Collaborative Research And Development And License

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Exhibit 10.17


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

AMENDED AND RESTATED
COLLABORATIVE RESEARCH AND DEVELOPMENT AND LICENSE
AGREEMENT

THIS AMENDED AND RESTATED COLLABORATIVE RESEARCH AND DEVELOPMENT AND LICENSE AGREEMENT (this "Agreement" ), dated as of June 30, 1999, is between METABASIS THERAPEUTICS, INC. , a Delaware corporation having its principal place of business at 9390 Towne Centre Drive, San Diego, California 92121 ( "MTI" ), and SANKYO CO., LTD. , a Japanese corporation having its principal place of business at 5-1 Nihonbashi-Honcho, 3-chome, Chuo-ku, Tokyo 103, Japan ( "Sankyo" ).

W I T N E S S E T H:

WHEREAS , SICOR Inc., a Delaware corporation formerly known as Gensia Sicor Inc.( "SICOR" ), and Sankyo entered into a Collaborative Research and Development Agreement, dated as of April 18, 1997 and amended by an Amendment dated as of September 22, 1998 (the "Original R&D Agreement" ), under which Sankyo agreed to sponsor research to be conducted by SICOR to develop products for treatment of Diabetes (as such term is hereinafter defined) and to commercialize with SICOR products resulting from such research; and

WHEREAS , pursuant to the Asset and Liability Transfer Agreement, dated as of December 17, 1997 (the "Transfer Agreement" ), SICOR sold, assigned, transferred and delivered to MTI, and MTI acquired from SICOR, all of SICOR's right, title and interest in, to and under, amongst other things, the Original R&D Agreement; and

WHEREAS , MTI and Sankyo each desire to amend and restate the Original R&D Agreement and to modify certain of the rights and obligations of the parties thereunder.

NOW, THEREFORE , in consideration of the premises and of the covenants herein contained, the parties hereto mutually agree as follows:

ARTICLE 1

DEFINITIONS

For purposes of this Agreement, the terms defined in this Section shall have the meanings specified below:

1.1 "Affiliate" shall mean, in respect of either party hereto, any corporation or other entity which controls, is controlled by, or is under common control with such party. A corporation or other entity shall be regarded as in control of another corporation or entity if it owns or directly or indirectly controls more than fifty percent (50%) of the voting stock or other ownership interest of the other corporation or entity, or if it possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the corporation or other entity or the power to elect or appoint fifty percent (50%) or more of the members of the governing body of the corporation or other entity.

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1.2 "Candidate Compound" shall mean a Recommended Compound which has been selected by the appropriate research and development committee of Sankyo under Section 4.3 hereof for further development and evaluation under this Agreement.

1.3 "Compound" shall mean a Research Compound, Recommended Compound, Candidate Compound or Licensed Compound.

1.4 "Diabetes" shall mean insulin-dependent diabetes mellitus (Type I Diabetes), noninsulin-dependent diabetes mellitus (Type II Diabetes) and other conditions of high blood glucose.

1.5 "Effective Date" shall mean April 21, 1997.

1.6 "Field" shall mean the treatment of Diabetes by means of lowering blood glucose levels by direct suppression of hepatic gluconeogenesis by inhibiting fructose-1, 6-bisphosphatase.

1.7 "First Commercial Sale" of any Product shall mean the first sale for use or consumption by the general public of such Product in a country after required marketing and pricing approval has been granted by the governing health authority of such country.

1.8 "IND" shall mean an Investigational New Drug Application filed with the Food and Drug Administration, or any successor agency, in the United States pursuant to 21 C.F.R. Part 312, or any successor provision thereto (or the equivalent application with the governing health authority of any other Primary Country, as defined in Section 4.2 hereof).

1.9 "Licensed Compound" shall mean a Candidate Compound which Sankyo has deemed a Licensed Compound pursuant to Section 4.4 below.

1.10 "NDA" shall mean an application to market a new drug filed with the Food and Drug Administration, or any successor agency, in the United States pursuant to Section 505 of the Federal Food, Drug and Cosmetic Act and 21 C.F.R. Part 314, or any successor provisions thereto (or the equivalent application with the governing health authority of any other Primary Country).

1.11 "Net Sales" with respect to any Product shall mean the invoiced sales price of such Product billed to independent customers (who are not Affiliates), less, to the extent such amounts are included in the invoiced sales price, actual credited allowances to such independent customers for such Product which was spoiled, damaged, out-dated or returned, and less actual (a) freight and insurance costs incurred in transporting such Product to such customers; (b) quantity and other trade discounts (including prime vendor rebates) actually allowed and taken; (c) customs duties and surcharges and other governmental charges incurred in connection with the exportation or importation of such Product in final form; and (d) liabilities incurred resulting from any government (or agency thereof) mandated rebate program, whether Federal, State, Municipal or Local; provided, however, that, with respect to any Product in any country, the sum of the amounts in clauses (a), (b), (c) and (d) with respect to such Product in such country, when expressed as a percentage of the invoiced sales price of such Product in such country, shall not exceed [***] .

1.12 "Patent Rights" shall mean all patent applications heretofore or hereafter filed or having legal force in any country within the Territory owned by or licensed to MTI or Sankyo or to which MTI or Sankyo otherwise acquires rights, which claim a Product or Licensed Compound, or the process of manufacture or use of a Product or Licensed Compound for use in the Field, together with any and all patents that have issued or in the future issue therefrom, including utility model and design patents, extensions or restorations, including Supplementary Protection Certificates or the equivalent thereof, certificates of invention and any and all divisions, continuations, continuations-in-part, reissues or additions to any of the aforesaid patents and patent applications; all to the extent and only to the extent that MTI or Sankyo now has or hereafter will have the right to grant licenses, immunities or other rights thereunder. Patent Rights shall also include technology respecting the subject matter of the *** Confidential Treatment Requested.

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patents and patent applications embraced by Patent Rights necessary to carry out the purposes of this Agreement in the Field.

1.13 "Products" shall mean pharmaceutical compositions incorporating a Licensed Compound. All formulations of the same drug substance for the same route of administration, such as oral, parenteral or intravenous, shall constitute a single Product.

1.14 "Recommended Compound" shall mean a Research Compound which has utility in the Field and which has been selected by the Steering Committee under Section 4.2 hereof for further development under the Research Program.

1.15 "Recommended Compound Criteria" shall mean the detailed scientific criteria set forth in Appendix A for determining whether a Research Compound has utility in the Field and is suitable for further development and evaluation as a Recommended Compound under this Agreement.

1.16 "Research Compound" shall mean a compound that is selected by the party which owns or licenses (with a right to sublicense) such compound (or in the case of jointly-owned compounds, selected jointly) and that is evaluated as part of the Research Program.

1.17 "Research Program" shall mean the research program described generally in the research work plan set forth in Appendix A hereto, as revised from time to time as provided in this Agreement.

1.18 "Research Program Term" shall mean the period of time indicated in Section 3.4 as modified by the termination provisions in Article 14.

1.19 "Research Year" shall mean each twelve-month period during the Research Program with the first Research Year beginning May 1, 1997.

1.20 "Royalty Term" shall mean, with respect to each Product in each country, the period of time equal to the longer of (a) ten (10) years from the date of the First Commercial Sale of such Product in such country or (b) if the manufacture, use or sale of such Product in such country was at the time of the First Commercial Sale in such country covered by a Valid Patent Claim, the term for which such Valid Patent Claim remains in effect and would, if in a granted patent, be infringed but for the license granted by this Agreement.

1.21 "Steering Committee" shall mean the joint research committee composed of representatives of MTI and Sankyo described in Section 5.1 hereof.

1.22 "Territory" shall mean the entire world.

1.23 "Third Party" shall mean any entity other than MTI or Sankyo and their respective Affiliates.

1.24 "Valid Patent Claim" shall mean either (a) a claim of an issued and unexpired patent included within the Patent Rights, which has not been held permanently revoked, unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through reissue or disclaimer or otherwise or (b) a claim of a pending patent application included within the Patent Rights, which claim was filed in good faith and has not been abandoned or finally disallowed without the possibility of appeal or refiling of said application.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES

2.1 Authorization. Each party warrants and represents to the other that it has the legal rights and power to extend the rights and licenses granted to the other in this Agreement, that it has the full right to enter into this Agreement, and to fully perform its obligations hereunder, and that it has not

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made nor will it make any commitments to others in conflict with or in derogation of such rights or this Agreement. Except as otherwise disclosed, each party further represents to the other that it is not aware of any legal obstacles, including patent rights of others, which could prevent it from carrying out the provisions of this Agreement.

2.2 Patent Validity. Nothing in this Agreement shall be construed as a warranty or representation by either party as to the validity or scope of any Patent Rights.

ARTICLE 3

RESEARCH PROGRAM

3.1 Research Procedures.

3.1.1 Conduct of Research. The Research Program shall be conducted in good scientific manner, and in compliance with all applicable legal requirements, to attempt to achieve efficiently and expeditiously its objectives. MTI and Sankyo shall proceed diligently with the work set out in the Research Program by using their respective good faith efforts considering, in the case of MTI, the funding received from Sankyo hereunder.

3.1.2 Use of Research Funding. MTI shall apply all funding it receives from Sankyo under this Agreement (other than milestone payments payable by Sankyo to MTI pursuant to Section 7.3) for the sole purpose of discovering, identifying, studying, improving and testing Research Compounds in accordance with the Research Program (including overhead expenses related thereto) set forth on Appendix A hereto, and amended from time to time by the parties, with the goal of identifying candidate compounds for designation as Recommended Compounds. All milestone payments paid by Sankyo to MTI pursuant to Section 7.3 shall be used by MTI for working capital purposes. In each of the first two Research Years during the term of the Research Program, MTI shall allocate an average of approximately [***] full time equivalent researchers and staff to perform its obligations under the Research Program. In the third Research Year during the term of the Research Program, MTI shall allocate an average of [***] full time equivalent researchers and staff to perform its obligations under the Research Program [***] . MTI's staffing obligations during the term of the Research Program shall be subject to adjustment at the recommendation of the Steering Committee. Sankyo acknowledges that MTI's allocation of full time equivalent researchers and staff to perform its obligations under the Research Program during the period commencing on the Effective Date and ending on the date hereof has been acceptable. MTI shall continue to fulfill its obligations under this Section 3.1.2 by allocating full time equivalent researchers and staff in a manner which is consistent with its past practices.

3.1.3 Other Work. During the Research Program Term, neither MTI nor Sankyo shall perform any research and development work for any Third Party in the Field, except that either party may use for any purpose outside the Field any Research Compounds made or obtained by such party that are not designated as Recommended Compounds and are no longer being evaluated for designation as Recommended Compounds, any Recommended Compounds made or obtained by such party that are not selected as Candidate Compounds, and any Candidate Compounds made or obtained by such party that are not licensed as Licensed Compounds. It is understood that MTI and Sankyo each presently conducts, and will conduct during the Research Program Term, research for itself and for others outside the Field.

3.1.4 Subcontracts. MTI may subcontract portions of the Research Program with the prior written approval of the Steering Committee.

3.1.5 Data. MTI and Sankyo shall each maintain records in sufficient detail and in good scientific manner appropriate for patent purposes and as will properly reflect all work done and *** Confidential Treatment Requested.

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results achieved in the performance of the Research Program (including all data in the form required under any applicable governmental regulations). Such records shall include books, records, reports, research notes, charts, graphs, comments, computations, analyses, recordings, photographs, computer programs and documentation thereof, computer information storage means, samples of materials and other graphic or written data generated in connection with the Research Program including any data required to be maintained pursuant to applicable governmental regulations. MTI and Sankyo shall each provide the other the right to inspect records, and, as requested from time to time by the other party, shall provide copies of all requested records, to the extent reasonably required for the performance of the requesting party's obligations, or exercise of the requesting party's rights, under this Agreement; provided that each party shall maintain such records and the information of the other contained therein in confidence in accordance with Section 11.1 below and shall not use such records or information except to the extent otherwise permitted by this Agreement.

3.1.6 Delivery of Compounds. MTI will promptly identify and deliver to Sankyo [***] information on the structure of, data generated on, and (if so requested) reasonable quantities (for research and preclinical pharmacology use) of, any Research Compound [***] , Recommended Compound or Candidate Compound, for development and evaluation by Sankyo in accordance with this Agreement. The parties shall discuss in good faith any requested arrangements for the synthesis and supply to Sankyo of larger quantities of materials for use under the Research Program. Upon the occurrence of an event which would entitle to Sankyo to terminate this Agreement pursuant to Section 1.42, MTI will promptly identify and deliver to Sankyo (for research and preclinical pharmacology use) [***] fifty percent (50%) of the quantity of any Research Compound then in the possession of MTI.

3.1.7 MTI and Sankyo Quarterly Reports. MTI and Sankyo shall each provide to the members of the Steering Committee quarterly written reports which shall reasonably detail and evaluate the work each has performed during such calendar quarter under the Research Program and the results thereof. In addition, each quarterly report by MTI shall set forth, in reasonable detail, (a) the goals of the Research Program for such calendar quarter, (b) the results actually achieved by MTI under the Research Program during such calendar quarter, (c) the number of full time equivalent researchers and staff allocated to perform MTI's obligations under the Research Program during such calendar quarter, (d) MTI's estimated fully burdened cost for such full time equivalent researchers and staff allocated to perform its obligations under the Research Program during such calendar quarter, (e) a summary of the costs and expenses of any subcontractors and outside consultants incurred by MTI under the Research Program during such calendar quarter, and (f) the goals of the Research Program for the next calendar quarter. Such reports shall be sent to each member of the Steering Committee fourteen (14) days subsequent to the end of a calendar quarter.

3.1.8 Steering Committee Quarterly Reports. Within fourteen (14) days following a Steering Committee meeting held pursuant to the provisions of Section 5.1 hereof, the Steering Committee shall prepare and send to each party to this Agreement minutes of such meeting, together with a reasonably detailed written report which shall (a) describe the work performed to date on the Research Program, (b) evaluate the work performed in relation to the goals of the Research Program and (c) state any determination of the Steering Committee not to proceed with a Research Compound and the reasons therefor.

3.2 Other Options.

3.2.1 Screening of Third Party Compounds. MTI may screen compounds obtained from a Third Party ( "Third Party Research Compounds" ) with a view to finding Recommended Compounds. The Steering Committee shall decide whether such evaluation of Third Party Research Compounds *** Confidential Treatment Requested.

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can be carried out within the existing budget of the Research Program, or if additional funding is required for such evaluation. If the Steering Committee decides that additional funding is required, Sankyo may at its sole option agree to provide the necessary additional funding, in which case such evaluation shall be treated as part of the Research Program. In the event Sankyo does not agree to provide such funding, MTI may provide the funding, and [***] .

3.2.2 Sankyo Compounds. At its option, Sankyo shall supply MTI with available Sankyo compounds for screening, and shall designate a Sankyo employee whose responsibility shall be the procurement of compounds for screening from within Sankyo and from other sources.

3.3 Funding of the Research Program.

3.3.1 Amount of Funding. In consideration of MTI's performance of its obligations under the Research Program, (a) Sankyo paid MTI a research fee of US$3,500,000 for each of the first two Research Years during the term of the Research Program, and (b) Sankyo shall pay a research fee of US$3,500,000 for the third Research Year during the term of the Research Program, of which US$1,750,000 remains outstanding.

3.3.2 Payment Terms. The balance of the research fee for third Research Year shall be paid in equal quarterly installments on the first business day of the fourth, seventh and tenth months in that Research Year.

3.3.3 Audit.

(a) Upon the written request of Sankyo at Sankyo's expense and not more than once in any [***] period, MTI shall permit an internationally recognized independent public accountant selected by Sankyo and reasonably acceptable to MTI, to have access during normal business hours to such supporting financial records of MTI as may be reasonably necessary to verify the accuracy of the allocable expense calculations set forth in MTI's reports under Section 3.1.7 above in respect of any fiscal year ending not more than [***] prior to the date of such request.

(b) The fees charged by such accountant shall be paid by Sankyo unless the audit discloses that the allocable expense calculations reported by MTI for the audited period are more than [***] of the actual allocable expense calculations for such period, in which case MTI shall pay the reasonable fees and expenses charged by the accountant.

(c) Upon the expiration of [***] following the end of any fiscal year, the expense calculations with respect to such year shall be binding and conclusive upon Sankyo. Sankyo agrees that all information subject to review under this Section 3.3 is confidential and that Sankyo shall cause its accountant to retain all such information in confidence.

3.3.4 Adjustments to Second and Third Year Funding. Notwithstanding anything to the contrary in this Section 3.3, if the aggregate expenditures by MTI in performing its obligations under the Research Program during the [***] are greater than [***] or are less than [***] of the aggregate US$3,500,000 in research funding received by MTI from Sankyo under Section 3.3.1 above for such Research Year, then [***] .

3.4 Term of Research Program.

3.4.1 Term. Except as provided herein, the term of the Research Program commenced as of May 1, 1997, and shall continue for three (3) years.

3.4.2 Extension. Within [***] following the expiration or termination of the Research Program (other than under Section 14.2 hereof), MTI and Sankyo shall prepare a written report describing Research Compounds that have not, as of the date of such expiration or termination, been recommended as Recommended Compounds. Sankyo shall have the right during the [***] *** Confidential Treatment Requested.

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period after receipt of such report to fund further research and development of such Research Compounds by so notifying MTI. In the event Sankyo so funds further research and development of such Research Compounds, such further research and development shall be carried out [***] .

ARTICLE 4

FURTHER EVALUATION AND DEVELOPMENT
OF RESEARCH COMPOUNDS

4.1 Research and Evaluation of Research Compounds. The parties shall conduct such research and evaluation under the Research Program of a Research Compound until such time as it is determined whether or not such Research Compound meets the Recommended Compound Criteria.

4.2 Designation of Recommended Compounds. Within [***] after identification by either party of a Research Compound which is believed to meet the Recommended Compound Criteria, each party shall present to the Steering Committee all data and other evidence available to such party regarding such Research Compound for use in the Field. The Steering Committee promptly shall review all such data and other evidence and shall determine whether such Research Compound meets the Recommended Compound Criteria. If the Steering Committee determines that such Research Compound meets the Recommended Compound Criteria, such Research Compound shall be designated as a Recommended Compound. [***] .

4.3 Selection of Candidate Compounds. For a period of [***] after designation of a Recommended Compound, Sankyo shall have the right to conduct further preclinical development and evaluation of such Recommended Compound under the Research Program, and to determine in its sole discretion whether such Recommended Compound is appropriate to conduct more extensive preclinical development under this Agreement to evaluate its potential as a clinical candidate. If, within such [***] period, Sankyo gives written notice to MTI that the appropriate research and development committee of Sankyo has selected such Recommended Compound to conduct further preclinical development under this Agreement, thereafter such Recommended Compound shall be a Candidate Compound.

4.4 Licensed Compounds. For a period of [***] after selection of a Candidate Compound, Sankyo shall have the right to conduct more extensive preclinical development and evaluation of such Candidate Compound as a clinical candidate, and to determine in its sole discretion whether such Candidate Compound should be deemed a Licensed Compound in accordance with the provisions of this Agreement. If, at any time within such [***] period, Sankyo determines in its sole discretion that such Candidate Compound should be deemed a Licensed Compound, Sankyo shall provide written notice thereof to MTI. Thereafter, such Candidate Compound shall be a Licensed Compound for all purposes under this Agreement. Licensed Compounds shall also include any Research Compound that Sankyo determines meets the Recommended Compound Criteria, Recommended Compound and/or Candidate Compound which Sankyo may further develop following the termination or expiration of the Research Program Term in accordance with Sections 6.1.1, 14.2 and 14.3 and which Sankyo may determine, in its sole discretion, to deem as a Licensed Compound pursuant to this Section 4.4.

4.5 Clinical Development.

4.5.1 Responsibility to Develop. Sankyo is to be responsible for all clinical development and regulatory approvals and shall own all such approvals; provided that in the event that MTI terminates this Agreement pursuant to Section 14.2 hereof, Sankyo shall transfer all such registrations to MTI. MTI may attend meetings held by Sankyo respecting development of Licensed Compounds, and Sankyo will provide notice to MTI of such meetings in a reasonable and timely manner and solicit MTI input, but no such development meetings need be delayed, postponed or altered to accommodate participation by MTI. Notwithstanding the foregoing, *** Confidential Treatment Requested.

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Sankyo shall neither commence human clinical trials of any Compound, nor file any regulatory application therefor, unless and until such Compound is a Licensed Compound.

4.5.2 Clinical Development and Marketing. The preclinical and clinical development of Licensed Compounds shall be the responsibility of Sankyo. For each Licensed Compound, Sankyo shall use reasonable diligence and scientific judgment to evaluate and develop such Licensed Compounds in a timely manner in accordance with industry standards and Sankyo's internal practices and advise MTI as to the status of such Licensed Compounds. Sankyo agrees to conduct such preclinical and human clinical trials as are necessary to obtain all regulatory approvals to manufacture and market Products in each Primary Country in the Territory, and diligently, consistent with industry standards generally, develop, obtain necessary approval to market and commence marketing each such Product in Primary Countries unless in its reasonable business judgment such development and marketing is not practical or is strategically inadvisable. For the purposes of this Agreement, "Primary Countries" shall mean Australia, the Benelux countries, Canada, France, Germany, Italy, Japan, the Scandinavian countries, Spain, Switzerland, the United Kingdom and the United States. Sankyo shall use reasonable diligence, consistent with industry standards generally, to develop and market Products in other countries (the "non-Primary Countries" ) in the Territory unless in its reasonable business judgment such development and marketing is not practical or strategically inadvisable. Notwithstanding anything to the contrary in this Agreement, if Sankyo does not diligently develop and market a Product incorporating a Licensed Compound in a Primary Country or in a non-Primary Country where Sankyo has not made a reasonable business judgment that to develop and market such Product is not practical or strategically inadvisable, then following [***] written notice by MTI to Sankyo if such decision has not been reversed by Sankyo, (a) the license and other rights granted to Sa ...