Provision Language
Definitions
“COGS”shall mean the total cost of Manufacture of a unit of COVID Product sold and shall include Manufacturing Costs and Pass–Through Costs, as defined below, and subject to periodic review and changes over time:
“Manufacturing Costs” shall mean [*****]: (i)“Standard Manufacturing Cost” is a budgeted cost per unit established to facilitate inventory evaluation, planning and budgeting, which shall include: [*****]. (ii) “Cost Variances” is the variance between, for a period to be agreed by the Parties, actual costs of Manufacturing versus the Standard Manufacturing Cost and may include [*****]; (iii) “Other Manufacturing Costs” are additional costs of Manufacturing which [*****]; and (iv) “Freight” are costs incurred for [*****]. Manufacturing
Costs shall exclude: (a) excess costs that result from a Party’s (or its Affiliate’s) negligence or willful misconduct. Based on each Party’s accounting policies, Manufacturing Cost can be calculated [*****].
“Pass–Through Costs” within COGS shall include [*****].
“FTE Rate” shall mean for GSK and CureVac, as applicable, for the period commencing on the Effective Date until such time as the Parties mutually agree otherwise, €[*****] per annum. The FTE Rate shall include all fully loaded costs, including costs of salaries (including overtime), benefits, other employee costs, overhead and supporting general and administration allocations. The Parties may agree on an increase of the FTE Rate for inflation on an annual basis based upon the percentage increase in the European ConsumerPrice Index.
“Net Sales” shall mean the gross invoice price of COVID Product sold by the sellingParty or its Affiliates or Sublicensees directly to a Third Party, less the following deductions if and to the extent such deductions to unaffiliated entities are actually allowed and granted: (i) trade, quantity, and/or cash discounts, charge–back payments, allowances or rebates, including promotional or similar discounts or rebates, and discounts or rebates to governmental or managed care organizations; (ii) discounts provided in connection with coupon, voucher or similar patient programs; (iii) credits or allowances given or made with respect to a COVID Product by reason of rejection, defects, recalls, returns, rebates, or retroactive price reductions; (iv) any tax, tariff, duty or government charge (including any sales, value added, excise or similar tax or government charge, but excluding any income tax) levied on the sale, transportation or delivery of COVID Product and borne by the selling Party, its Affiliates or Sublicensees without reimbursement from any Third Party; (v) any charges for freight, postage, shipping or transportation, or for insurance, in each case to the extent borne by the selling Party, its Affiliates or Sublicensees without reimbursement from any Third Party; and (vi) any administrative fees paid to group purchasing organizations or managed care entities for the sale of COVID Product (provided, however, that such deduction may not exceed two percent(2%) of the gross sales in the corresponding accounting period). All such discounts, allowances, credits, rebates and other deductions shall be fairly and equitably allocated to the sale of the relevant COVID Product by the selling Party, its Affiliates or Sublicensees, such that the COVID Product does not bear a disproportionate portion of such deductions as compared to other products sold separately from but with a certain link or other connection to the COVID Product.For the avoidance of doubt, the Net Sales shall be calculated only once for the first bona fide arm’s length sale of the COVID Product by either the selling Party, its Affiliate or its Sublicensee, to a Third Party which is neither an Affiliate nor a Sublicensee of the selling Party. Net Sales shall be determined in accordance withInternational Financial Reporting Standards (IFRS) applied in a consistent manner.
In the event a COVID Product is sold as part of a Combination Product (either as a separate Finished Product sold together with other products or because the Drug Substances associated with that COVID Product are formulated with additional other therapeutically or prophylactically active pharmaceutical ingredients (including, if mutually agreed between the Parties, [*****]) or companion or complementary diagnostic), Net Sales of the Combination Product will be calculated, on a country–by–country basis, as follows: (i) If (x) the COVID Product and (y) the other product(s) or active pharmaceutical ingredient are also sold separately in the applicable country, Net Sales of the COVID Product portion of the Combination Product will be calculated by multiplying the total Net Sales of the Combination Product by the fraction A/(A+B), where A is the average gross selling price in the applicable country of the COVID Product sold separately in the same formulation and dosage, andB is the sum of the average gross selling prices in the applicable country of all other products or active ingredients in the Combination Product sold separately during the applicable Calendar Quarter. (ii) If the COVID Product is sold separately, but the average gross selling price of the other product(s)or active ingredients cannot be determined, Net Sales of the Combination Product shall be equal to the Net Sales of the Combination Product multiplied by the fraction A/C whereinA is the average gross selling price of the COVID Product and C is the average gross selling price of the Combination Product. (iii) If the other product(s) or other active ingredients is/are sold separately, but the average gross selling price of theCOVID Product cannot be determined, Net Sales of the Combination Product shall be equal to the Net Sales of theCombination Product multiplied by the following formula: one (1) minus B/C wherein B is the average gross selling price of the other product(s)or active ingredients and C is the average gross selling price of the Combination Product. (iv) If the average gross selling price of neither the COVID Product, nor the other product(s) or active ingredients, can be determined, e.g., because neither the COVID Product, nor the other product in a Combination Product, are being sold separately, Net Sales of the Combination Product shall be equal to Net Sales of the Combination Product multiplied by A/B whereinA is the number of COVID Products comprised in the Combination Product and B is the sum of “one” for each COVID Product and the relative value of the other product(s) and/or other active pharmaceutical ingredients comprised in the Combination Product, such value to be determined by the patent protection status of the respective products, the development costs of the respective products, and the pricing of comparable products in the MajorMarkets.For illustration purposes, if there are two additional active ingredients in a CombinationProduct, one valued at 30 percent of the average price of the COVID Products, and one valued at 50 percent of the average price of the COVID Products, A/B equals 2/2.8, and Net Sales are multiplied by 0.71. The Parties will agree on the respective values in the JSC. If the JSC is unable to agree on the respective values within [*****] the matter being referred by either Party to the JSC, either Party may refer the matter for resolution in accordance with Section 15.5(viii), provided that the reference to “fair market value”shall be replaced with the value of the respective COVID Product and the relative value of the other product(s) and/or other active pharmaceutical ingredients. Each Party will bear equally the cost of the experts appointed in accordance with Section 15.5(viii). (v) The average gross selling price for such other product(s) or active ingredients contained in the Combination Product shall be calculated for each [*****] period by dividing the sales amount by the units of such other product(s), as published by IMS or another mutually agreed independent source. In the initial [*****] period during which aCombination Product is sold, forecasted average gross selling prices shall be used for royalty calculation purposes.Any over or under payment due to a difference between forecasted and actual average gross selling prices shall be paid or credited in the second royalty payment of the following [*****] period. In the following Calendar Year the average gross selling price of the previous year shall apply from the second royalty payment on.
“Regulatory Exclusivity” shall mean, on a country–by–country and COVID Product–by– COVID Product basis, an additional protection, other than patent protection, granted by a Regulatory Authority that confers an exclusive period during which a Party or its Affiliates or Sublicensees have the exclusive right to market or sell a COVID Product in such country through a regulatory exclusivity right (e.g., new use or indication exclusivity, new formulation exclusivity, orphan drug exclusivity, pediatric exclusivity, or any applicable data exclusivity), provided that regulatory exclusivity shall only be deemed to exist in a country if (i) Applicable Laws, and the guidance, policies and practice of the competent Regulatory Authority allow other mRNA–Based products to qualify as generic or biosimilar versions of a COVID Product; and (ii) as a result, absent or after the expiry of the regulatory exclusivity right, such mRNA– Based products can enter the market of the country in question with substantially lower development investment.
4. Development Collaboration
[…]
4.3 Sharing of Development Costs for COVID Products. Subject to satisfaction of the condition set out in Section 1.183, the Parties shall from the Effective Date (or, in relation to the First–Gen COVID Vaccine Product, from the effective date of Option Exercise) equally share (50%/50%): [*****].
4.4 Development Funding for Pathogen Combination Products. GSK shall, subject to the remainder of this Section 4.4, compensate CureVac for the Development Costs CureVac incurs in performing the Development activities for a Pathogen Combination Product (with FTE calculated at the FTE Rate), where applicable in accordance with the budget and assumptions as agreed under that COVID R&D Plan.
4.5 All Development Costs. The Parties shall in good faith consider means of gaining efficiencies in the performance of the COVID R&D Plan(s) that have a positive impact on the associated budget, and in connection with incurring any other Development Costs, such as outsourcing of certain research activities to a subcontractor, provided these will not adversely impact the timeline for completion of Development activities. The Parties shall account for their respective Development Costs and non–refundable funding on a Calendar Quarterly basis, where applicable with supportive documentation reasonably detailing the composition of the agreed budgeted cost (with FTE calculated at the FTE Rate) for the applicable Calendar Quarter period. The respective undisputed balance to achieve the equal share of Development Costs and non– refundable funding shall be paid within [*****] after receipt of an invoice from the respective Party which is entitled to receive a payment from the other Party (whether under profit–sharing arrangement or otherwise). The Parties shall promptly notify each other as soon as reasonably practicable in the event that either Party becomes aware that Development Costs are expected to deviate, where applicable, from the amounts approved in the Development budget, as a result of a change to the assumptions under a COVID R&D Plan, whereupon the Parties shall discuss the causes of such deviation and evaluate potential mitigation measures relating thereto, and an appropriate adjustment (if any) to the Development budget. The Parties shall refer any Development budget increase amounting to greater than [*****] of the previously approved amount to the JSC for prior approval. Unless such budget increase is approved by the JSC, a Party shall not be liable to bear, as part of the sharing of Development activities where the Development Costs are budgeted under the relevant COVID R&D Plan, any Development Costs incurred by the other Party in excess of [*****] the amount set out in the agreed Development budget from time to time. The Parties shall not unreasonably withhold their approval in the JSC to any budget increase which is reasonably required as a result of the change to a budgeting assumption set out in a COVID R&D Plan. CureVac’s share in Development Costs to be refunded under Section 4.3 shall in no event exceed an amount of [*****], and any Development Costs to be refunded under Section 4.3 which exceed such amount shall be offset against up to [*****] of the Net Profit share payment to be made by GSK to CureVac for the Collaboration COVID Vaccine Products under Section 8.2 below.
8. Consideration And Payments
8.1 Upfront Payment. In partial consideration for the exclusive licenses granted to GSK under the CureVac Technology, GSK shall pay to CureVac a non–refundable and non–creditable fee in the amount of seventy–five million Euro (EUR 75,000,000) within [*****] after the Closing Date. CureVac shall issue an invoice for that amount on or before the Closing Date.
8.2 Profit Sharing for COVID Products (other than Pathogen Combination Products)
8.2.1 Profit Split Allocation. As further consideration for the rights and licenses granted by CureVac to GSK to the CureVac Technology and the LNP Technology under this Agreement, subject to Section 8.2.2 and the royalty scheme which applies for Pathogen Combination Products under Section 8.3, the Parties agree to split the total Net Profit generated with the sale of COVID Products (other than Pathogen Combination Products) in the Territory as follows:
[*****].
8.2.2 APA Share Credit. As further consideration for the rights and licenses granted by CureVac to GSK to the CureVac Technology and the LNP Technology under this Agreement, CureVac shall be entitled to receive the first [*****] of GSK’s share under the profit split for the sale of COVID Vaccines (other than Pathogen Combination Products) under Sections 8.2.1(i) and (ii)(A), (B) and (C) (the “APA Share Credit”).
As further consideration for the exclusive licenses granted to GSK under the CureVac Technology and the LNP Technology under this Agreement, the APA Share Credit set out in this Section 8.2.2 shall be increased by the amounts specified below upon achievement of the following events, provided achieved within the specified timelines: [Redacted]
* Parties acknowledge that readiness for shipment of clinical materials is also dependent on GSK’s diligence in connection with the timely review of the information relevant for the certification by GSK’s qualified person and batch release in accordance with GMP, and the taking of certification and release decisions on the basis thereof. As such, any delay beyond the term for GSK to undertake such activities as from the receipt by GSK of all information it requires to decide on such certification and release (as defined in the applicable Quality Agreement), and that is not caused by an issue with the Manufacturing of the clinical materials in accordance with GMP, Applicable Laws, the Regulatory Approval and the applicable Quality Agreement, nor with a failure of such clinical materials meet the specifications set forth in the Regulatory Approval, shall be added to the timeline for completion of the milestone. [*****].
8.2.3 Calculation of Profit Split. For the purposes of Section 8.2.1:
“Net Profits” shall mean Net Sales less:
(i) COGS;
(ii) royalties and intangible amortization payments (including in–licensing fees and other payments due as a result of sublicensing) arising under any existing and future agreements with any Third Party pursuant to which a Party Controls any intellectual property rights required to Develop, Manufacture or Commercialize any COVID Products (other than Pathogen Combination Products), including any In–Licensing Agreement (but excluding any expenses arising under CureVac’s existing agreements with [*****]) for COVID Products (other than Pathogen Combination Products); and
(iii) SG&A, subject to the caps on SG&A deductions specified in Section 8.2.4 below; and
(iv) Other Allowable Expenses.
For clarity, any liability of either Party to the other Party (or any third party beneficiary or indemnified party) under this Agreement (including for any breach of this Agreement, for breach of warranty, under any indemnity or otherwise) shall not be taken into account in the calculation of Net Profits.
Where this Agreement refers to the “generation” of a Net Profit, such term shall be interpreted to refer to the recognition of the revenue from the gross sale underlying the Net Profit in question, as determined in accordance with International Financial Reporting Standards. As such, subject to Section 8.2.1(iii), Net Profit shall be shared in full in light of when a sale of a COVID Product in question is recognized upon delivery thereof, irrespective of CureVac having received upfront payments with regard to the sale of such product when it was not yet a COVID Product.
8.2.4 SG&A deductions. For purposes of calculating Net Profits, the SG&A [selling, general & administrative] expenses of both Parties (to be deducted from Net Sales when calculating the Net Profits) are capped as follows:
(i) For Net Sales generated anywhere in the Territory of a COVID Product, SG&A shall be capped (a) at [*****] of Net Sales for the first COVID Product which achieves Regulatory Approval during the first [*****] after the First Commercial Sale of such COVID Product; and (b) at [*****] of Net Sales for any further COVID Products, and for the first COVID Product which achieves Regulatory Approval after the first [*****] after the First Commercial Sale of such COVID Product; and
(ii) For Net Sales generated anywhere in the Territory of a COVID Product through Government and NGO Contracts, SG&A shall be capped from and including the date of First Commercial Sale of such COVID Product at [*****] of such Net Sales.
8.2.5 Profit Sharing Term. Profit sharing payments under this Section 8.2 shall be made as long as GSK Commercializes COVID Vaccines.
8.3 Royalty Payment for Pathogen Combination Products
8.3.1 Royalty Rate for the GSK Territory. As further consideration for the rights and licenses granted by CureVac to GSK to the CureVac Technology and the LNP Technology under this Agreement with respect to Pathogen Combination Products, GSK shall pay to CureVac the following royalties on Net Sales in each Calendar Quarter in the GSK Territory of all Pathogen Combination Products in the amounts set forth below: [Redacted]
8.3.2 Royalty Term. On a country–by–country and Pathogen Combination Product–by–Pathogen Combination Product basis, GSK’s royalty obligations as set forth in this Section 8.3 shall begin with the First Commercial Sale of such Pathogen Combination Product by GSK in such country, and shall expire upon the later to occur of:
(i) the expiry of the last to expire Valid Claim of any Patent Rights Controlled by CureVac (whether alone or jointly) Covering such Pathogen Combination Product in such country;
(ii) the earlier of (A) expiry of Regulatory Exclusivity for such Pathogen Combination Product in such country and (B) twelve (12) years following the First Commercial Sale of such Pathogen Combination Product in such country; or
(iii) ten (10) years following the First Commercial Sale of such Pathogen Combination Product in such country, provided that such Pathogen Combination Product incorporates Know-How Controlled by CureVac, or Know-How of the other Party is required to Develop, Manufacture and/or Commercialize the Pathogen Combination Product in such country, and provided further that GSK’s royalty obligations under this Section 8.3 with respect to a Pathogen Combination Product shall expire for all countries of the respective Party Territory on the twentieth (20th) anniversary of the First Commercial Sale of such Pathogen Combination Product in the first country of the respective Party Territory (the “Royalty Term”). For clarity, the matters specified above shall not apply to the calculation of Net Sales for the purposes of the Net Profit split.
8.3.3 Know-How Reduction. During the applicable Royalty Term and on a country–by–country and Pathogen Combination Product–by–Pathogen Combination Product basis, the royalty rate for a Pathogen Combination Product in a country shall be reduced by [*****] of the applicable rate determined pursuant to Section 8.3.1, if such Pathogen Combination Product is not or no longer Covered by a Valid Claim in such country. For clarity, this reduction shall not apply to the calculation of Net Sales for the purposes of the Net Profit split.
8.3.4 No Milestones under the 2020 Collaboration Agreement. For clarity, if the Development of a stand–alone “Product” under the 2020 Collaboration Agreement is abandoned prior to Regulatory Approval of such product, and the SARS–CoV–2 Pathogen is included into such product for the Development of a Pathogen Combination Product, then any events which would trigger “Development & Regulatory Milestone Payments” and “Sales Milestone Payments” under the 2020 Collaboration Agreement, and that had not yet been achieved for such stand–alone abandoned product, will not be triggered by the Pathogen Combination Product, but the Pathogen Combination Product will then be subject to the terms and conditions of this Agreement.
8.3.5 Exhaustiveness. Except as set forth otherwise in this Agreement, the royalty shall be the exhaustive consideration for the maintenance by CureVac of the CureVac Technology with respect to Pathogen Combination Products, and CureVac shall be responsible for the payment of any royalties, fees, costs or expenses under the In–Licensing Agreements required for Pathogen Combination Products.
8.3.6 Third Party Offset. Without limiting any other right or remedy of GSK under this Agreement, or any obligation of CureVac, on a country–by–country and Pathogen Combination Product–by–Pathogen Combination Product basis, if, during the Term, GSK or any of its Affiliates is required to obtain a license under certain Third Party Patent Rights to obtain freedom to operate with respect to the use or exploitation of any CureVac Elements for the Development, Manufacture and Commercialization of Pathogen Combination Products under this Agreement and to pay a royalty or other consideration under such license (including milestone payments or any payment in connection with the settlement of a patent infringement claim), then the Parties shall discuss obtaining an FTO license in accordance with Section 10.2.4. Royalties due to CureVac for the respective Pathogen Combination Product in the respective country(ies) Covered by the Third Party Patent Rights in–licensed by GSK to obtain at its discretion freedom to operate under this Section 8.3.6 shall, subject to Section 8.3.7, be reduced by: (i) [*****]of the reasonable amount payable by GSK to the Third Party for licenses required in respect of the Patent Right listed in Exhibit 8.3.6 relevant to the Pathogen Combination Products; and (ii) [*****]of the amount payable to the Third Party for any other licenses. For the avoidance of doubt, chemically modified mRNA will not be used by CureVac under this Agreement, and CureVac will therefore not be responsible for, and will not bear any payments to Third Parties with respect to such chemically modified mRNA. For clarity, this offset shall not apply to the calculation of Net Sales for the purposes of the Net Profit split.
8.3.7 Cumulative Deductions. Notwithstanding the above, any royalty reduction made pursuant to Section 8.3.3 and/or Section 8.3.4 shall in no event reduce the applicable royalty rate for the respective Pathogen Combination Product in the respective country to less than [*****] of the amounts determined pursuant to Section 8.3.1.
8.4 Blended Payments. With respect to a potential step down in profit sharing or royalty rates to account for the expiry of certain Patent Rights, the Parties acknowledge and agree that the CureVac Technology, GSK Technology and the LNP Technology licensed hereunder may justify profit sharing and royalty rates for sales of COVID Products in different amounts, which rates could be applied separately to COVID Products involving the exercise of CureVac Technology, the LNP Technology and the GSK Technology. Furthermore, the Parties acknowledge and agree that the CureVac Technology licensed under this Agreement may justify profit sharing royalty rates and/or royalty terms of differing amounts for sales of COVID Products in the GSK Territory, which rates could be applied separately to COVID Products involving the exercise of CureVac Patent Rights in the GSK Territory and/or the incorporation of CureVac Know-How, and that if such profit sharing rates or royalties were calculated separately, profit sharing rates and royalties relating to the CureVac Patent Rights in the GSK Territory and profit sharing rates and royalties relating to the CureVac Know-How would last for different terms. For practicality reasons the Parties have agreed on blended profit sharing and royalty rates. For clarity, this Section 8.4 solely explains the rationale behind the profit sharing royalty rates agreed on by the Parties and does not modify any of the other provisions of this Agreement.
8.5 Profit Sharing and Royalty Payments. Within [*****] after the end of each Calendar Quarter in which any Net Sales occur, each Party shall calculate the profit sharing and royalty payments owed to the other Party and shall remit to the other Party the amount owed to such other Party. All profit sharing and royalty payments shall be computed by converting the Net Profits and Net Sales in each country in the GSK Territory and in the CureVac Territory into the currency of Euro, using the monthly exchange rates as customarily used by such Party. All costs and expenses shall be computed by converting the relevant costs and expenses into the currency of Euro, using the monthly exchange rates as customarily used by such Party.
8.6 Reports. Each payment shall be accompanied by a written report describing the Net Profits and Net Sales of each COVID Product sold by or on behalf of the respective Party, its Affiliates and Sublicensees during the applicable Calendar Quarter for each country in which sales of any COVID Product occurred, specifying: (i) the gross sales (if available) and Net Sales in each country’s currency, including an accounting of deductions taken in the calculation of Net Sales; (ii) the COGS and SG&A and other deductions made to calculate Net Profits in accordance with Section 8.2.3; (iii) the applicable exchange rate to convert from each country’s currency to Euro; and (iv) the profit share and royalties payable in Euro. All costs and expenses invoiced by either Party shall be accompanied by a detailed breakdown of those costs and expenses, together with the applicable exchange rate to convert from the currency in which the costs and expenses were incurred to Euro.
8.7 Records and Audit. Each Party and its Affiliates and/or its Sublicensees shall keep and maintain records of: (i) sales of the COVID Product(s) in the CureVac Territory or the GSK Territory, as the case may be, so that the profit share (including Net Profit) and royalties payable and the royalty reports may be verified; and (ii) all costs and expenses incurred by it which are reimbursable (or shared equally by the parties) under this Agreement, so that the costs and expenses reimbursable (or which are shared) may be verified. Such records shall upon reasonable written notice be open to inspection during business hours for a [*****] period after the Calendar Quarter to which such records relate, but in any event not more than once per Calendar Year, by a nationally recognized independent certified public accountant selected by the auditing Party and retained at the auditing Party’s expense. Said accountant shall have the right to audit the records kept pursuant to this Agreement for a period covering not more than [*****]. If said examination of records reveals any underpayment(s) or over payment(s) of any amounts payable, then the audited Party shall promptly pay or credit the balance due to the auditing Party, and if the underpayment(s) is/are more than [*****] then the audited Party shall also bear the expenses of said accountant (and if no further payments are due, shall be refunded or paid by the audited at the request of the auditing Party).