Provision Language
Definitions
“Exempt Collaborator” means a not-for-profit organization or academic institution that has entered into a formal collaboration and/or supply agreement with Licensee to conduct pre-clinical development and solely sponsor clinical trials of Licensed Product, excluding Supplied Materials, to treat an Ultra-Orphan Indication; in which Licensee may acquire clinical development and data for regulatory approval and sale of a Licensed Product.
“Net Sales” means the total gross receipts for sales of Licensed Products or practice of Licensed Processes by or on behalf of Licensee or its sublicensees, and from leasing, renting, or otherwise making Licensed Products available to others without sale or other dispositions, whether invoiced or not, less returns and allowances, packing costs, insurance costs, freight out, taxes or excise duties imposed on the transaction (if separately invoiced), and wholesaler and cash discounts in amounts customary in the trade to the extent actually granted. No deductions shall be made for commissions paid to individuals, whether they are with independent sales agencies or regularly employed by Licensee , or sublicensees, and on its payroll, or for the cost of collections.
“Orphan Indication” means a disease that affects less than two hundred thousand (200,000) people in the United States as defined by the Food and Drug Administration or five (5) in ten thousand (10,000) people in the European Union as defined by the European Medicines Agency.
“Supplied Materials” means (a) A helper plasmid for AAV5 5RepCap 5RepCapB containing the p5 promoter, the AAV5 Rep and AAV5 Cap genes and an SV40ori adjacent to the polyadenylation signal at the 3’ end or equivalent; (b) A vector plasmid for AAV5, pAAV5LacZ/pAAV5RnLacZ expressing nucleus localized beta-galactosidase contains the LacZ gene under control of Rous Sarcoma Virus (RSV) promoter between the AAV5 ITRs or equivalent both of which are described in Chiorini et at Virol;. 73(2):1309-19 (Feb. 1999), including any progeny, subclones, or unmodified derivatives thereof where “unmodified derivatives” is defined as set forth in the Uniform Biological Material Transfer Agreement as published in the Federal Register at 60(45): 12771-75 (March 8, 1995); and (c) Plasmid maps corresponding to items (a) and (b) as set forth in the Paragraph. Further, these Supplied Materials were supplied by PHS to Licensee under a Material Transfer Agreement.
“Ultra-Orphan Indication” means a disease that affects less than one (1) in Fifty Thousand (50,000) people in the United States or the European Union.
6. ROYALTIES AND REIMBURSEMENT
6.1 Licensee agrees to pay PHS a noncreditable, nonrefundable license issue royalty as set forth in Appendix C.
6.2 Licensee agrees to pay PHS a nonrefundable minimum annual royalty as set forth in Appendix C.
6.3 Unless otherwise exempted in Paragraphs 6.13-6.19, Licensee agrees to pay PHS earned royalties as set forth in Appendix C.
6.4 Unless otherwise exempted in Paragraphs 6.13-6.19, Licensee agrees to pay PHS benchmark royalties as set forth in Appendix C.
6.5 Licensee agrees to pay PHS sublicensing royalties as set forth in Appendix C.
6.6 A patent or patent application licensed under this Agreement shall cease to fall within the Licensed Patent Rights for the purpose of computing earned royalty payments in any given country on the earliest of the dates that:
(a) the application has been abandoned and not continued;
(b) the patent expires or irrevocably lapses, or
(c) the patent has been held to be invalid or unenforceable by an unappealed or unappealable decision of a court of competent jurisdiction or administrative agency.
6.7 No multiple royalties shall be payable because any Licensed Products or Licensed Processes are covered by more than one of the Licensed Patent Rights. In the event that this Agreement and PHS license L-107-2007/0 as amended from time to time apply to the same product sold by the Licensee or its sublicensees then the Licensee shall only pay earned royalties and benchmark royalties under this Agreement.
6.8 On sales of Licensed Products by Licensee to sublicensees or on sales made in other than an arms-length transaction, the value of the Net Sales attributed under this Article 6 to this transaction shall be that which would have been received in an arms-length transaction, based on sales of like quantity and quality products on or about the time of this transaction.
6.9 With regard to unreimbursed expenses associated with the preparation, filing, prosecution, and maintenance of all patent applications and patents included within the Licensed Patent Rights and paid by PHS prior to the effective date of this Agreement. Licensee shall pay PHS, as an additional royalty, on or before March 1, 2012, and upon PHS ’ submission of a statement and request for payment to Licensee, an amount equivalent to these unreimbursed expenses previously paid by PHS, the total amount should not exceed two hundred and fifty thousand U.S. dollars ($250,000). If this Agreement is terminated by Licensee on or before March 1, 2012, Licensee agrees to pay the amount in full within sixty (60) days before termination.
6.10 With regard to unreimbursed expenses associated with the preparation, filing, prosecution, and maintenance of all patent applications and patents included within the Licensed Patent Rights and paid by PHS on or after the effective date of this Agreement. PHS , at its sole option, may require Licensee:
(a) to pay PHS on an annual basis, within sixty (60) days of PHS ’ submission of a statement and request for payment, a royalty amount equivalent to these unreimbursed expenses paid during the previous calendar year;
(b) to pay these unreimbursed expenses directly to the law firm employed by PHS to handle these functions. However, in this event, PHS and not Licensee shall be the client of the law firm; or
(c) in limited circumstances, Licensee may be given the right to assume responsibility for the preparation, filing, prosecution, or maintenance of any patent application or patent included with the Licensed Patent Rights. In that event, Licensee shall directly pay the attorneys or agents engaged to prepare, file, prosecute, or maintain these patent applications or patents and shall provide PHS with copies of each invoice associated with these services as well as documentation that these invoices have been paid.
6.11 PHS agrees, upon written request, to provide Licensee with summaries of patent prosecution invoices for which PHS has requested payment from the Licensee under Paragraphs 6.9 and 6.10. Licensee agrees that all information provided by PHS related to patent prosecution costs shall be treated as confidential commercial information and shall not be released to a third party except as required by law or a court of competent jurisdiction.
6.12 Licensee may elect to surrender its rights in any country of the Licensed Territory under any of the Licensed Patent Rights upon sixty (60) days written notice to PHS and owe no payment obligation under Paragraph 6.10 for patent-related expenses paid in that country after ninety (90) days of the effective date of the written notice.
6.13 Exemption for Ultra-Orphan Indication Research
(a) Licensee shall be permitted, upon PHS consent, (not to be unreasonably withheld), to manufacture and supply Licensed Product, excluding Supplied Materials, to an Exempt Collaborator for use solely in pre-clinical and clinical development to treat an Ultra-Orphan Indication. Prior to commencement of manufacturing of Licensed Product for an Exempt Collaborator, Licensee shall request permission in writing and must obtain written consent from PHS. Additional documentation to establish an Exempt Collaborator may be required by PHS.
(b) For avoidance of doubt, Licensee shall retain Supplied Materials and shall not release Supplied Materials alone to an Exempt Collaborator.
(c) Upon receipt of written consent from PHS for manufacturing of a Licensed Product for an Exempt Collaborator, Licensee shall not be obligated to pay Benchmark royalties which would have been payable under Appendix C, Section IV for Benchmarks triggered by clinical trials solely sponsored by the Exempt Collaborator until such time as Licensee exercises its option to acquire the clinical development from the Exempt Collaborator.
(d) Upon acquisition of the clinical development from an Exempt Collaborator. Licensee shall pay PHS royalties which become payable from that point onwards in accordance with Appendix C, Section IV. Licensee must inform PHS in writing within thirty (30) days of Licensee ’s decision to acquire or not acquire clinical development from the Exempt Collaborator.
(e) For avoidance of doubt, PHS shall consider Licensee ’s sponsorship or co-sponsorship of a clinical trial or regulatory submission for a Licensed Product to treat an Ultra-Orphan Indication as an acquisition of clinical development from an Exempt Collaborator.
(f) Earned royalty payments on Net Sales specified in Appendix C , Section III shall not be applicable to Licensed Product manufactured for research and clinical trials conducted by an Exempt Collaborator approved by PHS per Paragraph 6.13.
(g) In lieu of earned royalty payments, Licensee shall pay PHS a royalty payment of ten thousand U.S. dollars ($10,000) for each collaboration approved by PHS with an Exempt Collaborator . Such royalty shall be due within thirty (30) days of the date of PHS written consent per Paragraph 6.13. In the event that several licenses granted by PHS to the Licensee apply to the same product, only a single payment of $10,000 will be payable per collaboration.
APPENDIX C – ROYALTIES
Royalties:
I. Licensee agrees to pay to PHS a noncreditable, nonrefundable license issue royalty in the amount of one hundred forty thousand dollars ($140,000). Payment will be made in two tranches, the first payment of one hundred thousand dollars ($100,000) being payable within sixty (60) days from the effective date of this Agreement; the second payment of forty thousand dollars ($40,000) being payable on March 1, 2012. If this Agreement is terminated by Licensee on or before March 1, 2012, Licensee agrees to pay the remaining tranch of license issue royalty in full within sixty (60) days before termination
II. Licensee agrees to pay to PHS a nonrefundable minimum annual royalty in the amount of fifteen thousand dollars ($15,000) as follows:
(a) The first minimum annual royalty is due within sixty (60) days of the effective date of this Agreement and may be prorated according to the fraction of the calendar year remaining between the effective date of this Agreement and the next subsequent January 1; and
(b) Subsequent minimum annual royalty payments are due and payable on January 1 of each calendar year and may be credited against any earned royalties due for sales made in that year.
III. Licensee agrees to pay PHS earned royalties of one and two-tenth percent (1.2%) on Net Sales by or on behalf of Licensee and its sublicensees.
IV. Licensee agrees to pay PHS Benchmark royalties within sixty (60) days of achieving each Benchmark:
(a) Thirty-one thousand and five hundred U.S. dollars ($31,500) – Initiation of each Phase 1 clinical trial or foreign equivalent.
(b) Seventy-eight thousand five hundred U.S. dollars ($78,500) – Initiation of each Phase II clinical trial or foreign equivalent.
(c) One hundred and fifty-seven thousand and five hundred U.S. dollars ($157,500) – Initiation of each Phase III clinical trial or foreign equivalent.
(d) Initiation of first Marketing Approval or foreign equivalent for any indications in the liver in the following jurisdictions/countries:
(i) Three hundred fifteen thousand U.S. dollars ($315,000) in Europe.
(ii) Three hundred fifteen thousand U.S. dollars ($315,000) in the United States.
(iii) Seventy-eight thousand five hundred U.S. dollars ($78,500) in Australia.
(iv) Seventy-eight thousand five hundred U.S. dollars ($78,500) in Canada.
(v) Seventy-eight thousand five hundred U.S. dollars ($78,500) in Japan.
(e) Initiation of first Marketing Approval or foreign equivalent for any indications in the brain in the following jurisdictions/countries:
(i) Three hundred fifteen thousand U.S. dollars (S315,000) in Europe.
(ii) Three hundred fifteen thousand U.S. dollars ($315,000) in the United States.
(iii) Seventy-eight thousand five hundred U.S. dollars ($78,500) in Australia.
(iv) Seventy-eight thousand five hundred U.S. dollars ($78,500) in Canada. (v) Seventy-eight thousand five hundred U.S. dollars ($78,500) in Japan.
V. Licensee agrees to pay PHS additional sublicensing royalties, as following, on the fair market value of any consideration received for granting each sublicense within sixty (60) days of the execution of each sublicense:
(a) For any sublicense executed by the Licensee before the completion of any phase I clinical trial or foreign equivalent for any disease indications, Licensee agrees to pay a sublicensing royalty of ten percent (10%); and
(b) For any sublicense executed by the Licensee after the completion of any phase I clinical trial or foreign equivalent but before the completion of any phase II clinical trial or foreign equivalent for any disease indications, Licensee agrees to pay a sublicensing royalty of six percent (6%); and
(c) For any sublicense executed by the Licensee either after the completion of any phase II clinical trial or foreign equivalent for any disease of Orphan Indication , or after the completion of any phase III clinical trial or foreign equivalent for any other disease indications, whichever comes first. Licensee agrees to pay a sublicensing royalty of three percent (3%).
Contractual payments made by a sublicensee to the Licensee or an Affiliate received after the effective date of this Agreement for costs, services and expenses for the Licensee or Affiliate to conduct, supervise or participate in one or more clinical trial(s) for the development of the Licensed Products shall not be accounted for as sublicensing royalties.
Amendment 1
WHEREAS, NIH and Licensee desire that the Agreement be amended a first lime as set forth below in order to:
[…]
b) Modify language related to financial terms associated with sublicensing, so as to cause a reduction in financial obligations due to NIH from sublicensing of the Agreement by Licensee in order to expedite the development of therapeutics for rare diseases.
2) Replace Paragraph 6.7 with the following:
6.7 No multiple royalties shall be payable if any Licensed Products or Licensed Processes are covered by more than one of the Licensed Patent Rights. In the event that this Agreement and NIH license L-107-2007/0 as amended from time to time apply to the same product sold by the Licensee or its sublicensees, then the Licensee shall only pay earned royalties, benchmark royalties, and sublicensing royalties under this Agreement.
3) Replace Appendix C Section V with the following:
Licensee agrees to pay NIH additional sublicensing royalties, as follows, on the fair market value of any consideration received for granting each sublicense within sixty (60) days of the execution of each sublicense:
(i) For any sublicense executed by the Licensee before the completion of any phase I clinical trial or foreign equivalent for any disease indication, Licensee agrees to pay a sublicensing royalty as in the following formula:
Sublicensing Royalty = 10.0% x P/(P+T+L)
for the purposes of calculating sublicensing royalties in (i), where P/(P+T+L) is a fraction in which P represents the NIH ’s Licensed Patent Right , T represents the Intellectual Property (IP) licensed by Licensee from a third party, and where such an IP is related only to an active component of the Licensed Products (i.e. gene of interest incorporated into the AAV construct), and L represents Licensee’s own IP used to make the Licensed Product. Furthermore P, T and L, when present, each carries a value of 1. The value of the fraction P/(P+T+L) as applied to (i) can never go below 1/3 (0.33), and therefore the Sublicensing Royalty as applied to (i) will never go below 3.3% (10.0% x 0.33).
(ii) For any sublicense executed by the Licensee after the completion of any phase 1 clinical trial or foreign equivalent but before the completion of any phase II clinical trial or foreign equivalent for any disease indication, Licensee agrees to pay a sublicensing royalty as in the following formula:
Sublicensing Royalty =6.0% x P/(P+T+L)
The value of the fraction P/(P+T+L) as applied to (ii) can never go below 0.45, and therefore the Sublicensing Royalty as applied to (ii) will never go below 2.7% (6.0% x 0.45)
(iii) For any sublicense executed by the Licensee either after the completion of any phase II clinical trial or foreign equivalent for any disease of Orphan Indication, or Ultra-Orphan Indication, or after the completion of any phase III clinical trial or foreign equivalent for any other disease indications, Licensee agrees to pay a sublicensing royalty as in the following formula:
Sublicensing Royalty = 3.0% x P/(P+T+L)
The value of the fraction P/(P+T+L) as applied to (iii) can never go below 0.65, and therefore the Sublicensing Royalty as applied to (iii) will never go below 1.95% (3.0% x 0.65)
Contractual payments made by a sublicensee to the Licensee or an Affiliate received after the effective date of this Agreement for costs, services and expenses for the Licensee or Affiliate to perform research and development activities, or to conduct, supervise or participate in one or more clinical trial(s) for the development of the Licensed Products, or to manufacture clinical and commercial batches of Licensed Products, shall not be accounted for in the calculation of sublicensing royalties.
4) Licensee shall pay NIH an amendment issue royalty in the sum of five hundred thousand US Dollars ($500,000.00) as follows:
i) Two hundred and fifty thousand Dollars ($250,000) shall be paid by Licensee within sixty (60) days of the effective date of this First Amendment.
ii) The remaining amount of two hundred and fifty thousand Dollars ($250,000) shall be paid to NIH upon execution by Licensee of any new sublicensing or partnership agreement or on the first anniversary of this First Amendment, whichever occurs first.