Exclusive License And Research Collaboration Agreement

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Exhibit 10.23


***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80(b)(4),
200.83 and 230.406


EXCLUSIVE LICENSE AND RESEARCH COLLABORATION AGREEMENT

between

MERCK & CO., INC.

and

METABASIS THERAPEUTICS, INC.


EXCLUSIVE LICENSE AND RESEARCH COLLABORATION AGREEMENT


This Agreement (this "Agreement" ) is dated as of December 23, 2003 (the "Effective Date "), and is entered into by and between MERCK & CO., INC., a corporation organized and existing under the laws of New Jersey ( "Merck" ), and METABASIS THERAPEUTICS, INC., a corporation organized and existing under the laws of Delaware ( "Metabasis" ).


RECITALS:


WHEREAS , Metabasis has developed Metabasis Technology (as hereinafter defined) for the discovery and optimization of liver targeted compounds and [***] Merck HCV Compounds (as hereinafter defined);

WHEREAS , Merck and Metabasis desire to enter into a research collaboration to apply Metabasis Technology to Merck HCV Compounds to develop the Collaboration Compounds (as hereinafter defined) upon the terms and conditions set forth herein; and

WHEREAS , Merck desires to obtain licenses under the Metabasis Technology and Metabasis' interest in the Collaboration Technology and Prior Technology (as each such term is hereinafter defined) to develop and commercialize Products in the Field (as hereinafter defined), and Metabasis desires to grant such licenses, in each case upon the terms and conditions set forth herein.

NOW, THEREFORE , in consideration of the foregoing premises and the mutual covenants herein contained, the Parties hereby agree as follows:

1. DEFINITIONS

Unless specifically set forth to the contrary herein, the following terms, whether used in the singular or plural, shall have the respective meanings set forth below. References to "Articles", "Sections" and "subsections" in this Agreement shall be to Articles, Sections and subsections respectively, of this Agreement unless otherwise specifically provided:

1.1 " Affiliate " shall mean (i) any corporation or business entity of which more than fifty percent (50%) (or if the jurisdiction where such entity is domiciled prohibits foreign ownership of such entity, the maximum foreign ownership interest permitted under such laws, provided that Merck or Metabasis actually controls such entity) of the securities or other ownership interests representing the equity, the voting stock or general partnership interest are owned, controlled or held, directly or indirectly, by Merck or Metabasis; or (ii) any corporation or business entity which, directly or indirectly, owns, controls or holds more than fifty percent (50%) (or if the jurisdiction where such entity is domiciled prohibits foreign ownership of such entity, the maximum foreign ownership interest permitted under such laws, provided that such entity actually controls Merck or Metabasis) of the securities or other ownership interests representing the equity, the voting stock or, if applicable, the general partnership interest, of Merck or Metabasis; or (iii) any corporation or business entity of which more than fifty percent (50%) (or if the jurisdiction where such entity is domiciled prohibits foreign ownership of such entity, the maximum foreign ownership interest permitted under such laws, provided that the owning entity actually controls the owned entity) of the securities or other ownership interests representing the equity, the voting stock or general partnership interest are owned, controlled or held, directly or indirectly, by a corporation or business entity described in (i) or (ii).

1.2 " Calendar Quarter " shall mean the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 and December 31.

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1.3 " Calendar Year " shall mean each successive period of twelve (12) months commencing on January 1 and ending on December 31.

1.4 " Change of Control " means with respect to a Party: (1) a sale of all or substantially all of such Party's assets or business relating to this Agreement; (2) a merger, reorganization or consolidation involving a Party in which the stockholders of such Party immediately prior to such transaction cease to own collectively a majority of the voting equity securities of a successor entity; or (3) a person or entity, or group of persons or entities, acting in concert acquire more than 50% of the voting equity securities or management control of such Party.

1.5 "Collaboration Compound" shall mean a chemical entity that is synthesized solely by a Party or jointly by the Parties prior to or in the course of the Research Program, or prior to the [***] of the expiration or termination of the Research Program Term, that (a) [***] ; and (b) [***] .

1.6 " Collaboration Know-How " shall mean Know-How directed to any Invention or development made solely by a Party (or on its behalf) or jointly by the Parties in the course of the Research Program during the Research Program Term, or, [***] prior to the [***] of the expiration or termination of the Research Program Term, that, in each case, is a composition of matter of a Collaboration Compound or a method of making or using a Collaboration Compound; but excluding, in each case, Collaboration Patents and Metabasis Technology.

1.7 " Collaboration Patents " shall mean Patents claiming any Invention conceived solely by a Party (or on its behalf) or jointly by the Parties in the course of the Research Program during the Research Program Term, or, [***] prior to the [***] of the expiration or termination of the Research Program Term, that, in each case, is a composition of matter of a Collaboration Compound or a method of making or using a Collaboration Compound; but excluding, in each case, Metabasis Technology.

1.8 " Collaboration Technology " shall mean the Collaboration Know-How and Collaboration Patents.

1.9 " Combination Product " shall mean a Product which includes one or more pharmaceutically active ingredients other than Collaboration Compound in combination with Collaboration Compound. All references to Product in this Agreement shall be deemed to include Combination Product.

1.10 " Committee " shall mean the joint research committee established to facilitate the Research Program as more fully described in Section 2.4.

1.11 "Competitive Product" shall mean, with respect to a Product being commercialized by or on behalf of a Related Party in a particular country, any preparation in final form being commercialized by a non-Related Party in such country [***] , delivered by the same mode of administration as such Product, whether for sale by prescription, over-the-counter or any other method.

1.12 "Compulsory License" shall mean, in the case of a Product, a compulsory license obtained by a Third Party through the order, decree or grant of a Regulatory Authority, authorizing such Third Party to manufacture, use, sell, offer for sale or import such Product in a particular country.

1.13 "Confidential Information" shall have the meaning given such term in Section 4.1.

1.14 "European Market " shall mean: (a) any one of the following countries: the United Kingdom, France, Germany, Italy or Spain; or (b) the European Union as a whole.

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1.15 "Exclusive Efforts" shall have the meaning given such term in Section 2.10.

1.16 "Existing Third Party Patent Licenses" shall have the meaning given such term in Section 6.2.

1.17 " Field " shall mean the treatment of hepatitis C viral infections in humans.

1.18 " First Commercial Sale " shall mean, with respect to any Product, the first sale for end use or consumption of such Product in a country after all required approvals with respect to such Product, including Marketing Authorization, have been granted by the Regulatory Authority of such country. For purposes of clarification, the first sale for end use or consumption of a Product in a country after conditional approval has been granted will constitute a First Commercial Sale for purposes of this Agreement.

1.19 " Full Time Equivalent" or "FTE" shall mean the equivalent of a full-time scientist's work time over a twelve-month period (including normal vacations, sick days and holidays). The portion of an FTE year devoted by a scientist to the Research Program shall be determined by dividing the number of full days during any twelve-month period devoted by such employee to the Research Program by the total number of working days during such twelve-month period.

1.20 "FTE Rate" shall mean the amount Merck will pay Metabasis over a consecutive twelve (12) month period during the Research Program Term to support one (1) Metabasis FTE dedicated to the Research Program. The FTE Rate will be [***] per FTE. The FTE Rate shall include all personnel, equipment, reagents and all other expenses including support staff and overhead for or associated with an FTE, provided that payment by Merck of the FTE Rate shall not be deemed to give Merck any ownership interest in any equipment, reagents or other property purchased by Metabasis using such research funding.

1.21 "Good Laboratory Practices" of "GLP" shall mean Good Laboratory Practices regulations as promulgated by the United States Food and Drug Administration and any successor governmental authority having substantially the same function.

1.22 "HepDirect Technology" shall mean (a) any and all [***] of [***] that are activated by any [***] and/or (b) any method of making or using any of the foregoing.

1.23 "HepDirect Patents" shall mean Patents in the Territory that claim, cover or relate to HepDirect Technology, which as of the Effective Date are owned by Metabasis or to which Metabasis through license or otherwise has acquired rights, including, but not limited to, those listed on Schedule V to the Research Plan.

1.24 " IND " shall mean an Investigational New Drug application, Clinical Study Application, Clinical Trial Exemption, or similar application or submission for approval to conduct human clinical investigations filed with or submitted to a Regulatory Authority in conformance with the requirements of such Regulatory Authority.

1.25 " Information " shall mean any and all information and data, including without limitation all Know-How and all other scientific, pre-clinical, clinical, regulatory, manufacturing, marketing, financial, legal and commercial information or data, whether communicated in writing or orally or by any other method, which is provided by one Party to the other Party in connection with this Agreement.

1.26 " Invention " means any process, method, use, composition of matter, article of manufacture, discovery or finding, whether or not patentable.

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1.27 "Joint Invention" shall mean any Invention conceived jointly by the Parties in the course of the Research Program during the Research Program Term; but excluding, in each case, Joint Patents, Collaboration Technology, Merck Technology and Metabasis Technology.

1.28 "Joint Patents" shall mean Patents claiming any Joint Invention; but excluding, in each case, Collaboration Technology, Merck Technology and Metabasis Technology.

1.29 "Joint Technology" shall mean Joint Inventions and Joint Patents.

1.30 "Know-How" shall mean all tangible and intangible (a) techniques, technology, practices, trade secrets, inventions (whether patentable or not), methods, knowledge, know-how, skill, experience, test data and results (including pharmacological, toxicological and clinical test data and results), analytical and quality control data, results or descriptions, software and algorithms and (b) compounds, compositions of matter, cells, cell lines, assays, animal models and physical, biological or chemical material.

1.31 "Major Market" shall mean the United States of America, the European Union or Japan.

1.32 [***]

1.33 [***]

1.34 "Marketing Authorization" shall mean any approval (including without limitation all applicable pricing and governmental reimbursement approvals) necessary to receive permission from the relevant Regulatory Authority to market and sell a Product in any country.

1.35 "Merck HCV Compound" shall mean any one of the [***] specifically listed on Schedule I to the Research Plan.

1.36 " Merck Know-How " shall mean Know-How directed to: (a) Merck HCV Compounds; or (b) any Invention or development made solely by Merck prior to or in the course of the Research Program during the Research Program Term that is not directed to a composition of matter of a Collaboration Compound or a method of making or using a Collaboration Compound; but excluding, in each case, Merck Patents, Prior Technology, Collaboration Technology and Metabasis Technology.

1.37 "Merck Patents" shall mean Patents claiming: (a) Merck HCV Compounds; or (b) any Invention conceived solely by Merck prior to or in the course of the Research Program during the Research Program Term that is not directed to a composition of matter of a Collaboration Compound or a method of making or using a Collaboration Compound; but excluding, in each case, Prior Technology, Collaboration Technology and Metabasis Technology.

1.38 "Merck Technology" shall mean the Merck Know-How and Merck Patents.

1.39 "Metabasis Internal Program" shall mean an internal research program funded by Metabasis to discover and develop [***] that use HepDirect Technology (other than Collaboration Compounds) for use in the Field. The Metabasis Internal Program may include, without limitation, activities directed to certain biological assays and the optimization thereof and methods for preparing, testing and using HepDirect Technology. The Metabasis Internal Program as it exists on the Effective Date is more fully described in Schedule II to the Research Program. However, Merck acknowledges

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that the Metabasis Internal Program is subject to change from time to time after the Effective Date, subject to the provisions of Article 8 of this Agreement.

1.40 "Metabasis Internal Program Compound" shall have the meaning given such term in Section 8.2.

1.41 " Metabasis Know-How " shall mean Know-How directed to: (a) HepDirect Technology developed [***] prior to the Effective Date or [***] outside of the course of the Research Program during the Research Program Term; or (b) any improvement or enhancement to any item described in the preceding clause (a) developed [***] in the course of the Research Program during the Research Program Term; but excluding, in each case, Metabasis Patents.

1.42 "Metabasis Patents" shall mean Patents claiming any Invention directed to: (a) HepDirect Technology conceived [***] prior to the Effective Date or [***] outside of the course of the Research Program during the Research Program Term; or (b) any improvement or enhancement to any item described in the preceding clause (a) conceived [***] in the course of the Research Program during the Research Program Term. Metabasis Patents shall include, without limitation, the HepDirect Patents.

1.43 "Metabasis Technology" shall mean the Metabasis Know-How and Metabasis Patents.

1.44 " NDA " shall mean a New Drug Application, Biologics License Application, Worldwide Marketing Application, Marketing Application Authorization or similar application or submission for Marketing Authorization of a Product filed with a Regulatory Authority to obtain marketing approval for a biological, pharmaceutical or diagnostic product in that country or in that group of countries.

1.45 " Net Sales " shall mean the gross invoice price of Product sold by Merck or its Related Parties to the first Third Party after deducting, if not previously deducted, from the amount invoiced or received:

(a) trade and quantity discounts other than early pay cash discounts;

(b) returns, rebates, chargebacks and other allowances;

(c) retroactive price reductions that are actually allowed or granted; and

(d) a fixed amount equal to [***] of the amount invoiced to cover bad debt, sales or excise taxes, early payment cash discounts, transportation and insurance, custom duties, and other governmental charges.

With respect to sales of a particular Combination Product, and on a country-by-country basis, the "Net Sales" for royalty purposes hereunder shall be calculated by multiplying the actual Net Sales (calculated in the manner described above) of such Combination Product by the fraction [***] , in which A is [***] , and B is [***] All [***] shall be calculated as the [***] during the applicable accounting period for which the Net Sales are being calculated. If, on a country-by-country basis, no [***] , is made in such country during the applicable accounting period, or if [***] cannot be determined for an accounting period, then the "Net Sales" for royalty purposes hereunder for sales of such Combination Product in each such country shall be determined by multiplying the Net Sales (calculated in the manner described above) of such Combination Product in such country by a fraction, determined by mutual agreement of the Parties, that reflects [***] to the end user in such country, provided that in no event will [***] be less than [***] for purposes of this paragraph.

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1.46 " Party " shall mean Merck or Metabasis, and "Parties" shall mean Merck and Metabasis.

1.47 "Patents" shall mean (a) all patents, certificates of invention, applications for certificates of invention, and patent applications, including without limitation patent applications under the Patent Cooperation and the European Patent Convention, and abandoned patent applications throughout the world, together with (b) any renewal, division, continuation (in whole or in part), or continued prosecution applications of any of such patents, certificates of invention and patent applications, and any all patents or certificates of invention issuing thereon, and any and all reissues, reexaminations, extensions, divisions, renewals, substitutions, confirmations, registrations, revalidations, revisions, and additions of or to any of the foregoing, and any foreign counterparts of any of the foregoing and any other patents and patent applications claiming priority back to any of the foregoing.

1.48 " Phase I Clinical Trial " shall mean a human clinical trial in any country to initially evaluate the safety and/or pharmacological or antigenic effect of a Product in human subjects or that would otherwise satisfy the requirements of 21 CFR 312.21(a) or the equivalent laws, rules or regulations in the European Union or Japan.

1.49 " Phase II Clinical Trial " shall mean a human clinical trial in any country to initially evaluate the effectiveness of a Product (whether as a primary or secondary endpoint) for a particular indication or indications in human subjects with the disease or indication under study or that would otherwise satisfy the requirements of 21 CFR 312.21(b) or the equivalent laws, rules or regulations in the European Union or Japan.

1.50 " Phase III Clinical Trial " shall mean a pivotal human clinical trial in any country the results of which could be used to establish safety and efficacy of a Product as a basis for a Marketing Application or that would otherwise satisfy the requirements of 21 CFR 312.21(c) or the equivalent laws, rules or regulations in the European Union or Japan.

1.51 " Prior Inventions " shall mean the Inventions (whether or not patentable) specifically listed in Schedule III to the Research Plan. For purposes of clarification, Prior Inventions exclude Metabasis Technology.

1.52 " Prior Patents " shall mean Patents claiming any Prior Invention. The Prior Patents existing as of the Effective Date are listed in Schedule IV to the Research Plan. For purposes of clarification, Prior Patents exclude Metabasis Technology.

1.53 " Prior Technology " shall mean all Prior Inventions and Prior Patents.

1.54 " Product(s )" shall mean any preparations in final form containing one or more Collaboration Compounds for sale by prescription, over-the-counter or any other method, including without limitation any Combination Product.

1.55 " Regulatory Authority " shall mean any applicable government regulatory authority involved in granting approvals for the manufacturing, marketing, reimbursement and/or pricing of a Product in the Territory, including, in the United States, the United States Food and Drug Administration and any successor governmental authority having substantially the same function.

1.56 " Related Party " shall mean Merck, its Affiliates and sublicensees (which term does not include distributors) permitted under this Agreement. Notwithstanding the foregoing, in no event shall Metabasis be considered a Related Party.

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1.57 "Research Plan" means the plan (the initial form of which has been agreed upon in writing by the Parties by letter agreement dated concurrently herewith) that sets out the research work to be performed by Metabasis and Merck in conducting the Research Program, as such plan may be amended or modified by the Committee or the Parties as contemplated under this Agreement.

1.58 " Research Program Term " shall mean the duration of the Research Program, and "Initial Research Program Term " and "Extended Research Program Term" shall have the respective meanings given such terms in Section 2.7.

1.59 " Research Program " shall mean the research activities undertaken by either or both of the Parties hereto as set forth in Article 2 and the Research Plan.

1.60 " Territory " shall mean all of the countries in the world, and their territories and possessions.

1.61 " Third Party " shall mean an entity other than Merck and its Related Parties, and Metabasis and its Affiliates.

1.62 " Valid Patent Claim " shall mean a claim of an issued and unexpired patent included within the Collaboration Technology, the Prior Technology or the Metabasis Technology, which has not been revoked or held unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction, and which is not appealable or has not been appealed within the time allowed for appeal, and which has not been disclaimed, denied or admitted to be invalid or unenforceable through reissue, re-examination or disclaimer or otherwise.

2. RESEARCH PROGRAM

2.1 General

Metabasis and Merck shall engage in the Research Program upon the terms and conditions set forth in this Agreement. The activities to be undertaken in the course of Research Program are set forth in the Research Plan which may be amended from time to time upon the mutual written agreement by authorized representatives of the Parties.

2.2 Conduct of Research

Subject to the terms and conditions of this Agreement, each Party shall be responsible for managing and controlling their respective research obligations under the Research Plan. Each Party shall conduct the Research Program in good scientific manner, and in compliance in all material respects with all requirements of applicable laws, rules and regulations and all applicable good laboratory practices to attempt to achieve their objectives efficiently and expeditiously. Each Party shall proceed diligently and in a timely manner with the work set out in the Research Program by using their respective good faith efforts to allocate sufficient time, effort, equipment and facilities to the Research Program and to use personnel with sufficient skills and experience as are required to accomplish the Research Program in accordance with the terms of this Agreement and Research Plan. In no event shall Metabasis be obligated to devote to the Research Program more than the number of FTEs being funded by Merck under this Agreement.

Each Party shall be entitled to utilize the service of Third Parties to perform their respective Research Program activities only upon the prior written consent of the other Party (not to be unreasonably withheld) or as specifically set forth in the Research Plan. Notwithstanding any such consent, each Party

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shall remain at all times responsible for the performance of its respective responsibilities under the Research Program and shall obtain the written agreement of each such Third Party, prior to the time such Third Party initiates work, to assign ownership of Inventions made in the course of Research Program activities to such Party, and such Party will make such further assignment of such Inventions as provided under Article 7 hereof.

2.3 Use of Merck Research Funding and Metabasis FTE Commitments

2.3.1 Metabasis shall apply the research funding it receives from Merck under this Agreement solely to carry out its Research Program activities in accordance with the Research Plan and the terms and conditions of this Agreement.

2.3.2 For the initial year of the Research Program Term commencing with the Effective Date, Metabasis shall dedicate [***] FTEs to the Research Program to work directly on the Research Program, all of which shall be funded by Merck in accordance with Section 5.2. At least [***] working by or on behalf of Metabasis as an FTE on the Research Program will work exclusively on the Research Program during the Research Program Term. Subject to the preceding sentence, [***] working by or on behalf of Metabasis as an FTE on the Research Program may work on other Metabasis research programs; provided, however, that no more than [***] working by or on behalf of Metabasis as an FTE on the Research Program may work on the Metabasis Internal Program, without the prior approval of the Committee. Metabasis shall inform persons working on its behalf on the Research Program of Metabasis' obligations under this Section and under Section 8.1 and shall instruct such persons to comply herewith and therewith and shall further instruct such persons to avoid sharing or utilizing Merck Confidential Information, Merck Technology, Prior Technology and Collaboration Technology with any individuals working on Metabasis Internal Program. In the event that Merck opts to extend the Research Program Term for a second year or the Parties mutually agree to extend the Research Program Term beyond any such second year, in each case in accordance with Section 2.7, the Parties shall mutually agree upon the number of Metabasis FTEs to be devoted to the Research Program for each Calendar Year during such Extended Research Program Term, all of which shall be funded by Merck in accordance with Section 5.2.

2.3.3 Metabasis shall ensure: (i) by confidentiality agreement that all FTEs and all other Metabasis personnel, employees, and agents involved in the Research Program shall comply with the confidentiality provisions of this Agreement; and (ii) that each FTE that works on the Research Program is qualified by appropriate experience and qualifications to perform the Research Program work assigned to such FTE in a capable and professional manner. If Merck reasonably believes that any FTE working on the Research Program for Metabasis (or on its behalf) is not meeting the foregoing requirements, then Merck may so notify Metabasis and, Metabasis shall either shift such FTE off the Research Program and replace him/her with a satisfactory FTE or justify to Merck that such FTE is satisfying the foregoing requirements.

2.4 Joint Research Committee

The Parties hereby establish a committee to facilitate the Research Program as follows:

2.4.1 Composition of the ...