Cystic Fibrosis Research Alliance And Commercialization Agreement

CYSTIC FIBROSIS RESEARCH ALLIANCE AND COMMERCIALIZATION AGREEMENT


BETWEEN


THE CYSTIC FIBROSIS FOUNDATION


AND


AURORA BIOSCIENCES CORPORATION


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CYSTIC FIBROSIS RESEARCH
ALLIANCE AND COMMERCIALIZATION AGREEMENT


THIS AGREEMENT is entered into as of May 19, 2000 (the "Effective Date") by and between the CYSTIC FIBROSIS FOUNDATION with a principal place of business at 6931 Arlington Road, Bethesda, Maryland 20814 ("CFF"), and AURORA BIOSCIENCES CORPORATION, a Delaware corporation having offices at 11010 Torreyana Rd., San Diego, California 92121 ("Aurora").


RECITALS


WHEREAS, Aurora has expertise in the development of automated screening systems and screening biologies used therein and has rights to certain intellectual property related thereto; and


WHEREAS, Aurora has the scientific expertise and capacity to undertake the drug discovery program contemplated herein; and


WHEREAS, CFF wishes to enter into this Agreement with Aurora to significantly extend and expand an existing cystic fibrosis assay development and screening project.


NOW, THEREFORE, in consideration of the foregoing premises and of the covenants, representations and agreements set forth below, the parties agree as follows:


1 DEFINITIONS


The definitions used in this Agreement are attached in Exhibit 1.


2 THE COLLABORATION


2.1 Collaboration Committee. The Collaboration Committee shall
provide advice and support to the Steering Committee regarding
scientific and technical aspects of the Collaboration. The
Collaboration Committee will cooperate to prepare annually a
detailed and updated Work Plan for each subsequent year of the
Collaboration as provided in Exhibit 2.1 for the first year of
the Collaboration, make recommendations on the allocation of
funded FTEs at Aurora in accordance with this Agreement, and
periodically review the progress of the Collaboration. In
addition, the Collaboration Committee shall make good faith
scientific and resource recommendations to the Steering
Committee as set forth in this Agreement, help to determine
scientific priorities for assay development and screening,
technology development, genomics and bioinformatics initiatives,
suggest changes in strategy or new areas for research, and
identify to the Steering Committee projects that should be
discontinued. Each party will appoint *** voting members to the
Collaboration Committee within *** days of the Effective Date.
Recommendations by the Collaboration Committee will be made by a
simple majority of all voting members.


The Collaboration Committee will request and require Aurora to
provide a written summary of the research performed on an annual
basis and such summary will be reviewed in good faith by the
Collaboration Committee. The Collaboration Committee may
recommend


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approval of the Work Plan for each year of the Collaboration.
The Collaboration Committee will meet in person, by telephone or
videoconference at least *** times per year or more often as
mutually agreed. Each party will pay its own expenses incurred
in connection with participation at Collaboration Committee
meetings. Each party will appoint one (1) of its Collaboration
Committee representatives to be responsible for coordinating
communications between the parties. Subgroups or subcommittees
of the Collaboration Committee may be established and meet,
either in person or by telephone or videoconference, more
frequently on an "as needed" basis. As appropriate, the
Collaboration Committee will make recommendations to the
Steering Committee.


2.2 Steering Committee. The Steering Committee will have overall
management of finances and scientific oversight responsibility
for the Collaboration using recommendations of the Collaboration
Committee. The Steering Committee shall review and approve the
Work Plan as it may be updated and amended from time to time and
other recommendations of the Collaboration Committee, ensure
that reasonable objectives of the Collaboration are pursued and
monitored, that the science performed is of high quality, and
that resources are appropriately acquired or used. With respect
to financial management and scientific issues, the Steering
Committee will attempt to mutually resolve issues that arise in
the course of the Collaboration in a good faith manner. The
Steering Committee will meet in person, by telephone or
videoconference at least *** times per year or more often as
mutually agreed. Each party will pay its own expenses incurred
in connection with participation at Steering Committee meetings.
Each party will appoint one (1) of its Steering Committee
representatives to be responsible for coordinating
communications between the parties. Each party will appoint ***
voting members to the Steering Committee within *** days of the
Effective Date. Decisions of the Steering Committee will be made
by a simple majority of all members, ***.


2.3 The Collaboration. The Collaboration will specifically focus on
the discovery and preclinical development of novel therapeutics
for CF. Subject to the parties' obligations herein, Aurora will
use reasonable efforts during the Collaborative Period to
perform the following in accordance with the Work Plan:


2.3.1. Develop at least *** high throughput or ultra-high
throughput CF Assays or CF-Related Assays for selected
CF Targets.


2.3.2. Conduct at least *** primary screens with CF Assays and
CF-Related Assays of at least *** to *** compounds per
screen using assays developed pursuant to Section 2.3.1,
the number of compounds used depending on the assay type
in accordance with the Work Plan, for a total of up to
*** datapoints ***, including controls, re-tests and
potency determinations which will constitute
approximately *** of such datapoints; provided, however
that no more than *** datapoints (generally in no less
than *** compound blocks for primary screening) will
require Aurora's *** technology. The parties may agree
in writing to screen additional compounds to generate
datapoints in excess of *** using Aurora's ***
technology at a price of *** dollars ($***) per ***
datapoints, and to generate datapoints in excess of ***
datapoints using Aurora's high or ultra high throughput
(UHTSS) technology at a price of *** dollars *** per ***
datapoints.


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2.3.3. Develop focused compound libraries of chemicals ***
pursuant to the Work Plan.


2.3.4. Provide follow-up chemical design and synthesis for Lead
expansion and optimization for an estimated *** Leads
selected from Validated Hits from primary screens using
assays developed pursuant to Section 2.3.1 and the Work
Plan and the parties agree to negotiate in good faith to
expand the Collaboration to pursue additional Leads if
the funding under Section 3.2.1 is insufficient for
further Lead development.


2.3.5. Develop ***assemble a *** assays relevant to each CF
Assay or CF-Related Assay as mutually agreed upon in
writing by the parties and pursuant to the Work Plan.


2.3.6. Profile Hits having desirable secondary functional assay
properties using in vitro assays available to Aurora
that are appropriate for one or more of the following:
metabolism, safety, toxicology and pharmacokinetics as
early in the Collaborative Period as reasonable. Profile
Validated Hits in in vivo tests for pharmacokinetics as
set forth in the Work Plan


2.3.7. Coordinate Lead prioritization, in conjunction with the
Collaboration Committee ***. Lead prioritization will be
based on ***.


2.3.8. Produce *** Development Candidates for CF Assays and
CF-Related Assays *** Development Candidates in total)
with profiles suitable for further in vivo testing and
entry into the drug development pipeline.


2.4 The CF targets not currently specified in the Work Plan that may
be subsequently proposed in writing by CFF after the Effective
Date shall be CF Targets that CFF reasonably believes to be
amenable for development for a high throughput screen using
Aurora Technology. Aurora may reasonably request further
information regarding the proposed CF Targets. Within *** days
of first receiving such information, Aurora shall notify CFF in
writing in the event that Aurora reasonably believes that the
development of a CF Assay or CF-Related Assay based on the
proposed CF Target is not consistent with Aurora's Third Party
obligations or if Aurora believes that the development of a CF
Assay or CF-Related Assay for a proposed CF Target would not
reasonably be legally (e.g., patent infringement) feasible based
on available information and that information provided by CFF.
If Aurora declines to work on a CF Target proposed by CFF,
Aurora will provide CFF with reasons for declining to work on
the proposed CF Target based on the written opinion of outside
counsel, to the extent that Aurora does not have to reveal
Confidential Information of a Third Party, waive attorney client
privilege or contravene an obligation to a Third Party.


2.5 Staffing. In accordance with its best business practices for
staffing to provide discovery services to large pharmaceutical
companies, Aurora will provide *** to the Collaboration to
endeavor to accomplish the reasonable objectives of the Work
Plan. Aurora will propose a Collaboration Manager to the
Steering Committee and subject to the approval of CFF, such
approval not to be unreasonably withheld. ***. Aurora will use
***,


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and if Aurora *** involved in the Collaboration *** in the
Collaboration, Aurora will expeditiously use *** to *** with
***.


3 COMPENSATION TO AURORA


3.1 Technology Access Fee. CFF will pay to Aurora a non-refundable
and non-creditable technology access fee of *** dollars ($***),
due on the Effective Date, and additional payments of ***
dollars ($***) on the subsequent anniversaries of the Effective
Date during the Collaborative Period.


3.2 Research and Contract Services Payments.


3.2.1 FTE Funding. Payments for FTE research support for assay
development, screening, technology development,
chemistry and project management (non-creditable,
non-refundable) for the Collaboration will be made by
CFF to Aurora, initially on the Effective Date (for year
1) and then on the first day of each quarter thereafter
in equal installments for each year during the
Collaborative Period in accordance with following table,
and as adjusted on an annual basis by the Biotech Index:


Year of Agreement No. of FTEs Research Funding Per Year
----------------- ----------- -------------------------
Year 1 *** ***
Year 2 *** ***
Year 3 *** ***
Year 4 *** ***
Year 5 *** ***


Aurora will provide *** corresponding to the research performed
under the Collaboration to CFF and the Steering Committee to
facilitate monitoring of progress and expenditures. *** during
the Collaborative Period and applied by Aurora with the approval
of the Collaboration Committee and any *** at the end of the
Collaborative Period ***.


3.2.2. Third Party Contract Services for In Vivo Testing and
Chemistry. In addition to the FTE funding payments as
described in Section 3.2.1 above, CFF will also make
non-creditable, non-refundable payments to Aurora for
the purchase by Aurora of contracted services for in
vivo testing, chemistry scale-up and synthesis to
support in vivo testing or additional chemistry
libraries (not including Sections 2.3.2 and 2.3.3) from
Third Parties necessary for the Collaboration and
approved by the Steering Committee, such payment to be
made by CFF to Aurora within *** days of receipt of
invoice (including back-up invoices and other supporting
detail) from Aurora that such expenses have been
incurred. It is estimated that the total cost of
contract services through the Collaborative Period will
be approximately *** dollars ($***) ***. This ***, for
the Collaboration, pursuant to Section 3.2.1.


3.2.3 Third Party Services and Collaboration. From time to
time, during the Collaborative Period, Aurora may
determine that it is in the best interests of the
Collaboration to (i)


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subcontract certain services within the scope of the
Collaboration including the services set forth in
Section 3.2.2; (ii) access or license biological
materials, reagents, compounds and know-how useful for
the Collaboration from Third Parties, either academic or
commercial; (iii) obtain unusual reagents, materials or
instrumentation (collectively, "Collaboration Assets");
(iv) license technology not otherwise available to
Aurora; or (v) propose that additional Aurora FTE's are
necessary to accomplish the goals of the Collaboration,
which will not include payments by CFF pursuant to
Section 2.3.2 ***. Aurora will review with the
Collaboration Committee and report promptly to the
Steering Committee upon making such determination and,
if possible, at least *** days prior to the beginning of
each year during the Collaboration Period in which the
action resulting from such determination is proposed to
occur:


3.2.3.1 the nature of the Third Party services, licenses
or Collaboration Assets Aurora has determined
are appropriate;


3.2.3.2 such supporting material as is necessary to
allow the Steering Committee to fully understand
the need for such subcontracting, licensing,
Collaboration Assets, additional FTE's, and the
costs involved; and


3.2.3.3 whether Aurora proposes


3.2.3.3.1 that the cost of any such services,
licenses or Collaboration Assets will
be paid by Aurora from the payments
made by CFF to Aurora hereunder; or


3.2.3.3.2 whether Aurora proposes that an
additional payment by CFF will be
necessary because Aurora's other
activities and expenditures on the
Collaboration will cause it to fully
utilize such payments.


3.2.3.4 If Section 3.2.3.3.2 above is applicable or if
additional FTE's are proposed, the Steering
Committee shall determine whether ***.
Additional Aurora FTEs utilized within this
Collaboration will be charged to CFF at a rate
of *** dollars ($***) per year, as adjusted by
the ***.


3.2.3.5 If the Steering Committee determines in
accordance with Section 3.2.3 that Collaboration
Assets are to be acquired, Aurora shall *** of
the Collaboration; provided, however, that ***
such Collaboration Assets *** approved by the
Steering Committee) at the termination of the
Collaboration.


3.2.3.6 If the decision of the Steering Committee in
Section 3.2.3.4 would *** of the Collaboration
*** Third Party (i) the Steering Committee shall
fully consider whether the proposed transfer is
justified in reaching the goals of the
Collaboration by balancing the anticipated
benefits of such transfer and the availability
and cost of alternative means to obtain such
rights or services; and (ii) if a transfer of a
portion of downstream revenues is determined to
be appropriate, such transfer shall be shared
proportionately by the parties to the Agreement
in accordance with the agreed upon percentages
specified for sharing such benefits under
Sections 4.5.1 and 4.5.2 of this Agreement.


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3.2.4 Screening of Third Party Compounds. During the
Collaborative Period CFF may, with the written consent
of Aurora ***, have Aurora screen chemicals provided by
CFF and obtained with written permission from Third
Parties ***. Such chemicals shall be provided to Aurora
in accordance with the provisions of Section 3.2.5. Such
chemicals supplied by CFF or Third Parties will be
provided to Aurora in appropriate amounts in *** at a
concentration of *** in a *** plate with *** wells of
test chemicals, or in a *** plate with *** wells of test
chemicals, or such other format as is mutually agreed by
the Collaboration Committee. Aurora agrees not to
transfer such chemicals to any other Third Party, or to
use them for any purpose other than screening assays
developed under the Collaboration. CFF will exercise
good faith efforts to obtain from each relevant Third
Party *** with such Third Party chemicals to Aurora by
CFF or such Third Party within *** of completion of such
screening *** to CFF by Aurora or a mutually agreed upon
time *** that can be used to determine ***. The parties
agree that *** obtain the right to *** Aurora from each
such Third Party and *** information to Aurora *** that
can be used to ***. Aurora will return or destroy unused
chemicals upon written notice from CFF.


3.2.5 Development and Commercialization of Third Party
Compounds. Aurora, CFF and Third Party compound or
chemistry service suppliers (if any) will agree in
writing at the time of entering into any Third Party
agreement pursuant to Section 3.2.4 *** of Validated
Hits or Leads resulting from CF Assays or CF Related
Assays solely in the CF Field and/or the Pulmonary Field
under this Agreement, and that *** of Validated Hits or
Leads resulting from CF-Related Assays outside the CF
Field or the Pulmonary Field and commercial rights
thereto in accordance with Section 4.3. *** Aurora and
CFF will receive milestone and royalty payments or other
forms of consideration for rights to Development
Candidates or Products resulting from such Validated
Hits or Leads.


3.3. Research Milestones. In addition to the other payments in
accordance with this Agreement and in consideration for
achieving certain Collaboration objectives set forth below, CFF
will pay to Aurora the following non-refundable, non-creditable
research milestone payments:


3.3.1 Payments for Assay Development. CFF will pay assay
development milestones to Aurora upon ***. The
characteristics of the assays and associated data
required for evaluation as a CF Assay or CF-Related
Assay will be made available to CFF and the Chemistry
Advisory Group. Such assay(s) will *** validation and
payment of such milestone. The milestone amount for the
*** is *** dollars ($***) to be paid by CFF within ***
days of notice by Aurora that such assay ***. The
parties anticipate, subject to a greater understanding
of the biology and chemistry of CF Targets by the
parties, that during the Collaborative Period *** CF
Assays or CF-Related Assays ***. New CF Targets under
consideration, and a schedule for CF Target development
and implementation in screening, are and will be
described in the Work Plan. Validation of CF Assays and
CF-Related Assays is subject to the approval of the
Steering Committee after recommendation of the
Collaboration Committee using guidelines described in
the Agreement and such approval will take no longer than
*** days. The first such assay is likely to be ***
September 9, 1999 between the parties.


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3.3.2 Payments for Validated Hit Identification. CFF will pay
Validated Hit identification milestones to Aurora upon
the identification of each Validated Hit for a CF
Target, representing ***. The structures of Hits and
associated data will be made available solely to CFF and
the Chemistry Advisory Group *** as a Validated Hit.
Each such Validated Hit will *** identification and
payment of such milestone. The milestone amount for the
confirmation of each Validated Hit is:


*** dollars ($***) for *** Validated Hit for each of the
CF Targets;


*** dollars ($***) for *** Validated Hit for each of the
CF Targets; and


*** dollars ($***) for *** Validated Hit for each of the
CF Targets;


provided, however if CFF determines *** the screening
and compound characterization with *** CF Targets, upon
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