Sarm Research, Development And License Agreement

by and between


TAP PHARMACEUTICAL PRODUCTS INC.


and


LIGAND PHARMACEUTICALS INCORPORATED


dated


JUNE 22, 2001


TABLE OF CONTENTS


Page
---- ARTICLE 1 DEFINITIONS........................................................1


ARTICLE 2 REPRESENTATIONS, WARRANTIES AND COVENANTS..........................5


ARTICLE 3 RESEARCH PROGRAM...................................................6


ARTICLE 4 MANAGEMENT OF THE RESEARCH PROGRAM................................10


ARTICLE 5 DEVELOPMENT PROGRAM...............................................12


ARTICLE 6 LICENSES -- RESEARCH, DEVELOPMENT, MARKETING AND MANUFACTURING....14


ARTICLE 7 FEES, ROYALTIES AND MILESTONE PAYMENTS............................16


ARTICLE 8 ROYALTY REPORTS AND ACCOUNTING....................................17


ARTICLE 9 PAYMENTS..........................................................19


ARTICLE 10 INFRINGEMENT ACTIONS BY THIRD PARTIES............................20


ARTICLE 11 CONFIDENTIALITY..................................................20


ARTICLE 12 PUBLICATION......................................................22


ARTICLE 13 PATENTS..........................................................22


ARTICLE 14 TERM AND TERMINATION.............................................26


ARTICLE 15 INDEMNITY........................................................28


ARTICLE 16 FORCE MAJEURE....................................................29


ARTICLE 17 ASSIGNMENT.......................................................29


ARTICLE 18 NOTIFICATION OF PATENT TERM RESTORATION..........................30


ARTICLE 19 SEVERABILITY.....................................................30


ARTICLE 20 DISPUTE RESOLUTION...............................................30


ARTICLE 21 MISCELLANEOUS....................................................34


EXHIBIT A - RESEARCH PROGRAM DRAFT TECHNICAL OPERATING PLAN


EXHIBIT B - LIGAND'S SELECTIVE ANDROGEN RECEPTOR MODULATORS


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SARM RESEARCH, DEVELOPMENT AND LICENSE AGREEMENT


THIS AGREEMENT, effective the 22nd day of June, 2001 (the "Effective Date") is by and between TAP PHARMACEUTICAL PRODUCTS INC., a Delaware corporation, having its principal place of business at 675 North Field Drive, Lake Forest, Illinois 60045 ("TAP") and LIGAND PHARMACEUTICALS INCORPORATED, a Delaware corporation, having its principal place of business at 10275 Science Center Drive, San Diego, California 92121 ("LIGAND").


R E C I T A L S
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WHEREAS, LIGAND has developed expertise, proprietary rights and compounds relating to the discovery and development of pharmaceutical products for the treatment and prevention of certain disease indications mediated through the androgen receptor; and


WHEREAS, TAP has expertise in the development, marketing and sales of pharmaceutical products; and


WHEREAS, TAP and LIGAND desire to engage in a joint effort to discover, develop and commercialize pharmaceutical products that are small molecule compounds which act through the androgen receptor; and


WHEREAS, in conjunction with such joint research, development and commercialization, TAP desires to sponsor certain research and development activities to be carried out by LIGAND and LIGAND and TAP desire that TAP develop, register and commercialize products resulting from the joint research and development.


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


ARTICLE 1
---------
DEFINITIONS
-----------


For the purposes of this Agreement, the terms defined in this Article 1 shall have the respective meanings set forth below:


1.1"AFFILIATE" shall mean, with respect to a party, any other business entity that directly or indirectly controls, is controlled by, or is under common control with, such party. A business entity or party shall be regarded as in control of another business entity if it owns or, directly or indirectly controls (a) in the case of corporate entities at least *** percent (***%) (or the maximum ownership interest permitted by law) of the equity securities in the subject entity entitled to vote in the election of directors and (b) in the case of an entity that is not a corporation, at least *** percent (***%) (or the maximum ownership interest permitted by law) of the equity securities or other ownership interests with the power to direct the management and policies of such subject entity by any means whatsoever or entitled to elect the corresponding management authority. Notwithstanding the foregoing, for purposes of this Agreement, neither


*** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.


Abbott Laboratories nor Takeda Chemical Industries, Ltd. or any of their subsidiary companies shall be deemed an "Affiliate" of TAP and such entities shall be third parties for all purposes hereunder.


1.2"AGGREGATE ANNUAL RESEARCH FEE" shall mean the fee for a Contract Year as set forth in the table in Section 3.2 unless modified by mutual agreement of LIGAND and TAP.


1.3"ANNUAL RESEARCH FEE" shall mean on a per FTE basis (a) for the first year of the Research Program, *** dollars ($***), and (b) for each subsequent year of the Research Program, the Annual Research Fee for the previous year increased by the percentage increase during the previous year in the Consumer Price Index (CPI) as published by the U.S. Department of Labor, Bureau of Labor Statistics. If such index ceases to be published, then such index shall be replaced with the index that most closely resembles the performance of such index, as determined by the mutual agreement of the parties.


1.4"CLINICAL CANDIDATE" shall mean a Research Compound selected by TAP for pre-clinical development directed towards the filing of an IND.


1.5"CONTRACT YEAR" shall mean the *** period from the Effective Date and each subsequent *** period during the Research Program Term.


1.6"DESIGNATED TARGET" shall mean the androgen receptor.


1.7"FDA" shall mean the United States Food and Drug Administration, any successor entity thereto and any foreign equivalent thereof.


1.8"FIRST COMMERCIAL SALE" shall mean the first sale by TAP, its Affiliates or sublicensees of a Licensed Product in a country after any required marketing approval has been granted by the governing health authority of such country.


1.9"FULL DEVELOPMENT" shall mean development and testing of a Clinical Candidate in humans from its declaration as a Clinical Candidate by TAP through approval by the appropriate regulatory authorities to market such Clinical Candidate as a Licensed Product in the TAP Field.


1.10"FTE" shall mean the full-time equivalent of the scientific work of one (1) scientist for *** which equates to a total of *** or *** of scientific work on or directly related to the Research Program. Each LIGAND scientist billed to the Research Program may be an equivalent of less than or greater than one FTE, based on their hours worked, to meet Research Program requirements.


1.11"IND" shall mean an Investigational New Drug Application as defined in the United States Food, Drug and Cosmetic Act and regulations promulgated thereunder, or any corresponding foreign equivalent thereof or comparable regulatory or scientific filing to initiate human clinical exposure.


*** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.


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1.12"JOINT RESEARCH COMMITTEE" or "JRC" shall mean the joint research committee composed of representatives of LIGAND and TAP described in Section 4.1 hereof.


1.13"JOINT DEVELOPMENT COMMITTEE" or "JDC" shall mean the joint development committee composed of representatives of LIGAND and TAP described in Section 5.2 hereof.


1.14"LICENSED PRODUCT" shall mean a Clinical Candidate that has been approved for marketing in the Territory by TAP, its Affiliates or sublicensees.


1.15"LIGAND FIELD" shall mean the treatment or prevention of prostate cancer, benign prostatic hyperplasia, acne and hirsutism.


1.16"NDA" shall mean a New Drug Application as defined in the United States Food, Drug and Cosmetic Act and the regulations promulgated thereunder, or any corresponding foreign equivalent thereof.


1.17"NET SALES" shall mean:


A. With respect to a Licensed Product containing a Research Compound
as its sole pharmaceutically active ingredient, the gross
invoiced sales of such Licensed Product by a party, its
Affiliates or sublicensees to unrelated third parties less the
following deductions:


***
***
***


B. With respect to a Licensed Product containing a Research Compound
and one or more other pharmaceutically active ingredients which
is not a Research Compound, the gross invoiced sales of such
Licensed Product in a particular country by a party, its
Affiliates and its sublicensees to unrelated third parties less
the deductions


***
***
***


1.18 "PATENT RIGHTS" shall mean (a) all patent applications heretofore or hereafter filed in any country within the Territory owned by or licensed to a party, or to which a party otherwise


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acquires rights, claiming a Research Compound, Clinical Candidate or Licensed Product, formulations of any of the foregoing, the process of manufacture or use of a Research Compound, Clinical Candidate or Licensed Product, together with any and all patents that have issued or in the future issue therefrom and (b) all divisionals, continuations, continuations-in-part, reexaminations, reissues, renewals, extensions or additions to any such patents and patent applications and patents issuing thereon, as well as foreign equivalents of the foregoing; all to the extent and only to the extent that such party now has or hereafter will have the right to grant licenses or other rights thereunder; provided, however, Patent Rights shall not include U.S. Patent No. *** and any divisionals, continuations, continuations-in-part, reexaminations, reissues, renewals, extensions or additions to such patent, as well as foreign equivalents of the foregoing, unless such patent (or any of the foregoing) includes any claim covering a compound listed on EXHIBIT B in which case such patent (or any of the foregoing) shall be included in the Patent Rights. For purposes of illustration, Patent Rights shall include, but are not limited to U.S. Patent Application Serial Number *** .


1.19 "RESEARCH COMPOUND" shall mean (a) a compound which is identified or confirmed as acting through or mediating the activity of the Designated Target in the Research Program and synthesized during the Research Program Term, or (b) LIGAND's selective modulators of the androgen receptor listed on EXHIBIT B hereto.


1.20 "RESEARCH PROGRAM" shall mean, subject to Sections 3.3 and 14.3, the three (3) year program of research and testing in which LIGAND and TAP will participate and which is described generally in the Draft Technical Operating Plan set forth in Article 3 and EXHIBIT A hereto, as the same may be revised from time to time as provided in this Agreement.


1.21 "RESEARCH PROGRAM TERM" shall mean, subject to Sections 3.3 and 14.3, the three (3) year period of the Research Program measured from the Effective Date, and any renewals and any mutually agreed extensions thereof.


1.22 "ROYALTY TERM" shall mean, on a country-by-country basis, with respect to each Licensed Product in each country, the period of time equal to the longer of (a) *** from the date of the First Commercial Sale of a Licensed Product, (b) the date on which *** (c) with respect to the last patent, other than a Significant Patent, that provides Meaningful Exclusivity and that contains a Valid Claim, the earlier of (i) *** or (ii) *** or (d) solely in the case of a country that is not a member country of the World Trade Organization, *** . As used herein, "Meaningful Exclusivity" shall mean *** percent ( *** %) or more of the independently audited annual sales volume of all forms and formulations of products containing a Research Compound sold in a particular country, provided that the form and source of the independently audited annual sales volume data are satisfactory to both LIGAND and TAP and from a source such as IMS (Intercontinental Medical Statistics) or similar provider of such data. All expenses for such audited annual sales data will be the sole responsibility of that party which would otherwise owe a royalty.


*** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.


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1.23 "SIGNIFICANT PATENT" shall mean a patent within Patent Rights that contains a Valid Claim covering either (a) the composition of a Research Compound contained in a Licensed Product or (b) one of the registered indications of a Licensed Product.


1.24 "TAP FIELD" shall mean the treatment or prevention of hypogonadism, male sexual dysfunction, female sexual dysfunction, female osteoporosis, frailty, male hormone replacement therapy and all other indications, other than those within the LIGAND Field, with a Licensed Product.


1.25 "TERRITORY" shall mean the entire world.


1.26 "VALID CLAIM" shall mean any claim of an issued or granted and unexpired patent included in Patent Rights, which claim has neither (i) been held invalid or unenforceable by a court or agency of competent jurisdiction (following exhaustion of all possible appeal processes), nor (ii) been admitted by the patentee to be invalid or unenforceable.


ARTICLE 2
---------
REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------


Each party hereby represents, warrants and covenants to the other party as follows:


2.1 CORPORATE EXISTENCE AND POWER. Such party (a) is a corporation duly organized, validly existing and in good standing under the laws of the state in which it is incorporated, (b) has the corporate power and authority and the legal right to own and operate its property and assets, to lease the property and assets it operates under lease, and to carry on its business as it is now being conducted, and (c) is in compliance with all known requirements of applicable law, except to the extent that any noncompliance would not have a material adverse effect on the properties, business, financial or other condition of such party and would not materially adversely affect such party's ability to perform its obligations under this Agreement ("Material Adverse Effect").


2.2 AUTHORIZATION AND ENFORCEMENT OF OBLIGATIONS. Such party (a) has the corporate power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder, and (b) has taken all reasonably necessary corporate action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on behalf of such party, and constitutes a legal, valid, binding obligation, enforceable against such party in accordance with its terms, subject to the effects of bankruptcy, insolvency or other laws of general application affecting the enforcement of creditor rights and judicial principles affecting the availability of specific performance and general principles of equity whether enforceability is considered a proceeding at law or equity.


2.3 CONSENTS. All necessary consents, approvals and authorizations of all governmental authorities and other persons required to be obtained by such party in connection with the execution, delivery and performance of this Agreement have been and shall be obtained, except to the extent such failure to obtain would not have a Material Adverse Effect on such party.


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2.4 NO CONFLICT. Notwithstanding anything to the contrary in this Agreement, the execution and delivery of this Agreement and the performance of such party's obligations hereunder (a) do not, to the best of its knowledge, conflict with or violate any requirement of applicable laws or regulations reasonably known to a party and (b) do not and shall not, to the best of its knowledge, conflict with, violate or breach or constitute a default or require any consent under, any contractual obligation of such party, except to the extent that such violation, breach, default or the failure to obtain such consent would not have a Material Adverse Effect on such party.


2.5 INTELLECTUAL PROPERTY. Such party (a) owns or is the licensee in good standing of all Patent Rights, trade secrets and other intellectual property to be used by it in connection with the Research Program, except to the extent that such use is to be based upon patents, trademarks and other intellectual property furnished by the other party pursuant to this Agreement; (b) has received no notice of infringement or misappropriation of any alleged rights asserted by any third party in relation to any technology to be used by it in connection with the Research Program; (c) is not in default with respect to any third-party agreement under which it has rights to be used by it in connection with the Research Program; and (d) is not aware of any patent, trade secret or other right of any third party which could materially adversely affect its ability to carry out its responsibilities under the Research Program or the other party's ability to exercise or exploit any license granted to it under this Agreement. Such party agrees to immediately notify the other party in writing in the event such party hereafter receives a notice of the type referred to in (b) above, becomes in default under any third-party agreement referred to in (c) above, or becomes aware of any patent, trade secret or other right of the nature referred to in (d) above.


2.6 DISCLAIMER OF WARRANTIES. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE, OR WARRANTY GIVEN, BY LIGAND OR TAP (A) THAT ANY PATENT WILL ISSUE BASED UPON ANY PENDING PATENT APPLICATION WITHIN THE PATENT RIGHTS, (B) THAT ANY PATENT WITHIN THE PATENT RIGHTS WHICH ISSUES WILL BE VALID OR ENFORCEABLE, OR (C) THAT, EXCEPT FOR THE PROVISIONS OF SECTION 2.5 HEREIN WHICH SHALL NOT BE AFFECTED BY THIS SECTION 2.6, THE USE OF ANY LICENSE GRANTED HEREUNDER OR THE USE OF ANY PATENT RIGHTS WILL NOT INFRINGE THE PATENT OR PROPRIETARY RIGHTS OF ANY OTHER PERSON. FURTHERMORE, NEITHER LIGAND NOR TAP MAKES ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE PATENT RIGHTS EXCEPT AS PROVIDED IN SECTION 2.5.


ARTICLE 3
---------
RESEARCH PROGRAM
----------------


3.1 Research Procedures.


3.1.1 CONDUCT OF RESEARCH. LIGAND and TAP each shall conduct the work assigned to it in the Research Program in good scientific manner, and in compliance in all material respects with all requirements of applicable laws and regulations and with all applicable good laboratory practices and good manufacturing practices to attempt to achieve its objectives hereunder efficiently and expeditiously. LIGAND and TAP each shall proceed diligently with


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the work set out in the Research Program assigned to it by using their respective good faith efforts to provide, among others, the following resources:


(a) in the case of LIGAND, allocation of that number of FTEs per year
determined by dividing the Aggregate Annual Research Fee for a
Contract Year by the Annual Research Fee for that year, using
personnel with sufficient skills and experience, together with
sufficient equipment and facilities, to carry out LIGAND's
obligations under the Research Program and to accomplish the
objectives thereunder, provided, however, that at least *** ( ***
%) of the FTEs shall be made up of persons engaged full time in
the Research Program; and


(b) in the case of TAP, allocation of a reasonable amount of time and
effort, using personnel or third parties with sufficient skills
and experience, together with sufficient equipment and
facilities, to carry out TAP's obligations under the Research
Program and to accomplish the objectives thereunder.


3.1.2 SCREENING RESPONSIBILITY. LIGAND shall be responsible for conducting *** as set forth in the Research Program and as designated by the JRC and shall promptly inform TAP and the JRC of the progress and results thereof.


3.1.3 USE OF RESEARCH FUNDING. LIGAND shall use the research funding it receives from TAP under the Agreement for the purpose of achieving the objectives of the Research Program.


3.1.4 SUBCONTRACTS DURING RESEARCH PROGRAM. Neither LIGAND nor TAP shall subcontract to Affiliates or third parties portions of the Research Program to be performed by it without the prior consent of the JRC, which consent shall not be unreasonably withheld. Any agreement between a party and a subcontractor shall contain confidentiality obligations equivalent in scope to the confidentiality obligations contained in this Agreement to protect LIGAND's confidential information for as long a duration as is reasonably possible, up to the duration of TAP's obligations contained herein but in any case not less than *** beyond the conclusion of work contemplated in the Agreement with the subcontractor, and shall be in compliance in all material respects with all requirements of applicable laws and regulations, together with all applicable good laboratory practices and good manufacturing practices. The contracting party shall supervise and be responsible under this Agreement for such subcontract work.


3.2 FUNDING OF THE RESEARCH PROGRAM. In consideration for LIGAND's performance of its obligations under the Research Program, TAP shall pay LIGAND, at a minimum, an amount equal to *** percent ( *** %) of the Aggregate Annual Research Fee set forth below on a quarterly basis in advance for services to be performed by LIGAND under the Research Program. The first payment shall be due and payable on the fifth business day following the


*** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission.


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Effective Date. Subsequent payments shall be due and payable on or before the fifteenth business day prior to the commencement of each subsequent quarterly period.


MINIMUM MINIMUM AGGREGATE CONTRACT YEAR FTES ANNUAL RESEARCH FEE

*** *** ***
*** *** ***
*** *** ***


*Subject to CPI adjustment per Section 1.3 herein


The FTEs and Aggregate Annual Research Fee shown above is the minimum amount to be allocated by LIGAND and paid by TAP under the Research Program, and may be increased as recommended by the JRC, and approved in writing by TAP and LIGAND. In the event this Agreement is terminated by TAP pursuant to Section 14.2, TAP shall be entitled to (a) a *** refund of the minimum Aggregate Annual Research Fee previously paid to LIGAND for the particular quarterly period during which the Agreement is terminated as well as (b) a *** refund of all payments which have been made for any subsequent quarterly period, to the extent such amounts have already been paid. Such refund shall be made by LIGAND to TAP within forty-five (45) days of the date that TAP terminates this Agreement. Within thirty (30) days after the end of each Contract Year, a reconciliation shall be made based upon the records of LIGAND and LIGAND shall remit to TAP the excess, if any, of the Aggregate Annual Research Fee for such Contract Year, if any, over the product of the Annual Research Fee for such Contract Year multiplied by the number of LIGAND FTEs used in the Research Program during such Contract Year.


3.3 ANNUAL RENEW OPTION. TAP shall have the option to extend the original term of the three-(3) year Research Program by up to two (2) additional one-(1) year terms. At least *** prior to the *** anniversary of the Effective Date, TAP shall provide LIGAND with written notice of its intent to extend the Research Program for an *** . Should TAP desire to further extend the Research Program for yet *** it shall provide LIGAND with written notice of its intent at least *** prior to the extended *** anniversary of the Effective Date. The amount paid to LIGAND per FTE shall, at a minimum, be in accordance with Section 1.3 herein, and the Aggregate Annual Research Fee shall, at a minimum, be the same as for Contract Year *** under Section 3.2 herein, plus any increase for CPI adjustments per Section 1.3 herein, unless otherwise authorized by the JRC.


3.4 LIGAND RESEARCH PROGRAM EXPENSES. TAP shall reimburse LIGAND for all reasonable expenses authorized by the JRC and incurred by LIGAND, which are not covered by the Aggregate Annual Research Fee, within thirty (30) days of the presentation of an invoice by LIGAND for the same.


3.5 EXCLUSIVITY.


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3.5.1 During the Research Program Term, subject to Section 3.5.2, LIGAND and TAP shall work exclusively with each other, whether directly, indirectly or through an Affiliate, in the TAP Field; provided, TAP shall have the right to distribute and/or co-promote Androgel with Unimed Pharmaceuticals, Inc. pursuant to that certainCo-Promotion Agreement dated 1 June 2001.


3.5.2 Notwithstanding the provisions of Section 3.5.1 above, but subject to TAP's license rights under Articl ...