License And Research Agreement

EXHIBIT 10.23


LICENSE AND RESEARCH AGREEMENT


LICENSE AND RESEARCH AGREEMENT (the "Agreement") dated as of May 17, 2000 (the "Effective Date") by and between 3-DIMENSIONAL PHARMACEUTICALS, INC., a Delaware corporation having its principal place of business at 665 Stockton Drive, Suite 104, Exton, PA 19341-1151, USA (hereinafter referred to as "3DP") and SCHERING AG, a corporation organized and existing under the laws of Germany having its principal place of business at 13342, Berlin, Germany (hereinafter referred to as "Schering"). 3DP and Schering are sometimes referred to herein individually as a "Party" and collectively as the "Parties".


WHEREAS:


(A) 3DP has identified a class of non-peptidic, potent urokinase plasminogen
activator (uPA) inhibitors with potential application in various
therapeutic fields, and has the right to grant rights and licenses under
patent applications, patents and know-how relating to such class of
inhibitors.


(B) 3DP is interested in continuing to carry out research to evaluate further
uPA inhibitors and Schering is willing to fund such research on the terms
and subject to the conditions hereinafter set out.


(C) Schering is interested in obtaining from 3DP certain rights and licenses to
the patent applications, patents and know-how relating to the above-
mentioned class of uPA inhibitors already identified by 3DP and to any
compounds identified during the course of the above-mentioned research, and
3DP is willing to grant such rights and licenses to Schering under the
terms and subject to the conditions hereinafter set out.


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(D) Schering Berlin Venture Corporation and 3DP have entered into a Stock
Purchase Agreement of even date herewith (the "Stock Purchase Agreement").


NOW THEREFORE, in consideration of the mutual covenants set forth in this Agreement and other good and valuable consideration the sufficiency of which is hereby acknowledged, the Parties agree as follows:


ARTICLE 1


DEFINITIONS


The following terms, when capitalized, shall have the following meanings (such meanings to be equally applicable to both the singular and the plural forms of the terms defined) as used in this Agreement:


1.1 "3DP Know-How" means all Know-How, whether currently existing or developed
during the course of the Research Term or within six (6) months thereafter
that relates to the research, development, utilization, manufacture, use or
sale of a Licensed Compound or Licensed Product. Notwithstanding anything
herein to the contrary, 3DP Know-How shall exclude 3DP Patents and 3DP Non-
uPA Inhibitor Patents.


1.2 "3DP Non-uPA Inhibitor Compounds" mean compounds and data relating to such
compounds discovered during the Research Program by 3DP or an Affiliate
which do not constitute uPA Inhibitors but which the Joint Research
Committee considers have some biological activity of interest to the
Research Program or are of potential commercial interest to Schering.


1.3 "3DP Non-uPA Inhibitor Patents means Patents Controlled by 3DP which
claim Non-uPA Inhibitor Compounds.


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1.4 "3DP Patents" means: (i) Patents in Schedule A; (ii) Patents to be filed by
3DP that claim 3DP's orally available uPA Inhibitor lead series, [**] and
derivatives thereof, as described in the Outline Research Plan; and (iii)
Patents that claim New Compounds. Notwithstanding anything herein to the
contrary, 3DP Patents shall exclude any 3DP Know-How, Improvements and 3DP
Non-uPA Inhibitor Patents.


1.5 "3DP Technology" means 3DP Know-How and 3DP Patents.


1.6 "Accept", "Accepted" or "Acceptance" as used with respect to a Lead
Candidate, Back-Up or Follow-Up means a Lead Candidate, Back-Up or Follow-
Up, respectively, that has fulfilled the Biological Criteria agreed upon by
the Parties pursuant to Section 2.3 and which Schering has decided to
develop either as an Accepted Lead Candidate or as an Accepted Back-Up or
Accepted Follow-Up thereof.


1.7 "Accepted Back-Up" means a Back-Up which has fulfilled the Biological
Criteria agreed upon by the Parties pursuant to Section 2.3 and which
Schering has decided to develop as a Back-Up to an Accepted Lead Candidate.


1.8 "Accepted Follow-Up" means a Follow-Up which has fulfilled the Biological
Criteria agreed upon by the Parties pursuant to Section 2.3 and which
Schering has decided to develop as a Follow-Up to an Accepted Lead
Candidate.


1.9 "Accepted Lead Candidate" means a Lead Candidate which has fulfilled the
Biological Criteria agreed upon by the Parties pursuant to Section 2.3 and
which Schering has decided to develop as a Licensed Product in a specified
Separate Therapeutic Area.


___________________


**Certain portions of this Exhibit have been omitted based upon a request for confidential treatment that has been filed with the Commission. The omitted portions have been filed separately with the Commission.


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1.10 "Affiliate" means any person, corporation, partnership, firm, joint venture
or other entity which, directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with
3DP or Schering, as the case may be. As used in this definition, "control"
means the possession of the power to direct or cause the direction of the
management and policies of an entity, whether through the ownership of the
outstanding voting securities or by contract or otherwise.


1.11 "Annual Worldwide Net Sales" means the total worldwide Net Sales of a
Licensed Product in a Separate Therapeutic Area in a Sales Year or in the
First Sales Year as applicable.


1.12 "Audit Disagreement" shall have the meaning set forth in Section 9.2.


1.13 "Back-Up" shall mean a Licensed Compound that is intended to be reserved as
a back-up for an Accepted Lead Candidate and is not intended to be
developed or commercialized unless development and/or commercialization of
such Accepted Lead Candidate is terminated by Schering.


1.14 "Base Compound" means a uPA Inhibitor existing at the Effective Date which:
(i) falls within the claims of the Patents referenced in Schedule A or
falls within the same Chemical Class as such compounds; or (ii) falls
within 3DP's orally available uPA Inhibitor lead series, [**] and
derivatives thereof, as described in the Outline Research Plan.


1.15 "Biological Criteria" means the criteria for acceptance of a Lead
Candidate, Back-Up or Follow-up to be agreed upon by the Parties pursuant
to Section 2.3.


____________________


**Certain portions of this Exhibit have been omitted based upon a request for confidential treatment that has been filed with the Commission. The omitted portions have been filed separately with the Commission.


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1.16 "Chemical Class": Compounds shall be deemed to fall within the same
Chemical Class if one compound is a homolog, isomer, analog or first order
derivative of another compound. A compound is a "homolog" of another
compound if it differs from that compound by a methylene group or an
ethylene group or a similar or equivalent group that does not affect the
relationship of the functional groups in the compound that give rise to its
activity as a uPA Inhibitor. An "isomer" is a compound differing from
another compound by positional isomery, geometric isomery or stereochemical
isomery. An "analog" is a compound which differs from another compound by
the replacement of a single group within the latter compound. A compound is
a "first order derivative" of another compound if it is derived from that
compound by a single chemical reaction.


1.17 "Control" or "Controlled" means possession of the ability to grant a
license or sublicense of patent rights, know-how or other intangible rights
as provided for herein without violating the terms of any agreement or
other arrangement with any Third Party.


1.18 "Drug Approval Application" means an application for Regulatory Approval
required to be approved before commercial sale or use of a Licensed Product
as a drug in a regulatory jurisdiction, including, but not limited to, for
the purposes of Regulatory Approval in the United States, a New Drug
Application and all supplements filed pursuant to the requirements of the
FDA (including all documents, data and other information concerning a
Licensed Product which are necessary for, or included in, FDA approval to
market the Licensed Product), and, for the purposes of Regulatory Approval
in the EU, applications for Regulatory Approval to the EMEA.


1.19 "EMEA" means the European Medicines Evaluation Agency or any
successor agency.


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1.20 "EU" means the countries which are members of the European Union as such
membership may change from time to time.


1.21 "FDA" means the United States Food and Drug Administration or any successor
agency.


1.22 "Field" means all uses of Licensed Products for the prevention, treatment,
cure or mitigation of all disease states, conditions, disorders and
indications in humans.


1.23 "First Commercial Sale" means the date on which Schering or an Affiliate or
sublicensee of Schering first sells commercially, pursuant to a Regulatory
Approval, a Licensed Product in any country, provided that if such first
commercial sale has occurred in a country for which pricing or
reimbursement approval is necessary for widespread sale and no more than a
reasonable minimal amount of Licensed Product has been sold in such country
prior to grant of such pricing or reimbursement approval, then such sale
shall not be deemed a First Commercial Sale until such pricing or
reimbursement approval has been obtained.


1.24 "First Sales Year" means the period between the date of First Commercial
Sale of a Licensed Product in a Separate Therapeutic Area in the first
country in the Territory in which such Licensed Product is sold in such
Separate Therapeutic Area and the end of the calendar year in which such
First Commercial Sale is made.


1.25 "Follow-Up" shall mean a Licensed Compound which is proposed by either
Party for Acceptance as a follow-up to an Accepted Lead Candidate to be
developed or commercialized for the same Separate Therapeutic Area for
which the Accepted Lead Candidate is then being developed or
commercialized; provided, however, that a Licensed Compound which
constitutes the Follow-Up cannot be the same


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Licensed Compound as is already being developed or commercialized as a Lead
Candidate.


1.25 "Improvements" shall mean Patents and Know-How that are based on research
conducted by 3DP outside of the Research Program and that are specifically
and directly related to Licensed Products, to the extent that such Patents
and Know-How are Controlled by 3DP. For the avoidance of doubt, Patents and
Know-How claiming New Compounds shall be considered 3DP Patents and 3DP
Know-How rather than Improvements.


1.26 "IND" means the investigational new drug application relating to one or
more Licensed Products required to be filed with the FDA pursuant to 21 CFR
Part 312, including any amendments thereto. References herein to an IND
shall include, to the extent applicable, any comparable applications
outside the US such as, for example, the CTX in the EU.


1.27 "Joint Patents" shall have the meaning set forth in Section 7.3.


1.28 "Joint Research Committee" means the committee established pursuant
to Section 2.3.


1.29 "Know-How" means all data, technical information, know-how, experience,
inventions, discoveries, trade secrets, compositions of matter and methods,
and whether or not patentable or confidential, to the extent that such
Know-How is Controlled by a Party or its Affiliates.


1.30 "Lead Candidate" means a Licensed Compound which is proposed by either
Party for Acceptance as an Accepted Lead Candidate pursuant to Section 2.6.


1.31 "Licensed Compound" means a Base Compound or a New Compound.


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1.32 "Licensed Product" means a product in finished dosage form containing a
Licensed Compound as active ingredient for use in the Field.


1.33 "Major Market Country" means the US, Japan and any country of the European
Union.


1.34 "Net Sales" means the amount invoiced by Schering, its Affiliates or
sublicensees for sales of a Licensed Product to Third Parties less the
following deductions applicable to the Licensed Product for:


(i) transportation charges and insurance charges paid by Schering;


(ii) sales and excise taxes or customs duties paid by Schering or any
other governmental charges imposed upon the sale of the Licensed
Product and paid by Schering;


(iii) fees paid to distributors, consignees or agents in connection with
the sale of the Licensed Product;


(iv) reasonable rebates and premiums granted or allowed in connection
with the sale of a Licensed Product;


(v) allowances or credits to customers on account of governmental
requirements, price differences, rejection, outdating, returns or
recalls of the Licensed Product;


(vi) quantity discounts, cash discounts or chargebacks granted in
connection with the sale of the Licensed Product;


(vii) provisions for price reductions; and


(viii) costs of customer programs such as cost effectiveness or patient
assistance studies or programs designed to aid in patient compliance
with medication schedules in connection with the sale of a Licensed
Product.


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For the purpose of calculating Net Sales, the Parties recognize that (a)
Schering's customers may include persons in the chain of commerce who enter
into agreements with Schering as to price even though title to the Licensed
Product does not pass directly from Schering to such customers and even
though payment for such Licensed Product is not made by such customers
directly to Schering and (b) in such cases, chargebacks paid by Schering to
or through a Third Party (such as a wholesaler) can be deducted by Schering
from gross revenue in order to calculate Net Sales. Any deductions above
which involve a payment by Schering shall be taken as a deduction against
aggregate sales for the period in which the payment or deduction is made.


In the event a Licensed Product is sold in the form of a combination
product containing one or more active ingredients in addition to a Licensed
Product, Net Sales for such combination product will be adjusted by
multiplying actual Net Sales of such combination product by the fraction
A / (A+B) where A is the invoice price of the Licensed Product, if sold
separately, and B is the invoice price of any other active ingredient or
ingredients in the combination, if sold separately. If, on a country-by-
country basis, the other active ingredient or ingredients in the
combination are not sold separately in that country, Net Sales shall be
calculated by multiplying actual Net Sales of such combination product by
the fraction A / C where A is the invoice price of the Licensed Product if
sold separately, and C is the invoice price of the combination product. If,
on a country by country basis, neither the Licensed Product nor the other
active component or components of the combination product is sold
separately in said country, Net Sales shall be determined between the
parties in good faith.


1.35 "New Compound" means: (i) any uPA Inhibitor and members of the same
Chemical Class which is identified, discovered, created or synthesized by
3DP or an Affiliate in the course of the Research Program; (ii) any
chemical entity, and any member of the same Chemical Class as such chemical
entity, that is identified, discovered, created or synthesized by 3DP or an
Affiliate and is


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discovered during the Research Term, but outside of the Research Program,
to be a uPA Inhibitor, to the extent that such chemical entity is
Controlled by 3DP or an Affiliate; and (iii) any chemical entity, and any
member of the same Chemical Class as such chemical entity that is
identified, discovered, created or synthesized by 3DP or an Affiliate and
is discovered to be a uPA Inhibitor after the end of the Research Term but
within six (6) months thereafter, to the extent that such chemical entity
is Controlled by 3DP or an Affiliate.


1.36 "Patents" mean all patents and patent applications and all patent
applications hereafter filed, including any continuation, continuation-in-
part, division, provisional or any substitute applications, any patent
issued with respect to any such patent applications, any reissue,
reexamination, renewal or extension (including any supplemental patent
certificate) of any such patent, and any confirmation patent or
registration patent or patent of addition based on any such patent, and all
foreign counterparts of any of the foregoing, to the extent that such
Patents are Controlled by a Party and its Affiliates.


1.37 "Patent Expenses" means the fees, expenses and disbursements and outside
counsel fees, and payments to Third Party agents incurred in connection
with the preparation, filing, prosecution and maintenance of 3DP Patents or
Joint Patents covering a Licensed Compound or Licensed Product in the
Field, including costs of patent interference and opposition proceedings
and actions at law and equity against Third Parties for patent
infringement.


1.38 "Pivotal Clinical Trial" means a clinical trial designed by Schering or an
Affiliate or sublicensee which is essential to demonstrate efficacy and
without which the relevant New Drug Application to the FDA (or equivalent
in another Major Market Country) would lack adequate and well-controlled
proof of efficacy likely to be acceptable to the regulatory authorities for
the grant of marketing approval of a Licensed Product set by the
regulatory authorities in the Major Market Country for which the clinical
trial is designed.


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1.39 "Regulatory Approval" means any approvals (including pricing and
reimbursement approvals), product and/or establishment licenses,
registrations or authorizations of any federal, state or local regulatory
agency, department, bureau or other governmental entity, necessary for the
manufacture, use storage, importation, export, transport or sale of
Licensed Compound or Licensed Product in a regulatory jurisdiction.


1.40 "Research Plan" means the Outline Research Plan (as described in Section
2.4) for identifying, conceiving, synthesizing, structurally characterizing
and/or otherwise discovering or optimizing one or more Licensed Compounds
agreed upon by the Parties and attached to this Agreement as Part I of
Schedule B; together with the First Year Research Plan and Second Year
Research Plan to be agreed to between the Parties pursuant to Section 2.4
and to be attached to this Agreement as Part II and Part III of Schedule B,
respectively.


1.41 "Research Program" means research activities undertaken pursuant to this
Agreement as described in the Research Plan, associated with the discovery
or creation of Base Compounds and New Compounds, including in vitro studies
of Licensed Compounds, in vivo animal studies for research purposes only
and related activities.


1.42 "Research Term" means a twenty-four month period commencing on the
Effective Date.


1.43 "Research Year" means a twelve-month period during the Research Term
commencing on the Effective Date and ending on an anniversary thereof.


1.44 "Sales Year" means a full calendar year during which any Licensed Product
is sold in any country of the world in a Separate Therapeutic Area.


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1.45 "Separate Therapeutic Area" means a broad category of disease(s),
condition(s) or disorder(s) generally regarded, by virtue of their common
pathology, area of impact or otherwise, as therapeutically/medically
distinct from other such categories. For avoidance of doubt and without
limitation, examples of Separate Therapeutic Areas are: oncology;
cardiovascular system; central and peripheral nervous systems;
endocrinology; dermatology and inflammation.


1.46 "Territory" means all countries of the world.


1.47 "Third Party" means any entity other than 3DP or Schering and their
respective Affiliates and sublicensees.


1.48 "Urokinase Plasminogen Activator (uPA) Inhibitor" means a compound that has
[**]


1.49 "US" or "United States" means the United States of America, its territories
and possessions, including the District of Columbia, the Commonwealth of
Puerto Rico, the US Virgin Islands, Guam, and all other places under the
jurisdiction of the United States of America.


________________ **Certain portions of this Exhibit have been omitted based upon a request for confidential treatment that has been filed with the Commission. The omitted portions have been filed separately with the Commission.


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1.50 "Valid Claim" means any claim of an issued, unexpired patent which shall
not have been abandoned, withdrawn, canceled or disclaimed, nor held
invalid or unenforceable by a court of competent jurisdiction in an
unappealed or unappealable decision.


ARTICLE 2


RESEARCH PROGRAM


2.1 Commencement: The Research Program will commence on the Effective Date and
will continue (unless earlier terminated pursuant to Article 10 below) for
the Research Term. 3DP shall perform its responsibilities under the
Research Program in accordance with the terms of the Research Plan. The
objective of the Research Program is to identify Licensed Compounds which
may become Lead Candidates for development and commercialization by
Schering.


2.2 Research Funding: Schering shall fund the Research Program in the amount of
[**] for each Research Year. Payments for each Research Year will be made
quarterly in advance. In addition, Schering shall reimburse 3DP the
documented costs payable to any Third Party in connection with activities
under the Research Program where such activities and the costs therefor
have been approved in advance in writing by Schering. The Parties consider
that the performance of the Research Program as currently envisaged will
not require the payment of any such costs to Third Parties. No activities
may be delegated by 3DP under the Research Program without the prior
written consent of Schering except as agreed to by the Joint Research
Committee. All payments shall be made in US dollars to the credit of such
bank account as may be designated by 3DP in writing to Schering. Any
payments which fall due on a date which is a legal holiday in the


________________ **Certain portions of this Exhibit have been omitted based upon a request for confidential treatment that has been filed with the Commission. The omitted portions have been filed separately with the Commission.


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State of Pennsylvania or in Berlin, Federal Republic of Germany, may be
made on the next following day which is not a legal holiday.


2.3 Joint Research Committee:


(a) Composition and Purposes: Upon the execution of this Agreement, 3DP
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and Schering will establish a Joint Research Committee which shall consist
of six members, three designated by 3DP and three designated by Schering.
The Joint Research Committee shall meet formally at least quarterly or
with such other frequency, and at such time and location, as may be
established by the Joint Research Committee, for the following purposes:


(i) To review and approve, if appropriate, revisions to the Research
Plan;


(ii) To monitor and review the progress of the Research Program and to
consider whether any amendment of the Research Program should be
recommended to the Parties;


(iii) To review Licensed Compounds proposed by either Party for further
preclinical testing;


(iv) To review and approve Biological Criteria for the Acceptance of Lead
Candidates, Back-Ups and Follow-Ups;


(v) To decide whether and how a Licensed Compound proposed by either
Party as a potential Lead Candidate, Back-Up or Follow-up should be
assessed in accordance with the Biological Criteria.


(vi) To discuss matters relating to publications and Patents.


(b) Decision Making: The objective of the Joint Research Committee shall
---------------
be to reach agreement by consensus on all matters within the scope of the
Research Plan. However, all decisions to be made under this Agreement will
be made by majority vote in the Joint Research Committee, and if the Joint
Research Committee cannot agree on any matter (a "Disputed Matter"), the
Disputed Matter shall be referred to the Chief Executive Officer of 3DP and
the President


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