Research, Development And License Agreement

EXHIBIT 10.40


Portions of this exhibit were omitted and filed separately with the Secretary of the Commission pursuant to an application for confidential treatment filed with the Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. Such portions are marked by a series of asterisks.


RESEARCH, DEVELOPMENT AND LICENSE AGREEMENT


AMONG

NEOSE TECHNOLOGIES, INC.

AND


NOVO NORDISK A/S


AND


NOVO NORDISK HEALTH CARE AG


DATED AS OF NOVEMBER 17, 2003

Table of Contents

Page


1.

DEFINITIONS 1

2.

CONDUCT OF THE PROJECT AND COMMERCIALIZATION EFFORTS 7

3.

FEES AND DEVELOPMENT PAYMENTS 9

4.

PRODUCT PAYMENTS AND ROYALTIES 11

5.

INTELLECTUAL PROPERTY GRANTS AND RIGHT OF NEGOTIATION 13

6.

OWNERSHIP OF INTELLECTUAL PROPERTY 15

7.

BLOCKING PATENTS 18

8.

SUPPLY AGREEMENT 19

9.

CONFIDENTIALITY 19

10.

REPRESENTATIONS AND WARRANTIES 21

11.

INDEMNIFICATIONS AND LIMITED LIABILITY 22

12.

TERM AND TERMINATION 24

13.

DISPUTE RESOLUTION 25

14.

GOVERNMENT APPROVAL 26

15.

MISCELLANEOUS 27

RESEARCH, DEVELOPMENT AND LICENSE AGREEMENT

This RESEARCH, DEVELOPMENT AND LICENSE AGREEMENT ("Agreement" ), is dated as of November 17, 2003, among Neose Technologies, Inc., a Delaware corporation ("Neose" ), and Novo Nordisk A/S , a Danish corporation, and Novo Nordisk Health Care AG, a Swiss Corporation (collectively, "Novo" ).


BACKGROUND


Neose has developed and continues to develop proprietary technologies and related know-how for the glycosylation, design and remodeling of proteins, peptides and antibodies. Such glycomodelling technologies are including but not limited to GlycoAdvance TM , GlycoPEGylation ? and GlycoConjugation ? technologies. Neose and Novo are parties to two Research and Development Collaboration Agreements, dated September 30, 2002 and October 28, 2002, respectively, relating to the use of Neose's technologies on Novo's *****. Novo now wishes to continue the development of ***** under the terms and conditions of this Agreement, which includes, among other things, further research and development, scale-up and technology transfer activities by Neose, and the grant of rights to Novo under certain patents and know-how owned or controlled by Neose for use in connection with the development and commercialization of *****.


Contemporaneously with the execution and delivery of this Agreement, Neose and Novo are entering into another Research, Development and License agreement regarding *****


TERMS


NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants contained in this Agreement, and intending to be legally bound hereby, Novo and Neose agree as follows:

1. DEFINITIONS . Capitalized terms not otherwise defined shall have the meaning set forth in this Section 1 .


1.1 "Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person. Without limiting the foregoing, a Person shall be regarded as in control of another Person if it owns, or directly or indirectly controls, more than fifty percent (50%) of the voting stock or other ownership interest of the other Person.


1.2 "Blocking Patent" means any Patent Rights claimed to be owned or Controlled by a Third Party with respect to which Patent Rights an assertion is being made by or on behalf of the Third Party that the use of the Neose Technology under this Agreement infringes such Person's Patent Rights.

1.3 "Calendar Quarter" means any of the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 or December 31 during the Term.

1.4 "Calendar Year" shall mean the respective periods of twelve (12) consecutive calendar months ending on December 31 during the Term.


1.5 "Commercially Reasonable Efforts" shall mean efforts and resources normally used by a Party in similar undertakings, taking into account the proprietary position of the product or technology involved, the regulatory structure involved, the profitability of such undertaking, the competitiveness of the relevant marketplace, and other relevant factors.

1.6 "Commercial Sale" means any sale of a New Product by Novo, its Affiliates, or Sublicensees to a Person other than their respective Affiliates or Neose.


1.7 "Confidential Information" shall mean any of the Disclosing Party's proprietary or confidential information, technical data, trade secrets or know-how, including, but not limited to, research, product plans, products, the identity of the Novo Materials, information relating to the Novo Materials, service plans, services, customer lists and customers, markets, software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, marketing, distribution and sales methods and systems, sales and profit figures, finances and other business information disclosed to the Recipient by or on behalf of the Disclosing Party, either directly or indirectly, in writing, orally or by drawings or inspection of documents or other tangible property.


1.8 "Control" or "Controlled" means possession of the ability to grant a license or sublicense as provided for herein without violating the terms of an agreement or other arrangement with a Third Party existing before or after the Effective Date.


1.9 "Designated Representative" means, in the case of Neose, its Senior Vice President, Business and Commercial Development, or such other person designated by Neose in writing from time to time to Novo, and, in the case of Novo, its Executive Vice President and Chief Science Officer, or other such other person designated by Novo in writing from time to time to Neose.

1.10 "Disclosing Party" is used as defined in Section 9.1 .


1.11 "Effective Date" shall mean the later of (i) the date of execution of this Agreement by both Parties or (ii) if notification is required to be made under the HSR Act, the expiration or earlier termination of any notice and waiting period under the HSR Act.

1.12 "***** Agreement" means the Research, Development and License Agreement between Neose and Novo with respect to *****, which is being entered into contemporaneously with the execution of this Agreement.


1.13 "FDA" means the United States Food and Drug Administration and any successor agency.

1.14 "Field of Use" means the development and commercial manufacture of New Product for *****.

1.15 "GMPs" shall mean current good manufacturing practices for the methods to be used in, and the facilities and controls to be used for, the manufacture, processing, packing and holding of biological products, all as set forth from time to time by the FDA, including all amendments and supplements thereto throughout the term of this Agreement.


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1.16 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.


1.17 "Improvements" means any and all developments, discoveries, inventions, additions, amendments, modifications, ideas, processes, methods, compositions, formulae, techniques, information and data, whether or not patentable, conceived, developed or reduced to practice, that improve or beneficially change, or enhance the economic and technical attributes of, any Know-How or Patent Rights or any process, device or composition.

1.18 "IND" means an application for an Investigational Exemption for a New Drug filed with the FDA, or any comparable filing made with a regulatory authority outside the United States.

1.19 "Joint Improvements" means any and all Improvements made, conceived or reduced to practice jointly by Neose and Novo in the conduct of the Work Plan under this Agreement, whether patentable or not, other than Neose Improvements and Novo Improvements.

1.20 "Know-How" means any and all formulae, procedures, processes, methods, designs, know-how, show-how, trade secrets, discoveries, inventions (whether or not patentable), patent applications, licenses, software and source code, programs, prototypes, designs, discoveries, techniques, methods, ideas, concepts, data, engineering and manufacturing information, electronic control circuits, specifications, diagrams, drawings, schematics, blueprints and parts lists and other proprietary information, rights and works of authorship, whether or not reduced to writing.


1.21 "M1 Profile for the New Product" means the parameters for candidate selection required for ***** set forth on Exhibit 1.21, as amended from time to time in accordance with Section 2.2 .


1.22 "Mutual Nondisclosure Agreement" means the Amended and Restated Mutual Nondisclosure Agreement between the Parties dated November 25, 2002.

1.23 "Neose Improvements" means any and all Improvements relating to the Neose Technology made, conceived, or reduced to practice by (i) either Neose or Novo or both in the conduct of the Work Plan under this Agreement or (ii) either Neose or jointly by Neose and Novo under this Agreement, in each case, other than the Novo Materials, the Novo Materials modified using the Neose Technology and New Product.

1.24 "Neose Patents" means all Patent Rights relating to methods and processes for glycosylation design and remodeling of proteins, peptides and antibodies that are Controlled by Neose, including, but not limited to: (i) the Patent Rights listed in Exhibit 1.24, (ii) the Patent Rights developed by Neose in the conduct of the Work Plan during the Term of this Agreement, and (iii) any later acquired Patent Rights Controlled by Neose and used to develop any New Product.


1.25 "Neose Project-Related Costs" means Neose's costs of conducting the Work Plan, which shall be determined in accordance with this Agreement and calculated as follows: (i) with respect to personnel, at the rate of *****; and (ii) with respect to materials, at the *****.


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1.26 "Neose Technology" means the Neose Patents and any Know-How Controlled by Neose relating to methods and processes for the *****, including, without limitation, its GlycoAdvance ? , GlycoPEGylation ? and GlycoConjugation ? technologies, and other ***** processes, and all Know-How resulting from work conducted by Neose during the Term.

1.27 "Net Sales" means proceeds from Commercial Sales of New Products by Novo, its Affiliates or Sublicensees to Third Parties, after deducting (to the extent actually incurred or reasonably estimated and accrued in accordance with Generally Accepted Accounting Principles in the United States and to the extent not already deducted in the amount invoiced): (i) reasonable trade, cash and quantity discounts or rebates (other than price discounts granted at the time of sale), reasonable service allowances and reasonable required agent's commissions, if any, allowed or paid, (ii) credits or allowances actually given or made for rejection or return of previously sold products or for retroactive price reductions (including Medicare, Medicaid, and/or discounts and similar types or rebates and/or discounts), (iii) taxes, duties or other governmental charges levied on or measured by the billing amount (excluding income and franchise taxes), as adjusted for rebates and refunds, and (iv) charges actually incurred for freight and insurance directly related to the distribution of New Products (excluding amounts reimbursed by Third Party customers). A "Commercial Sale of a New Product" is deemed to occur when the invoice is issued, or if no invoice is issued, upon the earlier of shipment or transfer of title in the New Product to a Third Party. In the event that New Product is sold or distributed for use in combination with or as a component of another product or products (a "Combination Product"), the calculation of Net Sales from such Combination Product shall be determined as set forth below:


If all of the active ingredient components 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 New Product containing the same weight of the licensed active ingredient constituent sold independently [A], divided by the sum of the gross invoice price of all of the active ingredient constituents 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]


The distribution costs associated with any Combination Product will be allocated in the same proportion among the licensed active ingredient components and all other active ingredient components.


If the active ingredient components of a Combination Product are not sole 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.


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1.28 "New Product" shall mean the following: any of the Novo Materials modified by using the Neose Technology.


1.29 "Novo Improvements" means any and all Improvements that are related to the Novo Materials and/or any of the New Products made, conceived or reduced to practice by Novo or Neose or both, other than Neose Improvements.

1.30 "Novo Materials" means any and all forms of ******, including, but not limited to, ***** substances.


1.31 "Novo Technology" means the Patent Rights and Know-How Controlled by Novo relating to the Novo Materials.

1.32 "Ownership Rights" means any and all right, title and interest under patent, copyright, trade secret and trademark law, or any other intellectual property or other law, in and to any Know-How, Patent Rights, or Improvements.


1.33 "Parties" means Neose and Novo, collectively.

1.34 "Party" means Neose or Novo, as the context requires, or each of Neose and Novo, individually.

1.35 "Patent Rights" shall mean individually and collectively any and all patents and/or patent applications and provisional applications, all inventions disclosed therein, and any and all continuations, continuations-in-part, continued prosecution applications, divisions, renewals, patents of addition, reissues, confirmations, registrations, revalidations, revisions and re-examinations thereof, utility models, petty patents, design registrations and any and all patents issuing therefrom and any and all foreign counterparts thereof and extensions of any of the foregoing including without limitation extensions under the U.S. Patent Term Restoration Act, extensions under the Japanese Patent Law, and Supplementary Protection Certificates (SPCs) according to Counsel Regulation (EEC) No. 1768/92 and similar extensions for other patents under any applicable law in any country of the world.

1.36 "Permit" means any governmental or regulatory filing, submission, approval, permit or license that is required by applicable law in any jurisdiction worldwide for clinical trials, Commercial Sales or other use of any of the New Products.

1.37 "Person" means an individual, corporation, partnership, trust, business trust, association, joint stock company, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, government, governmental agency, authority or instrumentality, or any other form of entity not specifically listed in this Agreement.

1.38 "Product-Candidate" means any new ***** product-candidate Controlled by Neose during the Term.


1.39 "Project" means the project to be conducted hereunder by the Parties in accordance with the Work Plan.

1.40 "Project Manager" means the project managers described in Section 2.4.1 .

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1.41 "Reagents" means the enzymes and sugar nucleotides required to use the Neose Technology in the manufacture of New Products.


1.42 "Recipient" is used as defined in Section 9.1 .


1.43 "Regulated Market" means any jurisdiction worldwide that requires a Permit for clinical trials, Commercial Sales or any other use of a New Product.


1.44 "Regulatory Approval" means any marketing authorization (including authorizations approving a Biologics License Application) required for a New Product, exclusive of any pricing or third-party reimbursement approval.

1.45 "Required Agreement" means any agreement with a Sublicensee required under Section 5.1.3 .

1.46 "Steering Committee" means the steering committee established pursuant to Section 2.4.2 , or any successor group appointed by the Parties.


1.47 "Sublicensee" means a sublicensee of Novo's rights under Section 5.

1.48 "Supply Agreement" means the supply agreement to be entered into between Neose and Novo in accordance with Section 8 .


1.49 "Territory" means the world.


1.50 "Term" means the term of this Agreement, which shall commence on the Effective Date and shall expire or terminate as described in Section 12 .

1.51 "Third Party" means any Person other than Novo, Neose, or their respective Affiliates.

1.52 "Valid Patent Claim" means a claim of an issued and unexpired patent forming part of the Neose Patents that has not been held revoked, unenforceable or invalid by a decision of a court or other government agency of competent jurisdiction, or unappealable or unappealed within the time allowed for appeal, or which has not been admitted to be invalid or unenforceable through reissue or disclaimer or otherwise. For the purposes of determining royalties due and payment obligations under this Agreement, any claim being prosecuted in a pending patent application included in the Licensed Patents shall be deemed a Valid Patent Claim, provided that such claim is not pending for more than ***** in which the subject matter of the claim is disclosed, after which period it shall cease to be considered a Valid Patent Claim until the patent issues.


1.53 "Work Plan" means the Work Plan attached hereto as Exhibit 2.2, and, unless otherwise specified, as amended from time to time in accordance with Section 2.2 .

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2. CONDUCT OF THE PROJECT AND COMMERCIALIZATION EFFORTS

2.1 Conduct. Commencing promptly after the Effective Date, Neose and Novo will use Commercially Reasonable Efforts to carry out their respective obligations under the Work Plan.

2.2 Creation and Modification of Work Plan. Attached hereto as Exhibit 2.2 is the Work Plan, setting forth a project summary and timetable for the research and development, scale-up and technology transfer activities to be conducted under this Agreement. Neose shall be responsible for the development of validated, GMP processes for the production of Reagents for use in the manufacture of New Products and protocols for the use of the Reagents in the manufacture of New Products by Novo, all as set forth in Exhibit 2.2. The Work Plan may be amended or modified from time to time, but only in a writing signed by each Party's Designated Representative and specifying the Parties' estimate of any additional Neose Project-Related Costs that will be paid by Novo as a result of such amendment.


2.3 Funding

2.3.1 Estimate. The Neose Project-Related Costs are estimated to be *****, plus the cost of materials. This estimate is based upon the Work Plan set forth in Exhibit 2.2. If the Parties amend the Work Plan in a manner that requires any new product or service to be provided by Neose (e.g., a new Reagent, expression system, scale up activity) which is not currently incorporated in the Work Plan, the Parties shall agree in writing on any increase in the Neose Project-Related Costs that are authorized in connection with such amendment.

2.3.2 Payment. Novo will pay for the Neose Project-Related Costs quarterly in advance. No earlier than thirty (30) days before the beginning of each Calendar Quarter following the Effective Date, Neose will invoice Novo for such amount based on a budgeted estimate of Neose Project-Related Costs for such Calendar Quarter. Within thirty (30) days after the end of each Calendar Quarter following the Effective Date, Neose shall submit to Novo a written report setting forth the actual Neose Project-Related Costs for such Calendar Quarter, and shall, as applicable, pay to Novo any amounts paid by Novo for such Calendar Quarter in excess of the actual Neose Project-Related Costs shown in such report, or invoice Novo for any additional amounts owed hereunder. Novo will pay all invoices delivered under this Section 2.3 within ***** days after receipt.

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2.4 Management of Project


2.4.1 Project Managers. Within thirty (30) days after the Effective Date, each of the Parties shall appoint a Project Manager, who will be its primary contact regarding the Project. The Project Managers shall keep each other reasonably informed of the progress under the Work Plan and shall be responsible for maintaining appropriate records of the deliberations and decisions of the Project Managers and the Steering Committee. The Project Managers shall be responsible for overseeing and directing the day-to-day activities conducted at their respective sites in accordance with the Work Plan and suggesting changes for consideration by the Steering Committee. A Party may change its Project Manager at any time, and from time to time, effective upon notice to the other Party of such change.

2.4.2 Establishment and Responsibilities of Steering Committee. Promptly following the Effective Date, the Parties will establish a Steering Committee to monitor the progress of the Work Plan, to evaluate and recommend to the Parties any proposed amendments or modifications to the Work Plan and the costs thereof, to approve and monitor compliance with any publication policy provided to it by Novo, and to carry out all other obligations assigned to it under this Agreement or by the Parties. Each Party may designate a co-chairperson and secretary of the Steering Committee.


2.4.3 Action by Steering Committee and Dispute Resolution. The Steering Committee shall consist of such number of members and alternate members as the Parties may determine from time to time. Each Party shall appoint fifty percent (50%) of the permanent and alternate members of the Steering Committee. The members of the Steering Committee shall include members of senior management of each Party. The members of the Steering Committee representing a Party and present at a meeting shall have one vote, collectively. If the Steering Committee cannot reach agreement on any matter, ***** shall be entitled to *****; provided, however, that if the Steering Committee cannot reach agreement on any matter involving a change in the scope of work to be conducted by ***** under the Work Plan, the schedule of the work to be conducted by ***** under the Work Plan, or the *****, such dispute shall resolved in accordance with Section 13 .


2.4.4 Changes to Steering Committee. Each Party may remove and replace its representatives on the Steering Committee at any time, without cause, upon written notice to the other Party. An alternate member designated by a Party shall be entitled to participate in the absence of a permanent member designated by such Party. All references to " members" in this Agreement refer to the then permanent members of the Steering Committee and any alternate member acting in the place of a permanent member.


2.4.5 Meetings. Regular meetings of the Steering Committee shall be scheduled by the Project Managers or the secretary of the Steering Committee designated by either Party. Special meetings of the Steering Committee may be called by the Project Managers or by any two or more members, at least one of whom represents each Party. Meetings may be in person or by teleconference or videoconference, and notice of meetings may be by email. Each Party will bear its own costs in connection with the management of the Project and the Steering Committee.

2.4.6 No Waiver. No action, nor any failure to act, by the Steering Committee shall alter, amend, waive or otherwise affect the obligations of the Parties under this Agreement. The Parties may amend this Agreement only in accordance with Section 15.6 , and a Party may waive any of its rights under this Agreement only in accordance with Section 15.9 .


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2.5 Cooperation. Throughout the Project, each Party shall cooperate with the other in the conduct of the Work Plan, and will provide such information in its possession or under its Control to the other Party as is reasonably necessary for the other Party to comply with and satisfy the requirements of any and all international, national, state, local or other laws, treaties, rules, procedures or regulations for purposes of this Agreement, or to carry out its obligations under this Agreement.

2.6 Permits. Prior to the commencement of any clinical trials, Commercial Sales or other use of any New Product in a Regulated Market, Novo shall obtain at its expense all Permits required for such activity in the applicable jurisdictions. Novo shall submit all applications for Permits for the New Products in the name of Novo or its Affiliates. Novo shall hold all such Permits, if and when granted, in its name alone. Neose, at Novo's expense, shall provide reasonable assistance and technical support to Novo in obtaining the Permits for the New Products. Novo shall pay all expenses with respect to obtaining the Permits for the New Products including, without limitation, the cost of clinical trials and preparation and prosecution of permit applications. Novo shall be solely responsible for renewing any Permits at its expense. Neose shall supply Novo, at Novo's expense, with Reagents for producing New Products under the terms and conditions of the Supply Agreement.

2.7 Additional Development and Commercialization Activities. Except as set forth in the Work Plan or the Supply Agreement, Neose shall not have any obligation to perform any further research, development, technology transfer, technical support, improvements, modifications, or other activities. Novo shall use Commercially Reasonable Efforts to obtain Regulatory Approvals for, and Commercial Sales of, each New Product.


3. FEES AND DEVELOPMENT PAYMENTS


3.1 License Fee. In consideration of the licenses granted by Neose under this Agreement and the ***** Agreement, Novo shall pay Neose a one-time, nonrefundable upfront fee of ***** within ten (10) days after the Effective Date.


3.2 Milestone Payments Relating to Development of the New Product. In consideration of the development efforts of Neose under the Work Plan, Novo shall pay Neose the amount of each milestone payment set forth in this Section 3.2 upon the occurrence of the earlier to occur of the respective milestone event with respect to the development of the New Product or the corresponding anniversary date specified below. The Parties agree that Neose shall have earned the right to receive a milestone payment, and Novo shall be obligated to pay the milestone payment and shall have met its diligence obligations with respect to the milestone, in each case, as a result of either (i) the achievement of the milestone event prior to the occurrence of the corresponding anniversary date or (ii) the occurrence, alone, of the corresponding anniversary date.


3.2.1 ***** upon the ***** to occur of: (i) the first date on which there shall be a candidate which has been shown to meet the *****, and Neose shall have delivered to Novo ***** for the production of such candidate; and (ii) the ***** anniversary of the Effective Date. ...