Leptin Research, Development And License Agreement

LEPTIN RESEARCH, DEVELOPMENT AND LICENSE AGREEMENT


by and between


SMITHKLINE BEECHAM PLC


and


LIGAND PHARMACEUTICALS INCORPORATED


DATED


MARCH 17, 1998


***Certain confidential portions of this Exhibit were omitted by means of blackout of the text (the "Mark"). This Exhibit has been filed separately with the Secretary of the Commission without the Mark pursuant to the Company's Application Requesting Confidential Treatment under Rule 24b-2 under the Exchange Act.


2


LEPTIN RESEARCH, DEVELOPMENT AND LICENSE AGREEMENT
SMITHKLINE BEECHAM PLC-LIGAND PHARMACEUTICALS INCORPORATED


TABLE OF CONTENTS


ARTICLE 1 DEFINITIONS............................................................1


ARTICLE 2 REPRESENTATIONS AND WARRANTIES.........................................8


ARTICLE 3 RESEARCH PROGRAM......................................................10


ARTICLE 4 MANAGEMENT OF THE RESEARCH PROGRAM....................................16


ARTICLE 5 DEVELOPMENT PROGRAM...................................................18


ARTICLE 6 LICENSES..............................................................19


ARTICLE 7 ROYALTIES AND OTHER PAYMENTS..........................................22


ARTICLE 8 ROYALTY REPORTS AND ACCOUNTING........................................26


ARTICLE 9 METHOD OF PAYMENTS....................................................28


ARTICLE 10 INFRINGEMENT ACTIONS BY THIRD PARTIES.................................29


ARTICLE 11 CONFIDENTIALITY.......................................................29


ARTICLE 12 PUBLICATION...........................................................31


ARTICLE 13 PATENTS...............................................................32


ARTICLE 14 TERM AND TERMINATION..................................................36


ARTICLE 15 INDEMNITY.............................................................42


ARTICLE 16 FORCE MAJEURE.........................................................43


ARTICLE 17 ASSIGNMENT............................................................44


ARTICLE 18 NOTIFICATION OF PATENT TERM RESTORATION...............................44


ARTICLE 19 SEVERABILITY..........................................................45


ARTICLE 20 MISCELLANEOUS.........................................................45


SIGNATURES ......................................................................47


APPENDIX A - RESEARCH WORKPLAN......................................................48


APPENDIX B - LIGAND SOLE PATENT RIGHTS..............................................55 3


LEPTIN RESEARCH, DEVELOPMENT AND LICENSE AGREEMENT


THIS LEPTIN RESEARCH, DEVELOPMENT AND LICENSE AGREEMENT, (hereinafter "Agreement") is by and between SMITHKLINE BEECHAM plc, a corporation of England, having its registered office at New Horizons Court, Brentford, Middlesex, TW8 9EP, England and LIGAND PHARMACEUTICALS INCORPORATED , a Delaware corporation, having its principal place of business at 9393 Towne Centre Drive, San Diego, California, U.S.A.


R E C I T A L S


WHEREAS, LIGAND has developed expertise and acquired proprietary rights relating to the discovery and development of certain pharmaceutical products;


WHEREAS, SB has developed expertise and acquired proprietary rights relating to the discovery, development, marketing and sales of certain pharmaceutical products;


WHEREAS, SB and LIGAND desire to engage in a joint research and development effort directed to the discovery and/or design of compositions of matter which act as MODULATORS (as hereinafter defined) of certain STATS (as hereinafter defined) controlled by LEPTIN in the hope of developing one or more pharmaceutical products from such compounds;


WHEREAS, LIGAND is the owner of all right, title and interest in certain PATENT RIGHTS (as hereinafter defined) and KNOW-HOW (as hereinafter defined); and


WHEREAS, SB desires to obtain certain worldwide licenses from LIGAND under the aforesaid PATENT RIGHTS and KNOW-HOW, and LIGAND is willing to grant to SB such licenses;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, SB 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 to this Agreement, any other entity, whether de jure or de facto, which 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, at least *** (or such lesser percentage which is the maximum allowed to be owned by


Page 1


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


4


a foreign entity in a particular jurisdiction) of the voting stock or other ownership interest of the other entity, or if it directly or indirectly possesses the power to direct or cause the direction of the management and policies of the other entity by any lawful means whatsoever.


1.2 "ANNUAL RESEARCH FEE" shall mean the fee paid to LIGAND for scientists for a CONTRACT YEAR, as determined by the LRC. There shall be ***
in the ***
***
***
***
***
***
***
***
***
***
***
***.


1.3 "COMPETING PRODUCT" shall mean, with respect to each specified RESEARCH COMPOUND or PRODUCT, any other RESEARCH COMPOUND or PRODUCT which exhibits similar therapeutic or prophylactic activity and which may be sold for the same indications as such specified RESEARCH COMPOUND or PRODUCT.


1.4 "COMMENCEMENT DATE" shall mean commencement of the RESEARCH PROGRAM under this Agreement, which shall be two (2) weeks after the EFFECTIVE DATE.


1.5 "CONTRACT YEAR" shall mean the twelve (12) month period from the COMMENCEMENT DATE and each subsequent twelve (12) month period during the RESEARCH PROGRAM TERM.


1.6 "DESIGNATED PATHWAY" shall mean the LEPTIN RECEPTOR and the JAK and/or STATS mediated signaling process or processes mediated by the LEPTIN RECEPTOR.
***
***
***
***.


1.7 "EFFECTIVE DATE" shall mean the date as of which this Agreement is effective and shall be the date all required filings under the Hart-Scott-Rodino Antitrust Improvements Act, as amended (the "HSR Act") with respect to the contemporaneous sale of shares of the Company's Common Stock (as defined in the Stock and Warrant Purchase Agreement of even date herewith) to SB shall have been made and any required waiting period


Page 2


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


5


under the HSR Act shall have expired or been earlier terminated, and no action or proceeding in the United States of America by law or in equity shall be pending or threatened by any person, firm, corporation, government, governmental authority, regulatory body or agency to enjoin, restrict or prohibit the transactions contemplated under this Agreement or under the Stock and Warrant Purchase Agreement.


1.8 "EXPLORATORY DEVELOPMENT" shall mean development and testing, beyond the RESEARCH PROGRAM, designed to document the pharmaceutical profile of a RESEARCH COMPOUND to demonstrate whether such RESEARCH COMPOUND may be reasonably expected to be useful in the FIELD.


1.9 "FDA" shall mean the United States Food and Drug Administration or any successor entity thereto.


1.10 "FIELD" shall mean any and all uses including the research, discovery, development and commercialization of PRODUCTS which are MODULATORS of the DESIGNATED PATHWAY.


1.11 "FIRST COMMERCIAL SALE" shall mean, with respect to a PRODUCT, the first sale to a THIRD PARTY of such PRODUCT in a country after any required marketing and pricing approvals have been granted by all appropriate governmental authorities of such country, such first sale being an actual sale or a deemed sale contributing to NET SALES as defined in Section 1.24 and reportable under Section 8.1.


1.12 "FULL DEVELOPMENT" shall mean development and testing of a RESEARCH COMPOUND, or a PRODUCT incorporating such RESEARCH COMPOUND, beyond EXPLORATORY DEVELOPMENT, designed to obtain approval by the appropriate regulatory authorities to market such PRODUCT.


1.13 "HTS" shall mean High Throughput Screen, which is a cell culture-based screening assay useful for the discovery and characterization of MODULATORS and which is: (a) is capable of routinely testing or characterizing *** potential MODULATORS per week; (b) is able to detect *** ; (c) is sufficiently reproducible and selective and (d) has an appropriate signal to noise ratio to be useful as an HTS as demonstrated by profiling *** , as *** . Notwithstanding the foregoing, the LRC may decide that
***
***.


1.14 "IND" shall mean an Investigational New Drug Application for PRODUCT in the FIELD filed by or on the behalf of SB with the FDA, or the equivalent application(s) filed with the appropriate regulatory authorities in a MAJOR MARKET COUNTRY or under regulations governing a concertation proceeding which includes a MAJOR MARKET


Page 3


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


6


COUNTRY.


1.15 "KNOW-HOW" shall mean all present and future technical information and know-how which is not in the public domain and which relates to HTSs and other technology not in the public domain which is related to the discovery and development of RESEARCH COMPOUNDS, including but not limited to assays for PRIMARY and SECONDARY SCREENING, and the making and using of PRODUCTS.


1.16 "LEPTIN" shall mean any cytokine-like hormone expressed primarily in white adipose tissue and encoded by the OB gene or any naturally occurring or non-naturally occurring modified version thereof.


1.17 "LEPTIN RECEPTOR" shall mean a cell surface protein or protein complex capable of specifically binding to leptin. At least one member of this complex is encoded by the OB receptor gene.


1.18 "LEPTIN RESEARCH COMMITTEE" or "LRC" shall mean the research management committee composed of representatives of LIGAND and SB described in Section 4.1 hereof.


1.19 "LIGAND" shall mean LIGAND Pharmaceuticals Incorporated, a Delaware corporation, having its principal place of business at 9393 Towne Centre Drive, San Diego, California, U.S.A.


1.20 "MAJOR MARKET COUNTRY" shall mean any of Canada, France, Germany, Italy, Japan, Spain and the United Kingdom.


1.21 "MILESTONE I" shall mean the ***
***
***
***.


1.22 "MODULATOR" shall mean a composition of matter other than a LEPTIN, which modulates the DESIGNATED PATHWAY, including, but not limited to, LEPTIN mimetics, potentiators, agonists and antagonists, ***
***
***
***.


1.23 "NDA" shall mean a New Drug Application or Product License Application filed by or on behalf of SB with the FDA, or equivalent application(s) filed with the appropriate regulatory and pricing authorities in a MAJOR MARKET COUNTRY, or under regulations governing a concertation proceeding which includes a MAJOR MARKET COUNTRY, requesting approval for commercialization of a PRODUCT for an indication in the FIELD.


Page 4


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


7


1.24 "NET SALES" shall mean with respect to a PRODUCT containing a RESEARCH COMPOUND as a pharmaceutically active ingredient, which PRODUCT is sold for its activity as a MODULATOR of the DESIGNATED PATHWAY, the gross invoiced sales of such PRODUCT by SB, its AFFILIATES or sublicensees ("the Selling Party") to THIRD PARTIES:


***


Page 5


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


8


***


1.25 "PATENT RIGHTS" shall mean (a) all issued patents and patent applications heretofore or hereafter filed in any country within the TERRITORY which are or become owned in whole or in part by or licensed to LIGAND or SB or jointly by SB and LIGAND, or to which LIGAND or SB otherwise acquires rights, having claims which read upon a PRODUCT or a RESEARCH COMPOUND or the process of manufacture or use of a PRODUCT or a RESEARCH COMPOUND or upon a method or reagent useful in a method to discover or develop a PRODUCT or RESEARCH COMPOUND, 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 SPCs; all to the extent and only to the extent that (i) LIGAND or SB now has or hereafter will have the right to grant licenses or other rights thereunder and (ii) the granting of such licenses or rights thereunder is necessary for either party to practice the rights and discharge the obligations it has by reason of this Agreement. PATENT RIGHTS also include patents and patent applications concerning "Transferred Technology" as that term is used in Sections 3.1.2, 13.4 and 14.2.6 and, to that extent, only for the purposes of Section 3.1.2, 13.4 and 14.2.6. "LIGAND SOLE PATENT RIGHTS" shall mean PATENT RIGHTS owned or controlled solely by LIGAND. The LIGAND SOLE PATENT RIGHTS that are the subject of grants to SB hereunder are listed


Page 6


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


9


in Appendix B, the status of which shall be periodically updated.


1.26 "PHASE II" shall mean studies (as defined in 21 C.F.R. 312.21(b)) in human subjects designed to demonstrate the effectiveness of a drug candidate.


1.27 "PHASE III" shall mean studies (as defined in 21 C.F.R. 312.21(c)) in human subjects which are adequately well controlled (as those terms are defined in 21 C.F.R. 314.126) intended to gather additional information about the effectiveness and safety of a drug candidate.


1.28 "PRIMARY SCREENING" shall mean conducting any cell based or other assay, screen or other test on a compound under the RESEARCH PROGRAM to determine initially, to the extent the assay is able to do so, whether such compound functions as a MODULATOR of activity mediated through the DESIGNATED PATHWAY.


1.29 "PRODUCT" shall mean a RESEARCH COMPOUND that has been subjected to full development and has been approved for marketing by the appropriate government regulatory agencies.


1.30 "QUALIFIED SCIENTIST" shall mean a scientist having a Doctor of Philosophy or equivalent degree in a scientific specialty appropriate to work carried out by LIGAND under the RESEARCH PROGRAM or a scientist having a Master's or Bachelor's degree in such a scientific specialty and at least three (3) years of full-time experience in that scientific specialty. Eligible scientific specialties include, but are not limited to, biochemistry, molecular biology, cell biology, and pharmacology.


1.31 "RESEARCH COMPOUND" shall mean a composition of matter which is (i) determined (by SB or LIGAND) to function as a MODULATOR of the DESIGNATED PATHWAY either during the term of the RESEARCH PROGRAM, or, except in the case of termination by SB under Sections 14.4 or 14.5 below, by SB, within *** after expiration or termination of the RESEARCH PROGRAM if the RESEARCH PROGRAM is less than or equal to *** long or within *** if the RESEARCH PROGRAM is longer than *** , and (ii) which is developed and marketed for an indication directly related to its activity as a MODULATOR of the DESIGNATED PATHWAY. Notwithstanding the above, the term RESEARCH COMPOUND shall not embrace ***
***.


1.32 "RESEARCH PROGRAM" shall mean a program of research in the FIELD in which LIGAND and SB will participate under this Agreement and which is described generally in the research work plan set forth in Appendix A hereto, as revised from time to time as provided in the Agreement.


1.33 "RESEARCH PROGRAM TERM" shall mean, subject to Sections 14.4 and 14.5 below, the period of the RESEARCH PROGRAM measured from the


Page 7


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


10


COMMENCEMENT DATE and any extensions thereof resulting from the exercise of SB's option under Section 3.3 or by mutual agreement of the parties.


1.34 "SB" shall mean SmithKline Beecham plc, a corporation of England, having its registered office at New Horizons Court, Brentford, Middlesex, TW8 9EP, England.


1.35 "SECONDARY SCREENING" shall mean conducting any cell based or other assay, screen or other test on a RESEARCH COMPOUND using in vitro cell systems or reagents after the PRIMARY SCREENING of such RESEARCH COMPOUND for the purpose of confirming the results of the PRIMARY SCREENING or to test the RESEARCH COMPOUND for cross-reactivity with other than the DESIGNATED PATHWAYS or for determining other relevant properties of the RESEARCH COMPOUND.


1.36 "SPC" shall mean shall mean a right based upon a patent to exclude others from making, using and selling a PRODUCT, such as a Supplementary Patent Certificate.


1.37 "STATs TECHNOLOGY" shall mean that technology currently possessed by or developed during the term of the Agreement by LIGAND, whether or not forming a part of LIGAND's PATENT RIGHTS, that permits or facilitates the discovery and development of MODULATORS of gene transcription controlled by receptor-mediated activation of latent cytoplasmic elements known as STATs (Signal Transducers and Activators of Transcription), including technology relating to the role played in the initiation or maintenance of such gene transcription by a family of kinases referred to as JAKs (Janus Kinase).


1.38 "TERRITORY" shall mean all the countries and territories of the world.


1.39 "THIRD PARTY" shall mean a party other than a party to this Agreement.


1.40 "U.S.A." shall mean the United States of America and all of its territories and possessions.


ARTICLE 2


REPRESENTATIONS AND WARRANTIES


Each party hereby represents and warrants 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 or country 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 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


Page 8


11


and would not materially adversely affect such party's ability to perform its obligations under this Agreement.


2.2 Authorization and Enforcement of Obligations. (a) Such party has the corporate power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder; (b) such party has taken all necessary corporate action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder; (c) the execution and performance by such party of its obligations under this Agreement will not constitute a breach of, or conflict with, any other agreement or arrangement, whether written or oral, by which it is bound; and (d) 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.


2.3 Consents. All necessary consents, approvals and authorizations of all governmental authorities and other THIRD PARTIES required to be obtained by such party in connection with the execution, delivery and performance of this Agreement have been and shall be obtained.


2.4 Intellectual Property. Such party (a) owns or is the licensee in good standing of all PATENT RIGHTS and KNOW-HOW to be used by it in connection with the RESEARCH PROGRAM, except to the extent that such use is to be based upon intellectual property furnished by the other party; (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; and (c) is not in default with respect to any license agreement related to the RESEARCH PROGRAM. Each party shall immediately notify the other party in writing in the event such party hereafter receives a notice of the type referred to in (b) above, or becomes in default under any license agreement referred to in (c) above. Each party further represents and warrants that it will not encumber, with liens, mortgages, security interests or otherwise, any PATENT RIGHTS, KNOW-HOW or other intellectual property to be used in connection with the RESEARCH PROGRAM. Each party further warrants and represents that it will not knowingly engage in any activity in furtherance of the RESEARCH PROGRAM which it reasonably believes or has reason to believe will constitute an infringement of any known THIRD PARTY patent rights, including the knowing unlicensed or otherwise unauthorized use of any assay or any component thereof which is claimed in a patent of a THIRD PARTY in the country of use.


2.5 DISCLAIMER OF WARRANTIES. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE, OR WARRANTY GIVEN, BY LIGAND OR SB (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 (C) THAT, EXCEPT FOR THE PROVISIONS OF SECTION 2.4 HEREIN WHICH SHALL NOT BE AFFECTED BY THIS SECTION 2.5, THE USE OF ANY LICENSE GRANTED HEREUNDER OR THE USE OF ANY PATENT RIGHTS WILL NOT INFRINGE THE


Page 9


12


PATENT OR PROPRIETARY RIGHTS OF ANY OTHER PERSON. FURTHERMORE, NEITHER LIGAND NOR SB MAKES ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE PATENT RIGHTS EXCEPT AS PROVIDED IN SECTION 2.4.


2.6 Each of LIGAND and SB acknowledges that, in entering into this Agreement, the other has relied or will rely upon information supplied by it, information to be supplied by it, and information which it has caused or will cause to be supplied to the other by it's agents, representatives and/or licensees, and each warrants and represents that all such information is and will be timely and accurate in all material respects. Each further warrants and represents that it has not, up through and including the date of this Agreement, omitted to furnish the other with any information concerning the transactions contemplated by this Agreement which would be material to the other's decision to enter into this Agreement and to undertake the commitments and obligations set forth herein.


2.7 Use of Research Funding. LIGAND warrants and represents that it will apply the research funding, if any, it receives from SB under the Agreement solely toward achieving the objectives of the RESEARCH PROGRAM.


ARTICLE 3


RESEARCH PROGRAM


3.1 Research Procedures.


3.1.1 Conduct of Research. LIGAND and SB each shall conduct the work assigned to it in the RESEARCH PROGRAM, 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, and shall provide the following resources:


(a) in the case of LIGAND, allocation of at least *** scientists per CONTRACT YEAR (measured on a full-time equivalent basis) in the *** CONTRACT YEARS, at least *** scientists in the *** CONTRACT YEAR *** , and, thereafter, in the *** CONTRACT YEARS *** (measured on a full time equivalent basis) *** , the scientists to be primarily in the fields of molecular biology and biochemistry and secondarily in the fields of medicinal chemistry and pharmacology, using personnel with sufficient skills and experience, together with sufficient equipment and facilities, to carry out LIGAND's obligations under the RESEARCH PROGRAM provided, however, that at least *** of the LIGAND full-time equivalents shall be made up of *** in the RESEARCH PROGRAM and at least *** of the LIGAND full-time equivalents shall be *** ; and


(b) in the case of SB, allocation of a reasonable amount of time and effort, using personnel with sufficient skills and experience, together with sufficient equipment and


...