Research And License Agreement

Exhibit 10.7 Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions, marked by [***], have been separately filed with the Securities and Exchange Commission. RESEARCH AND LICENCE AGREEMENT Between YEDA RESEARCH AND DEVELOPMENT COMPANY LIMITED a company duly registered under the laws of Israel of
P O Box 95, Rehovot 76100, Israel(hereinafter, " Yeda" )and PROTALIX BIOTHERAPEUTICS LIMITED a company duly registered under the laws of Israel,
having its principal place of business at 2 Snunit St,
Science Park, POB 455, Carmiel 20100, Israel(hereinafter, " the Company" ) PREAMBLE: WHEREAS: (A) in the course of research conducted at the Weizmann Institute of Science (" the Institute" ), under the supervision of Professor Anthony H. Futerman of the Department of Biological Chemistry, Professor Joel L. Sussman of the Department of Structural Biology and Professor Israel Silman of the Department of Neurobiology (" the Scientists" ), the Scientists together with other scientists of the Institute, all of the aforementioned persons, collectively " the Inventors" arrived at an invention entitled [***](" the Invention" ), being the subject of and more fully described in PCT patent application number [***] and the other patent applications listed in Appendix A hereto [***](" the Existing Patent Applications" ) and created and/or generated the know- [***] Omitted pursuant to a confidential treatment request. The confidential portion has been filed separately with the Securities and Exchange Commission.


- 2 - how and other information relating to the Invention as described in Appendix B hereto (" the Know-How" ); and (B) the Company is: (i) interested in the performance of further research at the Institute under the supervision of the Scientists in the field of the Invention, as specified in the research program attached hereto, marked Appendix C (" the Research Program" and " the Research" ); and (ii) willing, subject to and in accordance with the terms and conditions of this Agreement, to finance the performance of the Research in accordance with the budget attached hereto and marked Appendix D (" the Research Budget" ); and (C) Yeda is willing, subject to and in accordance with the terms and conditions of this Agreement, to procure the performance of the Research at the Institute as aforesaid; and (D) by operation of Israeli law and/or under the terms of employment of the Inventors at the Institute and pursuant to an agreement between the Institute, Yeda and the Inventors, all right, title and interest of the Inventors and/or the Institute in and to the Invention, in any results deriving from the performance of the Research at the Institute and in the Existing Patent Applications vests and shall vest in Yeda; and (E) subject to and in accordance with the terms of this Agreement, the Company wishes to receive, and Yeda is willing to grant to the Company, a worldwide exclusive licence in respect of the Licensed Information (as hereinafter defined) and under the Patents (as hereinafter defined), for the development, manufacture, production, and sale of enzymatically active mutants of glococerebrosidase and derivatives therefrom for the treatment of Gaucher disease and/or any other indication (" Products" ), all subject to and in accordance with the terms and conditions of this Agreement below; and (F) the Company declares that on 12 January 2006 the Magneton Committee (appointed by the General Manager of the Ministry of Industry, Trade and Employment (" MITE" )) approved the application filed by the Company


- 3 - for the receipt of government grants within the framework of the Magneton Program (as hereinafter defined) for the performance of the Research and for research and development activities by the Company in respect of the Products, pursuant to a letter dated 15 January 2006 from the manager of the Magneton Program, a copy of which is annexed hereto as Appendix E (" the Magneton Approval" ), NOW THEREFORE IT IS AGREED BETWEEN THE PARTIES HERETO AS FOLLOWS: 1. PREAMBLE, APPENDICES AND INTERPRETATION 1.1. The Preamble and Appendices hereto form an integral part of this Agreement. 1.2. In this Agreement the terms below shall bear the meanings assigned to them below, unless the context shall indicate a contrary intention: 1.2.1. " Affiliated Entity" - shall mean, with respect to any party hereto, any company, corporation, other entity or person (hereinafter, collectively, " entity" ), which directly or indirectly, is controlled by, or controls, or is under common control with, such party. For the purposes of this definition, " control" shall mean the ability, directly or indirectly, to direct the activities of the relevant entity (save for an ability flowing solely from the fulfilment of the office of director or another office) and shall include, without limitation, the holding, directly or indirectly, of more than 30% (thirty percent) of the issued share capital or of the voting power of the relevant entity or the holding, directly or indirectly, of a right to appoint more than 30% (thirty percent) of the directors of such entity or of a right to appoint the chief executive officer of such entity;


- 4 - 1.2.2. " Development Program" - shall mean, with respect to any Product or Products, a development program specifying the activities and timetable necessary to develop such Products to commercialisation, including the performance of steps required for obtaining regulatory approvals from all relevant authorities for such Products and/or the sale of such Products ; 1.2.3. " Exchange Rate" - shall mean, with respect to any amount to be calculated, or which is paid or received in a currency other than US Dollars, the average of the selling and buying exchange rates of such currency (in respect of cheques and remittances) and the US Dollar prevailing at Bank Hapoalim B.M. at the end of business on the date of calculation, payment or receipt, as the case may be; 1.2.4. " First Commercial Sale" - shall mean, with respect to any Product in any country, the first commercial sale of such Product in such country after U.S. Food and Drug Administration (" FDA" ) New Drug Approval, European Medicines Agency (" EMEA" ) or national medicinal agency marketing approval or equivalent approval in such country has been obtained for such Product; 1.2.5. " Licence" - shall mean an exclusive worldwide licence under the Licensed Information and the Patents, for the development, manufacture, production, use, marketing, distribution and sale of the Products, subject to the provisions of clause 7.1 below and the other terms and conditions of this Agreement; 1.2.6. " Licensed Information" - shall mean: (i) the Invention; (ii) the Know-How; and (iii) all and any inventions, products,


- 5 - materials, compounds, compositions, substances, methods, processes, techniques, know-how, data, information, discoveries and other results of whatsoever nature discovered or occurring in the course of, or arising from, the performance of the Research; 1.2.7. " Magneton Directive" - shall mean Directive 8.6 of the General Manager of MITE dated 22 August 2001 entitled " The Encouragement of Technology Transfer from Academia to Industry Magneton" 1.2.8. " Magneton Program" - shall mean the program for the encouragement of the transfer of generic technology from academic to commercial bodies administered by MITE, as described in the Magneton Directive; 1.2.9. " Net Sales" - shall mean the total amount invoiced by the Company and the total amount invoiced by each Sublicensee (and, subject to clause 7.4.4.6 below, each Further Sublicensee (as hereinafter defined)) in connection with the sale of Products (for the removal of doubt, whether such sales are made before or after the First Commercial Sale of any Product in any country); provided that, with respect to sales which are not at arms-length and/or are not in the ordinary course of business and/or are not according to then current market conditions for such a sale, the term " Net Sales" shall mean the total amount that would have been due in an arms-length sale made in the ordinary course of business and according to the then current market conditions for such sale or, in the absence of such current market conditions, according to market conditions for


- 6 - sale of products similar to the Products, in all cases after deduction of: (i) sales taxes (including value added taxes) or customs duties to the extent applicable to such sale and included in the invoice in respect of such sale; (ii) credits or allowances, if any, actually granted on account of price adjustments, recalls, rejections or returns of Products previously sold; (iii) freight and insurance charges to the extent such items are applicable to such sale and are separately itemised on invoices; and (iv) bad debts (as determined in accordance with relevant GAAP rules) deriving from Net Sales in respect of which royalties were paid by the Company pursuant hereunder; and provided further that, with respect to sales by the Company and/or a Sublicensee and/or a Further Sublicensee, as applicable, to any Affiliated Entity of the Company or of such Sublicensee or Further Sublicensee, as the case may be, the term, " Net Sales" shall mean the higher of (but for the avoidance of doubt, not both of): (a) " Net Sales" , as defined above, with respect to sales which are not at arms-length and/or in the ordinary course of business and/or according to current market conditions; and (b) the total amount invoiced by such Affiliated Entity on resale to an independent third party purchaser after the


- 7 - deductions specified in subparagraphs (i) and (ii) above, to the extent applicable; 1.2.10. " OCS" - shall mean the Office of the Chief Scientist at MITE; 1.2.11. " Patents" - shall mean: (i) the Existing Patent Applications and all patents which may be granted thereon; and (ii) all other patent applications or applications for certificates of invention covering portions of the Licensed Information and all patents or certificates of invention which may be granted thereon; as well as all continuations, continuations-in-part, patents of addition, divisions, renewals, reissues and extensions (including any patent term extension) of any of the aforegoing patents, but excluding: (a) patents that have been invalidated or cancelled pursuant to the final ( i.e., unappealed or unappealable) judgment of a competent court; and (b) patent applications that have been withdrawn or have expired, in each case such exclusion to be effective only from the date of such invalidation, cancellation, withdrawal or expiry, as the case may be. For the purposes of this Agreement, the term " Patent" shall also mean a Supplementary Protection Certificate (within the meaning of such term under Council Regulation (EU) No. 1768/92) or any other similar statutory or supplementary protection; 1.2.12. " Research Period" - shall mean the [***]period commencing on the date of signature of this Agreement, as may be extended in accordance with clause 2.1 below; [***] Omitted pursuant to a confidential treatment request. The confidential portion has been filed separately with the Securities and Exchange Commission.


- 8 - 1.2.13. " Sublicence" and
" Sublicensee" - " Sublicence" shall mean any right granted, licence given, or agreement entered into, by the Company (or, but without derogating from clause 7.4.4.6 below, a Sublicensee) to or with any other person or entity, permitting any use of the Licensed Information and/or the Patents (or any part thereof) for the independent development and/or manufacture and/or production and/or marketing and/or distribution and/or sale of Products (whether or not such grant of rights, licence given or agreement entered into is described as a sublicence or as an agreement with respect to the development and/or manufacture and/or production and/or distribution and/or marketing and/or sale of Products or otherwise) and the term " Sublicensee" shall be construed accordingly; 1.2.14. " Sublicensing Receipts" - shall mean consideration, whether monetary or otherwise, received (for the removal of doubt, whether received before or after the First Commercial Sale in any country) by the Company for or from the grant of Sublicences or Further Sublicences and/or pursuant thereto, or in connection with the grant of an option for a Sublicence, except for: (i) amounts received by the Company which constitute royalties based on sales of the Products by Sublicensees in respect of which the Company has paid royalties to Yeda; and (ii) amounts received by the Company from a Sublicensee and actually


- 9 - expended by the Company (as evidenced by invoices, receipts or other appropriate documentation) in respect of Product-related research and/or development activities to be performed by the Company for such Sublicensee after the date of signature of the relevant Sublicence (or, as the case may be, option for a Sublicence), provided that: (a) any such amounts constitute research and/or development funding only and not payment for Products nor any other type of grant or benefit, (b) such research and/or development activities are performed pursuant to a defined research and development program and research and development budget agreed with the relevant Sublicensee, a copy of which is provided to Yeda; and (c) the Company submits to Yeda a written expense report, confirmed by the Company' s independent accountant or chief financial officer, setting out the time and materials utilised, and reasonable overhead costs and other expenses actually incurred by the Company in the conduct of the said research and


- 10 - development activities, which report demonstrates that such amounts have actually been expended by the Company in the conduct of such research and/or development activities in accordance with such work program and budget, it being agreed, for the removal of doubt, that any amounts received by the Company as aforesaid, but not expended as set out above, shall be deemed to be Sublicensing Receipts. 1.2.15. the terms: " Yeda" , " the Company" , " the Institute" , " the Scientist" , " the Inventors" , " the Invention" , " the Existing Patent Applications" , " the Know-How" , " the Magneton Approval" , " the Magneton Directive" , " the Magneton Program" , " MITE" , " the Research Program" , " the Research" , " the Research Budget" and " Products" - shall bear the definitions assigned to them respectively in the heading or the preamble hereto, as the case may be. 1.3. In this Agreement: 1.3.1. words importing the singular shall include the plural and vice-versa and words importing any gender shall include all other genders and references to persons shall include partnerships, corporations and unincorporated associations; 1.3.2. any reference in this Agreement to the term " patent" shall also include any re-issues, divisions, continuations or extensions thereof (including measures having equivalent effect);


- 11 - 1.3.3. any reference in this Agreement to the term " patent applications" shall include any provisional patent applications, PCT, national or regional patent applications, applications for continuations, continuations-in-part, divisions, patents of addition or renewals, as well as any other applications or filings for similar statutory protection; 1.3.4. any reference in this Agreement to the term " sale" shall include the sale, lease, rental or other disposal of any Product with the exception of disposition, without charge, for demonstration and/or testing purposes; and 1.3.5. " including" and " includes" means including, without limiting the generality of any description preceding such terms.2. PERFORMANCE OF THE RESEARCH 2.1. In consideration of the sums to be paid by the Company to Yeda pursuant to clause 3.1 below and, subject to the execution of such payments and to clause 3.2 below, Yeda undertakes, subject to clause 2.2 below, to procure the performance of the Research at the Institute under the supervision of the Scientists during the Research Period. By written agreement of the parties, the Research Period may be extended by such period and upon such terms and conditions as the parties shall so agree. 2.2. If all of the Scientists shall cease to be available for the supervision of the performance of the Research, such cessation shall not constitute a breach of this Agreement by Yeda. In the event that all of the Scientists shall cease to be available as aforesaid, Yeda shall use its reasonable efforts to find from amongst the scientists of the Institute a replacement scientist or scientists acceptable to the Company (such acceptance to be in writing, and not to be unreasonably withheld), but no undertaking to find such a replacement is given by Yeda. If all of the Scientists cease to be available and no acceptable replacement scientists can be found within 60 (sixty) days of all of the Scientists becoming unavailable as aforesaid, then the Company shall be entitled, by written notice to Yeda, to terminate the Research Period, in which event the Research Period and the performance of Research hereunder shall cease at the end of a further period of 60 (sixty) days from the date of receipt by Yeda of such written notice. In the event of such termination, Yeda shall be released from any obligation to procure the


- 12 - performance of the Research during the period after such termination, and the Company shall be released from any obligation to finance the Research in respect of the period commencing after such termination, but without affecting the Licence and all the other terms and conditions of this Agreement which shall remain in full force and effect (save for those relating to the performance and financing of the Research). 2.3. It is agreed that if the performance of the Research shall involve the conduct of experiments on and/or using animals, the performance of the Research and the Research Program shall be subject to the Israeli Anti-Cruelty Law, 1994 and to the approval of, and any modifications requested by, the Institutional Animal Care and Use Committee and the Safety Committee of the Institute, in order to ensure compliance with the above law. It is agreed that, in view of the fact that the performance of the Research may involve the conduct of experiments using human material (such as cells, blood, tissue, DNA, RNA, lysates, or body fluids) the performance of the Research and the Research Program shall be subject to the approval of, and any modifications requested by the Safety Committee of the Institute and the Institutional Review Board for Human Experimentation. 2.4. For the avoidance of doubt, it is agreed that nothing in this Agreement shall constitute a representation or warranty by Yeda, express or implied, that any results will be achieved by the Research or that the Licensed Information or any part thereof or any results achieved by the Research are or will be commercially exploitable or of any other value and Yeda furthermore makes no warranties and representations, express or implied, whatsoever as to the Research, any results of the Research, the Patents or the Licensed Information.3. FUNDING THE RESEARCH 3.1. Subject only to clause 3.2 below, the Company undertakes to pay to Yeda the total amount (in US Dollars) of the Research Budget (being [***]per year for each year of the Research Period) in [***] equal [***] instalments, payable in advance at the beginning of each [***] period during the Research Period, the first such payment to be made on the date [***] following the signature of this Agreement. An invoice in respect of an instalment paid as aforesaid shall be issued by Yeda promptly after the receipt by Yeda of such instalment. All payments of the Research Budget shall be made by direct wire transfer to Yeda' s bank account, the details of which are set out in clause 17.7 [***] Omitted pursuant to a confidential treatment request. The confidential portion has been filed separately with the Securities and Exchange Commission.


- 13 - below. For the removal of doubt, nothing contained in this Agreement shall prevent Yeda and/or the Institute from obtaining further finance for the Research from other entities (subject to the approval of the OCS should such approval be required pursuant to the Magneton Program and/or the Magneton Directive), provided that such other entities are not granted any rights in respect of the Research and/or the Licensed Information which prejudice any rights granted to the Company under the Licence. 3.2. If funding approved pursuant to the Magneton Program is withheld or delayed by the OCS solely due to a delay by Yeda in fulfilling its reporting obligations as required by such Program, then the Company shall be entitled, by written notice to Yeda, to suspend further payments to Yeda pursuant to clause 3.1 above until such time as such reporting obligations are fulfilled by Yeda (and such suspension shall cease immediately upon the fulfilment by Yeda of such reporting obligations). In the event of such suspension of payment, Yeda shall be entitled to discontinue the performance of the Research and its reporting obligations pursuant to section 4 below until funding recommences.4. REPORTING BY YEDA 4.1. Yeda will procure the preparation by the Scientists of, and shall submit to the Company: (i) during the time that funding is provided pursuant to the Magneton Program, interim written reports on the progress of the Research during the Research Period on a quarterly basis, and, after such time, on a yearly basis, in both cases within 60 (sixty) days of the end of the period covered by such report, (ii) a written report summarising the results of the Research within 60 (sixty) days of the end of the Research Period; and (iii) reports of any significant findings in the Research promptly upon such findings being made. 4.2. Yeda shall submit to the Company financial reports setting forth the monies received and expended in connection with the Research on a quarterly basis in accordance with the requirements of the Magneton Directive. A financial report as aforesaid shall be submitted to the Company during the Research Period on a quarterly basis, and, after such time on a yearly basis, in both cases within 60 (sixty) days after the end of the period covered by such report. Charges in respect of Research expenditures shall be made in accordance with the procedures prevailing at the Institute for charging research expenditures to individual projects of applied research and in


- 14 - accordance with the Magneton Directive and/or the directives of the OCS.5. TITLE Subject only to the Licence, all right, title and interest in and to the Licensed Information and the Patents and all right, title and interest in and to any drawings, plans, diagrams, specifications, other documents, models, or any other physical matter in any way containing, representing or embodying any of the aforegoing, vest and shall vest in Yeda.6. PATENTS; PATENT INFRINGEMENTS 6.1. 6.1.1. Subject to clauses 6.3 and 6.4 below, [***]shall prosecute the Existing Patent Applications using the outside patent counsel retained by [***] for such purpose prior to the execution of this Agreement, unless otherwise agreed by the parties in writing, and shall maintain at the applicable patent office any patents issuing from the Existing Patent Applications. The Company and Yeda shall consult with one another and cooperate fully with regard to the prosecution of the Existing Patent Applications and in maintenance of such patents. 6.1.2. At the initiative of either party, the parties shall consult with one another regarding the filing of patent applications in respect of any portion of the Licensed Information and/or corresponding to the Existing Patent Applications, including the jurisdictions in which such applications should be filed, the timing of the filing of such applications and the contents thereof. Following such consultations, and subject to clauses 6.3 and 6.4 below, [***] shall retain outside patent counsel to prepare, file and prosecute patent applications as aforesaid in such jurisdiction or jurisdictions as shall be determined by the parties in consultation as aforesaid. Subject to clauses 6.3 and 6.4 below, [***]shall also maintain at the applicable patent office any patents granted as a result of any of the above patent applications. The parties agree that their joint policy will be to seek comprehensive patent protection for all Licensed Information licensed to the Company hereunder. The Company and Yeda shall cooperate fully in the preparation, filing, prosecution and maintenance of such patent applications and patents. [***] shall: (i) deliver to [***], promptly, copies of all documentation prepared in connection with the maintenance or [***] Omitted pursuant to a confidential treatment request. The confidential portion has been filed separately with the Securities and Exchange Commission.


- 15 - prosecution of the Existing Patent Applications; and (ii) procure that [***] receives a copy of correspondence between [***] and any patent attorney or other professional or any competent authority (where the Patents may be filed, maintained or made) all, in each case, relating to the prosecution and/or maintenance of the Patents. 6.1.3. Without derogating from the aforegoing, [***] shall, at its expense, take all necessary steps as commercially feasible in order to obtain, or, at [***] election, assist [***] to obtain, the extension of each patent referred to in this clause 6.1 above, or, in the case of a patent in any member state of the European Union, a Supplementary Protection Certificate as referred to in clause 1.2.11 above (including the preparation and filing of applications for such extensions and Supplementary Protection Certificates), within the period prescribed therefor under applicable law and, if applicable, take all necessary steps as commercially feasible in order to obtain " Orphan Drug" status (within the meaning of such term under the US Orphan Drug Act or under Council Regulation (EU) No. 141/2000, as the case may be), or any other form of protection that affords exclusivity, within the period prescribed therefor under applicable law. [***] shall notify [***] promptly in writing and shall provide a copy to [***] of each marketing authorisation granted in respect of each Product in each country and, if applicable, of " Orphan Drug" or other form of protection affording exclusivity granted in respect of a Product and shall keep [***] informed and shall provide copies to [***] of all documents regarding all applications, activities and/or proceedings regarding such extensions and/or any Supplementary Protection Certificates and/or " Orphan Drug" or other form of protection affording exclusivity, as aforesaid. 6.2. All applications to be filed in accordance with the provisions of clauses 6.1.2 and 6.1.3 above, shall be filed in the name of [***] or, should the law of the relevant jurisdiction so require, in the name of the relevant inventors and then assigned to [***]. 6.3. In the event that, following such consultations between the parties regarding the filing, prosecuting and/or maintenance (as applicable) of patent applications and/or patents pursuant to clauses 6.1.1 and 6.1.2 above, [***]shall not wish to file and/or continue to prosecute a patent application and/or maintain a patent in any country in relation to any part of the Licensed Information (including any of the Existing [***] Omitted pursuant to a confidential treatment request. The confidential portion has been filed separately with the Securities and Exchange Commission.


- 16 - Patent Applications), then [***], in its discretion, may elect to file and/or continue to prosecute such patent application and/or maintain such patent in such country at its own cost and expense. [***] shall notify [***] in writing of [***] election to file and/or continue to prosecute such patent application and/or maintain such patent in such country as aforesaid, at [***] expense (such notice, " [***]" ), and, in the event that [***] shall not, within 30 (thirty) days of receipt of the [***] Notice: (i) reimburse [***] for all out-of-pocket costs and fees incurred by [***] until the date of the [***] (the [***] to be supported by receipts or other appropriate documents evidencing such costs and fees) in connection with the said patent application (in the preparation and/or filing and/or prosecution and/or maintenance of such application) and/or such patent, such costs and fees to be expressed in the currency in which paid by [***] and to be reimbursed or paid (as the case may be) by [***] to [***] in US Dollars in accordance with the Exchange Rate of such currency on the date of reimbursement or payment; and (ii) undertake in writing to [***] to bear all additional and future expenses relating to such patent application and/or patent, then [***] shall be entitled, at any time after the expiry of the said 30 (thirty) day period after suc ...