Research & Development And Option Agreement 12/14/95

RESEARCH AND DEVELOPMENT
AND OPTION AGREEMENT


This Agreement dated as of December 14, 1995, (the "Agreement") by and between CYTOGEN CORPORATION ("Cytogen"), a Delaware corporation, having its place of business at 600 College Road East, Princeton, NJ 08540-5308, and ELAN CORPORATION, plc ("Elan"), organized and existing under the laws of Ireland, having its place of business at Monksland, Athlone, County Westmeath, Ireland.


WHEREAS, Cytogen has developed a genetic diversity library technology which, among other things, may be utilized to discover peptide molecules which target certain cell receptors; and


WHEREAS, Elan has developed drug delivery technologies including, without limitation, encapsulation technologies which have been shown to facilitate the transport of a spectrum of drugs across a variety of biological barriers, including, without limitation, intestinal epithelium, pulmonary epithelium, dermis, vascular endothelium and the blood brain barrier; and


WHEREAS, Elan has developed in vitro screening assays to characterize
-------- the transport of drugs, including peptides, across a variety of biological barriers; and


WHEREAS, Elan has developed a phage display and combinatorial library technology which, among other things, may be utilized to discover peptide molecules which target certain cell receptors or facilitate the transport of a drug across a Biological Barrier (as hereinafter defined), which technology


will not be utilized as part of the Research Program (as hereinafter defined); and thus this Agreement shall not be construed as granting Cytogen any right or license to peptides discovered by Elan using Elan's phage display and combinatorial library technology; and


WHEREAS, discussions between representatives of both parties have been held concerning the combination of Cytogen's GDL Technology, as hereinafter defined, and Elan's Technology, as hereinafter defined, to develop a novel drug delivery approach; and


WHEREAS, as both parties desire to implement a collaborative research program to demonstrate enhanced absorption in vivo of a drug across a Biological
------- Barrier, as hereinafter defined, in an animal model using the GDL Patents and GDL Technology, as hereinafter defined, and Elan Patents and Elan Technology, as hereinafter defined.


NOW THEREFORE, the parties hereto, intending to be legally bound, agree as follows:


1. Definitions. Unless otherwise provided, each capitalized term used
----------- herein shall have the following meanings.


1.1 "Affiliate(s)" shall mean, with respect to a party to this Agreement, any corporation, partnership or organization which directly or indirectly controls, is controlled by or is under common control with such party. Existence of such control


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is established by the direct or indirect ownership of more than 50% of the voting interest in an entity.


1.2 "Biological Barrier" shall mean the intestinal epithelium, the pulmonary epithelium, the blood-brain barrier, and the dermis.


1.3 "Cytogen Products" shall mean Products that are not covered by one or more claims, or produced, processed, or otherwise manufactured by any method and/or process covered by one or more claims, of an application or patent within the Elan Patents or the Program Patents relating to the Elan Patents or the Elan Technology.


1.4 "Cytogen Program Patents" shall mean Program Patents conceived or made solely by one or more Cytogen employees.


1.5 "Cytogen Program Technology" shall mean Program Technology that (a) is related to the GDL Patents or GDL Technology; and (b) is unrelated to the Elan Patents or Elan Technology.


1.6 "Elan Patents" shall mean inventions owned or controlled by or licensed to Elan that are directed to in vivo drug delivery methods and drug delivery systems, including without limitation, drug encapsulation methods and systems, or biological systems designed to assay biological agents, including without limitation, peptides, with respect to their transport, toxicity, (including without limitation, inflammation), absorption, or adsorption properties; all United States and


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foreign patent applications which may be filed covering such inventions, as well as continuations, continuations-in-part, divisions and renewals thereof; all United States and foreign patents which may be granted thereon, and all reissues, reexamined patents, and extensions thereof. A list of the Elan Patents shall be promptly furnished to Cytogen at its request at any time during the Research Program Period.


1.7 "Elan Products" shall mean Products that are not covered by one or more claims, or produced, processed, or otherwise manufactured by any method and/or process covered by one or more claims, of an application or patent within the GDL Patents or of the Program Patents that relate to the GDL Patents or GDL Technology. Moreover, Elan Products shall not include any Product containing a peptide or a molecule derived from such peptide, in which the peptide was identified from a peptide library in the performance of the Research Program, in which such peptide, peptide library, or method of identification is covered by one or more claims of an application or patent within the GDL Patents or the Program Patents that relate to the GDL Patents or GDL Technology.


1.8 "Elan Program Patents" shall mean Program Patents conceived or made solely by one or more Elan employees.


1.9 "Elan Program Technology" shall mean Program Technology that (a) is related to the Elan Patents or Elan Technology; and (b) is unrelated to the GDL Patents or GDL Technology.


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1.10 "Elan Technology" shall mean all Technology related to one or more inventions within the Elan Patents, that is owned or controlled by or licensed to Elan, the subject matter of which is in vivo drug delivery methods
------- and drug delivery systems, including without limitation, drug encapsulation methods and systems, or biological systems designed to assay biological agents, including without limitation, peptides, with respect to their transport, toxicity, (including, without limitation, inflammation), absorption, or adsorption properties.


1.11 "Field" shall mean the treatment of human disease and human disorders.


1.12 "GDL Patents" shall mean the patent applications identified in Schedule A annexed hereto, and all continuations, continuations-in-part, divisions and renewals thereof; all United States and foreign patents which may be granted thereon, and all reissues, reexamined patents, and extensions thereof, as well as the inventions described and claimed therein, that are owned or controlled by or licensed to Cytogen with the right to sublicense. Schedule A shall be updated from time-to-time.


1.13 "GDL Technology" shall mean all Technology related to one or more inventions within the GDL Patents, that is owned or controlled by or licensed to Cytogen with the right to sublicense.


1.14 "Joint Program Patents" shall mean Program Patents conceived or made jointly by (i) one or more Elan employees; and (ii) one or more Cytogen employees.


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1.15 "Know-How Product" shall mean any product that (a) is contained within Program Technology; or (b) is produced, processed or otherwise manufactured by any method and/or process contained within the Program Technology.


1.16 "Option Period" shall mean the period commencing on the date hereof and continuing until ninety (90) days after the Research Program Termination Date, as may be extended pursuant to Section 4.2 hereof.


1.17 "Product" shall mean any product which, at the time of manufacture, use or sale is either (a) covered by one or more pending claims of an application or one or more Valid Claims of a patent within the Program Patents; or (b) produced, processed, or otherwise manufactured by any method and/or process covered by one or more pending claims of an application or one or more Valid Claims of a patent within the Program Patents; or (c) contains a peptide or a molecule derived from such peptide, in which the peptide was identified from a peptide library in the performance of the Research Program, and in which such peptide, peptide library, or method of identification is covered by one or more pending claims of an application or one or more Valid Claims of a patent within the GDL Patents or Program Patents.


1.18 "Program Patents" shall mean (a) all inventions which are conceived or made at any time during the Research Program in connection with any research conducted under the Research Program; and (b) all United States and foreign patent applications which may be filed covering such inventions, as well


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a continuations, continuations-in-part, divisions and renewals thereof; all United States and foreign patents which may be granted thereon, and all reissues, reexamined patents, and extensions thereof.


1.19 "Program Technology" shall mean all technical information pertaining to the Research Plan of Exhibit A including all inventions, formulas, methods, plans, processes specifications, characteristics, equipment, design, know-how, experience and trade secrets which the participants in the Research Plan may discover or learn in connection with their respective work for or participation in the Research Program, to the extent that, as of its date of disclosures to both parties, is not (a) already known to one of the parties; (b) disclosed in the published literature; (c) generally available to industry; or (d) obtained by one of the parties from a third party without binder of secrecy, provided, however, that such third party has no confidentiality obligation to - -------- ------- the other party or any of its affiliates with respect to such information. All such information which is characterized as Program Technology shall cease to be Program Technology when, through no fault or omission of either party hereto, such information becomes (a) disclosed in the published literature; or (b) generally available to industry; or (c) obtained by one of the parties from a third party without binder of secrecy, provided, however, that such third party
------- has no confidentiality obligation to the other party or any of its affiliates with respect to such information.


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1.20 "Research Plan" shall mean the Research and Development Plan to be agreed to by the parties on or before January 8, 1996, a preliminary draft of which is attached hereto as Exhibit A, and which Plan shall include a specific schedule for work, milestones and personnel requirements associated with the development of a drug formulation or formulations that is transported across a Biological Barrier.


1.21 "Research Program" shall mean all research, experimentation or development relating to the product proposed to be conducted or conducted by the parties hereto under the terms of the Research Plan.


1.22 "Research Program Period" shall mean the period commencing on the date hereof and continuing until the Research Program Termination Date.


1.23 "Research Program Termination Date" shall mean the date of delivery by Cytogen of the final written research report which summarizes the data and findings generated during the


"Research Program, which report shall be delivered within thirty (30) days of the completion of the Research Program, as may be extended pursuant to Section 2.5 hereof.


1.24 "Supervisory Committee" shall mean the committee as described in Section 2.4 hereof.


1.25 "Technology" shall mean a party's discoveries, processes, instruments, machines, materials, compositions, test procedures, manufacturing processes, techniques, formulations, methodologies, data, information, inventions, and trade secrets,


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to the extent that, as of the date of disclosure and/or delivery to the other party ("receiving party") was not (a) known to the receiving party as evidenced by written documentation; (b) disclosed in published literature; (c) generally available to industry; or (d) obtained by the receiving party from a third party without binder of secrecy, provided, however, that such third party has no
-------- ------- confidentiality obligations to the party hereto disclosing the information ("disclosing party") or to any of its Affiliates with respect to such subject matter. All subject matter which is characterized as Technology shall cease to be Technology when, through no fault or omission of the receiving party, such subject matter becomes (a) disclosed in the published literature; or (b) generally available to industry; or (c) obtained by the receiving party from a third party without binder of secrecy, provided, however, that such third party
-------- ------- has no confidentiality obligations to the disclosing party or any of its Affiliates with respect to such subject matter.


1.26 "Territory" shall mean all of the countries in the World.


1.27 "Valid Claim" shall mean a claim of an issued, unexpired Patent which has not been abandoned, or held invalid in an unappealed or unappealable final decision rendered by a court of competent jurisdiction.


2. Research Program.
----------------


2.1 Research Plan. Each of the parties hereto shall use all
------------- commercially reasonable efforts to undertake the Research


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Program in accordance with the Research Plan. Each party shall designate up to six of its employees as scientific members to the Research Program Council who will have specific responsibilities designated under this Research Plan. The Research Plan shall be updated in writing to a revised Research Plan from time- to-time upon mutual written agreement of the parties.


2.2 Research Funding. Elan shall be responsible for providing all
---------------- funding necessary for both parties to undertake their respective duties and obligations under the Research Program and all other costs and expenses related thereto. The total cost of the Research Program shall not exceed Three Million Dollars ($3,000,000) (the "Research Budget"), with aggregate payments for work performed by Cytogen not to exceed one Million Five Hundred Thousand Dollars ($1,500,000).


2.3 Payments to Cytogen. During the term of the Research Program,
------------------- Cytogen shall submit monthly invoices to Elan for all work performed by Cytogen which shall be billed at the rate of $[*] per hour per person of research time, inclusive of all taxes (the "Research Fee"), and which invoice shall be accompanied by documentation sufficient to support the Research Fee set forth in such invoice. During the initial term of this Agreement, Elan shall have no obligations to pay Cytogen for any additional expenses or costs other than the Research Fee. Payment of the Research Fee shall be made by Elan within thirty (30) days of receipt of an invoice.


* Information omitted and filed separately with the Commission under Rule 24b-2.


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2.4 Research Management. Elan and Cytogen shall establish a
------------------- Supervisory Committee comprised of a designee of each of Cytogen and Elan, who shall initially be Thomas J. McKearn and Donal Geaney, or such other members of senior management as may be appointed by each party and approved by the other. The Supervisory Committee shall meet periodically and no less than once a quarter to review the overall conduct and performance of the Research Program. Each of the parties hereto shall provide to the Supervisory Committee monthly written reports and data on the status of their work under the Research Program and such other reports and information as may be requested by the Supervisory Committee from time to time to perform its duties hereunder. The Supervisory Committee may make such changes or modifications to the Research Plan as may be necessary to achieve the milestones set forth therein. Within thirty (30) days of the completion of the Research Program, as determined by the Supervisory Committee, Cytogen shall prepare and deliver to the Supervisory Committee a final written report which summarizes the data and findings arising from both its work and that of Elan under the Research Program. Elan agrees to cooperate and provide reasonable assistance to Cytogen in the preparation of such written report and Elan shall have the opportunity to review the final written report prior to its submission to the Supervisory Committee.


2.5 Duration and Extension of Research Program. The Research Program
------------------------------------------ shall be conducted for that period of time


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established in the Research Plan. The parties anticipate that the Research Program shall commence on or about January 3, 1996, and shall continue for a period of sixteen (16) months. At the written request of Elan, such period may be extended at any time during the Research Program Period for an additional period not to exceed one (1) year, provided that any and all costs and expenses incurred in implementing the Research Program during such extended period shall be included in a modified research budget to be agreed to by the parties and shall be the sole responsibility of Elan.


3. Grant of Licenses.
-----------------


3.1 Grant by Cytogen to Elan. Subject to the terms and conditions of
------------------------ the option granted pursuant to Section 4.1 hereof and of any License Agreement between the parties entered into pursuant to Section 4.3 hereof, Cytogen hereby grants to Elan:


(a) the exclusive, perpetual, royalty-free right and license
under the Joint Program Patents and Cytogen Program Patents, with the right
to sublicense, to make, use, sell, offer for sale, and import Elan Products
that are covered by one or more claims directed to in vivo drug delivery
systems or directed to methods for in vivo drug delivery of an application
or patent within Program Patents that are related to the Elan Patents or
Elan Technology; and


(b) the exclusive, perpetual, royalty-free right and license
under Program Technology, with the right to


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sublicense, to make, use, sell, offer for sale, and import products that
(i) are contained within Elan Program Technology; or (ii) are produced,
processed or otherwise manufactured by any method and/or process contained
within the Elan Program Technology.


3.2 Grant by Elan to Cytogen. Subject to the terms
------------------------


and conditions of the option granted pursuant to Section 4.1 hereof and of any License Agreement between the parties entered into pursuant to Section 4.3 hereof, Elan hereby grants to Cytogen:


(a) the exclusive, perpetual royalty-free right and license
under the Joint Program Patents and the Elan Program Patents, with the
right to sublicense, to make, use, sell, offer for sale, and import
Cytogen Products that are covered by one or more claims of an
application or patent within the Program Patents relating to the GDL
Patents or GDL Te ...