantially
all of the assets of an entity during such period of time and such entity distributes or
such assets include a Competitive Product, Strata, or its Affiliate(s), shall have [***] in which to
divest itself of such Competitive Product or to otherwise cease distribution of such Competitive
Product, and Strata shall not be in violation of this Section 11.2 if it so divests or ceases
distribution within such [***] period. The Parties mutually agree that Stratas (or Affiliates)
|
|
|
*** |
|
Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions. |
- 42 -
commercialization, as described above, of any Competitive Product shall not be deemed a breach of
this Agreement, and Micrologix sole recourse for such an event shall be that as described in this
Section 11.2 only.
Section 11.3 Limitation To The Territory.
Strata hereby covenants that it will not directly or indirectly, without the prior written
authorization of Micrologix: (i) promote or actively solicit the sale of the Product or advertise
the Product, outside of the Territory; (ii) purchase or cause to be purchased Product which Strata
has represented, directly or indirectly, as being for the purpose of sale in a specific country in
the Territory for sale in any other country outside the Territory; (iii) contact any of
Micrologixs suppliers or vendors of the Product or element thereof for the purpose of causing the
Product to be sold outside the Territory; (iv) knowingly sell or distribute for resale the Product
purchased hereunder to a Third Party who intends to sell the Product outside of the Territory; and
(vi) knowingly sell or distribute for resale Product purchased from a Third Party outside the
Territory for resale in the Territory.
Section 11.4 Records and Audits.
|
(a) |
|
Each Party shall keep or cause to be kept true, accurate and complete Books and
Records as are required to determine, in a manner consistent with accrual method of
accounting in accordance with GAAP, any sums or credits due under this Agreement during
the Term and for a period of three years thereafter or as otherwise required to comply
with Applicable Laws. Without limiting the generality of the foregoing, the Parties
agree that such Books and Records shall include the following: |
|
(i) |
|
Strata shall keep such Books and Records to permit Micrologix
to confirm the completeness and accuracy of (A) the information presented in
each Royalty Statement and all payments due hereunder; (B) the calculation of
Net Sales; (C) any payments due Micrologix under this Agreement; and (D) any
other payment obligations of Strata hereunder. |
|
|
(ii) |
|
Micrologix shall keep such Books and Records to permit Strata
to confirm the completeness and accuracy of (A) Reimbursable Costs; (B) any
payments due Strata under this Agreement; and (C) any other obligations of
Micrologix hereunder. |
|
(b) |
|
With regard to sums or credits due or related reports, at the request (and
expense) of the requesting Party, the other Party shall permit the requesting Party
and/or such requesting Partys independent certified public accountant selected by such
Party and reasonably acceptable to the other Party to audit and/or inspect only
those Books and Records of the other Party as may be necessary to determine, with
respect to any calendar year ending no more than three years prior to such Partys
request, the completeness and accuracy of any reports made and/or any sums or
credits due under this Agreement. Any such independent accounting firm shall be
subject to the confidentiality provisions of this Agreement. Such inspection shall
be conducted during the Partys normal business hours, no more than once in any
twelve (12) month period and upon at least thirty (30) days prior |
- 43 -
|
|
|
written notice by
the requesting Party. If such requesting Party concludes that such payments were
underpaid during the periods reviewed by such requesting Party and/or its
accountants, the other Party shall pay the requesting Party the amount of any such
underpayments, plus interest at a rate equal to the Prime Rate of Interest, within
thirty (30) days of the date the requesting Party delivers to the other Party the
report so concluding that such payments were underpaid. If such requesting Party
and/or its accounting firm concludes that such payments were overpaid during such
period, the Party shall pay to the other Party the amount of any such overpayments,
without interest, within thirty (30) days of the date the requesting Party delivers
to the other Party the report so concluding that such payments were overpaid. The
requesting Party shall bear the full cost of such audit unless such audit discloses
an underpayment by more than [***] *** Certain information on this page has been
omitted and filed separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions. of the amount due during such
period. In such case, the other Party shall bear the full cost of such audit. |
|
|
(c) |
|
In the event the non-requesting Party does not agree with the conclusions of
such report under Section 11.4(b), (whether such payments were underpaid or overpaid),
then such Party shall notify the other Party within thirty (30) days after receipt of
such report. Thereafter, the Parties shall in good faith try and resolve such
differences. If the Parties are unable to reach a mutual agreement within fifteen (15)
days after the date of notice then independent auditors of each Party shall meet and
select an independent accounting firm (being an accounting firm not used by either
Party) to make the final determination within fifteen (15) days thereafter. The
determination of such independent accounting firm shall be binding and conclusive on
the Parties, and the cost of such firm shall be borne by the Party against whom the
determination by such firm is made. |
|
|
(d) |
|
Micrologix shall, upon prior, reasonable notice by Strata and during normal
business hours, allow Strata or its Representative to inspect and audit Micrologixs
facilities, equipment, personnel and operating procedures (and of any Subcontractor, as
applicable) used to develop the Product and any Books and Records related thereto to
confirm compliance with the terms and conditions of this Agreement, including
compliance with Applicable Laws and Governmental Approvals; provided that Strata shall
use Commercially Reasonable Efforts to ensure that such inspection and audit shall not
interfere with Micrologixs (or its Subcontractors, as applicable) normal operations.
However, notwithstanding the foregoing, Strata shall be permitted to inspect and audit
as provided above
immediately on notice in the event of a bona fide belief that (i) an
Applicable Law is being, or may be, violated or (ii) there is, or may be, an SADE or
imminent and otherwise material harm to the public due to the Product. Without
limiting anything else under this Agreement, if any of the obligations of Micrologix
is performed by a Subcontractor, then Micrologix shall cause any such Subcontractor
to comply with the terms and conditions of this Section 11.4(d). If any inspection
or audit hereunder reveals that Micrologix (or its Subcontractor(s) or other
Representatives) is not in compliance in all material respects with the |
*** |
Certain information on this page has been
omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted portions. |
- 44 -
|
|
|
terms and conditions of this Agreement, Applicable Laws, or/and applicable Governmental
Approvals, Micrologix, at its sole cost, shall use Commercially Reasonable Efforts
to promptly correct (and, as applicable, cause its Subcontractor(s) to use
Commercially Reasonable Efforts to promptly correct) any such deficiencies to ensure
compliance as required hereunder. Micrologix shall keep Strata informed on a
regular, on-going and periodic basis as to the status of any such deficiencies and
such corrections. |
Section 11.5 Marketing Expenses.
Strata covenants and agrees that, except as otherwise specified in this Agreement, Strata shall be
solely responsible for the cost and implementation of any and all marketing, sales, promotional and
related activities concerning or related to the marketing, sale, distribution and promotion of the
Product under this Agreement.
Section 11.6 Further Actions.
Upon the terms and subject to the conditions hereof, each of the Parties shall use its Commercially
Reasonable Efforts to take, or cause to be taken, all appropriate action and do, or cause to be
done, all things necessary or advisable under Applicable Laws or otherwise to consummate and make
effective the transactions contemplated by this Agreement.
ARTICLE 12
PRODUCT RECALL
Section 12.1
Product Recalls or Withdrawal.
If at any time or from time to time during the Term: (a) any Competent Authority of any country in
the Territory requests Strata to recall or withdraw the Product; (b) a court of competent
jurisdiction issues an order or directive for the Product to be recalled or withdrawn; or (c) if a
voluntary recall or withdrawal of the Product is contemplated by Strata (individually or
collectively, a Recall), then Strata shall carry out any Recall in the Territory in as
expeditious a manner as reasonably possible to preserve the goodwill and reputation of the Product
and the goodwill and reputation of the Parties. Strata shall in all events be responsible for
conducting any Recall in the Territory, market withdrawals or corrections with respect to the
Product in the Territory. Strata shall maintain records of all sales and distribution of Product
and customers sufficient to adequately administer a Recall for the period required by Applicable
Law. Micrologix shall cooperate as reasonably requested by Strata in connection with any such
Recall. Strata will be responsible for complying with all Applicable Laws and Governmental
Approvals during the Recall and will be responsible for all interactions with appropriate Competent
Authorities, including, the FDA Office of Compliance in the U.S. and the appropriate FDA local
district office(s) in the U.S. Strata shall be responsible for preparing and timely submitting any
reports any other documentation required by the Competent Authorities in connection with any such
Recall.
Section 12.2
Recall Costs.
Strata shall be responsible for conducting any Recall of the Product in the Territory and the cost
and expense therefor shall be paid by Strata, unless such Recall is due to, prior to or during the
- 45 -
Development: (i) any breach by Micrologix of its representations, warranties, covenants,
obligations or agreements under this Agreement; or (ii) the negligence or willful misconduct of
Micrologix and/or any of Micrologixs Representatives under this Agreement, including violation of
Applicable Laws in their performance under this Agreement; in which case all such costs and
expenses, to the extent same are reasonable, shall be borne and paid solely by Micrologix. In such
event, Micrologix will reimburse Strata for any such costs and expenses paid by Strata within
thirty (30) days of its receipt of a reasonably detailed invoice(s) for such costs and expenses
from Strata.
Section 12.3
Notification Of Complaints.
During the Term and for a period of four (4) years after the termination, expiration or
cancellation of this Agreement or for such longer period as may be required by Applicable Law(s),
each Party agrees to (a) notify the other Party immediately of all available material information
concerning any complaint, product defect reports, and similar notices received by either Party with
respect to the Product, whether or not determined to be attributable to the Product and (b) with
respect to an SADE, comply with the provisions of Section 6.6. Strata shall define and implement
appropriate and necessary regulatory compliance procedures for product defect reporting, including
action plans and an SOP and will handle all product complaints in the Territory. In connection
with any such product complaint Micrologix shall cooperate as reasonably requested by Strata.
Strata, at its sole cost and expense, will have the responsibility for preparing and submitting any
reports to the Competent Authorities, including FDA field alerts.
Section 12.4
Notification Of Threatened Action.
During the Term and, for a period of four years after the termination, expiration or cancellation
of this Agreement or for such longer period as may be required by Applicable Law(s), each Party
agrees to immediately notify the other Party of any information it receives regarding any
threatened or pending action, inspection or communication by or from a concerned Competent
Authority which may affect the safety or efficacy claims of the Product or the continued marketing
or distribution of the Product. Upon receipt of such information, the Parties shall consult with
each other in an effort to arrive at a mutually acceptable procedure for taking appropriate action,
provided that, subject to Micrologixs obligation under Section 6.1 and Applicable Laws during the
Period Micrologix is the IND holder, Strata shall have the final decision making authority with
respect thereto.
ARTICLE 13
TERM AND TERMINATION
Section 13.1
Term.
This Agreement shall become effective on the Effective Date and shall expire on the date of the
expiration of the last to expire Royalty Term in any country in the Territory (the Term), unless
earlier terminated as provided in Section 13.2, Section 13.3 or Section 13.4.
- 46 -
Section 13.2
Termination by Either Party.
Either Party may terminate this Agreement (in its entirety or on a country by country basis as
hereinafter provided) prior to the expiration of the Term upon the occurrence of any of the
following:
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(a) |
|
upon or after the cessation of operations of the other Party or the bankruptcy,
dissolution or winding up of the other Party (other than dissolution or winding up for
the purposes or reconstruction or amalgamation which includes an assignment permitted
by this Agreement) or the filing of any involuntary petition for bankruptcy,
dissolution, liquidation or winding up of the affairs of the other Party which is not
dismissed within ninety (90) days after the date on which it is filed or commenced, and
in the case of any of the foregoing events, the non-defaulting Party may terminate the
Agreement in its entirety; or |
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|
(b) |
|
upon or after the breach of any material provision of this Agreement by the
allegedly breaching Party if the allegedly breaching Party has not cured such breach
within sixty (60) days after written notice thereof by the non-breaching Party, the
non-breaching Party may, at its sole option, terminate this Agreement with respect to
the particular country in the Territory that is the subject of such breach, and this
Agreement shall remain in effect as it applies to all other countries; provided,
however, that if such breach and failure to cure occurred in the United States, the
non-breaching Party may terminate this Agreement in its entirety, and if such breach
and failure to cure occurred in a Major European Market Country, the non-breaching
Party may terminate this Agreement in respect of the whole of Europe. For the
avoidance of doubt, performance of the development and commercialization obligations
required to be performed in accordance with Commercially Reasonable Efforts hereunder
are evaluated based upon the Territory as a whole as set out in Section 1.10. |
Section 13.3
Termination by Strata.
Strata may terminate this Agreement in its entirety, or on a country-by-country basis prior to the
expiration of the Term as follows:
|
(a) |
|
subject to Section 2.3(d), prior to issuance of a Marketing Authorization in
the US, at any time on written notice to Micrologix if it is determined by Strata in
good faith, acting reasonably and in accordance with prudent scientific and business
judgment and otherwise in accordance with generally accepted practices
in the pharmaceutical industry, that the Product is not reasonably expected to
demonstrate safety or efficacy; or |
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(b) |
|
if the Second Phase III Study is commenced, at any time on written notice to
Micrologix if Strata exercises its right to terminate such study pursuant to Section
2.3(d); or |
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(c) |
|
if the Second Phase III Study is not commenced, or after the completion of the
Second Phase III Study, at any time upon one hundred twenty (120) days prior written
notice to Micrologix. |
- 47 -
Section 13.4
Termination by Micrologix.
Micrologix may terminate this Agreement in its entirety or on a country by country basis prior to
the expiration of the Term upon thirty (30) days prior written notice if Strata conducts any of the
activities respecting a Competitive Product in a particular country as set forth in Section 11.2.
Section 13.5
Effect of Termination.
|
(a) |
|
Payment Obligations. If this Agreement is terminated by either Party pursuant
to Section 13.2, Section 13.3 or Section 13.4, subject to the rights and obligations of
Strata related to selling off Product inventory as provided in Section 13.5(b)(ii) and
Section 13.5(b)(iii) and to pay Reimbursable Costs and certain wind down costs as set
forth in Sections Section 13.5(b)(iv)(A), Strata shall not be obligated to pay any
other wind down costs, milestone payments and/or other monies to Micrologix under this
Agreement, other than payments due and owing prior to the effective date of
termination. |
|
|
(b) |
|
Termination by Either Party. Upon the early termination of this Agreement by
either Party pursuant to Section 13.2, Section 13.3 or Section 13.4, the following
shall occur: |
|
(i) |
|
Subject to Section 13.7, Strata, its sublicensees and
Affiliates (as the case may be) shall have no right to practice within the
Micrologix Patent Rights or use any of the Micrologix Technology, and all
rights, title or interest in, or other incidents of ownership under, the
Micrologix Technology shall revert to and become the sole property of
Micrologix, and the licenses granted to Strata under Section 3.1 shall
automatically terminate. |
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(ii) |
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Notwithstanding Section 13.5(b)(i), provided that this
Agreement is terminated other than: (A) by Micrologix due to the breach of
Strata pursuant to Section 13.2 or Section 13.4; or (B) by Strata pursuant to
Section 13.3; Strata may, in its sole discretion, elect to sell-off or
distribute, as applicable, its existing inventory of Product to which the
termination pertains in accordance with the terms set forth in Section
13.5(b)(iii), after the effective date of termination, by notifying Micrologix
of its decision within thirty (30) days after the date it receives a notice of
termination by Micrologix or the date it provides a notice of termination to
Micrologix, as the case may be. |
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(iii) |
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If Strata elects pursuant to Section 13.5(b)(ii) to sell-off
or distribute, as applicable, its existing inventory, it shall not, either
directly or indirectly, use or permit the use of the Product except as set
forth under this Section 13.5(b)(iii) and shall proceed as follows: |
|
(A) |
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continue to comply with its royalty obligations
for the Product to Micrologix under Article 4; |
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(B) |
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continue to sell off or distribute, as
applicable, existing inventory of Product until such time as the
inventory is depleted but in no |
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event more than six (6) months after
the applicable notice of termination. At the expiration of such
period, Strata shall sell all existing inventory of Product to
Micrologix. In such case, Micrologix shall pay to Strata the full
amount of the actual cost paid by Strata, or Stratas documented
out-of-pocket costs, as applicable, for such remaining inventory of
Product; |
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(C) |
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if Strata does not elect pursuant to Section
13.5(b)(ii) to sell-off or distribute, as applicable, any existing
inventory of Product, or if this Agreement is terminated by Micrologix
under Section 13.2 or Section 13.4 for Stratas breach, or by Strata
pursuant to Section 13.3, Strata shall, at Micrologixs election,
either: |
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(1) |
|
sell all existing inventory of
Product to Micrologix at Stratas actual cost of acquisition, or
Stratas documented out-of-pocket costs, as applicable; or |
|
|
(2) |
|
destroy all remaining inventory
of Product in accordance with Applicable Laws and provide
Micrologix with written proof of destruction sufficient to
comply with Applicable Laws. |
|
|
|
In either case, Micrologix shall pay to Strata the actual cost paid
by Strata for such remaining inventory of Product; |
|
(D) |
|
if Strata sells any inventory of Product to
Micrologix pursuant to this Section 13.5(b)(iii), it shall warrant that
such inventory of Product has been stored in material compliance with
the applicable specifications therefor, Governmental Approvals and all
Applicable Laws, has not been adulterated within the meaning of
Applicable Laws and has otherwise been maintained by Strata according
to such specifications, Governmental Approvals and Applicable Laws; and |
|
|
(E) |
|
any sales of Product made by Strata to
Micrologix pursuant to this Section 13.5(b)(iii) shall be made by
Strata within thirty (30) days after the date it becomes obligated to
do so and shall be shipped to Micrologix appropriately packaged and
stored. All transportation costs in connection with such sale,
including insurance, freight and
duties, and all reasonable costs of re-working the Product so that
such Product is in saleable form, shall be shared equally by Strata
and Micrologix. Amounts owed by either Party to the other pursuant
to this Section 13.5(b)(iii) for the Product shall be paid by such
Party within ten (10) days after receipt by a Party of a reasonably
detailed invoice from the other Party for the amount so owing to it
by the other Party under this Section 13.5(b)(iii). |
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(iv) |
|
if this Agreement is terminated prior to the completion of the
Development and the payment therefor: |
- 49 -
|
(A) |
|
by Micrologix pursuant to Section 13.2 for
Stratas breach or pursuant to Section 13.4, or by Strata pursuant to
Section 13.3(a) or Section 13.3(b), Strata shall, at Micrologixs
election, pay Micrologixs reasonable, wind-down costs under any
Development Subcontract provided that Micrologix uses Commercially
Reasonable Efforts to minimize, or if possible eliminate, such costs. |
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(B) |
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by Strata pursuant to Section 13.2 due to the
breach of Micrologix, Strata shall have no obligation to pay for any
wind-down costs, milestone payments and/or any other monies due and
owing from and after the effective date of such termination under this
Agreement. |
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(v) |
|
if this Agreement is terminated by Micrologix pursuant to
Section 13.2 for Stratas breach or pursuant to Section 13.4, or by Strata
pursuant to Section 13.3(a) or Section 13.3(b), to the extent of its legal
right to do so, Strata shall immediately assign or transfer to Micrologix any
Governmental Approvals and trademarks for the Product held in the name of or
Controlled by Strata, if any, in any country in the Territory. |
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(vi) |
|
to the extent of its legal right to do so, Strata shall, at
Micrologixs request, grant Micrologix a worldwide royalty-bearing, license
under any Strata Work Product necessary to use, market, advertise, promote,
distribute, offer for sale, sell, make, manufacture, have manufactured, export
and import, and develop Products with the right to sublicense and assign the
foregoing, in consideration of such reasonable royalties on net sales by
Micrologix or Product to be negotiated in good faith between Micrologix and
Strata at such time, and if the Parties cannot agree on such license and
royalties, either Party may refer the matter to arbitration pursuant to Article
14. Nothing in this Section shall cause a royalty to be payable in respect of
rights obtained by Micrologix pursuant to Section 5.3 or Section 6.2. |
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(vii) |
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if this Agreement is terminated by Strata pursuant to Section
13.2 due to the breach of Micrologix, to the extent of its legal right to do
so, Strata shall immediately assign or transfer to Micrologix any Governmental
Approvals and trademarks for the Product held in the name of or
Controlled by Strata, if any, in any country in the Territory, in
consideration of such reasonable royalties on net sales by Micrologix of
Product to be negotiated in good faith between Micrologix and Strata at such
time, and if the Parties cannot agree on such license and royalties, either
Party may refer the matter to arbitration pursuant to Article 14. Nothing in
this Section shall cause a royalty to be payable in respect of rights
obtained by Micrologix pursuant to Section 6.2. |
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(viii) |
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at the sole option and request of Micrologix, which request shall be made no
more than sixty (60) days after the effective date of termination, if
Micrologix chooses to permit Third Party sublicenses related to the |
- 50 -
|
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|
Product to survive termination of this Agreement, Strata will cooperate reasonably to
facilitate the transfer of Third Party sublicenses from Strata to Micrologix or
its designee. |
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(ix) |
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except as otherwise provided in this Agreement, expiration or
termination of this Agreement shall not relieve the Parties of any obligation
accruing prior to such expiration or termination. Except as set forth below or
elsewhere in this Agreement, the obligations and rights of the Parties under
Article 1 (as needed), Section 3.4, Section 4.7(b)(ii), Section 4.7(c), Section
5.3(c), Section 5.3(e) (for a one year period after expiration or termination
of this Agreement, in respect of the manufacture of Product for use in the
Field in the Territory), Section 6.2(b), Section 7.2, Section 7.4, Article 8,
Article 9, Article 10, Article 12, Article 13, Article 14 and Article 15, and
any other that by its terms is intended to survive, shall survive expiration or
termination of this Agreement. |
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(x) |
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subject to the provision of Section 13.7, within thirty (30)
days following the expiration or termination of this Agreement, each Party
shall return to the other Party, or destroy, upon the written request of the
other Party, any and all Confidential Information of the other Party in its
possession and upon a Partys request, such destruction (or delivery) shall be
confirmed in writing to such Party by a responsible officer of the other Party,
except for such Confidential Information which the receiving Party is required
to keep under Applicable Laws, in which event such Confidential Information
shall be held subject to the terms and conditions of Article VIII. |
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(c) |
|
Termination on a Country-by-Country Basis. In the event any termination under
this Agreement relates solely to one or more countries in the Territory as permitted
herein, then this Agreement and the license contained in Section 3.1 shall only be
terminated to the extent it applies to such country or countries in the Territory and
this Agreement shall remain in effect as it applies to all other countries in the
Territory. |
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(d) |
|
Bankruptcy Rights. In the event this Agreement is terminated or rejected by a
Party or its receiver or trustee under applicable bankruptcy laws due to such Partys
bankruptcy, then all rights and licenses granted under or pursuant to this Agreement by
such Party to the other Party are, and shall otherwise be deemed to
be, for purposes of Section 365(n) of the Bankruptcy Code in the United States and
other comparable Applicable Law in any other country in the Territory (collectively
Other Bankruptcy Laws), licenses of rights to intellectual property as defined
under Section 101(52) of the United State Bankruptcy Code. The Parties agree that
all intellectual property rights licensed hereunder, including any patents or patent
applications of a Party in any country covered by the license grants under this
Agreement, are part of the intellectual property as defined in Section 101(52) of
the United States Bankruptcy Code, subject to protections afforded the
non-terminating Party under Section 365(n) of United States Bankruptcy Code or Other
Bankruptcy Laws. |
- 51 -
Section 13.6
Remedies.
All of the non-breaching Partys remedies shall be cumulative, and the exercise of one remedy
hereunder by the non-defaulting Party shall not be deemed to be an election of remedies. These
remedies shall include the non-breaching Partys other rights of recovery for such breach with or
without terminating this Agreement.
Section 13.7
License Following Expiration.
Upon expiration of each of the applicable Royalty Terms in each country in the Territory, Strata
shall thereafter have an irrevocable, non-exclusive, royalty-free license in such country, with the
right to sublicense, to use, develop, market, advertise, promote, distribute, make, manufacture,
have manufactured, offer for sale, sell, export and import the Product for use in the Field in the
Territory. Upon request by Strata, Micrologix shall continue to allow Strata to manufacture and
sell the Product under the Micrologix Technology pursuant to a separate agreement to be negotiated
in good faith between the Parties.
ARTICLE 14
DISPUTE RESOLUTION/DAMAGES
Section 14.1 Disputes.
The Parties recognize that disputes as to certain matters may from time to time arise during the
Term which relate to either Partys rights and/or obligations hereunder or to the interpretation,
performance, breach, or termination of this Agreement, (a Dispute). It is the objective of the
Parties to establish procedures to facilitate the resolution of a Dispute in an expedient manner by
mutual cooperation and without resort to litigation. To accomplish this objective, the Parties
agree to follow the procedures set forth in this Article 14 if and when a Dispute arises under this
Agreement. The Parties acknowledge and agree that nothing under this Article 14 shall in any way
affect, alter, negate or modify Stratas tie-breaking vote in the JDMC under Section 2.4(d).
Subject to Section 11.4(c), a Dispute among the Parties will be resolved as recited in this Article
14. Any Disputes relating to this Agreement shall be promptly presented to the Chief Executive
Officers of Micrologix and Strata, or their respective designees (who must be members of a Partys
senior management) for resolution. From the date of referral of a Dispute to the Chief Executive
Officers or their designees of the Parties and until such time as any matter has been resolved by
the Parties or has been finally settled by arbitration hereunder, the running of the cure periods
(if any) as to which a Party must cure a breach that is part of the subject matter of
any Dispute shall be suspended. In the event that the Chief Executive Officers of Micrologix and
Strata, or their respective designees, cannot after good faith negotiations resolve the Dispute
within 10 days (or such other period of time as mutually agreed to by the Parties in writing) of
being requested by a Party to resolve a Dispute, the Parties agree that such Dispute shall be
resolved by binding arbitration in accordance with this Section 14.1.
If a Party intends to begin arbitration to resolve such Dispute, such Party shall provide written
notice (the Arbitration Notice) to the other Party informing such other Party of such intention
and the issues to be resolved. Any arbitration hereunder shall be conducted pursuant to the
Commercial Arbitration Rules of the American Arbitration Association (AAA), including the
Supplementary Procedures for Large Complex Disputes (the AAA Rule) except as modified
- 52 -
herein. The arbitration shall be conducted by a panel of three (3) arbitrators (the Panel) to be mutually
agreed upon by the Parties and appointed by the AAA. The arbitrators shall be industry experts
experienced in the issues comprising the Dispute and shall have no past, present or anticipated
future affiliation with either Party. If the Parties are unable to agree upon all or any number of
the three (3) mutually acceptable arbitrators within thirty (30) days after the filing of the
Arbitration Notice, the AAA shall promptly appoint the arbitrator(s) to complete the Panel in
accordance with the criteria set forth in this Section 14.1. The arbitration shall take place in
Denver, Colorado. The Panel shall apply the laws of the State of Delaware, without regard to its
conflicts of laws provisions. The Panel shall issue appropriate protective orders to protect each
Partys Confidential Information. If a Party can demonstrate to the Panel that the complexity of
the issue or other reasons warrant the extension of one or more timetables in the AAA Rules, the
Panel may extend such timetables but in no event shall the proceeding extend more than twelve (12)
months from the date of filing of the Arbitration Notice with the AAA. The Panels decision shall
be in writing. The Panel shall have the authority to award any remedy allowed by law or in equity,
including compensatory damages, pre-judgment interest and to grant final, complete, interim, or
interlocutory relief, including specific performance, injunctions and other equitable relief, but
not punitive or other damages set forth in Section 14.5 and each Party shall be deemed to have
waived any right to such excluded damages. Each Party shall bear its own costs, fees and expenses
in the arbitration and shall share equally the Panels fees, unless the Panel determines that its
fees are to be paid by the non-prevailing Party.
Section 14.2
Performance to Continue.
Each Party shall continue to perform its obligations under this Agreement pending final resolution
of any Dispute arising out of or related to this Agreement; including continuing the Development,
provided, however, that a Party may suspend performance of its obligations during any period in
which the other Party fails or refuses to perform its obligations.
Section 14.3
Determination of Patents and Other Intellectual Property.
Notwithstanding the foregoing, any dispute relating to the determination of validity of claims,
infringement or claim interpretation relating to Micrologixs Patents shall be submitted
exclusively to the federal courts.
Section 14.4 Injunctive Relief.
Nothing in this Agreement shall prevent either Party from seeking a temporary restraining order or
injunction against the other Party as required to prevent such other Partys misuse of the
intellectual property or Confidential Information of the other Party seeking such temporary
restraining order or injunction. In addition nothing in this Agreement shall prevent Strata from
seeking a temporary restraining order or injunction against Micrologix to prevent any breach by
Micrologix under Section 11.1. The Parties understand and agree that because of the difficulty in
measuring economic losses to the non breaching Party as a result of a breach of the covenants set
forth in this Agreement respecting intellectual property and Confidential Information and because
of the immediate and irreparable damage that may be caused to the non breaching Party for which
monetary damages would not be a sufficient remedy, the Parties agree that the non breaching Party
will be entitled to seek specific performance, temporary and permanent injunctive relief, and such
other equitable remedies to which it may then be entitled against the
- 53 -
breaching Party. This Section 14.4 shall not limit any other legal or equitable remedies that the non breaching Party may
have against the breaching Party.
Section 14.5 No Consequential Damages.
EXCEPT WITH REGARD TO DAMAGES ARISING UNDER SECTION 8.1(B) AND EACH PARTYS DUTY TO INDEMNIFY THE
OTHER FOR INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES RECOVERED BY A THIRD
PARTY AS PROVIDED UNDER ARTICLE 10, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY
INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES INCURRED BY EITHER PARTY UNDER
THIS AGREEMENT OR OTHERWISE.
Section 14.6
Attorneys Fees.
In the event of any claim hereunder related to either Partys infringement of the intellectual
property rights of the other Party or the misuse of Confidential Information of the other Party,
the prevailing party in any such dispute shall pay the reasonable legal fees and costs related
thereto.
ARTICLE 15
MISCELLANEOUS
Section 15.1
No Solicitation.
Neither Party nor its Affiliates (collectively, the Initiating Group) shall, directly or through
its representatives, solicit for employment any officer, director, employee or consultant of the
other Party or its subsidiaries or Affiliates (collectively, the Other Group) with whom the
Initiating Group has contact in connection with, or who otherwise is known by the Initiating Group
to participate in, the transactions contemplated by this Agreement for a period of [***]. The
Initiating Group shall not be precluded from hiring any such person who has been terminated by the
Other Group prior to commencement of employment discussions between such person and the Initiating
Group or its representatives. Solicitation shall not include any generalized public advertisement
or any other solicitation by the Initiating Group or its
representatives that is not specifically directed toward any such employee of the Other Group or
toward any group of such employees of the Other Group.
Section 15.2
Assignment; Binding Effect.
Except as otherwise provided in this Agreement, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the Parties hereto (whether by
operation of Applicable Laws or otherwise) without the prior written consent of the other Party,
which consent shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, either
Party may sell, transfer or assign its rights under this Agreement to any Third Party, as part of a
sale or transfer of substantially all of a Partys assets; provided that such Third Party agrees
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*** |
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Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions. |
- 54 -
in writing to be bound by the terms and conditions of this Agreement. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit of the Parties hereto
and their respective permitted successors and assigns. Notwithstanding anything contained in this
Agreement to the contrary, nothing herein, expressed or implied, is intended to confer on any
person other than the Parties hereto or their Representatives, respective heirs, successors,
executors, administrators and assigns any rights, remedies, obligations or liabilities under or by
reason of this Agreement. Any purported assignment, sale, transfer, delegation or other
disposition by a Party, except as permitted herein, shall be null and void.
Section 15.3 Force Majeure.
Neither Party shall be held liable or responsible to the other Party nor be deemed to have
defaulted under or breached this Agreement for failure or delay in fulfilling or performing any
term of this Agreement when such failure or delay is caused by or results from causes beyond the
reasonable control of the affected Party, including fire, flood, embargo, war, act of war (whether
war be declared or not), act of terrorism, failure of supplier, insurrection, riot, civil
commotion, strike, lockout or other labour disturbance, act of God (a Force Majeure); provided
that the Party whose performance is delayed or prevented shall provide prompt notice of the Force
Majeure to the other Party. Performance shall be excused so long as the condition constituting
Force Majeure continues and the non-performing Party uses good faith diligent efforts to mitigate,
avoid or end such delay of failure in performance as soon as practicable.
Section 15.4 Governing Law.
This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the
State of Delaware, except that no conflict of laws provision shall be applied to make the laws of
any other jurisdiction applicable to this Agreement.
Section 15.5
Waiver.
Except as specifically provided for herein, the waiver from time to time by either of the Parties
of any of their rights or their failure to exercise any remedy shall not operate or be construed as
a continuing waiver of same or of any other of such Partys rights or remedies provided in this
Agreement.
Section 15.6
Severability.
In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 15.7
No Right to Use Names.
Except as otherwise provided herein, no right, express or implied, is granted by the Agreement to
use in any manner the name Micrologix, Strata or any other trade name or trademark of the other
Party or its Affiliates in connection with the performance of the Agreement.
- 55 -
Section 15.8 Notices.
All notices and other communications provided for hereunder shall be in writing and shall be mailed
by first-class, registered or certified mail, postage paid, or delivered personally, by overnight
delivery service or by facsimile, computer mail or other electronic means, with confirmation of
receipt, addressed as follows:
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If to Micrologix:
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Micrologix Biotech Inc. |
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BC Research Complex |
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3650 Wesbrook Mall |
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Vancouver, BC Canada V6S 2L2 |
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Attention: President |
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With a copy to:
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Farris, Vaughan, Wills & Murphy |
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2600 700 West Georgia Street |
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Vancouver, BC Canada V7Y 1B3 |
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Attention: James Hatton |
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If to Strata:
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Strata Pharmaceuticals, Inc. |
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10923 Cloverhurst Way |
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San Diego, California 92130 |
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Attention: CEO |
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With copies to:
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Morrison & Foerster LLP |
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3811 Valley Centre Drive, Suite 500 |
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San Diego, California 92130-2332 |
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Attention: Jay de Groot |
Notice so given shall be deemed given and received (a) if by mail on the fourth day after posting;
(b) by cable, telegram, telex or personal delivery on the date of actual transmission, with
evidence of transmission acceptance, or (as the case may be) personal or other delivery; and (c) if
by overnight delivery courier, on the next business day following the day such notice is delivered
to the overnight delivery courier service.
Section 15.9 Independent Contractors.
The activities and resources of each Party shall be managed by such Party, acting independently and
in its individual capacity. It is expressly agreed that Micrologix and Strata shall be independent
contractors and that the relationship between the two Parties shall not constitute a partnership or
agency of any kind. Neither Micrologix nor Strata shall have the authority to make any statements,
representations or commitments of any kind, or to take any action, which shall be binding on the
other Party, without the prior written consent of the other Party.
Section 15.10 Rules of Construction.
The Parties hereto agree that they have been represented by counsel during the negotiation and
execution of this Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other document will be
construed against the Party drafting such agreement or document.
- 56 -
Section 15.11
Entire Agreement; Amendment.
This Agreement (including the Exhibits attached hereto) sets forth all of the covenants, promises,
agreements, warranties, representations, conditions and understandings between the Parties hereto
with respect to the subject matter hereof and supersedes and terminates all prior agreements and
understandings between the Parties, including the Letter Agreement. There are no covenants,
promises, agreements, warranties, representations conditions or understandings, either oral or
written, between the Parties other than as set forth herein. No subsequent alteration, amendment,
change or addition to this Agreement shall be binding upon the Parties hereto unless reduced to
writing and signed by the respective authorized officers of the Parties. Purchase orders, purchase
order releases, confirmations, acceptances and similar documents submitted by a Party in conducting
the activities contemplated under this Agreement are for administrative purposes only and shall not
add to or modify the terms of the Agreement. To the extent of any conflict or inconsistency
between this Agreement and any such document, the terms of this Agreement shall govern.
Section 15.12
Counterparts; Facsimile.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument. This Agreement
may be signed and delivered to the other Party by facsimile signature; such transmission will be
deemed a valid signature.
Section 15.13
Interpretation.
The Section headings contained in this Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement. Except where the context clearly requires
to the contrary: (i) each reference in this Agreement to a designated Section or Exhibit is to
the corresponding Section or Exhibit of or to this Agreement; (ii) instances of gender or
entity-specific usage (e.g., his her its person or individual) shall not be interpreted
to preclude the application of any provision of this Agreement to any individual or entity; (iii)
including shall mean including, without limitation; (iv) references to Applicable Laws shall
mean such Applicable Laws in effect during the Term (taking into account any amendments
thereto effective at such time without regard to whether such amendments were enacted or adopted
after the Effective Date); (v) references to $ or dollars shall mean the lawful currency of the
United States; (vi) references to Federal or federal shall be to laws, agencies or other
attributes of the United States (and not to any State or locality thereof); (vii) references to
days shall mean calendar days, unless it is expressly stated as business days; and (viii) the
English language version of this Agreement shall govern all questions of interpretation relating to
this Agreement, notwithstanding that this Agreement may have been translated into, and executed in,
other languages.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly
authorized officers as of the Effective Date.
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Micrologix Biotech Inc. |
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Strata Pharmaceuticals, Inc. |
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By:
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/s/ James DeMesa |
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By: |
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/s/ Theodore R. Schroeder |
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Name:
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James DeMesa
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Name:
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Theodore R. Schroeder
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Title:
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President and CEO
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Title:
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President and Chief Executive Officer |
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- 57 -
EXHIBIT A
DEVELOPMENT PLANS
Please refer to the following documents:
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Strata Pharmaceuticals Inc. Development Plan, Timeline and Budget for NDA for LCSI Based
on Second Phase III Study, dated July___, 2004; and |
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Strata Pharmaceuticals Inc. Development Plan, Timeline and budget for NDA for CRBSI
Based on First Phase III Study, dated July ___, 2004. |
- 58 -
EXHIBIT B
PATENTS
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Country |
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Application or Patent No. |
USA
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[***] |
USA
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[***] |
USA
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[***] |
USA
|
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[***] |
USA
|
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[***] |
PCT
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[***] |
Canada
|
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[***] |
Europe
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[***] |
Belgium
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[***] |
Switzerland
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[***] |
Germany
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[***] |
Spain
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[***] |
France
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[***] |
Great Britain
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[***] |
Hong Kong
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[***] |
Ireland
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[***] |
Italy
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[***] |
Europe
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[***] |
Hong Kong
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[***] |
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*** |
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Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions. |
- 59 -
|
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Country |
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Application or Patent No. |
USA
|
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[***] |
USA
|
|
[***] |
USA
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[***] |
USA
|
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[***] |
PCT
|
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[***] |
Canada
|
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[***] |
Europe
|
|
[***] |
Hong Kong
|
|
[***] |
USA
|
|
[***] |
USA
|
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[***] |
PCT
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[***] |
CA
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[***] |
Europe
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[***] |
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*** |
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Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions. |
- 60 -
EXHIBIT C
INVENTORY
[***]
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*** |
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Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the omitted portions. |
- 61 -
EXHIBIT D
REGULATORY FILINGS
[***]
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*** |
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Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the omitted portions. |
Exhibit 10.11
Exhibit 10.11
CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
IV APAP AGREEMENT
(US and Canada)
by and between
BRISTOL-MYERS SQUIBB COMPANY
and
CADENCE PHARMACEUTICALS, INC.
February 21, 2006
TABLE OF CONTENTS
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ARTICLE I |
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DEFINITIONS |
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1 |
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1.1 |
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Defined Terms |
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1 |
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ARTICLE II |
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GRANT OF U.S. AND CANADIAN RIGHTS AND RELATED TRANSFERS |
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12 |
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2.1 |
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Grant of Sublicense and License |
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12 |
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2.2 |
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No Implied Licenses; Reservation of Rights |
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13 |
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2.3 |
|
Rights of Pharmatop |
|
|
14 |
|
2.4 |
|
Further Sublicenses |
|
|
15 |
|
2.5 |
|
Delegation of Manufacturing |
|
|
16 |
|
2.6 |
|
Development and Commercialization Arrangements |
|
|
17 |
|
2.7 |
|
Improvements |
|
|
17 |
|
2.8 |
|
Transfer of Regulatory Filings; Communications with Regulatory Authorities |
|
|
18 |
|
2.9 |
|
Transfer of Data and Transition Arrangements |
|
|
19 |
|
2.10 |
|
Tech Transfer Plan |
|
|
21 |
|
2.11 |
|
Technology Documentation |
|
|
21 |
|
2.12 |
|
Technical Assistance |
|
|
22 |
|
2.13 |
|
Cooperation |
|
|
22 |
|
2.14 |
|
Additional Assistance |
|
|
23 |
|
2.15 |
|
Pharmacovigilance; Adverse Event Reporting |
|
|
23 |
|
2.16 |
|
Infringement Pharmatop Patents |
|
|
25 |
|
2.17 |
|
Infringement BMS Patents |
|
|
27 |
|
2.18 |
|
Maintenance of BMS Patents |
|
|
27 |
|
2.19 |
|
Noncontravention |
|
|
27 |
|
2.20 |
|
Patent Extensions |
|
|
27 |
|
2.21 |
|
Data Exclusivity and Orange Book Listings |
|
|
28 |
|
2.22 |
|
Notification of Patent Certifications |
|
|
28 |
|
2.23 |
|
Audit, Inspection and Review |
|
|
28 |
|
2.24 |
|
[***] Covenant; [***]Covenant |
|
|
29 |
|
|
|
|
|
|
|
|
ARTICLE III |
|
ADDITIONAL COVENANTS |
|
|
30 |
|
3.1 |
|
Annual Operating Plan |
|
|
30 |
|
3.2 |
|
Development, Commercialization and Financial Reports and Consultations |
|
|
30 |
|
3.3 |
|
Development Responsibilities and Costs |
|
|
32 |
|
3.4 |
|
Obligations in respect of the Pharmatop License Agreement |
|
|
33 |
|
3.5 |
|
Certain Rights and Obligations under the Pharmatop License Agreement |
|
|
33 |
|
3.6 |
|
Conduct of Clinical Trials of Products by Cadence in |
|
|
|
|
|
|
Clinical Study Countries 35 |
|
|
|
|
3.7 |
|
Conduct of US or Canadian Clinical Trials of Products by BMS |
|
|
37 |
|
|
|
|
*** |
|
Certain information on this page has
been omitted and filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions. |
ii
|
|
|
|
|
|
|
3.8 |
|
Existing BMS Suppliers |
|
|
38 |
|
|
|
|
|
|
|
|
ARTICLE IV |
|
FINANCIAL TERMS |
|
|
38 |
|
4.1 |
|
Payments to BMS |
|
|
38 |
|
4.2 |
|
Reduction of Certain Milestone Payments |
|
|
39 |
|
4.3 |
|
Payments by Cadence to Pharmatop |
|
|
40 |
|
4.4 |
|
Manner of Payment |
|
|
41 |
|
4.5 |
|
Interest |
|
|
41 |
|
4.6 |
|
Expenses; Taxes |
|
|
41 |
|
|
|
(a) Expenses |
|
|
41 |
|
|
|
(b) Transfer Taxes |
|
|
41 |
|
|
|
(b) Tax Withholding |
|
|
41 |
|
4.7 |
|
Sales Reports and Royalty and Other Payments |
|
|
41 |
|
4.8 |
|
Sales Record Audit |
|
|
42 |
|
|
|
|
|
|
|
|
ARTICLE V |
|
MUTUAL COVENANTS OF THE PARTIES |
|
|
42 |
|
5.1 |
|
Publicity |
|
|
42 |
|
5.2 |
|
Confidentiality |
|
|
43 |
|
|
|
(a) Confidentiality Obligations |
|
|
43 |
|
|
|
(b) Limited Disclosure |
|
|
43 |
|
|
|
(c) Authorized Disclosure |
|
|
44 |
|
|
|
(d) Employees and Consultants |
|
|
45 |
|
|
|
(d) Securities Filings |
|
|
45 |
|
|
|
(f) Academic Publications |
|
|
45 |
|
|
|
(g) Additional Confidentiality Obligations under the Pharmatop |
|
|
|
|
|
|
License Agreement |
|
|
46 |
|
5.3 |
|
Restrictions Binding on Affiliated Companies and Investors |
|
|
46 |
|
5.4 |
|
Alliance Management |
|
|
46 |
|
5.5 |
|
Liens |
|
|
46 |
|
5.6 |
|
BMS Confidential Disclosure Agreements |
|
|
47 |
|
|
|
|
|
|
|
|
ARTICLE VI |
|
REPRESENTATIONS AND WARRANTIES |
|
|
47 |
|
6.1 |
|
Mutual Representations and Warranties |
|
|
47 |
|
|
|
(a) Organization |
|
|
47 |
|
|
|
(b) Authorization |
|
|
47 |
|
|
|
(c) Binding Agreement |
|
|
47 |
|
|
|
(d) No Conflicts; Consents |
|
|
48 |
|
|
|
(e) Litigation |
|
|
48 |
|
6.2 |
|
Additional Representations of Cadence |
|
|
48 |
|
|
|
(a) Financial Statements |
|
|
48 |
|
|
|
(b) Absence of Undisclosed Liabilities |
|
|
49 |
|
|
|
(c) Absence of Material Adverse Effect |
|
|
49 |
|
|
|
(d) Legal Matters |
|
|
50 |
|
|
|
(e) Receipt of Financing; Restrictions |
|
|
50 |
|
6.3 |
|
BMS Rights |
|
|
50 |
|
6.4 |
|
BMS Patents and Know-How |
|
|
51 |
|
6.5 |
|
DISCLAIMER |
|
|
52 |
|
iii
|
|
|
|
|
|
|
6.6 |
|
Limitation of Liability |
|
|
52 |
|
|
|
|
|
|
|
|
ARTICLE VII |
|
INDEMNIFICATION; ARBITRATION |
|
|
53 |
|
7.1 |
|
Mutual Indemnification |
|
|
53 |
|
7.2 |
|
Additional Indemnification Obligations of Cadence |
|
|
54 |
|
7.3 |
|
Additional Indemnification Obligations of BMS |
|
|
54 |
|
7.4 |
|
Conditions to Indemnification; Third Party Claims |
|
|
55 |
|
7.5 |
|
Insurance |
|
|
55 |
|
7.6 |
|
Arbitration |
|
|
56 |
|
7.7 |
|
Pharmatop Arbitration |
|
|
57 |
|
|
|
|
|
|
|
|
ARTICLE VIII |
|
TERM AND TERMINATION |
|
|
58 |
|
8.1 |
|
Term |
|
|
58 |
|
8.2 |
|
Automatic Termination |
|
|
58 |
|
8.3 |
|
Termination by Either Party |
|
|
58 |
|
8.4 |
|
Termination by BMS |
|
|
59 |
|
8.5 |
|
Termination by Cadence |
|
|
59 |
|
8.6 |
|
Scope of Termination |
|
|
60 |
|
8.7 |
|
Effect of Termination |
|
|
60 |
|
8.8 |
|
Transition |
|
|
62 |
|
8.9 |
|
Survival |
|
|
63 |
|
8.10 |
|
Bankruptcy |
|
|
63 |
|
|
|
|
|
|
|
|
ARTICLE IX |
|
MISCELLANEOUS |
|
|
63 |
|
9.1 |
|
Amendments |
|
|
63 |
|
9.2 |
|
Counterparts; Facsimile Execution |
|
|
63 |
|
9.3 |
|
Cumulative Remedies |
|
|
63 |
|
9.4 |
|
Entire Agreement |
|
|
63 |
|
9.5 |
|
Schedules |
|
|
63 |
|
9.6 |
|
Force Majeure |
|
|
64 |
|
|
|
(a) General |
|
|
64 |
|
|
|
(b) Definition |
|
|
64 |
|
|
|
(c) Duty to Mitigate |
|
|
64 |
|
|
|
(d) Suspension of Certain Obligations |
|
|
64 |
|
9.7 |
|
Assignment |
|
|
64 |
|
9.8 |
|
Governing Law |
|
|
65 |
|
9.9 |
|
Headings |
|
|
65 |
|
9.10 |
|
Notices |
|
|
65 |
|
9.11 |
|
Severability |
|
|
66 |
|
9.12 |
|
No Third Party Beneficiaries |
|
|
66 |
|
9.13 |
|
Waivers |
|
|
66 |
|
9.14 |
|
Documentary Conventions |
|
|
66 |
|
9.15. |
|
Consents and Approvals |
|
|
67 |
|
9.16. |
|
Absence of Presumption |
|
|
67 |
|
9.17. |
|
Relationship of Parties |
|
|
67 |
|
iv
|
|
|
|
|
|
|
Schedule 1.1 |
|
BMS Patents |
|
|
|
|
Schedule 6.3(a) |
|
Pharmatop Patents |
|
|
|
|
v
INDEX OF DEFINED TERMS
|
|
|
|
|
|
|
Section |
|
$ |
|
|
1.1 |
|
Adverse Event |
|
|
1.1 |
|
Affiliated Company |
|
|
1.1 |
|
Agreement Introductory Paragraph
Annual Operating Plan |
|
|
3.1 |
|
[***] |
|
|
3.2 |
(c) |
Applicable Law |
|
|
1.1 |
|
Approval |
|
|
1.1 |
|
Available [***] |
|
|
2.24 |
|
Balance Sheet |
|
|
6.2 |
(b) |
Balance Sheet Date |
|
|
6.2 |
(b) |
Bankruptcy |
|
|
1.1 |
|
BMS Introductory Paragraph
[***] |
|
|
1.1 |
|
BMS Indemnitees |
|
|
7.2 |
|
BMS Know-How |
|
|
1.1 |
|
[***] |
|
|
4.1 |
(g) |
BMS Patent Product |
|
|
1.1 |
|
BMS Patent Royalty Term |
|
|
1.1 |
|
BMS Patents |
|
|
1.1 |
|
[***] Covenant |
|
|
2.24 |
(b) |
BMS Rights |
|
|
1.1 |
|
Business Day |
|
|
1.1 |
|
Cadence Introductory Paragraph
Cadence Claims |
|
|
6.2 |
(d) |
Cadence Indemnitees |
|
|
7.3 |
|
Calendar Quarter |
|
|
1.1 |
|
Calendar Year |
|
|
1.1 |
|
[***] |
|
|
2.1 |
(c)(i) |
[***] |
|
|
2.24 |
(d) |
[***] |
|
|
2.24 |
|
[***] |
|
|
3.2 |
(f) |
Clinical Study Countries |
|
|
1.1 |
|
Clinical Supply Agreement |
|
|
1.1 |
|
Clinical Testing Product |
|
|
1.1 |
|
Confidential Information |
|
|
1.1 |
|
Consent |
|
|
6.1 |
(d) |
Contract Research Organization |
|
|
1.1 |
|
Contracts |
|
|
1.1 |
|
Control |
|
|
1.1 |
|
Controlled |
|
|
1.1 |
|
Controlling |
|
|
1.1 |
|
Covenant Termination Date |
|
|
2.24(c). 1.1 |
|
Derivative |
|
|
1.1 |
|
Development Plan |
|
|
3.3 |
|
Disclosing Party |
|
|
1.1 |
|
Dispute |
|
|
7.6 |
|
Dollar |
|
|
1.1 |
|
Drug Regulatory Authority |
|
|
1.1 |
|
Effective
Date Introductory Paragraph
Equivalent Percentage |
|
|
4.1 |
(f) |
Exchange Act |
|
|
1.1 |
|
[***] Date |
|
|
1.1 |
|
[***] Period |
|
|
1.1 |
|
[***] Date |
|
|
2.1 |
(c) |
Execution
Date Introductory Paragraph
FDA |
|
|
1.1 |
|
FDCA |
|
|
1.1 |
|
Financial Statements |
|
|
6.2 |
(a) |
Force Majeure |
|
|
9.6 |
(b) |
Governmental Entity |
|
|
1.1 |
|
HSR Act |
|
|
1.1 |
|
ICC |
|
|
7.6 |
(a) |
Improvement |
|
|
1.1 |
|
In Accordance With GAAP |
|
|
6.2 |
(a) |
include |
|
|
9.14 |
|
includes |
|
|
9.14 |
|
including |
|
|
9.14 |
|
IND |
|
|
1.1 |
|
Indemnified Party |
|
|
7.4 |
|
Indemnifying Party |
|
|
7.1 |
|
Indemnitees |
|
|
7.1 |
|
Judgments |
|
|
6.1 |
(d) |
License |
|
|
2.1 |
(a) |
Lien |
|
|
1.1 |
|
Losses |
|
|
7.1 |
|
Material Adverse Effect |
|
|
1.1 |
|
NDA |
|
|
1.1 |
|
NDA Acceptance |
|
|
1.1 |
|
Net Sales |
|
|
1.1 |
|
|
|
|
*** |
|
Certain information on this page has
been omitted and filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions. |
vi
|
|
|
|
|
|
|
Section |
|
[***] Date |
|
|
2.1 |
(c) |
[***] Date |
|
|
2.24 |
(d) |
Organizational Documents |
|
|
1.1 |
|
Other Chemical Entity |
|
|
1.1 |
|
Other Product Data |
|
|
2.9 |
|
Other Reportable Information |
|
|
2.15 |
(e) |
Parties Introductory Paragraph
Party Introductory Paragraph
Patents |
|
|
1.1 |
|
Person |
|
|
1.1 |
|
Pharmatop Background
Pharmatop Know-How |
|
|
1.1 |
|
Pharmatop
License Agreement Background
Pharmatop Patent Challenge |
|
|
2.16 |
(a) |
Pharmatop Patents |
|
|
1.1 |
|
Pharmatop Royalty Term |
|
|
1.1 |
|
Previously Disclosed |
|
|
1.1 |
|
Proceedings |
|
|
6.1 |
(e) |
Product |
|
|
1.1 |
|
Product Data |
|
|
1.1 |
|
Qualifying [***] |
|
|
1.1 |
|
Qualifying [***] |
|
|
1.1 |
|
Receiving Party |
|
|
1.1 |
|
Registrational Information |
|
|
1.1 |
|
Regulatory Filings |
|
|
1.1 |
|
[***] Product |
|
|
2.24 |
(b) |
Retained Sum |
|
|
4.2 |
(b) |
Royalties |
|
|
4.1 |
(h) |
Rules |
|
|
7.6 |
(a) |
[***] |
|
|
2.24 |
|
Silicon Valley Loan Agreement |
|
|
6.2 |
(b) |
[***] |
|
|
2.24 |
|
Specified Number of Days |
|
|
8.3 |
|
Sublicense |
|
|
2.1 |
(a) |
Tax |
|
|
1.1 |
|
Tech Transfer Period |
|
|
2.12 |
|
Tech Transfer Plan |
|
|
2.10 |
|
Technology |
|
|
1.1 |
|
Technology Documentation |
|
|
1.1 |
|
Territory |
|
|
1.1 |
|
Third Party |
|
|
1.1 |
|
[***] |
|
|
2.24 |
|
Title 11 |
|
|
8.10 |
|
Transaction Documents |
|
|
1.1 |
|
Transfer Taxes |
|
|
1.1 |
|
[***] |
|
|
2.24 |
|
Valid Claim |
|
|
1.1 |
|
without limitation |
|
|
9.14 |
|
|
|
|
*** |
|
Certain information on this page has
been omitted and filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions. |
vii
IV APAP AGREEMENT
(US and Canada)
This IV APAP Agreement (US and Canada) (the Agreement) is entered into as of February 21,
2006 (the Execution Date), by and between Bristol-Myers Squibb Company, a Delaware corporation
having an address at 345 Park Avenue, New York, New York 10154 (BMS), and Cadence
Pharmaceuticals, Inc., a Delaware corporation having an address at 12730 High Bluff Drive, San
Diego, California 92130 (Cadence), effective as of March 29, 2006 (the Effective Date).
Cadence and BMS are sometimes collectively referred to herein as the Parties and each
individually as a Party.
BACKGROUND
1. BMS has licensed from SCR Pharmatop, a civil law partnership organized under the laws of
France, having its head offices address at 10, Square St. Florentin, 78150 Le Chesnay, France,
recorded with the Register of Commerce and Companies of Versailles under No. 407552702
(Pharmatop), rights under certain patents and patent applications relating to parenteral
paracetamol (also referred to in the United States as acetaminophen) formulations in the United
States, Canada and Mexico.
2. The License Agreement dated as of December 23, 2002, between Pharmatop and BMS (the
Pharmatop License Agreement) sets forth such rights.
3. BMS desires to sublicense to Cadence BMSs intellectual property rights and related
obligations under the Pharmatop License Agreement to Cadence with respect to the Territory (as
defined below) upon the terms and conditions set forth in this Agreement and to provide for certain
other matters.
AGREEMENT
THEREFORE, the Parties, intending to be legally bound, agree as follows:
ARTICLE I DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall have the
following meanings:
Adverse Event means any untoward medical occurrence in a patient or clinical investigation
subject administered any Product, and which does not necessarily have a causal relationship with
such product. An adverse event can therefore be any unfavorable and unintended sign (including an
abnormal laboratory finding, for example),
symptom or disease temporally associated with the use of a medicinal product, whether or not
considered related to the medicinal product. For the avoidance of doubt, in the U.S. an Adverse
Event shall include an adverse experience or test result in connection with the use of the Product
that requires a written IND safety report in accordance with 21 CFR Part 312.32(c), as amended or
superseded from time to time.
Affiliated Company of a Party means any corporation, firm, partnership or other entity that
directly or indirectly Controls, is Controlled by or is under common Control with such Party at any
time during the term of this Agreement, but only for so long as such entity directly or indirectly
Controls, is Controlled by or is under common Control with such Party.
Agreement has the meaning given to such term in the introductory paragraph hereof.
Annual Operating Plan has the meaning given to such term in Section 3.1 hereof.
[***] has the meaning given to such term in Section 3.2 hereof.
Applicable Law means any applicable federal, state, local or foreign statute, law,
ordinance, rule or regulation, judicial order, or industry standard imposed by regulation or law,
including the laws of the United States and Canada, and regulations promulgated by any other
applicable Governmental Entity or Drug Regulatory Authority.
Approval means, with respect to any Product in any regulatory jurisdiction, approval from
the applicable Drug Regulatory Authority sufficient for the importation, manufacture, distribution,
use and sale of the Product in such jurisdiction in accordance with Applicable Law, including
receipt of pricing and reimbursement approvals, where applicable.
Available [[***] has the meaning set forth in Section 2.24(a).
Balance Sheet has the meaning given to such term in Section 6.2(b) hereof.
Balance Sheet Date has the meaning given to such term in Section 6.2(b) hereof.
Bankruptcy means with respect to a Party the first to occur of:
(i) such Party shall have (A) voluntarily commenced any proceeding or filed any petition seeking
relief under Title 11 of the United States Code, or any other bankruptcy, insolvency or similar law
or any law for the protection of creditors of the United States, any state thereof, or any other
applicable jurisdiction, (B) applied for or consented to the appointment of a receiver,
trustee, custodian, sequestrator, conciliator, administrator or similar official for it or a
substantial part of its property, (C) filed an answer admitting the material allegations of a
petition filed
against or in respect of it in any such proceeding, (D) made a general assignment
for the benefit of creditors, (E) admitted in writing its inability, to pay its debts as they
become due or (F) taken corporate action for the purpose of effecting any of the foregoing; or
(ii) an involuntary proceeding shall have been commenced or any involuntary petition
shall have been filed in a court of competent jurisdiction seeking (A) relief in respect of
such Party or of a substantial part of its or their property, under Title 11 of the
|
|
|
*** |
|
Certain information on this page has
been omitted and filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions. |
2
United
States Code, or any other bankruptcy, insolvency or similar law of the United States, any
state thereof or any other applicable jurisdiction, (B) the appointment of a receiver,
trustee, custodian, sequestrator, conciliator, administrator or similar official for such
Party or all or substantially all of its property or (C) the winding-up or liquidation of
such Party; and such proceeding or petition shall have continued undismissed for 60 days or
an order or decree approving or ordering any of the foregoing shall have continued unstayed
and in effect for 30 days.
BMS has the meaning given to such term in the introductory paragraph hereof.
[***] means (i) [***]and (ii) [***].
BMS Indemnitees has the meaning given to such term in Section 7.2 hereof.
BMS Know-How means formulation and manufacturing know-how that is used by BMS and its
Affiliated Companies as of the Execution Date or during the Supply Term (as defined in the Clinical
Supply Agreement) to make or formulate the Product or the Clinical Testing Products (as defined in
the Clinical Supply Agreement) in the European Union.
BMS Patent Product means any Product for which the manufacture, use, import, sale or offer
for sale in the United States would otherwise infringe a Valid Claim of any of the BMS Patents but
for the license rights granted by BMS in Article 2 hereof.
BMS Patent Royalty Term means the date commencing upon the expiration of the Pharmatop
Royalty Term in the United States and terminating upon the date that the manufacture, use, import,
sale or offer for sale of BMS Patent Products in the United States is no longer covered by any
Valid Claim of a BMS Patent (including any patent term extensions, such as pediatric exclusivity
extensions, as may be available under Applicable Law) or covered by any data or regulatory
exclusivity.
BMS Patents means the Patents listed on Schedule 1.1.
BMS Rights means (i) BMSs rights under the Pharmatop Patents and Pharmatop Know-How with
respect to the Products in the Territory licensed to BMS under the Pharmatop License Agreement
during the term of this Agreement, subject to the limitations, terms and conditions set forth in
the Pharmatop License Agreement and (ii) the right granted to BMS in Section 2.1 of the Pharmatop
License Agreement to make and have made the Products outside the Territory for use within the
Territory.
Business Day means any day other than a Saturday, a Sunday or a United States Federal
holiday.
Cadence has the meaning given to such term in the introductory paragraph hereof.
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Cadence Claims has the meaning given to such term in Section 6.2(d) hereof.
Cadence Indemnitees has the meaning given to such term in Section 7.3 hereof.
Calendar Quarter means each of the periods of time from (a) January 1 through March 31; (b)
April 1 through June 30; (c) July 1 through September 30; and (d) October 1 through December 31.
Calendar Year means a year that begins on January 1 and ends on December 31.
[***] has the meaning set forth in Section 2.1(c)(i).
[***] has the meaning set forth in Section 2.24(d).
[***] has the meaning set forth in Section 2.24(a).
[***] has the meaning set forth in Section 3.2(f).
Clinical Study Countries means the countries set forth on a list of such countries that has
been Previously Disclosed, as such list is amended from time to time in accordance with the last
paragraph of Section 3.6.
Clinical Supply Agreement means the Clinical Supply Agreement dated as of the Execution Date
between Lawrence Laboratories and Cadence (and BMS, as guarantor).
Clinical Testing Product has the meaning set forth in the Clinical Supply Agreement.
Confidential Information means (a) with respect to a Party and its Affiliated Companies
(collectively, the Receiving Party), all information,
Technology and confidential or proprietary materials which are disclosed by the other Party and its
Affiliated Companies (collectively, the Disclosing Party) to the Receiving Party hereunder or
under the Clinical Supply Agreement or that has previously been disclosed under the Mutual
Confidential Disclosure Agreement between the Parties dated July 6, 2005, as amended, or to any of
its employees, consultants, Affiliated Companies or sublicensees and any information that
is considered Confidential Information for purposes of the Clinical Supply Agreement, (b) the Product
Data, which shall be Confidential Information of BMS to the extent resulting from work, trials or
studies conducted by or on behalf of BMS and which shall be Confidential Information of Cadence to
the extent resulting from work, trials or studies conducted by or on behalf of Cadence, (c)
correspondence with Drug Regulatory Authorities, which shall be Confidential Information of the
Party that conducted such correspondence, and (d) all reports (including any development,
commercialization and/or financial reports), plans (including the Development Plan and the Annual
Operating Plan) and other documents and budgets provided by Cadence and/or its Affiliated Companies
to BMS pursuant to this Agreement, all of which shall be considered Confidential Information of
Cadence except, in each of (a), (b),(c) or (d), to the extent that any such information (i) as of
the date of disclosure is known to the Receiving Party
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or its Affiliated Companies, as demonstrated
by credible written documentation existing and in the possession of the Receiving Party prior to
the date of disclosure, other than by virtue of a prior confidential disclosure to such Receiving
Party; (ii) as of the date of disclosure is in, or subsequently enters, the public domain, through
no fault or omission of the Receiving Party; (iii) is obtained without restriction from a Third
Party having a lawful right to make such disclosure free from any obligation of confidentiality to
the Disclosing Party; or (iv) is independently developed by or for the Receiving Party without
reference to or reliance upon any Confidential Information of the Disclosing Party as demonstrated
by credible written documentation. The amount of the payments made to BMS under this Agreement
shall be Confidential Information of both BMS and Cadence. A Partys Affiliated Company that has
disclosed Confidential Information to a Receiving Party shall continue to be considered a
Disclosing Party even after it ceases to be an Affiliated Company of such Party. A Partys
Affiliated Company that has received Confidential Information from a Disclosing Party shall
continue to be considered a Receiving Party even after it ceases to be an Affiliated Company of
such Party.
Consent has the meaning given to such term in Section 6.1(d) hereof.
Contract Research Organization means a reputable Third Party research or development
organization one of whose principal businesses is the provision of contract research or development
services to unrelated Persons.
Contracts means all contracts, agreements, commitments and other legally binding
arrangements, whether oral or written.
Control means (a) with respect to any intellectual property (including any Patents or
Technology), the possession by a Party of the ability to grant a license or sublicense of such
intellectual property without violating the terms of, or requiring a consent under, any agreement
or arrangement between such Party and any Third Party and (b) when used
with respect to any Person means the power to direct or cause the direction of the management
or policies of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract, or otherwise. Controlled and Controlling shall have correlative
meanings.
Covenant Termination Date has the meaning set forth in Section 2.24(c).
Derivative of paracetamol means any compound whose chemical structure is derived from the
chemical structure for paracetamol through structural modifications and/or chemical changes that
retain those portions of paracetamols chemical
structure that are known to contribute materially to the activity, specificity and selectivity of
paracetamol.
Development Plan has the meaning given to such term in Section 3.3 hereof.
Disclosing Party has the meaning given to such term in the definition of Confidential
Information herein.
Dispute has the meaning given to such term in Section 7.6 hereof.
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Dollar or $ means United States dollars, the lawful currency of the United States.
Drug Regulatory Authority means any Governmental Entity with responsibility for granting any
licenses, approvals or authorizations or granting pricing and/or reimbursement approvals necessary
for the marketing and sale of pharmaceutical products in any regulatory jurisdiction.
Effective Date has the meaning given to such term in the introductory paragraph hereof.
Exchange Act means the Securities Exchange Act of 1934, as amended from time to time.
[***] Date means [***] on which (i) [***], (ii) [***] or (iii) [***]; provided that (A)
[***] and (B) [***].
[***] Period means the [***] not include any period during which [***].
[***] Date has the meaning given to such term in Section 2.1(c).
Execution Date has the meaning given to such term in the introductory paragraph hereof.
FDA means the United States Food and Drug Administration or any successor agency.
FDCA means the Federal Food, Drug & Cosmetics Act, 21 U.S.C. 321 et seq., any amendments or
supplements thereto, or any regulations promulgated or adopted thereunder or any successor act
thereof.
Financial Statements has the meaning given to such term in Section 6.2(a) hereof.
Force Majeure has the meaning given to such term in Section 9.6(b) hereof.Governmental
Entity means any Federal, state, local or foreign government or any court of competent
jurisdiction, regulatory or administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign.
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
ICC has the meaning given to such term in Section 7.6(a) hereof.
Improvement means any adaptation, improvement, enhancement or upgrade with respect to the
formulation and/or manufacture of the Products, whether such Improvement can be protected by patent
or not.
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In Accordance With GAAP has the meaning given to such term in Section 6.2(a) hereof.
IND means an Investigational New Drug Application (as defined in 21 CFR Part 312.3, as
amended or superseded from time to time) that is required to be filed with the FDA before beginning
clinical testing of a Product in human subjects in the United States, or any successor application
or procedure.
Indemnified Party has the meaning given to such term in Section 7.4 hereof.
Indemnifying Party has the meaning given to such term in Section 7.1 hereof.
Indemnitees has the meaning given to such term in Section 7.1 hereof.
Judgments has the meaning given to such term in Section 6.1(d) hereof.
License has the meaning given to such term in Section 2.1(a) hereof.
Lien means any pledge, encumbrance, mortgage, security interest, purchase option, call or
similar right.
Loan Agreement has the meaning given to such term in Section 6.2(b) hereof.
Losses has the meaning given to such term in Section 7.1 hereof.
Material Adverse Effect means, with respect to any applicable representation and warranty of
a Party or to any other matter to which such phrase is applied, a material adverse change in or
effect on (i) such Partys (and its subsidiaries) business, operations, assets, condition
(financial or otherwise) taken as a whole or (ii) such Partys ability to perform its obligations
under any Transaction Document to which it is a party.
NDA means a new drug application or an abbreviated new drug application (as described in 21 CFR
314.50), including any amendments or supplements thereto, filed with the FDA pursuant to the FDCA
and includes any Common Technical Document for the Registration of Pharmaceuticals for Human Use
filed with the FDA or any Drug Regulatory Authority in Canada.
NDA Acceptance means the earlier of (i) the date Cadence receives written notice from the
FDA of acceptance by the FDA of an NDA filed by or on behalf of Cadence or its licensees with
respect to any Product in the United States, or (ii) sixty (60) days following filing of such NDA
with the FDA, provided that Cadence has not received a Notice of Refusal to File from the FDA
with respect to such NDA.
Net Sales means the total revenue invoiced by Cadence, its Affiliated Companies,
sublicensees, co-promotion and co-marketing partners and any other Person selling or promoting
Products on behalf of any such Person from the sale of a Product to independent Third Parties in
the Territory less the following amounts: (a) credits, allowances and rebates to, and chargebacks
from the account of, such customers for spoiled, damaged, out-dated and returned Product;
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(b) trade
discounts, cash discounts, quantity discounts, rebates and other price reduction programs, and
other charge back payments; (c) sales, value-added and other similar taxes (including duties or
other governmental charges levied on, absorbed or otherwise imposed on the sales of Products
including governmental charges otherwise measured by the billing amount); (d) customs duties,
surcharges and other governmental charges incurred in connection with the exportation or
importation of the Product; and (e) bad debts on Product sales written off in accordance with
generally accepted accounting principles, consistently applied. For the purposes of this
definition, samples distributed by Cadence, its Affiliated Companies, sublicensees, co-promotion
and co-marketing partners and any other Person selling or promoting Products on behalf of any such
Person to their customers free of charge, and any Product used or provided for clinical or research
purposes, shall not be included in Net Sales.
When Products are sold for monies other than Dollars, the monies due will first be determined
in the foreign currency of the country in which such Products were sold and then converted into
equivalent Dollars, on a monthly basis, using the applicable U.S. Federal Reserve rate in effect on
the last business day of each calendar month.
In the event that Cadence makes sales of Products to an Affiliated Company, sublicensee,
co-promotion or co-marketing partner or any other person selling or promoting Products on behalf of
any such Person, the calculation of Net Sales shall be based on the greater of (x) the revenue
received by Cadence from its sale of Products to the Affiliated Company, sublicensee, co-promotion
or co-marketing partner or other person selling or promoting Products on behalf of any such Person,
as the case may be, and (y) the revenue received by the Affiliated Company, sublicensee,
co-promotion or co-marketing partner or other person selling or promoting Products on behalf of any
such Person from its sale of Products to Third Parties.
[***] Date has the meaning set forth in Section 2.1(c).
[***] Date has the meaning set forth in Section 2.24(d).
Organizational Documents means, with respect to any Person at any time, such Persons
certificate or articles of incorporation, by-laws, memorandum and articles of association,
certificate of formation of limited liability company,
limited liability company agreement, and other similar organizational or constituent documents, as
applicable, in effect at such time.
Other Chemical Entity means any chemical entity that is not parenteral paracetamol or a
Derivative thereof.
Other Reportable Information has the meaning set forth in Section 2.15(e).
Parties has the meaning given to such term in the introductory paragraph hereof.
Party has the meaning given to such term in the introductory paragraph hereof.
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Patents means, to the extent that they have been or are filed or issued in the Territory:
(a) patents and patent applications existing as of the Execution Date and/or at any time
thereafter; and (b) any divisionals, continuations, substitutions, continuations-in-part,
extensions, renewals, re-examinations or reissues of such patents and/or applications as of the
Execution Date and/or at any time thereafter.
Person means any individual, firm, corporation, partnership, limited liability company,
trust, joint venture, governmental authority or other entity.
Pharmatop has the meaning given to such term in Background.
Pharmatop Know-How means the Know-How (as such term is defined in the Pharmatop License
Agreement) licensed to BMS under the Pharmatop License Agreement.
Pharmatop License Agreement has the meaning given to such term in Background.
Pharmatop Patent Challenge has the meaning given to such term in Section 2.16(a).
Pharmatop Patents means the Licensed Patents (as such term is defined in the Pharmatop
License Agreement) filed or issued in the Territory and licensed to BMS under the Pharmatop License
Agreement.
Pharmatop Royalty Term means, with respect to each country in the Territory on a
country-by-country basis, the date commencing with the date of first commercial sale of a Product
in such country, and terminating upon the latest of (a) the date that is ten (10) years after such
first commercial sale in such country, (b) the date that the manufacture, use and sale of a Product
in such country is no longer covered by any Valid Claim of a Pharmatop Patent in such country
(including any patent term extensions, such as pediatric exclusivity extensions, as may be
available under Applicable Law) or (c) the date that the obligation of BMS to pay royalties to
Pharmatop (or any successor licensor), pursuant to the Pharmatop License Agreement, terminates.
Previously Disclosed means with respect to any document or information, a document or
information set forth in a mutually agreed letter or
memorandum delivered by Cadence or BMS to the other contemporaneously with the execution of this
Agreement which identifies such document or information as Previously Disclosed for purposes of
this Agreement.
Proceedings has the meaning given to such term in Section 6.1(e) hereof.
Product means (i) any parenterally administered dosage form containing paracetamol (or any
Derivative thereof) alone or in combination with one or more other drugs (as defined, as of
December 23, 2002, in Section 201 of the FDCA), and for which the manufacture, use or sale in a
country in the Territory (x) would otherwise infringe any of the Pharmatop Patents or BMS Patents
but for the license rights granted by BMS in Article 2 hereof, and/or (y) incorporates or uses to
any material extent any Pharmatop Know-How and/or (ii) any parenterally administered dosage form
containing paracetamol (or any Derivative thereof) alone or in combination with
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one or more other
drugs (as defined, as of December 23, 2002, in Section 201 of the FDCA) that is manufactured by a
process that incorporates or uses to any material extent any BMS Know-How. When used with respect
to any jurisdiction outside the Territory, Product shall refer to any parenterally administered
dosage form containing paracetamol (or any Derivative thereof) alone or in combination with one or
more other drugs (as defined, as of December 23, 2002, in Section 201 of the FDCA).
Product Data means data, information and conclusions resulting from any analytical,
galenical, stability, toxicology or pharmacokinetic work and/or clinical studies and/or clinical
trials relating to, or conducted by or on behalf of BMS or Cadence and filed in support of,
Approval of Products in the United States.
Qualifying [***] means a [***], with respect to which [***].
Qualifying [***] means any [***] (i) [***], (ii) [***], and (iii) [***].
Receiving Party has the meaning given to such term in the definition of Confidential
Information herein.
Registrational Information has the meaning set forth in the Pharmatop License Agreement.
Regulatory Filings means, collectively, any and all INDs, NDAs or any other filings
(including any foreign equivalents) as may be required by any Drug Regulatory Authority for the
development, manufacture or commercialization of Products, as applicable.
[***] Product has the meaning given to such term in Section 2.24(b) hereof.
Royalties has the meaning given to such term in Section 4.1(h) hereof.
Rules has the meaning given to such term in Section 7.6(a) hereof.
[***] has the meaning given to such term in Section 2.24(a).
[***] has the meaning set forth in Section 2.24(a).
Specified Number of Days has the meaning given to such term in Section 8.3.
Sublicense has the meaning given to such term in Section 2.1(a) hereof.
Tax means all taxes, charges, fees, levies or other assessments, and all estimated payments
thereof, including income, excise, license, severance, stamp, occupation, premium, profits,
windfall profits, customs duties, capital stock, employment, disability, registration, alternative
or add-on minimum, property, sales, use, value added, environmental, franchise, payroll, transfer,
gross receipts, withholding, social security or similar unemployment taxes, and any other tax of
any kind whatsoever, imposed by any federal, state, local or foreign
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governmental authority,
including any interest, penalties and additions to tax relating to such taxes, charges, fees,
levies or other assessments.
Tech Transfer Period has the meaning given to such term in Section 2.12 hereof.
Tech Transfer Plan has the meaning given to such term in Section 2.10 hereof.
Technology means and includes all inventions, discoveries, Improvements, trade secrets,
know-how, processes, procedures, research records, records of inventions, test information, market
surveys and other similar proprietary methods, materials or property, whether or not patentable,
relating to Products, including (a) samples of, methods of production or use of, and structural and
functional information pertaining to, chemical compounds, proteins or other biological substances,
(b) data, formulations, techniques and know-how (including any negative results), and (c) rights
under patents, patent applications and copyrights.
Technology Documentation means a written description of the BMS Know-How.
Territory means the United States (including Puerto Rico and all U.S. possessions and
territories) and Canada.
Third Party means any Person other than Cadence, BMS and their respective Affiliated
Companies.
Title 11 has the meaning given to such term in Section 8.10 hereof.
Transaction Documents means this Agreement and the Clinical Supply Agreement.
Transfer Taxes means taxes and assessments imposed upon the transfer, such as transfer,
sales, value added, and stamp taxes, and not Taxes measured by income or gain, but including any
interest, penalties or other additions thereto.
[***] has the meaning set forth in Section 2.24(a).
[***] has the meaning set forth in Section 2.24(a).
Valid Claim means a claim in any unexpired issued Pharmatop Patent or BMS Patent that has
not been held invalid or unenforceable by a non-appealed or unappealable decision by a court or
other appropriate body of competent jurisdiction, and which is not admitted to be invalid through
disclaimer, dedication to the public, and which has not been cancelled or abandoned in accordance
with and as permitted by (i) both the terms of this Agreement and the Pharmatop License Agreement
in the case of the Pharmatop Patents, or (ii) the terms of this Agreement in the case of the BMS
Patents.
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ARTICLE II GRANT OF U.S. AND CANADIAN RIGHTS AND RELATED TRANSFERS
2.1 Grant of Sublicense and License .
(a) Effective as of the Effective Date and subject to Section 3.4 and the reservation of
rights set forth in Section 2.2 and subject to early termination as provided in Article VIII, BMS
hereby grants to Cadence on behalf of itself and its Affiliated Companies:
(i) subject to the terms, conditions and limitations set forth in the Pharmatop License
Agreement and subject to Section 2.1(c):
(A) an exclusive (even as to BMS), royalty-bearing sublicense under the BMS Rights with
the right to sublicense as provided in Section 2.4, to import, use, sell and offer for sale
Products in the Territory;
(B) an exclusive (even as to BMS) sublicense under the BMS Rights, with the right to
sublicense as provided in Section 2.4, to make and have made the Products in the Territory
solely for (1) import, use, sale and offer for sale within the Territory or (2) import and
use in clinical trials in the Clinical Study Countries as permitted by Section 3.6; and
(C) an exclusive (even as to BMS) sublicense under the BMS Rights, with the right to
sublicense as provided in Section 2.4, to make and have made the Products anywhere in the
world solely for (1) import, use, sale and offer for sale within the Territory, subject to
the limitations set forth in Section 2.1 of the Pharmatop License Agreement (other than the
consent of UPSA S.A., which has been obtained as of the Effective Date) and subject to
Section 3.8, or (2) import or use in Cadences clinical trials in the Clinical Study
Countries as permitted by Section 3.6 hereof;
(ii) a non-exclusive license under the BMS Patents, with the right to sublicense as provided
in Section 2.4, to import, use, sell and offer for sale Products in the Territory; provided,
however, that the license granted in this paragraph shall not grant any right to the composition of
matter of any Other Chemical Entity, or the right to import, use, sell or offer for sale any Other
Chemical Entity or to any use not claimed by the BMS Patents;
(iii) a non-exclusive license under the BMS Patents, with the right to sublicense as provided
in Section 2.4, to make and have made the Products in the Territory solely for import, use, sale
and offer for sale within the Territory; provided, however, that the license granted in this
paragraph shall not grant any right to the composition of matter of any Other Chemical Entity, or
the right to make or have made any Other Chemical Entity or to any use not claimed by the BMS
Patents;
(iv) a non-exclusive license under the BMS Know-How, with the right to sublicense as provided
in Section 2.4, to make and have made the Products anywhere in the world solely for (1) use and
sale within the Territory and (2) import and use in clinical trials in the Clinical Study Countries
as permitted by Section 3.6; and.
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(v) a non-exclusive right to use, copy, translate, display and distribute (subject to any
confidentiality obligations), improve and make derivative works of the BMS Technology Documentation
for the purpose of making and having made the Products consistent with the license set forth above
with respect to the BMS Know-How.
The sublicenses granted in Section 2.1(a)(i) are referred to herein collectively as the
Sublicense), and the licenses granted in Sections 2.1(a)(ii), (iii), (iv) and (v) are referred to
herein collectively as the License).
The Sublicense granted to Cadence hereby shall only permit Cadence to sell Products that are
packaged, finished products ready for use, and the Sublicense shall not extend to any sales in bulk
or of semi-finished products except to permitted sublicensee(s) of Cadence. Except as may be
otherwise agreed in writing by BMS in its sole discretion, the License granted to Cadence hereby
shall only permit Cadence to sell Products that are packaged, finished products ready for use, and
the License shall not extend to any sales in bulk or of semi-finished products except to permitted
sublicensee(s) of Cadence.
(b) Cadence hereby (i) accepts such Sublicense and License, (ii) acknowledges that the
Sublicense rights granted hereunder are subject and subordinate to the rights of Pharmatop under,
and all the terms and conditions of, the Pharmatop License Agreement and (iii) agrees to comply
with all the restrictions of the Pharmatop License Agreement that relate to the exercise of the
rights sublicensed to Cadence hereunder.
(c) If on the [***], then [***]; provided that:
(i) [***] (A) Cadence may [***] and (B) such [***]. Cadence shall provide to BMS
evidence reasonably satisfactory to BMS of the accuracy of such report. Notwithstanding the
foregoing, [***] (A) [***] or (B) [***]. In the event [***] as provided in this Section
2.1(c).
(ii) Such [***].
(iii) Such [***].
Each date, if any, as of which such [***].
(d) Any Affiliated Companies on whose behalf BMS has made any of the foregoing license grants
that hereafter ceases to be an Affiliated Company of BMS shall
nevertheless continue to be obligated under such license grants in accordance with the terms
of this Agreement.
2.2 No Implied Licenses; Reservation of Rights.
(a) Cadence shall have no licenses or other rights other than those expressly granted in this
Agreement, and, in particular and without limiting the foregoing, nothing in this
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Agreement shall
be construed to grant Cadence any licenses or other rights in any intellectual property rights,
information or data (i) owned or Controlled by BMS or any of its Affiliated Companies, except as
expressly set forth in this Agreement or (ii) owned or Controlled by Pharmatop or any of its
Affiliated Companies that is not licensed by Pharmatop to BMS under the Pharmatop License
Agreement.
(b) Cadence acknowledges that BMS or one or more of its Affiliated Companies holds certain
license rights from Pharmatop (whether under the Pharmatop License Agreement or otherwise) relating
to countries outside the Territory, and, except for the right of cross-reference provided for in
Section 2.8(d), the rights granted to Cadence under this Agreement do not include any license or
other rights with respect to such other rights of BMS and its Affiliated Companies, all of which
are expressly reserved to BMS and its Affiliated Companies.
(c) Notwithstanding the exclusivity of any rights granted under Section 2.1, BMS hereby
reserves the non-exclusive, sublicensable right under the BMS Rights, BMS Patents and BMS Know-How
(i) to make and have made the Products in the Territory for supply to Cadence, or to the extent
otherwise necessary or appropriate for BMS or any of its Affiliated Companies or sublicensees to
perform its obligations, under the Clinical Supply Agreement, (ii) to make and have made the
Products anywhere in the world for import, use, sale and offer for sale outside the Territory and
(iii) to import, make, have made and use Products in the Territory for any non-clinical or clinical
research purpose of BMS and its Affiliated Companies (subject, to the extent applicable, to Section
3.7) or in support of any Regulatory Filings or other activities outside the Territory (subject, to
the extent applicable, to Section 3.7); provided that the rights reserved pursuant to clause (iii)
above shall not be sublicensable.
(d) BMS is not sublicensing or granting to Cadence, and Cadence acknowledges and agrees that
it is not receiving any rights under Section 2.10 or the proviso of the last sentence of Section
2.3 of the Pharmatop License Agreement, all of which are reserved to BMS.
(e) BMS shall have no licenses or other rights other than those expressly granted in this
Agreement, and, in particular and without limiting the foregoing, nothing in this Agreement shall
be construed to grant BMS any licenses or other rights in any intellectual property rights,
information or data owned or Controlled by Cadence or any of its Affiliated Companies, except as
expressly set forth in this Agreement.
2.3 Rights of Pharmatop.
(a) Nothing in this Agreement shall reduce or limit any of Pharmatops rights under the
Pharmatop License Agreement.
(b) Pharmatop shall have the same right to supervise the activities of Cadence hereunder as
Pharmatop has with respect to BMSs activities under the Pharmatop License Agreement.
(c) Pharmatop shall have the same rights to audit Cadences (and any of its sublicensees)
activities relevant to this Agreement, and to inspect Cadences (and any
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sublicensees) facilities
involved in the manufacture of Products, in the same manner as Pharmatop has with respect to BMSs
activities and facilities under the Pharmatop License Agreement.
2.4 Further Sublicenses.
(a) Except as set forth in Section 2.5, the rights licensed to Cadence under Section 2.1 shall
be sublicensable to a Third Party [***] (except to the extent otherwise agreed to by BMS in writing
in its sole discretion, which writing shall, to the extent applicable, specifically waive
compliance with this Section 2.4(a)): (i) such sublicense shall refer to this Agreement and shall
be subject and subordinate to this Agreement and, with respect to the Sublicense, the Pharmatop
License Agreement, (ii) the sublicensee shall assume and agree in writing to be bound by and comply
with the terms and conditions of this Agreement in the same manner as Cadence, and without limiting
the generality of the foregoing to maintain insurance coverage at the same levels and on the same
terms and conditions as set forth in Section 7.5, provide sales reports pursuant to Section 4.7
hereof and keep books and records and permit BMS to review such books and records pursuant to
Section 4.8 hereof, (iii) BMS shall be made an express third party beneficiary of the sublicensees
obligations under such sublicense that relate to compliance with the terms and conditions of this
Agreement with the express right to enforce the same directly against the sublicensee, (iv) a copy
of the proposed sublicense (except that any confidential financial terms may be redacted) shall be
provided to BMS at the time Cadence seeks BMSs consent to such sublicense as aforesaid, (v) an
executed copy of the sublicense (except that any confidential financial terms may be redacted)
shall be provided to BMS promptly after execution, (vi) each sublicense or other right granted by
Cadence with respect to any right licensed to it hereunder shall terminate immediately upon the
termination of the Sublicense or License from BMS to Cadence with respect to such right; and (vii)
such sublicensees shall not have the right to grant further sublicenses or otherwise transfer any
rights sublicensed to them with respect to the Products except in accordance with and subject to
this Section 2.4 and all of the other terms and conditions of this Agreement. The foregoing shall
also apply in the event of any subsequent amendment or modification of such sublicense agreement.
In the event Cadence desires to effect any such sublicense, it shall provide BMS with such
information concerning the proposed arrangement as BMS may reasonably request. BMS shall
use reasonable efforts to provide its response within [***] ([***])[***] (or, if BMS so
requests, [***] ([***])[***]) after receiving such information. The failure of BMS to consent to
or disapprove of such proposed sublicense within such [***] period shall not constitute a consent
to such sublicense.
(b) Cadence may grant sublicenses to its Affiliated Companies under the Sublicense and the
License [***], subject, in the case of a sublicense of rights licensed to Cadence pursuant to the
Sublicense, to compliance with the Pharmatop License, and then shall be sublicensable only as
follows (except to the extent otherwise agreed to by BMS in writing in its sole discretion, which
writing shall, to the extent applicable, specifically waive compliance with this Section 2.4(a)):
(i) such sublicense shall be subject and subordinate to this Agreement and, with respect to the
Sublicense, the Pharmatop License Agreement, (ii) such sublicense shall
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terminate immediately in
the event such Affiliated Company ceases to be an Affiliated Company of Cadence, (iii) an executed
copy of the sublicense shall be provided to BMS promptly after execution, (iv) each sublicense or
other right granted by Cadence with respect to any right licensed to it hereunder shall terminate
immediately upon the termination of the Sublicense or License from BMS to Cadence with respect to
such right and (v) such sublicensees shall not have the right to grant further sublicenses or
otherwise transfer any rights sublicensed to them with respect to the Products except in accordance
with and subject to this Section 2.4 and all of the other terms and conditions of this Agreement.
The foregoing shall also apply in the event of any subsequent amendment or modification of such
sublicense agreement. Without limiting any of Cadences responsibilities under Section 2.4(c),
Cadence shall cause its Affiliated Company to comply with the terms and conditions of this
Agreement in the same manner as Cadence.
(c) Cadence shall be primarily responsible for all payments due and the making of reports
under this Agreement by its sublicensees and for compliance with all applicable terms of this
Agreement, and Cadence shall remain jointly and severally liable with each of its sublicensees
(whether or not such sublicensee is an Affiliated Company of Cadence) for any failure by such
sublicensee to perform, observe or comply with the terms and conditions of this Agreement or the
Pharmatop License Agreement.
(d) Any purported sublicense hereunder not entered into in compliance with this Section 2.4
shall be null and void and without effect.
(e) Cadence or its Affiliated Companies may engage a Third Party, including a contractor,
consultant, or Contract Research Organization, to perform research or development activities with
respect to Products on behalf of Cadence or its Affiliated Companies and such activities shall not
be deemed a sublicense if no rights under the BMS Rights, BMS Patents or BMS Know-How are licensed
or granted; provided, that (i) none of the rights of BMS hereunder are diminished or otherwise
adversely affected as a result of such engagement, (ii) any such Third Party shall enter into an
appropriate written agreement obligating such Third Party to be bound by obligations of
confidentiality and restrictions on use of Confidential Information that
are no less restrictive than the obligations in this Agreement; and (iii) Cadence shall at all
times be responsible for the performance of such Third Party. Cadence shall use all reasonable
efforts to cause such Third Party to agree in writing to assign to Cadence inventions made by such
Third Party in performing such services for Cadence.
2.5 Delegation of Manufacturing. Subject to the scope of the rights granted to
Cadence in the Sublicense and the License and subject to Section 3.8, Cadence may arrange by
written agreement to have the Products manufactured by a Third Party manufacturer without the prior
consent of BMS but subject to compliance with the Pharmatop License Agreement with respect to
sublicensing, if applicable, and subject to clauses (i), (iii), (v), (vi) and (vii) of Section
2.4(a) and the provision to BMS of a copy of the agreement or agreements relating to such
manufacturing arrangement (subject to redaction of confidential financial terms) promptly after the
execution thereof. If the Products are manufactured by a Third Party manufacturer (other than
pursuant to the Clinical Supply Agreement), Cadence shall notify BMS and Pharmatop and shall
provide BMS and Pharmatop with the identity of each such manufacturer and provide proof to BMS and
Pharmatop that (a) each such manufacturer has been informed in writing that the products to be made
are subject to the Licensed Patents (as defined in the
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Pharmatop License Agreement) held by
Pharmatop and (b) each such manufacturer has agreed to manufacture the Products only pursuant to a
written agreement with Cadence and solely for the benefit of Cadence and its sublicensees. In
addition Cadence shall use reasonable efforts to have such Third Party agree in writing to assign
or license to Cadence Improvements made by such Third Party with respect to the manufacture of the
Products, which license if obtained by Cadence shall include the right to sublicense such rights to
BMS and Pharmatop as contemplated by Section 2.7. The above restrictions do not apply to raw
materials, packaging items or other incidental articles from outside suppliers, or to the
performance of packing operations in accordance with customary practices in the pharmaceutical
industry.
2.6 Development and Commercialization Arrangements. Cadence shall not enter into any
co-development or other development collaboration with any Third Party with respect to the Products
without the prior written consent of BMS. The engagement of a Contract Research Organization to
perform research or development services on behalf of Cadence or its Affiliated Companies, which
research is funded entirely by Cadence and its Affiliated Companies (and not indirectly by a Third
Party through Cadence or any of its Affiliated Companies), shall not constitute a co-development or
other development collaboration that requires the consent of BMS. In the event Cadence enters into
any co-promotion or co-marketing arrangement with any Third Party with respect to the Products or
any other arrangement with a Third Party whereby such Third Party would distribute or commercialize
any Product, Cadence shall include in the quarterly reports provided to BMS pursuant to Section 3.2
information concerning the activities of the other party to such co-promotion, co-marketing,
distribution or commercialization arrangement. In connection with any arrangement with a Third
Party whereby such Third Party would distribute, co-promote, co-market or otherwise develop or
commercialize any Product (or collaborate with Cadence in the development or commercialization of
any Product), Cadence shall comply, and shall cause such Third Party to comply, with all applicable
terms and
conditions of this Agreement and the Pharmatop License Agreement. Cadence shall remain
jointly and severally liable with any such Third Party for any failure by such Third Party to
perform, observe or comply with the terms and conditions of this Agreement or the Pharmatop License
Agreement.
2.7 Improvements.
(a) BMS shall inform Cadence in a timely manner of any Improvements made by Pharmatop (or any
Third Party sublicensees of Pharmatop) as to which BMS receives notice pursuant to Section 2.2 or
Article 8 of the Pharmatop License Agreement. If requested by Cadence, BMS will request that
Pharmatop license such Improvements to BMS and, upon receipt of such license, shall sublicense such
Improvements to Cadence on a non-exclusive, [***] basis ([***]), consistent with the license
thereof from Pharmatop and the Pharmatop License Agreement, to the extent not already covered by
the Sublicense.
(b) BMS shall notify Cadence in writing of any Improvements made in whole or in part by its
(and its Affiliated Companies) employees, agents, sublicensees and Third Party manufacturers after
the Effective Date and Controlled and implemented by BMS and its
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Affiliated Companies. Upon the
request of Cadence, BMS shall grant Cadence a non-exclusive, [***] license to practice and use such
Improvements, including the right to grant sublicenses, anywhere in the world to make and have made
Products solely (i) to import, use, sale and offer for sale within the Territory and (ii) to import
and use in clinical trials in the Clinical Study Countries as permitted by Section 3.6. BMS shall
provide Cadence with such information in BMSs possession as may be reasonably requested by Cadence
in order to practice such Improvements.
(c) Cadence shall notify BMS and Pharmatop in writing of any Improvements made in whole or in
part by its (and its Affiliated Companies) employees, agents, sublicensees and Third Party
manufacturers after the Effective Date and Controlled and implemented by Cadence and its Affiliated
Companies, and Cadence shall license such Improvements to Pharmatop on the basis described in
Article 8 of the Pharmatop License Agreement. In addition, upon the request of BMS, Cadence shall
grant BMS a non-exclusive [***] license to practice and use such Improvements, including the right
to grant sublicenses, anywhere in the world (i) to make and have made the Products in the Territory
for supply to Cadence, or to the extent otherwise necessary or appropriate for BMS or any of its
Affiliated Companies or sublicensees to perform its obligations, under the Clinical Supply
Agreement, (ii) to make and have made the Products anywhere in the world for import, use, sale and
offer for sale outside the Territory and (iii) to import, make, have made and use Products in the
Territory for any non-clinical or clinical research purpose of BMS and its Affiliated Companies
(subject, to the extent applicable, to Section 3.7) or in support of any Regulatory Filings or
other activities outside the Territory (subject, to the extent applicable, to Section 3.7);
provided that the rights granted pursuant to
clause (iii) above shall not be sublicensable. Cadence shall provide BMS with such
information in Cadences possession as may be reasonably requested by BMS in order to practice such
Improvements.
2.8 Transfer of Regulatory Filings; Communications with Regulatory Authorities.
(a) As of the Effective Date, BMS hereby cedes and assigns to Cadence all right, title and
interest in and to the Regulatory Filings with Drug Regulatory Authorities in the Territory
relating to the Products and shall use reasonable efforts to take any actions with the applicable
Drug Regulatory Authority in the Territory that are necessary to transfer ownership and control of
such Regulatory Filings to Cadence not later than five (5) days after the Effective Date.
(b) During the [***]([***])[***] period following the Effective Date, BMS shall transfer to
Cadence copies of all Regulatory Filings with Drug Regulatory Authorities in the Territory relating
to Products and shall provide Cadence with copies of all material correspondence with Drug
Regulatory Authorities in the Territory relating to Products. Following the Effective Date,
Cadence shall have sole responsibility for (i) communicating with Drug Regulatory Authorities in
the Territory with respect to Products, including responsibility for all Regulatory Filings in the
Territory and all associated official correspondence and informal communications, and (ii) subject
to Section 2.15, reporting to Drug Regulatory Authorities in the Territory any Adverse Event
relating to Products in compliance with the requirements of Applicable Law in the Territory. If
BMS maintains such Regulatory Filings and correspondence
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in electronic form, BMS shall provide such
copies to Cadence in electronic form, but BMS shall have no obligation to reformat or otherwise
alter or modify any materials or to create or recreate any such materials in electronic form in
order to provide them to Cadence.
(c) BMS and its Affiliated Companies and licensees and, subject to the terms of Sections 3.1
and 3.3 of the Pharmatop License Agreement, Pharmatop shall have a right to cross-reference, file
or incorporate by reference any Regulatory Filings in the Territory transferred hereunder or
subsequently made by Cadence and its Affiliated Companies and sublicensees with respect to Products
in the Territory (and any data contained therein) to support Regulatory Filings by BMS and its
Affiliated Companies and licensees for Products outside the Territory.
(d) Cadence and its Affiliated Companies and licensees shall have a right to cross-reference,
file or incorporate by reference any Regulatory Filings made by BMS and its Affiliated Companies
and sublicensees of the BMS Rights with respect to Products outside the Territory (and any data
contained therein) to support Regulatory Filings by Cadence and its Affiliated Companies and
licensees in the Territory (or Regulatory Filings in such additional jurisdictions where Cadence
may in the future acquire rights).
2.9 Transfer of Data and Transition Arrangements. Following the Effective Date:
(a) During the [***] ([***])[***] period following the Effective Date, BMS shall provide to
Cadence a copy of (i) all Product Data, (ii) other written information, data and reports in BMSs
possession that relate exclusively to the Products to the extent such information, data and reports
are necessary (in the reasonable judgment of both BMS and Cadence) to the development of the
Products in the Territory, and (iii) the full Marketing Authorization dossier submitted to Drug
Regulatory Authorities in the EU with respect to the Products (in non-Common Technical Document
format) and the variation dossiers submitted to Drug Regulatory Authorities in the EU with respect
to the Products after the initial Approval, including (1) with respect to Perfalgan (A) copies of
the applicable clinical study reports (and the appendices, tables, listings and graphs therein),
(B) copies of the raw data from the applicable clinical studies included in the Marketing
Authorization Application, (C) to the extent available, rendered PDF copies of such clinical study
reports (and such appendices, tables, listings and graphs) and (D) to the extent available, SAS
data sets containing such raw data and (2) with respect to ProDafalgan, to the extent they exist,
(A) copies of the applicable clinical study reports (and the appendices, tables, listings and
graphs therein), (B) copies of the raw data from the applicable clinical studies included in the
Marketing Authorization Application, (C) rendered PDF copies of such clinical study reports (and
such appendices, tables, listings and graphs) and (D) SAS data sets containing such raw data, but
only to the extent such information, data and reports described in clauses (i), (ii) and (iii)
above are reasonably available to BMS or its Affiliated Companies without undue searching (the
information, data and reports described in clauses (ii) and (iii) above being referred to herein as
Other Product Data); provided, however, that the foregoing shall in no event require BMS or its
Affiliated Companies to provide copies of laboratory notebooks or manufacturing run records
required to be maintained by BMS or its Affiliated Companies under Applicable Law. If BMS or its
Affiliated Company maintains
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such Product Data or Other Product Data in electronic form, BMS shall
provide such copies to Cadence in electronic form, but BMS shall have no obligation to reformat or
otherwise alter or modify any materials or to create or recreate any such materials in electronic
form in order to provide them to Cadence. BMS shall retain ownership of such Product Data and
Other Product Data, may retain a copy of the Product Data and Other Product Data and retains the
right to use and reference such Product Data and Other Product Data for any purpose to the extent
consistent with BMSs other retained rights and the rights granted to Cadence hereunder, including
the right to cross-reference, file or incorporate by reference such Product Data and Other Product
Data and to assign, transfer or license to other Persons any or all of such rights of use and
reference. Cadence shall have the right to use such Product Data and Other Product Data for any
purpose in connection with the exercise of the rights granted to Cadence under this Agreement. In
the event that any such Regulatory Filing is supplemented or modified, BMS shall notify Cadence
that supplements or modifications have been made not later
than [***] ([***])[***] after such supplementation or modification, and BMS shall provide
Cadence with copies thereof upon Cadences request.
(b) Cadence shall notify BMS in writing of the completion of any additional registrational
clinical trials or studies (Phase I Phase III) or large-scale safety studies performed by or on
behalf of Cadence relating to Products within [***]([***])[***] after the final study report
relating to such trial or study has been completed and received all necessary internal Cadence
approvals in accordance with Cadences customary procedures. Cadence shall provide BMS
semi-annually with copies of any such final study reports and copies of the final study reports
relating to any non-registrational clinical trials or studies performed by or on behalf of Cadence
relating to Products that have received all necessary internal Cadence approvals in accordance with
Cadences customary procedures, in each case that have received such necessary approvals in the
preceding semi-annual period, and BMS and its Affiliated Companies and licensees shall have a right
to cross-reference, file or incorporate by reference such final study reports and any existing or
future Regulatory Filings (and any data contained therein) made or maintained by Cadence and its
Affiliated Companies for Products in the Territory (including the foreign equivalent of any NDA
relating to Products) to support Regulatory Filings by BMS and its Affiliated Companies and
licensees for Products outside the Territory and to use such final study reports, Regulatory
Filings and data for other commercially reasonable uses to support commercialization activities
outside the Territory. In the event that any such Regulatory Filing is supplemented or modified,
Cadence shall notify BMS that supplements or modifications have been made not later than
[***]([***])[***] after such supplementation or modification, and Cadence shall provide BMS with
copies thereof upon Cadences request.
(c) BMS shall notify Cadence in writing of the completion of any additional registrational
clinical trials or studies (Phase I Phase III) or large-scale safety studies done within the then
existing label performed by or on behalf of BMS relating to Products within [***]([***])[***] after
the final study report relating to such trial or study has been completed and received all
necessary internal BMS approvals in accordance with BMSs customary procedures. BMS shall provide
Cadence semi-annually with copies of any such final study reports and copies of the final study
reports relating to any non-registrational clinical trials or
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studies performed by or on behalf of
BMS relating to Products that have received all necessary internal BMS approvals in accordance with
BMSs customary procedures, in each case that have received such necessary approvals in the
preceding semi-annual period, and Cadence and its Affiliated Companies and licensees shall have a
right to cross-reference, file or incorporate by reference such final study reports and any
existing or future Regulatory Filings (and any data contained therein) made or maintained by BMS
and its Affiliated Companies for Products outside the Territory (including the foreign equivalent
of any NDA relating to Products) to support Regulatory Filings by Cadence and its Affiliated
Companies and licensees for Products in the Territory and to use such final study reports,
Regulatory Filings and data for other commercially reasonable uses to support commercialization
activities in the Territory.
(d) BMS shall provide Cadence with prompt written notice of any Registrational Information of
Pharmatop made available to BMS pursuant to Article III of the Pharmatop License Agreement. To the
extent permitted by the Pharmatop License Agreement, Cadence and its Affiliated Companies and
licensees shall have a right to cross-reference, file or incorporate by reference any such
Registrational Information to support Regulatory Filings by Cadence and its Affiliated Companies
and licensees for Products in the Territory, provided [***] reimburses [***] directly (or
indirectly through payment to [***]) [***] ([***]) of the [***] to develop or obtain such Pharmatop
Registrational Information consistent with Sections 3.1 and 3.3 of the Pharmatop License Agreement.
2.10 Tech Transfer Plan. Within [***]([***])[***] of the Effective Date, the Parties
shall meet to develop a technology transfer plan (the Tech Transfer Plan) containing a plan and
schedule for transferring and otherwise providing Cadence access to the BMS Know-How and Technology
Documentation.
2.11 Technology Documentation. Pursuant to the Tech Transfer Plan, BMS shall provide
Cadence with one (1) copy (which may be in paper or electronic form as provided below) of the
Technology Documentation to which BMS or its Affiliated Companies have access to without undue
searching (unless such documents are material to the manufacture of the Products or Clinical
Testing Products in which case BMS shall use all reasonable commercial efforts to locate such
Technology Documentation); provided, however, that the foregoing shall in no event require BMS to
provide copies of laboratory notebooks or manufacturing run records required to be maintained by
BMS under Applicable Law (other than one blank batch record which shall be provided to Cadence).
If BMS maintains such Technology Documentation in electronic form, BMS shall provide such
Technology Documentation to Cadence in electronic form. Otherwise, BMS may provide such Technology
Documentation in paper form. All Technology Documentation shall be in the English language,
reasonably comprehendible and, if any Technology Documentation requires translation, authenticated
translation shall be provided by BMS at no cost to Cadence. BMS shall not have any obligation to
translate any documentation relating to the Pharmatop Know-How. The Technology Documentation at
the time provided to Cadence shall be written with sufficient detail and clarity for Cadence, a
Cadence Affiliated Company or a Third Party sublicensee or supplier of Cadence to practice and/or
otherwise utilize the manufacturing processes disclosed thereunder. The Technology
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Documentation
shall not be used by Cadence for any purpose other than to manufacture the Products and Clinical
Testing Products as permitted under this Agreement and the Clinical Supply Agreement. The
Technology Documentation shall be Confidential Information of BMS, and Cadence shall have full
responsibility and liability to BMS for any unauthorized use or disclosure of such Confidential
Information; provided that Cadence shall have the right to disclose and otherwise provide such
Technology Documentation to one or more Third Party manufacturers and/or suppliers so long as such
Third Parties agree to maintain the confidentiality of such information. BMS shall be
responsible for the cost of providing one (1) set of copies only; provided, however, that BMS
shall have no obligation to reformat or otherwise alter or modify any such materials to the extent
provided consistent with this Section 2.11, or to create materials in electronic form, in order to
provide them to Cadence.
2.12 Technical Assistance. During the period commencing on the Effective Date and
ending on [***] (the Tech Transfer Period), BMS shall provide the technical assistance provided
for in this Section 2.12. During the Tech Transfer Period, BMS shall provide Cadence with the
assistance of up to [***] of BMS employees having knowledge relevant to the Clinical Testing
Products, the Technology Documentation and the BMS Know-How to provide Cadence with a reasonable
level of technical assistance and consultation in connection with the technology transfer and
implementation of the manufacturing processes included in the Technology Documentation for the
purpose of assisting Cadence in assuming the responsibility for manufacturing the Products. The
first [***]([***])[***] of such technical assistance and consultation shall be without charge to
Cadence other than for the reasonable out-of-pocket costs of BMS and its Affiliated Companies. For
technical assistance and consultation in excess of [***]([***])[***], Cadence shall pay BMS for
such technical assistance and consultation at the rate of [***]. [***]. Cadence shall bear [***]
implementing the Technology Documentation, including all costs and expenses it incurs in connection
with such technology transfer, process development, manufacturing scale-up, quality control and
quality assurance. BMS makes no warranty, express or implied, that Cadence shall be able to
successfully implement and use the Technology Documentation. Cadence shall be responsible for
ensuring that its personnel who receive such assistance are appropriately qualified and experienced
for such purpose. At Cadences written request, BMS shall, during the Tech Transfer Period and
upon reasonable prior notice and subject to BMSs customary rules and restrictions with respect to
site visits by non-BMS personnel, permit Cadences technical personnel to visit the facilities
utilized by BMS for the supply of Clinical Testing Products under the Clinical Supply Agreement for
the purpose of personally observing the production of the Clinical Testing Products. The time of
BMS employees expended in connection with any such visit (but not visits contemplated by the
Clinical Supply Agreement) shall be charged against the [***] of technical assistance and
consultation to be provided by BMS hereunder and compensated as provided in this Section 2.12. BMS
shall not have any obligation to provide any such technical assistance or consultation following
the expiration of the Tech Transfer Period.
2.13 Cooperation. The Parties shall cooperate to implement processes to ensure a
close, cooperative working relationship between the Parties and their respective technical
personnel in order to facilitate the technology transfer assistance contemplated above.
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2.14 Additional Assistance. In the event Cadence desires any additional technical
assistance or consultation, Cadence may request such
additional technical assistance or consultation from BMS. BMS shall consider such request in
good faith, but BMS shall not have any obligation to provide any such additional technical
assistance or consultation unless BMS agrees in writing in its sole discretion to provide such
additional technical assistance or consultation. In the event BMS agrees in its sole discretion to
provide any such additional technical assistance or consultation, Cadence shall pay BMS for such
additional technical assistance or consultation at a rate equal to [***].
2.15 Pharmacovigilance; Adverse Event Reporting. Subject to the terms of this
Agreement, and within [***] ([***])[***] after the Effective Date of this Agreement, BMS and
Cadence (under the guidance of their respective Pharmacovigilance Departments, or equivalent
thereof) shall in good faith define and finalize the responsibilities the Parties shall employ to
protect patients and promote their well-being in their respective territories. These
responsibilities shall include mutually acceptable guidelines and procedures for the receipt,
investigation, recordation, communication, and exchange (as between the Parties) of adverse event
reports, pregnancy reports, and any other information concerning the safety of the Product. Such
guidelines and procedures shall be in accordance with, and enable the Parties and their Affiliated
Companies to fulfill, local and international regulatory reporting obligations to government
authorities. Furthermore, such agreed procedures shall be consistent with relevant International
Council for Harmonization guidelines, except where said guidelines may conflict with existing local
regulatory safety reporting requirements, in which case local reporting requirements shall prevail.
Until such guidelines and procedures are set forth in an agreement between the Parties,
hereafter referred to as the Safety Data Exchange Agreement, the terms of paragraphs (a) (d) and
(f) below, of this Section, shall apply. Following the execution of the Safety Data Exchange
Agreement, paragraphs (a) (d) and (f) shall have no further force or effect.
(a) Each Party shall notify the other Party as soon as practicable, but not later than
[***]([***])[***] after it receives information about the initiation of any investigation, review
or inquiry by any Drug Regulatory Authority concerning the safety of the Product.
(b) Individual Case Safety Reports and pregnancy reports which come to the attention of either
Party shall be notified to the other Party, in English, in the form of a source document or CIOMS
Form by secure email or fax within [***]([***])[***] of receipt.
(c) Each Party is responsible for complying with all applicable investigational and
post-marketing safety reporting regulations with respect to the use of the Product in the territory
in which its affiliated companies, its sublicensees, its agents, or its contractors promotes the
Product, as subject to the terms of this Agreement. This includes the submission of expedited and
periodic reports to the appropriate Drug Regulatory Authority(s).
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(d) All information to be reported to a Party under this Section shall be sent as follows (or
to such other address, contact person, telephone number, facsimile number or e-mail address as may
be specified in writing to the other Party):
(i) To BMS, at:
Bristol-Myers Squibb Company
Global Pharmacovigilance
Adverse Event Processing
311 Pennington-Rocky Hill Road
Mail Stop HW 19-1.01
Pennington, NJ 08534
USA
FAX Number: 609-818-3804
Email: worldwide.safety@bms.com
(ii) To Cadence, at:
Cadence Pharmaceuticals, Inc.
12730 High Bluff Drive, Suite 410
San Diego, CA 92130
Attention: Vice President, Regulatory Affairs and Quality Assurance
Telephone: [***]
Facsimile: 858-436-1401
Email: [***]
(e) A Partys costs incurred in connection with receiving, investigating, recording,
reviewing, communicating, and exchanging Adverse Events and Other Reportable Information shall be
borne solely by such Party. As used herein, Other Reportable Information means any communication
or other information that questions the purity, identity, potency or quality of the Product and all
reports of Product exposure during pregnancy and Product overdose whether or not resulting in an
Adverse Event.
(f) If any Drug Regulatory Authority (1) should contact Cadence with respect to the improper
development, use, distribution, manufacture or commercialization of any Product, (2) conducts, or
gives notice of its intent to conduct, an inspection at Cadences facilities, or (3) takes, or
gives notice of its intent to take, any other regulatory action with respect to any activity of
Cadence that could reasonably be expected to adversely affect any development or commercialization
activities of any Product under this Agreement, then Cadence shall promptly notify BMS of such
contact or notice. Cadence shall provide BMS with copies of all pertinent information and
documentation issued by any such Drug Regulatory Authority within two (2) Business Days of receipt
and copies of any responses to such Drug Regulatory
Authority that pertain to the Products promptly after the submission thereof to such Drug
Regulatory Authority.
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2.16 Infringement Pharmatop Patents.
(a) In the event either Party becomes aware that the Pharmatop Patents (or their inventorship)
have become the subject to an administrative or judicial action, suit or challenge by a Third Party
(including any reexamination or other proceeding challenging the validity or enforceability of the
Pharmatop Patents) with respect to the Territory (to the extent relating to the Territory, a
Pharmatop Patent Challenge), such Party shall promptly notify the other Party and BMS and Cadence
shall consult with each other in order to attempt to determine the appropriate response to such
Pharmatop Patent Challenge. If Pharmatop undertakes the defense thereof, Cadence shall have the
right, to the extent permitted by the Pharmatop License Agreement, to participate and be
represented in any such Pharmatop Patent Challenge by its own counsel [***]. To the extent Cadence
is not permitted by the Pharmatop License Agreement to participate directly in such Pharmatop
Patent Challenge, BMS shall (i) consult with Cadence during the defense of such Pharmatop Patent
Challenge and (ii) if requested by Cadence, participate in such Pharmatop Patent Challenge [***]
and cooperate with Cadence, [***], to arrange for the interests of the Parties (including Cadence)
to be represented in such Pharmatop Patent Challenge.
If Pharmatop does not defend any such Pharmatop Patent Challenge, BMS shall provide written
notice to Cadence promptly after receiving notice of Pharmatops decision not to defend and shall
consult with Cadence concerning the defense of such Pharmatop Patent Challenge. BMS shall use
reasonable efforts (in light of relevant time and other deadlines) to determine whether it will
defend such Pharmatop Patent Challenge and, if BMS elects not to defend such Pharmatop Patent
Challenge, shall use reasonable efforts to provide Cadence with sufficient notice to permit Cadence
to defend such Pharmatop Patent Challenge as permitted by Section 6.3 of the Pharmatop License
Agreement and as set forth in this Section 2.16.
If BMS elects to defend against any such Pharmatop Patent Challenge as permitted by Section
6.3 of the Pharmatop License Agreement, BMS shall consult with Cadence during the defense of such
Pharmatop Patent Challenge and BMS shall permit Cadence to participate and be represented in any
such Pharmatop Patent Challenge by its own counsel [***].
The Parties shall reasonably assist Pharmatop and the other Party in the defense of any
Pharmatop Patent Challenge. In the event the Party defending such Pharmatop Patent Challenge
requests the assistance of the other Party, [***] shall reimburse the [***] for its [***] incurred
in connection with such assistance. BMS shall not, without the written consent of Cadence, consent
to the entry into any such settlement agreement by Pharmatop, that would
restrict the scope, or adversely affect the enforceability or validity of, any of the
Pharmatop Patents in the Territory.
If neither Pharmatop nor BMS elects to defend against a Pharmatop Patent Challenge, then BMS
shall provide written notice to Cadence promptly after the later of BMS receiving notice of such
decision by Pharmatop or such decision by BMS (in accordance with the last sentence of the second
paragraph of this Section 2.16(a)) and, to the extent permitted by the
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Pharmatop License Agreement,
Cadence shall have the right to defend [***] any such Pharmatop Patent Challenge in accordance with
Section 6.3(b) of the Pharmatop License Agreement, and BMS shall be entitled to participate and be
represented in any such Pharmatop Patent Challenge by its own counsel [***]. Cadence shall not
enter into any settlement agreement with respect to such Pharmatop Patent Challenge, without the
written consent of Pharmatop to the extent required by the Pharmatop License Agreement, and the
written consent of BMS. If Cadence is not permitted by the Pharmatop License Agreement to defend
such Pharmatop Patent Challenge, then at the written request of Cadence, BMS shall defend such
action, suit or challenge as provided above, at [***].
(b) In the event either Party becomes aware of any infringement of a Valid Claim in the
Territory under the Pharmatop Patents, such Party shall promptly notify the other Party and BMS and
Cadence shall consult with each other and with Pharmatop in order to attempt to end such
infringement, consistent with the Pharmatop License Agreement and shall take all appropriate action
to do so. BMS shall have the right in the first instance, but not the obligation, to initiate
legal action against an infringing party. Cadence shall reasonably assist BMS and Pharmatop in any
action or proceeding prosecuted against the infringing Person by BMS or Pharmatop. If neither
Pharmatop nor BMS prosecutes a legal action against the infringing Person (or if Pharmatop or BMS
ceases to pursue or withdraws from such action), Cadence may initiate and prosecute such action (or
substitute itself for Pharmatop or BMS in such action) at its own expense to the extent permitted
by and in accordance with Section 6.5 of the Pharmatop License Agreement. Cadence shall not enter
into a settlement agreement concerning such action, suit or challenge without the written consent
of BMS.
If neither Pharmatop nor BMS prosecutes a legal action against the infringing Person (or if
Pharmatop or BMS ceases to pursue or withdraws from such action) and Cadence is not permitted by
Section 6.5 of the Pharmatop License Agreement to initiate and prosecute such action (or substitute
itself for Pharmatop or BMS in such action), then at the written request of Cadence, BMS shall
initiate and prosecute such action at the expense of Cadence and shall not, without the written
consent of Cadence, enter into a settlement agreement with such infringing Person that would
restrict the scope, or adversely affect the enforceability or validity of, any of the Pharmatop
Patents in the Territory.
(c) Subject to the rights of Pharmatop set forth in the Pharmatop License Agreement, in the
event either Party recovers any damages or other sums in such action in
relation to any infringement of a Valid Claim under a Pharmatop Patent in the Territory or in
settlement thereof, such damages or other sums recovered shall first be applied to all
out-of-pocket costs and expenses incurred by the Parties in connection therewith, including
attorneys fees, subject to any allocation due to Pharmatop pursuant to the Pharmatop License
Agreement. If such recovery (after giving effect to any allocation due to Pharmatop pursuant to
the Pharmatop
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License Agreement) is insufficient to cover all such costs and expenses of both
Parties, it shall be shared in proportion to the total of such costs and expenses incurred by each
Party. If after such reimbursement any funds shall remain from such damages or other sums
recovered (after giving effect to any allocation due to Pharmatop pursuant to the Pharmatop License
Agreement), such funds shall be shared [***] ([***]) by Cadence and [***] ([***]) by BMS. In the
event any such action involves patent rights outside the Territory, Cadence shall be entitled to
share only in the portion of any recovery that relates to infringement of any Pharmatop Patents in
the Territory and shall not have any right to share in any recovery with respect to rights outside
the Territory.
2.17 Infringement BMS Patents.
(a) In the event the BMS Patents (or their inventorship) become the subject to an
administrative or judicial challenge by a Third Party with respect to the Territory, BMS shall
notify Cadence of such challenge within [***]([***])[***] of receipt of notice of such challenge.
BMS shall have the right, but not the obligation, to defend such action, suit or challenge, and BMS
shall notify Cadence of its decision regarding whether or not it will defend such action, suit or
challenge. If BMS decides in its sole discretion to enter into any settlement agreement with
respect to such action, suit or proceeding, BMS shall notify Cadence of such intent. If such
settlement restricts the scope, or adversely affects the license to the BMS Patents granted to
Cadence under Section 2.1, Cadence shall have the right, but not the obligation, to enter into
discussions with BMS for the purpose of renegotiating the terms of said license in view of such
settlement.
(b) If BMS does not defend any such action, suit or challenge and Cadence disagrees with BMSs
decision, Cadence shall have the right, but not the obligation, to (i) enter into discussion with
BMS for the purpose of renegotiating the terms of the license to the BMS Patents granted to Cadence
under Section 2.1 or (ii) notwithstanding Article 8 of this Agreement, terminate the License
granted under Sections 2.1(a)(ii) (v) subject to the confidentiality provisions set forth in
Sections 5.2 and 5.3.
2.18 Maintenance of BMS Patents. In the event BMS determines that it no longer
desires to maintain any of the BMS Patents, BMS shall notify Cadence in writing of the BMS Patents
that it no longer desires to maintain, and Cadence shall have the right to retain counsel of its
own choosing to prosecute and maintain such BMS Patents and to make all maintenance and other
payments as may be necessary to maintain such BMS Patents in effect.
2.19 Noncontravention. Neither BMS nor Cadence shall be required to take any action
pursuant to Section 2.16, 2.17, 2.21 and 2.22 that it determines in its sole judgment and
discretion conflicts with or violates any court or government order or decree to which it is then
subject.
2.20 Patent Extensions. Subject to applicable terms of the Pharmatop License
Agreement, BMS and Cadence shall each cooperate with one another to obtain patent term extensions
(including any pediatric exclusivity extensions as may be available) or supplemental protection
certificates or their equivalents in any country in the Territory with respect to a BMS Patent or
Pharmatop Patent in the Territory.
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2.21 Data Exclusivity and Orange Book Listings. Subject to applicable terms of the
Pharmatop License Agreement: (i) with respect to data exclusivity periods in the Territory (such
as those periods listed in the FDAs Orange Book (including any available pediatric extensions))
Cadence, as appropriate, shall use commercially reasonable efforts consistent with its obligations
under Applicable Law in the Territory to seek, maintain and enforce all such data exclusivity
periods available for Products, and (ii) with respect to filings in the FDA Orange Book for issued
patents for a Product, the appropriate Party shall, consistent with its obligations under
Applicable Law in the Territory, list (and update as appropriate) in a timely manner all applicable
Patents required to be filed by it, or that it is permitted to file, under such Applicable Law in
connection with such Product. At least [***] ([***])[***] prior to an anticipated deadline for the
filing of patent listing information for such Patents, the Party making such filing shall notify in
writing and consult with the other Party regarding the content of such filing. In the event of a
dispute between the Parties as to whether a particular Patent can be listed and/or the content of
the filing for such listing, the Parties shall take expedited steps to resolve the dispute as
promptly as possible, including seeking advice of an independent legal counsel to guide their
decision. The other Party shall provide, consistent with its obligations under Applicable Law in
the Territory, reasonable cooperation to the Party making such listing in filing and maintaining
such Orange Book (and foreign equivalent) listings.
2.22 Notification of Patent Certifications. A Party receiving any allegation of
patent invalidity, unenforceability or non-infringement of a Pharmatop Patent or a BMS Patent
pursuant to a paragraph IV patent certification by a Third Party filing an Abbreviated New Drug
Application, an application under §505(b)(2) of the FDCA or other similar patent certification by a
Third Party, and/or any foreign equivalent thereof in connection with a Product in the Territory
shall notify the other Party and shall provide the other Party with copies of all such allegations.
Such notification and copies shall be provided to the other Party within five (5) days after
receipt of such certification. If and to the extent such allegation relates to a Pharmatop Patent,
and subject to the terms of the Pharmatop License Agreement, Cadence shall have the right (but not
the obligation) to contest such patent certification in the Territory and initiate and control
actions with respect thereto in accordance with Section 2.16, and upon request by Cadence, BMS shall
provide reasonable assistance and cooperation at Cadences expense in any actions reasonably
undertaken by Cadence to contest any such patent certification.
2.23 Audit, Inspection and Review. BMS shall have the right [***] during business
hours and upon reasonable prior notice to enter, inspect and evaluate that part of any plant or
other facility that is engaged in the production, preparation, processing or storage of the
Products for compliance with applicable environmental, health and safety regulations, cGMP and
other Applicable Law in the Territory and for compliance with the terms of this Agreement; provided
that such inspections may not be made more than [***] in any [***]; and provided, further, that if
material corrective measures are necessary, BMS may [***] verify the implementation of such
corrective measures. In addition to the other rights of BMS set forth in this Agreement: (i) BMS
shall have the same right to inspect and review the activities of Cadence hereunder as Pharmatop
has with respect to BMS under the Pharmatop License Agreement, and (ii) BMS shall have the same
rights to audit Cadences (and any of its sublicensees) activities relevant to this
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Agreement, and
to inspect Cadences (and any sublicensees) facilities involved in the manufacture of Products, in
the same manner as Pharmatop has with respect to BMSs activities and facilities under the
Pharmatop License Agreement. Cadence shall cause its sublicensees, suppliers, toll manufacturers
and other Third Parties involved in the production, preparation, processing or storage of the
Products to provide such access to BMS and shall include an appropriate provision in the applicable
contract with any such Third Party providing for such access and shall cause such sublicensees,
suppliers, toll manufacturers and other Third Parties to grant such access to BMS. Cadence shall
notify BMS within [***] ([***])[***] after receipt of any notice of any inquiry, inspection or
legal action by any Drug Regulatory Authority related to any aspect of the production of the
Products. Cadence shall provide to BMS, promptly after receipt by Cadence, a copy of the results
of any inspection reports and/or legal actions with or by any Drug Regulatory Authority in the
Territory relating to such matters. Cadence shall keep BMS informed on an on-going basis as to any
proposed responses regarding corrective or remedial actions to be taken as a result of any such
inquiry, inspection or legal action, including actions relating to plants and facilities of Third
Parties.
2.24 [***] Covenant; [***] Covenant.
(a) Certain Definitions. As used herein:
Available [***] means, as of any date, [***] determined In Accordance With GAAP
[***].
[***] means as of any date, [***] determined In Accordance with GAAP [***]:
(1) (A) [***], or
(B) [***], and
(2) (A) [***], (B) [***] and (C) [***],
but only to the extent any such items are not already included in [***].
[***] means, as of any date [***] plus [***], in each case determined In Accordance
With GAAP.
[***] means, as of any date, the [***].
[***] means, as of any date, the [***].
[***] means, as of any date, the [***].
(b) [***] Covenant. Provided that neither [***]:
(A) [***]; or
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(B) [***].
The foregoing covenant is referred to herein as the [***] Covenant. [***] shall be entitled
to temporary and permanent injunctive relief in order to restrain any violation of this Section
2.24(b).
As used herein, the term [***] Product means (i) [***] and/or (ii) [***].
(c) Termination of Covenant. If on [***] Covenant shall immediately terminate without
any action on the part of [***]. Each such date of such termination is referred to herein as a
Covenant Termination Date. In the event [***].
During any period in which [***] shall have the right to (i) [***] and (ii) [***].
(d) Permanent Termination of Covenant; [***]. If [***]
(e) Reinstatement of [***]. As set forth in Section 2.1(c), if and when [***].
ARTICLE III ADDITIONAL COVENANTS
3.1 Annual Operating Plan. Not later than [***]([***])[***] prior to the beginning of
each Calendar Year, Cadence shall provide to BMS a written operating plan (each an Annual
Operating Plan) setting forth in reasonable detail Cadences plans for the continued development
(including plans for clinical and other studies and plans for obtaining any necessary Approvals in
the Territory) and commercialization of the Products for such Calendar Year, together with the
related budgets therefore and the estimated timelines for completion of key activities. The
initial Annual Operating Plan for 2006 is as Previously Disclosed. Each subsequent Annual
Operating Plan shall include a comparable level of information and detail as set forth in such
Previously Disclosed Annual Operating Plan (and following first commercial sale of the Product in
the Territory, shall include a line item for advertising and promotional expenses). Cadence shall
promptly notify BMS in writing of any material change in any such Annual Operating Plan or of any
material deviation from any Annual Operating Plan.
3.2 Development, Commercialization and Financial Reports and Consultations.
(a) Quarterly Development and Commercialization Reports. Cadence shall provide
quarterly written reports to BMS, within [***]([***])[***]) following the end of each Calendar
Quarter, presenting a summary in reasonable detail of the development and commercialization actions
taken by Cadence relating to the Products in the Territory and results obtained through the end of
such Calendar Quarter and a summary of any material changes to the Development Plan since the last
such quarterly report. The report with respect to commercialization activities shall include,
among other things, the number of full-time equivalent sales representatives assigned to each
Product by Cadence and any co-promotion or
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co-marketing partner or any Third Party with which
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In the event [***].
(f) Standards for Determining [***]. All projections used to determine [***] (i)
[***] (A) [***] and (B) [***] and (ii) [***]. If any calculation of [***].
(g) Presentations concerning Development and Commercialization Activities. In
addition, on reasonable request by BMS, Cadence shall meet with BMS to make presentations
concerning the development and commercialization activities taken relating to the Products and
to permit BMS to ask reasonable questions and receive answers from Cadence with respect to
such matters (including advertising and promotional expenditures and measures of sales effort);
provided, however, that Cadence shall not be required to make more than [***] in any Calendar Year.
[***].
(h) Date of NDA Approval. Cadence shall notify BMS in writing as soon as reasonably
practicable of the expected date of approval by the FDA of the NDA with respect to any Product in
the United States and shall notify BMS of any such Approval not later than [***]([***])[***]
following the date on which Cadence receives written notice of such approval or receives an
approvable letter from the FDA with respect to any such NDA.
(i) Correspondence with Pharmatop. Each Party shall provide to the other Party copies
of all material correspondence and reports provided by it to Pharmatop or by Pharmatop to it after
the Effective Date with respect to the Products in the Territory.
3.3 Development Responsibilities and Costs.
(a) Cadences initial plan (current as of the Execution Date) for the development of the
Products, including the clinical and other studies it contemplates as of the date of this Agreement
in order to obtain Approval of the Products in the United States and related budgets and timelines
as of the Execution Date as the same may be amended from time to time in accordance with Section
3.3(c) (collectively, the Development Plan) has been Previously Disclosed.
(b) Cadence shall have sole responsibility for, and shall bear the cost of the development and
commercialization of the Products in the Territory. Cadence shall develop and commercialize the
Products in compliance with all Applicable Law. Without limiting the foregoing, Cadence shall
cause all Products manufactured, labeled, advertised and sold by it and its Affiliated Companies
and sublicensees or on its or their behalf to comply in all material respects with Applicable Law.
(c) Without limiting Cadences obligations under the Pharmatop License Agreement, Cadence
shall use reasonable commercial efforts to pursue, fund and complete the development of the
Products as set forth in the Development Plan as modified from time to time in accordance with this
Agreement (including obtaining all necessary Approvals in the
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Territory). In the event that the
results of clinical or other studies or communications from Drug Regulatory Authorities require a
material modification to the Development Plan, Cadence shall consult with BMS concerning such
results or communications and potential changes to the Development Plan that would offer a
reasonable prospect for obtaining Approvals on a reasonably expeditious basis. Any modification to
the Development Plan that involves [***]. No such consent by BMS shall relieve Cadence of any
obligation under the Pharmatop License Agreement.
3.4 Obligations in respect of the Pharmatop License Agreement. Notwithstanding any
other provision of this Agreement, Cadence (i) hereby unconditionally assumes and agrees during the
term of this Agreement to perform as and when due all the obligations of BMS under the Pharmatop
License Agreement that relate to the Territory (except (A) to the extent such obligations were
required to be performed by BMS prior to the Effective Date and (B) for any obligation to indemnify
Pharmatop for any breach by BMS of any such obligations prior to the Effective Date), the BMS
Rights or the exercise of the rights sublicensed to Cadence under this Agreement and (ii) shall
comply with all the terms and conditions of the Pharmatop License Agreement that relate to the
Territory, the BMS Rights or the exercise of the rights sublicensed to Cadence under this
Agreement, it being understood that Cadence shall be obligated to perform such obligations and
comply with such terms and conditions in respect of its activities under this Agreement and the
Pharmatop License Agreement but shall not have any obligation to cause BMS to perform such
obligations or to cause BMS to comply with such terms and conditions. Without limiting the
foregoing, Cadence shall be obligated to perform and comply, but shall not have any liability with
respect to any failure by BMS (but not its own failure) to perform and comply, with Section 4.6(a),
Article 10 or Article 12 of the Pharmatop License Agreement. Without limiting any other right or
remedy of BMS under this Agreement and in order to prevent, ameliorate, mitigate or cure a breach
of the Pharmatop License Agreement, in the event that Cadence fails to perform any of such
obligations under the Pharmatop License Agreement (except to the extent that a breach by BMS of its
obligations under this Agreement or the Pharmatop License Agreement or any other act or omission by
BMS prevents such performance by Cadence or any of its Affiliated Companies, sublicensees,
contractors or agents), which failure is not cured within ninety (90) days after written notice
from BMS, BMS may perform such obligation on behalf of Cadence at Cadences expense, and Cadence
shall reimburse BMS for its fully burdened costs (including both its out-of-pocket costs and
internal costs) in connection with such performance; provided, however, that this Section 3.4 shall
not authorize BMS to control the conduct of any clinical trial or study under the Development Plan.
This Agreement sets forth the obligations of the Parties inter se, and nothing in this Agreement
(including any standard of effort set forth herein) shall limit or modify the obligations of the
Parties assumed under the Pharmatop License Agreement.
3.5 Certain Rights and Obligations under the Pharmatop License Agreement.
(a) BMS shall provide Cadence with copies of written communications received by BMS from
Pharmatop after the Effective Date pursuant to Section 2.2 of the Pharmatop License Agreement with
respect to the results of research and development work
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performed by Pharmatop and concerning any
inventions or Know-How (as defined in the Pharmatop License Agreement) made by Pharmatop relating
to the Products.
(b) If Pharmatop provides to BMS a copy of any application, filing or request for review and
comment by BMS, BMS shall provide a copy of each application, filing or request to Cadence promptly
after receipt thereof, and shall give reasonable consideration to any comments of Cadence in any
comments provided by BMS to Pharmatop.
(c) If Pharmatop provides to BMS a quarterly written patent report pursuant to Section 5.1(d)
of the Pharmatop License Agreement, BMS shall provide a copy of such report to Cadence within a
reasonable period of time after receipt thereof, provided that BMS may redact information relating
to Patents outside the Territory.
(d) To the extent that Pharmatop is obligated to indemnify sublicensees of BMS pursuant to
Section 12.1 of the Pharmatop License Agreement and Cadence desires to assert a claim for
indemnification pursuant to such section, Cadence shall have the right, to the extent permitted by
the Pharmatop License Agreement, to assert such claim for indemnification against Pharmatop. In
the event Cadence is not permitted by the Pharmatop License Agreement to assert such claim directly
against Pharmatop, BMS shall cooperate with Cadence (at Cadences expense and subject to Section
7.7 of this Agreement) to permit Cadence to assert such claim, including, if necessary, allowing
Cadence to bring such claim in the name of BMS, unless BMS has a reasonable objection to such
procedure; provided that Cadence shall give BMS written notice of any proposed settlement with
Pharmatop and a reasonable opportunity to review and comment on such proposed settlement, and
Cadence shall not enter into any settlement with Pharmatop that could adversely affect the rights
of BMS hereunder or under the Pharmatop License Agreement without the prior written consent of BMS
in its sole discretion.
(e) To the extent that BMS is permitted to assert against Pharmatop a claim on behalf of
Cadence (as BMSs sublicense) for (i) indemnification and defense pursuant to Section 3.2 of the
Pharmatop License Agreement based on any use made by Pharmatop, its Affiliated Companies or its or
their licensees of the Registrational Information or with respect to the breach of any
representation, warranty or covenant of Pharmatop contained in the Pharmatop License Agreement or
(ii) for specific performance of any covenant of Pharmatop contained in the Pharmatop License
Agreement, BMS shall use reasonable efforts to cooperate with Cadence
(at Cadences expense and subject to Section 7.7 of this Agreement) to permit Cadence to assert such claim or request for
specific performance by Pharmatop, including, if necessary, allowing Cadence to bring such claim in
the name of BMS, unless BMS has a reasonable objection to such procedure; provided that Cadence
shall give BMS written notice of any proposed settlement with Pharmatop and a reasonable
opportunity to review and comment on such proposed settlement, and Cadence shall not enter into any
settlement with Pharmatop that could adversely affect the rights of BMS hereunder or under the
Pharmatop License Agreement without the prior written consent of BMS in its sole discretion. BMS
makes no representation or warranty as to whether BMS is permitted to assert any such claim on
behalf of Cadence.
(f) Whenever Cadence provides any report, notice or other communication to Pharmatop in
compliance with of any of the obligations under the Pharmatop License Agreement assumed by Cadence
pursuant to Section 3.4 (e.g., the obligation to provide quarterly updates
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pursuant to Section 4.3
of the Pharmatop License Agreement), Cadence shall provide a copy of such report or notice to BMS
at least [***] ([***])[***] prior to the time such report, notice or communication is provided to
Pharmatop or, if it is impracticable to provide such copy at least
[***]([***])[***]) ahead of time, Cadence shall provide such copy to BMS as early as
practicable prior to the provision thereof to Pharmatop.
(g) BMS agrees that it shall, if reasonably requested by Cadence and at Cadences expense,
take reasonable efforts to enforce the material obligations of Pharmatop under the Pharmatop
License Agreement as it relates to the Territory, including obligations under Article 5 of the
Pharmatop License Agreement.
(h) BMS covenants that it shall not agree or consent to any amendment, supplement or other
modification to the Pharmatop License Agreement or exercise any other right of agreement or consent
thereunder, in each case as it relates to the Territory, unless Cadence has consented in its sole
discretion in writing to the same.
(i) If Cadence is not in breach of any of its material obligations under this Agreement, BMS
shall not terminate the Pharmatop License Agreement (either unilaterally or by mutual agreement
with Pharmatop) with respect to any country in the Territory without the prior written consent of
Cadence, which consent may be given or withheld in Cadences sole discretion. If Cadence is in
breach of any of its material obligations under this Agreement, BMS may terminate the Pharmatop
License Agreement in its sole discretion. If BMS determines to terminate the Pharmatop Agreement,
BMS shall consult with Cadence in advance to the extent reasonably practical.
(j) BMS shall not market a Competing Product (as defined in the Pharmatop License Agreement)
in any country in the Territory during the Pharmatop Royalty Term for such country without
obtaining a written waiver from Pharmatop of the consequences of such marketing under Section 7.4
of the Pharmatop License Agreement.
(k) Cadence shall provide written notice to BMS of any use by Pharmatop of which Cadence is
aware of any Registrational Information of Cadence as to which BMS has the
right [***] from Pharmatop as contemplated by Sections 3.1 and 3.3 of the Pharmatop License Agreement, and, if
requested by Cadence, BMS shall thereafter request from Pharmatop [***] contemplated by Sections
3.1 and 3.3 of the Pharmatop License Agreement. If BMS [***] from Pharmatop for the use by
Pharmatop of any Cadence Registrational Information as contemplated by Section 3.1 and 3.3 of the
Pharmatop License Agreement, BMS shall [***] over to Cadence within [***]([***])[***] after the
receipt thereof.
3.6 Conduct of Clinical Trials of Products by Cadence in Clinical Study Countries. In
the event (i) Cadence is unable (or reasonably believes that it will be unable) to recruit in the
Territory sufficient clinical study subjects to conduct clinical trials necessary for Approval of
the Products in the Territory due to US treatment parameters that would significantly delay or
impair Cadences ability to recruit patients or otherwise complete the study on a timely basis and
(ii) Cadence desires to conduct all or a portion of such clinical study in any of the Clinical
Study
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Countries where BMS retains rights to commercialize the Product, then Cadence shall notify
BMS in writing and provide BMS with a copy of the clinical trial study design and protocol(s)
for the conduct of such clinical study in the Clinical Study Countries in which it plans to
conduct such study and a statement of the proposed number of patients proposed to be recruited in
each city in such Clinical Study Countries. Cadence shall not conduct any such study without the
prior written consent of BMS and the license provided for below, which consent and license shall
not be unreasonably withheld if: (i) such study design and protocols are reasonably satisfactory
to BMS (and its Affiliated Companies in the Clinical Study Countries) and (ii) such study is lawful
to conduct in the regulatory jurisdictions where such study will be conducted and meets prevailing
ethical standards and guidelines (including BMS internal policies) relating to the conduct of
clinical trials and the use of the Product. In the event BMS consents to the conduct of such study
in a Clinical Study Country, BMS shall cause its applicable Affiliated Companies to grant a limited
license or sublicense to Cadences Affiliated Company in such Clinical Study Country where the BMS
Affiliated Companies have rights to grant such license or sublicense solely for the purpose of
permitting such clinical study solely in accordance with such study design and protocol; provided
that (1) not later than [***] ([***])[***] after [***] during such clinical trial, Cadence shall
provide BMS with a written report of the number of vials of Product administered to patients in
such clinical study in each country outside the Territory where such study is conducted and [***],
and (2) such clinical study shall be subject to such reasonable limitations as may be reasonably
satisfactory to BMS to avoid undue concentration of study subjects in a particular city.
Neither BMS nor any of its Affiliated Companies shall have any duties or responsibilities in
connection with such clinical trial, other than (to the extent applicable) the supply of Clinical
Testing Products pursuant to the Clinical Supply Agreement, except that this provision shall not
affect the obligations of BMS and Cadence to exchange safety information as provided in Section
2.15 and the Safety Data Exchange Agreement to be entered into pursuant to Section 2.15.
In the event Cadence desires to conduct all or a portion of such clinical study in [***], then
Cadence may request that BMS consent to the inclusion of [***] as an additional Clinical Study
Country. In the event (i) Cadence is unable (or reasonably believes that it will be unable) to
recruit in the Territory and the Clinical Study Countries sufficient clinical study subjects to
conduct clinical trials necessary for Approval of the Products in the Territory due to treatment
parameters in the US and the Clinical Study Countries that would significantly delay or impair
Cadences ability to recruit patients or otherwise complete the study on a timely basis and (ii)
Cadence desires to conduct all or a portion of such clinical study in any of the other countries
where BMS retains rights to commercialize the Product, then Cadence may request that BMS consent to
the inclusion of up to [***]([***]) additional countries as Clinical Study Countries; provided that
Cadence may not request the inclusion of more [***]([***]) additional countries as Clinical Study
Countries, including [***], over the term of this Agreement. In the event Cadence makes such
request, BMS shall cause its Alliance Manager to use reasonable efforts to obtain the necessary
internal BMS consents and approvals of the applicable BMS Affiliated Company in the applicable
country to the inclusion of such country as a Clinical Study Country,
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which consents and approvals may be given or withheld in the sole discretion of such BMS
Affiliated Company. In the event such consents and approvals are obtained, the Parties shall amend
the list of Clinical Study Countries to include such country.
Cadence acknowledges that as of the Effective Date, BMS does not commercialize, and has not
effected the registration of, Products in certain of the Clinical Study Countries and other
countries where Cadence may desire to conduct clinical trials or studies. Nothing in this
Agreement shall obligate BMS or any of its Affiliated Companies (i) to maintain, retain, obtain or
seek any rights in any Clinical Study Country or any other country where Cadence may desire to
conduct clinical trials or studies or (ii) to make, maintain, refile, renew or reinstate any
Regulatory Filing in any such country.
3.7 Conduct of US or Canadian Clinical Trials of Products by BMS. In the event BMS is
unable (or reasonably believes that it will be unable) to recruit outside the Territory sufficient
clinical study subjects to conduct clinical trials necessary for Approval of the Products in any
jurisdiction outside the Territory due to local treatment parameters that would significantly
delay or impair BMSs ability to recruit patients or otherwise complete the study on a timely basis
and BMS desires to conduct any clinical trials or studies of Products in the Territory, then BMS
shall notify Cadence in writing and provide Cadence with a copy of the clinical trial study design
and protocol(s) for the conduct of such clinical trial in the Territory and a statement of the
proposed number of patients proposed to be recruited in each city in the Territory. BMS shall not
conduct such study without the prior written consent of Cadence, which shall not be unreasonably
withheld if: (i) such study design and protocols are reasonably satisfactory to Cadence; and (ii)
such study is lawful to conduct in the country in the Territory where such study will be conducted
and meets prevailing ethical standards and guidelines (including Cadence internal policies)
relating to the conduct of clinical trials and the use of the Product. In the event Cadence
consents to the conduct of such study in the Territory, BMS may conduct such study solely in
accordance with such study design and protocol; provided that:
(A) if such clinical trial or study will take place prior to the launch of the
Product by Cadence in the country where BMS proposes to conduct such clinical trial or
study, such study is subject to such reasonable limitations designed to avoid impairing
Cadences ability to recruit patients for its own contemporaneous clinical trials; or
(B) if such clinical trial or study will take place after the launch of the
Product by Cadence in the country where BMS proposes to conduct such clinical trial or
study, then (1) not later than [***] ([***])[***] after [***] during such clinical trial,
BMS shall provide Cadence with a written report of the number of vials of Product
administered to patients in such clinical study in each country in the Territory where such
study is [***], and (2) such clinical study shall be subject to such reasonable limitations
as may be reasonably satisfactory to Cadence to avoid undue concentration of study subjects in a
particular city in the Territory.
Neither Cadence nor any of its Affiliated Companies shall have any duties or responsibilities
in connection with such clinical trial by BMS or its Affiliated Companies, except
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that this
provision shall not affect the obligations of BMS and Cadence to exchange safety information as
provided in Section 2.15 and the Safety Data Exchange Agreement to be entered into pursuant to
Section 2.15.
3.8 Existing BMS Suppliers. [***].
ARTICLE IV FINANCIAL TERMS
4.1 Payments to BMS. In partial consideration of the rights granted to Cadence
hereunder:
(a) On the Effective Date, Cadence shall pay to BMS Twenty-Five Million Dollars ($25,000,000).
(b) Within ten (10) Business Days following the [***], Cadence shall pay to BMS [***]([***]).
Such amount shall be paid only once, regardless of [***].
(c) Within ten (10) Business Days after [***], Cadence shall pay to BMS an amount equal to
[***]([***])[***]; provided, however, that such payment shall not exceed [***]([***]).
(d) Not later than [***]([***][***] following the [***] in which the [***], Cadence shall pay
to BMS [***]([***]); provided, however, if [***], Cadence shall pay such amount to BMS not later
than [***]([***])[***] following the [***].
(e) In addition to the payment provided for in Section 4.1(d) above, not later than
[***]([***][***] following the [***] in which the [***], Cadence shall pay to BMS [***]([***]);
provided, however, if such [***], Cadence shall pay such amount to BMS not later than [***]([***])
[***].
(f) During the Pharmatop Royalty Term, Cadence shall pay to BMS royalties calculated at the
rate of:
(i) [***] of that portion of aggregate Net Sales in each Calendar Year that is [***],
(ii) [***] of that portion of aggregate Net Sales in each Calendar Year that is [***] and up
to and including Net Sales of [***], and
(iii) [***] of that portion of aggregate Net Sales in each Calendar Year that is [***],
with the aggregate amount of Royalties payable pursuant to clauses (i) (iii) above [***] by the
amount of the [***] and any [***] and [***] of this Agreement and the terms of the Pharmatop
License Agreement (which [***] provided for in [***]). In the event the amount of [***] and any
[***] with respect to any [***].
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In the event the royalties payable to Pharmatop are reduced in respect of any Combination
Product (as defined in the Pharmatop License Agreement) sold by Cadence or its Affiliated Companies
or sublicensees in the Territory, the Royalties payable to BMS pursuant to this Section 4.1(f) in
respect of such Combination Product shall be reduced (dollar-for-dollar) by the amount of the
reduction in such royalties payable to Pharmatop.
[***].
(g) During the BMS Patent Royalty Term, Cadence shall pay to BMS royalties calculated at the
rate of:
(i) [***] of that portion of aggregate Net Sales of Products that are BMS Patent Products in
each Calendar Year that is [***],
(ii) [***] of that portion of aggregate Net Sales of Products that are BMS Patent Products in
each Calendar Year that is in [***] and up to and including Net Sales of such Products of [***],
and
(iii) [***] of that portion of aggregate Net Sales of Products that are BMS Patent Products in
each Calendar Year that is [***].
[***].
The Royalties payable by Cadence to BMS pursuant to this Section 4.1(g) shall be [***] for any
Calendar Quarter if:
(i) [***]
(ii) [***]
(iii) [***]
but only to the extent such Royalties are [***] as of the date of such event.
[***].
(h) The royalties payable pursuant to Section 4.1(f) and Section 4.1(g) are referred to herein
as Royalties). Such Royalties shall be paid quarterly as provided in Section 4.7 of this
Agreement.
(i) [***].
4.2 Reduction of Certain Milestone Payments.
(a) If (i) after the Effective Date, a Third Party claim or action challenging the Pharmatop
Patents succeeds so as to deprive Pharmatop (and therefore BMS and Cadence) of any of its rights
under the Pharmatop Patents in the United States or (ii) after the Effective Date, Pharmatop or BMS
is unable to maintain, or a material alteration of the scope or content occurs with respect to, any
of the claims under any of the Pharmatop Patents, in the United States, then
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(1) the payment
provided for in Section 4.1(b) shall, if not yet earned, be reduced to [[***] ([***]) and (2) the
payment provided for in Section 4.1(c) shall, if not yet earned, be reduced by [***].
(b) If a Third Party should market in the United States after the Effective Date a
parenterally-administered liquid solution product, in a stable and readily injectible form, that
(i) contains paracetamol and one or more other analgesic ingredients, (ii) uses any of the
Technology contained within any issued claim of any Pharmatop Patent in such country or any
Pharmatop Know-How, and (iii) is not considered to infringe any Pharmatop Patent or BMS Patent in
such country (whether by judicial determination or settlement, by joint agreement of either BMS and
Pharmatop or BMS and Cadence or by the failure of Pharmatop, BMS and Cadence to prosecute such
Third Party for infringement under Section 6.5 of the Pharmatop License Agreement or Section 2.16
of this Agreement), then (1) the payment provided for in Section 4.1(b) shall, if not yet earned,
be reduced to [***]([***]) and (2) the payment provided for in Section 4.1(c) shall, if not yet
earned, be reduced by [***]; provided that (A) during the pendency of any legal action against such
Third Party with respect to the possible infringement of a Pharmatop Patent or BMS Patent the
amount of such reduction (the Retained Sum) shall be temporarily retained by Cadence until such
litigation ends, (B) if the outcome of the litigation is the invalidation of the Pharmatop Patents
so that the Third Party is free to sell such product in the United States, [***] and (C) if the
outcome of the litigation is not as described in clause (B) above, [***].
(c) The reductions provided for in Sections 4.2(a) and 4.2(b) shall not be [***] and (i) the
aggregate amount of the reduction in the payment provided for in Section 4.1(b) shall not exceed
[***]([***]) and (ii) the aggregate amount of the reduction in the payment provided for in Section
4.1(c) shall not exceed [***].
(d) Notwithstanding the foregoing Sections 4.2(a) and 4.2(b), if aggregate Net Sales during
any Calendar Year [***], then (i) for the [***] such Calendar Year Cadence shall pay to BMS
[***]([***]) of the aggregate amount of the reduction [***], (ii) for the [***] such Calendar Year
Cadence shall pay to BMS an [***]([***]) of the aggregate [***] and (iii) for the
[***] such Calendar Year Cadence shall pay to BMS an [***]([***]) of the aggregate [***].
Such [***] shall be made not later than [***]([***])[***] following the applicable Calendar Year.
4.3 Payments by Cadence to Pharmatop. In partial consideration of the rights granted
to Cadence hereunder and without limiting any of the other obligations assumed by Cadence under the
Pharmatop License Agreement:
(a) Within ten (10) business days (as such term is used in the Pharmatop License Agreement)
following the [***], Cadence shall pay to Pharmatop [***]([***]) in satisfaction of the obligation
set forth in Section 7.1(b) of the Pharmatop License Agreement.
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(b) Cadence shall pay to Pharmatop all royalties payable to Pharmatop pursuant to the
Pharmatop License Agreement with respect to the Territory in the manner provided for in such
agreement.
(c) If for any period a Guaranteed Payment is due under the Pharmatop License Agreement,
Cadence shall pay to Pharmatop the amount of such Guaranteed Payment in the manner provided for in
the Pharmatop License Agreement.
(d) Cadence shall provide to BMS evidence reasonably satisfactory to BMS of each such payment.
(e) The amount of the payments made to BMS under this Agreement shall be Confidential
Information of BMS and of Cadence. Cadence shall not disclose to Pharmatop in the reports provided
by Cadence to Pharmatop pursuant to the Pharmatop License Agreement or otherwise the amount of any
payments to BMS hereunder.
4.4 Manner of Payment. All payments to be made to BMS or Cadence hereunder shall be
paid in Dollars by wire transfer of immediately available funds to a bank account designated in
writing by the payee not less than [***] ([***])[***] prior to the required payment date.
4.5 Interest. Any payment by Cadence to BMS hereunder not made as and when due shall
bear interest at the rate of [***]([***]) per annum, compounded daily, from the due date to the
date of payment.
4.6 Expenses; Taxes.
(a) Expenses. Except as expressly set forth in this Agreement, all costs and expenses
incurred in connection with the preparation and negotiation of this Agreement and the other Transaction Documents and the transactions
contemplated hereby shall be paid by the Party incurring such expense. Each Party shall bear the
fees and expenses of any agent, broker, investment banker, finder or other Person engaged by it or
any of its Affiliated Companies in connection with the transactions contemplated by this Agreement
and the other Transaction Documents.
(b) Transfer Taxes. Any Transfer Tax, if any, applicable to the transactions contemplated by
this Agreement shall be borne and paid by Cadence.
(c) Tax Withholding. The withholding tax, duties, and other levies (if any) applied by a
government of any country of the Territory on payments made by Cadence to BMS hereunder shall be
borne by BMS. Cadence, its Affiliated Companies and sublicensees shall cooperate with BMS to
enable BMS to claim exemption therefrom under any double taxation or similar agreement in force,
shall provide to BMS proper evidence of payments of withholding tax, and shall assist BMS by
obtaining or providing in as far as possible the required documentation for the purpose of BMSs
tax returns.
4.7 Sales Reports and Royalty and Other Payments. The Royalties payable under Section
4.1 shall be calculated and will be payable quarterly for sales made in each Calendar
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Quarter in
the Royalty Term and the BMS Patent Royalty Term, as applicable. Cadence shall prepare and send to
BMS within [***] ([***])[***] after the end of each Calendar Quarter ([***]([***])[***] after the
last Calendar Quarter in a Calendar Year to allow for additional time to determine any adjustments
required to be made on an annual basis) a detailed statement, country by country and by dosage and
pharmaceutical form, of the Net Sales (and, during the BMS Patent Royalty Term, the Net Sales of
BMS Patent Products), the calculation of the Royalties payable under Section 4.1, the calculation
of any amounts payable to Pharmatop pursuant to the Pharmatop License Agreement with respect to the
Territory and the calculation of any reduction in the Royalties or other amounts deducted from the
payments to BMS as contemplated by Section 4.1 together with a description of any facts or
circumstances that Cadence believes entitles it to a reduction in, or deduction from, the Royalties
payable under this Agreement as contemplated by Section 4.1 and information reasonably satisfactory
to BMS to permit the calculation of any such reduction or deduction, accompanied by payment in
accordance with Section 4.4 of the Royalties due BMS. Cadence shall provide to BMS a copy of each
statement of Net Sales provided by Cadence to Pharmatop contemporaneously with the provision of
such statement to Pharmatop, which statements shall not disclose the Royalties or other amounts
payable to BMS under this Agreement.
4.8 Sales Record Audit. Cadence shall keep, and shall cause each of its Affiliated
Companies, sublicensees, distributors and agents to keep, full and accurate books of accounting In
Accordance With GAAP containing all particulars that may be necessary for the purpose of
calculating all Royalties payable to BMS. Such books of accounting (including those of Cadences
Affiliated Companies, sublicensees, distributors and agents) shall be kept at their principal place
of business, together with all necessary supporting data. BMS may, on reasonable (but not less
than [***]([***])[***]) written notice to Cadence,
have the calculation of the Royalties payable under Section 4.1 and any calculation or
reconciliation statement provided pursuant to Section 4.7 audited at its own expense by an
accounting firm selected by BMS that is reasonably acceptable to Cadence and that is bound by a
written agreement of confidentiality to Cadence. The auditors assignment will be limited to
reviewing the accuracy of a calculation or reconciliation statement sent by Cadence, and to
disclosing only if there are any errors in payment and, if an error exists, the amount of such
error(s) and the calculation thereof, and no additional or any other information. If an audit
discloses that the amount of Royalties owed to BMS was understated by more than [***]([***][***],
then [***] must reimburse [***] for the cost of the audit, in addition to paying the additional
Royalties together with interest on the additional amounts, calculated from the date on which the
additional amount should have been paid, as provided in Section 4.5. Such audit rights may be
exercised only once in any given Calendar Year, and any such audit shall apply [***].
ARTICLE V MUTUAL COVENANTS OF THE PARTIES
5.1 Publicity. Neither Party shall issue any public release or announcement
concerning this Agreement or the transactions contemplated hereby without the prior consent of the
other Party, except to the extent required by Applicable Law or the rules or regulations of any
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United States or foreign securities exchange (or inter-dealer quotation system) or regulatory
commission (in which case such Party shall, to the extent practicable, allow the other Party
reasonable time to comment on such release or announcement in advance of such issuance); provided,
however, that prior to any such disclosure, such Party shall use reasonable efforts to give advance
notice to the other Party of the timing and content of such disclosure. Nothing contained in this
Section 5.1 shall prevent either Party from making internal announcements to its and its Affiliated
Companies employees.
5.2 Confidentiality.
(a) Confidentiality Obligations. Each Party recognizes that the other Partys Confidential
Information constitutes highly valuable and proprietary confidential information and material.
Each Party agrees that until the date that is [***]([***])[***] after the date of disclosure to it
of any given item of Confidential
Information, it will keep confidential, and will cause its officers, employees, consultants,
agents, Affiliated Companies and sublicensees to keep confidential, such Confidential Information
disclosed to it by the other Party; provided that if the Pharmatop License Agreement requires a
longer period of confidentiality with respect to any Confidential Information of Pharmatop
disclosed to a Party, such Party shall also observe such longer period of confidentiality in
accordance with the Pharmatop License Agreement. Neither BMS nor Cadence nor any of their
respective employees, consultants, Affiliated Companies or sublicensees shall use Confidential
Information of the other Party for any purpose whatsoever except as otherwise expressly permitted
by this Agreement.
(b) Limited Disclosure. Each Party agrees that any disclosure of the other Partys
Confidential Information to any officer, employee, consultant, agent or Affiliated Company of such
Party, shall be made only if and to the extent necessary to carry out its obligations and
responsibilities, or to exercise its rights, under this Agreement, shall be limited to the maximum
extent possible consistent with such rights and responsibilities, and shall only be made to persons
who are bound by their employment (or other) contract (or, in the case of counsel or other licensed
professionals, by applicable rules of professional conduct) to maintain the confidentiality thereof
and not to use such Confidential Information except as expressly permitted by this Agreement. Each
Party further agrees not to disclose or transfer the other Partys Confidential Information to any
Third Party under any circumstance without the prior written approval from the other Party (such
approval not to be unreasonably withheld, delayed or conditioned if such Confidential Information
is appropriately protected by the recipient), except as otherwise required by law, and except as
otherwise expressly permitted by this Agreement. Each Party shall take such action, and shall
cause its officers, employees, consultants, agents, Affiliated Companies and sublicensees to take
such action, to preserve the confidentiality of the other Partys Confidential Information as it
would customarily take to preserve the confidentiality of its own Confidential Information, using a
level of care that shall not under any circumstances be less than reasonable care. Each of the
Receiving Partys Affiliated Companies shall be bound by the confidentiality obligations set forth
in this Section 5.2 for the entire period
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set forth in Section 5.2(a), including any entity that
becomes an Affiliated Company after the date of the relevant disclosure by the Disclosing Party,
whether or not such Affiliated Company ceases to be an Affiliated Company of the Receiving Party
during the term of the confidentiality obligations hereunder; and the Receiving Party shall be
responsible for any unauthorized disclosure of such Confidential Information by any of its
Affiliated Companies to which such Confidential Information is disclosed, including after such
company ceases to be an Affiliated Company.
(c) Authorized Disclosure. The Receiving Party may disclose Confidential Information
belonging to the other Party to the extent (and only to the extent) such disclosure is reasonably
necessary in the following instances:
(i) as reasonably necessary for filing or prosecuting Patents as contemplated by this
Agreement;
(ii) as reasonably necessary for Regulatory Filings and other communications with Drug
Regulatory Authorities as contemplated by this Agreement;
(iii) as reasonably necessary for prosecuting or defending litigation;
(iv) subject to Section 5.2(e) of this Agreement, as reasonably necessary to comply
with Applicable Law (including the rules and regulations of the Securities and Exchange
Commission or any national securities exchange) and with judicial process, if in the
reasonable opinion of the Receiving Partys counsel, such disclosure is necessary for such
compliance; and
(v) in connection with the performance of this Agreement and solely on a reasonable
need to know basis, to Affiliated Companies, potential collaborators (including potential
co-marketing and co-promotion contractors), sublicensees, potential sublicensees, research
collaborators, potential investment bankers, lenders, investors, employees, consultants,
medical professionals participating in the conduct of clinical trials, or agents, each of
whom prior to disclosure must be bound by similar obligations of confidentiality and non-use
at least equivalent in scope to those set forth in this Section 5.2; provided, that in the
case of disclosure to academic researchers and academic institutions, the confidentiality
period hereunder shall be the longest such period as the applicable Party may reasonably
negotiate with such researchers or institutions; and provided, that the Receiving Party
shall remain responsible for any failure by any Person who receives Confidential Information
pursuant to this Section 5.2 to treat such Confidential Information as required under this
Section 5.2;
provided, however, that nothing in this Agreement shall limit or affect the Parties
confidentiality obligations under the Pharmatop License Agreement.
If and whenever any Confidential Information is disclosed in accordance with this Section 5.2,
such disclosure shall not cause any such information to cease to be Confidential Information except
to the extent that such disclosure results in a public disclosure of such information (otherwise
than by breach of this Agreement). With respect to disclosures under Sections 5.2(c)(iii) and
5.2(c)(iv), where reasonably possible, the Receiving Party shall notify the
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Disclosing Party of the
Receiving Partys intent to make such disclosure sufficiently prior to making such disclosure so as
to allow the Disclosing Party adequate time to take whatever action it may deem appropriate to
protect the confidentiality of the information, and the Receiving Party shall further reasonably
assist the Disclosing Party to obtain confidential treatment of such Confidential Information.
The Parties acknowledge that the terms of this Agreement shall be treated as Confidential
Information of both Parties. For the avoidance of doubt, this Section 5.2 shall in no way prevent
a Party from disclosing the existence of this Agreement or any terms of this Agreement in order to
seek legal advice whenever deemed appropriate by such Party or to enforce such Partys rights under
this Agreement, whether through arbitration proceedings, court proceedings or otherwise, or to
defend itself against allegations or claims relating to this Agreement, or to disclose such terms
as it may be advised in written opinion of outside counsel are required to be disclosed to comply
with Applicable Law (a copy of which opinion shall be provided to the other Party).
(d) Employees and Consultants. Each Party hereby represents that all of its employees and any
consultants to such Party or its Affiliated Companies that will have access to the Confidential
Information of the other Party shall be bound by written obligations (or, in the case of counsel or
other licensed professionals, bound by rules of professional conduct) to maintain such information
in confidence consistent with the terms of this Agreement and not to use such information except as
expressly permitted herein. Each Party agrees to enforce confidentiality obligations to which its
employees and consultants (and those of its Affiliated Companies) are obligated with respect to any
such Confidential Information and agrees to be responsible for any breach or violation by such
Persons of any provisions of this Agreement or the Pharmatop License Agreement relating to the
confidentiality or non-use of any such Confidential Information by such Persons.
(e) Securities Filings. In the event either Party proposes to file with the Securities and
Exchange Commission or the securities regulators of any state or other jurisdiction a registration
statement or any other disclosure document which describes or refers to this Agreement under the
Securities Act of 1933, as amended, the Exchange Act, or any other Applicable Law relating to
securities matters, that Party shall notify the other Party of such intention and shall provide
such other Party with a copy of relevant portions of the proposed filing not less than five (5)
Business Days prior to such filing (and any revisions to such portions of the proposed filing a
reasonable time prior to the filing thereof), including any exhibits thereto relating to this
Agreement, and shall use reasonable efforts to obtain confidential treatment of any information
concerning this Agreement that such other Party requests be kept confidential, and shall only
disclose Confidential Information which it is advised by counsel or the Securities and Exchange
Commission is legally required to be disclosed. No such notice shall be required under this
Section 5.2(e) if the substance of the description of or reference to this Agreement contained in
the proposed filing has been included in any previous filing made by either Party hereunder or
otherwise approved by the other Party.
(f) Academic Publications. The Parties recognize that independent investigators have been
engaged, and will be engaged in the future, to conduct clinical trials and studies of the Products.
The Parties recognize that such investigators operate in an academic
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environment and may release
information regarding such studies in a manner consistent with academic standards and as further
provided in this paragraph. In the event that any such independent investigator of a Party desires
to publish any abstract, manuscript or article or make any presentation (including verbal
presentations) or other publication that includes any Confidential Information of the other Party,
such Party shall (i) require such independent investigator to provide the other Party and its
patent counsel the opportunity to review any proposed abstract, manuscript, article, presentation
(including verbal presentations) or other publication at least thirty (30) days prior to its
intended submission for publication or such presentation and (ii) upon request of the other Party
not to submit any such abstract, article or manuscript for publication or not to make such
presentation for such additional reasonable period of time (but not to exceed an additional thirty
(30) days) to enable the other Party to secure patent protection for any material in such
publication which it believes to be patentable or to consider the implications of publication on
eventual commercialization.
(g) Additional Confidentiality Obligations under the Pharmatop License Agreement. The
provisions of this Section 5.2 are in addition to and not in limitation of any applicable
obligation of confidentiality under the Pharmatop License Agreement.
5.3 Restrictions Binding on Affiliated Companies and Investors. Each Party shall
require each of its Affiliated Companies and investors to which Confidential Information of the
other Party is disclosed as permitted hereunder to comply with the covenants and restrictions set
forth in Sections 5.1 and 5.2 as if each such Affiliated Company and each such investor were a
Party to this Agreement and shall be fully responsible for any breach of such covenants and
restrictions by any such Affiliated Company or investor.
5.4 Alliance Management. Each of the Parties shall appoint one senior representative
who possesses a general understanding of development, regulatory and commercialization issues to
act as its Alliance Manager. The role of the Alliance Manager is to act as a single point of
contact between the Parties to assure a successful working relationship. Each Party may change its
designated Alliance Manager from time to time upon written notice to the other Party. Any Alliance
Manager may designate a substitute to temporarily perform the functions of that Alliance Manager.
5.5 Liens.
(a) Cadence shall not during the term of this Agreement (i) grant any Lien (excluding any
permitted sublicenses) with respect to this Agreement or any of the rights licensed or sublicensed
to it under this Agreement or (ii) permit such a lien, security interest or other encumbrance
(excluding any permitted sublicenses) to attach to this Agreement or any of such rights. For sake
of clarity, any breach of this Section 5.5(a) by Cadence that is not cured within ten (10) Business
Days after written notice thereof shall be deemed a material breach of this Agreement.
(b) BMS shall not during the term of this Agreement (i) grant any Lien (excluding any
permitted sublicenses) with respect to any of the BMS Rights, BMS Patents or BMS Know-How that
would prevent BMS from granting the licenses hereunder or performing its obligations under this
Agreement, or (ii) permit such a Lien to attach to the BMS Rights,
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BMS Patents or BMS Know-How. For sake of clarity, any breach of this Section 5.5(b) by BMS that is not cured within ten (10) Business
Days after written notice thereof shall be deemed a material breach of this Agreement.
5.6
BMS Confidential Disclosure Agreements. Promptly following the Effective Date, BMS shall assign to Cadence the Confidential Disclosure
Agreements executed by BMS and the other potential sublicensees considered by BMS in connection with the sublicense of the BMS Rights
contemplated hereby, to the extent assignable; provided, however, that if BMS is not permitted by the terms of such Confidential Disclosure
Agreements to so assign them, BMS shall request the other parties to such Confidential Disclosure Agreement to (i) return or destroy all the
confidential information of BMS relating to the Products and the BMS Rights provided to them by BMS in connection with such transaction and (ii)
certify to BMS that such confidential information has been returned or destroyed; provided, further, that BMS shall not have any obligation to
bring any suit or take any other action against any such other party to enforce the obligations thereunder. BMS shall provide to Cadence copies
of any such certifications received by BMS.
ARTICLE VI REPRESENTATIONS AND WARRANTIES
6.1 Mutual Representations and Warranties. Each of BMS and Cadence represents and
warrants to the other Party as follows:
(a) Organization. Such Party is a corporation duly organized, validly existing and in good
standing (or subsisting) under the laws of the jurisdiction of its organization, is qualified to do
business and is in good standing (or subsisting) as a foreign corporation or company in each
jurisdiction in which the performance of its obligations under this Agreement requires such
qualification, and has full corporate or company power and authority and possesses all governmental
franchises, licenses, permits, authorizations and approvals (other than the termination or
expiration of any waiting periods under the HSR Act, if applicable) necessary to enable it to
perform its obligations under this Agreement, other than such franchises, licenses, permits,
authorizations and approvals the lack of which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(b) Authorization. The execution, delivery and performance by such Party of this Agreement
have been duly authorized by all necessary corporate action and do not and will not require any
further consent or approval of its shareholders or members. Such Party has the power and authority
to execute and deliver this Agreement and to perform its obligations hereunder and to grant the
rights and licenses granted (or to be granted) by it in this Agreement.
(c) Binding Agreement. Such Party has duly executed and delivered this Agreement, and this
Agreement (assuming the due authorization, execution and delivery by each other party thereto),
constitutes its legal, valid and binding obligation, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws and judicial decisions of general applicability relating to or
affecting creditors rights generally and to general principles of equity (regardless of whether
enforceability is sought in equity or at law).
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(d) No Conflicts; Consents. The execution and delivery by such Party of this Agreement do
not, and the consummation of the transactions contemplated by this Agreement do not and will not,
conflict with, or result in any violation of or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or to increased, additional or accelerated
rights or entitlements of any Third Party under, or result in the creation of any Lien upon any of
the assets of such Party under, any provision of (i) its Organizational Documents, (ii) any
Contract to which such Party is a party or by which any of its properties or assets is bound,
except for the rights of Pharmatop under the Pharmatop License Agreement or (iii) any judgment,
order or decree (collectively, Judgments) or any Applicable Law applicable to such Party or its
properties or
assets. No consent, approval, license, permit, order or authorization (collectively,
Consent) of, or registration, declaration or filing with, any Governmental Entity (other than any
filing under the HSR Act) or any other Third Party is required to be obtained or made by or with
respect to such Party in connection with the execution, delivery and performance of this Agreement
or the consummation of the transactions contemplated by this Agreement.
(e) Litigation. There are no (a) outstanding Judgments against or affecting such Party, or
(b) claims, actions, suits, proceedings, arbitrations, investigations, inquiries, or hearings or
notices of hearings (collectively, Proceedings) pending or, to the knowledge of such Party,
threatened in writing against or affecting such Party, its Affiliated Companies, by or against any
Governmental Entity or any other Person, that in any manner challenges or seeks to prevent, enjoin,
materially alter or materially delay the transactions contemplated by this Agreement or that,
individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect on
such Party or on the exploitation (including the import, use, manufacture, sale and offer for sale)
of the Products hereunder.
6.2 Additional Representations of Cadence. Without limiting the generality of the
representations and warranties set forth in Section 6.1 above, Cadence represents and warrants to
BMS as follows:
(a) Financial Statements. True and complete copies of the audited balance sheet of Cadence as of
December 31, 2004, and the related statements of income, shareholders equity and cash flows for
the fiscal year ended on such date, together with the notes thereto and the unaudited consolidated
balance sheets of Cadence and its subsidiaries as of December 31, 2005, and the related statements
of income, shareholders equity and cash flows for the twelve (12) months ended on such date
(collectively, the Financial Statements) have been Previously Disclosed. The Financial
Statements are In Accordance With GAAP (as defined below). As used herein with respect to any
financial statements, In Accordance With GAAP means that such financial statements: (i) are in
accordance with the books and records of Cadence and its subsidiaries, if any, (ii) are true and
correct and fairly present in all material respects the financial position, results of operations,
shareholders equity and cash flows of Cadence and its subsidiaries, if any, on a consolidated
basis, if applicable, as of the dates and for the periods indicated, in each case in conformity
with United States generally accepted accounting principles consistently applied during the
applicable periods and (iii) if such financial statements are audited, include all required
footnotes and, if such financial statements are unaudited, include all required footnotes
concerning contingent liabilities, if any. The statements of income included
48
in the Financial
Statements do not contain any items of special or nonrecurring income, revenue or expense and have
not been affected by the inclusion of transactions entered into otherwise than on normal commercial
terms or by any other factors rendering such profits for all or any of such periods exceptionally
high or low, except as expressly specified therein. Except as specified in the Financial
Statements or the notes thereto, the balance sheets included in the Financial Statements do not
reflect any write-up or revaluation increasing the book value of any assets. The books and
accounts of Cadence and its subsidiaries
are true and complete in all material respects and fully and fairly reflect all of the transactions
of Cadence and its subsidiaries.
(b) Absence of Undisclosed Liabilities. To the knowledge of Cadence, Cadence and its
subsidiaries have no liability of any nature whatsoever (whether known or unknown, due or to become
due, accrued, absolute, contingent, existing, inchoate or otherwise) including any unfunded
obligation under any benefit plan (as defined in ERISA) or liabilities for Taxes, except for (i)
liabilities reflected or reserved against in the consolidated balance sheet of Cadence and its
subsidiaries as of December 31, 2005 (the Balance Sheet Date) included in the Financial
Statements (collectively, the Balance Sheet), or in the notes thereto, (ii) liabilities under the
Loan and Security Agreement among Cadence, Oxford Finance Corporation and Silicon Valley Bank dated
February 17, 2006 (the Loan Agreement), (iii) current liabilities incurred in the ordinary course
of business and consistent with past practice from the Balance Sheet Date to the Effective Date
which, individually and in the aggregate, do not exceed [***] and (iv) liabilities which
individually or in the aggregate would not have a Material Adverse Effect on Cadence. The
collateral pledged by Cadence pursuant to the Loan Agreement does not include any of Cadences
rights in, to or under this Agreement.
(c) Absence of Material Adverse Effect. To the knowledge of Cadence, since the Balance Sheet
Date and through the Effective Date, Cadence and its subsidiaries have not experienced a Material
Adverse Effect and no event or circumstance has occurred or developed which is reasonably likely to
result in such a Material Adverse Effect or which has resulted, or is reasonably likely to result,
in any loss or liability to Cadence and its subsidiaries in excess of [***].
Without limiting the foregoing, since the Balance Sheet Date there has not been, occurred or
arisen: (i) any declaration, setting aside or payment of any dividend or distribution (whether in
cash, stock or property) in respect of capital stock of Cadence or any of its subsidiaries, or any
direct or indirect redemption, purchase or other acquisition of shares of such capital stock or any
split, combination or reclassification of such capital stock (other than redemption of shares
issued pursuant to early-exercised options under Cadences 2004 Equity Incentive Award Plan), (ii)
any Lien on any of the assets or properties of Cadence and its subsidiaries (other than the pledge
of assets pursuant to the Loan Agreement); or (iii) any authorization, approval, agreement or
commitment to do any of the foregoing. The pledge of assets pursuant to the Loan Agreement does
not grant any Lien with respect to this Agreement or any of the rights licensed or sublicensed to
it under this Agreement.
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(d) Legal Matters. Since Cadences date of incorporation (May 26, 2004), there has not been
any, and there is no, claim, action, suit, litigation, investigation, inquiry, review or proceeding
(collectively, Cadence Claims) pending against Cadence or any of its subsidiaries relating to the
business or assets of Cadence or its subsidiaries before or by any court, arbitrator or
Governmental Entity; and to the knowledge of Cadence no such Cadence Claim has been threatened.
Neither Cadence nor any of its subsidiaries is subject to any judgment, decree, writ, injunction,
ruling, award or order of any Governmental Entity or any arbitrator relating to the business or
assets of Cadence and its subsidiaries.
(e) Receipt of Financing; Restrictions. Between the Execution Date and the Effective Date,
Cadence will have received additional financing in an amount that is not less than $50 million from
the sale of equity securities. The holders of the equity securities of Cadence and its
subsidiaries do not have (by virtue of the terms of such equity securities, by contract or
otherwise) any right (mandatory or optional) to require the redemption of any of such equity
securities. On or before the Effective Date, Cadence will have entered into the Loan Agreement
obligating the lender or lenders thereunder to lend to Cadence not less than $7 million, subject to
the terms and conditions set forth therein. Cadence has provided to BMS true and complete copies
of the documents relating to such equity financing and such Loan Agreement.
6.3 BMS Rights.
(a) Pharmatop Patents. As of the Execution Date, BMS represents and warrants to
Cadence as follows with respect to the Pharmatop Patents and Pharmatop Know-How:
(i) Schedule 6.3(a) sets forth a list of all the Pharmatop Patents. To the knowledge
of BMSs in-house patent counsel after reasonable due diligence, (A) the most recent Patent report
provided to BMS pursuant to Section 5.1 of the Pharmatop License Agreement relating to the
Pharmatop Patents has been provided to Cadence, except for information that may have been redacted
relating to Patents outside the Territory, and (B) BMS has not received any written notices of
allowances for the Pharmatop Patents or written notices of interferences proceedings with respect
thereto, except as previously disclosed to Cadence.
(ii) To the knowledge of BMSs in-house patent counsel after reasonable due diligence, there
are no unpaid maintenance, annuity or renewal fees currently overdue for any of the Pharmatop
Patents.
(iii) To the knowledge of BMSs in-house patent counsel, BMS is the sole and exclusive
licensee of the Pharmatop Patents in the Territory.
(iv) BMS has not sublicensed, granted any interest in or options to the Pharmatop Patents to
any Third Party in the Territory and covenants not do so prior to the expiration or termination of
this Agreement, except in the exercise of BMSs retained rights pursuant to Section 2.2.
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(b) To the knowledge of BMSs in-house counsel, BMS is not, nor has it received any notice
that it is, in default (or that with the giving of notice or lapse of time or both it would be in
default) with respect to the BMS Rights under the Pharmatop License Agreement that would permit
Pharmatop to terminate, or exercise a right of rescission, revision or amendment of, the Pharmatop
License Agreement with respect to the Territory and covenants that it shall not take, and shall
cause its Affiliated Companies not to take, any action or omit to
take any action after the Execution Date that would permit Pharmatop to terminate, or exercise
a right of rescission, revision or amendment of, the Pharmatop License Agreement with respect to
the Territory, other than the omission of the performance of obligations assumed by Cadence
hereunder.
(c) To the knowledge of BMSs in-house patent counsel, BMS has not received written notice of
any claim, action, suit or litigation alleging that BMSs exploitation (including the import, use,
manufacture, sale and offer for sale) of the BMS Rights for the Product interferes with, infringes,
or misappropriates any intellectual property rights of any Third Party (including written notice of
any claim, action, suit or litigation that BMS must license or refrain from using any intellectual
property rights of any Third Party in order to exploit(including the import, use, manufacture, sale
and offer for sale) any Products. To the knowledge of BMSs in-house patent counsel, BMS has not
received written notice that any claim, action, suit or litigation is pending or threatened which
challenges the legality, validity, enforceability, use or ownership of any BMS Rights.
(d) BMS represents and warrants to Cadence that a true and correct copy of the Pharmatop
License Agreement as of the Effective Date, including any and all amendments, supplements or other
modifications thereto, except for the redaction of certain financial information in Section 7.1
thereof, has been Previously Disclosed. A copy of the Licensor Confirmation provided by Pharmatop
with respect to certain intellectual property and other matters as of February 6, 2006, has been
Previously Disclosed.
(e) To the knowledge of BMS, no circumstances or grounds exist that would entitle Pharmatop to
terminate or exercise a right of rescission, revision, or amendment of the Pharmatop License
Agreement with respect to the Territory, and the execution, delivery and performance of this
Agreement will not constitute such a circumstance or ground.
(f) BMS has protected the Pharmatop Know-How in a manner not materially different from the
manner in which it customarily protects its other proprietary know-how of comparable commercial
value.
6.4 BMS Patents and Know-How. As of the Execution Date, BMS represents and warrants
to Cadence with respect to the BMS Patents and BMS Know-How that to the knowledge of its in-house
patent counsel:
(a) there are no unpaid maintenance, annuity or renewal fees currently overdue for any of the
BMS Patents; and
(b) there are no claims, judgments or settlements against or owed by BMS and no litigation
pending or threatened in writing relating to the BMS Patents; and
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(c) BMS has protected the BMS Know-How in a manner not materially different from the manner in
which it customarily protects its other proprietary know-how of comparable commercial value.
6.5 DISCLAIMER.
(a) EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE VI OR IN
SECTION 5.2(D), BMS MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED,
WITH RESPECT TO THE BMS RIGHTS, BMS PATENTS OR BMS KNOW-HOW, IMPROVEMENTS, REGISTRATIONAL
INFORMATION, REGULATORY FILINGS, APPROVALS, PRODUCT DATA, OTHER PRODUCT DATA OR REPORTS, STUDIES,
PATENTS, PROCESSES, FORMULATIONS, TECHNIQUES OR OTHER TRADE SECRETS OR CONFIDENTIAL INFORMATION
PROVIDED BY BMS TO CADENCE HEREUNDER OR ANY LICENSE GRANTED BY BMS HEREUNDER, OR WITH RESPECT TO
ANY COMPOUNDS OR PRODUCTS. WITHOUT LIMITING THE FOREGOING, BMS MAKES NO EXPRESS OR IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE BMS RIGHTS,
BMS PATENTS OR BMS KNOW-HOW OR ANY LICENSE GRANTED BY BMS HEREUNDER, OR WITH RESPECT TO ANY
COMPOUNDS OR PRODUCTS. FURTHERMORE, NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A
REPRESENTATION OR WARRANTY BY BMS THAT ANY OF THE FOREGOING IS VALID OR ENFORCEABLE OR THAT
CADENCES USE THEREOF CONTEMPLATED HEREUNDER DOES NOT INFRINGE ANY PATENT RIGHTS OR OTHER
INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY.
(b) EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE VI OR IN
SECTION 5.2(D), CADENCE MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, WITH RESPECT TO THE IMPROVEMENTS, REGISTRATIONAL INFORMATION, REGULATORY FILINGS,
APPROVALS, PRODUCT DATA, OTHER PRODUCT DATA OR REPORTS, STUDIES, PATENTS, PROCESSES, FORMULATIONS,
TECHNIQUES OR OTHER TRADE SECRETS OR CONFIDENTIAL INFORMATION PROVIDED BY CADENCE TO BMS HEREUNDER
OR ANY LICENSE GRANTED BY CADENCE HEREUNDER, OR WITH RESPECT TO ANY COMPOUNDS OR PRODUCTS. WITHOUT
LIMITING THE FOREGOING, CADENCE MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO ANY LICENSE GRANTED BY CADENCE HEREUNDER, OR WITH
RESPECT TO ANY COMPOUNDS OR PRODUCTS. FURTHERMORE, NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS
A REPRESENTATION OR WARRANTY BY CADENCE THAT ANY OF THE FOREGOING IS VALID OR ENFORCEABLE OR THAT
BMSS USE THEREOF CONTEMPLATED HEREUNDER DOES NOT INFRINGE ANY PATENT RIGHTS OR OTHER INTELLECTUAL
PROPERTY RIGHTS OF ANY THIRD PARTY.
6.6 LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT OR OTHERWISE,
(I) NEITHER PARTY SHALL BE LIABLE TO THE
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OTHER (OR TO ANY INDEMNIFIED PARTIES) WITH RESPECT TO ANY
SUBJECT MATTER OF THIS AGREEMENT, WHETHER UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER
LEGAL OR EQUITABLE THEORY, FOR ANY INCIDENTAL,
INDIRECT, SPECIAL, EXEMPLARY, PUNITIVE, MULTIPLE, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS, LOSS OF USE, DAMAGE TO GOODWILL, OR LOSS OF BUSINESS), EXCEPT THAT SUCH LIMITATION SHALL
NOT APPLY TO (A) PUNITIVE OR CONSEQUENTIAL DAMAGES PAID OR PAYABLE TO A THIRD PARTY BY AN
INDEMNIFIED PARTY FOR WHICH THE INDEMNIFIED PARTY IS ENTITLED TO INDEMNIFICATION HEREUNDER, (B) A
BREACH OF THE [***] COVENANT, (C) ANY FAILURE BY CADENCE OR ITS AFFILIATED COMPANIES TO (1) OBSERVE
OR COMPLY WITH THE TERMS OF THE PHARMATOP LICENSE AGREEMENT OR (2) PERFORM ANY OF THE OBLIGATIONS
UNDER THE PHARMATOP LICENSE AGREEMENT ASSUMED BY CADENCE HEREUNDER THAT, IN THE CASE OF EACH OF
PART (1) AND (2) OF THIS CLAUSE (C) RESULTS IN A TERMINATION OF THE PHARMATOP LICENSE AGREEMENT
WITH RESPECT TO ANY COUNTRY IN THE TERRITORY OR A TERMINATION OF THE PHARMATOP LICENSE AGREEMENT IN
ITS ENTIRETY, (D) ANY BREACH OF THE PHARMATOP LICENSE AGREEMENT BY BMS OR ITS AFFILIATED COMPANIES
(OTHER THAN WITH RESPECT TO ANY OBLIGATION TO BE PERFORMED BY CADENCE) THAT RESULTS IN A
TERMINATION OF THE PHARMATOP LICENSE AGREEMENT WITH RESPECT TO ANY COUNTRY IN THE TERRITORY OR A
TERMINATION OF THE PHARMATOP LICENSE AGREEMENT IN ITS ENTIRETY OR (E) ANY BREACH OF [***] OF THIS
AGREEMENT BY BMS OR ITS AFFILIATED COMPANIES OR OF [***] OF THIS AGREEMENT BY CADENCE OR ITS
AFFILIATED COMPANIES AS TO WHICH CADENCE OR BMS, AS THE CASE MAY BE, TERMINATES THIS AGREEMENT
PURSUANT TO SECTION 8.3(B) (IT BEING UNDERSTOOD THAT A BREACH OF ANY OF SUCH SECTIONS IS NOT
NECESSARILY A MATERIAL BREACH THAT WOULD PERMIT TERMINATION UNDER SECTION 8.3(B)), AND (II) EXCEPT
AS PROVIDED IN [***] ABOVE, BMS SHALL NOT BE LIABLE IN RESPECT OF ANY BREACH OF ANY REPRESENTATION
OR WARRANTY OF BMS CONTAINED IN THIS AGREEMENT IN AN AMOUNT GREATER THAN THE AMOUNTS PAID BY
CADENCE TO BMS UNDER SECTION 4.1 OF THIS AGREEMENT.
ARTICLE VII INDEMNIFICATION; ARBITRATION
7.1 Mutual Indemnification. Each Party (the Indemnifying Party) shall indemnify,
defend and hold harmless the other Party, its Affiliated Companies and their respective directors,
officers, employees, and agents and their respective successors, heirs and permitted assigns (the
Indemnitees), against any liability, damage, loss or expense (including reasonable attorneys
fees and expenses of litigation) (collectively, but subject to Section 6.6 hereof, Losses)
incurred by or imposed upon the Indemnitees, or any one of them arising out of or resulting from
(or alleged to arise out of or result from) any of the following:
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(i) any breach of any representation or warranty of the Indemnifying Party contained in this
Agreement; and
(ii) any breach of any covenant or agreement of the Indemnifying Party contained in this Agreement.
7.2 Additional Indemnification Obligations of Cadence. Without limiting its
obligations under Section 7.1, Cadence further agrees to indemnify, defend and hold harmless BMS,
its Affiliated Companies and their respective directors, officers, employees, and agents and their
respective successors, heirs and assigns (the BMS Indemnitees), against any Losses payable by the
BMS Indemnitees, or any one of them, to any Third Party arising out of or resulting from (or
alleged to arise out of or result from) (A) any breach of the Pharmatop License Agreement (other
than a breach by Pharmatop) resulting from (i) any failure of Cadence or any of its Affiliated
Companies, sublicensees, contractors or agents to perform, observe or comply with any provision of
the Pharmatop License Agreement that relates to the Territory (except to the extent that a breach
by BMS of its obligations under this Agreement or the Pharmatop License Agreement or any other act
or omission by BMS prevents such performance, observance or compliance by Cadence or its Affiliated
Companies, sublicensees, contractors or agents) or (ii) the exercise by Cadence or its Affiliated
Companies, sublicensees, contractors or agents of the BMS Rights sublicensed to Cadence under this
Agreement, (B) the development of Products by or on behalf of Cadence or any of its Affiliated
Companies or sublicensees for the Territory or any other jurisdiction as to which Cadence or any of
its Affiliated Companies has or may acquire rights with respect to Products, (C) the marketing,
promotion, sale, use, consumption of, or exposure to, Products in the Territory or any such other
jurisdiction, (D) the manufacturing (other than pursuant to the Clinical Supply Agreement) of
Products for sale, use or consumption in the Territory or any such other jurisdiction, (E) the use
by Cadence and its Affiliated Companies or any of its or their sublicensees, contractors or agents
of BMSs Product Data, Other Product Data or Regulatory Filings or other data, information,
records, filings or Confidential Information that BMS provides to Cadence pursuant to this
Agreement or (F) any failure by Cadence and its Affiliated Companies and its and their sublicensees
to comply with Applicable Law in connection with the development and commercialization (including
the manufacture, marketing, promotion and sale) of the Products hereunder.
7.3 Additional Indemnification Obligations of BMS. Without limiting its obligations under
Section 7.1, BMS further agrees to indemnify, defend and hold harmless Cadence, its Affiliated
Companies and their respective directors, officers, employees, and agents and their respective
successors, heirs and assigns (the Cadence Indemnitees), against any Losses payable by the
Cadence Indemnitees, or any one of them, to any Third Party arising out of or resulting from (or
alleged to arise out of or result from) (A) any breach of the Pharmatop License Agreement (other
than a breach by Pharmatop or a failure by Cadence or any of Cadences Affiliated Companies or any
of their sublicensees, contractors or agents to perform, observe or comply with any of the
provisions of the Pharmatop License Agreement, except to the extent that a breach by BMS of its
obligations under this Agreement or the Pharmatop License Agreement or any other act or omission by
BMS prevents such performance, observance or compliance by Cadence or its Affiliated Companies,
sublicensees, contractors or agents) resulting from (i) any
failure of BMS or any of its Affiliated Companies or its or their sublicensees (other than
Cadence), contractors or agents to perform, observe or comply with
any provision of the Pharmatop
License Agreement
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that relates to the Territory (except to the extent such failure results from any
act or omission of Cadence and its Affiliated Companies, sublicensees contractors and agents to
perform, observe or comply with any provision of the Pharmatop License Agreement that relates to
the Territory or with this Agreement), (B) any breach of the Pharmatop License Agreement by BMS or
any of its Affiliated Companies or its or their sublicensees (other than Cadence), contractors or
agents that arises out of activities of BMS or any of its Affiliated Companies or its or their
sublicensees (other than Cadence) outside the Territory, (C) the exploitation (including the
import, use, manufacture, sale and offer for sale) of the Products by BMS or any of its Affiliated
Companies or its or their sublicensees (other than Cadence), contractors or agents outside the
Territory or inside the Territory pursuant to the rights retained by BMS under this Agreement, (D)
the exploitation (including the import, use, manufacture, sale and offer for sale) of the Products
by BMS or any of its Affiliated Companies or its or their sublicensees (other than Cadence),
contractors or agents inside the Territory prior to the Effective Date or (E) the use by BMS and
its Affiliated Companies or any of its or their sublicensees (other than Cadence), contractors or
agents of Cadences Product Data, Other Product Data or Regulatory Filings or other data,
information, records, filings or Confidential Information that Cadence provides to BMS pursuant to
this Agreement.
7.4 Conditions to Indemnification; Third Party Claims. Subject to Article 12 of the
Pharmatop License Agreement, to the extent applicable, a Party seeking indemnification under this
Article VII (the Indemnified Party) with respect to any claim brought by any Third Party shall
give prompt notice of the claim to the Indemnifying Party and, provided that the Indemnifying Party
is not contesting the indemnity obligation, shall permit the Indemnifying Party to control and
assume the defense of any litigation relating to such claim and disposition of any such claim
unless the Indemnifying Party is also a party (or likely to be named a party) to the proceeding in
which such claim is made and the Indemnified Party gives notice to the Indemnifying Party that it
may have defenses to such claim or proceeding that are in conflict with the interests of the
Indemnifying Party, in which case the Indemnifying Party shall not be so entitled to assume the
defense of the case. If the Indemnifying Party does assume the defense of any claim or proceeding,
it (i) shall act diligently and in good faith with respect to all matters relating to the
settlement or disposition of any claim as the settlement or disposition relates to Parties being
indemnified under this Article VII, (ii) shall cause such defense to be conducted by counsel
reasonably acceptable to the Indemnified Party and (iii) shall not settle or otherwise resolve any
claim without prior notice to the Indemnified Party and the consent of the Indemnified Party if
such settlement involves anything other than the payment of money by the Indemnifying Party. The
Indemnified Party shall cooperate with the Indemnifying Party in its defense of any claim for which
the Indemnifying Party has assumed the defense in accordance with this Section 7.4, and shall have
the right (at its own expense) to be present in person or through counsel at all legal proceedings
giving rise to the right of indemnification.
7.5 Insurance. Cadence shall, beginning with the initiation of its first clinical
trial for a Product, maintain at all times thereafter during the term of
this Agreement, and until the later of (i) [***] ([***])[***] after termination or expiration
of this Agreement or (ii) the date that all statutes of limitation covering claims or suits that
may be brought for personal injury based on
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the sale or use of a Product have expired in all
countries in the Territory, comprehensive general liability insurance from a recognized,
creditworthy insurance company having an Excellent rating (A rating or above by A.M. Best), a
financial performance rating of at least Strong (A rating or above by A.M. Best) and an A.M. Best
Class Size of at least VIII, on a claims-made basis, with endorsements for contractual liability
and product liability, and with coverage limits of not less than [***] ([***]) per occurrence and,
[***], [***]([***])in the aggregate or, [***], [***]([***]) in the aggregate and which shall name
BMS as an additional insured thereunder. The minimum level of insurance set forth herein shall
not be construed to create a limit on Cadences liability hereunder. Within [***]([***])[***]
following written request from BMS, Cadence shall furnish to BMS a certificate of insurance
evidencing such coverage as of the date. Cadence shall provide BMS with not less than [***]([***])
days prior written notice of any modification or cancellation of coverage by Cadence and shall
provide written notice to BMS not less than [***]([***])[***] after receiving notice from its
insurer (or insurance broker) of any modification or cancellation of coverage by the insurer. In
the case of a modification or cancellation of such coverage, Cadence shall promptly provide BMS
with a new certificate of insurance evidencing that Cadences coverage meets the requirements in
the first sentence of this Section. The collection by BMS of any proceeds under any such insurance
policy shall not affect BMSs right to obtain indemnification or other remedies under this
Agreement, except to the extent that the collection of such proceeds reduces BMSs Losses, and the
assertion by BMS of a claim under any such insurance policy shall not impair BMSs right to assert
a claim against Cadence or any other Person for indemnification or otherwise pursuant to this
Agreement.
7.6 Arbitration. Except as set forth in Section 7.7, any controversy or claim arising
out of or relating to this Agreement or the validity, inducement or breach thereof (a Dispute)
shall be settled by binding arbitration as follows:
(a) A Party may submit such Dispute to arbitration by notifying the other Party, in
writing, of such Dispute and demanding arbitration of such Dispute in accordance with this
Section 7.6. Any such Dispute shall, except as provided herein, be finally resolved under
the Rules of Arbitration of the International Chamber of Commerce (the ICC) before an
arbitration tribunal of three (3) arbitrators appointed and ruling in accordance with such
Rules of Arbitration (the Rules), except where the Rules conflict with this Section 7.6,
in which case this Section shall control. Each of the arbitrators shall be an attorney who
has at least fifteen (15) years of experience with a law firm or corporate law department of
over twenty-five (25) lawyers or a judge of a court of general jurisdiction. The governing
law set forth in Section 9.8 shall govern any such proceedings, unless otherwise required by
Section 7.7. The language of the arbitration shall be English.
(b) Within thirty (30) days after the designation of the arbitrator, the arbitrator and
the Parties shall meet, and each Party shall provide to the arbitrator a written summary of
all disputed issues, such Partys position on such disputed issues and such Partys proposed
ruling on the merits of each such issue.
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(c) The arbitrator shall set a date for a hearing, which shall be no later than thirty
(30) days after the submission of written proposals pursuant to Section 7.6(b), for the
presentation of evidence and legal argument concerning each of the issues identified by the
Parties. The Parties shall have the right to be represented by counsel.
(d) The arbitrator shall use his or her best efforts to rule on each disputed issue
within thirty (30) days after completion of the hearing described in Section 7.6(c). The
determination of the arbitrator as to the resolution of any dispute shall be binding and
conclusive upon all Parties. All rulings of the arbitrator shall be in writing and shall be
delivered to the Parties except to the extent that the Rules provide otherwise. Nothing
contained herein shall be construed to permit the arbitrator to award punitive, exemplary or
any similar damages.
(e) [***].
(f) Any arbitration pursuant to this Section 7.6 shall be conducted in Chicago,
Illinois or, if such arbitration includes Pharmatop as contemplated by Section 7.7, Paris,
France. Any arbitration award may be entered in and enforced by any court with
jurisdiction.
(g) The Parties acknowledge and agree that the breach by any Party of the provision of
this Agreement related to the protection of trade secrets or confidentiality would not be
fully compensable by money damages and would result in irreparable harm to the other Party.
Notwithstanding anything in this Article 7, each Party shall have the right to seek
injunctive or other equitable relief from a court of competent jurisdiction that may be
necessary to avoid irreparable harm, maintain the status quo or preserve the subject matter
of the arbitration, including any breach or threatened breach of Section 5.1 or 5.2.
7.7 Pharmatop Arbitration. In the event of any controversy or claim between Pharmatop
and BMS relating to or affecting the rights thereunder with respect to the Territory arising out of
or relating to the Pharmatop License Agreement or the performance by Cadence of its obligations
under this Agreement or the Pharmatop License Agreement that is the subject of an arbitration
proceeding pursuant to Section 13.1 of the Pharmatop License Agreement, Cadence agrees that, if
requested by BMS (or if requested by Cadence to the extent such proceeding relates to the
Territory) and to the extent permitted by the Pharmatop License Agreement or by Pharmatop or the
arbitrators, (i) Cadence will (if requested by BMS) join in and participate in such proceeding;
(ii) if requested by Cadence with respect to any such proceeding that relates to the Territory, BMS
shall use reasonable efforts to seek to include Cadence in such proceeding, and (iii) if Cadence
participates or is included in such proceeding, any controversy or claim between BMS and
Cadence relating thereto shall be settled by arbitration in such proceeding to the extent possible
rather than in a proceeding under Section 7.6. In the event of any controversy or claim between
Pharmatop and Cadence arising out of or relating to the Pharmatop License Agreement or the
performance by Cadence of its obligations under this Agreement or the Pharmatop License Agreement
that is the subject of an arbitration proceeding
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pursuant to Section 13.1 of the Pharmatop License
Agreement or otherwise, BMS shall be entitled to participate in such proceeding, and to the extent
permitted by the Pharmatop License Agreement or by Pharmatop or the arbitrators, any controversy or
claim between BMS and Cadence relating thereto shall be settled by arbitration in such proceeding.
In the event BMS reasonably believes that the participation of Pharmatop in any arbitration
proceeding between BMS and Cadence pursuant to Section 7.6 would facilitate the orderly resolution
of such Dispute, BMS shall be entitled to have Pharmatop participate in such arbitration
proceeding.
ARTICLE VIII TERM AND TERMINATION
8.1 Term. This Agreement shall commence as of the Effective Date and, unless sooner
terminated in accordance with the terms hereof or by mutual written consent, shall expire in each
country in the Territory, on a country-by-country basis, upon the expiration of both the Royalty
Term and BMS Patent Royalty Term in such country.
8.2 Automatic Termination. This Agreement shall terminate automatically in the event
of the termination of the Pharmatop License Agreement. In the event of a partial termination of
the Pharmatop License Agreement, this Agreement shall terminate in respect of the rights so
terminated under the Pharmatop License Agreement.
8.3 Termination by Either Party. Either Party shall have the right to terminate this
Agreement on a country-by-country basis (except that any termination with respect to the United
States shall also apply to Canada), at its sole discretion, upon delivery of written notice to the
other Party, upon the occurrence of any of the following:
(a) the Bankruptcy of the other Party; and
(b) a material breach of this Agreement by the other Party with respect to any country
in the Territory (or, in the case of any covenant that is qualified by materiality, any
breach) that is not cured within the Specified Number of Days (as defined below) after
written notice of such breach is given; provided that such additional cure period shall not
apply to any breach of Section 5.5; and provided, further that the Parties acknowledge that
a series of breaches which are immaterial individually may, when considered in the
aggregate, result in a material breach and that such opportunity to cure shall run in
respect of each such immaterial breach from the date that the Party seeking to terminate has
given notice of such material breach.
As used herein Specified Number of Days means ninety (90) days (or 180 days in the case of
a termination based on the second proviso of the first paragraph of this Section 8.3(b)), except
that:
(i) if
[***]1 have not occurred:
(A) [***],
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(B)
[***]2 and
(C) [***];
(ii) if the [***] has occurred, the Specified Number of Days shall be
[***]([***])[***]; and
(iii) if the [***] has occurred, the Specified Number of Days shall be
[***]([***])[***].
8.4 Termination by BMS. BMS shall have the right to terminate this Agreement, at
BMSs sole discretion, upon delivery of written notice to Cadence, upon the occurrence of any of
the following:
(a) the failure of Cadence or any of its Affiliated Companies, sublicensees, contractors or
agents to perform, observe or comply with any provision of the Pharmatop License Agreement that
relates to the Territory, the BMS Rights or the exercise of the rights sublicensed or licensed to
Cadence under this Agreement or any other act or omission of Cadence or any of its Affiliated
Companies or any of their sublicensees, contractors or agents that results in a material breach of
the Pharmatop License Agreement or would permit Pharmatop to terminate, or exercise a right of
rescission with respect to, the Pharmatop License Agreement (except to the extent that a breach by
BMS of its obligations under this Agreement or any other act or omission by BMS prevents such
performance, observance or compliance by Cadence or its Affiliated Companies, sublicensees,
contractors or agents);
(b) the failure of Cadence to deliver to BMS any of the reports, statements or other
information required to be delivered to BMS pursuant to Section 3.2(e) which failure is not cured
within the ten (10) Business Day period provided for in such Section.
8.5 Termination by Cadence.
(a) Upon the occurrence of any of the following, Cadence shall have the right to terminate
this Agreement on a country-by-country basis (except that, unless otherwise specifically provided
herein, any termination with respect to the United States shall also apply to
Canada), at Cadences sole discretion, upon delivery prior written notice to BMS of not less
than (A) thirty (30) days more notice than is required under the Pharmatop License Agreement or
(B) ninety (90) days if no notice period is specified under the Pharmatop License Agreement:
(i) the occurrence after the Effective Date of an event that relates to the Territory
and would entitle BMS to terminate the Pharmatop License Agreement pursuant to Section 5.3,
6.2(a), 6.2(b), 6.3(a) or 6.3(b) thereof, whether or not BMS exercises such right of
termination; provided, however, that if such right of termination relates only to a specific
country in the Territory then the right of Cadence to terminate this Agreement shall apply
only to such country; and provided, further, that if any such
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event would permit a reduction
in the royalty payable to Pharmatop under the Pharmatop License Agreement and Cadence elects
to pay such reduced royalty, then Cadence shall not have any right to terminate this
Agreement as a result of such event; or
(ii) a failure by Pharmatop to perform any of its material obligations under the
Pharmatop License Agreement with respect to the Territory that would permit BMS to terminate
the Pharmatop License Agreement with respect to the Territory and is not cured within any
cure period applicable under the Pharmatop License Agreement; provided that if such right of
termination relates only to a specific country in the Territory then the right of Cadence to
terminate this Agreement shall apply only to such country.
(b) If
the [***]3 Date occurs, Cadence may terminate this Agreement upon
not less than ninety (90) days prior written notice to BMS.
8.6 Scope of Termination. Except as otherwise provided in this Agreement, any
termination of this Agreement pursuant to this Article 8 shall be as to all countries in the
Territory and all Products, except that in the event of a termination at the election of a Party
the terminating Party may elect by written notice to the other Party to have such termination apply
in respect to one (but not both) of the countries in the Territory, as designated by such Party in
such notice, in which case the rights and obligations of the Parties as to the remaining country of
the Territory shall be unaffected by such termination as to the non-terminated country; provided,
however, that, except for a termination pursuant to Section 8.5(ii), any termination with respect
to the United States shall also apply to Canada.
8.7 Effect of Termination. Upon termination of this Agreement with respect to any
country or all countries in the Territory:
(a) All rights and licenses granted to Cadence in Article 2 and Sections 3.5, 3.6 and 3.7
shall terminate with respect to each terminated country and all rights of Cadence under the BMS
Rights and the Pharmatop License Agreement, the BMS Patents and BMS Know-How shall revert to BMS,
and Cadence shall cease all use of the BMS Rights, BMS Patents and BMS Know-How with respect to
each terminated country, provided that, to the extent permitted by the Pharmatop License Agreement
and unless this Agreement is terminated as a result of a breach or failure to comply by Cadence or
any of its Affiliated Companies or their
sublicensees, contractors or agents to comply with the terms and conditions of this Agreement
or the Pharmatop License Agreement, Cadence shall have the right for one hundred eighty (180) days
after such termination to sell off any Products already manufactured or ordered pursuant to
non-cancelable purchase orders. All Net Sales of such sold off Products shall be subject to the
Royalty payments provided for in Article IV.
(b) Cadence shall assign to BMS or BMSs designee free of charge all INDs, NDAs and other
Regulatory Filings, Product Data, Other Product Data and Approvals owned or Controlled by Cadence
relating to the Products (and all of Cadences right, title and interest therein and thereto) in
each terminated country, and Cadence shall provide to BMS or BMSs
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designee free of charge one (1)
copy of all documents and filings contained in or referenced in any such filings, together with the
raw and summarized data for any preclinical and clinical studies of the Products. Cadence shall
take such actions with the applicable Drug Regulatory Authorities in each terminated country to
transfer ownership and control of such Regulatory Filings to BMS not later than five (5) days after
such termination.
(c) Cadence shall transfer to BMS or BMSs designee free of charge all Product Data, Other
Product Data and other data generated in connection with any preclinical studies, clinical trials
and other studies conducted by or on behalf of Cadence and its Affiliated Companies relating to the
Products and within forty-five (45) days after such termination shall transfer to BMS or BMSs
designee copies of all Regulatory Filings with Drug Regulatory Authorities in the terminated
countries with respect to Products, rendered PDF copies of the applicable clinical study reports
(and the appendices, tables, listings and graphs therein), the SAS data sets containing the raw
data from the applicable clinical studies. If Cadence maintains such Product Data, Other Product
Data and other data in electronic form, Cadence shall provide it to BMS or BMSs designee in
electronic form, but Cadence shall have no obligation to reformat or otherwise alter or modify any
materials or to create or recreate any such materials in electronic form in order to provide them
to BMS.
(d) Cadence shall disclose to BMS in writing its manufacturing patents, processes, techniques
and trade secrets for making the Products and BMS shall automatically have a fully paid up,
exclusive, perpetual, worldwide, transferable, sublicensable right and license under know-how and
patents Controlled by Cadence and its Affiliated Companies relating to any composition,
formulation, method of use or manufacture of any Product solely for using, importing, making,
having made, selling and offering for sale Products outside the Territory and in each terminated
country.
(e) Cadence shall assign (or, if applicable, cause its Affiliated Company to assign) to BMS or
BMSs designee free of charge all of Cadences (and such Affiliated Companies) right, title and
interest in and to any registered or unregistered trademark, trademark application, trade name or
internet domain name that is specific to a Product in each terminated country (it being understood
that the foregoing shall not include any trademarks or trade names that contain the name
Cadence).
(f) Cadence shall assign to BMS or BMSs designee free of charge all of Cadences right, title
and interest in any inventions owned by it pursuant to Section 2.7 (and any
patent applications filed thereon and patents issued thereon) pertaining to the composition of
matter or method of use or utility of any Product in each terminated country
(g) BMS shall be entitled to retain all amounts previously paid to BMS by Cadence under this
Agreement.
(h) Neither Party shall be relieved of any obligation that accrued prior to the effective date
of such termination or expiration, including any obligation of Cadence with respect to any amount
due or payable to BMS that accrued or that arises out of acts or events occurring prior to the
effective date of termination.
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(i) Unless such termination was as a result of a breach of this Agreement by Cadence or any of
its Affiliated Companies, sublicensees, agents or contractors or a failure of Cadence or any of its
Affiliated Companies, sublicensees, agents or contractors to comply with or observe the terms of
the Pharmatop License Agreement or a termination by Cadence pursuant to Section 8.5, Cadence shall
have, unless the License has been terminated pursuant to Section 2.17(b), a fully paid up,
perpetual, noncancelable and non-exclusive license (A) under the BMS Know-How, with the right to
sublicense as provided in Section 2.4, to make and have made the Products anywhere in the world
solely for use and sale within the Territory, (B) under the BMS Patents, with the right to
sublicense as provided in Section 2.4, to import, use, sell and offer for sale Products in the
Territory and (C) under the BMS Patents, with the right to sublicense as provided in Section 2.4,
to make and have made the Products in the Territory solely for use and sale within the Territory;
provided, however, that the licenses granted in clauses (B) and (C) of this paragraph shall not
grant any right to the composition of matter of any Other Chemical Entity, or the right to make or
have made any Other Chemical Entity or to any use not claimed by the BMS Patents.
(j) Notwithstanding the foregoing, in the event this Agreement terminates as the result of the
termination of the Pharmatop License Agreement as the result of a material breach of that agreement
by BMS (that is not the result of a breach of this Agreement by Cadence or any of its Affiliated
Companies, sublicensees, agents or contractors or a failure of Cadence or any of its Affiliated
Companies, sublicensees, agents or contractors to comply with or observe the terms of the Pharmatop
License Agreement), the assets to be transferred and information to be disclosed to BMS or its
designee pursuant to Sections 8.7(b), (c), (d), (e) and (f) shall not be transferred or disclosed
to BMS or its designee but shall, at on the written request of BMS, be transferred to Pharmatop;
provided, however, that (1) BMS shall have the right upon its request to have such assets
transferred, and such information disclosed, to it or its designee on terms to be agreed by BMS and
Cadence and (2) if Cadence obtains any damages or other remedy in respect of its cost of producing
or obtaining such assets and information, such assets shall be transferred, and such information
shall be disclosed, to BMS or its designee.
(k) The Parties hereto recognize that the assets to be assigned and transferred to BMS or its
designee (or to Pharmatop or its designee) pursuant to this Section 8.7 are unique and are not
available on the open market and that any breach of the terms of this Section 8.7 would give rise
to irreparable harm for which money damages would not be an adequate remedy. Accordingly, the
Parties agree that, in addition to all other remedies available to it, BMS shall be entitled to
enforce the terms of this Section 8.7 by a decree of specific performance, without the
necessity of proving the inadequacy as a remedy of money damages. In the event of failure to
obtain such assignment, Cadence hereby consents and grants to BMS and its designee the right to
access and reference (without any further action required on the part of Cadence, whose
authorization to file this consent with any Regulatory Authority is hereby granted) any and all
such Regulatory Filings, Product Data, Other Product Data, information and Approvals for any
regulatory or other use or purpose in each terminated country.
8.8 Transition. Upon termination of this Agreement with respect to any country or all
countries in the Territory, all actions then being controlled or undertaken by Cadence with respect
to the applicable terminated countries in the Territory shall revert to the control of BMS or its
designee, and Cadence and BMS (or BMSs designee) shall cooperate and use
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commercially reasonable
efforts to effect an orderly transfer and transition of such activities to BMS or its designee, and
Cadence shall take any reasonable action requested by BMS to facilitate such transition. BMS and
Cadence shall endeavor to effect such transition as promptly as reasonably practicable.
8.9 Survival. The following provisions shall survive termination or expiration of
this Agreement, as well as any other provisions which by their nature are intended to survive
termination or expiration: Section 2.8(c), BMSs rights of use and reference set forth in Section
2.9, Section 2.15, Section 4.8, Section 5.1, Section 5.2, Section 5.3, Section 6.6, Article 7
(other than Section 7.5), Article 8 and Article 9.
8.10 Bankruptcy. The Parties agree that in the event a Party becomes a debtor under
Title 11 of the U.S. Code (Title 11), this Agreement shall be deemed to be, for purposes of
Section 365(n) of Title 11, a license to rights to intellectual property as defined therein.
Each Party as a licensee hereunder shall have the rights and elections as specified in Title 11.
Any agreements supplemental hereto shall be deemed to be agreements supplementary to this
Agreement for purposes of Section 365(n) of Title 11.
ARTICLE IX MISCELLANEOUS
9.1 Amendments. This Agreement may be amended only by a writing signed by each of the
Parties, and any such amendment will be effective only to the extent specifically set forth in such
writing.
9.2 Counterparts; Facsimile Execution. This Agreement may be executed in any number
of counterparts, and by each of the Parties on separate counterparts, each of which, when so
executed, will be deemed an original, but all of which will constitute but one and the same
instrument. Delivery of an executed counterpart of this Agreement by facsimile will be equally as
effective as delivery of a manually executed counterpart of this Agreement.
9.3 Cumulative Remedies. The rights and remedies of the Parties under this Agreement
are cumulative and not exclusive of any rights or remedies which the Parties would otherwise have.
No single or partial exercise of any such
right or remedy by a Party, and no discontinuance of steps to enforce any such right or
remedy, will preclude any further exercise thereof or of any other right or remedy of such Party.
9.4 Entire Agreement. This Agreement and the Clinical Supply Agreement contain the
entire agreement of the Parties with respect to the transactions contemplated hereby and supersedes
all prior written and oral agreements, and all contemporaneous oral agreements, relating to such
transactions.
9.5 Schedules. The Schedules attached to in this Agreement are an integral part
hereof and all references to this Agreement include such Schedules.
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9.6 Force Majeure.
(a) General. No Party shall be liable for any failure to perform its obligations under this
Agreement (other than obligations to make payments of money) to the extent such performance has
been delayed, interfered with or prevented by an event of Force Majeure, except that Pharmatop
shall not be excused from performance of any obligation under the Pharmatop License Agreement
assumed by it unless such performance is excused under such agreement
(b) Definition. As used in this Section, Force Majeure means any circumstances whatsoever
which are not within the reasonable control of the Party affected thereby, including an act of God,
an act of any Governmental Entity (including any Drug Regulatory Authority), war, insurrection,
riot, strike or labor dispute, shortage of materials, fire, explosion, flood, government
requisition or allocation, breakdown of or damage to plant, equipment or facilities, interruption
or delay in transportation, fuel supplies or electrical power, embargo, boycott, order or act of
civil or military authority. The Party who declares an event of Force Majeure shall give prompt
notice to the other Party of such declaration.
(c) Duty to Mitigate. If the performance of any obligation has been delayed, interfered with
or prevented by an event of Force Majeure, then the Party affected by such event will take such
actions as are reasonably available to remove the event of Force Majeure or to mitigate the effect
of such occurrence, except that labor disputes will be settled at the sole discretion of the Party
affected thereby.
(d) Suspension of Certain Obligations. If an event of Force Majeure occurs, the obligations
of the Parties under this Agreement (other than obligations to make payments of money) will be
suspended during, but not longer than, the continuance of the event of Force Majeure.
9.7 Assignment.
(a) BMS may, without Cadences consent, assign or transfer all of its rights and obligations
hereunder, in connection with any transfer of all of BMSs rights under the Pharmatop License
Agreement with respect to the Territory to any Affiliated Company of BMS
or to any Third Party (including a successor in interest); provided, that such assignee or
transferee agrees in a writing provided to Cadence to be bound by the terms of this Agreement.
(b) Upon [***] ([***])[***] advance written notice to BMS and subject to BMSs (and, if
required by the Pharmatop License Agreement, Pharmatops) prior written approval, which approval
may be withheld or granted by BMS in its sole discretion (and by Pharmatop in accordance with the
Pharmatop License Agreement), Cadence may assign or transfer all of its rights and obligations
hereunder to a Third Party [***]; provided, that such Third Party shall have agreed prior to such
assignment or transfer to be bound by the terms of this Agreement in a writing provided to BMS and
Pharmatop. Cadence may assign or transfer all of its rights and obligations hereunder without such
consent to an Affiliated Company of Cadence (so long as such assignment or transfer includes all
Approvals in the Territory, all
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manufacturing assets relating to this Agreement, and all rights and
obligations under this Agreement); provided, that such Affiliated Company shall have agreed prior
to such assignment or transfer to be bound by the terms of this Agreement in a writing provided to
BMS; and provided, further, that all such rights and obligations automatically revert to Cadence
free of any Liens in the event such company ceases to be an Affiliated Company of Cadence. For the
purposes of clarification, transfers to a successor in interest by reason of merger, consolidation
or sale of substantially all of the assets of Cadence shall be governed by Section 9.7(c).
(c) Cadence may assign or transfer all of its rights and obligations hereunder without such
consent to a successor in interest by reason of merger, consolidation or sale of substantially all
of the assets of Cadence (and so long as such assignment or transfer includes, without limitation,
all Approvals in the Territory, all manufacturing assets relating to this Agreement, and all rights
and obligations under this Agreement); provided, that such successor in interest shall have agreed
prior to such assignment or transfer to be bound by the terms of this Agreement in a writing
provided to BMS.
(d) Subject to the foregoing, this Agreement shall inure to the benefit of and be binding on
the Parties successors and permitted assigns.
(e) Any assignment or transfer in violation of the foregoing shall be null and void and wholly
invalid, the assignee or transferee in any such assignment or transfer shall acquire no rights
whatsoever, and the non-assigning non-transferring Party shall not be required to recognize, such
assignment or transfer.
(f) No assignment by any Party of any of its rights or obligations under this Agreement shall
relieve such Party from any of its obligations hereunder and the assignor shall remain jointly and
severally liable with the assignee for the performance of the assigned obligations.
9.8 Governing Law. This Agreement is a contract under the laws of the State of New
York and for all purposes will be governed by, and construed and enforced in accordance with, the
laws of said State, without giving effect to any internal conflict of law rules.
9.9 Headings. All titles and headings in this Agreement are intended solely for
convenience of reference and will in no way limit or otherwise affect the interpretation of any of
the provisions hereof.
9.10 Notices. All notices, consents, requests, demands and other communications
required or permitted under this Agreement: (a) will be in writing; (b) will be sent by messenger,
certified or registered U.S. mail, a reliable express delivery service or facsimile (with a copy
sent by one of the foregoing means), charges prepaid as applicable, to the appropriate address(es)
or fax number(s) set forth below; and (c) will be deemed to have been given on the date of receipt
by the addressee (or, if the date of receipt is not a Business Day, on the first Business Day after
the date of receipt), as evidenced by (i) a receipt executed by the addressee (or a responsible
person in his or her office), the records of the Person delivering such communication or a notice
to the effect that such addressee refused to claim or accept such communication, if sent by
messenger, U.S. mail or express delivery service, or (ii) a receipt generated by the senders fax
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machine showing that such communication was sent to the appropriate number on a specified date, if
sent by facsimile. All such communications will be sent to the following addresses or numbers, or
to such other addresses or numbers as any Party may inform the others by giving five (5) Business
Days prior notice:
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If to Cadence:
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With copies to: |
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Cadence Pharmaceuticals, Inc.
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Cadence Pharmaceuticals, Inc. |
12730 High Bluff Drive, Suite 410
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12730 High Bluff Drive, Suite 410 |
San Diego, CA 92130
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San Diego, CA 92130 |
Attn: President & CEO
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Attn: Vice President, Business Development |
Fax No.: (858) 436-1401
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Fax No.: (858) 436-1401 |
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If to BMS:
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With a copy to: |
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Bristol-Myers Squibb Company
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Bristol-Myers Squibb Company |
Route 206 & Province Line Road
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Route 206 & Province Line Road |
Princeton, NJ 08540
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Princeton, NJ 08540 |
Attn: Senior Vice President Corporate Business
Development
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Attn: Vice President and SeniorCounsel, Licensing and
Business Development |
Fax No.: (609) 252-7128
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Fax No.: (609) 252-4232 |
9.11 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions hereof or
affecting the validity or enforceability of such provision in any other jurisdiction.
9.12 No Third Party Beneficiaries. This Agreement is made solely for the benefit of
the Parties hereto and their successors and permitted assigns, and, except as specifically set
forth in this Agreement, no other Person has, or
is entitled to enforce, any rights, benefits or obligations under this Agreement. Nothing set
forth in this Agreement shall diminish, affect or impair the rights of Pharmatop under the
Pharmatop License Agreement.
9.13 Waivers. The due performance or observance by the Parties of their respective
obligations under this Agreement will not be waived, and the rights and remedies of the Parties
hereunder will not be affected, by any course of dealing or performance or by any delay or failure
of any Party in exercising any such right or remedy. The due performance or observance by a Party
of any of its obligations under this Agreement may be waived only by a writing signed by the Party
against whom enforcement of such waiver is sought, and any such waiver will be effective only to
the extent specifically set forth in such writing.
9.14 Documentary Conventions. As used in this Agreement, (a) whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and neuter forms; (b) the
words include, includes and including shall be deemed to be followed by the phrase without
limitation; (c) the terms hereof, herein, hereby, hereunder and
66
derivative or similar
words refer to this entire Agreement and (d) unless otherwise specified, the terms Section or
Exhibit or Schedule refer to the specified Section, Exhibit or Schedule of or to this
Agreement. All references to generally accepted accounting principles shall refer to United States
generally accepted accounting principles, and all accounting terms not defined in any agreement or
instrument shall have the meanings determined by United States generally accepted accounting
principles as in effect from time to time. References to a Person are also to its permitted
successors and permitted assigns. Unless otherwise expressly provided herein, any reference to a
statute, instrument or other agreement in this Agreement means such statute, instrument or
agreement as it may from time to time be amended, modified or supplemented, including (in the case
of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes.
9.15. Consents and Approvals. All consents or approvals of the Parties contemplated
hereunder shall not be unreasonably withheld, delayed or conditioned unless expressly stated as
otherwise.
9.16. Absence of Presumption. Each of the Parties acknowledges and agrees that this
Agreement has been diligently reviewed by and negotiated by and between them, that in such
negotiations each of them has been represented by competent counsel and that the final agreement
contained herein, including the language whereby it has been expressed, represents the joint
efforts of the Parties hereto and their counsel. Accordingly, in interpreting this Agreement or
any provision hereof, no presumption shall apply against any Party hereto as being responsible for
the wording or drafting of this Agreement or any such provision, and ambiguities, if any, in this
Agreement shall not be construed against any Party, irrespective of which Party may be deemed to
have authored the ambiguous provision.
9.17. Relationship of Parties. Nothing in this Agreement shall be construed to (i)
create or imply a general partnership or joint venture
between the Parties, (ii) make either Party the agent of the other for any purpose, (iii) give
either Party the right to bind the other, (iv) create any duties or obligations between the Parties
except as expressly set forth herein (other than the implied obligation of good faith), or (v)
grant any direct or implied licenses or any other right other than as expressly set forth herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
67
SIGNATURE PAGE TO IV APAP AGREEMENT
IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the Execution Date.
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BRISTOL-MYERS SQUIBB COMPANY |
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By:
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/s/ Tamar Howson |
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Name:
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Tamar Howson |
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Title:
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SVP, Corporate & Business Development |
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CADENCE PHARMACEUTICALS, INC. |
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By:
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/s/ Theodore R. Schroeder |
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Name:
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Theodore R. Schroeder |
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Title:
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President and CEO |
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SCHEDULE 1.1
BMS PATENTS
US Patent Nos. 6,593,331 and 6,511,982
Any US Patent that issues pursuant to [***]
and any continuations, continuations-in-part, divisions, reissues, re-examinations, extensions and
renewals of any of the foregoing.
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*** |
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Certain information on this page has
been omitted and filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions. |
SCHEDULE 6.3(a)
PHARMATOP PATENTS
U.S. Patent 6,992,218
Canadian Patent (application) 2 415 403
U.S. Patent 6,028,222
Canadian Patent (application) 2 233 924
Exhibit 10.12
Exhibit
10.12
CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
PHARMATOP LICENSE AGREEMENT
E-1
License
Agreement
This agreement (the Agreement) is entered into as of the 23rd day of December, 2002 by and
among SCR Pharmatop, a civil law partnership organized under the laws of France, having its head
offices address at 10, Square St. Florentin, 78150 Le Chesnay, France, recorded with the Register
of Commerce and Companies of Versailles under No. 407552702 (PHARMATOP), and Bristol-Myers Squibb
Company, a corporation organized under the laws of the State of Delaware, USA, having its head
offices address at 345 Park Avenue, New York, New York 10154 USA (referred to hereafter as BMS).
W I T N E S S E T H
WHEREAS, PHARMATOP is the owner of certain patents, patent applications, and know-how relating to
parenteral paracetamol formulations;
WHEREAS, PHARMATOP has entered into a license agreement dated April 12, 1999 on these patents,
patent applications and know-how covering a certain number of countries in Europe, Africa, the
Middle East and Asia with UPSA S.A., a subsidiary of BMS; and
WHEREAS, BMS wishes to acquire an exclusive license under such patents, patent applications, and
know-how of PHARMATOP in the Territory (as defined below), and PHARMATOP is willing to grant BMS
such an exclusive license under the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the above premises and the covenants contained herein, the
parties agree as follows:
Article 1Definitions
The following definitions apply for the purposes of this Agreement:
1.1 |
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The term Affiliated Companies shall mean any entity that directly or indirectly controls,
is controlled by or is under common control with a Party to this Agreement, and |
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for such purpose control shall mean the power to direct or cause the direction of the
management or the policies of the entity, whether through the ownership of voting
securities, by contract or otherwise. |
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1.2 |
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The term Advertising and Promotion means customary activities that are reasonably incident
to the advertising and promotion of the Product in a country in the Territory (it being
understood that Phase IV clinical studies are not part of Advertising and Promotion). The
term Advertising and Promotional Costs means the out-of-pocket costs and expenses paid by
BMS or its Affiliates to a Third Party (and a reasonable charge for internal copying expenses
for promotional materials). |
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1.3 |
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The term Calendar Quarter shall mean each of the periods of time from (a) January 1 through
March 31; (b) April 1 through June 30; (c) July 1 through September 30; and (d) October 1
through December 31. |
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1.4 |
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The term Competing Product means any one or more non-opiate analgesic
parenterally-administered liquid solution products, in a stable and readily injectible form
for the treatment of post-operative pain (but which can not be another Injectible APAP
Product). For purposes of this Agreement, [***]
shall be deemed an opiate product, the marketing of which shall not be restricted by this
Agreement in any way. |
1.5 |
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The term Derivative of paracetamol means any compound whose chemical structure is derived
from the chemical structure for paracetamol through structural modifications and/or chemical
changes that retain those portions of paracetamols chemical structure that are known to
contribute materially to the activity, specificity and selectivity of paracetamol. |
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1.6 |
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The term Diligent Efforts means the carrying out of obligations or tasks in a sustained
manner consistent with the efforts that BMS devotes to a product or a research, development or
marketing project of similar market potential, profit potential or strategic value resulting
from its own research efforts, based on conditions then prevailing. |
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*** |
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Certain information on this page has
been omitted and filed separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions. |
-2-
1.7 |
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The term FDA shall mean the U.S. FDA or corresponding administrative body in Canada,
Mexico, or in any other country elsewhere in the Territory. |
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1.8 |
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The term Injectible APAP Product means any parenterally administered dosage form of
paracetamol or propacetamol, or any Derivative thereof, whether alone or in combination with
one or more other drugs (as defined, as of the Effective Date, in Section 201 of the United
States Federal Food, Drug and Cosmetic Act). |
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1.9 |
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The term Licensed Know-how refers to precautions and procedures required to enable the
manufacture of the liquid paracetamol solution, stable and ready for use by injection, that
are owned by, controlled by, or licensed (with right to sublicense) to PHARMATOP at any time
during the term of this Agreement, whether or not described in the Patent and in the Patent
Applications, and that represent Confidential Information of PHARMATOP. The current said
precautions and procedures are described in Appendix 5 attached hereto, and made a
part hereof. |
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1.10 |
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The term Licensed Patents shall mean (a) the Patent, (b) the Patent Applications, (c) any
other patents granted and patent applications applied for in the Territory relating to the
manufacture, formulation, use or sale of the Products that are owned by, controlled by, or
licensed to PHARMATOP during the term of this Agreement, and (d) any continuations,
continuations-in-part, divisions, reissues, re-examinations, extensions, and renewals of any
of the patent applications and patents listed in (a)-(c), and all patents which may be granted
on any patent applications in (b)-(d) in the Territory. |
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1.11 |
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The term Licensed Rights shall mean the Licensed Patents and the Licensed Know-How. |
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1.12 |
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The term Marketing Period shall mean, for a given country in the Territory, the period
running from the first day on which Products are sold in such country until the end of the
Agreement with respect to such country. |
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1.13 |
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The term NDA shall mean a new drug application submitted to the FDA seeking approval to
manufacture, promote, market, distribute, or sell a Product in a country in the Territory. |
-3-
1.14 |
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The term Net Sales shall mean the total revenue invoiced by BMS, Affiliated Companies, or
sub-licensees from the sale of a Product to independent Third Parties less the following
amounts: (a) credits, allowances and rebates to, and chargebacks from the account of, such
customers for spoiled, damaged, out-dated and returned Product; (b) trade discounts, cash
discounts, quantity discounts, rebates and other price reduction programs, and other charge
back payments; (c) sales, value-added and other similar taxes (including duties or other
governmental charges levied on, absorbed or otherwise imposed on the sales of Products
including, without limitation, governmental charges otherwise measured by the billing amount);
(d) customs duties, surcharges and other governmental charges incurred in connection with the
exportation or importation of the Product; and (e) bad debts on Product sales written off in
accordance with generally accepted accounting principles, consistently applied. For the
purposes of this definition, samples distributed by BMS, its Affiliates, or sub-licensees to
their customers free of charge, and any Product used or provided for clinical or research
purposes, shall not be included in Net Sales. |
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1.15 |
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The term Patent shall mean US patent No. 6,028,222 issued on 22nd February 2000,
a copy of which is attached hereto in Appendix 1 as Exhibit A and made a part
hereof, and any patent or supplementary protection certificate that PHARMATOP may obtain that
depends on such patent or that is granted based on the Patent Applications. |
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1.16 |
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The term Patent Applications shall mean (a) international patent application PCT/FR
97/01452, filed on 5th August 1997, a copy of which is attached hereto in Appendix 1
as Exhibit B, (b) international patent application PCT/FR01/01749, filed on
6th June 2001, a copy of which is attached hereto in Appendix 1 as
Exhibit C, and (c) any other patent application that PHARMATOP may file that depends
on a Patent or is based on claims contained in the patent applications specified above. |
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1.17 |
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The term Presentation shall mean dosage and pharmaceutical form. |
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1.18 |
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The term Primary Detail Equivalent (PDE) shall mean either [***] where |
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a [***] means [***]; and |
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(b) |
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a [***] means [***]; and |
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(c) |
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a [***] means [***]. |
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All PDEs shall be [***] and shall be reported by BMS in accordance with [***]. |
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1.19 |
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The term Product shall mean any parenterally administered dosage form containing
paracetamol (or any Derivative thereof) alone or in combination with one or more drugs (as
defined, as of the execution of this Agreement, in Section 201 of the United States Federal
Food, Drug and Cosmetic Act), and for which the manufacture, use or sale in a country in the
Territory (x) would otherwise infringe the Licensed Patents but for the license rights granted
to BMS in Article 2 hereof and/or (y) incorporates or uses to any material extent any Know-How
licensed to BMS under Article 2 hereof. |
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1.20 |
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The term Royalty Term means, with respect to a given country in the Territory, the date
commencing with the date of first commercial sale of a Product in such country, and
terminating upon the later of (a) the date that is ten (10) years after such first commercial
sale of a Product in such country, or (b) the date that the manufacture, use or sale of a
Product in such country is no longer covered by any Valid Claim of a Licensed Patent licensed
to BMS hereunder in such country. |
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*** |
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Certain
information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions. |
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1.21 |
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The term Target Product Profile means the target Product profile attached as
Appendix 2 hereto. |
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1.22 |
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The term Tax shall mean any tax, levy, impost, duty, charge, assessment or fee of any
nature (including interest, penalties and additions thereto) that is imposed by any government
or other taxing authority. |
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1.23 |
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The term Territory shall mean the United States (including Puerto Rico and all U.S.
possessions and territories), Canada and Mexico. |
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1.24 |
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The term Third Party means any person or entity other than PHARMATOP, BMS, and their
respective Affiliated Companies. |
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1.25 |
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The term U.S. FDA shall mean the United States Food and Drug Administration and any
successors thereto. |
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1.26 |
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The term Valid Claim shall mean a claim in any unexpired issued patent that has not been
held invalid or unenforceable by a non-appealed or unappealable decision by a court or other
appropriate body of competent jurisdiction, and which is not admitted to be invalid through
disclaimer, dedication to the public, and which has not been cancelled or abandoned in
accordance with or as permitted by the terms of this Agreement or by mutual written agreement. |
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1.27 |
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The term Year means, as to a given country in the Territory, the period beginning on the
date of first commercial sale of Product in such country and ending on the first March 31,
June 30, September 30 or December 31 that is closest (before or after) to the date that is
twelve months following such first commercial sale, and each twelve (12) month period
thereafter during the Royalty Term. |
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Additional defined terms are as follows:
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Defined Term |
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Section in Which Defined |
Affected Country |
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6.2 |
(a) |
Combination Product |
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7.2 |
(b) |
Confidential Information |
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10.1 |
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Grace Period |
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4.6 |
(c) |
Guaranteed Payments |
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7.3 |
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ICC |
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13.1 |
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Improvement |
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8.1 |
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Inspection |
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7.5 |
(b) |
Inventors |
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6.1 |
(a) |
NewPharm |
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6.1 |
(a) |
Registrational Information |
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3.1 |
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Retained Sum |
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6.5 |
(a) |
Transaction |
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4.6 |
(c) |
Transaction Date |
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4.6 |
(c) |
Article 2License
2.1 |
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PHARMATOP hereby grants to BMS an exclusive, royalty-bearing license, with right to
sublicense, under the Licensed Rights, to import, use, sell and offer for sale, make and have
made, Products in the Territory. Furthermore, PHARMATOP also hereby grants to BMS the right
to make and have made the Products outside the Territory for use within the Territory, subject
to the consent of UPSA S.A. for the countries for which an exclusive manufacturing right has
been granted by PHARMATOP to UPSA S.A. Except as may be otherwise agreed in writing by
PHARMATOP in its sole discretion, the license granted to BMS shall only permit it to sell
Products that are packaged, finished products ready for use, and the license shall not extend
to any sales in bulk or of semi-finished products except to BMS sublicensee(s). |
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2.2 |
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PHARMATOP does not promise or undertake to continue its research and development work in the
field of the Licensed Rights. If, however, at its sole discretion, PHARMATOP does continue
such work, it agrees to keep BMS fully informed on the results of its work, and if it makes
any inventions or develops any Know-How relating to the Product, such inventions and know-how
will be licensed to BMS pursuant to Section 2.1. |
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2.3 |
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PHARMATOP shall not itself use the Licensed Rights in any way, directly or indirectly,
including through licenses, for the manufacture, use, importation, and/or sale of Injectible
APAP Products in the Territory. PHARMATOP covenants and warrants that it shall not develop,
manufacture, or sell, or provide any assistance to any Third Party for the purpose of
developing, manufacturing or selling, any Injectible APAP Products for use in a country in the
Territory during the Marketing Period for such country. Notwithstanding the foregoing,
PHARMATOP shall have the right to use, manufacture, sell and license the Licensed Rights in
connection with other products other than Injectible APAP Products in the Territory or any
other country where PHARMATOP has granted to BMS or one of its Affiliated Companies exclusive
rights under any of its patents and know- how to sell such products in such country, and any
such use shall not violate the exclusivity provisions of this Agreement in respect of the
Licensed Rights granted to BMS hereunder; provided, however, that PHARMATOP
shall give to BMS a right of first refusal to license the right to use, manufacture and sell
such other products in the Territory under terms and conditions proposed by PHARMATOP. |
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2.4 |
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PHARMATOP shall not assign or sell its rights under the Licensed Rights in the Territory to a
Third Party without (a) requiring the assignee or purchaser to assume all of PHARMATOPs
obligations under this Agreement in its own name and (b) obtaining BMS prior consent in
writing, which may not be unreasonably withheld so long as PHARMATOP agrees to be jointly and
severally liable with the proposed assignee/purchaser for all obligations owed BMS under the
terms of this Agreement. |
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2.5 |
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BMS may assign its rights under this Agreement to a Third Party, in whole or in part,
provided that (i) the assignee entity expressly assumes all of BMS obligations under this
Agreement, unconditionally and in writing, so that it becomes directly obligated towards
PHARMATOP, (ii) BMS remains jointly obligated with the assignee entity for all of its
obligations under this Agreement; and (iii) PHARMATOP has given its prior written consent to
such assignment, which consent shall not be unreasonably withheld or delayed. BMS may also
assign or otherwise transfer this Agreement and the license granted hereby to an Affiliated
Company or successor in connection with a merger, consolidation, reorganization, or sale or
other transfer of its entire business, provided, in |
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such case, that any such assignee or transferee has agreed in writing to be bound by the
terms and provisions of this Agreement or is so bound by operation of law. |
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2.6 |
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BMS may grant sub-licenses to Affiliated Companies and Third Parties provided that (a) BMS
provides PHARMATOP with advance notice in writing of each sub-license, (b) no sub-license
attempts to reduce or limit any of PHARMATOPs rights under this Agreement, (c) BMS agrees to
be liable for the actions of any sub-licensee, and (d) PHARMATOP is given the same right to
supervise the activities of the sub-licensee as it has under the terms of this Agreement to
supervise BMS activities. BMS right to grant sub-licenses in accordance with this Section
shall include the right to delegate responsibility for marketing the Products in one or more
countries in the Territory. |
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2.7 |
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If the Products are manufactured by a company other than BMS, whether an Affiliated Company
or not, BMS must provide PHARMATOP with the identity(ies) of the manufacturer(s), and provide
proof to PHARMATOP that (a) the manufacturer(s) has been informed in writing that the products
to be made are subject to the Licensed Patents held by PHARMATOP and (b) the manufacturer(s)
has agreed to manufacture the products only pursuant to agreement with BMS and solely for the
benefit of BMS and its sublicensees. The above restrictions do not apply to raw materials,
packaging items or other incidental articles from outside suppliers, or to the performance of
packing operations in accordance with customary practices in the pharmaceutical industry. |
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2.8 |
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Any sub-licensee hereunder shall be required to assume all of the obligations of BMS under
this Agreement with respect to the rights sublicensed. BMS will indemnify and hold PHARMATOP
harmless from the failure of any sub-licensee to perform its obligations relating to Products
in the same manner as BMS is obligated to indemnify and hold PHARMATOP harmless under this
Agreement if BMS (rather than the sublicensee) had so failed to perform. PHARMATOP shall have
the same rights to audit any sub-licensees activities relevant to its sublicensing agreement,
and to inspect any sub-licensees facilities involved in the manufacture of Products, in the
same manner as PHARMATOP has with respect to BMS activities and facilities hereunder. |
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2.9 |
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In the event that BMS makes sales of Products to an Affiliated Company or sub-licensee,
then, notwithstanding anything to the contrary in Section 1.14 hereof, the calculation of Net
Sales for purposes of determining royalties owed to PHARMATOP under Section 7.2 hereof shall
be based on the greater of (x) [***]
and (y) [***] [***] |
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2.10 |
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Nothing in this Agreement shall be construed to grant a Party any rights in any intellectual
property rights, information or data owned or controlled by any other Party or its Affiliates,
except as expressly set forth in this Agreement. |
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2.11 |
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Within [***] after the execution of this Agreement, BMS will inform PHARMATOP whether, and in
what other countries of the world where BMS does not already possess such rights, BMS is interested
in obtaining rights to develop and market the Product. If BMS notifies PHARMATOP that BMS is
interested, then the Parties will use all reasonable efforts to conclude an agreement within [***]
thereafter in which PHARMATOP grants BMS the exclusive right in such countries in which BMS
indicated an interest; provided that the Parties can agree on mutually acceptable terms and
conditions during such [***] Should any such negotiations terminate without the grant of an
exclusive license to BMS in a given country, PHARMATOP shall be free thereafter to conduct
negotiations with any Third Party and grant licenses to the Product to any Third Party in such
country; provided, however, that BMS shall be entitled to exercise a right of first
refusal with respect to any such country as follows: Before PHARMATOP may accept an offer from, or
make an offer to, a Third Party on financial terms more favorable to the Third Party, when taken as
a whole, than those last offered by PHARMATOP to BMS to acquire such rights in such country,
PHARMATOP will inform BMS of such offer and shall allow BMS a period of [***] in which to elect
whether to acquire such rights under such terms as are offered to or by PHARMATOP with the Third
Party. |
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*** |
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Certain information on this page has been
omitted and filed separately with the Commission. Confidential treatment has been requested
with respect to the omitted portions. |
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Article 3PHARMATOPs Rights to Information
3.1 |
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Subject to Section 3.3, PHARMATOP shall be entitled, for the protection and advancement of
its rights in the Licensed Rights outside the Territory, to either obtain from BMS, or have
the right to reference, all information and conclusions relating to or resulting from any
analytical, galenical, stability, toxicology or pharmacokinetic work and/or clinical studies
and clinical trials conducted by BMS relating to the Products and all materials in the NDA
submitted to the U.S. FDA for the Products (collectively, the Registrational
Information) for the purpose of developing, manufacturing, registering, seeking marketing
approval for and selling an Injectible APAP Product in any country outside the Territory where
BMS or any of its Affiliates have not been licensed rights under any PHARMATOP patent or
know-how under a separate agreement with PHARMATOP; provided, however, that
BMS has the reciprocal right (subject to payment by BMS in the same manner as PHARMATOP is
obligated under Section 3.3) to obtain and use any such similar registrational information
obtained by PHARMATOPs licensees with respect to the development and marketing of any such
Injectible APAP Product in any such country. Subject to Section 3.3, BMS hereby expressly
permits PHARMATOP to use the Registrational Information to attempt to secure a licensee for
the sale and use of the Products outside the Territory in which BMS or any of its Affiliates
does not have exclusive license rights under any separate agreement with PHARMATOP, provided,
that the Registrational Information is treated as Confidential Information of BMS and is
disclosed to a potential licensee only pursuant to an appropriate confidentiality agreement as
set forth in Section 3.3 and that PHARMATOP remains responsible to BMS for any breach by such
potential licensee of its confidentiality and non-use obligations. |
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3.2 |
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Subject to Section 3.3, PHARMATOP or the licensee shall be entitled to use the
Registrational Information as part of new drug applications out of the Territory and shall
not owe any compensation to BMS for same. BMS shall have no liability or responsibility for
any use made by PHARMATOP and its licensees of the Registrational Information, and, subject
to sections 12.3 and 12.4, PHARMATOP shall indemnify, |
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defend and hold BMS and its Affiliates harmless from any use made by PHARMATOP, its
Affiliated Companies, or its or their licensees of the Registrational Information. |
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3.3 |
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Before PHARMATOP shall have the right to access or use any of the Registrational Information
as provided in this Article 3 for purposes of any regulatory filing, [***]
shall reimburse [***] [***] of the [***] [***] to develop or obtain the Registrational
Information. [***] shall not be required to reimburse [***] for the purpose of sharing such
Registrational Information, under agreement of confidentiality, with a Third Party to the
extent reasonably required for such Third Party to determine its interest in licensing the
Product in any countries where BMS and its Affiliates do not have license rights;
provided, that the Registrational Information to be made available to the Third Party
shall not include the actual Investigational New Drug (IND) or NDA filing, any clinical trial
or adverse event database, or any study results which have not been made publicly available or
filed to the NDA. Such sharing may include such Third Party having reasonable access to such
Registrational Information at BMS, at PHARMATOPs expense, in order to conduct reasonably
necessary due diligence. Such Third Party shall not have access to the Registrational
Information until it shall have executed a confidentiality agreement, in form and substance
acceptable to PHARMATOP and BMS, in which BMS either is a party to the confidentiality
agreement or is entitled to enforce such confidentiality as an express third party beneficiary
thereof under the terms of the confidentiality agreement and applicable law. |
Article 4Development and use obligations
4.1 |
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BMS shall use its Diligent Efforts to obtain NDA approvals (and other regulatory
authorizations) required to develop and market the Products in each country in the Territory. |
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4.2 |
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Neither Party warrants, represents or guarantees that the Products will obtain NDA approvals
in the Territory. |
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*** |
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Certain
information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions. |
-12-
4.3 |
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During the preparation and pendency of the various NDAs, BMS shall advise PHARMATOP in
writing on a confidential basis at least [***] as to actions taken, or to be taken, the likely
date of presentation of NDAs, any problems encountered, and the likely date of NDA approvals.
Within [***]
after the Effective Date and thereafter [***] until NDA Approval is received in a given
country, BMS will provide an estimate of the Product development timelines in such country and
for all studies that it is then undertaking or that it plans to undertake within the following
[***] in such country and will update such timelines on a [***] basis thereafter;
provided, that it is understood that, all forecasts are estimates for review by
PHARMATOP only, are not guaranteed or warranted and may not be relied upon in any way, and,
except as permitted by Article 10, may not be disclosed to Third Parties. PHARMATOP shall
submit to BMS in writing any comments on studies or applications conducted or submitted by
BMS. BMS must reply to any such comments in reasonable detail, so that PHARMATOP can make an
assessment of BMS performance of its obligations with respect to this Article 4; provided
that BMS shall remain solely responsible for the development and regulatory strategy for the
Product. |
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4.4 |
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If any matter or issue (including, but not limited to, an unexpected safety issue,
manufacturing problems or significant additional studies are required by U.S. FDA) arises
which is likely to materially obstruct or significantly delay the issue of an NDA approval
in a given country by more than [***], particularly the U.S. NDA approval, BMS must inform
PHARMATOP immediately and the parties must then consult with each other to examine and
determine whether any corrective measures should be undertaken to supplement or amend the
NDA in such country. If the proposed corrective measures are not economically or
technically viable to implement, then BMS may elect to terminate this Agreement as to such
country (and if the affected country is the United States, then it may elect to do so either
as to all countries or just the U.S.), in which case [***] all licenses and rights granted
to BMS hereunder shall immediately terminate with respect to such country(ies), and
PHARMATOP shall recover its entire freedom with respect to the Licensed Rights in such
country(ies) [***] |
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*** |
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Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to the omitted
portions. |
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[***] (and without BMS being liable to PHARMATOP in any manner on account of such
termination) and the terms of Section 9.3(b) shall apply. |
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4.5 |
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Once an NDA approval has been obtained, along with any other necessary approvals, BMS shall
use Diligent Efforts to market the Products in the country in which approval has been
obtained. BMS shall, at least [***],
provide to PHARMATOP a written report on the means and operations used by it to promote the
Products. Within [***] [***] [***] and thereafter [***] until the end of the Royalty Term for
a given country, BMS will provide its sales forecast for the following [***] and will update
such forecast (and provide actual sales performance results by Presentation) on a [***] basis
thereafter; provided, that it is understood that all sales forecasts are estimates for
review by PHARMATOP only, are not guaranteed or warranted and may not be relied upon in any
way, and may not be disclosed to Third Parties. On receiving these reports, PHARMATOP may ask
BMS in writing for reasonable further information and/or clarifications that directly concerns
the Product and that BMS may lawfully provide so as to enable PHARMATOP to assess BMS
performance of its obligations under this Section. |
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4.6 |
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(a) |
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Except as provided in section 4.6(c), BMS agrees that, during the Marketing
Period for a given country in the Territory, it will not sell and/or market any
Injectible APAP Product other than the Product. BMS represents that it currently
has no intention of developing and/or marketing other Injectible APAP Product for
use in the Territory. For any country in the Territory where BMS is already
marketing a propacetamol product on the Effective Date of this Agreement, BMS agrees
that, subject to any legal commitments it may have to Third Parties as of the
Effective Date and consistent with any requirements of applicable law, BMS will (1)
upon launch of the Product in such country, cease active promotion and marketing of
the propacetamol product in such country and transition customers of the
propacetamol product over to the Product in a manner that does not unduly |
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*** |
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Certain information on this page has been
omitted and filed separately with the Commission. Confidential treatment has been requested
with respect to the omitted portions. |
-14-
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jeopardize BMS customer relationships and allows for BMS inventory of
propacetamol products to be appropriately worked down; and (2) not sell or license
its rights to the propacetamol product to any Third Party for sale or use in such
country. |
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(b) |
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Subject to Section 7.4, nothing in this Agreement shall restrict or affect BMS
ability to develop and market at any time during the term of this Agreement, in any
country in the Territory, one or more parenterally-administered products containing an
analgesic or an opiod (as long as such product is not another Injectible APAP Product).
BMS shall inform PHARMATOP promptly of any decision to market any parenteral opiate or
non-opiate product for the treatment of post-operative pain. |
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(c) |
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Nothing in any provision of this Agreement shall, expressly or impliedly, preclude or
restrict BMS (or any of its Affiliated Companies) in any way from (1) acquiring the voting
stock or other securities, or the assets, of any Third Party, (2) selling voting stock or
other securities, or any of their assets, to any Third Party, or (3) merging, amalgamating,
taking over or consolidating (or engaging in any similar transaction) with any Third Party
(any of the foregoing a Transaction), where such Third Party is developing or
marketing its own Injectible APAP Product, subject to the following: If such Third Party
becomes an Affiliated Company of BMS by reason of such Transaction and is then marketing its
own Injectible APAP Product in a country in the Territory, then BMS shall inform PHARMATOP in
writing, within [***]
after the consummation of such Transaction has been publicly announced
(Transaction Date), whether BMS will divest or cause the divestiture of
the competing Injectible APAP Product in such country(ies). If BMS informs
PHARMATOP that it plans to so divest, then BMS shall use commercially reasonable
efforts to divest itself of such competing Injectible APAP Product in a manner
consistent with its reasonable business judgement and to complete such divestiture
of the competing Injectible APAP Product as promptly as practicable following
notification by BMS to PHARMATOP of the decision to divest. BMS shall have |
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*** |
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Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has been requested with respect to the
omitted portions. |
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until the date that is [***] after the applicable Transaction Date to complete
such divestiture (the Grace Period); provided, that, so long as
BMS demonstrates to PHARMATOPs reasonable satisfaction that BMS used commercially
reasonable efforts to effect such divestiture within such [***] Grace Period, but
was unable reasonably to effect such divestiture, then such [***] Grace Period shall
be extended for such additional [***] periods thereafter as is necessary to enable
such competing Injectible APAP Product to be in fact divested, so long as BMS
continues to demonstrate to PHARMATOPs reasonable satisfaction that BMS is using
commercially reasonable efforts to effect such divestiture within such period, and
provided further that in no event shall the aggregate Grace Period exceed [***] BMS
shall keep PHARMATOP reasonably informed of its efforts and progress in effecting
such divestiture until it is completed. The sale, promotion or marketing of any
such competing Injectible APAP Product by BMS or any of its Affiliated Companies
within the Territory during such Grace Period pursuant to this Section 4.6(c) shall
not be grounds for termination of this Agreement under Section 4.6(a). Nothing in
this Paragraph is intended to affect BMS obligation to use Diligent Efforts to
market the Product during the Grace Period. |
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If BMS notifies PHARMATOP that BMS does not plan to divest the competing Injectible APAP
Product, then, BMS shall have [***] after the Transaction Date in which to sublicense or sell
the rights to the Product to a Third Party, and if BMS is unable to do so within such [***],
then PHARMATOP may terminate this Agreement with respect to the affected country(ies) at any
time thereafter upon not less than [***]
written notice to BMS and the terms of Section 9.3(b) shall apply. |
4.7 |
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All INDs and NDAs for any Product shall be owned solely by BMS, and BMS shall be responsible
for all regulatory filings to be made thereto. |
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*** |
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Certain information on this page has been
omitted and filed separately with the Commission. Confidential treatment has been requested
with respect to the omitted portions. |
-16-
Article 5Patent Application Examination
5.1 |
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PHARMATOP shall use its best efforts to diligently prosecute the Patent Applications and to
have the Patent Applications granted by the patent offices concerned, within the customary
timeframes. PHARMATOP agrees to keep BMS informed on the progress of the examination of the
applications; to reply diligently in consultation with BMS to comments made by the examiners
(and Third Parties where appropriate); and, to take other reasonable and customary actions to
avoid delays with the issuance of the patents or a reduction to the scope thereof. |
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(a) |
|
PHARMATOP will promptly notify BMS in writing after each Notice of Allowance
and patent issuance in the Territory. The parties will cooperate to ensure a timely
filing in the Orange Book with respect to an issued patent. |
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(b) |
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PHARMATOP and BMS will cooperate to ensure timely filings for any available
Patent Term Restoration on the Product (currently, filings must be made within 60 days
after NDA Approval). |
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(c) |
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With respect to any Patent Right filed, prosecuted or maintained by PHARMATOP,
each patent application, office action, response to office action, request for terminal
disclaimer, voluntary amendment, interference proceeding filing or action, and request
for reissue or re-examination of any patent issuing from such application shall be
provided by PHARMATOP to BMS sufficiently prior to any such application, filing or
request to allow reasonable time for adequate review and comment by BMS. PHARMATOP
will also provide BMS copies of all correspondence and other material documents
received or prepared by PHARMATOP in the prosecution, maintenance, and enforcement of
the Licensed Patent Rights. |
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(d) |
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PHARMATOP shall provide to BMS, on a quarterly basis, a written patent report
that includes the serial number, docket number and status of each Licensed Patent. |
-17-
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(e) |
|
Within 90 days after execution of this Agreement, PHARMATOP will also ensure
that a signed and duly notarized Assignment Document, assigning the entire right,
title and interest in US Patent No. 6,028,222 from Francois Dietlin and Daniele
Fredj to SCR Pharmatop, is filed in the United States Patent and Trademark Office. |
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(f) |
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PHARMATOP will ensure that Patent Applications filed in the Territory will
include at least the same claims as filed in the PCT Applications as of the Effective
Date. |
5.2 |
|
PHARMATOP will, to the greatest extent practicable, prosecute the Patent Applications as
currently filed (or that will be filed in the Territory pursuant to section 5.1(f)), and
agrees not to alter the terms so as to materially narrow the scope thereof or abandon any
material pending claims unless consented to by BMS, or as otherwise is reasonable in light of
the prosecution of the Patent Applications. PHARMATOP does not guarantee to BMS that the
patents will be issued in terms similar to those of the Patent Applications. PHARMATOP will
not abandon any issued claims or admit that any such issued claims of the Patents are
unenforceable by disclaimer or otherwise, without BMS prior written consent. |
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5.3 |
|
During the entire period of examination of the Patent Applications, BMS will comply with all
its obligations towards PHARMATOP, including, but not limited to its financial obligations,
and shall not be entitled to suspend them on the ground that the examiners or Third Parties
have commented on or challenged the filed Patent Applications. BMS will be entitled to
terminate this Agreement with respect to a particular country, or obtain a reduction in the
royalty rate for sales therein, in accordance with Sections 6.2 and 6.3 below, as a result of
a final patent office decision that definitively rejects a Patent Application in such
country(ies). |
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5.4 |
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(a) |
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PHARMATOP shall pay the annual fees due to the patent offices in a timely manner to maintain
the Patents in force until their expiry. [***]
will reimburse |
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*** |
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Certain information on this page has
been omitted and filed separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions. |
-18-
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[***], commencing from and after the [***] of the Effective Date of this Agreement,
for its payment of the annual maintenance fees in any country in the Territory where
no Products have been sold as of the time of such payment, provided that
[***] provides proof of such payment and requests such reimbursement. For budgeting
purposes, [***] shall provide to [***], on February 1 and August 1 of each Year, a
reasonably detailed estimate of the out-of-pocket expenses it expects to incur, in
the next six (6) months, with respect to Licensed Patents. |
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(b) |
|
If PHARMATOP files for and obtains new Patents in a country in the Territory
based on Inventions made after the Effective Date of this Agreement that is likely to
have the effect of extending BMS period of marketing exclusivity, [***] will reimburse
[***] for [***] of its costs of filing and prosecuting the corresponding patent
applications in such country, including [***] reasonable out-of-pocket legal fees and
expenses, on presentation of appropriate supporting documents; provided,
however, that (a) [***] shall not be obligated to make any such reimbursement
to [***] prior to the [***] of the Marketing Period in such country or in any year in
which an Injectible APAP Product is marketed by a Third Party in such country, and (b)
any such reimbursement paid by [***] for a given country will be returned to [***] if,
prior to the [***] of the Marketing Period in such country, an Injectible APAP Product
which does not infringe the Patents is marketed in such country. |
Article 6Additional Provisions Affecting the Patents
|
(a) |
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PHARMATOP represents and warrants that Francois Dietlin and Daniele Fredj (the
Inventors) solely discovered or derived the inventions covered by the
Patents, as well as the Know-How embodied in the formulation of the Product, through
their own research and efforts and without misappropriating the trade secrets or
confidential information of any Third Party, and that the Inventors have |
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*** |
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Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions. |
-19-
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never been employed by or provided services to Fresenius. It further represents
that the portion of the inventions covered by U.S. patent No. 6,028,222 was duly
assigned by the Inventors to Newpharm, a company organized under the laws of France
having its head offices address at 10, square St. Florentin, 78150 Le Chesnay,
France (Newpharm) which obtained French patent No. 2.751.875 and that
Newpharm subsequently assigned the associated ongoing research and priority rights
to PHARMATOP as set forth in the agreement attached as Exhibit D and
confirmed by Newpharm in the letter attached hereto as Exhibit E. PHARMATOP
also represents that it is the sole owner of the Licensed Rights, and otherwise has
the sole right to exclusively license and grant rights to them, and that, to the
best of its knowledge, each invention is patentable. |
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(b) |
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BMS represents that, to its knowledge as of the Effective Date, and having
examined the Patent and the Patent Applications, it has not identified, and otherwise
has no knowledge of, any reasons why the Patent might be invalid or why the Patent
Applications could not be granted under conditions enabling the license herein to be
effectively implemented. |
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(c) |
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PHARMATOP represents and warrants to BMS that: (i) there is no action, suit or
proceeding pending or threatened in writing as of the Effective Date by any Third Party
against PHARMATOP, its Affiliated Companies, or any of the Inventors named in the
Patents which, if adversely determined, would have a material adverse effect upon the
issued claims of the Patents in the Territory as of the Effective Date or upon the
issuance of any claims of the Patent Applications in the Territory as of the Effective
Date; (ii) the issued claims of the Patent in the Territory which cover the
manufacture, use, importation or sale of Product are not dominated by any issued
patents of any Third Party in the Territory; and (iii) except as disclosed in
Appendix 3 (re Fresenius), it is not aware of any infringement by any Third
Party as of the Effective Date of any of the Patents in the Territory. |
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(i) |
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unable to obtain, without material alteration or restriction as
to scope and content, issuance in the Territory of the claims being prosecuted
as of the Effective Date on the PCT Patent Applications filed as of the
Effective Date; or |
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(ii) |
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unable to maintain, or a material alteration of the scope or
content occurs with respect to, any of the claims under any of the Patents
issued as of the Effective Date or on any patents issued on Patent Applications
filed as of the Effective Date; |
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then BMS may at its option terminate this Agreement for any of the countries so affected (an
Affected Country), or, if the affected country is the United States, then either as to the
United States or as to all countries in the Territory. Any such termination shall require (A)
not less than [***]
prior written notice, if after [***] in the [***] or (B) not less than
[***] [***] prior written notice, if [***] in the [***]. |
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(b) |
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If a Third Party should market in any country in the Territory a
parenterally-administered liquid solution product, in a stable and readily injectible
form, that (x) contains paracetamol and one or more other analgesic ingredients, (y)
uses any of the technology contained within any issued claim of any Licensed Patent in
such country or any Licensed Know-How, and (z) is not considered to infringe any Patent
within the Licensed Rights in such country (whether by judicial determination or
settlement, by joint agreement of PHARMATOP and BMS, or by both Parties failure to
prosecute such Third Party for infringement under Section 6.5), then BMS may elect to
terminate this Agreement pursuant to Section 9.3(a) for any such Affected Country, or,
if the Affected Country is the United States, then as to all countries in the
Territory. |
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(c) |
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If BMS opts to terminate this Agreement pursuant to section 6.2(a) or section
6.2(b) with respect to one or more Affected Countries, it shall be under the terms and
conditions of section 9.3(b). BMS shall not be entitled to obtain from PHARMATOP the
return of any sums paid to PHARMATOP before the date of said termination unless BMS can
establish that the refusal to issue the patent (or |
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*** |
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Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has been requested with respect to the
omitted portions. |
-21-
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the withdrawal thereof) is due to a knowingly inaccurate representation made by
PHARMATOP in Section 6.1 of this Agreement. BMS shall be permitted thereafter to
sell Products already manufactured by such termination date, provided that it pays
PHARMATOP the contractual royalties on such sales provided for in Article 7. BMS
shall not be restricted in any way thereafter from manufacturing and selling another
Injectible APAP Product in such terminated country(ies) for which the manufacture or
sale in such country (x) does not infringe the Licensed Patents and (y) does not use
to any material extent any Licensed Know-How. |
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(d) |
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In the event that BMS opts to maintain the Agreement in effect in an Affected
Country under section 6.2(a) or 6.2(b), then: |
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(i) |
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if such Affected Country is [***], the Guaranteed Payment
provision (section 7.3) shall be [***] thereafter effective as of the [***] in
which BMS elected to maintain the Agreement and each [***]thereafter; and |
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(ii) |
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the royalty rate on all Net Sales in such country for any
quarter in a given Year will be reduced by [***] for each such quarter in
which: |
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[***] |
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*** |
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Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.
|
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[***]
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(a) |
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Should the Patents (or their inventorship) be the subject of an administrative
or judicial challenge by a Third Party, PHARMATOP will undertake at its expense, in
consultation and liaison with BMS, to take all appropriate measures to oppose the
challenge by the Third Party. Subject to Sections 12.3 and 12.4, PHARMATOP shall
defend, indemnify and hold harmless BMS from any liabilities, losses, costs or damages,
which shall include costs or judgements whether for money or equitable relief, and
reasonable legal expenses and reasonable attorneys fees, arising out of any such
claims, suits or challenges. PHARMATOP shall not enter into a settlement agreement
with such Third Party without the written consent of BMS, which shall not be
unreasonably withheld. PHARMATOP shall not enter into a settlement agreement with such
Third Party without the written consent of BMS, which shall not be unreasonably
withheld. BMS shall have the right to participate and be represented in any such suit
by its own counsel at its own expense. The pendency of any administrative or judicial
claim or action by a Third Party challenging the Patents will not permit BMS to cease
or suspend its performance of its obligations under this Agreement, including its
financial obligations. If the Third Partys claim or action succeeds so as to deprive
PHARMATOP of any of its rights on Licensed Patents in a country in the Territory, then
BMS may terminate this Agreement as to such country in the same manner as it would have
been entitled to terminate pursuant to Section 6.2(a)(ii) and 6.2(c) (with BMS
providing the same written notice of termination required thereby unless the outcome of
such Third Partys claim or action would require BMS to cease marketing of the Product
prior to the end of the notice period) or to continue to market the Product subject to
Section 6.2(d). |
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(b) |
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In the event that PHARMATOP fails or elects not to defend any such action, suit,
or challenge, then BMS may defend such action, suit or proceeding at its own
expense, in its own name and the name of PHARMATOP, and entirely under |
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*** |
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Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the omitted portions. |
-23-
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BMS own direction and control. PHARMATOP will reasonably assist BMS (at BMS
expense) in any action or proceeding being prosecuted or defended by BMS, if so
requested by BMS or required by law. PHARMATOP shall have the right to participate
and be represented in any such suit by its own counsel at its own expense. No
settlement of any such action or defense which restricts the scope or affects the
enforceability of a Licensed Patent may be entered into by BMS without the prior
consent of PHARMATOP, which consent shall not be unreasonably withheld. If the
Third Partys claim or action succeeds so as to deprive PHARMATOP of any of its
rights on Licensed Patents in a country in the Territory, then BMS may terminate
this Agreement as to such country in the same manner as it would have been entitled
to terminate pursuant to Section 6.2(a)(ii) and 6.2(c) (with BMS providing the same
written notice of termination required thereby unless the outcome of such Third
Partys claim or action would require BMS to cease marketing of the Product prior to
the end of the notice period) or to continue to market the Product subject to
Section 6.2(d). |
6.4 |
|
PHARMATOP represents that, to its knowledge, the manufacture and sale of the Products in
Territory will not infringe any intellectual property right of any Third Parties and, subject
to sections 12.3 and 12.4, PHARMATOP will hold BMS harmless against any Third Party action or
claim asserting an infringement of such rights. In the event such an action or claim is
brought by a Third Party, then, subject to section 6.3, BMS will be obligated to continue to
perform its obligations under this Agreement, including its financial obligations. |
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6.5 |
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(a) |
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In the event that a Third Party is manufacturing and/or marketing anywhere in
the Territory an Injectible APAP Product for which the manufacture, use or sale
thereof infringes a Valid Claim under the Licensed Patents, the Parties shall
consult with each other in order to attempt to end such infringement, and shall take
all appropriate action to do so. BMS shall have the right in the first instance,
but not the obligation, to initiate legal action against an infringing party under
its |
-24-
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own direction and control. PHARMATOP will reasonably assist BMS ([***])
in any action or proceeding being prosecuted if so requested, and will
lend its name to such actions or proceedings if requested by BMS or required by law.
No settlement of any such action which restricts the scope, or adversely affects
the enforceability, of a Licensed Patent may be entered into by BMS without the
prior written consent of PHARMATOP, which consent shall not be unreasonably
withheld. |
|
|
(b) |
|
If BMS elects not to bring any action for infringement described in Section
6.5(a) and so notifies PHARMATOP in writing, then PHARMATOP may bring such action at
its own expense, in its own name and entirely under its own direction and control. BMS
will reasonably assist PHARMATOP ([***]) in any action or proceeding being prosecuted
if so requested, and will lend its name to such actions or proceedings if requested by
PHARMATOP or required by law. No settlement of any such action which restricts the
scope, or adversely affects the enforceability, of any Licensed Patent may be entered
into by PHARMATOP without the prior written consent of BMS, which consent shall not be
unreasonably withheld. |
|
|
(c) |
|
If either Party brings such an action or defends such a proceeding under this
Section 6.5 and subsequently ceases to pursue or withdraws from such action or
proceeding, it shall promptly notify the other Party and the other Party may substitute
itself for the withdrawing Party under the terms of this Section 6.5. |
|
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(d) |
|
In the event either Party exercises the rights conferred in this Section 6.5 and
recovers any damages or other sums in such action, suit or proceeding or in
settlement thereof, such damages or other sums recovered shall first be applied to
all out-of-pocket costs and expenses incurred by the Parties in connection
therewith, including attorneys fees. If such recovery is insufficient to cover all
such costs and expenses of both Parties, it shall be shared in proportion to the
total of such costs and expenses incurred by each Party. If after such
reimbursement any funds shall remain from such damages or other sums recovered, such
funds |
|
|
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*** |
|
Certain
information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions. |
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|
|
|
shall be retained by [***];
provided, [***]. |
|
(e) |
|
BMS will be obliged to continue performing its obligations towards PHARMATOP
during the pendency of any legal action against a Third Party; provided,
however, that, during such period of time [***] shall pay [***] [***] of the
royalties contractually due on Net Sales in the country where the infringing injectible
APAP Product is being marketed, with the balance (the Retained Sums)
temporarily retained by [***] If the outcome of the litigation is the invalidation of
a Patent, the provisions of Section 6.2 will be applicable, and, if [***] elects to
continue as provided in Section 6.2(c), [***](f) Any infringement of the Patents by an
Affiliated Company of BMS whom BMS has not sublicensed shall be deemed to be a breach
of Agreement by BMS. |
6.6 |
|
PHARMATOP does not make any representations of warranties with respect to the Patents other
than those expressly stated in this Article 6. |
|
6.7 |
|
BMS will have sole liability to Third Parties for any injuries or death caused to any person
by reasons of the manufacture, use or sale of the Products manufactured or sold pursuant to
this Agreement, and will indemnify PHARMATOP against claims by Third Parties based on product
liability as provided for in Section 12.2. |
|
6.8 |
|
In the event that BMS reasonably believes after consultation with PHARMATOP that it is required
to obtain a license from a Third Party in order to practice the Licensed Patents and Know-how, then
any license fees or other royalties payable by BMS to such Third Party with respect to same shall
be [***]. |
|
|
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*** |
|
Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment has been requested with respect
to the omitted portions. |
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Article 7License Fees and Royalties
7.1 |
|
BMS shall make the following lump sum, non-refundable (except as provided in section 12.3 or
as may be otherwise expressly provided in this Agreement) payments to PHARMATOP: |
|
(a) |
|
Within fifteen (15) business days following execution of this Agreement, the sum of [***]. |
|
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(b) |
|
Within ten (10) business days [***], the sum of [***] This amount will be paid
only [***], [***] |
|
(a) |
|
Subject to the Guaranteed Payments provided for in Section 7.3 and to sections
6.2, 6.5(e), 6.8, 7.2(b), 7.2(c) and 12.3 hereof, BMS shall make the following royalty
payments to PHARMATOP: |
|
i. |
|
[***] percent ([***]%) of the Net Sales of Products during
the [***] and [***] [***] in a given country; |
|
|
ii. |
|
[***] percent ([***]%) of the Net Sales of Products during the
[***] in a given country; |
|
|
iii. |
|
[***] percent ([***]%) of the Net Sales of Products during the
[***] in a given country; and |
|
|
iv. |
|
[***] percent ([***]%) of Net Sales of Products during the
[***], and all subsequent [***] of the Royalty Term thereafter in a given
country, unless this Agreement is sooner terminated in such country. |
|
|
|
Upon payment of all royalties due PHARMATOP in a given country through the end of
the Royalty Term for such country, BMS shall have a fully paid-up license under Section
2.1 to use the Licensed Rights in such country to develop, make, use and sell the
Products. |
|
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*** |
|
Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the omitted portions. |
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(b) |
|
[***] then the effective royalty rate for sales of such Combination Products shall be
[***] [***]
of the royalty rate paid by BMS to such Third Party for the Combination
Product, subject to a [***] of the royalty payable to PHARMATOP of [***] BMS will
provide evidence, reasonably satisfactory to PHARMATOP, of any [***](c) [***] [***]
[***]. [***] |
7.3 |
|
Subject to Section 12.3 hereof, during each of the first [***] of the Marketing Period
in the United States, BMS shall pay royalties to PHARMATOP equal to the greater of (i) [***]
or (ii) the [***]do not conform in all respects [***]Further, in any quarter in any Year in
[***] |
|
|
|
*** |
|
Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect to the omitted
portions. |
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|
|
[***]
be multiplied by a fraction the numerator of which is [***]and the denominator of which
is the sum of the numerator plus [***]using a mutually agreed upon methodology for
calculating [***]during such quarter[***]The Parties will review the procedures[***]from
time to time to ensure that they are fair and equitable to both Parties. |
|
7.4 |
|
|
|
(a) |
|
In the event that BMS markets a Competing Product in a country in the Territory
during the Royalty Term for such country, BMS agrees that: |
|
(i) |
|
During the [***] period following the launch of such Competing
Product (commencing with the [***] of the [***] following such launch), BMS
will continue to provide for the Product at least [***] of the Primary Detail
Equivalents (PDEs) and will continue to spend on the Product at least [***] of
the Advertising and Promotional Costs that it spent, as determined on an [***]
for the Product during the [***] period preceding such Competing Product
launch; and |
|
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(ii) |
|
During the [***] period following the launch of such Competing
Product, BMS will continue to provide for the Product at least [***] of the
Primary Detail Equivalents (PDEs) and will continue to spend on the Product at
least [***] of the Advertising and Promotional Costs that it spent, as
determined on an [***] for the Product during the [***] period preceding such
Competing Product launch and the [***] period following such Competing Product
launch; and |
|
|
(iii) |
|
During the [***] period following the launch of such Competing
Product, BMS will continue to provide for the Product at least [***] of the
Primary Detail Equivalents (PDEs) and will continue to spend on the Product
at least [***] of the |
|
|
|
*** |
|
Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the omitted
portions. |
-29-
|
|
|
Advertising and Promotional Costs that it spent, as determined on an [***]
for the Product during the [***] period following such Competing
Product launch. |
|
|
|
Notwithstanding the foregoing, in the event that such Competing Product is launched
during the period that Guaranteed Payments under Section 7.3 are payable, then
subsections 7.4(a)(i)-(iii) shall not apply except with respect to those full [***]
periods following such Competing Product launch that occur after the expiration of
the payment of such Guaranteed Payments during such [***]. |
|
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|
|
Further, this Section 7.4(a) shall only apply to the [***] Competing Product that
BMS may launch within each country in the Territory |
|
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(b) |
|
BMS will provide PHARMATOP, within [***] [***] after the end of each [***]
period following such Competing Product launch with sufficient information regarding
BMS PDE detailing and Advertising and Promotional spending to enable PHARMATOP to make
a reasonable, competent assessment as to whether BMS has fulfilled its obligations
under Section 7.4(a) above. |
|
|
(c) |
|
In the event that BMS fails to fulfill any of (i), (ii) or (iii) under section 7.4(a) above,
then PHARMATOP may, upon ninety days written notice to BMS, terminate this Agreement at any
time within thirty days after PHARMATOP receives the information from BMS required for
PHARMATOP to determine that BMS has failed to fulfill such obligations, in which event [***],
all licenses and rights granted to BMS hereunder shall immediately terminate, and PHARMATOP
shall recover its entire freedom with respect to the Licensed Rights in such country [***] and
the terms of Section 9.3(b) shall apply. If PHARMATOP elects to terminate BMS rights, such
termination shall be PHARMATOPs sole remedy and BMS shall not be liable for any additional
damages to PHARMATOP with respect to such failure. |
|
|
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*** |
|
Certain
information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions. |
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|
(a) |
|
The contractual royalties will be calculated and will be payable quarterly for sales made in
each Calendar Quarter in the Royalty Term. A detailed statement, country by country and by
Presentation, will be prepared and sent by BMS to PHARMATOP within [***] of the end of each
Calendar Quarter ([***] [***] after the last quarter in an Agreement Year to allow for
additional time to determine any adjustments required to be made on an annual basis),
accompanied by payment of the royalties due PHARMATOP. If the annual reconciliation shows an
amount due by either Party to the other, the amount due shall be paid as follows: BMS shall
pay any amount due by it at the same time as it provides the reconciliation to PHARMATOP.
PHARMATOP shall repay any amount due by it to BMS within [***]
after the receipt by it of such reconciliation report. |
|
|
(b) |
|
PHARMATOP may, on reasonable (but not less than [***]) written notice to BMS, have a
calculation statement audited at its own expense by an accounting firm selected by PHARMATOP
that is reasonably acceptable to BMS and that is bound by a written agreement of
confidentiality to BMS. The, auditors assignment will be limited to reviewing the accuracy
of a calculation statement sent by BMS (the Inspection), and to disclosing only if
there are any errors in payment and, if an error exists, the amount of such error(s) and the
calculation thereof, and no additional or any other information. If an audit discloses that
the amount of royalties owed to PHARMATOP was understated by more than [***] [***], then [***]
must reimburse [***] for the cost of the audit, in addition to paying the additional royalties
together with interest on the additional amounts, calculated from the date on which the
additional amount should have been paid, as provided in section 7.7. Such audit rights may be
exercised [***], and any such audit shall apply [***]. |
|
|
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*** |
|
Certain information on
this page has been omitted and filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions. |
-31-
7.6 |
|
BMS shall make all payments to PHARMATOP in United States Dollars by electronic funds
deposit, to a French bank and account number designated in writing by the Gerant of
PHARMATOP. Each Party shall bear its own expenses with respect to any such electronic funds
transfer. When products are sold for monies other than United States dollars, the monies
due will first be determined in the foreign currency of the country in which such products
were sold and then converted into equivalent United States currency, on a monthly basis,
using the applicable U.S. Federal Reserve rate in effect on the last business day of each
calendar month. Each quarterly Royalty Payment shall cover three (3) such monthly
conversions. PHARMATOP agrees that it will be solely responsible for all payments owed to
Newpharm or the Inventors. |
|
7.7 |
|
Any amounts not paid on its due date by BMS to PHARMATOP will bear simple interest on the
outstanding balance at the [***]
the applicable period, calculated from the contractual due date until the date of payment,
without the need for a formal notice to pay or any other notice. |
|
7.8 |
|
Neither the payment of interest by BMS nor the acceptance of the same by PHARMATOP shall
effect a waiver of any of PHARMATOPs rights or remedies under this Agreement. |
|
7.9 |
|
BMS shall pay any and all excise, sales, use, value added, and other similar Taxes solely
arising as a result of Product sales under this Agreement. Where required to withhold any tax
in connection with any payment hereunder to PHARMATOP due to applicable law, treaty, rule or
order of a governmental body, BMS shall deposit such taxes with the appropriate tax or revenue
authorities as a deduction from such royalty or other payment, and shall notify PHARMATOP and,
upon request of PHARMATOP, BMS shall furnish satisfactory evidence of such withholding and
payment. [***] shall not be required to gross up or reimburse [***] for any such
withholdings. BMS shall reasonably cooperate with PHARMATOP in obtaining exemption from
withholding taxes where available under applicable law. PHARMATOP shall be solely responsible
for all taxes levied on PHARMATOPs revenues, profits or income arising out of this Agreement. |
|
|
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*** |
|
Certain information on this page has been omitted
and filed separately with the Commission. Confidential treatment has been requested with
respect to the omitted portions. |
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7.10. |
|
BMS agrees that it will not engage in any fraudulent transactions relating to sales of the
Products that are specifically designed to reduce or avoid royalty payments to PHARMATOP. |
Article 8Improvements made by BMS
BMS shall promptly inform PHARMATOP of any adaptation, improvement, enhancement or upgrade
(collectively, an Improvement) BMS makes with respect to the formulation and/or manufacture
of the Products, whether such Improvement can be protected by patent or not. BMS will remain
the owner of any such Improvement that it makes to the Products; provided, however, that BMS
must grant to PHARMATOP, upon request, a non-exclusive, [***]
license to practice and use the Improvement, including the right to grant sublicenses,
outside of the Territory solely in connection with the manufacture, use or sale of the Products;
provided, that any sub-licensee of such rights shall have granted reciprocal rights to PHARMATOP
which can be sublicensed to BMS.
Article 9Term / Termination
9.1 |
|
Unless terminated earlier pursuant to the terms of this Agreement, the term of this Agreement
shall run on a country-by-country basis until the end of the Marketing Period. Upon the
expiration of this Agreement in a country, BMS will have no further financial obligations
towards PHARMATOP for sales made in such country after such expiration. |
|
9.2 |
|
Should either Party fail to perform any of material obligations of this Agreement, and fail
to cure such breach or default within ninety (90) days alter receiving a written notice from
the non-breaching Party specifying the breach and demanding that it be cured, then the
non-breaching Party shall have the right to terminate this Agreement; provided, that
if the material breach is restricted to a given country, termination shall be as to such
country only. |
|
9.3 |
|
|
|
|
|
*** |
|
Certain information on
this page has been omitted and filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions. |
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|
(a) |
|
BMS may, in its sole discretion, terminate this Agreement at any time during the Marketing
Period with respect to a given country at any time, provided that (i) it gives written notice
at least twelve (12) months in advance, and (ii) BMS has paid all amounts due under this
Agreement as of the date of such notice. If BMS terminates this Agreement pursuant this
section 9.3(a), then BMS agrees not to market any other Injectible APAP Product in such
country for a period of [***]
following termination; provided, that this section 9.3(a) shall not apply to
any Injectible APAP product marketed by BMS (x) that is thereafter acquired by BMS or
any of its Affiliates as a result of a Transaction (as such term is defined in section
4.6(c)) that occurs following the giving of such notice of termination and which was a
marketed product of the Third Party at the Transaction Date or (y) that is marketed by
BMS in accordance with the last sentence of section 6.2(c) as a result of a termination
by BMS pursuant to section 6.2(c) or 6.3(a). |
|
|
(b) |
|
Upon the effective date of a termination by BMS pursuant to this Section 9.3,
BMS will transfer to PHARMATOP, at PHARMATOPs expense, the NDA approvals, so that
PHARMATOP may take over, in the affected country(ies) in the Territory, the marketing
of the Products (directly or through any Third Parties of its choice). The Parties
shall in good faith consult on the procedures for this transfer of the marketing
information and contracts (covering stocks, current orders, official records, etc),
endeavoring to ensure that the marketing is disturbed, as little as possible, by the
transfer and that each Party continues to comply with its obligations under applicable
law. BMS shall also license or assign to PHARMATOP without charge any
trademark/tradename used by BMS that is specific to the Products; however, no rights
will be assigned or licensed to PHARMATOP under any names, marks, or logos used by BMS
and its Affiliates on the Product that are also used on their other products (e.g., the
Bristol-Myers Squibb name). At its option, PHARMATOP may commence marketing the
Products (directly or indirectly) at any time after its receipt of the termination
notice. The Parties agree to negotiate in good faith a smooth transition of marketing
for the Product as well as an orderly disposition of BMS Product inventory during the
[***] notice period referred to in section 9.3(a). |
|
|
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*** |
|
Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment has been requested with respect
to the omitted portions. |
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9.4 |
|
PHARMATOP shall have the right to terminate this Agreement on ninety (90) days written
notice if BMS either opposes any of the Patent Applications or challenges or contests the
validity or enforceability of any of the Licensed Patents. |
|
9.5 |
|
In the event that this Agreement is terminated or rejected by a Party or its receiver or
trustee under applicable bankruptcy laws due to such Partys bankruptcy, then all rights and
licenses granted under or pursuant to this Agreement by such Party to the other Party are, and
shall otherwise be deemed to be, for purposes of Section 365(n) of Title 11 of the United
States Bankruptcy Code and any similar law or regulation in any other country, licenses of
rights to intellectual property as defined under Section 101(35A) of Title 11 of the
Bankruptcy Code. The Parties agree that all intellectual property rights licensed hereunder,
including without limitation any patents or patent applications in any country of a Party
covered by the license grants under this Agreement, are part of the intellectual
property as defined under Section 101(35A) of the Bankruptcy Code subject to the
protections afforded the non-terminating Party under Section 365(n) of the U.S. Bankruptcy
Code, and any similar law or regulation in any other country. |
Article 10Confidentiality and Publicity
10.1 |
|
All information of a proprietary or confidential nature disclosed by one Party to the other
or developed by the other Party under this Agreement (Confidential Information)
shall be maintained in confidence, not disclosed to any Third Party, and used only for the
purposes of this Agreement. Each Party may disclose the other Partys Confidential
Information to Affiliated Companies, agents, legal and financial representatives, or
consultants under obligations of confidentiality, non-disclosure and non-use at least
equivalent to the obligations set forth in this Article. The obligations of confidentiality,
non-disclosure and non-use set forth in this Agreement shall expire five (5) years after the
date of termination or expiration of this Agreement. |
|
10.2 |
|
The obligations of confidentiality, non-disclosure and non-use set forth shall not
apply to information: (a) that was previously known to the receiving Party or any of its
Affiliated Companies free of restriction as evidenced by the records of such Party; (b) that
is or |
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|
|
becomes generally available to the public through no fault of the receiving Party; (c) that
is acquired in good faith by the receiving Party or any of its Affiliated Companies from a
Third Party not under an obligation of secrecy to the disclosing Party with respect to such
information; or (d) that is independently developed by employees or agents of the receiving
Party or any of the Affiliated Companies without reliance on Confidential Information
disclosed under this Agreement. |
|
10.3 |
|
Notwithstanding the obligations of confidentiality, non-disclosure, and non-use set forth
herein, a Party may: |
|
(a) |
|
disclose Confidential Information to a regulatory agency that is necessary to
obtain regulatory approval in a particular jurisdiction or as otherwise required by law
or judicial process; |
|
|
(b) |
|
disclose Confidential Information to a government official or agency if the
disclosure is necessary to protect the health and safety of a Partys workers or the
public or as required by law or for defending, enforcing, or prosecuting patent
applications and patents; and |
|
|
(c) |
|
disclose Confidential Information reasonably required in connection with the
development, manufacture, use, sale, external testing, or marketing of Products in the
Territory in accordance with the terms of this Agreement. |
10.4 |
|
Except as set forth in this section, neither Party shall disclose the nature or
existence of this Agreement to any Third Party, or the relationship between the parties
hereunder, without the prior written consent of the other Party, except that each Party
shall be permitted, without the prior permission of the other Party, to disclose the
existence of this Agreement and the nature of the licenses granted hereunder as required by
law or judicial process and to its accountants and attorneys. PHARMATOP shall be permitted,
without the prior permission of BMS, to disclose the existence of this Agreement and the
nature of the licenses granted hereunder on a confidential basis to a) potential licensees
pursuant the provisions of section 3.1, but not other terms and conditions; and b) as to the
terms of this Agreement, its existing or potential investors and commercial bankers. BMS
shall be |
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|
|
permitted, without the prior permission of PHARMATOP, to disclose the existence and
terms of this Agreement on a confidential basis to potential sublicensees, copromotion
partners, merger and acquisition candidates and collaborators. |
|
10.5 |
|
The provisions of this Article shall govern the exchange of Confidential Information between
the parties on or after the execution of this Agreement. The rights and obligations of this
Article shall survive termination of this Agreement. |
Article 11Warranties, Representations and Acknowledgements
11.1 |
|
PHARMATOP warrants and represents that it is a partnership duly organized and validly
existing under the laws of France, and has all power and authority to carry on its business as
now being conducted and to own its properties and is duly licensed or qualified in each
jurisdiction in which its failure to qualify would have a material adverse effect on its
business, financial condition or operations. PHARMATOP represents that, as of the Effective
Date, the assets of PHARMATOP, excluding the Patents and Patent Applications, are valued at
less than [***]
and that its revenues for calendar year 2002 will be less than [***]. |
|
11.2 |
|
PHARMATOP warrants and represents that it has full legal power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby; that the execution,
delivery and performance of this Agreement by it has been duly authorized by all requisite
legal action; and that this Agreement has been duly executed and delivered by it and
constitutes a valid and binding obligation enforceable in accordance with its terms, subject,
as to enforcement, to applicable bankruptcy, reorganization, insolvency, moratorium, and other
laws affecting creditors rights generally from time to time in effect. |
|
11.3 |
|
PHARMATOP represents and warrants that neither PHARMATOP nor any of its respective
Affiliated Companies is a party to, subject to or bound by any agreement or any judgment,
award, order, writ, injunction or decree of any court, governmental body or arbitrator that
would conflict with or be breached by the execution, delivery or |
|
|
|
*** |
|
Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has been requested with respect to the
omitted portions. |
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|
|
performance of this Agreement by it or that could prevent the carrying out of this
Agreement. |
|
11.4 |
|
PHARMATOP represents and warrants that to the best of its knowledge there is no (i) action,
suit, dispute, or governmental, administrative, arbitration, or regulatory proceeding pending
or threatened in writing or (ii) any investigation pending or threatened in writing against or
relating to PHARMATOP, its Affiliated Companies, or their officers, general partners, and
stockholders that, in either case could prevent the carrying out of this Agreement. |
|
11.5 |
|
PHARMATOP warrants and represents that it exclusively owns or controls by agreement or
license all right, title and interest in and to the Licensed Rights as defined herein and that
it has the full right and authority to enter into this Agreement and to carry out the
transactions contemplated herein. |
|
11.6 |
|
PHARMATOP warrants and represents that it has no outstanding encumbrances or agreements,
either written or oral, relating to the use of the Licensed Rights in the Territory, and that
it has not granted nor will grant during the term of this Agreement or any renewal hereof, any
similar rights, license, consent, or privilege in the Territory to any Third Party with
respect to the rights granted herein. |
|
11.7 |
|
BMS represents and warrants that BMS is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. |
|
11.8 |
|
BMS represents and warrants that it has full corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby; that the execution, delivery
and performance of this Agreement have been duly authorized by all requisite corporate action;
and that this Agreement has been duly executed and delivered by BMS and constitutes a valid
and binding obligation of BMS, enforceable in accordance with its terms, subject, as to
enforcement, to applicable bankruptcy, reorganization, insolvency, moratorium, and other laws
affecting creditors rights generally from time to time in effect. |
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11.9 |
|
BMS represents and warrants that neither it nor any of its Affiliated Companies, is a party
to, subject to or bound by any agreement or any judgment, award, order, writ, injunction or
decree of any court, governmental body or arbitrator, which would conflict with or be breached
by the execution, delivery or performance of this Agreement by BMS or which could prevent the
carrying out of this Agreement. |
|
11.10 |
|
BMS represents and warrants that to the best of its knowledge there is no (i) action, suit,
dispute, or governmental, administrative, arbitration, or regulatory proceeding pending or
threatened in writing or (ii) any investigation pending or threatened in writing against or
relating to BMS, its Affiliated Companies, or their officers and stockholders that, in either
case could prevent the carrying out of this Agreement. |
|
11.11 |
|
BMS represents and warrants that all consents of Third Parties, including, without
limitation, governmental authorities and non-governmental self-regulatory agencies which
regulate the business of BMS, necessary to the execution and delivery of this Agreement by BMS
or to its performance as of the Effective Date of the transactions contemplated hereby have
been obtained and all filings with and notifications to such governmental authorities
(including non-governmental self-regulatory agencies), regulatory agencies or other entities
have been effected. |
|
11.12 |
|
BMS covenants that it will use its commercially reasonable efforts such that all Products
manufactured, labeled, advertised, and sold by or on behalf of BMS under this Agreement shall
comply in all material respects with all applicable requirements of the U.S. Food, Drug and
Cosmetic Act and all other laws and regulations applicable thereto. |
|
11.13 |
|
Except as disclosed in Appendix 3 (re Fresenius), PHARMATOP represents that, as of
the date of full execution of this Agreement, there are, to the best of its knowledge, no
Third Party patents that would materially affect BMS ability to sell Products or PHARMATOPs
ability to obtain patent protection for Licensed Rights. |
|
11.14 |
|
The representations and warranties of the parties set forth in this Article and in Section
6.1 shall survive the termination, cancellation or expiration of this Agreement without
limitation. |
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Article 12Indemnification; Limitation on Liability
12.1 |
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Subject to Sections 12.3 and 12.4, each Party hereby agrees to indemnify, defend and hold the
other Party, its Affiliates, its licensees, and its and their officers, directors, employees,
consultants, contractors, sublicensees and agents (collectively, the Indemnitees)
harmless from and against any and all damages or other amounts payable to a Third Party
claimant (by enforceable judgement, settlement or otherwise), as well as any reasonable
attorneys fees and costs of litigation incurred by such Indemnitee as to any such Claim (as
defined in this Section 12.1) until the indemnifying Party has acknowledged that it will
provide indemnification hereunder with respect to such Claim as provided below, (collectively,
Damages) resulting from claims, suits, proceedings or causes of action
(Claims) brought by such Third Party against such Indemnitee based on: (a) a breach
of a representation or warranty by the indemnifying Party contained in this Agreement; (b)
breach of this Agreement or applicable law by such indemnifying Party; (c) negligence or
willful misconduct of a Party, its Affiliates or (sub)licensees, or their respective
employees, contractors or agents in the performance of this Agreement; and/or (d) breach of a
contractual or fiduciary obligation owed by it to a Third Party (including without limitation
misappropriation of trade secrets). |
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12.2 |
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Subject to Section 12.4, BMS hereby agrees to indemnify, defend and hold harmless
PHARMATOP and its directors, agents and employees from and against any and all damages and
other amounts payable to a Third Party claimant (by enforceable judgement, settlement or
otherwise), as well as any reasonable attorneys fees and costs of litigation incurred by
such PHARMATOP indemnitee as to any Claim (as defined below) until BMS has acknowledged that
it will provide indemnification hereunder with respect to such Claim, as a result of any
suits, claims, actions, and demands (Claims) made by such Third Party against such
PHARMATOP Indemnitee that are based, directly or indirectly, on the manufacture, use, or
sale of any Products by BMS or its Affiliates, agents or sublicensees, except to the extent
such Claims result from (a) a breach of a representation or warranty by PHARMATOP contained
in this Agreement; (b) breach of this Agreement or applicable law by PHARMATOP; (c)
negligence, fraud, or willful misconduct by PHARMATOP or its employees, contractors or
agents; and/or (d) breach |
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of a contractual or fiduciary obligation owed by PHARMATOP or an of its employees or
shareholders to a Third Party (including without limitation misappropriation of trade
secrets), or as provided in section 6.3(a). |
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12.3 |
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In the event that PHARMATOP is obligated to indemnify BMS as to a given amount for a given
Claim under this Agreement or is obligated to BMS for any damages of any character for any
breach of this Agreement (such damages and Claims, together, a PHARMATOP Payment
Obligation), BMS shall only be entitled to recover from PHARMATOP with respect to such
PHARMATOP Payment Obligation as follows: |
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(a) |
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If such PHARMATOP Payment Obligation relates to a breach by PHARMATOP of any of
its representations or warranties under this Agreement, BMS may recover directly from
PHARMATOP (or, if PHARMATOP fails to meet its obligations, from its general partners)
damages with respect to such PHARMATOP Payment Obligation up to an amount that does not
exceed [***] of all amounts then paid to PHARMATOP by BMS pursuant to sections [***]
and [***], less all amounts previously paid directly by PHARMATOP to BMS (i.e., other
than by royalty offset) with respect to any other PHARMATOP Payment Obligations
pursuant to this subsection (a) and pursuant to section 12.3(b). To the extent that
such amount is not sufficient to cover the entire amount due BMS, BMS may recover any
remaining amount due it only by offsetting and withholding the amount due against any
future royalties due BMS under section 7.2 or 7.3 until such amount is paid. |
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(b) |
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If such PHARMATOP Payment Obligation relates to a breach by PHARMATOP of any provisions of
this Agreement other than its representations and warranties under this Agreement, BMS may
recover directly from PHARMATOP (or, if PHARMATOP fails to meet its obligations, from its
general partners) damages with respect to such PHARMATOP Payment Obligation up to an amount
that does not exceed [***]
of all amounts then paid to PHARMATOP by BMS pursuant to section [***] and
[***], less all amounts previously paid directly by PHARMATOP to BMS (i.e., other
than by royalty offset) with respect to any |
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*** |
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Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment has been requested with respect
to the omitted portions. |
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other PHARMATOP Payment Obligations pursuant to this subsection (b) and, to the extent
relating to amounts previously paid by BMS pursuant to sections [***] and [***], with respect
to any other PHARMATOP Payment Obligations previously paid directly by PHARMATOP to BMS
pursuant to section [***] To the extent that such amount is not sufficient to cover the
entire amount due BMS, BMS may recover any remaining amount due it only by offsetting and
withholding the amount due against any future royalties due BMS under section [***]
or [***] until such amount is paid. |
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For the avoidance of doubt, it is expressly agreed between the Parties that these
limitations are intended to be cumulative to cover all PHARMATOP Payment Obligations. In
other words, if monies are paid or deducted under 12.3(a) (from amounts other than payments
under section 7.1), such payments or deductions reduce monies available for payment or
deduction under 12.3(b), and vice-a-versa. |
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12.4 |
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As used in this section 12.4, Indemnitee shall mean a party entitled to indemnification
under the terms of Section 12.1 or 12.2. It shall be a condition precedent to an Indemnitees
right to seek indemnification under such Section 12.1 or 12.2: |
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(a) |
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shall inform the indemnifying Party under such applicable Section of a Claim as
soon as reasonably practicable after it receives notice of the Claim; |
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(b) |
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shall, if the indemnifying Party acknowledges that such Claim falls within the
scope of its indemnification obligations hereunder, permit the indemnifying Party to
assume direction and control of the defense, litigation, settlement, appeal or other
disposition of the Claim (including the right to settle the claim solely for monetary
consideration); provided, that the indemnifying Party shall seek the prior
written consent (not to be unreasonably withheld or delayed) of any such Indemnitee as
to any settlement which would materially diminish or materially adversely affect the
scope, exclusivity or duration of any Patents licensed under this Agreement, would
require any payment by such Indemnitee, would require an admission of legal wrongdoing
in any way on the part of an Indemnitee, or would amend this Agreement; and |
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*** |
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Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions. |
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(c) |
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shall fully cooperate (including providing access to and copies of pertinent
records and making available for testimony relevant individuals subject to its control)
as reasonably requested by, and at the expense of, the indemnifying Party in the
defense of the Claim. |
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Provided that an Indemnitee has complied with the foregoing, the indemnifying Party shall
provide attorneys reasonably acceptable to the Indemnitee to defend against any such Claim.
Subject to the foregoing, an Indemnitee may participate in any proceedings involving such
Claim using attorneys of its/his/her choice and at its/his/her expense. In no event may an
Indemnitee settle or compromise any Claim for which it/he/she intends to seek
indemnification from the indemnifying Party hereunder without the prior written consent of
the indemnifying Party, or the indemnification provided under such Section 12.1 or 12.2 as
to such Claim shall be null and void. |
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12.5 |
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PHARMATOP represents and warrants that it is a general partnership under French law, that its
general partners are Daniele Fredj and Francois Dietlin, and that under French law, each of
the general partners are responsible for the liabilities of PHARMATOP. |
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12.6 |
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The liability, limitation of liability, and indemnification provisions set forth in this
Section 12 shall survive the termination, cancellation or expiration of this Agreement [***] |
Article 13Arbitration
13.1 |
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Any controversy or claim arising out of or relating to this Agreement or the validity,
inducement, or breach thereof, shall be settled by arbitration before a arbitration tribunal
of three (3) arbitrators appointed and ruling in accordance with the Arbitration Rules of
the International Chamber of Commerce Arbitration Association (ICC) then
pertaining, except where those rules conflict with this provision, in which case this
provision controls. Any court with jurisdiction shall enforce this clause and enter
judgment on any award. The arbitrators shall be attorneys who have at least fifteen (15)
years of experience with a law firm or corporate law department of over twenty five (25)
lawyers or who were a judge of a court of general jurisdiction. They shall not be a citizen
of the |
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*** |
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Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the omitted portions. |
-43-
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United States, Mexico, Canada, or France and shall not have its usual professional
office in one of these countries. They shall be selected within ten (10) days of
commencement of the arbitration by common consent of Parties or if Parties fall to agree in
the stated time, through selection procedures administered by the ICC. The arbitration
shall be held in the city of Paris, France. Within forty-five (45) days of initiation of
arbitration, the parties shall reach agreement upon and thereafter follow procedures
assuring that the arbitration will be concluded and the award rendered within no more than
six months from selection of the arbitrator. Failing such agreement, the ICC will design
and the parties will follow procedures that meet such a time schedule. |
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13.2 |
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All proceedings shall be conducted, and all documents submitted, in the English language.
[***]. |
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13.3 |
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Each Party has the right prior to the commencement of an arbitration and, if the
arbitrators cannot hear the matter within an acceptable period or can not award effective
relief, during the arbitration, to seek and obtain from an appropriate court provisional
remedies such as attachment, preliminary injunction, or replevin, to avoid irreparable harm,
maintain the status quo or preserve the subject matter of the arbitration. |
Article 14General provisions
14.1 |
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Any delays in or failures of performance by a Party under this Agreement shall not be
considered a breach of this Agreement if and to the extent caused by occurrences beyond the
reasonable control of the Party affected, including but not limited to acts of God; acts,
regulations or laws of any government; strikes or other concerted acts of workers; fires;
floods; explosions; riots; wars; rebellions; and sabotage. |
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14.2 |
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BMS shall obtain any and all governmental approvals required to authorize, implement or
enforce this Agreement or any of the terms and conditions hereof. |
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*** |
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Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the omitted
portions. |
-44-
14.3 |
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No change in, addition to or waiver of any of the provisions of this Agreement shall be
valid or binding unless in writing and duly executed by the Party against whom enforcement
of the change, addition or waiver is sought. Any such waiver shall constitute a waiver only
with respect to the specific matter described in such writing and shall in no way impair the
rights of the Party granting such waiver in any other respect or at any other time. |
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14.4 |
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Neither the waiver by any of the parties hereto of a breach of or a default under any of the
provisions of this Agreement, nor the failure by any of the parties, on one or more occasions,
to enforce any of the provisions of this Agreement or to exercise any right or privilege
hereunder, shall be construed as a waiver of any other breach or default of a similar nature,
or as a waiver of any of such provisions, rights or privileges hereunder. |
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14.5 |
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Headings herein are for the parties convenience only, and shall not be used to interpret
this Agreement. |
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14.6 |
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Except to the extent otherwise provided herein, each Party, shall bear its own expenses and
costs in connection with the transactions contemplated hereby, including the preparation,
execution and delivery of this Agreement and compliance herewith. |
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14.7 |
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All matters affecting the interpretation, validity, performance and enforcement of this
Agreement shall be governed by the laws of the state of New York (USA), without regard or
giving effect to its choice or conflict of law principles other than Section 5-1401 of the New
York General Obligations Law. |
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14.8 |
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If any provision of this Agreement is invalid or unenforceable in any jurisdiction, the
remaining provisions hereof shall remain in effect and such invalidity or unenforceability
shall not affect the validity or enforceability of such provision in any other jurisdiction.
The parties shall replace such ineffective provision for such jurisdiction with a valid and
enforceable provision which most closely approaches the purpose of this Agreement, and in
particular, the provision to be replaced. |
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14.9 |
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PHARMATOP and BMS are independent contractors and shall not be deemed to be partners,
joint venturers or each others agents, and neither shall have the right to act on |
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behalf of the other except as expressly provided hereunder or otherwise expressly agreed to
in writing. |
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14.10 |
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The parties have incorporated in this Agreement all representations, warranties, covenants,
commitments and understandings on which they have relied in entering into this Agreement and,
except as provided for herein, neither Party has made any covenant or other commitment to the
other concerning its future action. Accordingly, this Agreement, together with the appendixes
and exhibits attached hereto, (i) constitute the entire agreement and understanding between
the parties with respect to the matters contained herein, and there are no promises,
representations, conditions, provisions or terms related thereto other than those set forth in
this Agreement, and (ii) supersede all previous understandings, agreements and representations
between the parties, written or oral relating to the subject matter hereof. |
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14.11 |
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All communications, reports, payments and notices required by this Agreement shall be made
in writing and addressed to the parties at their respective addresses set forth below or to
such other address as requested by a Party by notice in writing to the other parties: |
If to PHARMATOP:
SCR Pharmatop
10, square St. Florentin
78150 Le Chesnay
FRANCE
Attention: Gerant
Phone: 33-1-39-545577
If to BMS:
Bristol-Myers Squibb Company
Route 206 and Province Line Road
Princeton, New Jersey 08540-4000
Attn: President for Consumer Medicines
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with a copy to the Vice President and Senior Counsel, BMS Consumer Medicines, at the same
address. |
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All such notices, reports, payments and communications shall be deemed given or made and
effective (i) when delivered personally; or (ii) when received, if sent by recognized
overnight courier or by registered or certified mail, return receipt requested and postage
prepaid. |
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14.12 |
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In order to insure that this license can be used validly against Third Parties, extracts of
this Agreement will be registered on the patent offices registers by BMS as deemed necessary
by BMS, at its expense. |
[The next page is the signature page]
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IN WITNESS WHEREOF, and intending to be legally bound, the parties hereto have caused this
Agreement to be executed in triplicates by their duly authorized representatives as of the 23rd day
of December 2002.
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SCR PHARMATOP
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BRISTOL-MYERS SQUIBB COMPANY |
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By:
/s/ Daniele Fredj
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By: /s/ [ illegible ] |
Name: Daniele Fredj
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Name: |
Title: Gerant
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Title: |
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By:
/s/ Francois Dietlin |
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Name: Francois Dietlin |
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Title: Gerant |
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APPENDICES AND EXHIBITS
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Appendix 1 :
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Patent Related Disclosures and Documents |
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Exhibit A:
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US Patent No. 6,028,222 issued on 22nd February 2000 |
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Exhibit B:
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International Patent Application PCT/FR 97101452, filed on 5th
August 1997 |
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Exhibit C:
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International Patent Application
PCT/FR01/01749, filed on 6th June
2001 |
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Exhibit D:
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D-1: Assignment Document covering the portion of the inventions covered by U.S.
patent No. 6,028,222 assigned by the Inventors to Newpharm for all other countries of
the world (which obtained French patent No. 2.75 1.875) and as to which Newpharm
subsequently assigned the associated ongoing research and priority rights to PHARMATOP. |
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D-2: Assignment of inventions covering U.S. patent No. 6,028,222
assigned by the Inventors to PHARMATOP for the United States |
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Exhibit E:
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Letter from NewPharm confirming the assignment in Exhibit D |
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Appendix 2:
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Target Product Profile |
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Appendix 3:
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Exceptions to PHARMATOP Representations and Warranties |
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Appendix 4:
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Guaranteed Payment Schedule |
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Appendix 5:
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Description of Licensed Know-How |
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Exhibit A
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Appendix 1 |
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US006028222A |
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United States Patent [19]
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[11]
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Patent Number:
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6,028,222 |
Dietlin et al.
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[45]
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Date of Patent:
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Feb. 22, 2000
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[54] |
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STABLE LIQUID PARACETAMOL COMPOSITIONS, AND METHOD FOR
PREPARING SAME |
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[75] |
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Inventors: Francois Dietlin, Le Pecq.; Daniele Fredj,
Gif-sur-Yvette, both of France |
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[73] |
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Assignee: SCR Pharmatop, France |
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[21]
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Appl. No.:
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09/051,246 |
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[22]
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PCT Filed:
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Aug. 5, 1997 |
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[86]
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PCT No.:
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PCT/FR97/01452 |
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§ 371 Date:
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Jun. 5, 1998 |
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§ 102(e) Date:
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Jun. 5, 1998 |
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[87]
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PCT Pub. No.:
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WO98/05314 |
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PTC Pub. Date:
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Feb. 12, 1998 |
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[30] |
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Foreign Application Priority Date |
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Aug 05, 1996 [FR] France |
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96 09858 |
[51]
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Int. Cl.7
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CO7C 209/90 |
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[52]
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U.S. Cl.
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564/4; 514/617, 564/2; |
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564/5; 564/6; 564/7; 564/223 |
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[58]
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Field of Search
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564/4,5,6,7, |
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564/2,223 514/617 |
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[56] |
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References Cited
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U.S. PATENT DOCUMENTS
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4,727,064 |
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2/1988
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Pitha
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514/58 |
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4,855,326 |
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8/1989
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Fuisz
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514/777 |
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5,658,919 |
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8/1997
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Ratnaraj et al
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514/269 |
FOREIGN PATENT DOCUMENTS
952395 9/1995 WIPO
OTHER PUBLICATIONS
XP 002045737, 1995
XP 002045739, 1985
XP 002045740, 1983
XP 002030816, 1986
Primary ExaminerShailendra Kumar
Attorney, Agent, or FirmBierman, Muserlian and Lucas
[57] ABSTRACT
Novel stable paracetamol compositions for use in therapeutic chemistry and specifically galenic
pharmacy are disclosed. The compositions contain a solution of paracetamol in an aqueous solvent
combined with a buffer having a pH of 4 to 8, and a free radical capturing agent. A water-insoluble
inert gas is carefully bubbled through the aqueous solvent to remove oxygen from the medium. Said
compositions may also be combined with a centrally or peripherally acting analgesic agent, and are
provided as injectable compositions for relieving pain.
28 Claims, No Drawings
6,028,222
STABLE LIQUID PARACETAMOL
COMPOSITIONS, AND METHOD FOR
PREPARING SAME
This application is a 371 of PCT/FR97/01452, filed Aug. 5, 1997.
FIELD OF THE INVENTION
The present invention relates to novel stable, liquid, analgesic formulations, containing
paracetamol as main active ingredient, either in combination or not, with an analgesic derivative.
DISCUSSION OF THE PRIOR ART
It has been known for many years and notably from a paper of FAIRBROTHER J. E. entitled:
Acetaminophen, published in Analytical Profiles of Drug Substances (1974), volume 3, pp. 1-109,
that paracetamol in the presence of moisture, and all the more in aqueous solution, may be
hydrolysed to yield p-aminophenol, which compound may itself be broken down into quinone-imine. The
rate of decomposition of paracetamol is enhanced as the temperature is increased and upon exposure
to light.
In addition, the instability of paracetamol in aqueous solution as a function of the
solutions pH has been extensively described. Thus, according to a paper entitled Stability of
aqueous solution of N-acetyl-p-aminophenol (KOSHY K. T. and LACH J.I.J. Pharm. Sci., 50 (1961),
pp. 113-118), paracetamol in aqueous solution is unstable, a fact which primarily correlates with
hydrolysis both in acidic and basic environment. This breakdown process is minimal at a pH close to
6, the half-life of the product thus degraded namely being as high as 21.8 years at 25° C.
According to Arrhenium law and knowing the specific reaction constant as determined by these
authors, the time needed to observe a 5% decrease in paracetamol concentration of an aqueous
solution stored at 25° C. at the optimal pH as been predicted to be 19 months. Besides hydrolysis,
the paracetamol molecule separately undergoes another kind of decomposition that involves formation
of a quinone-imine that may readily polymerize with generation of nitrogen-containing polymers.
These polymers and in particular those stemming from N-acetyl-p-benzoquinone-imine have been
further described as being the toxic metabolite of paracetamol, which is endowed notably with
cytotoxic and hemolytic effect. The decomposition of this metabolite in aqueous medium is still
more complex and gives rise to p-benzoquinone and hydroquinone (D. DAHLIN, J. Med. Chem., 25
(1982), 885-886).
In the current state of the art and in view of the quality control requirements specific to
pharmaceutical practice regulations, the stability of paracetamol in aqueous solutions is thus
insufficient and does not allow the formulation of liquid pharmaceutical compositions for
injection. As a result, the successful preparation of liquid pharmaceutical formulations for
parenteral administration, based on paracetamol, has not been achieved.
A number of trials has been undertaken to slow down the decomposition of paracetamol in
aqueous solution. Thus, in a paper entitled: Stabilization by ethylenediamine tetraacetic acid of
amide and other groups in drug compound, (FOGG Q. G. and SUMMAN, A. M., J. Clin. Pharm. Ther., 17:
(1992), 107-109), it is stated that a 0.1% aqueous solution of paracetamol has a p-aminophen
content resulting from hydrolysis of paracetamol, approximating 19,8% of the initial concentration
of paracetamol, as observed after storage in the dark during 120 days. Addition of EDTA at a rate
de 0.0075% brings down the decomposition rate to 7%. On the other hand, distilling an alkaline
solution of paracetamol results in an ammonia concentration of 14%, in presence or not of 1000 ppm
of ascorbic acid. Owing to its properties, ascorbic acid is indeed quite adapted to such
stabilization. However, upon exposure to bright light, a paracetamol solution containing 1000 ppm
of ascorbic acid does after all generate ammonia with a yield of 98%. In contrast, addition of EDTA
(0.0075%) to such a solution cuts down decomposition rate, with an ammonia yield not higher than
14%.
Despite of such efforts, it has not been possible to prepare aqueous liquid solutions of
paracetamol. In particular solutions for injection, having a guaranteed stability.
SUMMARY OF THE INVENTION
The present invention is aimed at solving the above stated problem in an appropriate manner.
It is directed to stable pharmaceutical compositions of paracetamol in an aqueous solvent having
added thereto a free radical antagonist. The aqueous solvent may be water or else aqueous mixtures
containing water and a polyhydric compound such as polyethylene-glycol (PEG) 300, 400, 1000, 1540,
4000 or 8000, propylene glycol or tetraglycol. A water-soluble alcanol such as for example ethanol
may also be used.
DETAILED DESCRIPTION OF THE
INVENTION
Stability of the aqueous solutions mentioned above does not solely depend on the choice of a
given carrier. It also depends on other variables, such as careful adjustment of pH, removal of
oxygen dissolved in the carrier and addition of a free radical antagonist or a free radical
scavenger.
Removal of dissolved oxygen is readily accomplished by bubbling an inert gas and preferably by
bubbling nitrogen.
The appropriate free radical antagonist is chosen among the derivatives of ascorbic acid,
those derivatives bearing at least a thiol functional group and straight chain or cyclic polyhydric
compounds.
Preferred ascorbic acid derivatives are D- or L-ascorbic acid, an alkali metal ascorbate, an
alkaline earth metal ascorbate or even still an aqueous medium-soluble ascorbic acid ester.
Free radical scavengers, bearing a thiol functional group may be an organic compound
substituted by one or more thiol functional groups, of the aliphatic series such as cystein,
acetylcystein, thioglycollic acid and salts thereof, thiolactic acid and salts thereof,
dithlothreltol, reduced glutathion, thiourea, thioglycerol, methionine and mercaptoethane sulfonic
acid.
The polyol used as a free radical scavenger is preferably a straight chain or a cyclic,
polyhydroxy alcohol such as mannitol, sorbitol, inositol, isosorbide, glycerol, glucose and
propylene-glycols.
Among free radical scavengers required pour stabilizing paracetamol, the ascorbic acid
derivative currently preferred is sodium ascorbate. Preferred thiol functional group substituted
derivatives are cystein, reduced-slate glutathion, N-acetylcystein and mercaptoethane sulfonic
acid.
It may appear as convenient to combine several free radical scavengers as far as they are
water-soluble and mutually compatible. Especially convenient free radical scavengers are mannitol,
glucose, sorbitol or even glycerol.
6,028,222
These may be readily combined.
It may appear as convenient to add to the preparation one or a number of complexing agents to
improve stability of the molecule since the active ingredient is sensitive to the presence of trace
metals that eventually speed up its decay.
Complexing agents are exemplified by nitrilotriacetic acid, ethylene diamino tetraacetic acid,
ethylene diamino, N, N-diacetic-N, N-dipropionic acid, ethylene diamino tetraphosphonic acid,
2,2-(ethylene diamino)dibutyric acid, or ethylene-glycol bis(diaminoethyl ether)
N,N,N,N-tetraacetic acid and sodium or calcium salts thereof.
The complexing agent also acts to complex bivalent ions (copper, zinc, calcium) that may be
present and that have a negative influence of the aging of the formulation throughout storage.
The gas that is bubbled into the solution to drive out oxygen, may be nitrogen or carbon
dioxide or still an inert gas. Nitrogen is favoured.
Isotonicity of the preparation may be achieved by adding an appropriate quantity of sodium
chloride, glucose, levulose or postassium chloride, or calcium chloride, or calcium
gluconoglucoheptonate, or mixtures thereof. The preferred isotonizing agent is sodium chloride.
The buffer used is a buffer compatible with parenteral administration in humans, the pH of
which may be adjusted between 4 and 8. Preferred buffers are based on alkali metal ou alkaline
earth metal acetates or phosphates. A more preferred buffer is sodium acetate/hydrogene phosphate
adjusted to the required pH with hydrochloric acid or sodium hydroxide. The concentration of such a
buffer may be comprised between 0.1 and 10 mg/ml. The preferred concentration is confined in the
range of 0.25 to 5 mg/ml.
On the other hand, preparations for injection have to be sterile and should lend themselves to
heat treatment sterilization. It is known that in certain conditions, antioxidants such as
glutathion are broken down ]FIALAIRC A. et al., J. Pharm. Biomed. Anal., vol. 10, No 6, pp. 457-460
(1992)]. The breakdown of reduced glutathion during heat treatment sterilization ranges from 40 to
77% depending on the selected temperature conditions. During such sterilization procedures, it is
convenient to employ means capable of preserving the integrity of these antioxidants. Addition of
complexing agents to aqueous solutions inhibits thermal decomposition of thiol derivatives, such as
glutathion.
Liquid pharmaceutical compositions according to the invention are preferably compositions
intended for injection. The paracetamol content of the solution may range from 2 mg/ml to 50 mg/ml
in case of so called dilute solutions, i.e. that can be directly infused by intravenous route and
from 60 mg/ml to 350 mg/ml where so-called concentrated solution are considered, i.e. either
intended for direct injection by intravenous or intramuscular route, or intended to be diluted
prior to slow infusion administration. The preferred concentrations are comprised between 5 and 20
mg/ml for dilute solutions and between 100 and 250 mg/ml for concentrated solutions.
Pharmaceutical compositions according to the invention may further contain another active
ingredient that enhances the specific effect of paracetamol.
In particular, the pharmaceutical compositions according to the invention may contain a
CNS-acting analgesic such as for example a morphinic analgesic.
The morphinic analgesic is selected among the morphinic derivatives of natural, semi-synthetic
or synthetic origin and piperidine derivatives selected from the following list, which is no way
intended to be exhaustive: buprenorphine, dramadol, codeine, dextromoramide, dextropropoxyphene,
hydrocodone, hydromorphone, ketobemidone, levomethadone, levorphanol, meptazinol, methadone,
morphine, nalbuphine, nicomorphine, dizocine, diamorphine, dihydrocodeine, dipipanone, methorphane,
dextromethorphane.
Preferred morphinic derivatives are codeine sulfate or morphine hydrochloride.
The codeine or codeine derivative concentration, expressed in terms of codeine base, is
comprised between 0.2% and 25% in relation to the paracetamol content. The preferred codeine
derivative is codeine sulfate. The concentration thereof is set between 0.5 and 15% in relation to
the paracetamol content.
The morphine or morphine derivative concentration, expressed in terms of morphine base, is
comprised between 0.05 and 5% in relation to the paracetamol content. The preferred morphine
derivative is morphine hydrochloride the concentration of which is preferably set between 0.5 and
15% in relation to paracetamol content.
The compositions according to the invention may further have added thereto an
anti-inflammatory agent such as of the of AINS type and in particular a phenylacetic acid compound.
Such agents are exemplified by ketoprofen, flurbiprofen, tiaprofenic acid, niflumic acid,
diclofenac or naproxen.
Compositions according to the invention may in addition incorporate an antiemetic either a
CNS-acting neuroleptic such as haloperidol or chlorpromazine or metopimazine or of the
gastrokinetic-mediated type such as metochlopramide or domperidone or even a serotoninergic agent.
Compositions in accordance with the invention may further incorporate an anti-epileptic drug
such as sodium valproate, clonazepam, carbamazepine or phenytoin.
It may also be possible to combine paracetamol with a corticosteroid such as for example
prednisone, prednisolone, methyl prednisone, dexamethasone, betametasone or an ester thereof.
Paracetamol can further be combined with a tricyclic antidepressant such as amitriptiline,
imipramine, clomipramine.
Anti-inflammatory agents may be included in concentrations ranging from 0.100 g to 0.500 g per
1000 ml of formulated product.
In Case of Concentrated Solutions
The water content expressed in percentage is preferably in excess of 5% of the total volume
and more preferably comprised between 10 and 65%.
The quantity of propylene glycol formulated in percentage is preferably in excess of 5% and
more preferably comprised between 20 and 50%.
The PEG used is preferably PEG 300, PEG 400, PEG 1000, PEG 1540 or PEG 4000. Concentrations
used are comprised between 10 and 60% in weight. PEG 300 and PEG 400 are further preferred.
Preferred concentrations range from 20 to 60%.
Ethanol concentrations range from 0 to 30% of total volume and preferably range from 0 to 20%.
Tetraglycol concentrations used do not exceed 15% to allow for maximal quantities that can
daily be received by parenteral administration viz 0.7 ml/kg of body weight.
6,028,222
Glycerol concentration varies from 0.5 to 5% as a function of the viscosity of the medium
suitable for use depending on the administrative route.
In Case of Dilute Solutions
The quantity of water used given in percentage is preferably in excess of 20% of the total
volume and preferably is comprised between 25 and 100%.
The quantity of propylene-glycol employed given in percentage is preferably comprised between
0 and 10%.
The PEG used is preferably PEG 300, PEG 400, or PEG 4000 with PEG 4000 being most preferred.
Preferred concentrations range from 0 to 10%. Tetraglycol concentrations used do not exceed 5%. In
preference, they are comprised between 0 and 4%.
The ascorbic acid or ascorbic acid derivative concentration which is used is preferably more
than 0.05 mg/ml and more desirably, comprised between 0.15 mg/ml and 5 mg/ml. Higher quantities may
indeed be used, without exceeding the solubility limits. Higher ascorbic acid or ascorbic acid
derivative concentration are administered to human beings for prophylactic or therapeutic purposes.
Thiol derivative concentration is comprised between 0.001% and 30% and more desirably,
comprised between 0.005% and 0.5% for dilute solutions, and between 0.1% and 20% for concentrated
solutions.
The pH of the solution is desirably adjusted taking into consideration the optimal stability
of paracetamol in aqueous solution, i.e. at a pH around 6.0.
The thus prepared composition may be packaged in glass sealed vials, or in stoppered glass
vials or in bottles made of a polymer material such as polyethylene, or in soft material bags made
from polyethylene, polyvinyl chloride or polypropylene.
The composition may be sterilized by heat treatment, for example at 121° C. during 20 minutes
or else by sterile filtration.
Currently preferred compositions in accordance with the invention have the following
ingredients:
Concentrated solutions
|
|
|
|
|
|
|
|
|
|
|
Injection |
|
Injection solution of |
|
|
solution of |
|
paracetamol associated to a |
|
|
paracetamol |
|
morphinic compound |
|
|
alone |
|
(per ml) |
Ingredient |
|
(per ml) |
|
Codeine |
|
Morphine |
|
paracetamol
|
|
0.160 g
|
|
0.160 g
|
|
0.160 g |
Codein sulfate.3H2O
|
|
|
|
0.0036 g
|
|
|
Morphine
|
|
|
|
|
|
0.00037 |
hydrochloride.3H.2O |
|
|
|
|
|
|
|
|
Propylene glycol
|
|
0.270 ml
|
|
0.270 ml
|
|
0.270 ml
|
PEG 400
|
|
0.360 ml
|
|
0.360 ml
|
|
0.360 ml
|
Sodium acetate
|
|
0.002 g
|
|
0.002 g
|
|
0.002 g |
Reduced glutathion
|
|
0.002 g
|
|
0.002 g
|
|
0.002 g |
Hydrochloric acid
1 N
|
|
q.s. pH 6.0*
|
|
q.s. pH 6.0*
|
|
q.s. pH 6.0*
|
Water for injection
|
|
q.s. 1000 ml
|
|
q.s. 1000 ml
|
|
q.s. 1000 ml
|
Nitrogen
|
|
q.s.f. bubbling
|
|
q.s.f. bubbling
|
|
q.s.f. bubbling
|
The pH specified above is the actual pH that has been measured by a pH-meter after
obtaining a 5 fold dilution of the solution with distilled water. It will be noted that the
apparent pH of the pure solution is different.
Using this solution composed of a solvent mixture constituted by 30% of propylene-glycol, by
40% of polyethylene-glycol 400 and by 30% of water (solution no 20), it is possible to dissolve
about 200 mg/ml of paracetamol at 20° C. Choosing a concentration of 160 mg/ml allows one to be
sure that no recristallization will occur, notably at low temperatures. In such situations, a
volume of 6,25 ml of said solution contains 1000 mg of paracetamol.
Dilute solutions
|
|
|
|
|
|
|
|
|
|
|
solution of paracetamol |
|
|
|
|
associated to codein (per ml) |
|
|
Injection |
|
Such |
|
Such |
|
|
solution of |
|
morphinic |
|
morphinic |
|
|
paracetamol |
|
compound is |
|
compound is |
Ingredient |
|
alone (per ml) |
|
codein |
|
morphine |
|
paracetamol
|
|
0.0125 g
|
|
0.125 g
|
|
0.125 g |
Codein
sulfate.
3H.2O
|
|
|
|
0.00018 g
|
|
|
Morphine hydrochloride.
3H2O
|
|
|
|
|
|
0.000019 g |
Mannitol
|
|
0.025 g
|
|
0.025 g
|
|
0.025 g |
Sodium hydrogen phosphate dihydrate
|
|
0.0025 g
|
|
0.00025 g
|
|
000025 g |
Sodium chloride
|
|
0.002 g
|
|
0.002 g
|
|
0002 g |
Disodium ethylene diamino
tetraacetate
|
|
0.0001 g
|
|
0.0001 g
|
|
0.0001 g |
Hydrochloric acid
or sodium hydroxide
|
|
q.s. pH 5.5
|
|
q.s. pH 5.5
|
|
q.s. pH 5.5 |
Water for injection
|
|
q.s.f. 1000 ml
|
|
q.s.f. 1000 ml
|
|
q.s.f. 1000 ml |
Nitrogen
|
|
q.s.f. bubbling
|
|
q.s.f. bubbling
|
|
q.s.f. bubbling |
The compositions according to the invention find therapeutic applications as pain relief
drugs. For moderate pain, the solutions merely contain paracetamol. For acute pain, the solutions
further contain a morphinic analgesic. Furthermore, the paracetamol solutions exert antipyretic
activity.
The following examples are given by way of illustration and not by limitation.
EXAMPLE I
Determination of the Optimal Solvent Mixture
1.1 Concentrated solutions
Increasing quantities of paracetamol were introduced in the solvent mixtures. The dissolution
rate of paracetamol increases with rise in temperature, so that the solubility tests in the
individual media were run by heating the solvent mixture to 60° C. After dissolution was judged
complete, the solutions were stored for 72 hours either at 25° C. or 4° C.
The solubility values are listed in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Propylene |
|
PEG |
|
|
|
|
|
Solubility |
|
Solubility |
Test |
|
Water |
|
glycol |
|
400 |
|
|
|
Tetraglycol |
|
at +4° C. |
|
at +25° C. |
a* |
|
(ml) |
|
(ml) |
|
(ml) |
|
Ethanol |
|
(ml) |
|
(mg/ml) |
|
(mg/ml) |
|
1
|
|
0.3
|
|
0.4
|
|
0.3
|
|
|
|
|
|
110
|
|
130 |
2
|
|
0.4
|
|
0.3
|
|
0.3
|
|
|
|
|
|
110
|
|
130 |
3
|
|
0.16
|
|
0.3
|
|
0.4
|
|
|
|
0.15
|
|
190
|
|
230 |
4
|
|
0.5
|
|
|
|
0.5
|
|
|
|
|
|
110
|
|
150 |
5
|
|
0.4
|
|
0.3
|
|
0.2
|
|
0.1
|
|
|
|
<110
|
|
120 |
6
|
|
0.5
|
|
0.3
|
|
0.1
|
|
0.1
|
|
|
|
<100
|
|
130 |
7
|
|
0.4
|
|
0.4
|
|
0.1
|
|
0.1
|
|
|
|
<100
|
|
150 |
8
|
|
0.5
|
|
0.3
|
|
0.2
|
|
|
|
|
|
<100
|
|
120 |
9
|
|
0.6
|
|
0.3
|
|
0.2
|
|
|
|
|
|
<100
|
|
<100 |
10
|
|
0.5
|
|
0.4
|
|
0.1
|
|
|
|
|
|
<100
|
|
<100 |
11
|
|
0.55
|
|
0.3
|
|
0.05
|
|
0.1
|
|
|
|
<100
|
|
<100 |
12
|
|
0.45
|
|
0.4
|
|
0.05
|
|
0.1
|
|
|
|
<100
|
|
120 |
13
|
|
0.65
|
|
0.3
|
|
0.05
|
|
|
|
|
|
<100
|
|
<100 |
14
|
|
0.55
|
|
0.3
|
|
0.05
|
|
|
|
|
|
<100
|
|
<100 |
15
|
|
0.4
|
|
0.4
|
|
0.2
|
|
|
|
|
|
<100
|
|
<150 |
16
|
|
0.45
|
|
0.45
|
|
0.1
|
|
|
|
|
|
<100
|
|
<100 |
17
|
|
0.4
|
|
0.2
|
|
0.4
|
|
|
|
|
|
160
|
|
200 |
18
|
|
0.5
|
|
0.2
|
|
0.3
|
|
|
|
|
|
160
|
|
160 |
19
|
|
0.5
|
|
0.1
|
|
0.3
|
|
|
|
|
|
100
|
|
190 |
20
|
|
0.3
|
|
0.3
|
|
0.4
|
|
|
|
|
|
190
|
|
200 |
21
|
|
0.3
|
|
0.3
|
|
0.35
|
|
|
|
0.15
|
|
160
|
|
210 |
22
|
|
0.25
|
|
0.25
|
|
0.35
|
|
|
|
0.15
|
|
170
|
|
220 |
6,028,222
The solubility values of the solvent mixtures do not increase in a consistent manner with
increasing temperature. Solubility is not enhanced if ethanol is added.
In addition, due to oversaturation phenomena which are observed in such solutions, notably in
media containing PEG, a delayed recristallization was noted subsequent to cooling. In these
conditions, the solutions under study were kept for 14 days at 20° C., then there was added, to the
solutions displaying no cristals following this time interval, a paracetamol germ cristal in order
to elicit cristallization of potentially oversaturated solutions. Finally, it was found that
solutions no 20 and no 3 have the highest solubility with respect to paracetamol, which threshold
was comprised between 160 mg/ml and 170 mg/ml depending on temperature.
1.2 Dilute solutions
Paracetamol is quantities well exceeding the solubility threshold was introduced in the
solvent mixtures previously warmed to 30° C. After stirring and cooling at 20° C., the solutions
were filtered. The paracetamol content of these solutions was determined by reading the absorbance
at 240 nm of a 1:200 dilution of the filtrate.
The results are recorded in the following tables.
|
|
|
|
|
|
|
concentration of |
|
|
paracetamol |
|
|
(mg/50 ml) |
|
Water |
|
|
720 |
|
5% Glucose |
|
|
710 |
|
4.82% levulose |
|
|
730 |
|
7% mannitol |
|
|
680 |
|
5% sorbital |
|
|
685 |
|
0.9% sodium chloride |
|
|
615 |
|
10% Calcium gluconoglucoheptonate |
|
|
670 |
|
Lestradets solution (5% glucose, 0.2% sodium chloride, 0.15% potassium chloride, 1.1% calcium
gluconoglucoheptonate) |
|
|
730 |
|
Ringers solution (0.7% sodium chloride, 0.1% potassium chloride, 0.1% sodium chloride) |
|
|
730 |
|
Ringers solution-Phosphate (0.7% sodium chloride, 0.182% monopotassium phosphate,
0.182% calcium chloride) |
|
|
710 |
|
Ringers solution-acetate (0.7% sodium chloride, 0.131% potassium acetate 0.013% calcium
chloride) |
|
|
715 |
|
Urea 0.3 M |
|
|
725 |
|
Type of solution (the following
solutions were prepared in Ringers
solution) |
|
|
|
|
|
|
|
|
|
Pure Ringers solution |
|
|
735 |
|
4.0% PEG 4000 + 1.0% propylene-glycol + 0.5% ethanol |
|
|
905 |
|
4.0% PEG 4000 + 1.0% propylene-glycol + 1.0% ethanol |
|
|
905 |
|
4.0% PEG 4000 + 1.0% propylene-glycol + 2.0% ethanol |
|
|
930 |
|
Type of solution (the following solutions were prepared
in 0.9% sodium chloride solution) |
|
|
|
|
|
|
|
|
|
0.9% sodium chloride |
|
|
615 |
|
+0.6% tetraglycol |
|
|
640 |
|
+1.2% tetraglycol |
|
|
680 |
|
+3.0% tetraglycol |
|
|
720 |
|
1.0% PEG 4000 |
|
|
630 |
|
1.0% PEG 4000 + 0.6% tetraglycol |
|
|
660 |
|
1.0% PEG 4000 + 1.2% tetraglycol |
|
|
710 |
|
3.0% PEG 4000 + 2.0% tetraglycol |
|
|
950 |
|
Paracetamol solubility is increased by the presence of PEG.
Solubilities of paracetamol in mixtures of PEG 4000 and 0.9% sodium chloride solutions were
determined in distilled water, at concentrations ranging from 0 to 7%, as a function of
temperature.
The results are given in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
Solvent volume (ml) required to |
PEG 4000 concentration |
|
dissolve 1000 mg of paracetamol as |
(%/vol.) in 0.9% sodium |
|
a function of temperature |
chloride solution |
|
4° C. |
|
17° C. |
|
22° C. |
|
30° C. |
|
42° C. |
|
0%
|
|
130
|
|
92
|
|
80
|
|
65
|
|
42 |
1%
|
|
99
|
|
78
|
|
67
|
|
63
|
|
47 |
2%
|
|
91
|
|
72
|
|
63
|
|
59
|
|
45 |
3%
|
|
80
|
|
64
|
|
56
|
|
54
|
|
41 |
4%
|
|
82
|
|
62
|
|
57
|
|
49
|
|
36 |
5%
|
|
79
|
|
59
|
|
51
|
|
46
|
|
34 |
7%
|
|
78
|
|
61
|
|
48
|
|
42
|
|
30 |
4.1 Concentrated solution
|
|
|
|
|
|
|
Quantity |
|
|
Solution without |
|
Solution subjected to |
Ingredient |
|
nitrogen bubbling |
|
nitrogen bubbling |
|
Paracetamol
|
|
0.160 g
|
|
0.160 g |
Propylene-glycol
|
|
0.270 ml
|
|
0.270 ml |
PEG 400
|
|
0.360 ml
|
|
0.360 ml |
Sodium hydroxide
or HCl 1N
|
|
q.s. pH 6.0
|
|
q.s. pH 6.0 |
Nitrogen
|
|
none
|
|
q.s.f. purging and filling |
Water for injection
|
|
q.s.f 1000 ml
|
|
q.s.f. 1000 ml |
Solution 20 containing paracetamol in a quantity of 160 mg/ml, adjusted to pH 6.0 by
sodium hydroxide or hydrochloric acid 1N, was either subjected or not subjected to nitrogen gas
bubbling. Tightly stoppered and capped vials packed by dispensing 10 ml of such solutions under
nitrogen atmosphere or air, were sterilized by autoclaving at 121° C. during 20 minutes. The
percentage of secondary peaks was then measured by liquid chromatography with respect to the main
peak of paracetamol, as well as was the pink color strength by reading the solution absorbance by
absorption spectrophotometry at peak absorbance wavelength, that is 500 nm.
Results
|
|
|
|
|
|
|
|
|
|
|
Secondary peaks |
|
|
|
|
in % of main |
|
absorbance of the |
|
|
peak of |
|
solution at 500 |
Solution tested |
|
paracetamol |
|
nm |
|
Autoclaved solution
packed without nitrogen
|
|
|
0.054 |
|
|
|
0.08 |
|
Autoclaved solution
packed under nitrogen
|
|
|
0.036 |
|
|
|
0.03 |
|
6,028,222
It is therefore seen that the difference in color of the solution packed under nitrogen is
very striking.
In order to check if 0% and 1% PEG-paracetamol solutions remain clear under cold storage, the
following solutions ere prepared:
|
|
|
|
|
|
|
|
|
|
|
Solution without |
|
Solution with PEG |
Ingredient |
|
PEG |
|
added |
|
Paracetamol
|
|
|
1 g |
|
|
|
1 g |
|
PEG 4000
|
|
|
|
|
|
|
1 g |
|
0.9% Sodium chloride solution in water for injection
|
|
|
0.036 |
|
|
|
0.03 |
|
|
|
q.s. 125 ml
|
|
q.s. 100 ml
|
After storage of these solutions at 4° C. during 10 days, none of the vials tested showed
cristallization. Presence of PEG is therefore not mandatory if the solutions are to remain clear
throughout the time interval studied.
EXAMPLE II
Tests
Conducted for Characterizing Paracetamol
Breakdown in Solution
2.1 Demonstrating paracetamol instability in solution
A paracetamol solution in water or in solution no 20 shows rapidly a pink color upon exposure
to light or storage at high temperature. At 50° C., color development occurs in 2 weeks time.
Appearance of such color tinge correlates with an increase in solution absorbance at a peak
absorbance wavelength of 500 nm. According to the paper of Fairbrother mentioned above, exposure of
paracetamol to moisture can result in hydrolysis with formation of para-aminophenol, followed by
oxydation, with appearance of a pink color, typical of the production of quinoneimine.
2.2 Identifying the breakdown products of paracetamol
In aqueous or partially aqueous solutions, p-aminophenol is not detected during storage. Rapid
production of colored products having a pink tinge is noted, the reaction rate being a function of
temperature and light. In course of time, such derivatives are increasingly dark and evolutes to
brown color.
All occurs as if, in contrast to what has been reported in the literature, the breakdown of
paracetamol first involves an oxydative process followed by hydrolysis. According to this theory,
paracetamol may react with an oxidant present in solution, for example oxygen dissolved in the
aqueous layer. This mechanism may involve the production of free radicals resulting in molecular
coupling, a fact that may account for the production of colored derivatives evoluting in color from
pink to brown.
2.3 Tests for demonstrating inhibition of free radical production
A typical reaction involving the production of free radicals involves adding a 30% aqueous
solution of hydrogen peroxide and a copper pentahydrate solution at a concentration of 62.5 mg/ml,
to a 1.25% aqueous solution of paracetamol. In a matter of minutes, there develops a color reaction
resulting in a color shift from yellow to dark brown. The color intensity observed decreases if
free radical scavengers or glycerol are prior added to the paracetamol solution. Color intensity is
a function of type of the type of free radical scavenger added, in the following decreasing order
as judged by color intensity.
Paracetamolalone>paracetamol+N-acetylcystein>paracetamol+cystein>paracetamol+sorbitol>paracetamol+mannitol>
paracetamol+glycerol.
EXAMPLE III
Stabilizing paracetamol solution by selecting the
pH that allows maximal stability
3.1 Concentrated solution
|
|
|
Ingredient |
|
Quantity |
|
Paracetamol
|
|
0.160 g |
Propylene-glycol
|
|
0.270 ml |
PEG 400
|
|
0.360 ml |
Sodium
hydroxide 1N or Hydrochloric acid 1N q.s.f.
|
|
pH 7.0-8.0-9.0-9.5-10.0
corresponding to actual pH: pH 5.8-6.7-7.1-7.5-8.0-8.5 |
Nitrogen q.s.f.
|
|
purging and filling |
Water for injection
|
|
q.s. 1000 ml |
Solution 20 containing paracetamol in a concentration of 160 mg/ml was adjusted to different
pHs: the apparent pH is given in comparison to actual pH (between parenthesis) after a 5
fold-dilution: 7,0 (5,8)-8,0 (8,7)-8,5 (7,1)-9,0 (97,5)-9,5 (8,0)-10.0 (8,5) using a sodium
hydroxide or normal hydrochloric acid solution. Vials that had been filled under nitrogen
atmosphere by dispensing 10 ml of such solutions, tightly stoppered and capped, were sterilized by
autoclaving at 121° C. for 20 minutes, and then in every case exposed, either to a temperature of
105° C. in the dark for 72 hours, or to a radiation of an actinic light at 5000° K. and 25° C.
during 264 hours.
Results
After autoclaving, only the solution adjusted to pH 10 shows a pink tinge. After storage at
105° C. for 72 hours, absorbance at 500 nm as well as the concentration of breakdown products of
paracetamol were minimal in the pH range from 7,5 to 9,5. Upon storage in the presence of light,
the color strength is enhanced as the pH is increased. Color development is extremely weak at pH
7,0 (actual pH 5,8). Neither the paracetamol content, nor the breakdown products are affected by
pH.
3.2 Diluted solution
|
|
|
Ingredient |
|
Quantity |
|
Paracetamol
|
|
0.008 g |
Sodium chloride
|
|
0.0067 g |
Disodium phosphate dihydrate
|
|
0.0012 g |
5% Citric acid q.s.f.
|
|
pH 5.0-6.0-7.0 |
Nitrogen q.s.f.
|
|
bubbling and filling |
Water for injection
|
|
q.s.f. 1000 ml |
The aqueous solution diluted and buffered having a paracetamol content of 8 mg/ml was adjusted
to different pH values: pH 5,0-7,0 using a citric acid solution.
Vials that had been packed under nitrogen atmosphere by dispensing 10 ml of such solution, were
tightly stoppered and capped, sterilized by autoclaving at 121° C.
6,028,222
for 20 minutes, and then in every case exposed to 70° C. in the dark during 231 hours.
Results
Following autoclaving, only the solution adjusted to pH 7 shows a pink color. After storage,
this same solution displays the brightest pink color. At pH 6,0 and 5,0 the solutions are faintly
colored.
EXAMPLE IV
Stabilization of Paracetamol in Solution by Oxygen Removal Through Nitrogen Bubbling
4.2 Diluted solution
Solution Tested
|
|
|
|
|
|
|
Quantity |
|
|
Solution without |
|
Solution subjected to |
Ingredient |
|
nitrogen bubbling |
|
nitrogen bubbling |
Paracetamol |
|
0.008 g |
|
0.008 g |
Sodium chloride |
|
0.008 g |
|
0.008 g |
Disodium phosphate
dihydrate |
|
000.1 g |
|
0.001 q |
5% Citric acid |
|
q.s.f. pH 6.0 |
|
q.s.f. pH 6.0 |
Nitrogen |
|
none |
|
q.s.f. purging and filling |
Water for injection |
|
q.s.f. 1000 ml |
|
q.s.f. 1000 ml |
|
|
|
|
|
The diluted aqueous solution containing paracetamol is adjusted to pH 6,0 by means of a
citric acid solution.
Vials that had been filled under a nitrogen atmosphere by dispensing 10 ml of such solutions,
were tightly stoppered and capped and then stored inside an incubator at 98° C. for 15 hours.
The percentage of secondary peaks in relation to the main peak of paracetamol was measured by
liquid chromatography, so was the pink color strength by reading the solution absorbance by
absorbance spectrophotometry at a peak absorption wavelength, that is 500 nm.
Results
|
|
|
|
|
|
|
|
|
|
|
Secondary peaks in |
|
Solution |
|
|
% of paracetamol |
|
absorbance |
Solution tested |
|
main peak |
|
at 500nm |
Solution packed without
nitrogen atmosphere |
|
|
1.57 |
|
|
|
0.036 |
|
solution packed under
nitrogen atmosphere |
|
|
0.44 |
|
|
|
0.016 |
|
The pink color of the solution packed under nitrogen atmosphere is considerably tainter
than that observed for the solution obtained after sterilization under nitrogen of the solution
packed without nitrogen.
EXAMPLE V
Stabilizing Solutions of Paracetamol by Adding
Free Radical Antagonists
5.1 Concentrated solution
|
|
|
Ingredient |
|
Quantity |
Paracetamol
|
|
0.160 g |
Propylene-glycol
|
|
0.270 ml |
PEG 400
|
|
0.360 ml |
Hydrochloric acid 1N
Or NaOH 1N q.s.f.
|
|
pH 6.0 |
Free radical scavenger (see
quantitative results)
|
|
q.s.f. (see quantitative results) |
Nitrogen q.s.f.
|
|
purging and filling |
Water for injection
|
|
q.s.f 1000 ml |
The solutions thus prepared are divided in 10 ml capacity vials, stoppered with a
Bromobutyl stopper and capped with an aluminium cap. After autoclaving at 121° C. for 20 minutes,
the vials were stored for 48 hours, either in the presence of actinic light at 5500° K. at room
temperature or at 70° C. in the dark. The preparation was examined for any change in color.
Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Appearance |
|
Appearance |
|
|
|
|
|
|
of the solution |
|
of solution |
|
|
|
|
|
|
upon exposure |
|
at 70° C. |
Free radical |
|
|
|
|
|
to light |
|
Color |
scavenger |
|
Concentration |
|
Color intensity |
|
intensity |
No scavenger |
|
|
|
|
|
pink (+) |
|
pink (++) |
Sodium disulfite |
|
0.295 mg/ml |
|
colorless |
|
Colorless |
Sodium ascorbate |
|
1.0 mg/ml |
|
yellow (+) |
|
yellow (+) |
Reduced glutathion |
|
1 mg/ml |
|
colorless |
|
colorless |
Reduced glutathion |
|
8 mg/ml |
|
colorless |
|
colorless |
Cystein
hydrochloride |
|
1 mg/ml |
|
cloudy |
|
cloudy |
a-monothioglycerol |
|
1 mg/ml |
|
colorless |
|
colorless |
Dithiothreitol |
|
1 mg/ml |
|
colorless |
|
colorless |
Mannitol |
|
50 mg/ml |
|
colorless |
|
colorless |
5.2 Dilute solution
Solutions tested
|
|
|
|
|
|
|
|
|
Quantity |
|
|
Formulation A |
|
Formulation B |
|
Formulation C |
Paracetamol
|
|
0.008 g
|
|
0.01 g
|
|
0.0125 g |
Sodium chloride
|
|
0.008 g
|
|
0.008 g
|
|
0.00486 g |
Disodium phosphate
dihydrate or sodium
acetate
|
|
0.001 g
|
|
0.001 g
|
|
0.00125 g |
Hydrochloric acid
|
|
q.s. pH 6.0
|
|
q.s. pH 6.0
|
|
q.s pH 5.5 |
C.R.L. |
|
q.s (see quantitative results)
|
Nitrogen q.s.f. |
|
purging and filling
|
Water |
|
q.s.f. 1000 ml
|
The solutions thus prepared were divided in 10 ml, 100 ml or 80 ml capacity vials,
stoppered with a Bromobutyl stopper and capped with an aluminium cap. The preparation was examined
for any pink color development.
After autoclaving at 121° C. for 20 minutes, the vials were stored for 48 hours, either in the
presence of actinic light at 5500° K. at room temperature or at 70° C. in the dark (formula A).
After autoclaving at 124° C. for 7 minutes, the vials were stored for 48 hours at room
temperature in the dark (formulation B and C). The preparation was examined for any pink shift and
the paracetamol as well as CRL were measured where a thiol derivative was used.
Results (CRL=free radical scavenger)
6,028,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solution |
|
|
|
|
|
|
appearance |
|
|
|
|
|
|
upon exposure |
|
Solution appearance |
|
|
|
|
to light |
|
at 70° |
C.R.L used |
|
Concentration |
|
color |
|
strength |
|
Color |
|
strength |
No C.R.L
|
|
|
|
pink
|
|
(+)
|
|
pink
|
|
(++) |
Thiourea
|
|
0.5 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
Dithiothreitol
|
|
1 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
a-monothio-glycerol
|
|
1 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
gluthathion
|
|
1 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
Sodium
|
|
0.2 mg/ml
|
|
pink
|
|
(+)
|
|
pink
|
|
(+) |
ascorbate
|
|
0.4 mg/ml
|
|
colorless
|
|
|
|
yellow
|
|
(+) |
|
|
0.6 mg/ml
|
|
pink
|
|
(+)
|
|
yellow
|
|
(+) |
|
|
1.0 mg/ml
|
|
colorless
|
|
|
|
yellow
|
|
(+) |
Cystein
|
|
0.05 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
hydrochloride
|
|
0.1 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
|
|
0.25 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
|
|
0.5 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
|
|
0.75 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
|
|
1 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
|
|
2 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
|
|
5 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dosage (in % of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
theoretical |
|
|
|
|
|
|
Solution appearance |
|
volume |
|
|
Concen- |
|
|
|
|
|
|
|
|
|
|
|
|
|
parace- |
C.R.L. used |
|
tration |
|
color |
|
strength |
|
C.R.L. |
|
tamol |
Cystein
hydrochloride
monohydrate |
|
0.2 mg/ml |
|
colorless |
|
|
|
|
|
|
80 |
% |
|
|
99.2 |
% |
Cystein
hydrochloride
monohydrate |
|
0.5 mg/ml |
|
colorless |
|
|
|
|
|
|
95 |
% |
|
|
99.6 |
% |
N-acetylcystein |
|
0.2 mg/ml |
|
colorless |
|
|
|
|
|
|
88 |
% |
|
|
99.2 |
% |
Mannitol |
|
20 mg/ml |
|
colorless |
|
|
|
|
|
|
|
|
|
|
|
|
Mannitol |
|
40 mg/ml |
|
Colorless |
|
|
|
|
|
|
|
|
|
|
|
|
Mannitol |
|
50 mg/ml |
|
Colorless |
|
|
|
|
|
|
|
|
|
|
|
|
Glucose |
|
50 mg/ml |
|
Colorless |
|
|
|
|
|
|
|
|
|
|
|
|
EXAMPLE VI
Stabilization of Solutions of Paracetamol
Containing a Morphinic Compound by Addition of
a Free Radical Scavenger
6.1 Concentrated solution
Solutions tested
|
|
|
Ingredient |
|
Quantity |
Paracetamol
|
|
0.160 g |
Codein phosphate
|
|
0.008 g |
Propylene-glycol
|
|
0.270 ml |
PEG 400
|
|
0.360 ml |
Hydrochloric acid 1N q.s.
|
|
q.s. pH 6.0 |
Free radical scavenger
|
|
q.s. (see quantitative results) |
Water for injection
|
|
q.s.f. 1000 ml |
The solutions thus prepared were divided in 10 ml capacity vials, stoppered with a
Bromobutyl stopper and capped with a removable aluminium cap. After autoclaving at 121° C. for 20
minutes, the vials were stored for 48 hours either under actinic light at 5500° K. at room
temperature, or at 70° C. in the dark. The preparation was inspected for any change in color.
Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solution apperance upon |
|
Solution apperance |
Free radical |
|
|
|
exposure to light |
|
70° C |
scavenger |
|
Concentration |
|
color |
|
strength |
|
color |
|
strength |
No free radical scavenger
|
|
|
|
pink
|
|
(+)
|
|
pink
|
|
(++) |
Sodium disulfite
|
|
0.295 mg/ml
|
|
yellow
|
|
(+)
|
|
yellow
|
|
(++) |
Sodium ascorbate
|
|
1.0 mg/ml
|
|
yellow
|
|
(++)
|
|
yellow
|
|
(+++) |
reduced glutathion
|
|
1 mg/ml
|
|
yellow
|
|
|
|
amber yellow
|
|
(+++) |
|
|
8 mg/ml
|
|
colorless
|
|
|
|
yellow
|
|
(++) |
|
|
16 mg/ml
|
|
colorless
|
|
(+)
|
|
yellow
|
|
(+) |
Dithio-threitol
sodium hypo-phosphite
|
|
1 mg/ml
|
|
violet pink
|
|
(+++)
|
|
violet pink
|
|
(++++) |
|
|
5mg/ml
|
|
pink
|
|
(+)
|
|
pink
|
|
(++) |
6.2 Dilute solutions
Solutions tested
|
|
|
Ingredient |
|
Quantity |
Paracetamol
|
|
0.008 g |
Codein phosphate
|
|
0.0004 g |
Sodium chloride
|
|
0.008 g |
Disodium phosphate dihydrate
|
|
0.0015 g |
Hydrochloric acid
|
|
q.s.f. pH 6.0 |
Free radical scavenger
|
|
q.s. (see results) |
Nitrogen q.s.f.
|
|
purging and filling |
Water for injection
|
|
q.s.f. 1000 ml |
The solutions thus prepared were divided in 10 ml capacity vials, stoppered with a
Bromobutyl stopper and capped with an aluminium cap. After autoclaving at 121° C. for 20 minutes,
the vials were stored for 48 hours, either under actinic light at 5500° C. at room temperature, or
at 70° C. in the dark. The preparation was examined for any change in color.
For the solution not containing any free radical scavenger and for the solution containing 0.5
mg/ml of cystein hydrochloride as free radical antagonist, paracetamol as well as codein are
measured by high performance liquid chromatography, immediately after autoclaving, in comparison
with identical solutions not subjected to autoclaving.
Appearence scoring of the solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solution apperance upon |
|
Solution apperance |
Free radical |
|
|
|
exposure to light |
|
70° C |
scavenger |
|
Concentration |
|
color |
|
strength |
|
color |
|
strength |
No free radical scavenger
|
|
|
|
pink
|
|
(+)
|
|
pink
|
|
(+) |
Sodium disulfite
|
|
0.295 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
Dithio-threitol
|
|
0.5 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
Monothio-glycerol
|
|
0.5 mg/ml
|
|
grey
|
|
|
|
grey |
|
|
Reduced glutathion
|
|
2.0 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
N-acetylcystein
|
|
2.0 mg/ml
|
|
grey
|
|
(+)
|
|
grey
|
|
(+) |
Cystein hydro-chloride
|
|
0.05 mg/ml
|
|
colorless
|
|
|
|
pink |
|
|
|
|
0.1 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
|
|
0.25 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
|
|
0.5 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
|
|
0.75 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
|
|
1.0 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
|
|
2.0 mg/ml
|
|
colorless
|
|
|
|
colorless |
|
|
|
|
5.0 mg/ml
|
|
colorless
|
|
|
|
colorless
|
|
(+) |
Assay results of paracetamol and codein
|
|
|
|
|
|
|
Solution tested |
|
Ingredient assayed |
|
non sterilized solution |
after sterilization |
Solutions with no
free radical
scavenger added
|
|
paracetamol
codein
|
|
0.0078 g/ml
|
|
0.0077 g/ml |
|
|
|
|
0.00043 g/ml
|
|
0.00042 g/ml |
Solution containing
0.5 mg/ml of
cystein
hydrochloride
|
|
paracetamol
codein
|
|
0.0082 g/ml
|
|
0.0081 g/ml |
|
|
|
|
0.00042 g/ml
|
|
0.00042 g/ml |
There is noted the lack of color development one one hand and excellent preservation of the
active ingredients after heat treatment sterilization on the other hand.
6,028,222
EXAMPLE VII
Biological Tolerance to the Preparation
7.1 Hematological tolerance
Tested solutions
|
|
|
Ingredient |
|
Quantity |
Paracetamol
|
|
0.160 g |
Propylene-glycol
|
|
0.270 ml |
PEC 400
|
|
0.360 ml |
Nitrogen q.s.f.
|
|
purging and filling |
Water for injection
|
|
q.s.f. 1000 ml |
The solution pH was not adjusted. The apparent pH is 7.6, corresponding to an actual pH of
6.5.
Whole human blood is incubated with the solution under study, in equal proportions by volume.
2 ml were drawn at 10 minutes intervals and centrifuged for 5 minutes at 5000 rpm. 100 .mu.l of the
supernatant were diluted in 1 ml of distilled water. The absorbance of this solution was determined
against a water blank at 540 nm, peak absorption wavelength of hemoglobin.
The study was run in comparison with a negative control (physiological saline) and a positive
control (pure water for injection).
Results
The absorbances of the individual solutions after different incubation periods are provided in
the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solution |
|
TO |
|
10 min |
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20 min |
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30 min |
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40 min |
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50 min |
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60 min |
Water p.p.i |
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2.23 |
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2.52 |
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2.30 |
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2.37 |
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2.38 |
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2.33 |
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2.36 |
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Physio-logical
saline |
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0.04 |
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0.05 |
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0.05 |
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0.05 |
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0.04 |
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0.05 |
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0.04 |
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Sol. Tested |
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0.09 |
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0.19 |
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0.27 |
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0.25 |
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0.24 |
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0.24 |
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0.25 |
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7.2 Muscular tolerance
Solution tested
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Ingredient |
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Quantity |
Paracetamol
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0.160 g |
Propylene-glycol
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0.270 ml |
PEG 400
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0.360 ml |
Nitrogen q.s.f.
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purging and filling |
Water for injection
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q.s.f. 1000 ml |
The pH of this solution was not adjusted. Apparent pH is equal to 7,6.
Sprague-Dawley rats, weighing between 260 g and 450 g were anesthesized with an i.p. injection
of ethyl carbamate (2 ml/kg of a 50% aqueous solution). The extensor digitorum longus muscle was
dissected from the right or left hind leg, and placed in buffer medium having the following
composition:
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Ingredient |
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Quantity |
Sodium chloride
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6.8 g |
Potassium chloride
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0.4 g |
Dextrose
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1.0 g |
Sodium bicarbonate
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2.2 g |
Phenol red (sodium salt)
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0.005 g |
Distilled water q.s.f.
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1 liter |
Hydrochloric acid 1N q.s.f.
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pH 7.4 |
The muscle is transiently fixed to a board and maintained in position by tendons. The test
product was injected in an amount of 15 .mu.l by means of a 25 .mu.l-capacity Hamilton seringe no
702. The muscle is then placed over a grit and immersed in the buffer solution kept at 37° C. with
carbogen bubbling throughout the incubation period. At 30 minutes intervals, the muscles were
introduced in a tube containing fresh buffer at 37° C. The procedure was repeated 4 times. The
buffer solution hence incubated is assayed for creatine kinase activity.
The study was run in parallel with:
muscle alone not subjected to injection (blank)
needle alone (introducing the needle without product injection)
physiological saline
Triton X-100 solution (negative controls)
solution 20
solution 20+paracetamol 160 mg/ml.
Creatine kinase was measured using a Hitachi 704 model analyzer in conjunction with a reagent
kit sold under tradename high performance Enzyline CK NAC 10 (Biomerieux).
Results
The creatine kinase activity (IU/l) of the individual solutions after variable incubation
periods are provided in the table given hereinafter:
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|
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Solution tested |
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30 min |
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60 min |
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90 min |
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120 min |
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Total |
Muscle alone
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23 .±. 6
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24 .±. 12
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15 .±. 7
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13 .±. 5
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75 |
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Needle alone
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35 .±. 6
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33 .±. 10
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20 .±. 4
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18 .±. 7
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106 |
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Physiological saline
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30 .±. 6
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10 .±. 12
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17 .±. 6
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23 .±. 4
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100 |
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Triton-X
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1802 .±. 2114
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1716 .±. 978
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155 .±. 89
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289 .±. 251
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14962 |
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Solution 20
(excipients)
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71 .±. 24
|
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89 .±. 40
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39 .±. 27
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62 .±. 39
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|
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261 |
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Solution 20 +
paracetamol
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141 .±. 40
|
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150 .±. 60
|
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68 .±. 63
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34 .±. 24
|
|
|
393 |
|
No necrosis signs were recorded using the composition according to the invention as no
significant difference between the results of test and excipient solutions was noted.
What is claimed is:
1. A stable, liquid formulation consisting essentially of acetaminophen dispersed in an
aqueous medium containing a buffering agent and at least one member of the group consisting of a
free radical scavenger and a radical antagonist.
2. The formulation of claim 1 wherein the aqueous medium has been deoxygenated by bubbling a
water-insoluble inert gas.
3. The formulation of claim 1 wherein the aqueous medium is buffered at a pH of 4 to 8.
4. The formulation of claim 3 wherein the aqueous medium is buffered at a pH of 5.5 to 6.
5. The formulation of claim 1 containing a free radical antagonist selected from the group
consisting of ascorbic acid ascorbic acid derivatives, organic compounds having at least one thiol
and a alkyl polyhydroxylated and cycloalkyl polyhydroxylated compounds.
6. The formulation of claim 5 wherein the ascorbic acid derivatives are selected from the
group consisting of D-ascorbic acid, L-ascorbic acid, alkali metal ascorbates, alkaline earth metal
ascorbates and water-soluble ascorbic acid esters.
6,028,222
7. The formulation of claim 5 wherein the organic compound having at least one thiol is
aliphatic or cycloaliphatic.
8. The formulation of claim 1 containing a free radical scavenger containing at least one
thiol is selected from the group consisting of thiolglycolic acid, thiolacetic acid,
dithiothreitol, reduced glutathion, thiourea,
a-thioglycerol, cystein, acetlcystein and
mercaptoethane sulfonic acid.
9. The formulation of claim 1 wherein the free radical scavenger is an aliphatic polyhydroxy
alkanol of 2 to 10 carbon atoms.
10. The formulation of claim 9 wherein the polyhydroxy alkanol is a cyclic glucitol or a
straight chain glucitol of 6 to 10 carbon atoms.
11. The formulation of claim 9 wherein the polyhydroxy alkanol is glycerol or propylene
glycol.
12. The formulation of claim 10 wherein the cyclic glucitol is selected from the group
consisting of mannitol, sorbitol, inositol, glucose and levulose.
13. The formulation of claim 1 also containing at least one complexing agent.
14. The formulation of claim 1 wherein the acetaminophen has a concentration of 2 to 350
mg/ml.
15. The formulation of claim 14 wherein the concentration is 60 is 350 mg/ml.
16. The formulation of claim 14 diluted to a concentration of 2 to 50 mg/ml.
17. The formulation of claim 1 also containing an isotonizing agent in an amount to obtain
isotonicity.
18. The formulation of claim 1 sterilized by heat treatment.
19. The formulation of claim 1 further containing an effective amount of an analgetic agent.
20. The formulation of claim 19 the analgetic agent is a morphine analgetic selected from the
group consisting of natural morphines, semi-synthetic morphines, synthetic morphines,
phenylpiperidines, nipecotic acid compounds, phenylcyclohexanol compounds and phenylazepine
compounds.
21. The formulation of claim 20 having a concentration of acetaminophen is 0.05 to 5% by
weight when morphine is present.
22. The formulation of claim 20 having an acetaminophen concentration of 0.2 to 2.5% by
weight when codeine is present.
23. The formulation of claim 1 further containing an anti-inflammatory agent of the
phenylacetic acid type.
24. The formulation of claim 23 wherein the anti-inflammatory agent is ketoprofen.
25. The formulation of claim 1 further containing an antiemetic agent.
26. The formulation of claim 1 further containing an antipileptic agent.
27. The formulation of claim 1 further containing a corticosteroid.
28. The formulation of claim 1 further containing a tricyclic antidepressant.
Appendix 1
Exhibit B
SUMMARY OF INTERNATIONAL PATENT APPLICATION PCT/FR97/01452, FILED ON
5th AUGUST 1997
This international patent application (PCT/FR97/01452) was filed on August 5, 1997. The
invention relates to novel stable paracetamol compositions for use in therapeutic chemistry and
specifically galenic pharmacy. The compositions contain a solution of paracetamol in an aqueous
solvent combined with a buffer having a pH of 4 to 8, and a free radical capturing agent. A
water-insoluble inert gas is carefully bubbled through the aqueous solvent to remove oxygen from
the medium. Said compositions may also be combined with a centrally or peripherally acting
analgesic agent, and are provided as injectable compositions for relieving pain.
Appendix 1
Exhibit C
SUMMARY OF INTERNATIONAL PATENT APPLICATION PCT/FR01/01749, FILED ON
6th JUNE 2001
This international patent application (PCT/FR01/01749) was filed on June 6, 2001. The
invention concerns the field of organic chemistry and more particularly that of therapeutic
chemistry. More precisely, it concerns a method for obtaining aqueous formulations of easily
oxidizable active principles, in particular phenols, stable over a prolonged
period, which consists in advanced bubbling deoxygenation with an inert gas and or vacuumizing
them, while protecting them against possible oxygen uptake by maintaining them under inert gas
atmosphere, by filling under inert gas into bottles previously made air-free by inert gas blowing,
then in subjecting them when they are being closed to a vacuum so as to obtain in the bottle a
pressure of not more than 65.000 Pa, thereby obtaining solutes having a residual oxygen
concentration in the solution, less than 2 ppm, and preferably of the order of 1 ppm and
even 0.5 ppm. The invention is useful in particular for preparing injection preparations having an
oxygen content in the solution, less than 2 ppm.
Appendix I
Exhibit D-1
AGREEMENT FOR ASSIGNMENT OF PRIORITY RIGHT
between
NEWPHARM, Société Civile de Recherche, registered at the National Trade Book under the serial
number 344 260 161 and the place of incorporation of which is situated at 5 rue dAngiviller 78000
Versailles, represented by Mr DIETLIN François as its manager
Hereinafter designer as the assignor on one part,
and
PHARMATOP, Société Civile de Recherche, registered at the National Trade Book under the serial
number 407 552 702 and the place of incorporation of which is situated at 5 rue dAngiviller 78000
Versailles, represented by Mrs FREDJ Danièle as its manager
Hereinafter designer as the assignee on the other part.
As the performance of a convention intervened this day between the same parties, it has been
set and agreed that follows:
Article 1: Definitions
Patent means the French patent application filed on August 5, 1996 with the n°96-09858 under the
title Novel stable liquid formulations based on Paracetamol and their mode of preparation.
Priority right means the Unionist priority right stemming from the filing of the said Patent in
accordance with article 4 of the Convention of Union of Paris dated March 20, 1883.
Article 1: Assignment
The assignor assigns through the present to the assignee which agrees, the full and entire
ownership of the priority right.
Article 2 : Applicable law
The law which is applicable for this agreement is the French law.
Article 3 : Advertising
All powers are given to the bearer of an original of these documents for requesting or performing
all formalities, registrations, publications, filing and mentioning everywhere and in every
administration where need will be.
Made at Versailles in three originals, February 15, 1997.
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NEWPHARM
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PHARMATOP |
Represented by François DIETLIN
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Represented by Danièle FREDJ |
Appendix 1
GEI-062
Exhibit D-2
ASSIGNMENT OF APPLICATION FOR PATENT
WHEREAS, WE, Francois Dietlin & Daniele Fredj
citizens of France and residents of France for which Application PCT/FR97/01452 has been
filed on 8/5/97 in which the United States has been named as a Designated State, and an
app1ication for Letters Patent of the United States thus entitled has been made, said
app1ication having been executed on even date herewith and the French priority date
of August 5, 1996 of Application Serial No. 96/09858 is hereby claimed.
WHEREAS, SCR Pharmatop a corporation duly organized and existing under the laws of France
and having a place of business at 5, rue dAngiville F-78000 Versailles, France is
desirous of acquiring the entire right, title and interest in and to said invention, application
and any Letters Patent which may issue thereon;
NOW, THEREFORE, to all whom it may concern, be it known that we, the said
François Dietlin & Daniele Fredj for and in
consideration of the sum of ONE DOLLAR ($1.00) to us in hand paid by the said
SCR Pharmatop and for other good
and valuable considerations, the receipt of all of which is hereby acknowledged, do hereby
sell, assign, transfer and set over unto the said SCR Pharmatop its
successors and assigns, the entire right, title and interest in and to said invention, said
application and any Letters Patent that may issue thereon in the United States together with
any division or divisions, extension or extensions, reissue or reissues thereof;
AND, we hereby authorize and request the Commissioner of Patents and Trademarks
to issue any and all Letters Patent which may issue upon said invention to said SCR
Pharmatop as assignee of the entire right, title and interest in and to said
invention, application and any Letters Patent that may issue thereupon.
GEI061
IN WITNESS WHEREOF, We have hereunto set our hands as of the following
date:
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On this day of before me personally came
to
me know and known to me to be the
individuals described in and who executed the foregoing instrument and fully acknowledged that they
executed the same.
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UNITED STATES DEPARTMENT OF COMMERCE
Patent and Trademark Office
ASSISTANT SECRETARY AND COMMISSIONER
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April 19, 1999
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PTAS
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PF PATENTS AND TRADEMARKS
Washington, D.C. 20231 |
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BIERMAN,
MUSERLIAN AND LUCAS CHARLES A. MUSERLIAN 600 THIRD AVENUE NEW YORK, NY 10016 |
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UNITED STATES PATENT AND TRADEMARK OFFICE
NOTICE OF RECORDATION OF ASSIGNMENT DOCUMENT
THE ENCLOSED DOCUMENT HAS BEEN RECORDED BY THE ASSIGNMENT DIVISION OF THE U.S. PATENT AND TRADEMARK
OFFICE. A COMPLETE MICROFILM COPY IS AVAILABLE AT THE ASSIGNMENT SEARCH ROOM ON THE REEL AND FRAME
NUMBER REFERENCED BELOW.
PLEASE REVIEW ALL INFORMATION CONTAINED ON THIS NOTICE. THE INFORMATION CONTAINED ON THIS
RECORDATION NOTICE REFLECTS THE DATA PRESENT IN THE PATENT AND TRADEMARK ASSIGNMENT SYSTEM. IF YOU
SHOULD FIND ANY ERRORS OR HAVE QUESTIONS CONCERNING THIS NOTICE, YOU MAY CONTACT THE EMPLOYEE WHOSE
NAME APPEARS ON THIS NOTICE AT 703-308-9723. PLEASE SEND REQUEST FOR CORRECTION TO: U.S. PATENT
AND TRADEMARK OFFICE, ASSIGNMENT DIVISION, BOX ASSIGNMENTS, CG-4, 1213 JEFFERSON DAVIS HWY, SUITE
320, WASHINGTON, D.C. 20231.
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RECORDATION DATE: 07/15/1998 |
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REEL/FRAME: 9706/0031 |
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NUMBER OF PAGES: 3 |
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BRIEF: ASSIGNMENT OF ASSIGNORS INTEREST (SEE DOCUMENT FOR DETAILS). |
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ASSIGNOR: |
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DIETLIN, FRANCOIS |
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DOC DATE: 04/20/1998 |
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ASSIGNOR: |
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FREDJ, DANIELE |
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DOC DATE: 04/20/1998 |
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ASSIGNEE: |
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SCR PHARMATOP |
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5, RUE DANGIVILLE |
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F-78000 VERSAILLES, FRANCE |
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SERIAL NUMBER: 09051246 |
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FILING DATE: 06/05/1998 |
PATENT NUMBER: |
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ISSUE DATE: |
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KIMBERLY WHITE, EXAMINER |
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ASSIGNMENT DIVISION |
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OFFICE OP PUBLIC RECORDS |
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Appendix 1
Exhibit E
Newpharm
Résidence
Concorde 10, square Saint-Florentin 7815 Le Chesnay
BRISTOL MYERS SQUIBB COMPANY
345 Park Avenue
New York NY 10154
USA
Paris, 20 December 2002
Dear Sirs,
We, SCR
NEWPHARM, are the owner of the French patent filed on 5
August 1996 under n°96.
09858 and issued under n°2.751.875.
We hereby represent to BMS
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that Mrs Danièle FREDJ and Mr François DIETLIN, inventors, have assigned to us,
except for the USA, all their rights, |
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that they have assigned their rights for the USA directly to PHARMATOP on 20
April 1998, |
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and that we have assigned to SCR PHARMATOP, an affiliated partnership, all
priority rights for all countries listed in international patent application PCT/FR97/01452
except USA on 15 February 1997. |
We covenant that we will never contest or challenge the rights of PHARMATOP
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on US patent n°6.028.222 issued on 22 February 2000, |
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PCT/FR01/01749 filed on 6 June 2001, |
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and on any patent or supplementary protection certificate that PHARMATOP may
obtain that depends on hereabove stated patent or that is granted based on the hereabove
stated patent applications, |
in the United States (including Puerto Rico and all US possessions and territories), Canada and
Mexico.
We agree that PHARMATOP will be solely and fully responsible for all and any payments owed by it to
us based on said rights and that we shall never claim to you whatsoever amount on these concerns.
Sincerely yours.
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Danièle Fredj
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François Dietlin |
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Société Civile de Recherche
Capital 1,341,551.35 Siret D 344 260 161 00023
Tel. : 33 1 39 54 55 77 Telecopy : 33 1 39 66 91 85
APPENDIX 2
TARGET PRODUCT PROFILE
(a) PRODUCT is indicated for the treatment of post-operative acute pain in adults.
(b) PRODUCT may be administered for up to 3 days.
(a) PRODUCT may be administered concomitantly with morphine.
B. |
|
Supporting Clinical Data available for promotion at Launch |
(a) Single dose analgesic efficacy in oral surgery pain model. Onset of analgesia: less
than 10 minutes. Duration of analgesia: 4 to 6 hours.
(b) Multiple dose analgesic efficacy confirmed in two different pain models:
orthopaedic surgery and lower abdominal surgery. Efficacy of proposed dosing regimen, p.r.n.
or fixed time, clearly demonstrated. Efficacy in combination with PCA morphine demonstrated.
(i) No clinically significant drug/drug interactions.
(ii) PRODUCT has comparable tolerance to placebo at the injection site.
(iii) PRODUCT carries no black box warnings.
(iv) PRODUCT has gastrointestinal safety profile comparable to placebo.
(v) PRODUCT has CNS safety profile comparable to placebo.
(vi) PRODUCT has cardiovascular safety profile comparable to placebo.
(vii) In cases of creatinine clearance <10 ml/min, due to the lack of data, infusion should
be used with caution.
(i) PRODUCT is administered as a 15-minute intravenous infusion of 1gram. May be used every 4
to 6 hours, or up to 4 times per day. Maximum daily dose must not exceed 4 grams.
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Assumes conduct of 2 new clinical trials prior to NDA submission |
APPENDIX 3
Exceptions to PHARMATOP Representations and Warranties
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international patent application PCT/W002/072080 A2 filed by FRESENIUS KABI DEUTSCHLAND GMBH, a
copy of which is attached. |
SUMMARY OF INTERNATIONAL PATENT APPLICATION PCT/WO02/072080 A2,
FILED BY FRESENIUS KABI DEUTSCHLAND
GMBH
This international patent application (PCT/WO02/072080 A2) was filed on March 12, 2002 by
Fresenius Kabi Deutschland GmbH. The invention relates to parenterally administrable, especially
infusible, aqueous paracetamol solutions which are stable in storage and free of particles and
discoloration. Said solutions contain a mixture of: a) between 1 and 17 grams of paracetamol per
liter, and b) between 0.01 and 0.17 grams of at least one physiologically compatible antioxidant
per liter, selected from the group comprising ascorbic acid, N-acetyl-L-cysteine and stabilizer
compounds containing SII groups which are different from N-acetyl-L-cysteine. The aqueous solution
is free of organic solvents and has a pH value of between 5.5 and 6.5 and an oxygen content of less than
0.5 milligrams per liter. The invention also relates to a method for producing such solutions, and
glass or plastic containers containing said solutions.
APPENDIX 4
GUARANTEED PAYMENTS (in US$ millions)
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Year 1 |
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Year 2 |
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Year 3 |
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Year 4 |
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Year 5 |
$[***]
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$[***]
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$[***]
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$[***]
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$[***] |
Guaranteed Payment amounts shall be payable subject to applicable terms and conditions of the
Agreement, shall be payable (when applicable) on a quarterly basis, and shall be due at the same
time as a royalty payment would otherwise have been due and payable for such quarter.
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*** |
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Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.
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Appendix 5
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[Translation]
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ANNEX 2: PROCEDURES AND PRECAUTIONS RELATING TO THE MANUFACTURE OF THE FORMULATION PMC 0397 |
These procedures and precautions were established starting from the methods implemented during
successive manufacture, at the Delmas Laboratories, of the pilot batches of Perfalgan® whose
compositions, dates of manufacture and volumes implemented are indicated hereafter:
[* * *]
*** Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested
with respect to the omitted portions.
[* * *]
***Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested
with respect to the omitted portions.
[* * *]
*** Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested
with respect to the omitted portions.
[***]
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*** |
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Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions. |
[***]
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*** |
|
Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions. |
[***]
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*** |
|
Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions. |
Exhibit 10.14
EXHIBIT 10.14
CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
CLINICAL SUPPLY AGREEMENT
between
LAWRENCE LABORATORIES
and
CADENCE PHARMACEUTICALS, INC.
dated as of February 21, 2006
TABLE OF CONTENTS
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Page |
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ARTICLE 1
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DEFINITIONS
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1.1
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Defined Terms
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2 |
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ARTICLE 2
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SUPPLY OF CLINICAL TESTING PRODUCTS
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2.1
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Supply and Purchase
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2.2
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Purchase Price of Clinical Testing Products
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2.3
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Limitation to Clinical Use
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ARTICLE 3
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TERMS AND CONDITIONS OF PURCHASE AND SALE
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3.1
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Forecasts
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3.2
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Ordering
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3.3
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Shipping Document
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3.4
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Delivery, Title, and Shipping
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3.5
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Invoicing and Payment
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9 |
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3.6
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Inspection; Non-Conforming Product
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3.7
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Obsolescence Charge
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3.8
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Quality Control
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11 |
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3.9
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Change of Supplier or Facility
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3.10
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Recalls
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3.11
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Representations, Warranties and Covenants
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12 |
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3.12
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Force Majeure
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ARTICLE 4
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REGULATORY MATTERS
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4.1
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Record Retention
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5.2
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Regulatory Matters
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13 |
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ARTICLE 5
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CONFIDENTIALITY
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5.1
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Confidentiality
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ARTICLE 6
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INDEMNIFICATION
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6.1
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By BMS
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6.2
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By Cadence
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6.3
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Conditions to Indemnification
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6.4
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Limitation of Liability
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ARTICLE 7
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DISPUTE RESOLUTION
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7.1
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Arbitration
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ARTICLE 8
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TERM; TERMINATION
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8.1
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Term; Termination
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8.2
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Consequences of Termination
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ARTICLE 9
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MISCELLANEOUS
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9.1
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Notices
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9.2
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Governing Law
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9.3
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Equitable Relief
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9.4
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Headings
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9.5
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No Third Party Beneficiaries
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9.6
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Severability
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9.7
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Assignment and Subcontracting
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9.8
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Consents
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9.9
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Entire Agreement
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9.10
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Exhibits
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9.11
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Waivers and Amendments
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9.12
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No Partnership or Joint Venture
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9.13
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Absence of Presumption
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9.14
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Counterparts; Facsimile Execution
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9.15
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Guarantee
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-ii-
EXHIBITS
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Exhibit A:
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Specifications |
Exhibit B:
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Initial Forecast |
Exhibit C:
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Quality Agreement |
-iii-
INDEX OF DEFINED TERMS
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Term |
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Section Where Defined |
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$
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1.1 |
Affiliate
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1.1 |
Agreement
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Introductory Paragraph
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Applicable Law
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1.1 |
BMS
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Introductory Paragraph
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BMS Party
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6.2 |
Business Day
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1.1 |
Cadence
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Introductory Paragraph
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Cadence Party
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6.1 |
cGMP
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1.1 |
Claim
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1.1 |
Clinical Testing Product
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1.1 |
Clinical Use
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1.1 |
Confidential Information
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1.1 |
Control
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1.1 |
Controlled
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1.1 |
Controlling
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1.1 |
Demand
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7.1 |
Dispute
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7.1 |
Dollar
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1.1 |
Drug Regulatory Authority
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1.1 |
Effective Date
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Introductory Paragraph
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EMEA
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1.1 |
Execution Date
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Introductory Paragraph
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Facility
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3.9 |
FDA
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1.1 |
FDCA
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1.1 |
Firm Order
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3.2(a) |
Force Majeure
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1.1 |
Forecast
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3.1 |
Indemnified Party
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6.3 |
Indemnifying Party
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6.3 |
IV APAP Agreement
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Recitals
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NDA
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1.1 |
Parent
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Introductory Paragraph
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Parenteral Acetaminophen Product
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1.1 |
Parties
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Introductory Paragraph
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Party
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Introductory Paragraph
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Person
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1.1 |
Pharmatop License Agreement
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Recitals
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Placebo
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1.1 |
Quality Agreement
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3.8 |
Regulatory Approval
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1.1 |
Specifications
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1.1 |
Supply Price
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2.2 |
Supply Term
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1.1 |
Technology
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1.1 |
Territory
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1.1 |
Third Party
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1.1 |
-iv-
CLINICAL SUPPLY AGREEMENT
This Clinical Supply Agreement (the Agreement) is entered into as of February 21,
2006 (the Execution Date) by and among Lawrence Laboratories, an indirect wholly-owned
subsidiary of Parent (as defined below) and a corporation organized under the laws of Ireland with
its registered office at Unit 12, Distribution Centre, Shannon Industrial Estate, Shannon, County
Clare, Ireland (BMS ), Cadence Pharmaceuticals, Inc., a Delaware corporation having an
address at 12730 High Bluff Drive, San Diego, California 92130 (Cadence ), and, solely
for the purposes of Section 9.15 hereof, Bristol-Myers Squibb Company, a Delaware corporation
having an address at 345 Park Avenue, New York, New York 10154 (Parent) and is effective
as of March 29, 2006 (the Effective Date ). BMS and Cadence are sometimes collectively
referred to herein collectively as the Parties and each individually as a
Party.
RECITALS
WHEREAS, Cadence holds certain license rights in intellectual property relating to Parenteral
Acetaminophen Products (as defined below) in the United States and Canada pursuant to that certain
IV APAP Agreement dated February 21, 2006, between Parent and Cadence (the IV APAP
Agreement), which sublicenses to Cadence certain intellectual property rights with respect to
the United States and Canada under that certain License Agreement dated December 23, 2002 between
SCR Pharmatop, a civil law partnership organized under the laws of France, having its head offices
address at 10, Square St. Florentin, 78150 Le Chesnay, France, recorded with the Register of
Commerce and Companies of Versailles under No. 407552702, and Parent (the Pharmatop License
Agreement ) and licenses to Cadence certain rights to use patents and know-how of Parent in
the same jurisdictions;
WHEREAS, BMS has arrangements for one of its Affiliates located in Italy to manufacture
Clinical Testing Products (as defined below) for supply to Cadence pursuant to this Agreement;
WHEREAS, BMS or its Affiliate holds certain license rights in intellectual property relating
to Parenteral Acetaminophen Products (as defined below) in Italy entitling BMS or its Affiliate to
use such intellectual property to manufacture Parenteral Acetaminophen Products in Italy for supply
to Cadence pursuant to this Agreement;
WHEREAS, BMS or its Affiliates have expertise in manufacturing Parenteral Acetaminophen
Products for use in clinical trials and related Placebos (as defined below); and
WHEREAS, Cadence desires to purchase, and BMS desires to supply from its Affiliates facility
in Italy (or such other facility as BMS may determine in accordance with this Agreement), Cadences
requirements for the Clinical Testing Products for use in clinical trials in support of applications for Regulatory Approvals (as defined below) for Parenteral
Acetaminophen Products in the Territory.
2
AGREEMENT
THEREFORE, the Parties, intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall have the
following meanings:
Affiliate of a Party means any corporation, firm, partnership or other entity
that directly or indirectly Controls, is Controlled by or is under common Control with such
Party.
Agreement has the meaning set forth in the Introductory Paragraph.
Applicable Law means any applicable federal, state, local or foreign statute,
law, ordinance, rule or regulation, judicial order or industry standard imposed by
regulation or law, including without limitation the laws of, and regulations promulgated
under, the FDCA or the Canadian equivalent of the FDCA.
BMS has the meaning set forth in the Introductory Paragraph.
BMS Party has the meaning set forth in Section 6.2.
Business Day means any day other than a Saturday, a Sunday or a United States
Federal, EU, Irish or Italian holiday.
Cadence has the meaning set forth in the Introductory Paragraph.
Cadence Party has the meaning set forth in Section 6.1.
cGMP means all current good manufacturing practices under 21 C.F.R. 210, as
amended from time to time or any successor regulation.
Claim means any claim (including without limitation, product liability
claims, strict liability or tort claims and intellectual property infringement claims),
action, suit, governmental investigation or other proceedings made or brought by or on
behalf of a Third Party against any Cadence Party or any BMS Party, as the case may be,
including without limitation enforcement actions by the FDA or other
applicable Drug Regulatory Authorities and claims for infringement of intellectual
property and for bodily injury, death or property damage.
3
Clinical Testing Product means any Parenteral Acetaminophen Products and any
related Placebo used in clinical trials to support Regulatory Approval in the Territory of
any such Parenteral Acetaminophen Product.
Clinical Use means the non-commercial use of any Clinical Testing Product in
clinical trials or otherwise, in each case solely to support Regulatory Approval of any
Parenteral Acetaminophen Product in the Territory.
Confidential Information has the meaning set forth in the IV APAP Agreement.
Control means (a) with respect to Technology or technical information, the
possession by a Party of the ability to grant a license or sublicense of such Technology or
technical information as provided herein without violating the terms of, or requiring a
consent under, any agreement or arrangement between such Party and any Third Party and (b)
when used with respect to any Person means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting securities,
by contract, or otherwise. Controlled and Controlling shall have
correlative meanings.
Demand has the meaning set forth in Section 7.1.
Dispute has the meaning set forth in Section 7.1.
Dollar or $ means United States dollars, the lawful currency of the
United States.
Drug Regulatory Authority means any governmental authority or instrumentality
with responsibility for granting any licenses, approvals, authorizations (e.g., NDAs) or
granting pricing and/or reimbursement approvals necessary for the marketing and sale of
pharmaceutical products in any regulatory jurisdiction.
Effective Date has the meaning set forth in the Introductory Paragraph.
EMEA means the European Agency for the Evaluation of Medicinal Products, or
any successor agency.
Execution Date has the meaning set forth in the Introductory Paragraph.
Facility has the meaning set forth in Section 3.9.
FDA means the United States Food and Drug Administration or any successor
agency.
FDCA means the Federal Food, Drug & Cosmetics Act, 21 U.S.C. 321 et seq., any
amendments or supplements thereto, or any regulations promulgated or adopted
thereunder.
4
Firm Order has the meaning set forth in Section 3.2(a).
Force Majeure means any circumstances that are not within the reasonable
control of the Person affected thereby, including without limitation an act of God,
terrorist attack, war, insurrection, riot, strike or labor dispute, shortage of materials,
fire, explosion, flood, government requisition or allocation, breakdown of or damage to
plant, equipment or facilities (to the extent that, in the event of a breakdown only, such
plant, equipment or facilities were reasonably maintained), interruption or delay in
transportation, fuel supplies or electrical power, embargo, boycott, order or act of civil
or military authority.
Forecast has the meaning set forth in Section 3.1.
Indemnified Party has the meaning set forth in Section 6.3.
Indemnifying Party has the meaning set forth in Section 6.3.
IV APAP Agreement has the meaning set forth in the Recitals.
NDA means a new drug application or an abbreviated new drug application,
including any amendments or supplements thereto, filed with the FDA pursuant to the FDCA or
any comparable filing with any Drug Regulatory Authority in Canada and includes any Common
Technical Document for the Registration of Pharmaceuticals for Human Use filed with the FDA
or any other Drug Regulatory Authority in the Territory.
Parent has the meaning set forth in the Introductory Paragraph.
Parenteral Acetaminophen Product means the currently validated parenterally
administered dosage form of paracetamol: APAP for injection [***] as more particularly set
forth in the Specifications.
Parties has the meaning set forth in the Introductory Paragraph.
Party has the meaning set forth in the Introductory Paragraph.
Person means any individual, firm, corporation, partnership, limited
liability company, trust, joint venture, governmental authority or other entity.
Pharmatop License Agreement has the meaning set forth in the Recitals.
Placebo means the currently validated placebo to be used for clinical trials
of Parenteral Acetaminophen Products: Placebo APAP for injection [***] as more particularly
set forth in the Specifications.
Quality Agreement has the meaning set forth in Section 3.8.
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*** |
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Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the omitted portions. |
5
Regulatory Approval means with respect to any Parenteral Acetaminophen
Products in any regulatory jurisdiction in the Territory, approval from the applicable Drug
Regulatory Authority sufficient to market and sell such Parenteral Acetaminophen Products in
such jurisdiction.
Specifications means with respect to Parenteral Acetaminophen Products and
Placebo the specifications set forth on Exhibit A.
Supply Price has the meaning set forth in Section 2.2.
Supply Term means the period beginning on the Effective Date and terminating
on the earlier of (i) the date Cadence receives Regulatory Approval from any Drug Regulatory
Authority in any jurisdiction in the Territory; or (ii) the close of business on December
31, 2008.
Technology means and includes all inventions, discoveries, improvements,
trade secrets, know-how, processes, procedures, research records, records of inventions,
test information, formulae, drawings, specifications, instructions, techniques, data, market
surveys and other similar proprietary methods, materials or property, whether or not
patentable, relating to Parenteral Acetaminophen Products and/or the Placebo, including but
not limited to (a) samples of, methods of production or use of, and structural and
functional information pertaining to, chemical compounds, proteins or other biological
substances, (b) data, formulations, techniques and know-how, and (c) rights under patents,
patent applications, and copyrights.
Territory means the United States (including Puerto Rico and all U.S.
possessions and territories) and Canada.
Third Party means a Person who or which is neither a Party nor an Affiliate
of a Party.
ARTICLE 2
SUPPLY OF CLINICAL TESTING PRODUCTS
2.1 Supply and Purchase. (a) During the Supply Term and upon the terms and
conditions set forth in this Agreement, BMS shall, or shall cause its Affiliates to, manufacture,
or cause the manufacture of, and supply to Cadence Clinical Testing Products for Clinical Use,
ordered pursuant to Firm Orders hereunder, subject to variations permitted by Section 3.2. Cadence
shall purchase from BMS and its Affiliates all of the Clinical Testing Products ordered by Cadence
pursuant to Firm Orders hereunder. BMS and its Affiliates shall not have any obligation to supply
Clinical Testing Products for commercial sale, and following the expiration of the Supply Term, BMS
and its Affiliates shall not have any obligation to supply Clinical Testing Products hereunder,
except that if BMS does not timely deliver at the designated port of departure in accordance with Section 3.4 any Clinical Testing
Products it is obligated to supply hereunder or if any portion of such Clinical Testing Products is
properly rejected in accordance
6
with Section 3.6, BMSs obligation to supply such quantity of Clinical Testing Products shall
remain in effect until conforming Clinical Testing Products are placed at the disposal of Cadences
carrier at the designated port of departure in accordance with this Agreement. BMSs obligation to
manufacture, supply and deliver the Clinical Testing Products is conditioned on the execution and
delivery of the Quality Agreement contemplated by Section 3.8 not less than four (4) months prior
to the scheduled date for placement of the Clinical Testing Products at the disposal of Cadences
carrier, and BMS shall have no obligation to accept any Firm Order that calls for the delivery of
any Clinical Testing Product following the end of the Supply Term. BMS shall not be obligated to
supply more than [***] each of Parenteral Acetaminophen Products or Placebo over the term of this
Agreement.
(b) The Clinical Testing Products shall be in finished dosage forms (in vials in bulk without
commercial or clinical labeling) as specified in the Specifications. Cadence shall be responsible
for labeling the Clinical Testing Products for Clinical Use.
(c) So that BMS shall be aware of the date of the expiration of the Supply Term, Cadence shall
(i) keep BMS informed as to the expected date of any Regulatory Approval with respect to Parenteral
Acetaminophen Products in the Territory, (ii) notify BMS within three (3) Business Days after
Cadence receives written notice of any such Regulatory Approval and (iii) promptly notify BMS of
any determination by Cadence to permanently cease all Clinical Use of the Parenteral Acetaminophen
Products in the Territory.
2.2 Purchase Price of Clinical Testing Products. The purchase price to be paid by
Cadence for Clinical Testing Products (the Supply Price) shall be $[***] for the
Parenteral Acetaminophen Products and $[***] for the Placebo, in each case as such prices are
adjusted as provided below. Such purchase prices shall be adjusted (i) as of the first day of each
calendar year to reflect any increase during the [***] period ending on November 30 of the
preceding calendar year in the [***] as published by Eurostat or any successor agency that assumes
responsibility for the preparation and publication of such index and (ii) from time to time to
reflect any increase exceeding [***] percent ([***]%) in the aggregate in the cost of raw materials
or supplies.
2.3 Limitation to Clinical Use. Neither Cadence nor any of its Affiliates shall (i)
label or relabel (or cause to be labeled or relabeled) any of the Clinical Testing Products for
commercial sale or for any use or purpose other than Clinical Use, (ii) sell to any Third Party any
Clinical Testing Products supplied hereunder or (iii) use any Clinical Testing Products for any
purpose other than Clinical Use.
ARTICLE 3
TERMS AND CONDITIONS OF PURCHASE AND SALE
3.1 Forecasts. Attached as Exhibit B is Cadences initial non-binding
forecast of its requirements for each Parenteral Acetaminophen Product and Placebo for Clinical Use
that Cadence expects to order for delivery during the [***] ([***]) [***] following the anticipated
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*** |
|
Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the omitted portions. |
7
Effective Date. Prior to the first day of each calendar quarter during the Supply Term, Cadence
shall deliver to BMS an updated non-binding forecast setting forth its requirements for each
Parenteral Acetaminophen Product and Placebo for Clinical Use that Cadence expects to order for
delivery during the [***] ([***]) month period beginning on the first day of such calendar quarter.
Each such forecast is referred to herein as, a Forecast.
3.2 Ordering. (a) Cadence shall submit to BMS a written irrevocable firm purchase
order for all Clinical Testing Products to be purchased by it not later than [***] ([***]) [***]
prior to the requested shipping date of such Clinical Testing Products (each, a Firm
Order). Each such Firm Order shall include the quantity of each Clinical Testing Product and
the desired time and manner of shipment and the shipping destination. Any Firm Order for any
Clinical Testing Product must be for a quantity equal to the minimum batch size for such Clinical
Testing Product as in effect from time to time or an integral multiple thereof. The minimum batch
size in effect as of the date of this Agreement is [***] of Parenteral Acetaminophen Product and
[***] of Placebo. The Parties agree that the actual number of vials successfully manufactured by
BMS for any batch of the Clinical Testing Products may be within a range of plus or minus [***]
percent (+/-[***]%) of the minimum batch size or of the actual number of vials ordered by Cadence
pursuant to a Firm Order. The number of vials of Clinical Testing Products supplied by BMS pursuant
to a Firm Order may vary from the amount actually ordered by Cadence within such limits, and BMS
may ship to Cadence, and Cadence shall purchase, such greater or lesser number of vials in full
satisfaction of such Firm Order, provided that Cadence shall only be required to purchase
such number of vials actually supplied to Cadence. BMS shall provide to Cadence no less than [***]
([***]) [***] prior written notice of any change in the minimum batch size. BMS shall not be
obligated to fill more than one order for, or to make more than one delivery of, Placebo. If
Cadence has submitted to BMS, and BMS has accepted, a Firm Order prior to the Effective Date, the
fulfillment of such Firm Order by BMS shall be subject to the execution of the Quality Agreement,
and BMS shall not be obligated to place any Clinical Testing Products at the disposal of Cadences
carrier prior to the expiration of [***] ([***]) [***] after the execution of the Quality
Agreement.
(b) No terms and conditions contained in any purchase order, acknowledgment, invoice, bill of
lading, acceptance or other preprinted form issued by either Party shall be effective to the extent
they are inconsistent with or modify the terms and conditions contained herein.
3.3 Shipping Document. Each shipment of Clinical Testing Products shall include a
certificate of analysis and a packing slip that describes the Clinical Testing Products, the date
of manufacture, traceable lot or batch number(s), quantities, shipment date and destination and
such additional information as the Parties may agree in writing from time to time.
3.4 Delivery, Title, and Shipping. (a) Delivery of Clinical Testing Products shall
be [***] the designated port of departure (Incoterms 2000) in Italy, which port of departure
(maritime or air) shall be specified by Cadence. BMS shall arrange for shipping and insurance in the manner customarily arranged for
its own products from the point of manufacture to the port of departure and shall arrange for
Italian export clearances, but Cadence shall bear the cost of such shipping and insurance, any
special packing expenses and export or customs agents, all of
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*** |
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Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the omitted portions.
|
8
which shall be included in BMSs invoice and paid by Cadence in accordance with Section 3.5.
Cadence shall arrange for loading, shipment, insurance from the port of departure to the ultimate
destination and import customs clearances at the destination country, and Cadence shall be
responsible for all loading charges, freight, insurance, import customs clearances and other
shipping expenses from such port of departure to the ultimate destination. Title to the Clinical
Testing Products and risk of loss, delay or damage in transit for Clinical Testing Products
purchased by Cadence shall pass to Cadence when the Clinical Testing Products are placed at the
disposal of Cadences carrier at the port of departure. Cadence shall cause its carrier to inspect
all Clinical Testing Products for physical damage prior to shipment, and Cadence shall promptly
notify BMS of any such physical damage. Cadence shall bear the cost of all such pre-shipment
inspection. BMS and its Affiliates shall not have any responsibility for any loss or damage to any
Clinical Testing Products after BMS or its export or customs agent places the Clinical Testing
Products at the disposal of Cadences carrier, nor shall any loss or damage to any Clinical Testing
Products following such placement at the disposal of Cadences carrier obviate Cadences obligation
to purchase and pay for such Clinical Testing Products. Without limiting BMSs right to recover
the full invoiced amount for the Clinical Testing Products and as partial security therefor,
Cadence shall cause each shipment of Clinical Testing Products to be insured for the full invoiced
amount of each shipment. Cadence shall provide to BMS proof, satisfactory to BMS, of such
insurance.
The ultimate destination country of each shipment hereunder shall be in the Territory. In the
event Cadence desires to use any of the Clinical Testing Products for clinical trials in the
Clinical Study Countries (as defined in the IV APAP Agreement) in accordance with Section 3.6 of
the IV APAP Agreement, Cadence shall ship such Clinical Testing Products to the Territory and
Cadence shall be solely responsible for shipping such Clinical Testing Products for the Territory
to an appropriate destination in the applicable Clinical Study Country.
(b) BMS shall place the Clinical Testing Products at the disposal of Cadences carrier at port
of departure (maritime or air) for shipment to Cadence or its designee, appropriately labeled with
a traceable lot or batch number and packaged for shipping in the standard commercial packaging
materials customarily used by BMS not later than the later of (i) [***] ([***]) [***] following the
receipt of Cadences Firm Order or (ii) the shipping date requested by Cadence in its Firm Order.
If Cadence requests a shipping date that is less than [***] ([***]) [***] after the delivery to BMS
of the applicable Firm Order, BMS shall use reasonable commercial efforts to meet such earlier
delivery date, but BMS shall not be in breach of this Agreement for failing to meet such earlier
delivery date. If BMS or its Affiliate is unable to place any shipment at the disposal of
Cadences carrier by the date described in the first sentence of this paragraph, in addition to any
other remedies available to Cadence pursuant to this Agreement, BMS shall provide Cadence with
updated delivery information (including estimated delivery date(s)) in writing on a weekly basis
until such shipment has been made available to Cadences carrier.[***](c) Cadence shall make
arrangements with a carrier to pick up each shipment of Clinical Testing Products at the designated
port of departure (maritime or air) and to transport such shipment of Clinical Testing Products to
Cadence or its designee. Cadence shall notify BMS in advance in writing of the name of the carrier
and shall provide such other information as may be necessary for BMS to place the Clinical Testing Products at the disposal
of such carrier
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*** |
|
Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the omitted portions.
|
9
at the port of departure. Cadence shall have sole responsibility for the import of the Clinical
Testing Products into the Territory and for obtaining all import and import-related customs permits
and clearances.[***](d) In the event of any shortage of supply of Clinical Testing Products due to
Force Majeure, BMS shall allocate its available supply of Clinical Testing Products between it and
its Affiliates, its and its Affiliates other customers and Cadence on a pro rata basis based on
the aggregate back orders of Clinical Testing Products, which allocation shall be determined by BMS
in good faith.
3.5 Invoicing and Payment. (a) BMS shall invoice Cadence for the Clinical Testing
Products in Dollars at the time of shipment. Each invoice shall include the invoice number, the
Firm Order number (if any), unit price and total price of the Clinical Testing Products contained
in the shipment.
(b) Cadence shall pay BMS within [***] ([***]) [***] after the receipt of any invoice. All
payments to be made hereunder to BMS shall be made in Dollars by wire transfer of immediately
available funds to such bank account as may be designated by BMS in writing from time to time,
unless the Parties agree to settle such payments through other means. In the event Cadence
disputes any invoice, Cadence shall pay any undisputed amount as and when due hereunder and shall
pay the additional amount, if any, owed with respect to such invoice not later than [***] ([***]
[***] following the resolution of such dispute, together with interest from the original due date
of such invoice at the rate specified in Section 3.5(c).
(c) Any payment not made as and when due shall bear interest at the rate of [***] percent
([***]%) per annum, compounded daily, from the due date to the date of payment. In addition to but
without limiting the preceding sentence, BMS shall have the right to suspend future shipments of
Clinical Testing Products to Cadence if BMS does not receive payment within [***] ([***]) [***]
after the date of any invoice, other than invoices subject to a bona fide dispute. BMS shall
resume shipments of Clinical Testing Products upon receiving such late payment and, if requested by
BMS, reasonable assurances as to payment of future invoices.
3.6 Inspection; Non-Conforming Product. (a) Cadence shall promptly inspect or cause
to be inspected all shipments of Clinical Testing Products hereunder and shall test, or cause to be
tested, all Clinical Testing Products received by it or its designee within [***] ([***]) [***]
after receipt of such shipment at the shipping destination. Within [***] ([***]) [***]s after
receipt by Cadence of any shipment of Clinical Testing Products, Cadence may reject any lot or
portion thereof that failed to conform to the Specifications or the terms of this Agreement at the
time BMS placed the Clinical Testing Products at the disposal of Cadences carrier by sending BMS
notice of the lot or batch numbers of the rejected Clinical Testing Products, together with an
indication of the specific basis for rejection and a sample of the rejected goods. Notwithstanding
the foregoing, if the discovery of the non-conformity of any Clinical Testing Product could not
reasonably have been discovered until after such [***] ([***]) [***] period, Cadence shall notify
BMS of such non-conformity promptly (and in any event not less than [***] ([***]) [***]) following
the discovery thereof. Cadence shall not be entitled to reject any shipment or any portion thereof
on account of damage incurred following the time that BMS
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placed the Clinical Testing Products at the disposal of Cadences carrier, and Cadences sole
remedy shall be against the carrier or under any applicable insurance. BMS shall have the right to
examine and test any Clinical Testing Product that Cadence claims to be non-conforming. If it is
determined that there is any such failure to conform to Specifications at the time that BMS placed
the Clinical Testing Products at the disposal of Cadences carrier, BMS and Cadence shall cooperate
to determine the cause of the non-conformity.
(b) In the event that BMS and Cadence do not resolve such issue within [***] ([***]) Business
Days after BMS notifies Cadence that BMS disagrees with Cadences belief as to the non-conformity
of any Clinical Testing Product at the time that BMS places the Clinical Testing Products at the
disposal of Cadences carrier, such Parties shall submit a sample of the disputed Clinical Testing
Product to an independent laboratory, mutually selected by the Parties, for testing, and the
results of such testing shall be binding upon the Parties, absent manifest error. The Party whose
assertion as to the conformity or nonconformity of the Clinical Testing Product in question is not
supported by the results of the testing of the independent laboratory shall bear all costs and
expenses of such testing. If the results of such testing by such independent laboratory are
inconclusive, then (i) all costs and expenses of such testing shall be borne by the Parties in
equal shares and (ii) the Parties shall share the Supply Price of such Clinical Testing Products
and the freight, insurance and other shipping expenses, fees, duties, taxes and levies incurred by
the Parties in connection therewith, and Cadence shall pay to BMS one-half of such Supply Price and
other items within [***] ([***]) [***] after the receipt of such inconclusive results; and (iii)
BMS shall promptly replace any such Clinical Testing Products and deliver FCA in accordance with
Section 3.4 replacement conforming Clinical Testing Products (even if such replacement entails
shipping Clinical Testing Products subsequent to the Supply Term), which shall be purchased and
paid for by Cadence in accordance with Article 2 and Section 3.5 of this Agreement.
(c) Cadence shall, as requested by BMS in its sole discretion: (i) return promptly to BMS at
BMSs expense all properly rejected Clinical Testing Products or (ii) destroy such non-conforming
Clinical Testing Products in accordance with FDA guidelines or send such non-conforming Clinical
Testing Products to a destruction facility of BMSs choice for destruction at BMSs expense.
Cadence shall not be required to pay BMS for any Clinical Testing Product that has been properly
rejected, and BMS shall reimburse or credit Cadence for the freight, insurance and other shipping
expenses, fees, duties, taxes and levies for any shipment of Clinical Testing Products that is
properly rejected. BMS shall promptly replace any properly rejected Clinical Testing Products and
supply to Cadence conforming Clinical Testing Products (even if such replacement entails shipping
Clinical Testing Products subsequent to the Supply Term). Cadence shall pay the Supply Price and
all shipping costs (which shall include the cost of returning the Clinical Testing Products to BMS
and reshipping such Clinical Testing Products to Cadence or its designee) for any Clinical Testing
Products improperly rejected.
3.7 Obsolescence Charge. To the extent that BMS purchases inventories of raw
materials, components or other supplies to meet Cadences Forecast, Cadence shall reimburse BMS for
any such inventories that were purchased but unused and cannot reasonably be used by BMS.
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3.8 Quality Control. Not later than [***] ([***]) [***] after the Execution Date, BMS
(and/or one of its Affiliates) and Cadence shall enter into a quality agreement (the Quality
Agreement) containing quality terms consistent with Applicable Law and such other terms as are
mutually satisfactory to the Parties and not inconsistent with this Agreement. When the Quality
Agreement is finalized and executed, a copy of the definitive Quality Agreement shall be attached
hereto as Exhibit C to this Agreement. In the event of any conflict between the terms of
this Agreement and the Quality Agreement, the terms of the Quality Agreement shall control.
3.9 Change of Supplier or Facility. BMS may in its sole discretion upon [***] ([***])
[***] written notice to Cadence change the manufacturing facility used in the manufacturing of the
Clinical Testing Products (the Facility ).
3.10 Recalls. Each Party shall notify the other by telephone within [***] ([***])
[***] after receiving any information, request or directive giving rise to a good faith belief that
a recall of any Clinical Testing Product is required under Applicable Law or is otherwise necessary
to avoid risk of injury or liability. In the event that a Drug Regulatory Authority in the
Territory issues or requests a recall or takes similar action in connection with the Clinical
Testing Products, or in the event that either Party in good faith, believes that a recall is
required under Applicable Law or is otherwise necessary to avoid risk of injury or liability, it
may initiate a recall by providing written notice thereof to the other Party specifying in
reasonable detail, the nature of the recall and the affected products. Within [***] ([***])
Business Days following such written notification (or sooner if exigent circumstances exist or
otherwise are required in order to comply with Applicable Law), the Parties shall discuss the
circumstances giving rise to such notification and the content of such notification, and, if so
required, the timing and breadth of the recall, the customers to which the recall shall extend, the
strategies and notifications to be used, and other related issues. BMS and Cadence each shall
maintain such traceability records as are sufficient and as may be necessary to permit a recall,
product withdrawal or field correction of any Clinical Testing Product. Each Party shall provide
full cooperation and assistance to the other Party in connection with any recall as may be
reasonably requested by the other Party. In the event that the Parties cannot agree on any such
decision regarding the manner of a recall and such recall relates solely to a failure of BMS and
its Affiliates to manufacture the Clinical Testing Product in accordance with Applicable Law or the
Specifications, the issue shall be resolved by BMS in good faith. In the event that the Parties
cannot agree on any such decision regarding the manner of a recall and such recall relates to a
matter other than a failure of BMS and its Affiliates to manufacture the Clinical Testing Product
in accordance with Applicable Law or the Specifications, the issue shall be resolved by Cadence in
good faith. Cadence shall be responsible for collecting and shipping any recalled Clinical Testing
Product to a location determined by BMS. BMS shall be responsible for disposing of any recalled
Clinical Testing Product in accordance with Applicable Law. The costs of the recall (including all
costs of collecting, shipping and disposing of the recalled Clinical Testing Product) shall be
borne by Cadence, except that such costs shall be borne by BMS to the extent it results from a
breach of any of BMSs representations, warranties or covenants under this Agreement.
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3.11 Representations, Warranties and Covenants.
(a) BMS represents, warrants and covenants that the Clinical Testing Products when delivered
FCA at the designated port of departure (Incoterms 2000) in accordance with Section 3.4 shall (i)
conform to the Specifications; (ii) be manufactured, packaged, tested, stored and handled by it and
its Affiliates in compliance with the Specifications, the Quality Agreement, cGMP and any
Applicable Laws; and (iii) at the time of that BMS places the Clinical Testing Products at the
disposal of Cadences carrier, not be adulterated or misbranded within the meaning of the FDCA.
Notwithstanding the foregoing, BMS does not represent, warrant or covenant against any Clinical
Testing Product becoming adulterated or misbranded within the meaning of the FDCA or ceasing to
conform to the Specifications as a result of an act or omission or damage caused by Cadence or any
Third Party (including any carrier of Cadence) after placement of the Clinical Testing Products at
the disposal of Cadences carrier pursuant to Section 3.4. BMS represents, warrants and covenants
that BMS or its Affiliate shall transfer to Cadence good and marketable title to the Clinical
Testing Products free from any and all liens, mortgages or encumbrances of any kind created by BMS
and its Affiliates and its and their suppliers and creditors.
(b) BMS represents, warrants and covenants that it and its Affiliates hold and will continue
to hold during the Supply Term sufficient rights in all manufacturing processes and Technology
necessary for the manufacture and supply of the Clinical Testing Products.
(c) BMS represents, warrants and covenants that as of the date hereof it has not received
written notice of any pending or threatened Claim that would interfere with BMSs performance under
this Agreement or that materially and adversely affects the rights and interests of Cadence
hereunder.
(d) Each Party represents, warrants and covenants that the execution and delivery of this
Agreement and the performance of its obligations hereunder: (i) has been authorized to enter into
this Agreement by all necessary corporate action on the part of it and its shareholders, (ii) does
not conflict with or violate any requirement of Applicable Law or any of its charter documents and
(iii) does not conflict with, violate or breach or constitute a default or require any consent
(which has not been obtained) under, any contractual obligation, license or court or administrative
order by which it is bound.
(e) EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 3.11, NEITHER BMS NOR ANY OF ITS AFFILIATES
MAKES ANY REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WRITTEN OR ORAL, STATUTORY OR
OTHERWISE WITH RESPECT TO THE CLINICAL TESTING PRODUCTS (WHETHER USED ALONE OR IN COMBINATION WITH
OTHER SUBSTANCES) OR ANY MANUFACTURING PROCESS USED TO MANUFACTURE ANY CLINICAL TESTING PRODUCTS,
INCLUDING WITHOUT LIMITATION (i) ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE; (ii) ANY IMPLIED WARRANTIES ARISING FROM COURSE OF PERFORMANCE, COURSE OF
DEALING OR USAGE IN THE TRADE; (iii) ANY WARRANTIES OF DESIGN OR DESCRIPTION OR ANY WARRANTY OTHERWISE
CREATED BY ANY AFFIRMATION OF FACT OR
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PROMISE OR SAMPLE OR MODEL; AND ALL SUCH REPRESENTATIONS AND WARRANTIES WHETHER IN CONTRACT,
WARRANTY, NEGLIGENCE, TORT, STRICT LIABILITY OR OTHERWISE, ARE HEREBY DISCLAIMED.
3.12 Force Majeure. No Party shall be considered to be in breach of, nor shall any
Party be liable for any failure to perform its obligations under, this Agreement (other than
obligations to make payments of money) by reason of Force Majeure. A Party affected by Force
Majeure shall give the other Party prompt notice of any interruption of performance on account of
Force Majeure, and of the resumption of such performance, and shall keep the other Party informed
on a current basis as to the steps being taken to remove, and the anticipated time of removal of,
the circumstances resulting in such Force Majeure. The time for performance of any obligation
hereunder that is affected by Force Majeure shall be extended by the actual time of delay caused by
such Force Majeure, provided that the Party affected by such Force Majeure uses commercially
reasonable efforts to mitigate any such delay. Notwithstanding the foregoing, nothing in this
Section 3.12 shall excuse or suspend the obligation to make any payment due under this Agreement in
the manner and at the time provided herein.
ARTICLE 4
REGULATORY MATTERS
4.1 Record Retention. Any books and records relating to the receipt, manufacture,
storage, handling or testing of any Clinical Testing Product shall be maintained under this
Agreement by a Party or its Affiliates in accordance with Applicable Law.
4.2 Regulatory Matters. At all times during the Term, BMS shall maintain the
production facility, equipment and processes (including, without limitation, the process used in
producing the Clinical Testing Products and in performing BMSs other obligations under this
Agreement in compliance with all Applicable Laws (including, without limitation, cGMP, the FDA and,
to the extent applicable, the EMEA guidelines, employment and labor law requirements, electrical,
fire and safety at work codes and regulations and guidelines issued by any applicable Drug
Regulatory Authorities in the Territory. BMS shall make available for inspection, upon the request
of Cadence, all documentation relating to such compliance. Upon reasonable prior notice and
subject to BMSs customary rules and restrictions with respect to site visits by non-BMS personnel,
BMS shall permit representatives of Cadence to conduct inspections at all Facilities utilized by
BMS and its Affiliates hereunder, pursuant to the Quality Agreement, to confirm such compliance;
provided that such inspections may not be made more than once in any twelve-month period (not
including Cadences initial visit to the Facility, to be made prior to February 28, 2006) and each
such inspection shall be limited to no more than [***] ([***]) [***]; provided,
further, that if material corrective measure are necessary, Cadence may conduct an
additional inspection to verify the implementation of such corrective measures, which additional
inspection shall be limited to [***] ([***]) [***]. BMS shall promptly provide to Cadence copies
of all material communications received from and sent to any Drug Regulatory Authority which relate solely to
the Clinical Testing Products and which is reasonably likely to cause BMS to be unable to make
timely delivery of Clinical Testing Products in accordance with this
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Agreement. BMS shall consult with Cadence regarding its response to any such communication
from a Drug Regulatory Authority. Cadence understands and agrees that any inspection, other than
inspections to verify corrective measures, will be charged against the time allocated for tech
transfer pursuant to Section 2.12 of the IV APAP Agreement. Cadences initial preparatory tour of
BMSs Facility, which shall take place prior to February 28, 2006, and shall last not more than one
(1) Business Day, shall not be charged against such time allocated for tech transfer and shall not
be counted as Cadences annual visit.
ARTICLE 5
CONFIDENTIALITY
5.1 Confidentiality. Any Confidential Information of the Parties exchanged hereunder
shall be governed by, and shall be maintained in confidence pursuant to, the confidentiality
provisions set forth in Section 5.2 and Section 5.3 of the IV APAP Agreement.
ARTICLE 6
INDEMNIFICATION
6.1 By BMS. BMS shall indemnify, defend and hold harmless Cadence, its Affiliates and
its and their employees, subcontractors, agents, officers and directors (each a Cadence
Party ) from and against all losses, liabilities, damages, fees (including, until such time as
BMS assumes control of a given Claim, reasonable attorneys fees and costs of litigation pertaining
to such Claim), and expenses paid or payable by a Cadence Party to a Third Party that result from
or arise out of any Claim against a Cadence Party to the extent such Claim or any losses,
liabilities, damages or fees, cost and expenses in connection therewith is alleged to be or is in
fact caused by, or is alleged to or in fact arises from or is based on the breach of any warranty
of BMS contained in Section 3.11 or any material breach of BMSs covenants contained elsewhere in
this Agreement; provided, however, that BMS shall not be obligated to indemnify a
Cadence Party under this Agreement for any losses, liabilities, damages, fees or expenses incurred
by such Cadence Party to the extent attributable to (i) any breach of this Agreement or the Quality
Agreement by Cadence or a Cadence Party or (ii) negligence, gross negligence or willful misconduct
on the part of Cadence or a Cadence Party.
6.2 By Cadence. Cadence shall indemnify, defend and hold harmless BMS, its Affiliates
and its and their employees, subcontractors, agents, officers and directors (each, a BMS
Party), from and against all losses, liabilities, damages, fees (including, until such time as
Cadence assumes control of a given Claim, reasonable attorneys fees and costs of litigation pertaining to such Claim), and
expenses paid or payable by a BMS Party to a Third Party that result from or arise out of any Claim
against a BMS Party to the extent such Claim or any losses, liabilities, damages or fees, cost and
expenses in connection therewith is alleged to be or is in fact caused by, or is alleged to or in
fact arises from or is based on (i) infringement of a Third Partys intellectual property in
connection with the use or sale of the Clinical Testing Products or
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(ii) any handling, storage, consumption, administration, injection, infusion, ingestion or other
use or misuse of or exposure to the Clinical Testing Products after the placement thereof at the
disposal of Cadences carrier at the designated port of departure, except to the extent that the
Claim or any losses, liabilities, damages or fees, cost and expenses in connection therewith
results from or arises out of (A) a failure of the Clinical Testing Products to conform to the
Specifications when placed at the disposal of Cadences carrier in accordance with Section 3.4; (B)
any breach of this Agreement or the Quality Agreement by BMS; (C) the negligence, gross negligence
or willful misconduct on the part of BMS; or (D) any other matter for which BMS is expressly
obligated to indemnify Cadence pursuant to Section 6.1. Cadence shall be solely responsible for
any handling, storage, consumption, administration, injection, infusion, ingestion or other use or
misuse of or exposure to, the Clinical Testing Products after placement at the disposal of
Cadences carrier, except as provided in the immediately preceding sentence.
6.3 Conditions to Indemnification. A Party seeking indemnification under this Article
6 (the Indemnified Party) shall give prompt notice of the Claim to the other Party (the
Indemnifying Party) and, provided that the Indemnifying Party is not contesting the
indemnity obligation, shall permit the Indemnifying Party to control and assume the defense of any
litigation relating to such Claim and disposition of any such Claim unless the Indemnifying Party
is also a party (or likely to be named a party) to the proceeding in which such Claim is made and
the Indemnified Party gives notice to the Indemnifying Party that it may have defenses to such
Claim or proceeding that are in conflict with the interests of the Indemnifying Party, in which
case the Indemnifying Party shall not be so entitled to assume the defense of the case. If the
Indemnifying Party does assume the defense of any Claim or proceeding, it (i) shall act diligently
and in good faith with respect to all matters relating to the settlement or disposition of any
Claim as the settlement or disposition relates to Parties being indemnified under this Article 6,
(ii) shall cause such defense to be conducted by counsel reasonably acceptable to the Indemnified
Party, or (iii) shall not settle or otherwise resolve any Claim without prior notice to the
Indemnified Party and the consent of the Indemnified Party (which consent shall not be unreasonably
withheld, conditioned or delayed) if such settlement involves anything other than the payment of
money by the Indemnifying Party. The Indemnified Party shall cooperate with the Indemnifying Party
in its defense of any Claim for which the Indemnifying Party has assumed the defense in accordance
with this Section 6.3, and shall have the right (at its own expense) to be present in person or
through counsel at all legal proceedings giving rise to the right of indemnification.
6.4 Limitation of Liability. IN NO EVENT SHALL EITHER PARTY (OR ANY OF ITS AFFILIATES
OR SUBCONTRACTORS) BE LIABLE TO THE OTHER PARTY FOR, NOR SHALL ANY INDEMNIFIED PARTY HAVE THE RIGHT
TO RECOVER, ANY SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS OR DAMAGES FOR LOST OPPORTUNITIES), WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT
LIABILITY OR OTHERWISE (WHETHER IN ANY CLAIM FOR INDEMNIFICATION PURSUANT TO THIS ARTICLE 6 OR
OTHERWISE), ARISING (x) OUT OF THE MANUFACTURE, USE OR SALE OF ANY CLINICAL TESTING PRODUCT SOLD
HEREUNDER OR (y) OUT OF ANY BREACH OF OR FAILURE TO PERFORM ANY OF THE PROVISIONS OF THIS AGREEMENT OR (z) ANY REPRESENTATION OR
WARRANTY CONTAINED IN OR MADE PURSUANT TO THIS AGREEMENT, EXCEPT THAT SUCH LIMITATION SHALL
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NOT APPLY TO PUNITIVE OR CONSEQUENTIAL DAMAGES PAID OR PAYABLE TO A THIRD PARTY BY AN INDEMNIFIED PARTY
FOR WHICH THE INDEMNIFIED PARTY IS ENTITLED TO INDEMNIFICATION HEREUNDER.
ARTICLE 7
DISPUTE RESOLUTION
7.1 Arbitration. Except as otherwise provided in this Agreement, any dispute,
difference or question arising between the Parties or any of their Affiliates or Indemnified
Parties in connection with this Agreement or the Quality Agreement, the formation, interpretation,
construction thereof or the rights, duties or liabilities of any Party or any of its Affiliates (a
Dispute) shall be resolved by binding arbitration in accordance with this Section 7.1.
Any Party or any such Affiliate or Indemnified Party may require resolution of any such Dispute by
arbitration hereunder by sending a written notice to the other Party demanding arbitration of the
Dispute (the Demand). In that event, the Dispute shall be finally resolved by
arbitration in accordance with the United States Arbitration Act and the Commercial Arbitration
Rules of the American Arbitration Association. The venue for the arbitration shall be New York,
New York. The arbitration shall be conducted in the English language before a panel of three (3)
arbitrators. Each Party shall name one arbitrator, and the two so named shall name the third
arbitrator, who shall act as chairman. If the two party arbitrators cannot agree on a third
arbitrator within thirty (30) days after the Demand, then at the request of either Party the
President of the Association of the Bar of the City of New York shall appoint the third arbitrator.
The arbitrators shall promptly meet, fix the time, date and place of the hearing and notify the
Parties. All documents, exhibits, testimony or other information that is not in the English
language shall be translated into the English language at the expense of the Party proffering the
evidence requiring translation. The decision of the arbitrators may (depending on the equities of
the case) include an award of legal fees, costs of arbitration and interest. The panel of
arbitrators shall promptly transmit an executed copy of its decision to the Parties. The decision
of the arbitrators shall be final, binding and conclusive upon the Parties. Judgment on the award
rendered by the arbitrators may be entered in any court having jurisdiction thereof. Each Party
retains the right to seek from a court any interim or provisional relief that may be necessary to
protect the rights or property of that Party as permitted by Section 9.3 hereof pending the
establishment of the arbitrators determination of the merits of the controversy, and any such
action shall not be deemed incompatible with this Agreement to arbitrate or a waiver of the right
to arbitration. The obligations of the Parties under this Section are specifically enforceable and
shall survive any termination of this Agreement. Unless the decision of the arbitrators provides
otherwise, the Parties shall bear their own costs in preparing for the arbitration and the costs of
the arbitrators shall be equally divided between the Parties.
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ARTICLE 8
TERM; TERMINATION
8.1 Term; Termination. (a) This Agreement shall commence on the Effective Date and
shall continue for the Supply Term and until BMS has supplied in accordance with this Agreement all
the Clinical Testing Products ordered by Cadence pursuant to Firm Orders prior to the end of the
Supply Term that BMS is obligated to supply under this Agreement unless earlier terminated as
provided below. This Agreement shall terminate upon the occurrence of any of the following events:
(i) the written consent of each of BMS and Cadence to terminate this Agreement;
(ii) Cadences permanent cessation of the Clinical Use of the Parenteral Acetaminophen
Products in the Territory;
(iii) the termination of the IV APAP Agreement; or
(iv) the dissolution or termination of Cadence, other than in connection with or
following an assignment of this Agreement in accordance with Section 9.7.
(b) Either Party may, by written notice to the other Party, terminate this Agreement in the
event of a material breach of this Agreement by the other Party, which remains uncured by such
other Party for a period of sixty (60) days.
8.2 Consequences of Termination. Termination of this Agreement pursuant to this
Article 8 shall be without prejudice to any rights which shall have accrued to the benefit of any
Party prior to such termination. Such termination shall not relieve any Party from its obligations
which are expressly indicated to survive the termination of this Agreement. All of the Parties
rights and obligations under the immediately proceeding sentence and under Sections 2.3, 3.6, 3.7,
3.10, 3.11 and 8.2 and Articles 4, 5, 6, 7and 9 hereof shall survive such termination for the
applicable period. In the event of the termination or expiration of this Agreement (other than for
an uncured material breach by BMS), Cadence will reimburse BMS and its Affiliates for the cost of
any inventory of Placebos or the inventory of raw materials and supplies purchased by BMS for
producing the Placebos to the extent (i) BMS or its Affiliates reasonably acquired and held such
inventory consistent with Cadences Forecasts, (ii) BMS and its Affiliate that holds such
inventory is unable reasonably to utilize such inventory for other customers or for itself or any
other BMS Affiliate and (iii) BMS delivers such inventory to Cadence.
ARTICLE 9
MISCELLANEOUS
9.1 Notices. All notices, consents, requests, demands and other communications
required or permitted under this Agreement: (a) shall be in writing in the English language;
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(b) shall be sent by messenger, a reliable express delivery service or facsimile (with a copy sent by
one of the foregoing means), charges prepaid as applicable, to the appropriate address(es) or
number(s) set forth below; and (c) shall be deemed to have been given on the date of receipt by the
addressee (or, if the date of receipt is not a Business Day, on the first Business Day after the
date of receipt), as evidenced by (i) a receipt executed by the addressee (or a responsible person
in his or her office), the records of the Person delivering such communication or a notice to the
effect that such addressee refused to claim or accept such communication, if sent by messenger or
express delivery service, or (ii) a receipt generated by the senders fax machine showing that such
communication was sent to the appropriate number on a specified date, if sent by facsimile. All
such communications shall be sent to the following addresses or numbers, or to such other addresses
or numbers as any Party may inform the others by giving five Business Days prior notice:
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With a copy to: |
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Cadence Pharmaceuticals, Inc. |
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Cadence Pharmaceuticals, Inc. |
12730 High Bluff Drive, Suite 410 |
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12730 High Bluff Drive, Suite 410 |
San Diego, CA 92130 |
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San Diego, CA 92130 |
Attn: President & CEO |
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Attn: VP of Business Development |
Fax No.: (858) 436-1401 |
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Fax No.: (858) 436-1401 |
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If to BMS: |
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With a copy to: |
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Lawrence Laboratories |
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Bristol-Myers Squibb Company |
Unit 12 Distribution Centre |
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1 Squibb Drive |
Shannon Industrial Estate |
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New Brunswick, NJ |
County Clare |
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Attn: Senior Counsel Technical Operations |
Ireland |
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Fax No.: 732-227-3874 |
Attn: General Manager |
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Fax No.: 011-35-3-61-47-1396 |
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If to Parent: |
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With a copy to: |
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Bristol-Myers Squibb Company |
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Bristol-Myers Squibb Company |
1 Squibb Drive |
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1 Squibb Drive |
New Brunswick, NJ |
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New Brunswick, NJ |
Attn: Director, Contract Manufacturing |
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Attn: Senior Counsel Technical Operations |
Fax No.: 732-227-3960 |
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Fax No.: 732-227-3874 |
9.2 Governing Law. This Agreement is a contract under the laws of the State of New
York and for all purposes shall be governed by, and construed and enforced in accordance with, the
laws of said State, without giving effect to any conflict of law rules.
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9.3 Equitable Relief. The Parties acknowledge and agree that each would be
irreparably damaged in the event that any provision of this Agreement is not performed by the other
in accordance with its specific terms or is otherwise breached. Accordingly, it is agreed that
each Party is entitled to an injunction or injunctions to prevent breaches of this Agreement by the
other and shall have the right to specifically enforce this Agreement and the terms and provisions
hereof against the other without the posting of any bond or other security, in addition to any
other remedy to which such aggrieved Party may be entitled at law or in equity; provided,
however, that the powers of the arbitrators under Section 7.1 shall be limited to enforcing
the obligations provided for in this Agreement as drafted.
9.4 Headings. All titles or captions contained in this Agreement are for convenience
of reference only and shall not limit or affect in any way the meaning or interpretation of this
Agreement.
9.5 No Third Party Beneficiaries. This Agreement shall be binding upon, and inure
solely to the benefit of, the Parties and their permitted assigns, and nothing herein, express or
implied, is intended to, or shall confer upon, any other Person any legal or equitable right,
benefit or remedy of any nature whatsoever.
9.6 Severability. If any term or other provision of this Agreement is held to be
invalid, illegal or incapable of being enforced by any Applicable Law or public policy, all other
terms and provisions of this Agreement shall nevertheless remain in full force and effect so long
as the economic or legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any Party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the Parties as closely as possible in
an acceptable manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
9.7 Assignment and Subcontracting. (a) Except as set forth below in this Section 9.7
neither this Agreement, nor any right, interest or obligation hereunder, may be assigned, pledged
or otherwise transferred by any Party, whether by operation of law or otherwise, without the prior
consent of the other Party, except that BMS may assign any of its rights or delegate any of its
obligations hereunder to any of its Affiliates, provided, that BMS shall provide Cadence
with written notice of any such assignment or delegation. Cadence acknowledges that BMS will
delegate the manufacturing of the Clinical Testing Products to its Affiliate, Bristol-Myers Squibb
S.R.L., in Italy and that delegation to such Affiliate shall not require any further notice to
Cadence.
(b) Either Party may assign or transfer all of its rights and obligations hereunder without
the prior consent of the other Party to a successor in interest by reason of merger,
consolidation or sale of substantially all of the assets of the assigning Party (and so long
as such assignment or transfer includes, without limitation, all Approvals, all manufacturing
assets relating to the IV APAP Agreement, and all rights and obligations under the IV APAP
Agreement); provided, that such successor in interest shall have agreed prior to such
assignment or transfer to be bound by the terms of this Agreement in a writing provided to the
other Party.
20
(c) BMS may subcontract any or all of its obligations under this Agreement to a Third Party,
with the prior written consent of Cadence, which shall not be unreasonably withheld, delayed, or
conditioned.
(d) Not withstanding anything to the contrary herein, any assignment, delegation or
subcontracting by a Party of any of its rights or obligations under this Agreement shall not
relieve such Party from any of its obligations hereunder.
(e) Any assignment or transfer in violation of the foregoing shall be null and void and wholly
invalid, the assignee or transferee in any such assignment or transfer shall acquire no rights
whatsoever, and the non-assigning non-transferring Party shall not be required to recognize, such
assignment or transfer.
(f) Subject to the foregoing, this Agreement shall inure to the benefit of and be binding on
the Parties successors and permitted assigns.
9.8 Consents. Any consent or approval to any act or matter required under this
Agreement shall be in writing and shall apply only with respect to the particular act or matter to
which such consent or approval is given, and shall not relieve any Party from the obligation to
obtain the consent or approval, as applicable, wherever required under this Agreement to any other
act or matter.
9.9 Entire Agreement. This Agreement contains the entire agreement of the Parties
with respect to the subject matter of this Agreement and supersedes all prior written and oral
agreements, and all contemporaneous oral agreements, relating to such subject matter.
9.10 Exhibits. The Exhibits attached to this Agreement are an integral part hereof
and all references to this Agreement include such Exhibits.
9.11 Waivers and Amendments. No modification of or amendment to this Agreement shall
be valid unless in a writing signed by all Parties referring specifically to this Agreement and
stating the Parties intention to modify or amend the same. Any waiver of any term or condition of
this Agreement shall be in a writing signed by the Party sought to be charged with such waiver
referring specifically to the term or condition to be waived, and no such waiver shall be deemed to
constitute the waiver of any other breach of the same or of any other provision hereof.
9.12 No Partnership or Joint Venture. This Agreement is not intended to create, and
nothing contained herein shall be construed to create, an association, joint venture, trust or
partnership, or to impose a trust or partnership covenant, obligation or liability on or with
regard to the other Party. Each Party shall be severally responsible for its own covenants, obligations and liabilities as herein
provided. No Party shall be under the control of, or shall be deemed to control any other Party;
no Party is the legal representative, agent, joint venturer or employee of the other Party with
respect to this Agreement for any purpose whatsoever; no Party shall have the right or power to
bind the other Party; and no Party has the right or authority to assume or create any obligations
of any kind or to make any representation or warranty on behalf of any other Party, whether express
or implied, or to bind any other Party in any respect whatsoever.
21
The provisions of this Agreement
are intended only for the regulation of relations between the Parties.
9.13 Absence of Presumption. With regard to each and every term and condition of this
Agreement and any and all agreements and instruments subject to the terms hereof, the Parties
hereto understand and agree that the same have or has been mutually negotiated, prepared and
drafted, and if at any time the Parties hereto desire or are required to interpret or construe any
such term or condition or any agreement or instrument subject hereto, no consideration shall be
given to the issue of which Party hereto actually prepared, drafted or requested any term or
condition of this Agreement or any agreement or instrument subject hereto.
9.14 Counterparts; Facsimile Execution. This Agreement may be executed in any number
of counterparts, and by each of the Parties on separate counterparts, each of which, when so
executed, shall be deemed an original, but all of which shall constitute but one and the same
instrument. Delivery of an executed counterpart of this Agreement by facsimile shall be equally as
effective as delivery of a manually executed counterpart of this Agreement.
9.15 Guarantee. In consideration for Cadence entering into this Agreement and for
other good and valuable consideration the sufficiency of which is hereby acknowledged, Parent
hereby absolutely and unconditionally guarantees to Cadence the timely performance of each and all
of the obligations (including, without limitation, any obligation to make payments under this
Agreement) of BMS (or any of its permitted assignees), subject to the terms and conditions of this
Agreement. Parent agrees that its guarantee is a continuing obligation which shall not be
terminated unless and until all of the obligations hereunder of BMS (or any of its permitted
assignees) are fully performed and that Cadence may enforce this guarantee without exhausting any
and all remedies available against BMS (or any of its permitted assignees).
SIGNATURE PAGE TO CLINICAL SUPPLY AGREEMENT
IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the day and year first
above written.
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LAWRENCE LABORATORIES
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By: |
/s/ Barry Sexton
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Name: |
Barry Sexton |
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Title: |
General Manager |
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CADENCE PHARMACEUTICALS, INC.
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By: |
/s/ Theodore R. Schroeder
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Name: |
Theodore R. Schroeder |
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Title: |
President and CEO |
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And with respect to Section 9.15 only:
BRISTOL-MYERS SQUIBB COMPANY
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By: |
/s/ Bernard F. Leclere
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Name: |
Bernard F. Lecler |
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Title: |
VP Supply Chain |
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EXHIBIT A
SPECIFICATIONS
Specifications for Parenteral Acetaminophen Products
The Specifications are the same as those for BMSs currently marketed product, which are set forth
below, except that the Specifications for the Clinical Testing Products do not include a trade
name. The Clinical Testing Products will be provided in vials in bulk, without commercial or
clinical labeling.
[***]
*** Certain information on this
page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted
portions.
[***]
*** Certain information on this
page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted
portions.
[***]
*** Certain information on this
page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted
portions.
[***]
*** Certain information on this
page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted
portions.
[***]
*** Certain information on this
page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted
portions.
[***]
*** Certain information on this
page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted
portions.
EXHIBIT B
INITIAL FORECAST
For the first [***] period after the Effective Date:
[***] (at minimum batch size) of Parenteral Acetaminophen Product
[***] (at minimum batch size) of Placebo
in each case to be placed at the disposal of Cadences carrier not later than the later of (i)
[***] ([***]) [***] after the Effective Date or (ii) [***] ([***]) months after the execution of
the Quality Agreement.
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*** |
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Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the omitted portions. |
EXHIBIT C
QUALITY AGREEMENT
Bristol-Myers Squibb Company
Cadence Pharmaceuticals
QUALITY AGREEMENT Intravenous Acetaminophen
Parties to this Agreement:
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Cadence Pharmaceuticals (the Contracting Company)
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-
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Company A |
Bristol-Myers Squibb Srl, BMS Anagni (the Contract Acceptor)
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-
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Company B |
1. GUIDING PRINCIPLES
This quality agreement (written in accordance with the principles defined in Chapter 7 of the
EU/PIC Guide to Good Manufacturing Practice and the US Food and Drug Administration regulations 21
CFR part 211) specifies the relationship between the quality organizations of Cadence
Pharmaceuticals and Bristol-Myers Squibb Srl BMS Anagni, for the Products listed in Appendix A.
These Products are manufactured and/or packaged and QC tested by BMS Anagni Company B (hereafter
referred to as BMS Anagni) and released and used for clinical trials by Cadence Pharmaceuticals
Company A (hereafter referred to as Cadence).
The abbreviation BMS Anagni is used throughout the remainder of this document to refer to
Bristol-Myers Squibb Srl located in Anagni, Italy represented by its affiliates or agents who are
signatories to this document. The abbreviation BMS refers to Bristol-Myers Squibb Company.
Quality contacts are listed in Appendix B.
A glossary of terms used in this document is shown in Appendix C.
2. PRIMARY RESPONSIBILITIES
2.1 |
|
The Cadence Pharmaceuticals Pharmaceutical Development and Quality Assurance Departments have
the responsibility to provide sufficient information to BMS Anagni to ensure that Products can
be manufactured, packaged and tested in accordance with cGMPs, the Product specifications and
Cadence requirements. The governing document for these requirements shall be the US
Investigational New Application (IND) number 58,362 which has been transferred from BMS to
Cadence Pharmaceuticals. Cadence will provide the manufacturing, specification and quality
sections of IND 58,362 directly to BMS Anagni with a letter authorizing the use of these
documents as the governing compliance document. The letter will be sent from the Vice
President of Regulatory Affairs and Quality Assurance at Cadence within 30 days of receipt of
the full IND from BMS. All manufacturing procedures, QC testing and release specifications
shall be in conformance with this IND application. |
2.2 |
|
Lawerence Laboratories, a Bristol-Myers Squibb Company wholly-owned subsidiary located in
Shannon, Ireland, has the responsibility to purchase and to ship to BMS Anagni, the API,
acetaminophen. |
|
2.2 |
|
BMS Anagni has the responsibility to purchase, test and release material, perform sampling,
maintain in-process controls and to ensure that the Products are manufactured, packaged, QC
tested and released for shipment in compliance with cGMPs and the Product registrations.
Anagni has also the responsibility to, test and release the API sent by Lawrence Laboratories |
|
2.3 |
|
Final certification and release of the bulk packaged Product to Cadence is the responsibility
of a BMS Anagni Qualified Person who will ensure that the Products have been manufactured,
packaged, and QC tested and in compliance with cGMPs and the IND application requirements. |
|
2.4 |
|
Final certification and release of the final labeled Product to clinical sites is the
responsibility of a Cadence Authorized Person who will ensure that the Products have been
handled, labelled and released to clinical sites in compliance with cGMPs and the IND
application requirements. |
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2.5 |
|
Changes to the manufacturing process, QC testing, release specifications or stability testing
requirements as outlined in IND 58,362 shall be approved by Cadence Quality Assurance and
Pharmacetical Development groups prior to implementation for any clinical batch of Product
intended for use by Cadence in clinical trials. |
|
2.6 |
|
A summary of responsibilities is included in Appendix D. |
3. CHANGE CONTROL
All changes will be completed in accordance with standard BMS Anagni procedures. This will
ensure that all the parties to this agreement are notified and their approval obtained, as
required, prior to the execution of the change. A change is defined as any alteration from the
process, QC testing, Specifications or other cGMP requirements outlined in IND 58,362. These
changes require approval by Cadence Quality Assurance and Pharmaceutical Development prior to
implementation.
4. MATERIAL RELEASE PROCEDURES
4.1 |
|
Starting Materials |
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|
|
API is supplied by Laurence Labs to BMS Anagni. BMS Anagni is responsible for inspecting
and testing starting materials according to approved in-house procedures and technical
specifications, which are in compliance with IND 58,362. |
4.2 |
|
Bulk Product / Bulk Nested Product / Finished Product |
|
4.2.1 |
|
Product testing, batch record review and batch release of Product will be performed by BMS
Anagni to ensure the Product meets specification listed in Attachment E, and was manufactured
in compliance with cGMPs, the Product IND 58,362 and other BMS, Anagi or Cadence requirements. |
|
4.2.2 |
|
For each batch of Product, BMS Anagni will send Cadence a Certificate of Analysis, a copy of
the Product Batch Record, a copy of all deviation reports and conclusions, a copy of any
out-of-specification reports and conclusions, other investigations conducted as a result of
deviations from production requirements and a Certificate of Conformance/Manufacture (CoC/M).
The CoC/M will include a statement that the batch has been manufactured and packaged according
to the master production documents in compliance with cGMPs and IND 58,362 and that any
deviations have been investigated as per BMS Anagni Standard Operating Procedures. In
addition, it will include the following information: |
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Product name, lot number, date of manufacture and expiry date (bulk nested
Products/Finished Products only) |
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Total quantity of bulk Product released (Number of units) |
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Notification if and when the batch was reprocessed or reworked using a validated procedure |
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Signature of BMS Anagni Product Release Authority |
4.3 |
|
Final certification and release of Product to clinical sites will be the responsibility of
Cadence Quality Assurance, who will act in accordance with applicable regulations and filings. |
5. BATCH RECORD RETENTION
5.1 |
|
Originals of all batch and laboratory documentation (including raw data) will be retained by
BMS Anagni according to regulatory and BMS Anagni requirements. |
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5.2 |
|
BMS Anagni will provide a copy of the complete batch documents to Cadence Quality Assurance. |
6. RETAIN SAMPLES
This requirement applies to bulk nested Product or Finished Product only. Bulk nested
Products are indicated by the abbreviation (BN) in Appendix A; Finished Products are
indicated by (FP) and bulk Product by (B).
BMS Anagni will ensure that retain samples of Product are kept under proper storage
conditions, as required to comply with retain sample requirements and/or registration
commitments. However, in no case should the number of retained samples be less than the
amount needed to perform twice the necessary tests for Finished Product release, with the
exception of sterility and bacterial endotoxin testing for which only one complete retest
quantity need be retained. Testing of retain samples may be initiated with approval of
Cadence Quality Assurance. Retain samples will be visually inspected on an annual basis as
per cGMP and BMS Anagni, requirements. Any issues will be immediately notified to Cadence
Quality Assurance.
7. STABILITY FOR FINISHED PRODUCT AND PLACEBO
This requirement applies to bulk nested Product and placebo or Finished Product and placebo
only. Bulk nested Products are indicated by the abbreviation (BN) in Appendix A; Finished
Products are indicated by (FP) and bulk Product by (B).
7.1 |
|
BMS Anagni will ensure the completion of appropriate stability studies on Products and
placebo in their primary packaging containers according to the stability protocol outlined in
IND 58,362, Attachment E, that will conform to current ICH and cGMP guidelines. |
|
7.2 |
|
For each lot of Product or placebo, representative samples must be collected for stability
testing according to the stability protocols. Stability to be performed on the clinical trial
lots according to the approved stability protocols, Attachment E. |
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7.3 |
|
If a confirmed result indicates a Product or placebo lot has failed to remain within
specifications, BMS Anagni is required to notify the Cadence Quality Assurance representatives
immediately. |
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7.4 |
|
In all cases BMS Anagni must investigate any confirmed out-of-specification result and
forward a copy of the completed investigation report within 30 days to Cadence Quality
Assurance. |
8. COMPLAINTS
8.1 |
|
Product complaint reports received by BMS Anagni from its customers will be handled in
accordance with standard BMS Anagni policies and guidelines. |
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8.2 |
|
When requested, BMS Anagni will investigate all Product complaints and provide Cadence
Quality Assurance with a written report within thirty (30) days after receipt of the complaint
or complaint sample as appropriate. |
9. RECALL
Recalls will be handled in accordance with applicable regulations and standard BMS Anagni
guidelines. The designated group that manages Product recalls is responsible for making all
Product recall decisions. Within certain jurisdictions, this group must include an
Authorized Person from Cadence Quality Assurance.
10. ANNUAL PRODUCT REVIEW Not Applicable
11. AUDITS
Audits of BMS Anagni will be performed by Cadence auditors prior to release of the first
clinical production lot by Cadence (only one audit is anticipated) and audit reports will be
available to the Anagni Quality group upon request.
12. VENDOR QUALIFICATION
This will be completed in accordance with appropriate Regulatory requirement and standard
BMS Anagni policies and guidelines.
13. STORAGE
BMS Anagni will ensure that pharmaceutical Products (bulk Product, bulk nested Product or
Finished Product) are stored within the Product label storage range defined in IND 58,362.
Excursions in temperature and/or relative humidity (if applicable) during storage must be
investigated. Any such excursion impacting on Product quality will be reported to the Authorized
Person.
14. SUBCONTRACTING
Where BMS Anagni proposes to subcontract any services related to the Products supplied, BMS
Anagni change control procedures will apply. Cadence Pharmaceutical Development and
Quality Assurance shall be notified of any intention to subcontract manufacturing or testing
activities to gain agreement prior to implementing any transfer activities.
15. MICROBIOLOGICAL MONITORING
BMS Anagni will maintain an appropriate microbiological monitoring program to ensure
acceptable microbiological quality and compliance with applicable regulations.
16. TRAINING
Each person engaged in the manufacturing, processing, packaging, testing or holding of a
drug Product shall have education, training, and experience, or any combination thereof, to
enable that person to perform the assigned functions. Training shall be in the particular
operations that the employee performs and in current applicable manufacturing regulations as
they relate to the employees functions. Training in applicable manufacturing regulations
shall be conducted by qualified individuals on a continuing basis and with sufficient
frequency to assure that employees remain familiar with requirements applicable to them.
This training must be documented in a training record for each employee.
17. QUALIFICATION & VALIDATION PROGRAMS
This will be completed in accordance with appropriate Regulatory expectations and standard
BMS Anagni policies and guidelines.
18. COMPLIANCE WITH LOCAL REGULATIONS
BMS Anagni undertakes to obtain and maintain the appropriate authorisation to manufacture
the Products. BMS Anagni shall inform the Cadence Quality Assurance person responsible about
any change or withdrawal of such authorisation without undue delay.
19. SHIPPING PROTOCOL AND RESPONSIBILITIES FOR RECEIPT OF PRODUCT AND PLACEBO
Shipping and resolution of product defects shall be managed as specified in the Clinical
Supply Agreement between Lawrence Laboratories and Cadence Pharmaceuticals, dated 21
February 2006.
Cadence shall evaluate the shipping protocols and any available data supplied by BMS for
both the product and placebo to determine the suitability of this information to support the
shipping of product by Cadence. If the BMS shipping data does not support the Cadence
proposed shipping conditions and procedures, Cadence shall conduct a shipping study for the
drug product and/or placebo to demonstrate the acceptability of the shipping conditions.
The Cadence shipping protocol and study results shall be shared with BMS.
20. HISTORY SECTION
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Version Number |
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Comment |
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Issue Date |
1
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First issue of the Quality Agreement
between Cadence and BMS Anagni for Products
listed in Appendix A
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June 2006 |
Issue date: This is defined as the date the document received final signature
Cadence Approval:
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Signed: |
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Richard E. Lowenthal, MSc, |
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Vice President Regulatory Affairs and
Quality Assurance, Cadence
Pharmaceuticals |
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Lawrence Laboratories:
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Signed: |
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Gillian OGHara |
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QA Director, Lawrence Labs |
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BMS Anagni Approval:
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Signed: |
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Eugenio Cusimano |
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QC/QA Director & Qualified Person
Bristol-Myers Squibb BMS Anagni |
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APPENDIX A:
Products:
Acetaminophen (Perfalgan) Injection [Active Product] (FP)
Acetaminophen (Perfalgan) Injection Placebo (FP)
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(BN)
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indicates this is a bulk nested Product |
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(B)
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indicates this is a bulk Product |
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(FP)
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indicates this is a Finished Product |
APPENDIX B:
Cadence Quality Assurance
Quality Contacts Richard E. Lowenthal, MSc
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Phone:
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858-335-1300 |
Fax:
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858-436-1401 |
e-mail:
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rlowenthal@cadencepharm.com |
Cadence Pharmaceutical Development
Product Development Contact William Craig, PhD
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Phone:
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858-354-0847 |
Fax:
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858-436-1401 |
e-mail:
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wcraig@cadencepharm.com |
Bristol-Myers Squibb BMS Anagni
Quality Contact Qualified Person
Eugenio Cusimano
QC/QA Director,
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Phone:
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++39 0775 762210 |
Fax:
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++39 0775 762285 |
e-mail:
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eugenio.cusimano@bms.com |
APPENDIX C:
Glossary of Terms
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Pharmaceutical Product
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Any Product that may be defined as a Bulk Product or a Finished Product |
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Bulk Product
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Any Product which has completed all processing stages up to, but not
including, packaging in a primary container (e.g., blister, bottle). |
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Finished Product
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Any Product that has completed all processing stages and is in its final
pack for release to Cadence. |
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Authorized Person
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The person or persons charged with final release of the batch for
clinical studies outside of the European Union (EU). |
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Qualified Person
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The person or persons charged with certification and batch release of
medicinal Products within the European Union (EU) or European Economic Area (EEA). |
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cGMP
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Current Good Manufacturing Practices for Pharmaceuticals as described in regulations
promulgated by the FDA or equivalent regulatory agency in a foreign country or
jurisdiction. |
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Governmental Authority
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Any (i) national, state, provincial, local or any foreign or
supranational government; (ii) governmental, regulatory or administrative authority,
agency or commission; or (iii) any court, tribunal or judicial or arbitral body. |
APPENDIX D:
Division of pharmaceutical responsibilities*
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Contract Giver:
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Cadence Pharmaceuticals, Inc. |
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Contract Acceptor
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Bristol Myers Squibb, Anagni |
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Contract Giver |
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Contract Acceptor |
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Agreement with the
registration documents
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þ
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þ |
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Active ingredient(s): |
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Specification
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þ
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þ Note 1 |
Supply/Procurement
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þ
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þ |
Testing
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o
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þ |
Release
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þ
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þ |
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Excipients: |
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Specification
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o
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þ Note 1 |
Supply/Procurement
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o
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þ |
Testing
|
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o
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þ |
Release
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o
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þ |
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Primary packaging: (Note 2) |
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Specification
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þ
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þ Note 1 |
Supply/Procurement
|
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o
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þ |
Testing
|
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o
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þ |
Release
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o
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þ |
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Secondary packaging (Note 3): |
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Specification
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þ
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þ Note 1 |
Supply/Procurement
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o
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þ |
Testing
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o
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þ |
Release
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o
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þ |
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Package leaflet: N/A |
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Specification
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o
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o |
Clearance for printing/proof reading
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o
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o |
Supply/Procurement
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o
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o |
Testing
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o
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o |
Release
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o
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o |
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* |
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This list is not necessarily all inclusive and is intended only as a summary of the highlights
contained within the body of the Quality Agreement. |
Contd
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Bulk product/bulk nested Product: |
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Manufacturing directions
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o
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þ Note 1 |
In-process control
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|
o
|
|
þ |
Manufacture
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o
|
|
þ |
Manufacturing record completion
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o
|
|
þ |
Review of manufacturing documentation
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o
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|
þ |
Testing directions
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o
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þ Note 1 |
Quality control/test record
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o
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|
þ |
Release
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þ
|
|
þ |
Certificate of manufacture/conformance
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o
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|
þ |
Certificate of analysis
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o
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|
þ |
Release for dispatch
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o
|
|
þ |
Assignment of batch number
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o
|
|
þ |
Assignment of expiration date
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o
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|
þ Note 4 |
Retain Samples
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þ
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|
þ see Section 6 |
Stability Testing
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þ
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|
þ see Section 7 |
Transportation to Contract Giver
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o
|
|
þ |
Review of manufacturer certificates
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þ
|
|
o |
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Authorized or Qualified Person release of
Finished Product
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þ
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|
o |
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Finished Product (Note 5) |
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Specification
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þ
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|
o Note 1 |
Packaging directions
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þ
|
|
o Note 1 |
In-process control
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þ
|
|
o |
Packaging
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þ
|
|
o |
Packaging record completion
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þ
|
|
o |
Review of packaging documentation
|
|
þ
|
|
o |
Testing directions
|
|
þ
|
|
o Note 1 |
Quality control/test record
|
|
þ
|
|
þ |
Certificate of analysis
|
|
þ
|
|
þ |
Certificate of manufacture/conformance
|
|
o
|
|
þ |
Assignment of batch number
|
|
þ
|
|
o |
Assignment of expiration date
|
|
þ
|
|
o |
Retain Samples
|
|
þ
|
|
o |
Stability Testing
|
|
o
|
|
o |
Transportation to warehouse (compliance with GDP)
|
|
o
|
|
o |
Review of manufacturer certificates
|
|
þ
|
|
o |
Authorized or Qualified Person release of
Finished Product
|
|
þ
|
|
o |
|
|
|
Note 1:
|
|
This refers to documents prepared internally by BMS Anagni. Any such documentation must
be in accordance with the appropriate Product registration. BMS Anagni is responsible for the
bulk finished product and all requirements for release and documentation. Cadence is
responsible for labeling of the product and final packaging to produce the clinical finished
product. |
|
|
|
Note 2:
|
|
This applies to bulk nested Product and Finished Product only see Appendix A |
|
|
|
Note 3:
|
|
This applies to Finished Product only see Appendix A
(Secondary packaging will occur at both BMS Anagni for shipment to the United
States and also at a 3rd party clinical packaging site for shipment to clinical
sites) |
|
|
|
Note 4:
|
|
This applies to bulk nested Product only see Appendix A |
APPENDIX E:
Testing Standards & Stability Protocols (attached)
[Note: Attached IND Stability Protocol as currently written]
Exhibit 10.15
EXHIBIT 10.15
CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
Execution Copy
CLEAR VIEW PROJECTS
May 19, 2005
Mr. Ted Schroeder
President and CEO
By Mail:
Cadence Pharmaceuticals
12730 High Bluff Drive, Suite 410
San Diego, CA 93130
By Email:
tschroeder@CadencePharm.com
Dear Ted:
Thank you for offering Clearview Projects, Inc, (Clearview) the opportunity to provide
Cadence Pharmaceuticals (Cadence or Company) with consulting services
(Services). This engagement letter (Engagement Letter) sets forth the terms
and conditions under which Clearview will perform such Services. Subsequent sections of this
Engagement Letter are organized as follows:
|
|
|
Background |
|
|
|
|
Services |
|
|
|
|
Fees and Expenses |
|
|
|
|
Other Terms |
Background
Cadence is a privately held, venture capital backed specialty pharmaceutical company focusing
on the hospital channel segment. Since its inception, the company has assembled an experienced
team of executives to fill out the senior management infrastructure. With this senior management
team in place, the company believes it is poised to scale up both its pipeline and commercial
launch activity.
Cadences first product, CPI-226, is a topical antimicrobial currently undergoing confirmatory
Phase III clinical trials. The primary endpoint for the CPI-226 Phase III trial is related to
so-called local catheter site infections. Management believes that confirmation of this endpoint
will lead to an FDA approval.
With CPI-226 as a starting base, the company seeks to acquire or in-license additional clinical
candidates or commercial products in order to fully develop the growth business model of the
company. Clearly, a key driver for scaling the initial growth curve of the company is this
product-level acquisition activity. To that end, you have identified three (3) late-stage
development program(s)/product(s) (Three Targets) for which you are in varying stages of
discussion with the current owner. Our understanding of the transaction situations associated with
each of the Three Targets is:
|
|
Phase III Pain Management development-stage program. The rights
to this late-stage development program are currently owned by a
Big Pharma and you anticipate the need to structure an offer in
the very near future for exclusive US rights. |
|
|
|
[***]. |
|
|
|
[***]. |
Services
Clearview will provide analytical and execution advice for all aspects of your efforts to
acquire rights associated with the Three Targets. These services will include:
|
|
Assistance in accessing the appropriate decision making process
within the current corporate owners organization. This will
include interaction with management at all levels in the companys
organization structure. |
|
|
|
Advice and support in developing a strategic business case for the
implied investment required for the acquisition/in-licensing of
these products/programs. This would include any interaction you
may require with the Cadence Board of Directors. |
|
|
|
Advice and support in structuring an offer and in executing all
aspects of the transaction process including business due
diligence and negotiations (alongside counsel and other functional
experts). |
|
|
|
Other related tasks that you may reasonably require in furthering
the acquisition initiatives. |
As with the vast majority of our engagements, we will utilize a team structure to perform the
engagement services. This approach enables Clearview to emphasize particularly specialized
expertise depending on the underlying task at hand. [***], Vice President and leader of
Clearviews partnering/alliance client activities, will oversee day-to-day aspects of the
engagement and will ensure that any mix of the professionals identified in Exhibit I are involved
as appropriate. In addition, other Clearview professional staff may be involved to effectively
carry out a variety of analytical and project management work activities.
During the term of this Engagement Letter, neither Cadence nor its Board will retain any other firm
to provide similar services to those being performed by Clearview and described herein
(Competitive Firm). A Competitive Firm, however, shall not include consultants providing
*** |
|
Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. |
2
specific expertise, support or advice not in competition with the Services relating to one or
more of the Three Targets.
The Services will be carried out for the specific use of Mr. Ted Schroeder, CEO of Cadence, and the
Board of Cadence. Commencement of the Services will be initiated upon the execution of this
Engagement Letter.
Fees and Expense
In consideration for our Services, Cadence will pay Clearview a cash monthly retainer
(Monthly Retainer) in the amount of $[***]. Should Cadence choose to stop its efforts
for pursuing a transaction for one or two of the Three Targets (Lapsed Target) and the
parties do not agree on a Substitute Target for each such Lapsed Target, then Clearviews
Monthly Retainer would be reduced to $[***] payable in cash. Substitute Target shall be
a commercial or late-stage development program/product which, upon mutual agreement between Cadence
and Clearview, becomes a constituency of the Three Targets. In addition to this Monthly Retainer,
upon the closing of each individual transaction involving the acquisition/in-licensing of rights
associated with any one of the Three Targets (Success Fee Transaction), Cadence will pay
Clearview, or an affiliate, $[***] (Success Fee). The consideration for the Success Fee
shall be composed of $[***] paid in cash (Cash Success Fee) and $[***] paid in the form
of either issued Cadence common equity (Equity Success Fee) or cash, the choice of which
shall be at the discretion of Cadence (Fee Choice). Cadence shall make its Fee Choice
within [***] days of closing a Success Fee Transaction. The number of common shares related to the
Equity Success Fee shall be determined by dividing $[***] by the price-per-share associated with
the equity financing round completed by Cadence within [***] days of closing a Success Fee
Transaction. If no equity financing round is completed by Cadence within [***]days of closing a
Success Fee Transaction, then the number of common shares related to the Equity Success Fee shall
be determined by dividing $[***] by the price-per-share associated with the most recent equity
financing round completed by Cadence.
The Monthly Retainer and Success Fee payments shall not include direct out-of-pocket expenses
incurred by Clearview in carrying out the Services (Expenses). We will invoice you
separately for Expenses, which for this engagement, should be principally travel-related and any
purchased third party market research that both Cadence and Clearview mutually agree to be
appropriate. Expenses incurred by Clearview shall be reimbursed by the Company in cash upon
receipt of reasonable documentation.
All Monthly Retainer and Expense payments shall be remitted to Clearview within [***]
business days of the Companys receipt of an invoice for such amounts. Success Fee payments shall
be remitted to Clearview at the closing of each such Success Fee Transaction. The Equity Success
Fee, however, shall be paid at the earlier of [***] days from closing a Success Fee
Transaction or within [***] business days of closing a Cadence equity financing round
subsequent to closing a Success Fee Transaction.
*** |
|
Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. |
3
All remittances to Clearview shall be wire-transferred in accordance with the following
instructions:
Bank: [***]
Account name: [***]
Account number: # [***]
SWIFT number: # [***]
SWIFT address: [***]
Other Terms
With no less than two weeks notice, (1) either party may terminate this Engagement Letter or
(2) Cadence may designate a Lapsed Target. In addition, (1) should Cadence terminate the
Engagement Letter and subsequently consummate a Success Fee Transaction within the [***]
period after such termination, then Clearview shall be entitled to a Success Fee for each such
transaction occurrence and (2) should Cadence consummate a Lapsed Success Fee Transaction
within the [***] period after such Lapsed Target designation, then Clearview shall be
entitled to a Success Fee for each such transaction occurrence. Lapsed Success Fee
Transaction shall be the closing of an individual transaction involving the
acquisition/in-licensing of rights associated with a Lapsed Target.
Clearview agrees that for the [***] period following either the termination of this
Engagement Letter, or as applicable, designation of a Lapsed Target, it shall not attempt or assist
in the attempt to enter into a partnership (Partnership) related to any one of the Three
Targets or a Lapsed Target without the prior written consent of Cadence. Partnership shall
include a program/product-level licensing or acquisition transaction, BUT, shall specifically
exclude the acquisition of a division or company whose assets include any one of the Three Targets
or a Substitute Target as a minority subset.
Either the Company or Clearview may terminate this Engagement Letter upon written notice to the
other party in the event of the dissolution, liquidation, insolvency of the other party or in the
event of a voluntary or involuntary bankruptcy or reorganization petition involving such other
party.
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INCIDENTAL,
CONSEQUENTIAL, INDIRECT, PUNITIVE OR EXEMPLARY DAMAGES (INCLUDING BUT NOT LIMITED TO LOST DATA,
LOST PROFITS OR SAVINGS, LOSS OF BUSINESS OR OTHER ECONOMIC LOSS) ARISING OUT OF, OR IN CONNECTION
WITH, THE SERVICES, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OR KNEW OF THE POSSIBILITY OF SUCH
DAMAGES, AND REGARDLESS OF THE NATURE OF THE CAUSE OF ACTION OR THEORY ASSERTED. Clearviews
liability for costs or damages allegedly incurred by Company arising out of, or in connection with,
Clearviews performance of the Services pursuant to this Engagement Letter shall be limited to the
aggregate amount of Fees paid to Clearview pursuant to this Engagement Letter.
*** |
|
Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. |
4
Without limiting any other rights or remedies of Clearview under this Engagement Letter, and
regardless of any investigation made at any time by or on behalf of Clearview or any information
Clearview may have, the Company shall indemnify and save harmless Clearview, its directors,
officers, employees, agents and assigns from and against any liability, damages (including punitive
damages), injury (including property damage, personal injury or death), loss, claim, cost, debt,
expense, obligation, public charge, lawsuit, contract, agreement, undertaking or deficiency of any
kind or nature, whether known or unknown, fixed, actual, accrued, or contingent, liquidated or
unliquidated (including, but not limited to, reasonable attorneys fees and other costs and
expenses incident to proceedings or investigations or the defense of any claim whether or not
litigation is commenced), arising out of, resulting from, or relating to, any act or omission
(other than gross negligence or willful misconduct) of Clearview, its employees, agents, associates
or assigns that occurs during the term of this Engagement Letter. This indemnification shall
survive the termination of this Engagement Letter.
Cadence indemnifies and releases Clearview from all liability relating to any access to, or use of,
information prepared in any form whatsoever by Clearview in carrying out the Services
(Clearview Information) by any other party. The Company acknowledges and agrees that the
duties of Clearview under this Engagement Letter are owed solely to the Company. The advice (oral
or written) rendered by Clearview pursuant to this Engagement Letter is intended solely for the
benefit and use of the management of the Company and its Board in considering such matters to which
this Engagement Letter relates and the parties agree that such advice may not be relied upon by any
other person.
The Company also acknowledges that any projections or forward-looking statements contained in
Clearview Information involve risks, uncertainties and other factors that may cause actual results
to differ materially from those expressed or implied in such projections or forward-looking
statements and that it is likely that actual results will differ materially from those contemplated
by such projections or forward-looking statements, and that Clearview gives no representations or
warranties, express or implied, that any such projections or forward-looking statements will be
realized.
Neither party may transfer or assign any of its rights or obligations under this Engagement Letter
without the prior written consent of the other party.
All notices or communications hereunder shall be sent in by facsimile transmission (if available)
or email (if available), followed by a signed copy sent by commercial mail or courier, and shall be
deemed to have been given two days after being transmitted.
Notice to Clearview shall be addressed to:
Clearview Projects, Inc.
100 Overlook Center
Princeton, NJ 08540
609-580-3600
5
FAX: 609-580-0047
Attn: Chief Executive Officer
Notice to Company shall be addressed to:
Cadence Pharmaceuticals
12730 High Bluff Drive, Suite 410
San Diego, CA 93130
858-436-1400
FAX: 858-436-1401
Attn: Chief Executive Officer
Written notification of change in address, telephone, fax, email or contact person is required to
be provided by either party to the other party in the same manner as notices.
This Engagement Letter shall be governed by, construed and enforced in accordance with the laws of
the State of Delaware, excluding its choice of law provisions. Any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in connection with,
this Engagement Letter or the transactions contemplated hereby may be brought in the courts of the
State of New Jersey and the federal courts of the United States of America located in New Jersey.
Each of the parties (a) consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding, (b) irrevocably
waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to
the laying of the venue of any such suit, action or proceeding in any such court or that any such
suit, action or proceeding which is brought in any such court has been brought in an inconvenient
forum, (c) will not attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court, and (d) will not bring any action relating to this Engagement Letter
or any of the transactions contemplated by this Engagement Letter in any other court. Process in
any such suit, action or proceeding may be served on any party anywhere in the world, whether
within or without the jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in this paragraph will be deemed effective
service of process on such party.
This Engagement Letter contains all of the understandings and agreements of the parties with
respect to the subject matter hereof and any and all prior understandings and agreements between
the parties are superseded by this Engagement Letter. This Engagement Letter may not be modified
unless the modification is in writing and executed by both parties.
6
We look forward to working with you on this exciting project. If this Engagement Letter is
satisfactory, please execute one copy below and return it to me by facsimile or in the envelope
provided.
|
|
|
|
|
|
Very truly yours,
Clearview Projects, Inc.:
|
|
|
Name |
Jan S. Wolpert |
|
|
Title |
CEO |
|
|
Signature |
/s/ Jan S. Wolpert
|
|
|
Date |
5/20/05 |
|
|
Accepted and Agreed:
Cadence Pharmaceuticals:
|
|
|
|
|
Name |
Theodore R. Schroeder |
|
|
|
Title |
President and CEO |
|
|
|
Signature |
/s/ Theodore R. Schroeder
|
|
|
|
Date |
5/20/05 |
|
|
|
|
7
Exhibit I. Clearview Bios
[***]
[***]
[***]
[***]
*** |
|
Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. |
8
[***]
[***]
[***]
*** |
|
Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. |
9
Exhibit 23.1
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption Experts and to the use of our
report dated April 21, 2006, in Amendment No. 2 to the Registration Statement (Form
S-1 No. 333-135821) and related
Prospectus of Cadence Pharmaceuticals, Inc. for the registration of
its shares of common stock.
San Diego, California
September 19, 2006
Correspondence
|
|
|
12636 High Bluff Drive, Suite 400 |
San Diego, California 92130-2071 |
Tel: (858) 523-5400 Fax: (858) 523-5450 |
www.lw.com |
|
|
|
FIRM / AFFILIATE OFFICES |
Brussels
|
|
New York |
Chicago
|
|
Northern Virginia |
Frankfurt
|
|
Orange County |
Hamburg
|
|
Paris |
Hong Kong
|
|
San Diego |
London
|
|
San Francisco |
Los Angeles
|
|
Shanghai |
Milan
|
|
Silicon Valley |
Moscow
|
|
Singapore |
Munich
|
|
Tokyo |
New Jersey
|
|
Washington, D.C. |
|
|
|
File No. 038916-0007 |
September 25, 2006
Jeffrey Riedler
Assistant Director
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Mail Stop 7010
Washington, D.C. 20549
|
|
|
Re:
|
|
Cadence Pharmaceuticals, Inc. |
|
|
Amendment No. 2 to Registration Statement on Form S-1 |
|
|
Filed September 25, 2006 |
|
|
SEC File No. 333-135821 |
Dear Mr. Riedler:
We are in receipt of the Staffs letter dated September 13, 2006 with respect to the
above-referenced Registration Statement. We are responding to the Staffs comments on behalf of
Cadence Pharmaceuticals, Inc. (Cadence or the Company) as set forth below. Simultaneously with
the filing of this letter, Cadence is submitting (by EDGAR) Amendment No. 2 to its Registration
Statement on Form S-1 (the Amendment), responding to the Staffs comments. Courtesy copies of
this letter and the Amendment (specifically marked to show the changes thereto) are being submitted
to the Staff by hand delivery.
Cadences responses set forth in this letter are numbered to correspond to the numbered
comments in the Staffs letter. All terms used but not defined herein have the meanings assigned
to such terms in the Amendment. For ease of reference, we have set forth the Staffs comments and
Cadences response for each item below.
Form S-1
Prospectus Summary, page 1
|
1. |
|
We note that in response to comments 6 and 17, you disclose in the Risk
Factors discussion on page 4 the information our comments requested. Although we do
not object to your including this information in the Risk Factors discussion, it
should also appear on page 2, where you first discuss those issues. |
Jeffrey Riedler
September 25, 2006
Page 2
|
|
|
Please state in the first full paragraph on page 2 that there are no patents for
the drug acetaminophen and that your patents for IV APAP relate only to the
specific formulation of the drug. |
Cadences Response: Cadence has revised the Amendment in accordance with the Staffs comment to
include a statement that there is no patent protection for acetaminophen and that Cadences patents
for IV APAP relate only to the specific formulation of the drug. Please refer to the revisions on
page 2 of the Amendment.
|
|
|
Please state in the second full paragraph on page 2 that the FDA might require
you to perform additional trials for IV APAP, and you might not ever obtain
approval for this drug in the United States. |
Cadences Response: Cadence has revised the Amendment in accordance with the Staffs comment.
Please refer to the revisions on page 2 of the Amendment.
|
2. |
|
We note your response and revisions pursuant to comment 5. However, the issue
does not appear to be resolved, so we reissue the comment. You state in the second
full paragraph on page 2 that IV APAP has undergone six Phase III trials. Please
discuss any difficulties or other issues that have necessitated six Phase III trials
rather than just one. If the number of trials is caused only by multiple indications,
disclose that fact. |
Cadences Response: Cadence has revised the Amendment in accordance with the Staffs comment to
clarify that the number of trials was driven by the multiple indications sought by Cadences licensor,
Bristol-Myers Squibb Company (BMS). Please refer to the revisions on page 2 of the Amendment.
Cadence supplementally advises the Staff that there were no other difficulties that necessitated
the multiple Phase III trials conducted by BMS.
Risk Factors
If any of our product candidates for which we receive regulatory approval . . . , page 12
|
3. |
|
We note your response to comment 10, and we reissue the comment. The fact that
you know of a trend that is actually occurring that could reduce the marketing impact
of any superiority claims you make regarding omiganan appears to warrant a separate
risk factor discussing the situation in detail. Please revise. |
Cadences Response: Cadence has revised the Amendment in accordance with the Staffs comment to
include a new risk factor discussing the decreasing use of 10% povidone-iodine in favor of
chlorhexidine. Please refer to the revisions on page 13 of the Amendment.
Our product candidates may have undesirable side effects . . . , page 14
|
4. |
|
We note your response to comment 11, and we reissue the comment. Please note
that we are not requesting simply what acetaminophen has the potential to cause.
Also,
|
Jeffrey Riedler
September 25, 2006
Page 3
your disclosure should be more specific than the statement that the adverse events have
all been related to the skin. Please identify and describe the side effects and
adverse events that have been observed in the clinical trials of your products to date.
Cadences Response: Cadence has revised the Amendment in accordance with the Staffs comment to
include a description of the drug-related adverse events that have been observed in the clinical
trials to date. Please refer to the revisions on page 15 of the Amendment.
We will need to increase the size of our organization . . . ,page 18
|
5. |
|
We note your response to comment 14. Please revise the risk factor to state
your best estimate as to the approximate number of employees you will need to hire in
the next 12 months and the approximate cost of doing so. State, if true, that you do
not currently know how many employees you will need beyond that timeframe. |
Cadences Response: Cadence has revised the Amendment in accordance with the Staffs comment.
Please refer to the revisions on page 19 of the Amendment.
We may not be able to manage our business effectively if we are unable . . . , page 18
|
6. |
|
We note your response to comment 15, and we reissue the comment. Since you
state the loss of one or more of the members of [your] senior management team or other
key employees would harm your business, you should identify the individuals to whom
you are referring. Please revise to identify the members of your senior management
team and the other employees you consider to be key. |
Cadences Response: Cadence has revised the Amendment in accordance with the Staffs comment.
Please refer to the revisions on page 19 of the Amendment.
Special Note Regarding Forward-Looking Statements, page 32
|
7. |
|
Please delete from the last paragraph of this section the statement that
investors should not place undue reliance on these forward-looking statements.
Although we do not object to the other cautionary statements in this section, this
statement appears to disclaim responsibility for information in your document. |
Cadences Response: Cadence has revised the Amendment in accordance with the Staffs comment.
Please refer to the revisions on page 34 of the Amendment.
Use of Proceeds, page 34
|
8. |
|
We note your response to comment 21. We reissue the comment because 20% of the
proceeds still appears to be a material amount. Please identify with more specificity
the uses currently described as working capital, capital expenditures and other
general corporate purposes, and state an approximate amount for each use. |
Jeffrey Riedler
September 25, 2006
Page 4
Cadences Response: Cadence has revised the Amendment to provide approximate dollar amounts of the
net proceeds intended to be used to: (i) fund clinical trials for its two product candidates and
other research and development activities and (ii) fund capital expenditures. Please refer to page
35 of the Amendment. Cadence supplementally advises the Staff that these amounts total $62
million and represent approximately 95% of the anticipated net proceeds from the offering, which
Cadence, at this time, estimates will be approximately $65 million. Accordingly, Cadence
respectfully submits to the Staff that no further detail is necessary to adequately inform
investors of the material anticipated use of proceeds from the offering.
Managements Discussion and Analysis of Financial Condition and Results . . . , page 41
Critical Accounting Policies and Estimates, page 43
Stock-Based Compensation, page 44
|
9. |
|
Regarding the disclosures that you provided in response to prior comments 39
and 40, please expand them to: |
|
a. |
|
Qualitatively and quantitatively discuss
the specific significant factors and assumptions utilized in your
asset-based approach and current value method in determining the fair
value of your common stock at a $0.10 per share prior to March 2006,
as per paragraph 182(a) of the AICPA Practice Aid. |
Cadences Response: Cadence has revised the Amendment in accordance with the Staffs comment.
Please refer to the revisions on page 46 of the Amendment.
|
b. |
|
Qualitatively and quantitatively elaborate
on how the licensing of IV APAP and the advancement of our business
model primarily contributed to the difference between the $0.10 per
share prior to March 2006 and the $0.34 per share between March and
June 2006. See paragraph 182(b) of the AICPA Practice Aid. |
Cadences Response: Cadence has revised the Amendment in accordance with the Staffs comment.
Please refer to the revisions on page 46 of the Amendment.
|
c. |
|
Qualitatively and quantitatively discuss
the significant factors, assumptions and methodologies used in the
contemporaneous valuations of $0.34 and $0.80 per share, including
how the enterprise value was estimated and changed. |
Cadences Response: Cadence has revised the Amendment in accordance with the Staffs comment.
Please refer to the revisions on page 46 of the Amendment.
|
d. |
|
Qualitatively and quantitatively elaborate
on how the prospect of an IPO alone primarily contributed to the
difference between the $0.34
per share between March and June 2006 and the $0.80 per share since
June 2006. See paragraph 182(b) of the AICPA Practice Aid.
|
Jeffrey Riedler
September 25, 2006
Page 5
Cadences Response: Cadence has revised the Amendment in accordance with the Staffs comment.
Please refer to the revisions on page 46 of the Amendment.
|
e. |
|
Qualitatively and quantitatively describe
how and why the significant factors, assumptions and methodologies
changed between the valuations of $0.10, $0.34 and $0.80 per share. |
Cadences Response: Cadence has revised the Amendment in accordance with the Staffs comment.
Please refer to the revisions on page 46 of the Amendment.
|
f. |
|
Qualitatively and quantitatively explain
how each valuation considered the probability of ultimately being
successful with your product candidates or not and the probability of
ultimately completing an IPO or not. |
Cadences Response: Cadence has revised the Amendment in accordance with the Staffs comment.
Please refer to the revisions on page 46 of the Amendment.
|
g. |
|
Once you can reasonably estimate the IPO
price, qualitatively and quantitatively discuss each significant
factor contributing to the difference between each valuation and the
estimated IPO price. See paragraph 182(b) of the AICPA Practice Aid. |
Cadences Response: Cadence acknowledges the Staffs comment and will qualitatively and
quantitatively discuss each significant factor contributing to the difference between each
valuation and either (i) the estimated offering price, or (ii) if a contemporaneous valuation by an
unrelated valuation specialist was obtained subsequent to the grants but prior to the IPO, the fair
value as determined by that valuation. Cadence respectfully advises the Staff that it will provide
such information in a pre-effective amendment to the Registration Statement prior to circulating
the preliminary prospectus for the offering.
Business
Our Product Development Programs, page 54
|
10. |
|
We note your response to comment 25, and we reissue the comment in part. Given
that BMS completed Phase III trials for IV APAP in the United States, please explain
why BMSs trials were not sufficient to support a new drug application. The Clinical
Development Plan discussion on page 60, which you reference in your response, does not
appear to address this issue; it focuses on your plans going forward. |
Cadences Response: Cadence has revised the Amendment in accordance with the Staffs comment to
clarify that because the Phase III clinical trial requirements differ in the United
States compared to Europe, Cadence is required to complete additional Phase III trials to support a
New Drug Application. Please refer to the revisions on page 56 of the Amendment.
Jeffrey Riedler
September 25, 2006
Page 6
Manufacturing, page 68
|
11. |
|
We note that in response to comment 13, you state the agreement with Lawrence
Laboratories for the manufacture of IV APAP involves no long-term commitment by either
party. However you disclose the agreement extends until the earlier of regulatory
approval or December 31, 2008, which appears to be long-term. Please reconcile these
statements so it is clear how the agreement is not a long-term agreement.
Alternatively, file the agreement as an exhibit. We may have further comments. |
Cadences Response: Cadence has filed the Clinical Supply Agreement with Lawrence Laboratories as
an exhibit to the Registration Statement. Please refer to Exhibit 10.14 of the Amendment.
Certain Relationships and Related Party Transactions, page 98
|
12. |
|
We note your response to comment 30. |
|
|
|
Please state how many shares of Series A-1 preferred stock you issued to
Windamere III, LLC to settle the $500,000 advance. |
Cadences Response: Cadence has revised the Amendment in accordance with the Staffs comment to
refer to the amount of shares issued to Windamere III, LLC in settlement of the $500,000 advance.
Please refer to the revisions on page 103 of the Amendment.
|
|
|
Please file as exhibits your agreements with Windamere III and Clearview
Projects. Given the amount of consideration in these two transactions, the
transactions appear to have been material. |
Cadences Response: Cadence has filed as an exhibit the agreement with Clearview Projects. Please
refer to Exhibit 10.15 of the Amendment. Cadence advises the Staff that the $500,000 advance to
Cadence from Windamere III, LLC was made pursuant to an oral agreement at the time of Cadences
inception. Accordingly, there is no written agreement with Windamere III, LLC to be filed. However,
Cadence has described the material terms of this advance in the Registration Statement. Please
refer to the Certain Relationships and Related Party Transactions Other Transactions section
on page 103 and the Notes to Financial Statements Related Party Transactions section on
page F-13 of the Amendment.
Jeffrey Riedler
September 25, 2006
Page 7
Index to financial Statements, page F-1
Notes to financial Statements, page F-7
6. License Agreements and Acquired Development and Commercialization . . . , page F-14
|
13. |
|
Please refer to your response to our prior comment number 37. Please
qualitatively and quantitatively demonstrate how you concluded that any alternative
accounting would not have a material impact on your financial statements. See SAB
Topic 1.M. (SAB 99). |
Cadences Response: Based on our telephone discussion with Oscar Young and Tabatha Akins of the
Staff on September 18, 2006, regarding this comment we will separate our response into two parts.
First, we address additional information surrounding our accounting applied, and second, we address
the materiality of any impact on the financial statements if Cadence would have applied SFAS 115,
Accounting for Certain Investments in Debt and Equity Securities.
Additional information regarding the accounting applied
Cadence chose, with the approval of its audit committee, not to apply the provisions of SFAS 115
because it did not acquire the shares of Migenix stock for the purpose of investing its available
funds. Instead the shares were acquired solely as a condition of the licensor to complete the
transaction to acquire the rights to Omigard. Since Cadence would be receiving unregistered stock
that was thinly traded, and with the understanding that it would be held through the development
period, Cadence concluded that the stock should be carried at its expected net realizable value,
which was estimated to be minimal. The difference between the cost of $500,000 and expected future
value, or $400,000, was recognized as part of the cost to license the product and recorded as in
process technology in Cadences 2004 results of operations.
In reviewing the provisions of SFAS 115, paragraph 3.c. states that restricted stock does not meet
that definition of an equity security and therefore SFAS 115 would not apply. Restricted stock is
defined for the purpose of SFAS 115, as follows:
"[E]quity securities for which sale is restricted by governmental or contractual
requirement (other than in connection with being pledged as collateral) except if
that requirement terminates within one year or if the holder has the power by
contract or otherwise to cause the requirement to be met within one year. Any
portion of the security that can be reasonably expected to qualify for sale within
one year, such as may be the case under Rule 144 or similar rules of the SEC, is not
considered restricted.
While the contract does not specifically restrict the sale of the shares, the shares were not
registered for immediate re-sale. Furthermore, it was the clear understanding between the parties
that Cadence would not immediately re-sell the shares, and the nature of the shares acquired in
substance created the same condition.
Cadence acknowledges that had it acquired the Migenix shares as an investment, the shares would
meet the definition of an equity security under SFAS 115 and its provisions would have been
applied.
Jeffrey Riedler
September 25, 2006
Page 8
Materiality considerations under SAB 99
Cadence is a development stage company founded in May 2004. It has had no revenues and since
inception has primarily been dedicated to research activities. Had Cadence recorded the shares as
an investment in equity securities, the difference between the accounting applied and the
accounting under SFAS 115 would be as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
|
|
2005 |
|
|
|
2006 |
|
|
|
Total |
|
|
|
Write-down,
as currently recorded |
|
|
$ |
400 |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
|
$ |
400 |
|
|
|
Write-down, assuming
application of SFAS 115 |
|
|
$ |
95 |
|
|
|
$ |
183 |
|
|
|
$ |
1 |
|
|
|
$ |
279 |
|
|
|
Over (under) |
|
|
$ |
305 |
|
|
|
$ |
(183 |
) |
|
|
$ |
(1 |
) |
|
|
$ |
121 |
|
|
|
Net loss, as reported |
|
|
$ |
(3,142 |
) |
|
|
$ |
(7,523 |
) |
|
|
$ |
(34,870 |
) |
|
|
$ |
(45,535 |
) |
|
|
Equity, as reported |
|
|
$ |
4,422 |
|
|
|
$ |
14,623 |
|
|
|
$ |
34,428 |
|
|
|
|
N/A |
|
|
|
SEC Staff Accounting Bulletin No. (SAB 99) provides guidance on assessing materiality as
follows:
"[Q]uantifying, in percentage terms, the magnitude of a misstatement is only the
beginning of an analysis of materiality; it cannot appropriately be used as a
substitute for a full analysis of all relevant considerations. Materiality concerns
the significance of an item to users of a registrants financial statements. A
matter is material if there is a substantial likelihood that a reasonable person
would consider it important. In its Concepts Statement 2, the FASB stated the
essence of the concept of materiality as follows:
The omission or misstatement of an item in a financial report is material if, in
the light of surrounding circumstances, the magnitude of the item is such that it
is probable that the judgment of a reasonable person relying upon the report would
have been changed or influenced by the inclusion or correction of the item.
The users of Cadences financial statements have historically been its investors, who generally
were also represented on its board of directors. To date, Cadences financial results have been
secondary to realizing Cadences potential through the successful development and commercialization
of its product candidates. Cadence is confident in representing to the Staff that the impact of not
applying the alternative accounting under SFAS 115 to the Migenix shares would not have altered any
of the investors decisions regarding their investment or in making strategic decisions.
SAB 99 also states that:
Evaluation of materiality requires a registrant and its auditor to consider all the
relevant circumstances, and the staff believes that there are numerous
circumstances in which misstatements below 5% could well be material. Qualitative
factors may cause misstatements of quantitatively small amounts to be material; as
stated in the auditing literature:
Jeffrey Riedler
September 25, 2006
Page 9
As a result of the interaction of quantitative and qualitative considerations in
materiality judgments, misstatements of relatively small amounts that come to the
auditors attention could have a material effect on the financial statements.
Among the considerations that may well render material a quantitatively small
misstatement of a financial statement item are:
|
|
|
whether the misstatement arises from an item capable of precise measurement or
whether it arises from an estimate and, if so, the degree of imprecision inherent
in the estimate, |
|
|
|
|
whether the misstatement masks a change in earnings or other trends, |
|
|
|
|
whether the misstatement hides a failure to meet analysts consensus
expectations for the enterprise, |
|
|
|
|
whether the misstatement changes a loss into income or vice versa |
|
|
|
|
whether the misstatement concerns a segment or other portion of the
registrants business that has been identified as playing a significant role in
the registrants operations or profitability, |
|
|
|
|
whether the misstatement affects the registrants compliance with regulatory
requirements, |
|
|
|
|
whether the misstatement affects the registrants compliance with loan
covenants or other contractual requirements, |
|
|
|
|
whether the misstatement has the effect of increasing managements compensation
for example, by satisfying requirements for the award of bonuses or other forms
of incentive compensation, and |
|
|
|
|
whether the misstatement involves concealment of an unlawful transaction. |
With the exception to the first consideration listed above where the difference is capable of
precise measurement, none of the considerations would apply to Cadence.
In summary, Cadence believes that the accounting applied to the Migenix shares was appropriate
based on the facts and circumstances under which the shares were acquired. However, if the Staff
concludes that an alternative accounting under SFAS 115 should have been applied, Cadence, for the
reasons described above, believes that the impact of the alternative accounting would not be
material to the users of its financial statements.
Jeffrey Riedler
September 25, 2006
Page 10
Finally, Cadence supplementally advises the Staff that it has revised its unaudited balance
sheet at June 30, 2006 and its unaudited results of operations for the six months ended June 30, 2006
and for the period from May 26, 2004 through June 30, 2006 to reflect an adjustment to increase
accrued liabilities (clinical trial accrual) and research and development expenses by $1.2 million.
In reviewing the clinical trial activity after June 30, 2006, Cadence discovered that it was not
receiving data from its investigator sites timely. The process to ensure that Cadence has all
the information to estimate the clinical trial accrual has been rectified.
* * *
Any comments or questions regarding the foregoing should be directed to the undersigned at
(858) 523-5435. Thank you in advance for your cooperation in connection with this matter.
|
|
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|
Very truly yours,
/s/ Cheston J. Larson
Cheston J. Larson
of LATHAM & WATKINS LLP
|
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Enclosures
|
|
|
cc:
|
|
Theodore R. Schroeder, Cadence Pharmaceuticals, Inc. |
|
|
William R. LaRue, Cadence Pharmaceuticals, Inc. |
|
|
David A. Socks, Cadence Pharmaceuticals, Inc. |
|
|
Faye H. Russell, Latham & Watkins LLP |
|
|
Mark B. Weeks, Heller Ehrman LLP |
|
|
Ross L. Burningham, Heller Ehrman LLP |
|
|
Richard Mejia, Jr., Ernst & Young LLP |