License, Research And Development Agreement

EXHIBIT 10.1
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LICENSE, RESEARCH AND DEVELOPMENT AGREEMENT


THIS LICENSE, RESEARCH AND DEVELOPMENT AGREEMENT is made as of August 2, 2000, by and between MGI PHARMA, INC., a Minnesota corporation having its principal place of business at 6300 West Old Shakopee Road, Suite 110, Bloomington, MN, U.S.A. 55438-2318 ("MGI"); and MethylGene Inc., a corporation organized under the laws of the Province of Quebec having its principal place of business at Suite 200, 7220 Frederick-Banting, Montreal, Quebec, Canada, H4S 2A1 ("MethylGene").


Recitals
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A. MethylGene has acquired rights to certain patents, patent applications and know-how, and developed certain data, relating to pharmaceutical products containing a compound known as MG98, and relating to pharmaceutical products resulting from MethylGene's DNA methyltransferase research program.


B. MGI desires to obtain, and MethylGene is willing to grant to MGI, an exclusive license under such intellectual property for the United States and its territories and possessions, Canada and its provinces and territories, and Mexico, all on the terms set forth herein.


NOW THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, the parties hereto have agreed as follows:


Article 1 INTRODUCTORY PROVISIONS


1.1 Defined Terms. The following terms, when used in capitalized form in this Agreement, shall have the meanings set forth below:


(a) "Affiliate" when used with reference to either party shall mean any entity controlling, controlled by or under common control with such party. For purposes hereof, "control" shall mean ownership, directly or indirectly, of more than fifty percent (50%) of the securities having the right to vote for election of directors, in the case of a corporation, and more than fifty percent (50%) of the beneficial interest in the capital, in the case of an entity other than a corporation.


(b) "Best Efforts" shall mean those efforts that would be made by a reasonably prudent business person acting in good faith and in the exercise of reasonable commercial judgment based on acceptable practice, process and speed found in the pharmaceutical industry and taking into account the potential commercial market for the applicable products in the Territory.


(c) "Confidential Information" shall mean all information and data, in any form, including but not limited to any information or data on assays, chemical structures, clinical trial results, diagnostics, biological markers, protein structures, mechanisms of action, analytical techniques, chemical synthesis, enzymology, computational models, manufacturing processes,


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markets, customers, suppliers, patents or patent applications, inventions, know-how, trade secrets, products, procedures, designs, formulas, business plans, financial projections, organizations, employees, consultants or any other similar aspects of a party's present or future business, the secrecy of which confers a competitive advantage upon that party.


(d) "DNA MT Product" shall mean any pharmaceutical compound derived from the Research Program.


(e) "Effective Date" shall mean the date first above written.


(f) "FDA" shall mean the United States Food and Drug Administration.


(g) "FTE" shall mean a minimum of forty (40) hours per week for individual MethylGene employees assigned to the Research Program, or its equivalent if a given employee is assigned on a less than forty (40) hours per week basis and therefore multiple employees are added to provide a single FTE.


(h) "Health Registration Dossier" shall mean all documentation which is now or shall hereafter be on file with the FDA, or any Regulatory Authority, which comprises the information and data submitted to such agency in support of an application made by either party, or a sublicensee of either party, to such agency for Marketing Authorization for any Licensed Product for treatment of any indication.


(i) "Hybridon" shall mean Hybridon, Inc. or its successor.


(j) "Hybridon Agreement" shall mean the License Agreement between Hybridon and MethylGene effective as of January 4, 1996, as amended on November 26, 1997, December 15, 1997 and May 5, 1998.


(k) "IDT" shall mean Integrated DNA Technologies Inc.


(l) "IDT Agreement" shall mean the Licensing Agreement between IDT and Hybridon, bearing an effective date of March 12, 1999.


(m) "Licensed Know-How" shall mean all Confidential Information which is owned or controlled by or licensed (with right of sublicense) to MethylGene as of the Effective Date or at anytime during the term of this Agreement and is necessary or useful to the development, use or sale of the Licensed Products.


(n) "Licensed Patents" shall mean the following, which are owned or controlled by or licensed (with right of sublicense) to MethylGene: (i) those patents and patent applications listed on Exhibit A hereto and any patents issuing therefrom; (ii) any patents and patent applications conceived or reduced to practice during the term of this Agreement and covering the manufacture (with respect only to the DNA MT Products), use, importation or sale of any of the Licensed Products, including any jointly-owned patents and patent applications as


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provided in Section 7.1, and (iii) all reissues, continuations, continuations-in-part, extensions, reexaminations, and foreign counterparts thereof.


(o) "Licensed Products" shall mean the MG98 Product and all DNA MT Products, collectively.


(p) "Marketing Authorization" shall mean any authorization which is legally required under applicable laws, regulations or administrative decisions to put a proprietary medicinal product on the market in any country for use in treatment of any indication; including, without limitation, any governmental price approval or reimbursement approved under a national health insurance system.


(q) "McGill MG98 Agreement" means the License Agreement between McGill University and Hybridon, bearing an effective date of October 13, 1994, as amended on December 15, 1995, February 25, 1998 and February 27, 1998.


(r) "McGill DNA MT Agreement" means the License Agreement between McGill University and Hybridon, bearing an effective date of December 15, 1995, as amended, February 25, 1998 and February 27, 1998.


(s) "MG98 Product" shall mean any pharmaceutical compound containing as an active ingredient the compound currently known as MG98.


(t) "Net Sales Revenue" shall mean (i) with respect to MGI's obligations under Section 5.3, the gross sale price of all Licensed Products, sold by MGI, its sublicensees and/or their respective Affiliates, to third parties, as reflected in invoices issued by all such sellers during that period of time, or (ii) with respect to MethylGene's obligations under Section 5.4, the gross sale price of all Licensed Products sold by MethylGene, its sublicensees and/or their respective Affiliates, to third parties, in the applicable country or countries, as reflected in invoices issued by all such sellers during that period of time; less in each case (A) credit for returns, including withdrawals and recalls; (B) sales rebates allowed or paid; (C) volume discounts to the extent that the same are not reflected in the invoiced price; (D) sales, value-added and other taxes that are payable by the buyer and are included in the invoiced price; (E) customs duties related to sales made by the seller to its customers.


(u) "R&D Costs" shall mean: (i) salaries and benefits for the MethylGene FTEs assigned to the Research Program pursuant to Section 3.4(a); (ii) overhead allocable to such MethylGene FTEs, consisting of lease, utilities, insurance and research & development management, but excluding general and administrative expenses; (iii) the actual costs of third party research to the extent approved by the R&D Steering Committee; (iv) the actual, out-of-pocket costs of prosecuting the Licensed Patents for the Licensed Products in the Territory; (v) equipment, materials and supplies dedicated to the Research Program (provided that purchases of equipment in excess of $5,000 shall be subject to approval of the R&D Steering Committee); and (vi) travel and lodging for MethylGene's members to attend R&D Steering Committee meetings, all as in accordance with generally accepted accounting principles.


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(v) "R&D Plan" shall mean that certain research and development plan to be determined by the R&D Steering Committee as provided in Section 3.1(b).


(w) "Regulatory Authority" shall mean, in respect of any country, any agency responsible for the issuance of Marketing Authorizations for pharmaceutical products marketed in that country.


(x) "Research Program" shall mean that program of DNA methyltransferase research being carried out by MethylGene pursuant to the terms of the R&D Plan.


(y) "Supporting Data" shall mean all data and information owned or controlled by either party or a sublicensee of either party relating to (i) the pharmacological or toxicological properties of any Licensed Product, (ii) any pre-clinical or clinical testing and experience in relation to any Licensed Product and (iii) the chemical composition, manufacturing processes and quality control testing of any Licensed Product, to the extent reasonably required for purposes of any application for Marketing Authorization. Supporting Data shall also include, but is not limited to, copies of annual reports, integrated study reports, protocols for clinical research and GLP pre-clinical studies, protocol changes and amendments, CMC sections and amendments, safety data, CRO databases, case report forms and access to patient records, GLP toxicity, safety and metabolism reports and data, and GLP pharmacokinetic data and reports owned or controlled by either party or a sublicensee of either party and relating to any Licensed Product, as well as, in general, data or information owned or controlled by either party or a sublicensee of either party which would be useful for a person pursuing clinical research and regulatory approval, or which would typically be part of any submission to FDA or other Regulatory Authority for the purpose of obtaining approval of any Licensed Product for any indication.


(z) "Territory" shall mean the United States and its territories and possessions, Canada and its provinces and territories, and Mexico.


(aa) "Third Party Agreements" shall mean those agreements listed on Exhibit B hereto and any other license agreements that the parties from time to time mutually determine are necessary or required for the development, manufacture (with respect only to the DNA MT Products) or sale of the Licensed Products in the Territory, as contemplated herein.


(bb) "TPC Agreement" means the Technology Partnerships Canada agreement between Her Majesty the Queen in Right of Canada, as represented by the Minister of Industry, bearing a commencement date September 1, 1997, as amended on March 27, 1998.


(cc) "UMASS" means the Worcester Foundation for Experimental Biology Inc. in its capacity as Licensor under the UMASS Agreement and its successors in such capacity.


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(dd) "UMASS Agreement" means the License Agreement between UMASS and Hybridon, Inc. effective February 21, 1990, as restated on September 8, 1993 and amended on December 18, 1995 and July 1, 1999.


1.2 Other Rules of Interpretation. Unless the context clearly indicates otherwise, the following rules shall govern the interpretation of this Agreement:


(a) The definitions of all terms defined herein shall apply equally to the singular, plural, and possessive forms of such terms.


(b) All references to "Sections," or "Exhibits" shall mean the corresponding Sections of and Exhibits to this Agreement.


Article 2 LICENSE GRANTS


2.1 License to MG98 Product. Subject to the terms and conditions of this Agreement, MethylGene hereby grants to MGI an exclusive, royalty-bearing license for all indications, with rights to sublicense (subject to Article 16 below), under all Licensed Patents and Licensed Know-How, to develop, use, import, sell and offer to sell the MG98 Product in the Territory.


2.2 License to DNA MT Products. Subject to the terms and conditions of this Agreement, MethylGene hereby grants to MGI an exclusive, royalty-bearing license for the oncology and rheumatology indications, with rights to sublicense (subject to Article 16 below), under all Licensed Patents and Licensed Know-How, to develop, make, have made, use and sell DNA MT Products within the Territory.


2.3 Transfer of Licensed Patents, Supporting Data and Confidential Information. Promptly after the Effective Date, MethylGene shall provide to MGI copies of all Licensed Patents, Supporting Data and Confidential Information that is material to the management of the Research Program and not previously disclosed to MGI.


Article 3 RESEARCH AND DEVELOPMENT


3.1 R&D Steering Committee.
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(a) Within sixty (60) days after the Effective Date, the parties shall form an R&D steering committee ("R&D Steering Committee") to manage the research and development collaboration with respect to the Licensed Products. The R&D Steering Committee will be composed of an equal number of members from both parties, at not less than 2 members each, and will meet on a quarterly basis, on an alternating basis between MGI's and MethylGene's facilities.


(b) The R&D Steering Committee shall establish a written R&D Plan for the Licensed Products, to be mutually agreed by the parties within sixty (60) days after the Effective Date. The R&D Plan will detail each party's responsibilities in the research and development of


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the Licensed Products, including without limitation, the Research Program to be carried out by MethylGene, and will be updated annually. Additional responsibilities of the R&D Steering Committee shall include overseeing the planning, budgeting and monitoring of the research program and all clinical development of the Licensed Products. The R&D Steering Committee shall consider and exploit (to the extent available) any tax advantages and economic efficiencies applying to the conduct of any clinical studies in Canada. If the R&D Steering Committee cannot resolve an issue within its purview, the CEOs of both parties will meet to settle such issue; provided, however, that if the CEOs are not able to amicably settle any such issues, MGI will have the deciding vote for the settlement of such issue.


(c) At MGI's request, MethylGene's Head of Research and Director of Chemistry will be available for a reasonable amount of consulting with MGI on acylfulvene analogs. Such consulting shall be provided at no additional charge to MGI, provided, however, that MGI shall bear the reasonable travel and lodging expenses incurred by MethylGene's Head of Research and Director of Chemistry in connection with providing such consulting services.


3.2 Development of MG98 and DNA MT Products.
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(a) MGI will use its Best Efforts to develop the MG98 Product and one or more DNA MT Products and to obtain Marketing Authorizations therefor in the Territory, at MGI's expense. During the term of this Agreement, MGI shall not research, develop or commercialize, itself or with any third party, any compound or product that directly inhibits the enzyme DNA methyltransferase or the mRNA of DNA methyltransferase (or any replacement target chosen pursuant to Section 3.4(b)), except with the prior written consent of MethylGene.


(b) The parties may determine that the MG98 Product and one or more DNA MT Products have applications outside of the field of oncology and rheumatology. If so, the parties shall jointly determine whether it is commercially feasible and prudent to partner with an appropriate third party capable of developing and commercializing the applicable compound for such indication or indications in the Territory. Such transaction will be based on a mutually agreed value sharing agreement between MGI and MethylGene, to be negotiated in good faith; provided that the payments under such agreement shall be in lieu of any royalties otherwise payable to MethylGene hereunder. If MGI elects not to participate in such a mutually agreed value sharing agreement and so notifies MethylGene in writing, the rights with respect to such Licensed Product in such indication shall automatically revert to MethylGene.


(c) MethylGene shall perform, at a minimum, at least 40% of the Phase II portion of the R&D Plan for the MG98 Product in the U.S. and /or Canada, on the behalf of MGI, as set forth in the R&D Plan. The amount of work to be funded by MGI and performed by MethylGene shall be equivalent to a minimum of *** in R&D Costs. This amount will partially cover contracted work and supplies already dedicated to Phase II clinical trials in the U.S. & Canada. MethylGene shall use its Best Efforts to obtain and contribute all applicable government support as an expenditure under the R&D Plan.


*** Denotes confidential information that has been omitted from the exhibit and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934.


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3.3 Reimbursement for Past R&D. In order to reimburse MethylGene for its past research and development with respect to the Licensed Products, MGI shall pay to MethylGene the following:


(a) U.S. $3,475,000 for past research and development work on the MG98 Product. Such amount will be payable as follows: U.S. $1,618,750 within two (2) days of the Effective Date, and the balance in three equal installments on September 28, 2000, November 28, 2000 and February 28, 2001; and


(b) U.S. $2,225,000 for past research and development work on the DNA methyltransferase research program. Such amount will be payable in four equal installments on the Effective Date hereof, September 28, 2000, November 28, 2000 and February 28, 2001. Within thirty (30) days after receipt of FDA approval of an Investigational New Drug Application in the U.S. for the first DNA MT Product, MGI will pay MethylGene an additional U.S. $1 million as compensation for past research and development work on the DNA methyltransferase research program.


3.4 On-Going Research Support
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(a) MethylGene will continue the Research Program and will dedicate 8 FTEs to such research. MGI will fund MethylGene's R&D Costs for the performance of the Research Program, up to U.S. $6 million over the two year period starting on the Effective Date. Such funding shall be made semi-annually in arrears, and at MGI's sole option, may be paid in cash (U.S. dollars) or shares of MGI common stock; provided, however, that no more than U.S. $1.5 million of such funding will consist of common shares of MGI in any year.


(b) MGI shall have an option, exercisable no earlier than six (6) months and no later than eighteen (18) months after the Effective Date, to pursue another research target (other than a target under investigation by MethylGene) agreed upon by the R&D Steering Committee in lieu of the DNA methyltransferase target. If the option is exercised to replace the target, MGI will continue to fund MethylGene's development work with respect to all research targets pursued for a minimum of an additional eighteen (18) months after the date of exercise, and a minimum of *** after the date of exercise, payable as set forth in Section 3.4(a).


(c) MethylGene acknowledges that any shares received from MGI in payment of its funding obligation under Section 3.4(a) may be "restricted securities" within the meaning of Rule 144 under the U.S. Securities Act of 1933, that such shares will not be transferable in the U.S. markets unless and until such shares are either registered under the U.S. Securities Act of 1933 or an exemption from such registration requirement is available, and that, in connection with any issuance of such shares, MethylGene will be required to make reasonable and customary representations to MGI concerning its investment intent and status as an "accredited investor" under U.S. securities laws. If and to the extent that MGI elects to make such payments in shares, MGI agrees to file a registration statement on Form S-3 to register such shares under the Securities Act of 1933 for resale by MethylGene within 15 calendar days after delivery of


*** Denotes confidential information that has been omitted from the exhibit and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934.


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such shares to MethylGene and to use its best efforts to have such registration statement declared effective as soon as possible after the filing thereof. Notwithstanding any such registration, MethylGene agrees that, in connection with any sale of such shares on the Nasdaq National Market (or on any securities exchange or other public trading market on which MGI's common stock is then traded), the number of shares of MGI common stock sold by MethylGene on any day will not exceed 10% of the average daily trading volume of MGI's common shares in that market for the preceding five trading days. MGI agrees that, if and to the extent that MethylGene sells any shares of MGI common stock received hereunder on the Nasdaq National Market (or on any securities exchange or other public trading market on which MGI's common stock is then traded) at a price that is less than the price used to determine the number of shares to be received by MethylGene in payment of such funding obligation, then MGI shall make a cash payment to MethylGene (within five days after receipt from MethylGene of evidence of such sale reasonably satisfactory to MGI) in U.S. dollars equal to the aggregate decrease in the value of such shares sold by MethylGene; provided, however, that MGI's obligation to make such payments shall terminate and not apply to any sale of shares by MethylGene occurring after the day on which, assuming MethylGene were selling as many shares as possible each day subject to the registration requirements of the U.S. Securities Act of 1933 and the volume limitations agreed to above, MethylGene could have disposed of all of its shares in such market.


3.5 Mutual Assistance. The parties agree to provide to each other such assistance as the other party shall reasonably request for purposes of obtaining Marketing Authorizations for the Licensed Products. Such assistance shall include (i) making its personnel available, both in person and by telephone, for reasonable periods of time, to advise personnel of the other party in connection with its applications for Marketing Authorization for the Licensed Products; (ii) collaborating in interpreting Supporting Data provided by either party to the other, and (iii) providing the other party with copies of all regulatory documentation and submissions prepared by the other party.


3.6 Coordination of Testing and Trials. The parties shall keep one another fully and currently informed as to all tests and trials that they intend to carry out for purposes of compliance with regulatory requirements and shall cooperate in the design of such tests and trials in order to ensure to the maximum possible extent that duplication of effort will be avoided, and, that the results will be suitable for filing with Regulatory Authorities inside and outside of the Territory. Without limiting the generality of the foregoing, the parties shall use their Best Efforts to ensure that all clinical trials of the Licensed Products that they shall undertake after the Effective Date shall be designed and conducted in accordance with good clinical practices and good laboratory practices as established for both inside and outside of the Territory.


3.7 Nonsolicitation. During the term of the Research Program and for a one (1) year period thereafter but in any event for at least three (3) years from the Effective Date, neither party nor its Affiliates shall directly or indirectly seek to employ any senior scientist or member of senior management who was employed by the other party or its Affiliates during such period or any other individual employed by the other party or its Affiliates who worked at any time on the Research Program; provided, however, that nothing herein shall restrict a party from making general solicitations for job applicants (e.g., help wanted ads).


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3.8 Contribution and Reimbursement. In the event that MethylGene does not obtain acceptance of the Phase II protocol in respect of the MG98 Product from the FDA or other Regulatory Authority in the Territory on or before October 1, 2000, MethylGene will contribute U.S. $1 million to the Research Program. Upon MethylGene obtaining such FDA or other Regulatory Authority approval after October 1, 2000, MGI shall reimburse MethylGene the amount of U.S. $1 million as compensation for past research and development work for the MG98 Product.


Article 4 MARKETING AND MANUFACTURE


4.1 Efforts to Commercialize. Once Marketing Authorization has been received for the applicable Licensed Product and subject to the availability of sufficient commercial supplies of such Licensed Product for commercial launch, MGI shall use its Best Efforts to promote, market and sell the MG98 Product and one or more DNA MT Products in the Territory. In the event MGI fails to meet its obligations under this Section 4.1 with respect to the MG98 Product or one or more DNA MT Products in the Territory, MethylGene may notify MGI in writing thereof. Such notice shall specify the nature of MGI's noncompliance under this Section 4.1, including, without limitation, the basis upon which MethylGene has made such determination. MGI shall have sixty (60) days following receipt of such notice to cure such non-compliance and if such non-compliance is not cured within such period, MethylGene shall have the right within its sole discretion to terminate MGI's licenses hereunder granted, on a product-by-product basis, for the applicable Licensed Product, by giving written notice to MGI.


4.2 Copromotion Option. MethylGene shall have the right and option at its discretion to co-promote the MG98 Product or the DNA MT Products in the Territory using its own resources and/or a third party sales force acceptable to MGI. If MethylGene desires to so co-promote any of the Licensed Products, it shall so notify MGI in writing. Such co-promotion shall be subject to the terms of a separate co-promotion agreement between the parties, which agreement shall include a co-promotion split based on the relative financial and resources contributions of each party to the development and commercialization of the MG98 Product or the DNA MT Products (including, without limitation, research, development, commercial launch and on-going commercial and medical support). Such co-promotion split shall be in lieu of royalties otherwise payable by MGI to MethylGene hereunder with respect to such Licensed Product. The parties acknowledge that to achieve an a ...