Research Collaboration And Option Agreement

Exhibit 10.62


Confidential Materials omitted and filed separately with Securities and
Exchange Commission. Asterisks denote omissions.


1/13/99


RESEARCH COLLABORATION AND OPTION AGREEMENT


THIS AGREEMENT, effective as of the 13th day of January, 1999 (the "Effective Date") between Ontogeny, Inc., a Delaware corporation having a place of business at 45 Moulton Street, Cambridge, MA 02138 ("Ontogeny") and Becton, Dickinson and Company, a New Jersey corporation having a place of business at One Becton Drive, Franklin Lakes, NJ 07417 ("BD").


INTRODUCTION


WHEREAS, Ontogeny is in the business of conducting research in the field of developmental biology;


WHEREAS, BD has expertise in the discovery, development, manufacture and commercialization of products, services, and devices in the medical technology industry for application in research, diagnostic and patient management;


WHEREAS, Ontogeny will undertake a research program, the goal of which is to regenerate islet cells for purposes of delivery to an individual for the treatment of diabetes. BD desires to obtain from Ontogeny an option to develop and commercialize products that incorporate the ex vivo delivery of islet cells that are the subject of such research program as well as a right of first offer to develop and commercialize certain diagnostic and research products ;


WHEREAS, the parties have therefore agreed on a research program and commercialization options under certain terms and conditions;


NOW, THEREFORE, in consideration of the mutual covenants and promises contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Ontogeny and BD agree as follows:


Article 1. Definitions


As used in this Agreement, the following terms, whether used in the singular or plural, shall have the following meanings:


1.1 "Affiliate" shall mean any corporation, company, partnership, joint venture, firm and/or entity, which controls, is controlled by or is under common control with a Party. For purposes of this Section 1.1, `control' shall mean (a) in the case of corporate entities, direct or indirect ownership of at least fifty (50%) of the stock or shares entitled to vote for the election of directors, and (b) in the case of non-corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity interest with the power to direct the management and policies of such non-corporate entities.


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1.2 "BD Collaboration Technology" shall mean any data, substances, processes, materials, formulas or information which are developed or created solely by BD or its Affiliates or jointly by BD or its Affiliates and Ontogeny or its Affiliates and (i) which incorporate or are based on or derived by use of Ontogeny Technology, or (ii) which are conceived or reduced to practice during the course of and in accordance with the Research Program provided that BD or an Affiliate of BD has been requested to do so by the JRC or Ontogeny as part of the Research Plan in writing to Noel Warner, Vice President Scientific Affairs, BDIS, 2350 Qume Drive, San Jose, CA 95131 with a copy to Susan Capello, Intellectual Property Counsel 1 Becton Drive, Franklin Lakes, NJ 07417 and BD confirms this request in writing. BD shall respond to such request in writing within 30 days.


1.3 "BD SPONSORED FTE" means a full time equivalent scientific person year carried out by a BD employee or contractor, having a Ph.D. degree or equivalent doctoral level research laboratory experience.


1.4 "Field" shall mean ex vivo delivery of ex vivo regenerated human beta islet cells to an individual for the treatment of diabetes.


1.5 "Ontogeny Intellectual Property Rights" means (a) the Ontogeny Patent Rights; and (b) any other intellectual property rights in and to the Ontogeny Technology, which Ontogeny or an Affiliate of Ontogeny owns or otherwise has the right to grant licenses under.


1.6 "Ontogeny Patent Rights" means any patent or patent application or equivalent thereof, anywhere in the world, having one or more claims covering Ontogeny Technology, which Ontogeny or an Affiliate of Ontogeny owns or otherwise has the right to grant licenses under.


1.7 "Ontogeny Technology" means any data, substances, processes, materials, formulas or information (unrelated to the hedgehog proteins), which are useful in the Field and reasonably necessary for the development of Product which Ontogeny or an Affiliate of Ontogeny owns or otherwise has the right to grant licenses under as of the Effective Date or during the Research Term if arising from research conducted under the Research Program.


1.8 "Party" means Ontogeny or BD; "Parties" means Ontogeny and BD.


1.9 "Product" means a product that comprises human beta islet cells for use in the Field.


1.10 "Research Program" means research performed by or on behalf of Ontogeny during the Research Term in accordance with the Research Workplan.


1.11 "Joint Research Committee" or "JRC" shall mean the research committee composed of representatives of Ontogeny and BD described in Article 2 hereof.


1.12 "Research Term" shall mean, unless earlier terminated, the two-year period beginning on the Effective Date and any extension thereof agreed to by the parties.


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1.13 "Research Workplan" means the Workplan, attached as Schedule A, which describes the research activities to be conducted in the Field in the course of the Research Program during the Research Term.


1.14 "Working Committee" shall mean a committee of an equal number of persons from Ontogeny and BD (maximum number of three (3) from each Party) who are responsible for monitoring the day to day progress of the Research Program.


Article 2. The Collaboration


2.1 The Research Program shall be conducted by Ontogeny in accordance with the provisions of the Research Workplan. Ontogeny shall work exclusively with BD in the Field during the term of the Agreement with the exception of third party contractors. In conducting the Research Program, Ontogeny shall have and maintain sufficient flexibility to shift effort and emphasis within the overall scope of the Research Workplan in a manner that will best result in the development of Product, providing that any substantial shift in effort or emphasis is agreed to by the Working Committee or the JRC.


2.2 Ontogeny and BD will form a Joint Research Committee (the "JRC") to be in existence during the Research Term and to be responsible for overseeing the progress of the Research Program. The JRC will have an equal number of members (maximum eight (8) members in total) from Ontogeny and BD. Ontogeny and BD will also form a Working Committee, which shall meet at mutually agreeable times or via conference call every three weeks and then meet with the JRC during its regular meetings to report the progress of the Research Program to the JRC. Each Party shall make its initial designation of its representatives on the JRC and the Working Committee not later than thirty (30) days after the Effective Date. The Chairperson of the Joint Research Committee shall be chosen from the Ontogeny representatives on the JRC and shall be reasonably acceptable to BD.


The objective of the JRC shall be to reach agreement on all matters by consensus within the scope of the Research Workplan, including any substantial changes thereto. However, decisions of the JRC shall be decided by majority vote of the JRC provided that such majority is comprised of at least one vote cast by a representative from Ontogeny and one cast by a representative from BD. The JRC shall also be responsible, if necessary, for modifying the short-term goals of the Research Program, provided, however, that no such modification shall (i) alter the terms of this Agreement or (ii) materially increase the responsibilities of, or the level of expense to be incurred by either Party without the prior approval of such Party. If the JRC cannot reach agreement on any matter within its purview, such matter shall be referred to the CEO of Ontogeny or his designee and the CTO of BD or his designee for resolution. If the CEO of Ontogeny or his designee and the CTO of BD or his designee are unable to reach agreement on any issue regarding the Research Program; then the CEO of Ontogeny shall have the final authority to decide upon such matter unless it entails a substantial change to the Research Workplan. If the issue does entail a substantial change to the Research Workplan and such issue has not been resolved by the Working Committee, the JRC or the CTO of BD and the CEO of Ontogeny, as described above, then either party shall have the right to terminate this Agreement under Section 8.3 hereof.


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The JRC shall meet at a mutually agreeable place no less frequently than once each calendar quarter and shall meet at such other times as deemed appropriate by the JRC. Each Party may change any one or more of its representatives on the JRC and/or the Working Committee at any time upon notice to the other Party. Each Party shall use reasonable efforts to cause its representatives to attend the meetings of the JRC and the Working Committee. Ontogeny shall provide to the JRC quarterly written summaries of the research activities conducted under the Research Program and the results thereof.


2.3 Ontogeny shall use diligent efforts to perform the activities set forth in the Research Workplan.


2.4 BD shall provide one (1) BD SPONSORED FTE, acceptable to Ontogeny to work on-site at Ontogeny during the Research Term. Such BD SPONSORED FTE shall work under the direction of Ontogeny managers and shall sign an invention and nondisclosure agreement set forth in Exhibit A whereby he/she shall agree to not disclose to a third party or BD or use except for purposes of the Research Program, confidential or proprietary information of Ontogeny and whereby he/she assigns to Ontogeny all his/her rights to any data, substances, processes, materials, formulas, information or ideas which are developed or created by such BD SPONSORED FTE during or as a result of the BD SPONSORED FTE's tenure at Ontogeny. Such BD SPONSORED FTE will have the right to practice the Ontogeny Technology and the BD Collaboration Technology in the Field for the purpose of conducting research under the Research Program during the Research Term. All of BD's interest in BD Collaboration Technology shall be assigned to Ontogeny. BD shall take all steps necessary to have all of its right, title and interest in the BD Collaboration Technology assigned to Ontogeny and to have any patent applications filed or patents issued thereon by BD assigned to Ontogeny.


2.5 BD shall have a right of first offer effective as of the Effective Date, to enter into a license agreement with Ontogeny to obtain the right to commercialize any jointly invented BD Collaboration Technology for research reagents and diagnostic uses in the field of diabetes and BD solely invented BD Collaboration Technology for research reagents and diagnostic uses in all fields as follows: Ontogeny shall promptly notify BD in writing with respect to any inventions or invention disclosures of which it becomes aware with respect to BD Collaboration Technology. BD shall have 30 days from the receipt of such notice to provide written confirmation to Ontogeny of BD's interest in entering into a license agreement with respect to such inventions. If BD indicates in writing that it does wish to enter into such an agreement during said 30 day period and if the JRC agrees that the specific invention should be commercialized at the current time, then the Parties will negotiate in good faith the terms of such a license agreement for three months from the date that BD so indicated in writing its desire to enter into such an agreement (the "First Offer Negotiation Period"). If the Parties fail to enter into such an agreement during the First Offer Negotiation Period, then Ontogeny shall be free to commercialize itself or license BD Collaboration Technology to a third party for research reagents and diagnostic uses and to pursue the development of such research reagents and diagnostic uses by itself or with one or more third parties.


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Confidential Materials omitted and filed with the Securities and Exchange
Commission. Asterisks denote omissions.


Article 3. Option Rights


3.1 Subject to the fulfillment by BD of its obligations under this Agreement, Ontogeny, hereby grants to BD an option to initiate a development program with Ontogeny to develop and commercialize Product, including the right to elect an exclusive, worldwide license to Ontogeny's and Ontogeny's Affiliates's rights in Ontogeny Intellectual Property Rights for use in the Field, (the "Option" in accordance with the following terms. Such Option is exercisable by BD in writing on or before the earlier of the end of the Research Term or within thirty (30) days after the successful completion of the Objective 2 ("Objective 2") set forth in the Research Workplan. If BD exercises such option, the Parties will exclusively negotiate in good faith the terms of a development/commercialization/license agreement for three months from the exercise date of the Option (the "Negotiation Period"), unless extended by mutual written agreement of the Parties. If the Parties fail to enter into such an agreement during the Negotiation Period, then Ontogeny shall be free to license Ontogeny Intellectual Property and BD Collaboration Technology and to pursue the development of Product by itself or with one or more third parties; provided, however, that for a period of [**] after the Negotiation Period, Ontogeny shall not offer such development/commercialization/license agreements to third parties with terms and conditions which are more favorable to the third party, taken as a whole, than those terms and conditions last offered by BD or by Ontogeny, without first offering, such terms and conditions to BD in writing.


Article 4. Payment Obligations


4.1 In consideration of the rights granted to BD under this Agreement, BD shall lend to Ontogeny the amount of [**], which loan shall be evidenced by a [**] convertible subordinated Note issued by Ontogeny in favor of BD (the "Note") pursuant to a note purchase agreement dated as of the Effective Date (the "Note Purchase Agreement"). The Note shall be convertible into [**] shares of Series G Convertible Preferred Stock ("Series G Stock") of Ontogeny, in accordance with the Note Purchase Agreement and the Note.


4.2 Within thirty (30) days following the earlier of the end of the Research Term or the successful completion of the Objective 2, BD shall purchase from Ontogeny [**] shares of convertible preferred stock of Ontogeny at a price per share equal to [**] and having the same rights as the Series G Stock with respect to voting rights, liquidation and dividends, pursuant to a stock purchase agreement which incorporates the substantive terms of the Note Purchase Agreement attached hereto as Schedule B with the exception that the anti-dilution protection provided shall be similar to that which Ontogeny is then providing to similar corporate research partners. If a BD accounting issue arises in relation to this purchase, the parties shall use reasonable efforts to execute an acceptable note and note purchase agreement to accomplish such purchase.


4.3 Within thirty (30) days after the Effective Date, Ontogeny shall purchase from BD a complete, new FACS system to facilitate the research in the Research Program at a cost of at least [**] and shall not be higher than the market price of such a system and subject to the following: Such FACS system shall meet specifications, as will be specified in Schedule C to this Agreement which shall be attached hereto and agreed to by the Parties in writing and there will be a two year warranty provided by BD covering 100% of service and parts.


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Article 5. Negation of Warranties


5.1 NOTHING IN THIS AGREEMENT IS OR SHALL BE CONSTRUED AS


A) A WARRANTY OR REPRESENTATION BY ONTOGENY AS TO THE VALIDITY OR SCOPE OF ANY ONTOGENY INTELLECTUAL PROPERTY RIGHTS;


B) A WARRANTY BY ONTOGENY AS TO THE OUTCOME OF RESULTS CONDUCTED UNDER THIS AGREEMENT;


C) A WARRANTY, EXPRESS OR IMPLIED, AS TO ANY INVENTION OR PRODUCT CONCEIVED, DISCOVERED OR DEVELOPED UNDER TH ...