Research & License Agreement

EXHIBIT 10.17


RESEARCH & LICENSE AGREEMENT BETWEEN
------------------------------------


MEGABIOS CORP.


AND


GLAXO GROUP LIMITED


APRIL 11, 1994


RESEARCH AND LICENSE AGREEMENT


ARTICLE PAGE


ARTICLE I - DEFINITIONS............................................ 1


ARTICLE II - RESEARCH.............................................. 6


ARTICLE III - RESEARCH FEES........................................ 7


ARTICLE IV - INFORMATION, REPORTS AND SAMPLES...................... 7


ARTICLE V - DEVELOPMENT, MARKETING AND SALES....................... 9


ARTICLE VI - GRANT OF CYSTIC FIBROSIS LICENSES AND SUBLICENSES..... 10


ARTICLE VII- GRANT OF ASTHMA OPTION................................ 12


ARTICLE VIII - PAYMENT OBLIGATIONS................................. 13


ARTICLE IX - OWNERSHIP, PATENTS AND INFRINGEMENT................... 16


ARTICLE X - CONFIDENTIALITY........................................ 19


ARTICLE XI- WARRANTIES AND COVENANTS............................... 22


ARTICLE XII - TERM AND TERMINATION................................. 23


ARTICLE XIII - ASSIGNMENT.......................................... 27


ARTICLE XIV - PUBLICITY............................................ 27


ARTICLE XV - MISCELLANEOUS......................................... 28


RESEARCH AND LICENSE AGREEMENT
------------------------------


THIS AGREEMENT is entered into as of the 11th day of April, 1994, by and between MEGABIOS CORP., a California corporation, having offices at 871 Industrial Road, San Carlos, California 94070 ("MEGABIOS") and GLAXO GROUP LIMITED, a corporation organized under the laws of England and Wales having offices at Glaxo House, Berkeley Avenue, Greenford, Middlesex, UB60NN, England, ("Glaxo"), each of MEGABIOS and Glaxo being referred to herein as a "Party."


WHEREAS, MEGABIOS owns or has rights to technology related to delivery systems for DNA fragments, particularly the Cystic Fibrosis Transmembrane Regulator ("CFTR") gene; and


WHEREAS, Glaxo has established expertise in the worldwide development and sale of pharmaceuticals, particularly those in the area of respiratory therapeutics; and


WHEREAS, the Parties desire to establish a relationship to foster research in such delivery system for the treatment of cystic fibrosis and to provide a mechanism for the commercialization of products resulting therefrom;


NOW, THEREFORE, the Parties agree as follows:


ARTICLE I - DEFINITIONS
-----------------------


1.1 "Affiliate" means any entity that directly or indirectly Owns, is Owned by, or is under common Ownership with, a Party to this Agreement, where "Owns" or "Ownership" means direct or indirect possession of at least 50% of the outstanding voting securities of a corporation or a comparable equity interest in any other type of entity.


1.2 "Agreement" means the present agreement together with all appendices.
---------


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1.3 "Asthma Agent" means any Complex containing at least a [*] which
------------ Complex is useful In the prevention or treatment of asthma.


1.4 "Asthma Field" means the subject matter of the disease asthma and
------------ methods and compounds including Asthma Agents, to prevent or treat asthma.


1.5 "Complex" means an aggregate, assemblage, association or construct of
------- at least two different molecules.


1.6 "Control" means possession of the ability, or an option to obtain such
------- ability, to grant a license or sublicense as provided for herein without violating the terms of any agreement with or other arrangement with, or the rights of, any Third Party.


1.7 "Cystic Fibrosis Agent" means any Complex containing at least a
--------------------- nucleotide sequence and a Lipid, which Complex is useful in the prevention or treatment of cystic fibrosis, and includes without limitation a Complex of [*] and one of the plasmid DNA's referred to by MEGABIOS as [*]


1.8 "Cystic Fibrosis Field" means the subject matter of Cystic Fibrosis
--------------------- Agents, the disease cystic fibrosis, and methods and compounds to prevent or treat cystic fibrosis, including the CFTR gene.


1.9 "Cystic Fibrosis Information" means any and all present and future
--------------------------- information relating to the Cystic Fibrosis Field, including but not limited to techniques, inventions, designs, practices, knowledge, know-how, skill and experience, test data (including pharmacological and clinical test data), analytical and quality control data, and marketing, sales and manufacturing data.


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[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.


1.10 "Development Costs" means the costs to find the desired formulation
----------------- of a Cystic Fibrosis Agent and to prove its safety and efficacy prior to it being approved by a governmental agency for sale in the prevention or treatment of cystic fibrosis, including, without Limitation, the costs of toxicology studies, clinical safety studies and clinical efficacy studies.


1.11 "Effective Date" means the date first written above.
--------------


1.12 "Glaxo Nucleotide Sequence" means a nucleotide sequence as to which
------------------------- (i) Glaxo has filed one or more patent applications or has been issued one or more patents in the United States and the European Patent Office containing one or more claims covering such sequence or its use, or (ii) Glaxo has some other demonstrable market exclusivity for the commercialization of, including, orphan drug status, in both the United States and the EEC.


1.13 "Joint Research Policy Committee" or "JRPC" means a committee of
------------------------------- MEGABIOS and Glaxo employees as described in Article II of this Agreement.


1.14 "Lipid" means[ * ]amphiphile of a hydrophilic headgroup and one or more attached hydrophobic moieties, which amphiphile spontaneously forms multimolecular structures of various forms on dispersion in aqueous media, including naturally occurring compounds, derivatives thereof, or compounds that do not occur in nature. Naturally occurring compounds include, without limitation, phospholipids, sphingolipids, glycolipids, sterols, glycerides, and other known structures. The headgroup may contain the following in any desired or preferred combination:


1.[ * ]


2.[ * ]


3.[ * ]


4.[ * ]


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[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.


5. [ * ]


The hydrophobic moieties of the molecule may be composed, without limitation, of one or more of the following:


1.[ * ]most likely composed of between [ * ] carbon atoms, with between [ * ]


2.[ * ]most likely composed of between [ * ] carbon atoms, with between


3. [*]


The hydrophobic moieties of the molecule may be linked to the headgroup via a number of possible chemical bonds, including, but not limited to, ester bonds, ether bonds, and amide bonds.


1.15 "Michigan License" means the form of license agreement entitled
---------------- "License Agreement/Michigan File 492c2 Technology/Therapeutic License" offered by the University of Michigan, a copy of which is attached hereto as Appendix 1.


1.16 "Net Sales Revenue" means the gross receipts from sales in the
----------------- Territory by Glaxo, or its Affiliates or sublicensees, as appropriate, of Cystic Fibrosis Agents to Third Parties less deductions for, to the extent specifically allocated to sales of such Agents, (i) direct transportation charges, including transit insurance, of transport of the Agent to the customer, (ii) sales and excise taxes and duties and any other governmental charges imposed upon production, importation, use or sale of such Agent all to the extent paid or allowed by Glaxo, its Affiliate or sublicensee (iii) normal and customary trade, quantity and cash rebates, credits or discounts actually allowed or incurred, (iv) actual allowances or credits to customers on account of


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[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.


rejection or return of Cystic Fibrosis Agents to Glaxo its Affiliates or sublicensees and (v) royalties and fees payable to Third Parties under Section 9.5.


1.17 "Patent" means a valid and enforceable patent including any
------ extension, registration, confirmation, supplementary protection certificate, reissue or renewal thereof.


1.18 "Patent Application" means an application for a Patent.
------------------


1.19 "Patent Rights" means the rights granted by any governmental
------------- authority under those claims of a Patent which cover a method or material in the Cystic Fibrosis Field, which Patent is owned or Controlled by MEGABIOS or an Affiliate of MEGABIOS, provided that such Patent issues from (i) a Patent
-------- Application filed at any time prior to one year following the termination of the Research Term or (ii) a Patent Application which claims priority from or has an effective filing date of any Patent Application disclosing the same method or material and filed at any time prior to one year following termination of the Research Term.


1.20 "Research Term" means the period commencing on the Effective Date
------------- and ending on such date as determined pursuant to Section 12.9.


1.21 "Sublicensing Revenue" means the gross revenues actually received by
-------------------- Glaxo as a result of the sublicensing of any Cystic Fibrosis Agents, including upfront fees and milestone payments, but excluding royalty payments.


1.22 "Territory" means all countries of the world, including nations,
--------- states, provinces and territories.


1.23 "Third Party" means any party other than MEGABIOS or Glaxo or an
----------- Affiliate of MEGABIOS or Glaxo.


1.24 "UCSF Option" means the option to license granted to MEGABIOS
----------- pursuant to the Option to an Exclusive License for In Vivo Gene Therapy agreement dated as of April 30,


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1992, by and between the Regents of the University of California and MEGABIOS, attached hereto as Appendix 2.


ARTICLE II - RESEARCH
---------------------


2.1 MEGABIOS Research. MEGABIOS will conduct research in the Cystic
----------------- Fibrosis Field for the Research Term with the goal of identifying Cystic Fibrosis Agents as outlined in the research plan attached as Appendix 3. MEGABIOS will expend reasonable efforts in the conduct of such research and maintain laboratories and offices necessary to carry out the goals of the research plan, as determined by the JRPC. Except as provided in Article III, MEGABIOS will bear all of its own expenses incurred in connection with such research and will manage and compensate its employees and consultants assigned to such research as it deems appropriate.


2.2 Responsibilities of the JRPC. Scientific aspects of the research under
---------------------------- Section 2.1 will be reviewed by the JRPC, which will be comprised of four members with two being appointed and replaced by Glaxo and two being appointed and replaced by MEGABIOS. The JRPC shall establish the research objectives to be achieved by the Parties. It will be the responsibility of the JRPC to establish such research objectives in a manner that advances compounds to exploratory development as rapidly as possible, consistent with Article 2.1 and subject to the requirements of responsible drug development. The initial members of the JRPC will be appointed by the Parties within 30 days following the Effective Date. The JRPC, in establishing the research objectives, will consider such scientific aspects of the research as scientific direction, allocation of resources within the scope of Section 2.1, and selection of compounds for further evaluation. The JRPC will meet at least four times per year at locations and times to be determined by the JRPC, with each Party to bear all travel and related costs for


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its members. A chair of the JRPC will be nominated alternatively by Glaxo and MEGABIOS to twelve month terms.


2.3 Disagreements. Any disagreement among members of the JRPC will be
------------- resolved within the JRPC based on the efficient achievement of the objects of this Agreement. Should the members maintain their disagreement and MEGABIOS or Glaxo request a resolution, the Chief Executive Officer of MEGABIOS and the Senior Science Officer of Glaxo will confer and use their best efforts to resolve the disagreement.


ARTICLE III - RESEARCH FEES
---------------------------


3.1 Research Fees. On the Effective Date Glaxo will pay MEGABIOS[ * ]and
------------- on the first days of July and October in 1994, and on the first days of January, April, July and October of up to and including October 1, 1998, Glaxo will pay MEGABIOS[ * ] for research to be conducted by MEGABIOS under Section 2.1.


ARTICLE IV - INFORMATION, REPORTS AND SAMPLES
---------------------------------------------


4.1 Disclosure by MEGABIOS. During the Research Term, MEGABIOS will make
---------------------- available and, upon request, disclose to Glaxo all Cystic Fibrosis Information known and Controlled by MEGABIOS as of the Effective Date and at any time during the Research Term, as provided in this Section 4.1. It is understood and acknowledged by the Parties that personnel from Glaxo and MEGABIOS shall informally confer with respect to efforts conducted in the Cystic Fibrosis Field. With respect to Cystic Fibrosis Information which MEGABIOS desires that Glaxo not use outside the Cystic Fibrosis Field, MEGABIOS shall deliver to Glaxo, in writing, a non-confidential (for purposes of Section 10.5) summary of such Cystic Fibrosis


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[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.


Information. Upon receipt of such summary, Glaxo shall request or decline, in writing, receipt of the Cystic Fibrosis Information so summarized. Should Glaxo request receipt, MEGABIOS shall set forth such Cystic Fibrosis Information in full, in writing and marked as confidential. All Cystic Fibrosis Information disclosed to Glaxo in writing and marked confidential as provided above will not be disclosed by MEGABIOS to any Third Party for use in the Cystic Fibrosis Field. During the Research Term MEGABIOS will deliver a semi-annual report presenting a summary of its research in the Cystic Fibrosis Field pursuant to Section 2.1. MEGABIOS will also communicate through the JRPC to inform Glaxo of research conducted pursuant to Section 2.1. MEGABIOS will provide Glaxo with [ * ] or photocopies thereof for any and all work carried out under this Agreement, as reasonably requested by Glaxo Any publication of Cystic Fibrosis Information will be subject to Section 10.4. MEGABIOS agrees that during the term of this Agreement it will not enter into any arrangement with any Third Party with the purpose of developing Cystic Fibrosis Agents.


4.2 Use of Cystic Fibrosis Information. Glaxo may use all Cystic Fibrosis
---------------------------------- Information conveyed to Glaxo by MEGABIOS under Section 4.1 in any manner it wishes, at its sole discretion, consistent with the license to Patent Rights granted with respect thereto under Article VI and subject to the restrictions and limitations on use set forth in Section 10.5. The disclosure by Glaxo to any Third Party of Cystic Fibrosis Information disclosed by MEGABIOS to Glaxo will be subject to Section 10.1 of this Agreement.


4.3 Testing of Samples. Upon request, during the Research Term samples
------------------ of all compounds reasonably believed by either Party to be Cystic Fibrosis Agents or to be useful in the design of Cystic Fibrosis Agents shall be tested for such utility by Glaxo. Glaxo shall communicate the results of such testing to MEGABIOS and such results will be considered


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[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.


Cystic Fibrosis Information to be maintained under obligations of non-disclosure under Section 10.1 of this Agreement. Any such samples delivered to Glaxo by MEGABIOS shall be subject to Section 10.3.


ARTICLE V - DEVELOPMENT, MARKETING AND SALES
--------------------------------------------


5.1 Development. Based on research conducted under Article II and Cystic
----------- Fibrosis Information disclosed under Article IV, the JRPC will recommend to Glaxo and Glaxo will select Cystic Fibrosis Agents to be developed to the stage of being approved by relevant regulatory authorities for sale in the Territory. Glaxo will carry out its responsibilities outlined in the research plan attached hereto as Appendix 3 including the funding of the Development Costs after such selection for such development for sales in various countries of the Territory with the amount of such funding and the selection of countries being at Glaxo's sole discretion. Glaxo will promptly notify MEGABIOS of any decision not to
---------------------------------------------------------- develop a particular Cystic Fibrosis Agent. - ---------------------------


5.2 Marketing. Glaxo will evaluate and position Cystic Fibrosis Agents
--------- as it deems appropriate m its sole discretion; provided, however, that Glaxo shall discuss and consider contributions from MEGABIOS regarding such evaluation and positioning.


5.3 Sales. Glaxo will sell Cystic Fibrosis Agents in quantities and
----- packaging to buyers and with sales, detailing, advertising and promotional efforts as it deems appropriate in its sole discretion; provided, however, that Glaxo shall discuss and consider contributions from MEGABIOS regarding such sales, detailing, advertising and promotional efforts, including co-promotion with Glaxo of a Cystic Fibrosis Agent.


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5.4 Pricing. It is the mutual objective of the Parties to develop Cystic
------- Fibrosis Agents and make them available to the medical community as rapidly as practical, consistent with each Parties' internal standards, and to derive overall profits from the sale of such Agents consistent with industry standards. Consistent with the foregoing, Glaxo will sell Cystic Fibrosis Agents at prices it deems appropriate in its sole discretion. In determining price, Glaxo will adhere to all state and federal laws and regulations regarding discriminatory pricing, predatory pricing, bundling and dumping, including the Robinson-Patman Act and the Sherman Anti-Trust Act.


5.5 Non-Exclusivity. It is recognized by the Parties that Glaxo may wish
--------------- to enter into agreements with Third Parties regarding products to treat diseases other than cystic fibrosis, including products which contain [*] Glaxo shall have the right to enter into such agreements, providing Glaxo adheres to the provisions of Article X.


ARTICLE VI - GRANT OF CYSTIC FIBROSIS LICENSES AND SUBLICENSES
--------------------------------------------------------------


6.1 Research License to Glaxo. MEGABIOS grants Glaxo a sole license, with
------------------------- the right to grant sublicenses only as set forth in Article 6.3, under its Patent Rights to make and use materials to conduct research solely in the Cystic Fibrosis Field and in the Territory. MEGABIOS shall retain the right under its Patent Rights to make and use all materials in the Cystic Fibrosis Field to the extent necessary to perform its obligations under this Agreement. MEGABIOS retains all rights under its patent rights to conduct research outside the Cystic Fibrosis Field.


6.2 Commercialization License to Glaxo. MEGABIOS grants Glaxo the
---------------------------------- exclusive, even as to MEGABIOS, license, with the right to grant sublicenses only as set forth in Section


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[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.


6.3 below under MEGABIOS' Patent Rights, in the Territory, to make, have made, use, sell, supply and import Cystic Fibrosis Agents in the Cystic Fibrosis Field.


6.3 Sublicensing. Glaxo may grant a sublicense of any of its rights under
------------ Sections 6.1 and 6 2 to an Affiliate of Glaxo upon prior written notice to MEGABIOS, and to a Third Party upon grant of written permission by MEGABIOS, which permission shall not be unreasonably withheld, based solely upon the ability of the sublicensee to achieve reasonable sales volumes of Cystic Fibrosis Agents on which payments are to be made to MEGABIOS under Article VIII. Any sublicenses granted hereunder shall be consistent with the terms and conditions in this Agreement, and as a condition of the effectiveness of any sublicense hereunder, the sublicensee shall agree in writing to be bound by the terms and conditions of this Agreement to which Glaxo is bound, without limitation.


6.4 Third Party License to Glaxo. MEGABIOS grants Glaxo a sublicense under
---------------------------- any license it Controls which is granted to MEGABIOS by a Third Party and which concerns a method or material in the Cystic Fibrosis Field, including the UCSF Option, such sublicense herein granted to Glaxo to be effective only upon MEGABIOS' exercise, where applicable, of an option for such Third Party license. Such sublicense shall be on terms substantially identical to the license granted to MEGABIOS by such Third Party and shall be limited to the Cystic Fibrosis Field. Glaxo understands and acknowledges that it has the sole responsibility for obtaining a license under the Michigan License, and for making all payments due in connection therewith.


6.5 Disclosure; Research License to MEGABIOS. During the Research Term,
---------------------------------------- Glaxo will make available and, upon request, disclose to MEGABIOS information controlled by Glaxo regarding Cystic Fibrosis Agents. Glaxo hereby grants to MEGABIOS a royalty-free, non-


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exclusive license, under Glaxo's patent rights, to make and use any materials solely for the conduct of research by MEGABIOS in the Cystic Fibrosis Field pursuant to Article II.


ARTICLE VII - GRANT OF ASTHMA OPTION
------------------------------------


7.1 Option MEGABIOS grants Glaxo the right to negotiate with MEGABIOS
------ regarding a non-exclusive, worldwide license, with the right to grant sublicenses, solely to develop, manufacture and sell Asthma Agents in the Asthma Field under MEGABIOS patent rights (and/or using MEGABIOS know-how) covering such Asthma Agents. The terms of such license shall include a royalty payment at a rate [ * ] of net sales, minimum royalty obligations and milestone payments (the "Asthma Option"). The Asthma Option shall expire on the earlier of (i) the [ * ]anniversary of the Effective Date, (ii) the termination of this Agreement pursuant to Article XII, or (iii) thirty (30) days written notice of unilateral termination of the option by Glaxo to MEGABIOS (the "Option Term"). The disclosure to Glaxo of any information regarding Complexes designed or constructed primarily to be Asthma Agents shall be governed by separate agreement between the parties. If, upon expiration of the Option Term, the Parties have not entered into a license agreement with respect to Asthma Agents, then Glaxo's rights with respect to such Agents shall terminate, and MEGABIOS shall be free to enter into any arrangement with any Third Party regarding such Agents.


7.2 Option Fees. In consideration for the option granted in Section 7.1
----------- above, Glaxo shall pay to MEGABIOS the amounts set forth below in each of the years of the Research Term so indicated:


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Year 1 [ * ]


Year 2 [ * ]


Year 3 [ * ]


Year 4 [ * ]


Year 5 [ * ]


Such amounts shall be payable in advance, 30 days prior to the commencement of the relevant Year for which payment is due, with "Year 1" commenc ...