Collaborative Research And License Agreement

THIS AGREEMENT WITH CERTAIN CONFIDENTIAL PORTIONS DELETED IS BEING FILED AS PART OF EXHIBIT 10.10 TO CHEMGENICS PHARMACEUTICALS INC'S REGISTRATION STATEMENT ON FORM S-1 BEING FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (REGISTRATION NO. 333- ____)


COLLABORATIVE RESEARCH AND LICENSE AGREEMENT


This COLLABORATIVE RESEARCH AND LICENSE AGREEMENT (the "Agreement") is entered into as of November 1, 1996 by and between AMERICAN HOME PRODUCTS CORPORATION, a Delaware corporation, represented by its Wyeth-Ayerst Laboratories Division having its principal place of business at 555 East Lancaster Avenue, St. Davids, Pennsylvania 19087 ("WYETH-AYERST"), and CHEMGENICS Pharmaceuticals Inc. ("CHEMGENICS"), a Delaware corporation, having its registered office at One Kendall Square, Building 300, Cambridge, Massachusetts 02139, U.S.A.


WHEREAS, CHEMGENICS has expertise in the discovery of bacterial genes and antibacterial drug targets, the use of bacterial molecular biology and genetics and the development and use of screening systems for the discovery of targets and compounds for treating bacterial diseases and has developed a drug source, including libraries of natural sources, for patentable therapeutic compounds; and


WHEREAS, WYETH-AYERST has expertise in discovering, developing, testing, obtaining regulatory approvals, manufacturing and marketing human therapeutic products for bacterial diseases; and


WHEREAS, WYETH-AYERST and CHEMGENICS wish to enter into this Agreement in order to collaborate in the performance of research to discover and develop antibacterial drugs; and


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WHEREAS, CHEMGENICS will perform research which will be funded and supported by WYETH-AYERST in order to discover drug targets and Compounds for use in the Field and will license the results of such research to WYETH-AYERST in the Territory for the purpose of research for Antibacterial Products for human use, including drug discovery, and the development, testing, obtaining regulatory approval, manufacture and sale of Antibacterial Products for human use;


NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the parties hereby agree as follows:


1. DEFINITIONS
----------- Whenever used in this Agreement with an initial capital letter, the terms defined in this Section 1 shall have the meanings specified.


1.0 "ACCEPTED TARGET" means an antibacterial target for which an assay has been developed, that is accepted by the Joint Steering Committee ("JSC") for development of [


]


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[


]


1.1 "ACTIVITY PROFILE" means one of the activity profiles set forth in Exhibit 1, or any other activity profile agreed upon by the Joint Steering Committee.


1.2 "AFFILIATE" means any corporation, firm, limited liability company, partnership or other entity which directly or indirectly controls or is controlled by or is under common control with a party to this Agreement. "Control" means ownership, directly or through one or more Affiliates, of fifty percent (50%) or more of the shares of stock entitled to vote for the election of directors, in the case of a corporation, or fifty percent (50%) or more of the equity interests in the case of any other type of legal entity, status as a general partner in any partnership, or any other arrangement whereby a party controls or has the right to control the Board of Directors or equivalent governing body of a corporation or other entity.


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1.3 "ANTIBACTERIAL PRODUCT" means any product which incorporates a CHEMGENICS Product or a WYETH-AYERST Product (including analogs, derivatives or modifications thereof) listed on Schedule I hereto, as amended from time to time, in accordance with Section 2.4 hereof, and any product in the Field which is discovered during the Research Term of this Agreement and a period of [ ] thereafter, whether or not under the R & D Program, utilizing any Compound, which discovery would not have occurred but for such utilization of such Compound.


1.4 "BACTERIAL DISEASE" means a disease in humans caused by infection with bacterial organisms and which is capable of being treated by pharmaceutical agents targeting the bacterial organisms. Bacterial disease shall not include the treatment of H. pylori infection for peptic ulcer disease or gastritis.


1.5 "CHEMGENICS OWNED TECHNOLOGY" has the meaning set forth in Section 6.2.1.


1.6 "CHEMGENICS PRODUCT" means a Compound provided by CHEMGENICS that has been designated an Antibacterial Product. "CHEMGENICS Product" shall also include any other compound discovered or developed during the Research Term of this Agreement and a period of [ ] thereafter using any such CHEMGENICS Compound or using structural, chemical, or biological information relating to any such CHEMGENICS Compound.


1.7 "COMMERCIAL LICENSE TERM" means the time period referenced in Section 8.2 hereof.


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1.8 "COMPOUND" means a chemical compound or mixture of compounds that is discovered or developed in the R & D Program by either party alone or jointly by both parties, which is identified as having antibacterial activity [


] Without limiting the generality of the foregoing, a Compound will be deemed "discovered" in the R & D Program if the potential utility or mode of action of such Compound in the Field is identified or investigated in the R & D Program.


1.9 "CONFIDENTIAL INFORMATION" means all Technology and all information (including but not limited to information about any element of Technology or a party's business) which is disclosed by one party to the other hereunder or under the Superseded Confidentiality Agreement (as defined in Section 12.14) and indicated as confidential by the disclosing party except to the extent that such information (i) as of the date of disclosure is demonstrably known to the party receiving such disclosure or its Affiliates, as shown by written documentation, other than by virtue of a prior confidential disclosure to such party or its Affiliates; (ii) as of the date of disclosure is in, or subsequently enters, the public domain, through no fault or omission of the party receiving such disclosure; or (iii) as of the date of disclosure or thereafter is obtained from a third party free from any obligation of confidentiality to the disclosing party.


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1.10 "COST OF GOODS" means the following direct and indirect costs incurred by WYETH-AYERST in the production of the Antibacterial Products: [


]


The amount to be allocated for departmental administrative and overhead shall be determined by computing the percent of direct labor and materials dollars applicable to the work performed in the production of the Antibacterial Products in a given department as a proportion to all direct labor and materials dollars charged to projects in that department, and multiplying that percent by the total overhead dollars related to that department. The percentage amounts used to determine the allocated amounts will be calculated using WYETH-AYERST's accounting system which will compute such rates on a consistent basis. Should WYETH-AYERST change its method of allocating overhead and administrative costs to its projects it will so advise CHEMGENICS and the parties will renegotiate the basis for


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allocating such costs to the work performed in the production of Antibacterial Products.


1.11 "CPMP" means the Committee on Proprietary Medical Products of the European Union.


1.12 "DISCOVERY PROJECT STATUS" means a designation given to a Compound when the JSC determines that [


]


1.13 "EFFECTIVE DATE" means the date of full execution of this Agreement by the parties.


1.14 "FIELD" means drugs for the prevention and treatment of Bacterial Diseases in humans.


1.15 "FIRST COMMERCIAL SALE" means the date of the first sale of an Antibacterial Product in the ordinary course of business in any country by WYETH-AYERST or an Affiliate or distributor, licensee or sublicensee of such party.


1.16 "FISCAL QUARTER" means one quarter of WYETH-AYERST's Fiscal Year.


1.17 "FISCAL YEAR" means the twelve month period beginning January 1 and ending December 31 of a calendar year.


1.18 "JOINT STEERING COMMITTEE" or "JSC" means the committee created pursuant to Section 2.2.


1.19 "JOINT TECHNOLOGY" has the meaning set forth in Section 6.2.3.


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1.20 "NDA" means a New Drug Application, as defined by the U.S. FDA, or the equivalent in any other country in the Territory.


1.21 "NET SALES" means with respect to an Antibacterial Product, the gross amount invoiced by WYETH-AYERST, its Affiliates and/or its licensees and sublicensees, on sales or other dispositions of the Antibacterial Product to unrelated third parties, less the following items, provided that such items are actually included in the price charged and do not exceed reasonable and customary amounts in the country in which such sale occurred:


[


]
Such amounts shall be determined from the books and records of WYETH-AYERST, its Affiliates and/or its licensees or sublicensees, maintained in accordance with generally accepted accounting principles, consistently applied.


If an Antibacterial Product is sold in bulk (as distinguished from packaged pharmaceutical form) for resale in packaged or finished form, Net Sales shall be calculated by


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determining the quantity of Antibacterial Product in packaged pharmaceutical form that would reasonably be produced from the bulk quantity of Antibacterial Product so sold, and by multiplying such quantity by the average price for such Antibacterial Product in packaged pharmaceutical form during the applicable royalty reporting period. If an Antibacterial Product is sold, or otherwise commercially disposed of for value (including, without limitation, disposition in connection with the delivery of other products or services), in a transaction that is not a sale for cash to an independent third party, then the gross amount invoiced in such transaction shall be deemed to be the gross amount that would have been paid had there been such a sale at the average sale price of such Antibacterial Product during the applicable royalty reporting period; provided, however, that sale of Antibacterial Product in bulk to a third party end user who repackages but does not resell such Antibacterial Product shall be calculated at the actual transaction price.


Net Sales shall not include any consideration received by WYETH-AYERST, its Affiliates or its licensees or sublicensees in respect of the sale, use or other disposition of an Antibacterial Product in a country as part of a clinical trial prior to the receipt of all regulatory approvals required to commence full commercial sales of such Antibacterial Product in such country, except sales under "treatment INDs," "named patient sales," "compassionate use sales," or their equivalents pursuant to which


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WYETH-AYERST, its Affiliates or licensees and sublicensees is/are entitled, under applicable regulatory policies, to recover costs incurred in providing such products to the patients.


1.23 "PATENT RIGHTS" means the rights and interests in and to issued patents and pending patent applications in any country, including, but not limited to, all provisional applications, substitutions, continuations, continuations-in-part, divisions, and renewals, all letters patent granted thereon, and all reissues, reexaminations and extensions thereof, whether owned solely or jointly by a party or licensed in by a party with the right to sublicense. "CHEMGENICS Patent Rights" shall mean Patent Rights owned or licensed by CHEMGENICS, with the right to sublicense, which are necessary to develop, make, use or sell Antibacterial Products, "WYETH-AYERST Patent Rights" shall mean Patent Rights owned or licensed by WYETH-AYERST, with the right to sublicense, which are necessary to develop, make, use or sell Antibacterial Products, and "Joint Patent Rights" shall mean such Patent Rights owned or licensed jointly by the parties.


1.24 "PRE-PROJECT STATUS" means a WYETH-AYERST research designation for a Compound that is a candidate for IND track, given to a Compound by WYETH-AYERST in accordance with its customary drug development practices, and when, at a minimum, it has been demonstrated to WYETH's satisfaction, consistent with its customary criteria, [


]


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[


]


1.25 "PROJECT COMMENCEMENT DATE" means December 1, 1996.


1.26 "R & D PROGRAM" means the research and development program, to be conducted by CHEMGENICS and WYETH-AYERST pursuant to Section 2 of this Agreement and reflected in the Work Plans.


1.27 "RESEARCH PHASE" means research relating to Compounds that have not yet received Pre-Project Status designation.


1.28 "TECHNOLOGY" means and includes all inventions, discoveries, improvements, proprietary materials, compounds, biological substances, data, know-how and trade secrets, whether or not patentable, including any negative results.


1.29 "TERRITORY" means all the countries of the world.


1.30 "VALID CLAIM" means any claim of a pending patent application or an unexpired patent which has not been held unenforceable, unpatentable or invalid by a decision of a court or other governmental agency of competent jurisdiction, unappealed or unappealable within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through reissue, reexamination, disclaimer or otherwise.


1.31 "WORK PLAN" means the written plan describing the activities to be carried out during each year of the R & D Program pursuant to this Agreement. Each Work Plan will be set forth in a written document prepared by CHEMGENICS and WYETH-AYERST approved by the Joint Steering Committee.


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1.32 "WYETH-AYERST OWNED TECHNOLOGY" has the meaning set forth in Section 6.2.2.


1.33 "WYETH-AYERST PRODUCT" means a Compound provided by WYETH-AYERST that has been designated an Antibacterial Product. "WYETH-AYERST Product" shall also include any other Compound discovered or developed during the Research Term of this Agreement and a period of [ ] thereafter using any such WYETH- AYERST Compound or using structural, chemical, or biological information relating to any such WYETH-AYERST Compound.


2. R & D PROGRAM
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2.1 IMPLEMENTATION OF R & D PROGRAM.
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2.1.1 Basic Provisions of Program.
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The objective of the Research Phase of the R & D Program shall be the discovery and characterization of Accepted Targets in areas covered by the four Activity Profiles contained in Exhibit 1 and any other Activity Profiles designated by the JSC from time to time. The objective of the development phase of the R & D Program shall be the development of Compounds receiving Pre-Project Status designation and the testing and regulatory approval of Antibacterial Products in areas covered by such Activity Profiles. In carrying out the R & D Program, CHEMGENICS shall devote an average of at least [ ] full-time equivalent employees per year to the Research Phase of the R & D Program over its five year duration, and shall ensure that a reasonable number of such employees are devoted solely to the R &


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D Program, and that key members of such group will be Ph.D. level researchers. CHEMGENICS and WYETH-AYERST shall each use commercially reasonable efforts to perform such tasks as are set forth to be performed by it in the Work Plans, including the provision of such facilities, materials, equipment and consultants as each deems necessary to the achievement of such Work Plans.


2.1.2 Collaborative Efforts and Reports.
---------------------------------


The parties agree that the successful execution of the R & D Program will require the collaborative use of both parties' areas of expertise. The parties shall keep the JSC and each other fully informed about the status of the portions of the R & D Program they respectively perform. In particular, without limitation, each party shall furnish to the JSC and each other a quarterly written report, describing the progress of its activities in reasonable detail, no later than thirty (30) days after the end of each Fiscal Quarter.


Scientists at CHEMGENICS and WYETH-AYERST shall cooperate in the performance of the R & D Program and, subject to any confidentiality obligations to third parties, shall exchange information and materials as necessary to carry out the R & D Program, but subject to the provisions of Sections 4 and 5 hereof. Each party will attempt to accommodate any reasonable request of the other party to send or receive personnel for purposes of collaborating or exchanging information under the R & D Program. Such visits and/or access will have defined


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purposes and be scheduled in advance. The requesting party will bear the travel and lodging costs of any such personnel.


2.1.3 Work Plans.
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The Work Plan for the first year of the R & D Program shall be prepared by CHEMGENICS and WYETH-AYERST and approved by the JSC as promptly as practical after the Effective Date. For each year of the R & D Program commencing with the second year, the Work Plan shall be prepared by CHEMGENICS and WYETH-AYERST and approved by the JSC no later than thirty (30) days before the end of the prior year. The Work Plan shall set forth specific research and development objectives, milestones and resource allocation requirements and shall be designed to facilitate the earliest practical identification of Accepted Targets and the fastest practical testing, regulatory approval and marketing of safe and effective Antibacterial Products.


Each Work Plan shall be in writing and shall set forth with reasonable specificity tasks for the period covered by the Work Plan. The JSC may make adjustments in the Work Plan at its quarterly meetings or otherwise as it may determine.


2.1.4 Exclusivity.
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CHEMGENICS agrees that for the duration of the "Research Term" (Research Phase of the R & D Program as specified in Section 2.3 below) and for a period of four (4) months thereafter, CHEMGENICS will not collaborate with or grant license rights to any other party in the Field, except as otherwise permitted hereby. WYETH-AYERST agrees that for the duration of


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this Agreement, WYETH-AYERST will not utilize any CHEMGENICS Owned Technology, as hereinafter defined, for any purpose other than (i) as provided herein or (ii) otherwise for the benefit of CHEMGENICS.


2.2 JOINT STEERING COMMITTEE, PROJECT MANAGEMENT TEAM AND PROJECT LEADERS.
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2.2.1 Establishment and Functions of JSC.
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CHEMGENICS and WYETH-AYERST shall establish a "Joint Steering Committee" (the "JSC"). The JSC will act on behalf of the two companies and will be responsible for planning and monitoring of the R & D Program (until Pre-Project Status designation by WYETH-AYERST with respect to any individual Compound) and for setting forth specific research and development objectives, milestones, determining when milestones are met, and resource allocation requirements. In particular, the activities of the JSC shall include reviewing progress in the R & D Program and recommending necessary adjustments to the R & D Program as the research and development progresses, supervising the Project Management Team, [


] Subject to Section 4.1, any technology in the Field to be considered for in-licensing by either party during


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the Research Term, as hereinafter defined, shall be initially presented to the JSC for discussion, utilizing only public, non-confidential information. Upon review of such non-confidential information, the JSC may request the further involvement of the JSC in any evaluation of such technology or may decline any such involvement.


In planning and monitoring the R & D Program, the JSC shall assign tasks and responsibilities taking into account each party's respective specific capabilities and expertise in order in particular to avoid duplication and enhance efficiency and synergies.


2.2.2 JSC Membership.
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CHEMGENICS and WYETH-AYERST each shall appoint, in their sole discretion, three members to the JSC, which shall include a Chair to be designated by WYETH-AYERST and a Co-Chair to be designated by CHEMGENICS. Substitutes or alternates for the Chair and Co-Chair or other JSC members may be appointed at any time by notice in writing to the other party. The parties may mutually agree to change the size of the JSC as long as there shall be an equal number of representatives of each party on the JSC.


The initial Chair, Co-Chair and other JSC members shall be designated by the parties upon execution of this Agreement.


2.2.3 Meetings.
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The JSC shall meet at least quarterly, with such meetings to be held, alternately, in Cambridge or Framingham, Massachusetts


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and Pearl River, New York, unless the parties agree otherwise. Any additional meetings shall be held at places and on dates selected by the Co-Chairs of the JSC. In addition, the JSC may act without a formal meeting by a written memorandum signed by the Co-Chairs of the JSC. Whenever any action by the JSC is called for hereunder during a time period in which the JSC is not scheduled to meet, the Co-Chairs of the JSC shall cause the JSC to take the action in the requested time period by calling a special meeting or by action without a meeting. Subject to the obligations set forth in Section 5, representatives of each party or of its Affiliates, in addition to the members of the JSC, may attend JSC meetings at the invitation of either party with the prior approval of the other party, which shall not be unreasonably withheld.


2.2.4 Minutes.
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The JSC shall keep accurate minutes of its deliberations which record all proposed decisions and all actions recommended or taken. Drafts of the minutes shall be delivered to the Co-Chairs of the JSC within twenty (20) days after the meeting. The party hosting the meeting shall be responsible for the preparation and circulation of the draft minutes. Draft minutes shall be edited by the Co-Chairs and shall be issued in final form only with their approval and agreement as evidenced by their signatures on the minutes.


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2.2.5 Quorum; Voting; Decisions.
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At each JSC meeting, at least two (2) member(s) appointed by each party shall constitute a quorum. Each JSC member shall have one vote on all matters before the JSC, provided that the member or members of each party present at a JSC meeting shall have the authority to cast the votes of any of such party's members on the JSC who are absent from the meeting. All decisions of the JSC shall be made by majority vote, provided that such vote is supported by at least one representative from each party. All JSC member actions shall be made in consultation with the management of the party appointing such member. In the event that the JSC is unable to resolve any matter before it, such matter shall be referred at the request of either party to the Chief Executive Officer of CHEMGENICS or some other individual nominated by him or her, and the President of Wyeth-Ayerst Research or some other individual nominated by him or her, for attempted resolution by good faith negotiations. If such officers cannot resolve the matter, each party may, at its own expense, appoint an unaffiliated scientific or other appropriate expert to advise such officers on the matter. The scientific or other appropriate experts shall be reasonably acceptable to the other party and shall be chosen based on their experience and expertise in the particular type of issue which is unresolved. The experts shall render a written advisory opinion to such officers, which may be considered by such officers in an attempt to resolve the issue.


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2.2.6 Expenses.
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CHEMGENICS and WYETH-AYERST shall each bear all expenses of their respective JSC members related to their participation on the JSC and attendance at JSC meetings, and of any scientific experts appointed by them pursuant to Section 2.2.5.


2.2.7 Project Leaders.
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CHEMGENICS and WYETH-AYERST shall each appoint a "Project Leader" who shall serve as such party's primary technical liaison with the other party to discuss technical matters pertaining to the R & D Program.


2.2.8 Project Management Team.
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CHEMGENICS and WYETH-AYERST shall establish a "Project Management Team" (the "PMT"), which will act on behalf of the two companies and which shall manage the R & D Program as directed by the JSC. CHEMGENICS and WYETH-AYERST each shall appoint, in their sole discretion, three members to the PMT, which shall include the Project Leaders. Substitutes or alternates for the Project Leaders or other PMT members may be appointed at any time by notice in writing to the other party. The parties may mutually agree to change the size of the PMT as long as there shall be an equal number of representatives of each party on the PMT.


The initial Project Leaders and other PMT members shall be designated by the parties upon execution of this Agreement. The PMT shall meet, keep minutes and establish operating procedures as directed by the JSC.


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The PMT shall be chaired by the two Project Leaders.


2.3 RESEARCH AND DEVELOPMENT TERM.
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2.3.1 Term of the R & D Program.
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The Research Phase of the R & D Program shall terminate five (5) years after the Project Commencement Date unless extended as provided below or unless earlier terminated by either party pursuant to the termination provisions below (hereinafter the "Research Term").


2.3.2 Extension of the Research Term.
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The Research Term may be extended upon six (6) months prior notice by mutual written agreement of the parties on terms to be agreed upon between the parties.


2.3.3 Early Termination of the R & D Program.
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(a) The R & D Program may be terminated by either party upon breach by the other of the obligation to pay any amount due hereunder, or upon breach of any other material obligation or condition, effective thirty (30) days after giving written notice to the other of such termination in the case of a payment breach and ninety (90) days after giving written notice to the other of such termination in the case of any other breach, which notice shall describe such breach in reasonable detail. The foregoing notwithstanding, (i) if the default or breach is cured or shown to be non-existent within the aforesaid thirty (30) or ninety (90) day period, the notice shall be deemed automatically withdrawn and of no effect, and (ii) as to an alleged breach expressly set forth with reasonable detail to be the subject of a


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