Collaborative Discovery And Lead Optimization Agreement

EXHIBIT 10.20


COLLABORATIVE DISCOVERY
AND LEAD OPTIMIZATION AGREEMENT


This Collaborative Discovery and Lead Optimization Agreement (the "Agreement") is made and effective as of February 11, 2000 (the "Effective Date"), by and between 3-Dimensional Pharmaceuticals, Inc., a corporation having its principal place of business at Eagleview Corporate Center, 665 Stockton Drive, Suite 104, Exton, PA 19341, U.S.A. (" 3DP"), and DuPont Pharmaceuticals Company (a wholly-owned subsidiary of E. I. DuPont de Nemours & Co. ("DuPont")) having its principal place of business at Centre Road, Chestnut Run Plaza, Building 721, Wilmington DE 19880 ("DPC"). 3DP and DPC may be referred to herein as a "Party" or, collectively, as the "Parties".


WHEREAS, 3DP is engaged in discovery research for a variety of biologically active compounds and the development of technologies to facilitate such research, and 3DP has patented systems for generating chemical compounds having desired pharmaceutical properties;


WHEREAS, DPC is engaged in research and development of human therapeutic products;


WHEREAS, 3DP and DPC desire to enter into a research and development collaboration identify qualified lead compounds active against selected targets and suitable for medicinal chemistry optimization that may be developed and commercialized by DPC;


NOW, THEREFORE, in consideration of the various promises and undertakings set forth herein, the Parties agree as follows:


ARTICLE 1. DEFINITIONS


The terms in this Agreement with initial letters capitalized, whether used in the singular or the plural, shall have the meaning set forth below or, if not listed below, the meaning designated in places throughout this Agreement.


1.1 "Active Compound" means a 3DP Compound or Derivative Compound that has been formally selected by DPC for preclinical and/or clinical development.


1.2 "Affiliate" means (i) any corporation or business entity of which at least 50% of the securities or other ownership interests representing the equity, the voting stock or general partnership interest are owned, controlled or held, directly or indirectly, by 3DP or DPC; or (ii) any corporation or business entity which, directly or indirectly, owns, controls or holds at least 50% of the securities or other ownership interests representing the equity, the voting stock or, if applicable, the general partnership interest, of 3DP or DPC.


1.3 "Agreement" means the present agreement including its Appendices.


1.4 "Confidential Information" means all information that has or could have commercial value or other utility in a Party's business, or the unauthorized disclosure of which could be detrimental to the Party's interests, including confidential information, inventions,


know-how, data and materials relating to the Research Program or to the Licensed Products, and shall include without limitation research, technical, clinical development, manufacturing, marketing, financial, personnel and other business information and plans, whether in oral, written, graphic or electronic form.


1.5 "Custom Accessible Library" means any DirectedDiversity? Chemical Library produced by 3DP using 3DP DirectedDiversity? Technology and structure activity data provided by DPC.


1.6 "Combination Product" means a Licensed Product which includes one or more active ingredients other than an Active Compound.


1.7 "Derivative Compound" means any compound other than a 3DP Compound, but which: [**]


1.8 "DirectedDiversity? Chemical Library" means a computer-generated library of compounds containing integrated structure-activity and synthesis data.


1.9 "DPC" means DuPont Pharmaceuticals Company as identified above.


1.10 "DuPont" means E. I. DuPont de Nemours & Co. as identified above.


1.11 "Effective Date" means the effective date of this Agreement as set forth above.


1.12 "Field" means [**]


1.13 "Licensed Product" means any commercial product containing an Active Compound.


1.14 "First Commercial Sale" shall mean, with respect to a given Licensed Product, the first sale for use or consumption by the public of such Licensed Product in a country after all required approvals, including marketing and pricing approvals, have been granted by the applicable governmental drug regulatory agency of such country.


1.15 "FTE" means a full time equivalent scientist (i.e., one full-time or multiple part-time scientists aggregating to one full-time scientist) employed by 3DP and assigned to work on the Research Program with such time and effort to constitute one scientist working on the Research Program on a full time basis consistent with normal business and scientific practice (at least 40 hours per week of dedicated effort; on an annual basis, at least 40 hours per week of dedicated effort for at least 48 weeks per year). In no event, does an FTE include a subcontractor.


** Certain portions of this Exhibit have been omitted based upon a request for confidential treatment that has been filed with the Commission. The omitted portions have been filed separately with the Commission.


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1.16 "NDA" means an application for the final approval required for authorization for marketing of a Licensed Product in a given country (including applicable regulatory, marketing and pricing approval) in accordance with the applicable laws and regulations of a given country. In the U.S., NDA means a New Drug Application or its equivalent in the Food and Drug Administration or successor agency.


1.17 "Net Sales" means the aggregate gross invoiced sales price of Licensed Product sold in the Territory by DPC, its Affiliates and any licensees or sublicensees, to an independent third party, including but not limited to distributors, in bona fide, arms-length transactions, after deduction of the following items (to the extent actually incurred or reasonably estimated and accrued and to the extent not already deducted in the amount invoiced): (i) customary trade, quantity and case discounts, wholesaler-charge backs, or rebates (including rebates to governmental agencies); (ii) customary credits or allowances for rejection or return of previously sold Licensed Products; (iii) any direct tax, duties, surcharges or government charge (other than an income tax) levied on the sale, transportation or delivery of a Licensed Product and borne by the seller thereof; (iv) retroactive price reductions; and (iv) any charge for freight or insurance if separately stated.


In the circumstance where all the active ingredients of a Combination Product are also sold separately and in identical strengths to those contained in the Combination Product, then the following shall apply:


Net Sales shall be calculated as set forth above on the basis of the gross invoice price of a Licensed Product containing the same weight of Active Compound sold independently [ A ] divided by the sum of the gross invoice price of each of the active ingredients contained in the Combination Product sold independently [ B + A ], multiplied by the gross invoice price of the Combination Product, as shown by the following formula:


Net Sales = [A] x [gross invoice price of the Combination Product]
-------
[B + A]


In the event the Active Compound and/or any of the other active ingredients of a Combination Product are not sold separately in identical strengths to those contained in the Combination Product, then the Parties agree to negotiate in good faith the calculation of Net Sales with regard to such Combination Product based upon the relative value of the active ingredients as determined by the Parties hereto in good faith.


1.18 "Patents" means all U. S. patent applications or issued patents, including provisionals, divisionals, continuations, continuations-in-part, reissues and extensions derived therefrom, such as patent term restorations, supplementary protection certificates, etc., as well as all foreign patents and foreign patent counterparts to the foregoing.


1.19 "Qualified Lead Compound" means a 3DP Compound or a Derivative Compound that satisfies the criteria established by the Research Steering Committee.


1.20 "Research Plan" means the detailed description of the research and development activities of the Parties for particular Targets in the performance of the Research Program. The


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Research Plan shall be prepared by the RSC and shall be updated in writing as changes are made to the Research Plan.


1.21 "Research Program" means the collaborative discovery and optimization activities of the Parties, as described in Article 2, that are intended to lead to the discovery of small molecule Qualified Lead Compounds that have an agreed upon level of activity against a Target and are suitable for medicinal chemistry optimization and commercial development by DPC.


1.22 "Research Program Patents" shall mean [**]


1.23 "Research Steering Committee" or " RSC" means the committee to be formed pursuant to Article 3 of this Agreement.


1.24 "Target" means a [**]


1.25 "Territory" means the entire world.


1.26 "Third Party" means an individual, corporation or other entity other than the Parties and their Affiliates.


1.27 "3DP" means 3-Dimensional Pharmaceuticals, Inc. as identified above.


1.28 "3DP Accessible Library" means any DirectedDiversity? Chemical Library that is generated by 3DP outside of the Research Program.


1.29 "3DP Compound" means any compound that is synthesized by 3DP during the term of the Research Program and acts through a Target.


1.30 "3DP DirectedDiversity? Technology" means 3DP Patents and proprietary know-how that relate to generating and utilizing a DirectedDiversity? Chemical Library, including but not limited to U.S. Patent Nos. 5,463,564; 5,574,656; and 5,684,711 and 5,901,069. This term does not include the SAR models as described in Article 2 of this Agreement.


1.31 "3DP Patents" means any Patents owned or controlled by 3DP by assignment, license or otherwise, which 3DP has the right to license or sublicense to DPC, other than Research Program Patents.


1.32 "Valid Claim" means a claim of a Patent that has not lapsed or become abandoned or been declared invalid or unenforceable by a court or agency of competent jurisdiction from which no appeal can be or has been taken.


**Certain portions of this Exhibit have been omitted based upon a request for confidential treatment that has been filed with the Commission. The omitted portions have been filed separately with the Commission.


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Article 2. RESEARCH PROGRAM


2.1 General Project Description. The Parties contemplate that the Research Program will include the following steps and activities:


(a) DPC will furnish to 3DP the structure and activity data on
chemical compounds screened against a Target, including both
compounds that are active ("Hits") and compounds that are
inactive against the Target.


(b) 3DP will use its DirectedDiversity? Technology to compute a
chemical descriptor matrix to describe and map the compounds
for which DPC provides data. 3DP also will develop a
Structure Activity Relationship (" SAR") model based on
this descriptor matrix for Hits.


(c) 3DP will compare the SAR model with compounds in 3DP
Accessible Libraries, and 3DP will identify [**] compounds
to be synthesized by 3DP and supplied to DPC for testing.
3DP will supply between [**] milligrams of each such
compound in 96 deep well plates (about 80 compounds per
plate). [**]


(d) 3DP will provide DPC with a secure internet based
communication channel to provide activity or other compound
related data to 3DP.


(e) 3DP will develop an improved SAR model based on the testing
data provided by DPC. This improved SAR will be used to
perform iterative rounds of selection and synthesis of
compounds from 3DP Accessible Libraries, and/or to develop
Custom Accessible Libraries from which compounds will be
selected and synthesized, and/or to perform preliminary
medicinal chemistry optimization and synthesis. Such
compounds will be supplied to DPC for additional testing in
furtherance of the Research Program.


2.2 Production of Qualified Lead Compounds. 3DP will iterate the steps of the foregoing Section 2. 1 (e) until [**] Qualified Lead Compounds have been identified for a Target.


2.3 Production of Active Compounds. 3DP will chemically modify Qualified Lead Compounds as may be appropriate with the objective of generating compounds which will be selected as Active Compounds by DPC.


2.4 Development of Active Compounds. DPC will conduct the preclinical and clinical tests as it deems appropriate for the commercial development of Active Compounds in the Field that are developed from Qualified Lead Compounds.


** Certain portions of this Exhibit have been omitted based upon a request for confidential treatment that has been filed with the Commission. The omitted portions have been filed separately with the Commission.


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2.5 Initial Term and Extension of Research Program. The initial term of the Research Program shall run until December 31, 2001. DPC may extend the term of the Research Program for up to 3 additional 1-year periods on an annual basis by notifying 3DP in writing at least ninety (90) days prior to the end of the initial term or any extended one-year term then in effect.


2.6 Additional and Alternative Targets. DPC, through the Research Steering Committee, shall have the option to bring forward a total of up to [**] Targets at any one time or to propose changing Targets.


2.7 Research Efforts. Each party shall use good faith commercially reasonable and diligent efforts (as defined below) to perform its responsibilities in the performance of the Research Program. DPC will provide funding to 3DP as set forth in Section 4.1 during the ten-n of the Research Program to support qualified FTEs at 3DP, which funding by DPC shall be contingent upon 3DP providing and retaining at least [**] such qualified FTEs assigned to the performance of the Research Program. As used herein, the term "commercially reasonable and diligent efforts" will mean, unless the Parties agree in writing otherwise, those efforts consistent with the exercise of prudent scientific and business judgment in accordance with industry standards, as applied to other programs of similar scientific and commercial potential.


Throughout the term of the Research Program, including any extensions thereof, 3DP shall assign the number of FTE qualified scientists specified in the Research Plan to perform the work set forth in the Research Plan. The mixture of skills and levels of such FTEs shall be appropriate to the scientific objectives of the Research Program and 3DP shall provide information about these FTEs to the RSC upon request. Unless the RSC agrees otherwise in writing, at least 50% of such FTE support shall be Ph.D. level scientists. The scientists comprising such FTEs and their percentage of time devoted to working on the Research Program shall be identified in Research Plan. In the event that DPC has reasonable concerns regarding any scientist assigned by 3DP to the Research Program, such concerns shall be communicated to and addressed by the RSC. The Parties shall proceed diligently with the work set out in the Research Plan by using their respective good faith commercially reasonable and diligent efforts.


Other than the research funding provided by DPC to 3DP under Section 4.1 hereof, and except as otherwise specifically agreed in writing by 3DP and DPC, each party shall be responsible for all costs and expenses it incurs in its performance of the Research Program.


2.8 Disclosure of Results; Reports. The results of all work performed by the Parties as part of the Research Program shall be promptly disclosed to the other Party as such results are obtained. The Parties will exchange at a minimum quarterly written reports (with copies to the RSC) presenting a meaningful summary of the work performed on the Research Program. In addition, on reasonable request by DPC, 3DP will make presentations of its activities under this Agreement to inform DPC of the details of the work done under this Agreement.


**Certain portions of this Exhibit have been omitted based upon a request for confidential treatment that has been filed with the Commission. The omitted portions have been filed separately with the Commission.


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Know-how and other information regarding the Research Program disclosed by one Party to the other Party pursuant hereto may be used only in accordance with the rights granted under this Agreement. Within 30 days following the end of each calendar quarter, the Parties shall each exchange and provide to the RSC a written report summarizing in reasonable detail the work performed by it under the Research Program during the preceding calendar quarter.


Article 3. RESEARCH PROGRAM GOVERNANCE


3.1 Research Steering Committee. 3DP and DPC agree to establish a Research Steering Committee, and shall each designate three (3) members selected by their respective R&D management to form this Research Steering Committee. The Research Steering Committee shall be responsible for:


(a) Adopting, reviewing and amending the Research Plan to
implement the Research Program, subject to DPC approval.
The Research Plan for the first Target agreed to by the
Parties is described in Appendix A.
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(b) Monitoring the progress of research in the Research Program.


(c) Reviewing initial Target and any subsequent Target
selection.


(d) Agreeing on and adopting criteria for the designation of
Qualified Lead Compounds. As an example, the Parties
contemplate that to satisfy such criteria in the case of
Hits that inhibit a Target with an [**], a Qualified Lead
Compound would require a [**] relatively more selective
against a Target than against related molecules, and be
patentable. The criteria for the designation of Qualified
Lead Compounds shall be set forth in the Research Plan.


(e) Selecting Qualified Lead Compounds to be advanced for
biological testing.


(f) Reviewing and approving publications and other public
disclosures related to the subject matter of the Research
Program.


3.2 RSC Meetings. The RSC shall meet in-person or by teleconference on a calendar quarter basis or more frequently as necessary as may be agreed upon, with each party to bear all travel and related costs for its representatives. Minutes of the meetings of the RSC will be generated and circulated to its members within 2 weeks following the RSC meeting.


3.3 RSC Decision-Making Process. Each member of the RSC shall have one vote, and decisions by the RSC shall be made by a majority vote. The Parties shall attempt to resolve any disagreement among members of the RSC within the RSC based on the efficient achievement of the objectives of this Agreement. Any disagreement which cannot be resolved by a majority vote of the RSC shall be referred to the appropriate officers of 3DP and DPC for resolution as set forth in Article 12. It is the intent of the Parties to resolve issues through the RSC whenever possible and to refer issues to the officers of 3DP and DPC only when resolution through the RSC cannot be achieved.


**Certain portions of this Exhibit have been omitted based upon a request for confidential treatment that has been filed with the Commission. The omitted portions have been filed separately with the Commission.


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3.4 Management of Matters Outside the Jurisdiction of the Research Steering Committee. Matters outside the scope of the Research Program and internal to each Party are not under the purview of the Research Steering Committee. Such matters include, but are not limited to the following: internal personnel policies and programs, budgeting, finance, commercial and marketing strategies, and business decisions. However, the Parties agree to communicate with each other promptly on those matters which, while outside the scope of the Research Program, nevertheless may reasonably be expected to influence the conduct or term of the Research Program or the intended commercialization of any Qualified Lead Compounds.


ARTICLE 4. FINANCIAL TERMS


4.1 Technology Access and FTE Reimbursement Fees.


[**] In the event that 3DP provides less than the number of FTEs as
specified above in support of the Research Program, the foregoing
payments will be reduced in proportion to the level of FTE support
actually provided by 3DP in support of the Research Program. Such
research funding shall be payable by DPC to 3DP in four quarterly
installments during the term of the Research Program within 30 days
of the start of the calendar quarter. Any payment for a portion of
a quarterly period shall be made on a pro rata basis. Except as
provided in this Section 4.1, or as may be agreed from time to time
by the parties in writing, 3DP and DPC will each bear all of its
own expenses incurred in connection with the Collaboration.
Depending on the total number of Targets designated and the number
of 3DP FTEs reasonably necessary to meet the objectives of this
Agreement, DPC and 3DP shall negotiate in good faith with respect
to additional compensation to 3DP in a form to be agreed upon by
the Parties, such as a lump sum payment or support by DPC for
additional FTEs at 3DP. The Parties agree that the rate of
compensation per FTE year shall be indexed annually to the U.S.
Consumer Price Index (CPI) and adjusted for payments beginning with
the first quarter of the year 2001.


4.2 Extended Term Fees. The level of reimbursement for FTEs in any extended term of the Research Program extending after December 31, 2002 shall be negotiated in good faith by the Parties, and shall at least reflect any increase to the FTE support level and any changes in the CPI in accordance with Section 4. 1 (b).


4.3 Fees for Early Termination of the Research Program. If DPC terminates this Agreement without cause pursuant to Section 9.2 prior to the end of the initial term or any extended term of the Research Program, it agrees to pay to 3DP the balance of any financial support otherwise due for that term of the Research Program.


4.4 Milestone Payments. DPC agrees to make milestone payments as set forth below upon the first occurrence of each milestone event for each 3DP Compound and Derivative Compound. Subject to the conditions set forth below, the milestone payments as set forth below shall be paid only one time for any particular 3DP Compound or Derivative Compound (regardless, for example, of the number of clinical trials conducted and NDA approvals obtained for that particular 3DP Compound or Derivative Compound). The amounts set forth below apply


**Certain portions of this Exhibit have been omitted based upon a request for confidential treatment that has been filed with the Commission. The omitted portions have been filed separately with the Commission.


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to 3DP Compounds and the applicable payments due for Derivative Compounds shall be [**] of the milestone payment amounts set forth below:


[**]


4.5 Royalty on Net Sales of Licensed Products. DPC agrees to pay an annual royalty based on Net Sales of Licensed Products. Royalty payments shall be due on December 31 of each calendar year in which Net Sales are generated.


[**]


4.6 Royalty Reduction. The royalty amounts set forth above shall be reduced by [**] on a country-by-country basis at any such time that there is no Patent pending or in effect that claims a particular Licensed Product in such country. For purposes of this Section 4.6, the royalty otherwise due in such country shall be decreased by [**].


4.7 Royalty Period. The royalty payments set forth above shall be payable for each Licensed Product on a product-by-product and country-by-country basis from the time of First Commercial Sale of Licensed Product in such country until the later of (i) [**] years from the time of First Commercial Sale of Licensed Product in such country or (ii) until the last to expire patent containing a Valid Claim providing marketing exclusivity with respect to such Licensed Product.


4.8 Royalty Conditions. The royalties under this Article shall be subject to the following conditions:


(i) that only one royalty shall be due with respect to the
same unit of Licensed Product;


(ii) that no royalties shall be due upon the sale or other
transfer among DPC, its Affiliates or licensees, but in such
cases the royalty shall be due and calculated upon DPC's or
its Affiliate's or licensee's Net Sales of Licensed Product
to the first independent third party;


(iii) no royalties shall accrue on the disposition of
Licensed Product in reasonable quantities by DPC, its
Affiliates or licensees as part of an expanded access
program or as bona fide samples or as donations to non-
profit institutions or government agencies for non-
commercial purposes; and


(iv) notwithstanding the above royalty rates, upon DPC's
request, the parties agree to discuss in good faith a
reduction of such royalty rate in any given country in the
event the available patent protection materially decreases
the commercial viability of the Licensed Product under such
royalty rate.


4.9 Third Party Patents. In the event that during the term of the royalty obligation for a Licensed Product under this Article IV, a third party shall control a patent or patents in any country covering the sale of a Licensed Product, and in the reasonable judgment of DPC, it would


**Certain portions of this Exhibit have been omitted based upon a request for confi ...