Product Development And Commercialization Agreement

EXHIBIT 10.24


Portions of this exhibit were omitted and filed separately with the Secretary of the Commission pursuant to an application for confidential treatment filed with the Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. Such portions are marked by a series of asterisks.


PRODUCT DEVELOPMENT AND COMMERCIALIZATION AGREEMENT


This Product Development and Commercialization Agreement (the "Agreement") dated as of the 19th day of November, 1999 (the "Effective Date") is made and entered into by and between ViroPharma Incorporated, a Delaware corporation having its principal place of business at 405 Eagleview Boulevard, Exton, PA 19341 ("ViroPharma"), and Battelle Memorial Institute, an Ohio non-profit corporation, having a principal place of business at 505 King Avenue, Columbus, OH 43201, through its Battelle Pulmonary Therapeutics Division ("BPTD"). ViroPharma and BPTD may be referred to herein as a "Party" or, collectively, as "Parties."


BACKGROUND


In consideration of the covenants and promises contained in this Agreement, and intending to be legally bound, the Parties agree as follows:


1. DEFINITIONS.


As used herein, the following capitalized terms shall have the following meanings when used in this Agreement, and all terms defined in the singular shall have the same meanings when used in the plural (and vice versa, as appropriate), unless otherwise specified:


1.1 "Affiliate" means a corporation, partnership, entity, person, firm,
company, or joint venture, whether de jure or de facto, that controls,
is controlled by or is under the common control with the referenced
Party. For the purposes of this definition the word "control"
(including, with correlative meaning, the terms "controlled by" or "is
under the common control with") means (a) ownership directly or
indirectly of at least fifty percent (50%) of the voting stock of the
applicable entity, or such lesser percentage that is the maximum
allowed to be owned by a foreign corporation in a particular
jurisdiction, or (b) the actual ability to control the management and
operations of the applicable entity.


1.2 "Approval Application" means any application to a Regulatory
Authority, required to be approved by such Regulatory Authority before
marketing the Drug Inhalation System in a particular country, and may
include, without limitation a New Drug Application, Abbreviated New
Drug Application, 510(k) Premarketing Notification, and/or a Premarket
Application, and analogous foreign regulatory filings.


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1.3 "BPTD Invention" means any Invention that covers the EHD Device, the
Drug Container, or the Drug Vehicle, or any method of making or using
the EHD Device, the Drug Container, or the Drug Vehicle in the Field,
which Invention is made during the Term of this Agreement.


1.4 "BPTD Patent" means any Patent owned or Controlled by BPTD or a BPTD
Affiliate during the term of the Agreement that generically or
specifically claims or covers the manufacture, use, sale, or offer for
sale, import or export of the EHD Device, the Drug Container, or the
Drug Vehicle. Attached hereto as Exhibit A is a list of BPTD Patents
existing as of the Effective Date, which Exhibit A shall be updated by
BPTD on at least a semiannual basis during the term of the Agreement,
provided, however, that unintentional omission of Patents from such
Exhibit A shall not constitute a breach of the Agreement, nor shall it
limit the scope of the defined term "BPTD Patent."


1.5 "BPTD Technology" means all BPTD Patents and BPTD Inventions, and all
Information reasonably necessary for ViroPharma to practice the rights
granted and fulfill the responsibilities imposed in this Agreement,
and all copyrights relating to the Drug Inhalation System, that BPTD
or a BPTD Affiliate owns or Controls during the term of the Agreement.


1.6 "Commercialization Plan" means the plan developed by ViroPharma for
the distribution, marketing and sale of the Drug Inhalation System.


1.7 "cGMPs" means the then current standards for manufacture of
pharmaceuticals and pharmaceutical delivery devices, as set forth in
the United States Federal Food, Drug, and Cosmetic Act and applicable
regulations promulgated thereunder, as amended from time to time, and
such standards of good manufacturing practice as are required by the
European Union and other organizations and governmental agencies in
countries in which the Drug Inhalation System is intended to be sold.


1.8 (a) "Confidential Information" means all secret, confidential or
proprietary information or data, whether provided in written, oral,
graphic, video, computer or other form, provided by one Party (the
"Discloser") to the other Party ("Disclosee") pursuant to this
Agreement or the Confidential Disclosure Agreement between the Parties
dated January 20, 1999, or generated pursuant to this Agreement,
including but not limited to information relating to the Discloser's
existing or proposed research, development efforts, business or
products, the terms of this Agreement and any other materials that
have not been made available by the Discloser to the general public.


(b) Notwithstanding the foregoing Section 1.8(a), Confidential
Information shall not include any information or materials that: (i)
at the time of disclosure by the Discloser to the Disclosee are in, or
after such disclosure become part of, the


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public domain, through no improper act on the part of the Disclosee
or any of its officers, employees, or agents; (ii) was in the
Disclosee's possession at the time that such information was first
disclosed by the Discloser, as shown by written evidence, and was not
acquired, directly or indirectly, from the Discloser; (iii) the
Disclosee receives from a third party, provided that such information
was not obtained by such third party, directly or indirectly, from
the Discloser; (iv) are required to be disclosed pursuant to valid
law, regulation or court order; or (v) was independently developed by
Disclosee employees having no access to the Confidential Information.


1.9 "Control" means, with respect to a material, Information or
intellectual property right, possession by a Party of the ability to
grant access to or a license or sublicense as provided for herein
under such material, Information or right without violating the terms
of any agreement or other arrangements with any Third Party existing
at the time such Party would be first required hereunder to grant the
other Party such access or license or sublicense.


1.10 "Development Activities" means all activities performed pursuant to
the Development Plan and this Agreement.


1.11 "Development Plan" means the detailed written work plan prepared in
accordance with Section 3.2.1, as such plan may be amended from time
to time.


1.12 "Device Specifications" means the analytical and design
specifications for the EHD Device and the Drug Container, prepared
and modified in accordance with Section 3.2.3(a), and incorporated
into this Agreement by reference.


1.13 "Diligent Efforts" means efforts that are no less than the applicable
efforts that a Party applies to the development, manufacture or
commercialization of its own compounds or products with similar
regulatory requirements and market potential.


1.14 "Drug" means a Small Molecule for use in the Field, and shall
include, without limitation VP 14637.


1.15 "Drug Container" means the container developed or identified for
ViroPharma for the Formulated Drug, all connectors, adapters and
other equipment necessary to permit the attachment of the container
to and incorporation of the container into the EHD Device, all
connectors, adapters and other equipment necessary to permit the
container to be attached to a device to fill the container with
Formulated Drug, and all labels, labeling and packaging for such
container.


1.16 "Drug Inhalation System" means the EHD Device and Packaged Drug
combined and assembled together for use in the Field by a patient
or subject.


1.17 "Drug Master File" or "DMF" means Information and materials, or the
applicable part thereof, submitted to a Regulatory Authority,
providing


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information on the manufacturing facilities and manufacturing
processes for making a Drug Inhalation System or component thereof,
including, without limitation, activities relating to manufacturing,
processing, formulating, packaging and storage to be conducted by or
under the direction of BPTD or its Affiliates, which Information may
be used to support Regulatory Approval of the Drug Inhalation System
in a country. For purposes of this Agreement, the Drug Master File
shall include, without limitation, chemistry, manufacturing and
control information, as defined in the FDA regulations at 21 CFR
Section 314.50(d).


1.18 "Drug Vehicle" means the combination of all excipients, active, and
inactive ingredients developed for ViroPharma other than the Drug,
with which the Drug is mixed to permit the Pulmonary Delivery of the
Drug via the EHD Device.


1.19 "EHD Device" means the hand-held, single-user, disposable device
developed by BPTD for ViroPharma for the electrohydrodynamic delivery
of Drugs by inhalation, including, without limitation, any removable
mouthpiece or mask for use by patients, and any other equipment or
accessories necessary for a patient to use the device in accordance
with its approved labeling and supplied together with the device, all
of which meet the Specifications.


1.20 "FDA" means the United States Food and Drug Administration, or the
successor thereto.


1.21 "Field" means the treatment and/or prevention of the effect on humans
of respiratory syncytial viruses ("RSV") by Pulmonary Delivery of one
or more Small Molecules not in a formulation or in a combination with
one or more ********** or **********, but not the treatment and/or
prevention of the effect on humans of RSV by Pulmonary Delivery of
one or more ********** or ********** alone or in a formulation or in
a combination with one or more Small Molecules.


1.22 "First Commercial Sale" means, on a country by country basis, the
first sale of the Drug Inhalation System to a Third Party after
Regulatory Approval.


1.23 "Formulated Drug" means the combined, formulated Drug and Drug
Vehicle.


1.24 "Full Royalty Rate Period" for the Drug Inhalation System in any
given country means the period during which ViroPharma's distribution
and/or sale of the Drug Inhalation System in the applicable country,
in the absence of the rights and licenses granted by this Agreement,
would have infringed a BPTD Patent.


1.25 "Information" means information and data of any type whatsoever, in
any tangible or intangible form, including without limitation
inventions, practices, methods, techniques, specifications,
formulations, formulae, knowledge, know-how, skill, experience, trade
secrets, test data including pharmacological,


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biological, chemical, biochemical, toxicological and clinical test
data, analytical and quality control data, stability data, studies
and procedures, and patent and other legal information or
descriptions.


1.26 "Invention" means any invention, modification, discovery,
improvement, technology, trade secret, chemical or biological
material, assay, method, process, technique, documentation,
scientific and technical data, drawing or other information, whether
patentable or not, relating to a Drug, Drug Vehicle, Formulated Drug,
Drug Container, or EHD Device, or any method of making or using such
Drug, Drug Vehicle, Formulated Drug, Drug Container, or EHD Device in
the Field.


1.27 "Major Markets" means Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Indonesia, Ireland, Italy, Japan, Mexico,
Netherlands, Portugal, Spain, Sweden, the United Kingdom, the United
States.


1.28 "Net Sales" means the total amount invoiced or otherwise charged by
ViroPharma or its Affiliates to customers or Third Party licensees on
account of the sale of the Drug Inhalation System, less the following
deductions: (a) deductions, credits, allowances, and discounts
actually granted for spoiled, damaged, out-dated and returned units
of the Drug Inhalation System (including withdrawals and recalls);
(b) rebates (including Medicaid, managed care rebates and other
similar types of rebates, e.g. chargebacks); (c) freight and
insurance costs for transporting the Drug Inhalation System which are
included in the billed amount; (d) sales, use, excise, value-added
and other direct taxes on the sale of the Drug Inhalation System; (e)
customs duties, surcharges and other governmental charges incurred in
connection with the exportation or importation of the Drug Inhalation
System; (f) trade, cash, and quantity discounts off the invoiced
price and similar promotional discounts or rebates (such as
management fees required by hospital buying groups or granted to
managed care organizations) off the invoiced price, and (g) amounts
reflecting retroactive price adjustments on sale of products, to the
extent not previously deducted from net sales, but only to the extent
such adjustment is not made more than one year after the sale; all of
the foregoing to the extent consistent with the normal practice in
the industry, and provided that any and all of the foregoing are
calculated in accordance with United States generally accepted
accounting principles consistently applied. Included in Net Sales
shall be any disposition of a Drug Inhalation System or component
thereof for value, and if for other than cash, such disposition to be
converted to a cash amount equal to the amount such system or
components are sold to others.


1.29 "Packaged Drug" means Formulated Drug packaged in a finished Drug
Container.


1.30 "Patent" means (a) all patent applications heretofore or hereafter
filed or having legal force in any country; (b) all patents that have
issued or in the future issue


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therefrom, including without limitation utility, model and design
patents and certificates of invention; and (c) all divisionals,
continuations, continuations-in-part, reissues, renewals, extensions
(including supplemental protection certificates), additions,
registrations or confirmations to or of any such patent applications
and patents.


1.31 "Pulmonary Delivery" means


a. the administration of any substance by:


i. inhalation through the mouth, or


ii. simultaneous inhalation through the mouth and nose, or


iii. where inhalation through the mouth is not possible or
reasonably practicable due to the patient's condition,
inhalation through the nose,


in each case to the lungs and/or to the trachea (including
necessary incidental non-therapeutic and non-functional [i.e.,
not for diagnosis, prevention or treatment of disease] delivery
to the mouth, nose and throat as a result of such inhalation) for
the purpose of diagnosis, prevention or treatment of disease;


b. the administration of any substance to the lungs, trachea, mouth,
throat or nasal passages by inhalation through the mouth and/or
nose for the treatment, prevention, or diagnosis of all cancers
of the respiratory tract; and


c. where it can be shown by clinical trials that treatment or
prevention of a particular disease by delivery of a substance to
the lungs and/or the trachea in accord with Section 1.31(a) above
is significantly improved by simultaneous delivery of the same
substance to the mouth and/or throat then "Pulmonary Delivery"
will be extended to include delivery under Section 1.31(a) above
together with simultaneous delivery of the same substance to the
mouth and/or throat for the prevention or treatment of that
disease.


For the avoidance of doubt, "Pulmonary Delivery" shall not include:
---


d. any delivery or deposition to the nasal passage or nasal cavities
other than as expressly permitted in Sections 1.31(a-b) above;
and


e. except as provided in Section 1.31(b) above, delivery to the
mouth and/or throat when not done simultaneously with delivery to
the lungs and/or trachea in accordance with Section 1.31(c)
above.


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1.32 "Pulmonary Surfactant" means


a. More than ********** total, per dose, of one or more of the
following **********; **********, and/or


b. Any amount of ********** or ********** or any derivative thereof
(a fragment or modified form of ********** or ********** or such
fragment) or any molecule specifically developed and
intentionally used to replace ********** or ********** in whole,
or in part, and/or


c. Any amount of ********** or any derivative thereof (a fragment
or modified form of ********** or such fragment) plus (i)
********** conforming to a) above and/or (ii) any molecule
conforming to b) above.


1.33 "Recovery Cost" means the actual costs inclusive of all direct and
reasonable indirect costs of products or services incurred after the
Effective Date, with no mark-up for profits, and in the case of
products or services provided by a Third Party, the actual amount
charged by such Third Party, but in no event shall Recovery Costs
include Third Party Payments. Notwithstanding anything in this
Agreement to the contrary, all services and/or property provided by
any Battelle Memorial Institute operating unit, division, or
affiliate other than BPTD shall be sold or billed to ViroPharma or
any other party under this Agreement at ordinary and customary prices
and/or rates, including profits (but not for BPTD).


1.34 "Reduced Royalty Rate Period" for the Drug Inhalation System in a
country means the period beginning on the expiration of the Full
Royalty Rate Period for the Drug Inhalation System in that country,
or if there is no Full Royalty Rate Period in that country, then
beginning on the First Commercial Sale of the Drug Inhalation System
in that country, and ending on the ********** anniversary of the
Effective Date.


1.35 "Regulatory Approval"


1.36 "Regulatory Authority" shall mean any national (e.g., the United
States Food and Drug Administration), supra-national (e.g., the
European Commission, the Council of the European Union, or the
European Agency for the Evaluation of Medicinal Products), regional,
state or local regulatory agency, department, bureau, commission,
council or other governmental entity in each country of the


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world involved in the granting of Regulatory Approval for the Drug
Inhalation System.


1.37 "Retained Rights" means the right of the Third Party identified in
Exhibit B to this Agreement to have granted to it upon request a
paid-up, non-exclusive license to make, keep, use and sell subject
matter disclosed and claimed in those of the BPTD Patents designated
with an asterisk in Exhibit A to this Agreement.


1.38 "Small Molecule" means any chemical entity or compound, but not small
peptides or proteins.


1.39 "Specifications" means the System Specifications and the Device
Specifications.


1.40 "System Specifications" means the analytical, design and performance
specifications for the Drug Inhalation System, prepared and modified
in accordance with Section 3.2.2, and incorporated into this
Agreement by reference.


1.41 "Third Party" means any entity or individual other than BPTD,
ViroPharma, or Affiliates of either.


1.42 "Third Party Payment" means any payment made by BPTD or a BPTD
Affiliate:


a. to any Third Party as a result of BPTD's obtaining or licensing,
before or after the Effective Date, such Third Party's Patents or
technology; or


b. to any Third Party as a result of any defense or settlement of
any Third Party claim or action alleging that the manufacture,
use, sale, offer for sale, importation or exportation of the EHD
Device, the Drug Vehicle or the Drug Container infringes a Third
Party Patent in any country of the world.


1.43 "ViroPhaema Invention" means any Invention that is not a BPTD
Invention, including, without limitation, any Invention that covers
the Drug, or the Formulated Drug, or any method of making or using
the Drug or Formulated Drug in the Field, which Invention is made
during the Term of this Agreement.


1.44 "ViroPharma Patent" means any Patent owned or Controlled by
ViroPharma or a ViroPharma Affiliate during the term of the Agreement
that claims an Invention in the Field or that generically or
specifically claims or covers the manufacture, use, sale, or offer
for sale, import or export of the Drug or Formulated Drug.


1.45 "ViroPharma Technology" means all ViroPharma Patents and ViroPharma
Inventions, and all copyright, trademarks, and Information that
ViroPharma or an Affiliate owns or Controls during the term of the
Agreement.


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2. LICENSES


2.1 License to ViroPharma.


2.1.1 General. Except as limited by the Retained Rights, BPTD grants
to ViroPharma and its Affiliates the worldwide, royalty-
bearing, exclusive, except as to BPTD and its Affiliates,
sublicensable right and license to use the BPTD Technology to
the extent necessary to perform the activities under this
Agreement in the Field, including, without limitation, making,
using, selling, offering for sale, importing, or exporting the
Drug Inhalation System or any part of the Drug Inhalation
System, or licensing a Third Party to do any of the foregoing.


2.1.2 Post Expiration of Payment Obligation. After the expiration of
the obligation to make payments under Sections 9.1-9.6 of this
Agreement, the licenses under this Section 2.1 shall be fully-
paid, perpetual, irrevocable and royalty-free.


2.2 License to BPTD. ViroPharma grants to BPTD and its Affiliates the
royalty-free, non-sublicensable, non-exclusive, right and license to
use the ViroPharma Technology only to the extent necessary to perform
the activities under this Agreement in the Field, but for no other
purposes.


2.3 Exclusive Relationship.


2.3.1 General. Except as specifically permitted by the terms of this
Agreement and for the purposes of this Agreement, during the
term of this Agreement, without the prior written consent of
ViroPharma, neither BPTD nor any of its Affiliates shall
directly or indirectly use or license a Third Party to use the
BPTD Technology in the Field.


2.3.2 Drug Vehicle Use. Except as specifically permitted by the terms
...