Collaborative Research and License Agreement

Exhibit 10.35


COLLABORATIVE RESEARCH AND LICENSE AGREEMENT


THIS COLLABORATIVE RESEARCH AND LICENSE AGREEMENT (the "Agreement") is made effective as of the 15th day of January, 2001 (the "Effective Date") by and between MICROCIDE PHARMACEUTICALS, INC., a Delaware corporation ("Microcide"), having its principal place of business at 850 Maude Avenue, Mountain View, California, USA 94043; and NAEJA PHARMACEUTICAL INC., an Alberta corporation ("NAEJA"), with its principal place of business at #2, 4290-91A Street, Edmonton, Alberta, Canada T6E 5V2. Microcide and NAEJA are sometimes referred to herein individually as a "Party" and collectively as the "Parties".


WHEREAS:


A. Microcide is a biotechnology company involved in the development of products useful for the treatment of infectious diseases or conditions.


B. Microcide is currently conducting preclinical studies on its proprietary fungal efflux inhibitors, and intends to discover and develop other compounds of this class, or other classes for combining with an appropriate Azole antifungal agent for the treatment of infectious diseases or conditions in the future.


C. NAEJA is a pharmaceutical company focusing on the discovery and development of human pharmaceutical drug candidates and has identified certain classes of Azole antifungal agents of interest to Microcide.


D. The Parties entered into a binding letter agreement, dated December 14, 2000, under which the Parties entered into the collaboration, effective January 15, 2001 (the "Letter Agreement"). On March 7, 2001, the Parties entered into an amendment to the Letter Agreement (the "Amendment"), amending the collaboration. The Letter Agreement and the Amendment, shown as Exhibit C and Exhibit D respectively, which shall not be deemed part of this Agreement, are considered by the Parties to be consistent in all respects with this Agreement. The Parties agree that in the case of any ambiguity in this agreement, such ambiguity shall, if possible, be resolved in a manner which is consistent with the Letter Agreement and the Amendment. In case of any conflict between the Letter Agreement, the Amendment and this Agreement, this Agreement (without Exhibits C and D) will govern.


E. The Parties desire to continue to collaborate to research, develop and commercialize drugs based upon the combination of an Azole antifungal agent and a fungal efflux inhibitor; or an Azole antifungal alone, within these classes worldwide for the treatment of infectious diseases or conditions in the future on the terms and conditions provided in this Agreement.


Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [*]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.


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ARTICLE I
DEFINITIONS


The following terms shall have the following meanings as used in this Agreement:


"Affiliate" means an entity that, directly or indirectly, through one
or more intermediaries, controls, is controlled by or is under common
control with NAEJA or Microcide. For purposes of this Section 1.1,
"control" shall mean direct or indirect beneficial ownership of
greater than fifty percent (50%) of the voting stock or equity, or
greater than fifty percent (50%) interest in the income of such
corporation or other business entity; provided that, if local law
requires a minimum percentage of local ownership, control will be
established by direct or indirect beneficial ownership of one hundred
percent (100%) of the maximum ownership percentage that may, under
such local law, be owned by foreign interests.


"Candidates" means Compounds identified by the Project Teams, pursuant
to Section 3.3, for evaluation and recommendation by the JRC for
possible Development.


"Class" means one (1) of the generic classes of molecules described in
Exhibit A.


"Collaboration" means the program of joint Research to be conducted by
the Parties pursuant to the Program Plan.


"Commercialization" shall mean all activities undertaken by a Party
relating to the manufacture and sale of Products, including without
limitation advertising, education, marketing distribution, market and
post approval product support clinical studies conducted after
Regulatory Approval of a Product.


"Compound" means any compound that is included in a Class.


"Control" means possession of the ability to grant a license or
sublicense as provided for herein without violating the terms of any
agreement or other arrangement with any Third Party.


"Development" means the activities conducted by Microcide pursuant to
Section 3.4 and following selection of a Candidate for IND-enabling
studies pursuant to Section 3.3, including without limitation, pre-
clinical studies, clinical studies and other activities directed
toward obtaining Regulatory Approval of a Product and new indications
thereof, and all activities relating to developing the ability to
manufacture the same in quantities greater than those required to
perform Research.


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"Drug Approval Application" means an application for Regulatory
Approval required before commercial sale or use of a Product as a drug
in a regulatory jurisdiction.


"Field" means the treatment, diagnosis, monitoring or prevention of
fungal infections in humans.


"FTE" means one (1) fulltime equivalent research employee dedicated by
a Party to the Collaboration, or in the case of less than a full-time
dedicated scientific person, a full-time, equivalent person year based
upon a total of forty-seven (47) weeks (i.e., one thousand eight
hundred eighty (1,880) hours) per year of work on or directly related
to the Collaboration.


"IND" or "Investigational New Drug Application" shall mean an
application for approval by the FDA or the equivalent non-U.S.
regulatory authority, to commence human clinical testing of a drug.


"Information" means techniques, assays, data and chemical, physical or
biological materials relating to the composition of matter, use or
manufacture of Compounds within Classes, Compounds and/or Products,
including inventions, practices, methods, knowledge, know-how, skill,
experience, test data including pharmacological, toxicological and
clinical test data, analytical and quality control data or
descriptions.


"Intermediate" means compounds that are precursors to, or intermediate
compounds in the manufacture or synthesis of, Compounds within a
Class. Intermediates shall include Microcide Intermediates.


"Joint Patent" shall have the meaning assigned to it in Section
10.1(c).


"Joint Research Committee" or "JRC" means the committee established as
required by Section 2.1;


"Microcide Intermediate" means all Intermediates Controlled by NAEJA
or made by Affiliates, employees, agents or independent contractors of
either Party or both Parties, solely or jointly, during the course of
performing under the Program, other than any Intermediate that has all
of the following characteristics: (i) it is not within a Class; (ii)
it is patentably distinct from all compounds within Classes; and (iii)
it can reasonably be believed to have potentially one or more uses
other than for the manufacture or synthesis of a compound within a
Class.


"Microcide Know-how" means Information which (i) Microcide discloses
to NAEJA under this Agreement and (ii) is within the Control of
Microcide. Notwithstanding anything herein to the contrary, Microcide
Know-how shall exclude Microcide Patents.


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"Microcide Patent" means a Patent which covers the discovery,
evaluation, manufacture, use, sale, offer for sale and/or import of
compounds within the Classes, Compounds and/or Products, which Patent
is Controlled by Microcide. "Microcide Patents" shall include Program
Patents.


"Major European Market" means any of the following countries: France,
Germany, Italy, Spain and the United Kingdom.


"NAEJA Know-how" means Information which (i) NAEJA discloses to
Microcide under this Agreement and (ii) is within the Control of
NAEJA. Notwithstanding anything herein to the contrary, NAEJA Know-
how shall exclude NAEJA Patents.


"NAEJA Patent" means a Patent which covers the discovery, evaluation,
manufacture, use, sale, offer for sale and/or importation of compounds
within the Classes, Compounds and/or Products, which Patent is
Controlled by NAEJA. "NAEJA Patent" shall include Intermediate
Patents.


"Net Sales" means the [*] by a Party or any of its Affiliates (each, a
"Seller") from all sales, including without limitation [*], by Seller
of any Product, which shall be reflected in Seller's books and records
maintained in accordance with the accounting principles used by the
applicable entity consistently applied across all of its products
(which principles will comply with Generally Accepted Accounting
Principles), less the following deductions with respect to such sale,
[*].


"Patent" means all (i) valid and enforceable patents, re-examinations,
reissues, renewals, extensions, term restorations and foreign
counterparts thereof, and (ii) pending (at any time while this
Agreement is in effect) applications for United States patents and
foreign counterparts thereof.


"Phase I Clinical Trials" means those human clinical trials on
sufficient numbers of normal volunteers and patients that are designed
to establish that a drug is safe for its intended use, and to support
its continued testing in Phase II Clinical Trials.


[*] Confidential Treatment Requested


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"Phase II Clinical Trials" means those human clinical trials on
sufficient numbers of patients that are designed to establish safety
and assess the biological activity of a drug for its intended use, and
to define warnings, precautions and adverse reactions that are
associated with the drug in the to be prescribed dosage range.


"Phase III Clinical Trials" means those pivotal human clinical trials
on sufficient numbers of patients that are designed to establish that
a drug is safe and efficacious for its intended use, and to define
warnings, precautions and adverse reactions that are associated with
the drug in the to be prescribed dosage range, and intended to support
Regulatory Approval of such drug.


"Product" means any formulation of a product incorporating a Compound.


"Program" means the Research of Products carried out by the Parties
pursuant to the Program Plan.


"Program Invention" shall have the meaning given such term in Section
10.1(b).


"Program Patents" shall have the meaning given such term in Section
10.1(b).


"Program Plan" shall have the meaning given such term in Section 3.1.


"Program Term" shall mean the duration of the Program as set forth in
Section 3.6.


"Project Team" means a project team established as required by Section
2.4.


"Regulatory Approval" means any approvals (including pricing and
reimbursement approvals, if appropriate), product and/or establishment
licenses, registrations or authorizations of any federal, state or
local regulatory agency, department, bureau or other governmental
entity, necessary for the manufacture, use, storage, import, export or
sale of Products in a regulatory jurisdiction.


"Research" means activities conducted jointly by the Parties under the
Program Plan in connection with selection of a compound in a Class as
a Compound pursuant to Section 3.3, and any other studies conducted by
a Party or the Parties together prior to commencement of Development
of a compound.


"Sublicense Revenues" means all amounts, other than reimbursement
specifically for [*], that a Party or its Affiliates [*].


[*] Confidential Treatment Requested


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"Territory" shall mean the entire world.


"Third Party" means any entity other than NAEJA or Microcide or their
respective Affiliates.


"Valid Claim" means a claim of (a) an issued patent, which claim has
not lapsed, been canceled, or become abandoned and which claim has not
been declared invalid or unenforceable by a court of competent
jurisdiction in a decision from which no appeal has or can be taken,
or (b) a patent application, so long as such application is being
prosecuted and the claim in question has not been abandoned by the
owner of the application (provided that such application has been
pending for a period not to exceed [*] from the date such
application takes priority).


ARTICLE 2
JOINT RESEARCH COMMITTEE AND PROJECT TEAM


2.1 Formation of Joint Research Committee; Decision Making
------------------------------------------------------


The Parties shall establish a Joint Research Committee having a total of four (4) members within thirty (30) days after the Effective Date, which shall have responsibility for strategic oversight and management of Research efforts for Products pursuant to the Program Plan. NAEJA and Microcide each shall select two (2) representatives to serve as members of the Joint Research Committee, each of whom shall have senior management responsibilities for the Party appointing such member. Each Party shall have the right at any time to replace its representatives on the JRC. Either Party may designate a substitute for a committee member to participate in a meeting in the event one of that Party's regular committee members is unable to be present at such meeting. As Research of Products progresses, the composition of the Joint Research Committee shall change from time to time to include members from each Party with expertise appropriate for the stage of Research then being conducted. The Joint Research Committee shall be operative during the Program Term. The Joint Research Committee shall make decisions only by unanimous vote after an open discussion of the matters as to which decisions are being made. If the JRC is unable to resolve any disagreement among its members, then the JRC shall submit such disagreement to the Chief Executive Officer of each party, who shall meet within fifteen (15) days of such submission and attempt to resolve such disagreement. If the Chief Executive Officers cannot resolve such dispute, either party shall have the right to initiate dispute resolution pursuant to Section 14.2.


[*] Confidential Treatment Requested


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2.2 Meetings
--------


Meetings of the Joint Research Committee may be called by either Party on twenty-one (21) days written notice to the other Party, unless such notice is waived in writing by the Parties. The Joint Research Committee will meet at least once every calendar quarter following its formation, with the site of such meetings alternating between Microcide's facility in Mountain View, California and NAEJA's facility in Edmonton, Alberta, or such other site as to which the Parties may mutually agree. Each Party will bear its own costs for participation in the Joint Research Committee meetings. One member of the hosting party will chair the meeting. The chairperson will prepare minutes of each meeting of the Joint Research Committee, which minutes will not be finalized until one of the other Party members of the Joint Research Committee reviews and confirms the accuracy of such minutes, which confirmation shall be given no later than ten (10) days after such minutes are submitted for review to the other Party. Such minutes shall be deemed Confidential Information of each Party under Section 9.1.


2.3 Responsibilities of the Joint Research Committee During the Program
------------------------------------------------------------------- Term ----


The Joint Research Committee shall oversee the Research of Products in order to obtain Regulatory Approvals, including, but not limited to, the following activities: (i) selection and substitution of Compounds for designation as Candidates based upon the presentations and recommendations of the Project Team; (ii) review of the overall strategy for Research of all Products; (iii) review and approval of the Program Plan; (iv) resolution of issues that remain unresolved by the Project Team; (v) approval of the specifications for each Compound or Product as proposed by the Project Team; (vi) selection of Third Party manufacturers of Compounds for Research activities; (vii) determination of the appropriate composition of the Project Team as set forth in Section 2.4; and (viii) performance of such other functions as appropriate for Research of Products, as may be agreed to in writing by the Parties.


2.4 Establishment of the Project Team; Membership; Responsibilities
---------------------------------------------------------------


Each Party shall appoint representatives, pursuant to this Section 2.4, to oversee the day-to-day activities of the Parties under the Program (the "Project Team"). The Parties shall establish a Project Team for each Class of compounds. The number and composition of the membership of each Project Team will vary from time to time during Research of each Product, with each Party providing at least two (2) members of each Project Team at all times. The Joint Research Committee shall determine the number of members for each Project Team and the appropriate areas of expertise required for each Project Team as Research of each Product progresses. Each Project Team shall meet by teleconference at least once (1) per month, and shall maintain more frequent ongoing communication by telephone or electronic mail as appropriate to fulfill its obligations under this Section 2.4. In all other respects, the Project Team shall follow the same procedures as to decision-making and quarterly meetings as the Joint Research Committee, with the Project Team Leader having the responsibility for preparing minutes of such quarterly meetings, such minutes to


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be deemed Confidential Information of each Party pursuant to Section 9.1. The Project Team will:


(a) coordinate the flow of Information and the Parties' efforts under
the Program Plans with respect to Research of each Product;


(b) propose to the Joint Research Committee Compounds for recommended
designation as Candidates;


(c) propose to the Joint Research Committee Program Plans for the
Research of Products for review as provided in Section 3.2;


(d) propose to the Joint Research Committee specifications for the
manufacture of Products for Research activities;


(e) coordinate disclosure of inventions and preparation and filing of
patent applications pursuant to Article 10; and


(f) perform such other activities as the Parties may agree in
writing.


The Project Team members shall attempt to resolve any issues or disputes between the Parties relating to Research of Products after a full discussion, except for those responsibilities allocated to the Joint Research Committee as provided in Section 2.3. If the Project Team is unable to resolve such issues within fifteen (15) days after all members of the Project Team become aware of such issue or dispute, then such issue shall be submitted for resolution by the Joint Research Committee. If the JRC is unable to resolve such issues within fifteen (15) days after all members of the JRC become aware of such issue or dispute, then such issue shall be submitted to the Chief Executive Officer of each party, who shall meet within fifteen (15) days of such submission and attempt to resolve such dispute. If the Chief Executive Officers cannot resolve such dispute, either party shall have the right to initiate dispute resolution pursuant to Section 14.2.


ARTICLE 3
PROGRAM


3.1 Program Plan


The Parties shall perform Research activities jointly as provided in the plan for initial non-clinical and pre-clinical Research of Products in the Field (including manufacturing scale-up work) set forth below in Exhibit B (the "Program Plan") and as revised from time to time pursuant to Section 3.2. Each Party shall perform its responsibilities detailed in the Program Plan in a professional and timely manner.


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3.2 Updates to Program Plan


The Program Plan for the calendar year 2001 has been agreed to by the Parties as set forth in Section 3.1. The Project Team shall update the Program Plan annually beginning in the year 2002 by formulating and presenting its proposal therefor to the Joint Research Committee prior to October 1 of each year preceding the year covered by such proposal. The Project Team shall make revisions to its proposal based upon Joint Research Committee comments and present by November 15 of such year the revised proposal to the Joint Research Committee for final approval by December 1 of such year. Each Program Plan shall describe the proposed overall program of Research of Products and related technology, including for each Class, Compound and Product, relevant Research activities therefor. Additionally, the Program Plan shall contain details regarding the quantities of compounds within Classes necessary to conduct the Program, and projections of costs to scale up manufacturing processes for which Microcide is responsible pursuant to Section 3.7(d).


3.3 Selection of Candidates
-----------------------


The Parties shall jointly conduct Research on the Classes pursuant to the Program Plan to identify which compounds included in such Class have [*] for Development of Products based thereon. Upon completion of or during such Research, the Project Team shall recommend to the Joint Research Committee compounds based upon [*] from each Class for commencement of [*] studies and subsequent studies necessary for Development of such compounds into potential Products. After selection of the compounds, the Parties shall jointly conduct additional Research to allow: (i) the Project Team to recommend to the Joint Research Committee, (ii) the Joint Research Committee to recommend to Microcide, and (iii) for Microcide to select, Candidates from Exhibit A Classes for Development into Products.


3.4 Development
-----------


After selection of the Candidates, Microcide shall use reasonable efforts to conduct development of Products in countries within the Territory that Microcide, in its sole discretion, selects and as necessary to gain Regulatory Approvals for such Products ("Development"). With respect to chemical process development services in support of manufacture of small quantities of Products, Microcide shall [*] to provide such services, on terms to be negotiated in good faith. If, after 30 days, such agreement is not reached between [*] to provide such services, provided that such agreements shall be [*]. If requested by Microcide, [*] in qualifying and securing Third Party chemical


[*] Confidential Treatment Requested


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process development and manufacturing sources for Product. Microcide shall [*].


3.5 Personnel and Resources
-----------------------


Each Party agrees to commit the personnel, facilities, expertise and other resources reasonably needed to perform its responsibilities under the Program Plan. During each of the first [*] during the Program Term, [*] shall, [*] in accordance with Section 3.7, maintain one group of [*] FTEs (the "First Group") and a second group of [*] FTEs (the "Second Group") devoted to performing [*] responsibilities under the Program Plan, each of whom shall be appropriately qualified to perform such work; [*]. In addition, from time to time upon the Parties' mutual written agreement, [*] will maintain [*] additional FTEs committed to performance of [*] responsibilities under the Program Plan.


3.6 Term of the Program
-------------------


The Program commenced as of January 15, 2001 and shall expire on the second anniversary thereof, unless terminated earlier by either party pursuant to the provisions of this Agreement, or extended by mutual agreement.


3.7 Program Funding
---------------


(a) Party Activities. Except as provided in Sections 3.7(b), (c) and
----------------
(d), [*] shall fund all activities for Research and Development
of Products that are conducted by [*].


(b) Funding for research expenses and renovations. Microcide shall
---------------------------------------------
pay to NAEJA a one-time funding of US $[*] for research expenses for
renovations and equipment to be used entirely at NAEJA's discretion.
The forgoing payment shall be made within ten (10) days after the
Effective Date. Any property acquired by NAEJA with such funding shall
be the sole and absolute property of NAEJA.


(c) FTE Funding by [*]. [*] shall to pay [*] research
------------------
funding based on the number of FTEs of [*] involved in performing [*]
Research activities under the Program (both during [*], as determined
under Section 3.5. For each such FTE in the First Group (as defined in
Section 3.5), [*] shall pay [*] at an annualized rate of US $[*] per
FTE that is [*] employee for the first year of the Program Term and US
$[*] per FTE that is a [*] employee for the second year of the


[*] Confidential Treatment Requested


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