EXHIBIT 10.1
The Registrant has omitted from this Exhibit 10.1 portions of the Agreement for
which the Registrant has requested confidential treatment from the Securities
and Exchange Commission. The portions of the Agreement for which confidential
treatment has been requested have been deleted and marked with an asterisk
surrounded by brackets ([*]) and have been filed separately with the Securities
and Exchange Commission.
HCV PROTEASE PROGRAM
Research and Development Agreement
between
Vertex Pharmaceuticals Incorporated
and
Eli Lilly and Company
Effective June 11, 1997
Research and Development Agreement
Table of Contents
Page Number
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Introduction................................................................. 1
Article 1 -- Definitions..................................................... 1
Article 2 -- Collaboration Scope and Governance.............................. 13
2.1 Purpose and Scope...................................................... 13
2.2 Steering Committee..................................................... 14
2.3 Project Team and Research Team......................................... 15
2.4 Responsibilities of Project Team....................................... 16
2.5 Responsibilities of Research Team...................................... 16
2.6 Project Team Meetings and Reports...................................... 16
2.7 Research Team Meetings and Reports .................................... 17
2.8 Disagreements.......................................................... 17
2.9 Governance Following Product Launch.................................... 18
Article 3 -- Research Program................................................ 18
3.1 Commencement; Roles.................................................... 18
3.2 Research Diligence..................................................... 19
3.3 Research Plan.......................................................... 19
3.4 Staffing and Funding................................................... 20
3.5 Scheduling Payment of Research Funds................................... 20
3.6 Accounting............................................................. 20
3.7 Research Program Costs................................................. 21
3.8 Research Program During Lilly Development.............................. 21
3.9 [*].................................................................... 21
3.10 Discontinuance of Research Program..................................... 22
Article 4 -- Lilly Development Option........................................ 22
4.1 Development Option Assessment.......................................... 22
4.2 Exercise of Development Option......................................... 23
4.3 Development Diligence.................................................. 23
4.4 [*].................................................................... 24
Article 5 -- Clinical Development Program.................................... 25
5.1 Commencement; Roles.................................................... 25
5.2 Clinical Development Plan.............................................. 25
5.3 Regulatory Approvals................................................... 25
5.4 Clinical Development Costs............................................. 25
Research and Development Agreement -- Confidential -- Page i
Page Number
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Article 6 -- Process Development Programs.................................... 26
6.1 Commencement; Roles.................................................... 26
6.2 Process Development Plan............................................... 26
6.3 Bulk Process Development Program....................................... 26
6.4 Product Development Program............................................ 27
6.5 Process Development Costs.............................................. 27
Article 7 -- Manufacturing Program........................................... 27
7.1 Commencement; Roles.................................................... 27
7.2 Manufacturing Plan..................................................... 28
7.3 Manufacturing Bulk Drug Substance...................................... 28
7.4 Processing Bulk Drug Substance into Drug Product....................... 29
7.5 Audit; Contract Manufacturers.......................................... 29
7.6 Costs.................................................................. 30
Article 8-- Mutual Exclusivity............................................... 30
Article 9 -- Commercialization............................................... 31
9.1 Commercialization...................................................... 31
9.2 Marketing Partners..................................................... 31
9.3 Vertex United States Co-Promotion Option............................... 31
9.4 Vertex European Co-Promotion Option.................................... 32
9.5 Compassionate Use Compensation Reduction............................... 33
9.6 Commercial Diligence................................................... 34
Article 10 -- Bulk Drug Substance Commercial Supply Option................... 34
10.1 Vertex Commercial Supply Option........................................ 34
10.2 Vertex Exercises Commercial Supply Option.............................. 35
10.3 Re-Negotiation of Bulk Drug Substance Purchase Price................... 37
10.4 Bulk Drug Substance Purchase Price and Payments........................ 37
Research and Development Agreement -- Confidential -- Page ii
Page Number
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Article 11 -- Royalties...................................................... 38
11.1 Royalties - Vertex Supplying Bulk Drug Substance....................... 38
11.2 Royalties - Vertex NOT Supplying Bulk Drug Substance................... 39
11.3 Competition Territory.................................................. 41
11.4 Trigger Event - Royalty Reduction...................................... 41
11.5 Royalty Payments....................................................... 41
Article 12 -- Equity Investments and Milestone Fees.......................... 41
12.1 Equity Investment...................................................... 41
12.2 Milestone Fees......................................................... 41
Article 13 -- Licenses....................................................... 43
13.1 Licenses............................................................... 43
13.2 Manufacturing and Other Rights Following Certain Events................ 44
13.3 Specific Performance................................................... 46
Article 14 -- Trademarks..................................................... 46
14.1 Selection; License; Expenses........................................... 46
14.2 Infringement........................................................... 47
Article 15 -- Improvements; Subsequent Product Ideas......................... 47
Article 16 -- Information and Reports........................................ 48
16.1 Information Disclosure................................................. 48
16.2 Complaints............................................................. 48
16.3 Adverse Event Reporting................................................ 48
16.4 Use of Information..................................................... 49
16.5 Publications........................................................... 49
16.6 Regulatory Reporting................................................... 50
16.7 Sales Reports.......................................................... 50
Research and Development Agreement -- Confidential -- Page iii
Page Number
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Article 17 --Intellectual Property........................................... 52
17.1 Patentable Inventions and Know-How..................................... 52
17.2 Infringement Claims by Third Parties................................... 54
17.3 Infringement Claims Against Third Parties.............................. 55
17.4 Notice of Certification................................................ 56
17.5 Patent Term Extensions................................................. 56
Article 18 -- Confidentiality and Nondisclosure.............................. 56
18.1 Confidentiality........................................................ 56
18.2 Authorized Disclosure.................................................. 56
18.3 Nondisclosure of Agreement............................................. 57
18.4 Survival............................................................... 57
18.5 Press Releases......................................................... 57
Article 19 -- Term and Termination of Agreement.............................. 57
19.1 Term................................................................... 57
19.2 Termination for Material Breach........................................ 58
19.3 Lilly Voluntary Termination............................................ 59
19.4 Termination Upon Insolvency............................................ 59
19.5 Accrued Rights, Surviving Obligations.................................. 60
19.6 Additional Rights Upon Termination for Breach.......................... 60
19.7 Assistance Following Termination....................................... 60
Article 20 -- Indemnity...................................................... 61
Article 21 -- Representations and Warranties................................. 62
21.1 Right, Power and Authority.............................................. 62
21.2 Absence of Litigation................................................... 62
21.3 No Approvals or Consents................................................ 62
21.4 Patents; Prior Art...................................................... 62
21.5 Prior Data.............................................................. 63
21.6 No Debarment............................................................ 63
Research and Development Agreement -- Confidential -- Page iv
Page Number
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Article 22 -- Governing Law; Dispute Resolution............................... 63
22.1 Governing Law........................................................... 63
22.2 Dispute Resolution Process.............................................. 63
Article 23 --Miscellaneous Provisions......................................... 64
23.1 Notices................................................................. 64
23.2 Foreign Exchange........................................................ 65
23.3 Force Majeure........................................................... 65
23.4 Withholding Taxes....................................................... 66
23.5 Entirety of Agreement................................................... 66
23.6 Non-Waiver.............................................................. 66
23.7 Disclaimer of Agency.................................................... 66
23.8 Severability............................................................ 66
23.9 Assignment.............................................................. 66
23.10 Headings................................................................ 67
23.11 Limitation of Liability................................................. 67
23.12 Interpretation.......................................................... 67
23.13 Counterparts............................................................ 67
23.14 Compliance with Laws.................................................... 67
Schedule 1.32-- Lilly Patents
Schedule 1.84-- Vertex Patents
Schedule 2.3(b) -- Initial Members of Research Team
Schedule 3.3 -- Initial Research Plan and Drug Product Criteria
Schedule 7.2 --Manufacturing Responsibilities Document
Schedule 9.3 A -- Terms of Co-Promotion
Schedule 9.3 B -- Compliance with Prescription Drug Marketing Act
Schedule 10.2 -- Terms and Conditions of Sale of Bulk Drug Substance
Schedule 13.1(b)(2) -- Excluded Technology
Schedule 16.3 -- Adverse Experience Reporting Procedures
Schedule 17.1(b) -- [*]
Schedule 18.5 -- Form of Press Release
Schedule 22.2(b) -- Acceptable Members of Third Party Panel
Research and Development Agreement -- Confidential -- Page v
RESEARCH AND DEVELOPMENT AGREEMENT
THIS RESEARCH AND DEVELOPMENT AGREEMENT ("Agreement") is entered into as of
the 11th day of June, 1997 ("Effective Date") between ELI LILLY AND COMPANY, a
corporation having its principal place of business at Lilly Corporate Center,
Indianapolis, Indiana 46285, hereinafter called together with its Affiliates
"Lilly."
AND
VERTEX PHARMACEUTICALS INCORPORATED, a corporation having its principal
place of business at 130 Waverly Street, Cambridge, Massachusetts 02139-4242,
hereinafter called together with its Affiliates "Vertex."
RECITALS
WHEREAS, Vertex is conducting a program to design and develop novel,
small-molecule inhibitors of the Hepatitis C viral protease [*] for the
prevention and treatment of Hepatitis C infection; and
WHEREAS, Lilly is interested in developing and commercializing
pharmaceutical products to combat Hepatitis C infection and would like to
collaborate with Vertex in a development effort specifically targeting
inhibitors of the HCV protease; and
WHEREAS, Vertex and Lilly believe that each party can bring significant and
complementary strengths to a collaboration and wish to proceed in accordance
with the terms of the following agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter recited, the parties agree as follows:
ARTICLE 1
DEFINITIONS
When used in this Agreement, each of the following terms shall have the
meanings as set forth below:
Research and Development Agreement -- Confidential -- Page 1
1.1 "Affiliate" shall mean any company or entity controlled by,
controlling, or under common control with a party hereto and shall include
without limitation any company forty percent (40%) or more of whose voting stock
(or other comparable ownership interest for an entity other than a corporation)
is owned or controlled, directly or indirectly, by a party, and any company
which owns or controls, directly or indirectly, forty percent (40%) or more of
the voting stock (or other comparable ownership interest for an entity other
than a corporation) of a party.
1.2 "Bulk Cost" shall mean:
a. Material and labor costs directly related to the commercial
manufacturing of Bulk Drug Substance, including [*];
b. An allocable share of labor and materials used in support of the
manufacturing process, [*];
c. An allocable share of manufacturing overhead costs, [*];
d. Usual and customary shipping and handling charges [*].
Manufacturing costs shall [*]. Manufacturing cost shall [*].
Notwithstanding anything to the contrary in this Agreement, the parties agree
that [*] shall be mutually agreed upon between the parties through the Project
Team (or Steering Committee or its designee if the Project Team has not been
appointed). Calculation of manufacturing costs shall be made in accordance with
GAAP, applied on a consistent basis, [*].
Predetermined standard costs shall be developed for Bulk Drug Substance and
shall be reviewed no less than annually, with changes, if material, to be
effective the first of the year. The concept of Practical Costing Capacity
shall be utilized in the development of those standard costs. Capacity of the
manufacturing facility, used for purposes of making fixed overhead allocations,
shall only include the capacity related to the Drug Product produced for Lilly
and shall [*]. For purposes of the foregoing, inventory shall be valued [*].
Manufacturing costs charged by Vertex will be subject to audit by Lilly on an
annual basis, at Lilly's expense.
If Vertex contracts with an outside vendor to provide Bulk Drug Substance
or intermediates of Bulk Drug Substance, Bulk Cost as provided above will
include [*].
Research and Development Agreement -- Confidential -- Page 2
1.3 "Bulk Drug Substance" shall mean a Project Compound in bulk crystals,
powder or other suitable form for incorporation in a Drug Product or a Drug
Product Candidate.
1.4 "Bulk Drug Substance Process" shall mean the process or processes used
to manufacture the Bulk Drug Substance and to confirm specifications and
stability of Bulk Drug Substance.
1.5 "Bulk Manufacturing Party" shall mean Vertex or its subcontractors in
the event that Vertex exercises the Commercial Supply Option in Section 10.1,
and otherwise it shall mean Lilly or its subcontractors.
1.6 "Bulk Manufacturing Program" shall mean the effort necessary to
develop or identify adequate manufacturing capabilities for clinical and
commercial supply of the Bulk Drug Substance and regulatory filings and related
steps in connection therewith undertaken pursuant to the Clinical Development
Plan and directed toward Regulatory Approval of a Drug Product.
1.7 "Bulk Process Development Program" shall mean the process development
effort necessary to develop a process to manufacture Bulk Drug Substance.
1.8 "Bulk Process Option" shall have the meaning as set forth in Section
6.3 of this Agreement.
1.9 "Calendar Quarter" shall mean a quarter ending on March 31, June 30,
September 30, or December 31.
1.10 "Calendar Year" shall mean the twelve month period ending on
December 31.
1.11 "Clinical Development Plan" shall have the meaning assigned thereto
in Section 5.2.
1.12 "Clinical Development Program" shall mean the pre-clinical studies,
clinical trials and regulatory filings and related steps undertaken pursuant to
the Clinical Development Plan and directed toward Regulatory Approval of a Drug
Product.
1.13 "Competition Territory" shall have the meaning as set forth in Section
10.2(d) of this Agreement.
1.14 "Competition Territory Net Sales" shall mean those Net Sales earned in
a Competition Territory.
Research and Development Agreement -- Confidential -- Page 3
1.15 "Confidential Information" shall mean each party's confidential
information, inventions, know-how and data, and shall include, without
limitation, manufacturing, marketing, financial, regulatory, personnel and
other business information and plans, whether in oral, written, graphic or
electronic form and whether in existence as of the Effective Date or
developed or acquired in the future, except where such information (i) is
public knowledge at the time of disclosure by the disclosing party, (ii)
becomes public knowledge through no fault of the receiving party, (iii) was
in the possession of the receiving party at the time of disclosure by the
disclosing party as evidenced by proper business records or (iv) is disclosed
to the disclosing party by a Third Party, to the extent such Third Party's
disclosure was not in violation of any obligation of confidentiality.
1.16 "Development Option" shall have the meaning as set forth in Section
4.1 of this Agreement.
1.17 "Development Option Period" shall have the meaning as set forth in
Section 4.1 of this Agreement.
1.18 "Drug Product" shall mean a finished product form prepared from Bulk
Drug Substance and ready for administration to the ultimate consumer as a
pharmaceutical.
1.19 "Drug Product Candidate" shall have the meaning as set forth in
Section 3.3 of this Agreement.
1.20 "Drug Product Criteria" shall have the meaning as set forth in Section
3.3 of this Agreement.
1.21 "Drug Product Process" shall mean the process or processes used to
convert the Bulk Drug Substance to the Drug Product, including but not limited
to formulating and fill/finishing.
1.22 "Effective Date" shall mean the date indicated at the beginning of
this Agreement.
1.23 [*].
1.24 "Event of Default" shall have the meaning as set forth in
Schedule 10.2
1.25 "Excluded Technology" shall have the meaning as set forth in
Section 13.1(b)(i)(2) of this Agreement.
Research and Development Agreement -- Confidential -- Page 4
1.26 "FDA" shall mean the United States Food and Drug Administration.
1.27 "Field" means the therapeutic treatment or prevention of Hepatitis C
infection primarily by means of [*].
1.28 "GAAP" shall mean U.S. generally accepted accounting principles,
consistently applied.
1.29 "GLP" shall mean the then current Good Laboratory Practice Standards
promulgated or endorsed by the FDA (or in the case of foreign jurisdictions,
comparable regulatory standards), including those procedures expressed or
implied in the regulatory filings made with respect to the Drug Product with the
FDA or foreign regulatory agents.
1.30 "GMP" shall mean the then current Good Manufacturing Practices
Standards promulgated or endorsed by the FDA (or in the case of foreign
jurisdictions, comparable regulatory standards), and all additional procedures
expressed or implied in the regulatory filings made with respect to the Drug
Product with the FDA or foreign regulatory authorities.
1.31 "Lilly Clinical Production Option" shall have the meaning as set forth
in Section 7.3(i)
1.32 "Lilly Patents" shall mean all patents, both foreign and domestic
(including without limitation, all substitutions, extensions, reissues,
renewals, reexaminations, patents of addition, supplementary protection
certificates and inventors' certificates thereof), and all pending patent
applications (including provisional applications, divisions, continuations and
continuations-in-part) which, as of the Effective Date, are owned, controlled,
or licensed in (with the right to sublicense), in whole or in part, by Lilly or
any Affiliate of Lilly, and that contain a Valid Claim which covers the
manufacture, use or sale of Project Compound(s), Bulk Drug Substance and/or Drug
Products, including but not limited to those patents and patent applications
listed on Schedule 1.32 attached hereto.
1.33 "Lilly Program Patents" shall mean all patents, both foreign and
domestic (including without limitation, all substitutions, extensions, reissues,
renewals, reexaminations, patents of addition, supplementary protection
certificates and inventors' certificates thereof), and all pending patent
applications (including provisional applications, divisions, continuations and
continuations-in-part) owned, in whole or in part, by Lilly at the time the
invention claimed therein was made, or licensed in by Lilly (with the right to
disclose and sublicense), that contains a Valid Claim which covers the
manufacture, use or sale of Project Compound(s), Bulk Drug Substance and/or Drug
Products, wherein said patents
Research and Development Agreement -- Confidential -- Page 5
and/or applications are acquired, filed or claim priority to an application
filed by Lilly after the Effective Date [*].
1.34 "Lilly Program Technology" shall mean all tangible or intangible
know-how, trade secrets, inventions (whether or not patentable), data, clinical
and preclinical results, information, and any physical, chemical or biological
material, or any replication of any part of such material, which is developed or
acquired (with the right to disclose and sublicense) by Lilly after the
Effective Date and on or before the end of the Research Term, to the extent such
Technology relates to the manufacture, use or sale of Project Compounds, Bulk
Drug Substance and/or Drug Products.
1.35 "Lilly Technology" shall mean all tangible or intangible know-how,
trade secrets, inventions (whether or not patentable), data, clinical and
preclinical results, information, and any physical, chemical or biological
material, or any replication of any part of such material reasonably necessary
for the development and manufacture of Project Compounds, Bulk Drug Substance
and/or Drug Product, that Lilly or any Affiliate of Lilly owns, controls or has
a license to (with the right to disclose and sublicense) as of the Effective
Date.
1.36 "Major Markets" shall have the meaning as set forth in Article 8 of
this Agreement.
1.37 "Manufacturing Plan" shall have the meaning assigned thereto in
Section 7.2 of this Agreement.
1.38 "Manufacturing Program" shall mean the effort to scale-up for and
manufacture the Bulk Drug Substance and Drug Product for clinical and commercial
supply.
1.39 "Manufacturing Responsibilities Document ("MRD")" shall have the
meaning assigned thereto in Section 7.2 of this Agreement.
1.40 "NDA" means with respect to any particular Drug Product, the New Drug
Application filed with the FDA pursuant to 21 U.S.C. Section 357 and 21 C.F.R.
Section 314 with respect to that Drug Product, together with all additions,
deletions and supplements thereto.
1.41 "Net Sales" means, with respect to a Drug Product, the gross amount
invoiced by Lilly or a Lilly Affiliate, sublicensee or marketing partner (under
Section 9.2 hereof) to unrelated third parties for the Drug Product, less (with
respect to sales of Drug Product to those third parties):
Research and Development Agreement -- Confidential -- Page 6
a. Trade, quantity and cash discounts [*];
b. Discounts, refunds, rebates, chargebacks, retroactive price adjustments,
[*];
c. Product returns and allowances [*];
d. That portion of the sales value associated with drug delivery systems
[*];
e. Any tax [*];
f. Allowance for distribution expenses, [*];
g. Any other similar, reasonable and customary deductions and adjustments
[*]:
(i) in the case of any sale [*],[*]; and
(ii) in the case of any sale or [*].
Net Sales shall be determined from the books and records of Lilly or any
Lilly Affiliate, sublicensee or marketing partner thereof, which shall be
maintained in accordance with generally accepted accounting principles ("GAAP")
consistently applied.
In the event the Drug Product is sold as part of a combination product, the
Net Sales of the Drug Product, for the purposes of determining royalty payments,
shall be determined by [*]. [*].
1.42 "Non-Protected Net Sales" shall mean Non-Protected ROW Net Sales and
Non-Protected United States/Japan Net Sales, collectively. For avoidance of any
doubt, Competition Territory Net Sales are specifically excluded from
Non-Protected Net Sales.
1.43 "Non-Protected ROW Territory" shall mean countries that are in the ROW
Territory but are not in the Protected ROW Territory. For avoidance of any
doubt, the Competition Territory is specifically excluded from the Non-Protected
ROW Territory.
1.44 "Non-Protected ROW Net Sales" shall mean Net Sales of a particular
Drug Product attributable to Non-Protected ROW Territory. For avoidance of any
doubt, Competition Territory Net Sales are specifically excluded from
Non-Protected ROW Net Sales.
Research and Development Agreement -- Confidential -- Page 7
1.45 "Non-Protected United States/Japan Net Sales" shall mean any Net Sales
of a Drug Product in Japan or the United States (or both) [*]. [*]. For
avoidance of any doubt, Competition Territory Net Sales are specifically
excluded from Non-Protected United States/Japan Net Sales.
1.46 "Phase I Clinical Trials" means human clinical trials conducted in
subjects to establish the initial safety profile and pharmacokinetics of a Drug
Product.
1.47 "Phase II Clinical Trials" means small scale human clinical trials
conducted in patients to collect preliminary data regarding efficacy in the
particular indication tested, as well as to obtain some indication of the dosage
regimen required.
1.48 "Phase III Clinical Trials" means large scale human clinical trials
conducted in patients and intended to generate data concerning the safety and
efficacy of a Drug Product in the particular indication tested sufficient to
support registration of the Drug Product with health regulatory authorities.
1.49 "Process Development Plan" shall have the meaning assigned thereto in
Section 6.2.
1.50 "Process Development Program" shall mean the Bulk Process Development
Program and the Product Development Program, collectively.
1.51 "Product Idea" shall have the meaning assigned thereto in Article 15.
1.52 "Product Launch" shall mean, with respect to a particular Drug
Product, the first commercial sale of that Drug Product [*].
1.53 "Product Manufacturing Program" shall mean the effort necessary to
develop or identify adequate formulation/fill/finish and related manufacturing
capabilities for clinical and commercial supply of the Drug Product utilizing
Bulk Drug Substance.
1.54 "Product Development Program" shall mean the process development
effort necessary to develop the Drug Product Process.
1.55 "Program Patents" shall mean Lilly Program Patents and Vertex Program
Patents, collectively, whether or not developed solely or jointly by Vertex or
Lilly.
Research and Development Agreement -- Confidential -- Page 8
1.56 "Program Technology" shall mean Lilly Program Technology and Vertex
Program Technology, collectively, whether or not developed solely or jointly by
Vertex or Lilly.
1.57 "Project" shall have the meaning as set forth in Section 2.1 of this
Agreement.
1.58 "Project Compound" means any chemical entity which during, and as a
part of, the Research Program, is identified, conceived, synthesized,
structurally characterized and/or demonstrated to be an inhibitor(s) of the HCV
protease [*]. For avoidance of any doubt, Project Compounds shall include, but
not limited to, those Lilly compounds designated as Project Compounds under
Section 3.9 of this Agreement.
1.59 "Project Team" shall have the meaning assigned in Section 2.3(a) of
this Agreement.
1.60 "Protected ROW Net Sales" shall mean Net Sales that are attributable
to the Protected ROW Territory. For avoidance of any doubt, the Competition
Territory Net Sales are specifically excluded from the Protected ROW Net Sales.
1.61 "Protected ROW Territory" shall mean with respect to a particular Drug
Product, [*]
1.62 "PTAC" shall mean the point in [*].
1.63 "Quarterly Project Report" shall have the meaning as set forth in
Section 2.6 of this Agreement.
1.64 "Quarterly Research Report" shall have the meaning as set forth in
Section 2.7 of this Agreement.
1.65 "Regulatory Approval" shall mean all authorizations by the appropriate
governmental entity or entities necessary for commercial sale of Drug Product
(including exports) in each jurisdiction in which Lilly elects to market the
Drug Product including, without limitation, approval of labeling, price,
reimbursement and manufacturing.
1.66 "Research Funds" shall have the meaning as set forth in Section 3.4 of
this Agreement.
Research and Development Agreement -- Confidential -- Page 9
1.67 "Research Plan" shall have the meaning set forth in Section 3.3 of
this Agreement.
1.68 "Research Program" means the program described in Article 3 of this
Agreement.
1.69 "Research Team" shall have the meaning assigned in Section 2.3(b) of
this Agreement.
1.70 "Research Term" shall be the period commencing on the Effective Date,
and ending six (6) years thereafter, unless earlier terminated by Lilly pursuant
to Article 19 or Section 3.10 hereof.
1.71 "Research Year" means a twelve-month period during the term of the
Research Program. The first Research Year shall be deemed to have commenced on
the Effective Date.
1.72 "ROW Net Sales" shall mean Protected ROW Net Sales and Non-Protected
ROW Net Sales. For avoidance of any doubt, Competition Territory Net Sales are
specifically excluded from ROW Net Sales.
1.73 "ROW Territory" shall mean the entire world excluding the United
States and Japan. For avoidance of any doubt, the Competition Territory is
specifically excluded from the ROW Territory.
1.74 "Sales Representative Cost" shall have the meaning as set forth in
Section 9.3 of this Agreement.
1.75 "Scientific Year" means the equivalent of the scientific work of one
Vertex scientist full time for one year which equates to [*]. Scientific work
on the Project to be performed by Vertex employees can include, but is not
limited to, experimental laboratory work, recording and writing up results,
reviewing literature and references, holding scientific discussions, attending
appropriate seminars and symposia, and carrying out Research Team duties.
1.76 "Steering Committee" shall have the meaning as set forth in Section
2.2 of this Agreement.
1.77 "Third Party" shall mean any entity which is not a party or Affiliate
of any party to this Agreement.
1.78 "Trademark" shall have the meaning assigned thereto in Section 14.1 of
this Agreement.
Research and Development Agreement -- Confidential -- Page 10
1.79 "Trigger Event" shall have the meaning set forth in Section 13.2(b) of
this Agreement.
1.80 "United States/Japan Territory" shall mean the United States and
Japan. For avoidance of any doubt, the Competition Territory is specifically
excluded from the United States/Japan Territory.
1.81 "United States/Japan Savings Differential" shall have the meaning set
forth in Section 11.1(b) of this Agreement.
1.82 "Valid Claim" shall mean any claim issued in an unexpired patent which
has not been held unenforceable, unpatentable or invalid by a decision of a
court or other governmental agency of competent jurisdiction following
exhaustion of all possible appeal processes, and which has not been admitted to
be invalid or unenforceable through reissue, reexamination or disclaimer.
1.83 "Vertex Commercial Supply Option" shall have the meaning as set forth
in Section 10.1 of this Agreement.
1.84 "Vertex Patents" shall mean all patents, both foreign and domestic
(including without limitation, all substitutions, extension, reissues, renewals,
reexaminations, patents of addition, supplementary protection certificates and
inventors' certificates thereof), and all pending patent applications (including
provisional applications, divisions, continuations and continuations-in-part)
which, as of the Effective Date, are owned, controlled, or licensed in (with the
right to sublicense), in whole or in part, by Vertex or any Affiliate of Vertex,
and that contain a Valid Claim which covers the manufacture, use or sale of
Project Compound(s), Bulk Drug Substance and/or Drug Products, including but not
limited to those patents and patent applications listed on Schedule 1.84
attached hereto.
1.85 "Vertex Program Patents" shall mean all patents, both foreign and
domestic (including without limitation, all substitutions, extensions, reissues,
renewals, reexaminations, patents of addition, supplementary protection
certificates and inventors' certificates thereof), and all pending patent
applications (including provisional applications, divisions, continuations and
continuations-in-part) owned, in whole or in part, by Vertex at the time the
invention claimed therein was made, or licensed in by Vertex (with the right to
disclose and sublicense), that contains a Valid Claim which covers the
manufacture, use or sale of Project Compound(s), Bulk Drug Substance and/or Drug
Products, wherein said patents and/or applications are acquired, filed or claim
priority to an application filed by Lilly after the Effective Date [*].
1.86 "Vertex Program Technology" shall mean all tangible or intangible
know-how, trade secrets, inventions (whether or not patentable), data, clinical
and
Research and Development Agreement -- Confidential -- Page 11
preclinical results, information, and any physical, chemical or biological
material, or any replication of any part of such material, which is developed
or acquired (with the right to disclose and sublicense) by Vertex after the
Effective Date and on or before the end of the Research Term, to the extent
such Technology relates to the manufacture, use or sale of Project
Compound(s), Bulk Drug Substance and/or Drug Product(s).
1.87 "Vertex Technology" shall mean all tangible or intangible know-how,
trade secrets, inventions (whether or not patentable), data, clinical and
preclinical results, information, and any physical, chemical or biological
material, or any replication of any part of such material, reasonably
necessary for the development and manufacture of Project Compounds, Bulk Drug
Substance and/or Drug Product, that Vertex or any Affiliate of Vertex owns,
controls or has a license to (with the right to disclose and sublicense)as of
the Effective Date.
ARTICLE 2
COLLABORATION SCOPE AND GOVERNANCE
2.1 Purpose and Scope. Consistent with the terms described herein, the
parties wish to collaborate in a project involving the research, development
and manufacture of a Project Compound for purposes of commercialization of a
Drug Product(s) (the "Project") . Subject to the terms described herein both
Vertex and Lilly shall use diligent efforts to achieve the goals set forth in
this Agreement.
As more fully described below, Vertex will have the principal
responsibility for conducting the Research Program in accordance with the
Research Plan and the terms described herein. Except as otherwise provided
in this Agreement (including those aspects of early Bulk Drug Substance
process development that are reasonably necessary to diligently develop a
Project Compound as contemplated in Schedule 3.3 hereof), in the event that
Lilly exercises the Development Option, the parties will commence work on the
Clinical Development Program, the Bulk Process Development Program, the
Product Development Program and the Manufacturing Program.
Vertex will have principal responsibility for conducting the Bulk Process
Development Program (either by itself or through a third party as provided
herein); provided, however, that Lilly and Vertex shall mutually agree on
those matters of the Bulk Process Development Program which significantly
impact the diligent implementation of the Clinical Development Plan, such as
(but not limited to) necessary specifications for Bulk Drug Substance and the
timing of the delivery of Bulk Drug Substance necessary to diligently
complete the Clinical Development Program.
Research and Development Agreement--Confidential--Page 12
Vertex (unless it fails to exercises the Vertex Commercial Supply Option,
and otherwise Lilly) will have principal responsibility for conduct of the
Bulk Manufacturing Program including the manufacture (either itself or
through a third party as provided herein) of Bulk Drug Substance for clinical
and commercial supply; provided, however, that Lilly and Vertex shall
mutually agree on those matters involving the Bulk Manufacturing Program
which significantly impact the diligent implementation of the Clinical
Development Plan and the commercialization of the Drug Product, such as (but
not limited to) the necessary specifications for Bulk Drug Substance and the
timing of delivery of Bulk Drug Substance.
Lilly will have principal responsibility for the Product Development
Program, involving the manufacture of Drug Product from Bulk Drug Substance
for clinical and commercial supply, the conduct of the Clinical Development
Program, and the filing and maintenance of regulatory documents necessary for
Regulatory Approvals. Except as otherwise provided for herein, Lilly will
have sole responsibility for distribution and marketing of the Drug Product.
All pricing for Drug Product shall be determined solely by Lilly. Except as
otherwise provided in this Agreement, it is expected that Drug Product will
be marketed by Lilly or its Affiliates (or in selected territories, by Third
Parties selected by Lilly) in each jurisdiction in which it is determined by
Lilly to be feasible and commercially attractive
All work done in connection with the Project shall be carried out in
strict compliance with any federal, state, or local laws, regulations, or
guidelines governing the work at the site where such work is being conducted.
2.2 Steering Committee. The Project shall be conducted under the
overall direction of a Steering Committee comprised of four (4) members (the
"Steering Committee"). Two (2) members shall be appointed by Lilly and two
(2) members shall be appointed by Vertex not later than thirty (30) days
after the Effective Date. All decisions of the Steering Committee shall be
unanimous by a quorum of all members. Either party may change its
representation on the Steering Committee at any time by written notice to the
other. Minutes shall be kept of all Steering Committee meetings and
circulated to the parties for approval. Minutes shall be deemed approved
unless any member of the Steering Committee objects to the accuracy of such
minutes within ten (10) days of receipt.
2.3 Project Team and Research Team
(a) Unless the Steering Committee decides otherwise, it shall appoint a
Project Team, consisting of such number of Lilly personnel, not exceeding
seven (7), as Lilly deems appropriate from time to time and such number of
representatives of
Research and Development Agreement--Confidential--Page 13
Vertex, not exceeding six (6), as Vertex deems appropriate from time to time
(the "Project Team"); it being understood that unless the parties mutually
agree otherwise, the Steering Committee shall appoint the Project Team no
later than thirty (30) days after Lilly exercises its option. The Project
Team shall provide the day-to-day management of the Clinical Development
Program (or as the parties may otherwise determine is appropriate), following
Lilly's exercise of its Development Option, and shall also be responsible for
directing and overseeing the Process Development Program, the Manufacturing
Program and certain other activities specifically referenced herein. The
Project Team shall be subordinate to the Steering Committee, which shall have
the right upon timely appeal as provided below to review, accept, reject or
modify all actions of the Project Team. Either party may change its
representatives on the Project Team at any time by written notice to the
other.
(b) The Steering Committee shall also appoint a Research Team consisting
of such number of Lilly personnel, not exceeding four (4), as Lilly deems
appropriate from time to time and such number of representatives of Vertex,
not exceeding five (5), as Vertex deems appropriate from time to time (the
"Research Team"). A list of the initial members of the Research Team is
attached hereto as Schedule 2.3(b). Each party may change its
representatives on the Research Team at any time by written notice to the
other. The Research Team shall be subordinate to the Steering Committee,
except as specifically referenced herein, which shall have the right upon
timely appeal as provided below to review, accept, reject or modify all
actions of the Research Team.
(c) Decisions of the Project Team and Research Team shall be made by
unanimous consent when possible, and otherwise by majority vote (except that
any votes concerning the Bulk Process Development Program and the Bulk
Manufacturing Program, if being undertaken by Vertex, shall be unanimous),
subject to the right of either party to appeal any decision of such team to
the Steering Committee. No vote of the Project Team and Research Team may be
taken unless a majority of the members of such respective team are present,
including at least one (1) representative of each party. The Project Team
and Research Team shall keep minutes of any meeting at which a decision is to
be reached and shall circulate such minutes to all members of the Project
Team, Research Team and the Steering Committee. Minutes shall be deemed
approved unless any member of the Project Team, Research Team, or the
Steering Committee objects to the accuracy of such minutes within ten (10)
days of receipt. Any party desiring to appeal a decision of the Project Team
or Research Team to the Steering Committee shall make its appeal in writing
to the Steering Committee within ten (10) days of receipt of the minutes for
the meeting at which the decision was made. Action pursuant to any decision
appealed to the Steering Committee shall be suspended pending a determination
by the Steering Committee to accept, reject or modify the decision of the
Project Team or Research Team, which determination shall be made with
Research and Development Agreement--Confidential--Page 14
reasonable promptness. Any party may at any time request reconsideration of
any issue if such party in good faith believes that substantial changes in
circumstances have occurred that necessitate such reconsideration.
(d) The Project Team and/or the Research Team may appoint one or more
other committees ("Advisory Committees") to perform such functions as the
Project Team and/or Research Team may determine. Unless a party elects not
to participate on a particular Advisory Committee, all Advisory Committees
shall have at least one representative of each party. Advisory Committees
may provide advice and make recommendations to the Project Team, but shall
have no authority to bind the Project Team or any of the parties.
2.4 Responsibilities of Project Team. In the event that the Steering
Committee appoints a Project Team, the Project Team shall: (1) establish
comprehensive and detailed plans designed to accomplish the goals of the
Process Development Program, the Clinical Development Program, and the
Manufacturing Program, (2) allocate tasks consistent with other provisions of
this Agreement and coordinate activities required to carry out the goals of
the Clinical Development Program, the Process Development Program, and the
Manufacturing Program, (3) consistent with other provisions of this
Agreement, determine (in conjunction with the Research Team and with
appropriate legal advice and assistance from both Lilly and Vertex) the
strategy for filing and prosecuting applications for Program Patents and
otherwise protecting Program Technology, (4) monitor progress of the Clinical
Development Program, the Process Development Program, and the Manufacturing
Program, and (5) discharge such other obligations as are assigned by the
Steering Committee to the Project Team under this Agreement.
2.5 Responsibilities of Research Team. The Research Team shall: (1)
prepare and oversee implementation of an overall research plan, and otherwise
establish comprehensive and detailed plans designed to accomplish the goals
of the Research Program; (2) allocate tasks consistent with other provisions
of this Agreement and coordinate activities required to carry out the goals
of the Research Program; (3) determine (in conjunction with the Project Team
and with appropriate legal advice and assistance from both Lilly and Vertex)
the strategy for filing and prosecuting applications for Program Patents and
otherwise protecting Program Technology; (4) monitor progress of the Research
Program; and (5) discharge such other obligations as are assigned by the
Steering Committee to the Research Team under this Agreement.
2.6 Project Team Meetings and Reports. Prior to Lilly exercising the
Development Option, the Project Team shall meet at such times as the Project
Team shall mutually agree. In the event that Lilly exercises the Development
Option, except as the Project Team may otherwise agree, the Project Team
shall meet formally at least four (4) times each year to discuss the status
of the Project
Research and Development Agreement--Confidential--Page 15
and matters related thereto. In the event that Lilly exercises the
Development Option, each party shall provide the Project Team with a
quarterly status report regarding the quarterly Project activity (the
"Quarterly Project Report"). The Quarterly Project Report shall be furnished
to the Project Team within (15) fifteen days after each Calendar Quarter.
2.7 Research Team Meetings and Reports. Except as the Research Team may
otherwise agree, during the Research Term, the Research Team shall meet
formally at least four (4) times each year to discuss the status of the
Research Program and matters related thereto. Vertex and Lilly, to the
extent it is involved in the Research Program, shall provide the Research
Team with a quarterly status report regarding the quarterly research activity
(the "Quarterly Research Report"). The Quarterly Research Report shall be
furnished to the Project Team and Research Team within (15) fifteen days of
May 15, August 15, November 15 and February 15.
2.8 Disagreements.
(a) Except as otherwise specifically provided in this Agreement,
disputes that arise under the terms herein shall be resolved as provided for
in this Section 2.8(a). Disputes not resolved by the Research Team or the
Project Team in their respective areas of responsibility shall be referred to
the Steering Committee. Disputes not resolved by the Steering Committee
shall be referred to senior management of Lilly and Vertex for resolution in
accordance with Section 22.2(a), or as otherwise explicitly directed herein.
After referral to the Steering Committee and then to top management under
Section 22.2(a), any remaining disagreement shall be resolved as set forth in
Section 2.8(b) and 2.8(c), [*]. Otherwise the resolution of such matters
shall only be made in good faith by the mutual agreement of the
parties. [*]. Otherwise the resolution of such matters shall only be made
in good faith by the mutual agreement of the parties.
(b) Except as otherwise set forth in this Section 2.8, (i) disputes
regarding the Product Development Program, the Clinical Development Program,
and the Product Manufacturing Program will be ultimately resolved by Lilly;
and (ii) disputes regarding the Research Program and the Research Plan, will
be ultimately resolved by Vertex. Disputes regarding the implementation and
execution of the Bulk Process Development Program shall be ultimately
resolved by Vertex. Notwithstanding the foregoing, [*].
(c) Disputes regarding the implementation and execution of the Bulk
Manufacturing Program shall be ultimately resolved by Bulk Manufacturing
Party. Notwithstanding the foregoing, [*].
Research and Development Agreement--Confidential--Page 16
2.9 Governance Following Product Launch. As soon as practicable
following Product Launch of the Drug Product, the parties shall meet to
review whether it is appropriate to continue the collaboration under the day
to day management of the Project Team with respect to second generation Drug
Products, or whether the objectives of the Project Team have been
substantially achieved and it is appropriate to disband or reorganize the
Project Team. Regardless of whether the parties elect to disband or
reorganize the Project Team, the Steering Committee shall continue to provide
overall direction to the collaboration.
ARTICLE 3
RESEARCH PROGRAM
3.1 Commencement; Roles. The joint Research Program between Lilly and
Vertex shall commence as soon as practicable after the Effective Date.
Except as otherwise provided in this Agreement, Vertex shall have principal
responsibility for the conduct of the Research Program, and Lilly shall
provide consultation, advice, and research efforts as deemed appropriate by
the Research Team. Such activities may include [*]. The Research Team shall
coordinate the efforts of the parties with respect to the Research Program.
3.2 Research Diligence. Vertex shall work diligently and shall use all
reasonable efforts, consistent with prudent business judgment, to discover
Project Compound(s) with the objective of producing a compound or compounds
which meet the Drug Product Criteria as soon as practicable. Vertex will
promptly notify Lilly if it should determine that any such research is not
feasible or commercially justifiable, and will outline in reasonable detail
the reasons therefor [*]. [*] but otherwise Vertex's staffing decisions will
be made at the discretion of Vertex's management, subject to the other
applicable provisions of this Agreement. [*].
3.3 Research Plan. The Research Team shall prepare and oversee the
implementation of an overall research plan (the "Research Plan") for the
Research Project (including those aspects of early Bulk Drug Substance
process development that are reasonably necessary to diligently develop a
Project Compound as contemplated in Schedule 3.3 hereof) (the "Drug Product
Candidate"). Vertex and Lilly have agreed upon an initial Research Plan for
research under the Research Program, as well as initial criteria, based upon
current scientific and commercial factors, to be applied in the
identification of a Project Compound as a commercially viable candidate for a
Drug Product (a "Drug Product Candidate"). These criteria shall be reviewed
at each formal Research Team meeting thereafter, and at any other time upon
the request of either Vertex or Lilly, and shall be modified as appropriate
to reflect material scientific or commercial
Research and Development Agreement--Confidential--Page 17
developments (such as the announcement by a Third Party of a significant
competitive drug). These criteria, as so modified from time to time, are
referred to in this Agreement as the "Drug Product Criteria." If either
Lilly or Vertex proposes a change in the Drug Product Criteria based upon a
specified material scientific or commercial development and the other party
does not agree that a change in the criteria is necessary or appropriate, the
matter will be referred initially to the Steering Committee for resolution.
In the case that Lilly has a Competing Program and the proposed modification
to the criteria is to make such criteria stricter, if the disagreement is not
resolved by the Steering Committee within 30 days after a referral to that
Committee by either party, the matter shall be referred for binding
resolution under the dispute resolution process referenced in Article 22
hereof. By execution of this Agreement, the initial Research Plan and Drug
Product Criteria, in the form attached as Schedule 3.3, are hereby approved
by each of the parties hereto. The Research Team shall review (and where
necessary modify), and approve all plans for research to be done under the
Research Program, shall review the personnel assigned to the Project, and all
results of work done under the Research Program.
3.4 Staffing and Funding. Subject to the fulfillment of all terms and
conditions of this Agreement, Lilly shall provide research funds (the
"Research Funds") as described in this Section for the Research Program
during the Research Term and Vertex shall during each Research Year assign to
the Research Program sufficient personnel to provide no less than [*].
Vertex intends to dedicate to this Program scientists who have an optimal
combination of experience and training in the Field.
During the Research Term, Lilly shall fund the Research Program as
follows:
Upon signature of this Agreement $3.00 Million
Research Year 1 [*]
Research Year 2 [*]
Research Year 3 [*]
Research Year 4 [*]
Research Year 5 [*]
Research Year 6 [*]
3.5 Scheduling Payment of Research Funds. Research Funds during the
Research Term shall be paid to Vertex by Lilly in U.S. Dollars by any bank
wire transfer in immediately available funds. The payment of Research Funds
due in each Research Year will be made in advance in four quarterly
installments on or before the fifteenth day after the commencement of each
quarter of the Research Year, provided that the first such payment and the
signature payment hereunder may be made on or before the 5th day after the
date hereof.
Research and Development Agreement--Confidential--Page 18
3.6 Accounting Vertex shall maintain complete records of all monies
paid by Vertex for research under the Project and shall provide Lilly, within
sixty (60) days after the end of each Calendar Year during the Research Term,
with a report stating the dollar amount of Research Funds that were expended
on research activities during any year for which the report is made, and a
general description of the research activities conducted. During the
Research Term, Vertex shall submit to Lilly an annual report accompanied by a
certificate signed by the corporate secretary of Vertex within sixty (60)
days following each Calendar Year, stating the name of each Vertex employee
who worked on the Research Program during that Calendar Year and certifying
that Vertex provided at least [*]. Notwithstanding the foregoing, [*]. Lilly
shall be entitled to any tax credits due on account of research and
development expenses, to the extent permitted by law, for the Research Funds
paid by Lilly.
Should a question arise regarding a report submitted under this Section,
Lilly may, at its own expense, request an audit by Vertex's independent
certified public accountants. Such a request shall be made within one year
from receipt of the reports. The independent certified public accountant
shall have the right to examine all records kept pursuant to this Section and
shall report to Lilly the findings of said examination of records insofar as
necessary to verify the reports. Such findings shall be maintained in
confidence by Lilly.
3.7 Research Program Costs. Except as otherwise set forth in this
Agreement or determined by the Project Team, [*].
3.8 Research Program During Lilly Development. In the event that Lilly
has exercised the Development Option and is diligently pursuing the
development of a Project Compound, Vertex and Lilly shall regularly confer,
with the objective of reaching agreement, on what further research under the
Research Program is most appropriate in light of Lilly's development efforts
with respect to such Project Compound. The parties acknowledge that a
principal focus of the Research Team under these circumstances shall be to
coordinate its research activities with Lilly's development activities so as
to commercialize a Drug Product as expeditiously as reasonably practicable.
Notwithstanding anything to the contrary in this Agreement, disputes
regarding research as contemplated in this Section 3.8 shall be resolved in
good faith by the mutual agreement of the parties.
3.9 [*]. The parties hereby agree that upon such selection the Research
Team shall designate such compounds as Project Compounds in writing and
append such writing to this Agreement. For avoidance of any doubt, in the
event that such
Research and Development Agreement--Confidential--Page 19
written designation does not occur, a compound described in this Section 3.9
shall not be a Project Compound.
Notwithstanding anything to the contrary in this Agreement, under no
circumstance shall Vertex receive any license, rights title or other interest
to any [*].
3.10 Discontinuance of Research Program. At any time two (2) years after
the Effective Date and upon six (6) months advance written notice, Lilly may
in its sole discretion terminate the Research Program, including any and all
of its obligations related thereto which have not yet accrued as of the
effective date of the Research Program termination, and including in
particular its obligation to make research payments which have not accrued as
of the effective date of termination; [*].
ARTICLE 4
LILLY DEVELOPMENT OPTION
4.1 Development Option Assessment. In the event that during the term of
this Agreement, the Research Team (or Vertex, if the provisions of Section
4.4(a) are applicable) identifies a Project Compound as a Drug Product
Candidate, the Research Team (or Vertex, if the provisions of Section 4.4(a)
are applicable) shall promptly notify Lilly in writing of such identification
including furnishing Lilly with a detailed report fully describing the Drug
Product Candidate and its satisfaction of the Drug Product Criteria (the
"Assessment Report"). The Assessment Report shall be prepared by the
Research Team (or Vertex, if the provisions of Section 4.4(a) are applicable)
with the assistance of the Project Team (assuming the Project Team has been
appointed as described in Section 2.3(a) of this Agreement) and shall
include, but not be limited to, a detailed plan for pre-clinical and clinical
development required to obtain Regulatory Approvals for the Drug Product
Candidate to become a Drug Product. From the date of such notification,
Lilly shall have [*] (the "Development Option Period") in which to decide
whether or not to pursue development of a Drug Product from such Drug Product
Candidate under the terms described in this Agreement (the "Development
Option"). Upon Lilly's request made at least 30 days prior to expiration of
the Development Option Period for such Drug Product Candidate, the Research
Team (with the assistance of the Project Team) or Vertex (if Section 4.4(a)
is applicable) shall also present the Drug Product Candidate to Lilly's [*].
Research and Development Agreement--Confidential--Page 20
4.2 Exercise of Development Option. Lilly may exercise its Development
Option in its sole discretion anytime during the Development Option Period
(but not thereafter) by providing Vertex during such period with written
notice of its intent to exercise the Development Option with respect to a
particular Drug Product Candidate. In the event Lilly exercises the
Development Option for a particular Drug Product Candidate, the parties shall
diligently pursue development and commercialization of such Drug Product
Candidate under the Clinical Development Program, Process Development
Program, Manufacturing Program and other terms of this Agreement.
4.3 Development Diligence In the event that Lilly exercises the
Development Option with respect to a particular Drug Product Candidate, Lilly
shall work diligently and shall use all reasonable efforts, consistent with
prudent business judgment, to develop a Drug Product with respect to such
Drug Product Candidate where in Lilly's good faith opinion such development
is technically feasible and commercially justifiable, devoting the same
degree of attention and diligence to such efforts that it devotes to such
activities for its own products of comparable development potential, with the
objective of launching a Drug Product into the Major Market as soon as
practicable. Lilly will promptly notify Vertex if it should determine that
any such development is not feasible or commercially justifiable, and will
outline in reasonable detail the reasons therefor [*]. [*] but otherwise
Lilly's staffing decisions will be made at the discretion of Lilly's
management, subject to other applicable provisions of this Agreement. [*].
4.4 [*].
[*].
ARTICLE 5
CLINICAL DEVELOPMENT PROGRAM
5.1 Commencement; Roles. The Clinical Development Program shall
commence as soon as practicable after Lilly exercises its Development Option
with respect to a particular Drug Product Candidate. Lilly shall have
principal responsibility for the conduct of the Clinical Development Program,
and Vertex shall provide consultation and advice. The Project Team shall
coordinate the efforts of the parties with respect to the Clinical
Development Program.
5.2 Clinical Development Plan. The Project Team shall prepare and
oversee the implementation of an overall development plan (the "Clinical
Development Plan") for the Drug Product which shall describe fully the
proposed
Research and Development Agreement--Confidential--Page 21
preclinical studies, toxicology, clinical trials, regulatory plans, clinical
trial material requirements and any other key elements of obtaining
Regulatory Approval in each country of the world where Lilly elects to market
the Drug Product.
5.3 Regulatory Approvals. The parties shall use their respective
commercially reasonable efforts consistent with their respective
responsibilities hereunder to file for and obtain all necessary Regulatory
Approvals. Except where Regulatory Approvals are legally required to be in
Vertex's name, Lilly shall have the sole right to obtain Regulatory
Approvals, which shall be in Lilly's name, and Lilly shall own all
submissions in connection therewith, provided that Vertex shall have an
irrevocable right of reference thereto. Regulatory strategies shall be
discussed and approved by the Project Team, but all contacts or filings with
any regulatory agency shall be handled and coordinated by Lilly. All
formulary or marketing approvals shall also be obtained by and in the name of
Lilly. Notwithstanding anything to the contrary herein, [*].
5.4 Clinical Development Costs. Except as set forth below or otherwise
determined by the Project Team, [*].
ARTICLE 6
PROCESS DEVELOPMENT PROGRAMS
6.1 Commencement; Roles. Except as otherwise provided in this Agreement
(including certain Bulk Process Development Program matters described in
Schedule 3.3 that are conducted during the Research Program), the Bulk
Process Development Program and the Product Development Program shall
commence as soon as practicable after Lilly exercises the Development Option.
Vertex shall have principal responsibility for the conduct of the Bulk
Process Development Program, and Lilly shall have principal responsibility
for the conduct of the Product Development Program. Each party shall provide
advice and consultation with respect to the area of principal responsibility
of the other party. The Project Team shall coordinate the efforts of the
parties with respect to both the Bulk Process Development Program and the
Product Development Program. The parties recognize that certain process
development and manufacturing activities may be performed by Third Parties as
contemplated by Article 7, but that those activities will be conducted in any
event in cooperation with the Project Team and representatives of both Lilly
and Vertex.
6.2 Process Development Plan. The Project Team shall prepare and
oversee the implementation of a detailed, overall process development plan,
which shall address fully the key elements necessary for the Bulk Process
Development Program and the Product Development Program and shall further
define the roles
Research and Development Agreement--Confidential--Page 22
of each party in the Process Development Program consistent with the terms of
this Agreement (the "Process Development Plan").
6.3 Bulk Process Development Program. As set forth above, Vertex shall
have principal responsibility for the Bulk Process Development Program,
including the development of the process to produce Bulk Drug Substance,
provision of analytical methods, environmental testing, in-process testing,
and release testing of the Bulk Drug Substance, generation of appropriate
procedures and controls in order to ensure compliance with GLP and GMP or
other governing regulations, and the procurement of necessary manufacturing
facilities (either owned by Vertex or by third party manufacturers) for the
production of Bulk Drug Substance to supply the forecasted needs of scheduled
clinical studies. Lilly shall provide advice with respect to the Bulk
Process Development Program, and the Project Team shall review and approve
procedures and practices required to ensure compliance with GLP, GMP,
environmental and other regulatory requirements. In the event that Vertex,
for any reason other than Force Majeure or the failure of Lilly to discharge
its obligations hereunder, is unable to meet its obligations as described
under this Section 6.3 in any material respect, including, but not limited
to, its obligation to provide sufficient quantities and quality of Bulk Drug
Substance for use in the clinical studies described in the Clinical
Development Plan, Lilly may, at its sole discretion upon thirty (30) days
prior written notice to Vertex (during which time Vertex may cure its
default), take any and all action reasonably necessary to ensure that such
obligations are met, including, but not limited to, taking over entirely the
Bulk Process Development Program obligations (or some portion thereof)
related to the Bulk Process Development Program (the "Bulk Process Option").
In the event that Lilly validly exercises such Bulk Process Option, any
reasonable and incremental costs incurred by Lilly in implementing the Bulk
Process Development Program (with interest on unreimbursed costs at a rate
selected in accordance with Section 11.4 hereof and determined on the date of
exercise of the Bulk Process Option) shall be reimbursed by Vertex [*].
6.4 Product Development Program. Lilly shall have principal
responsibility for the Product Development Program including the development
of the process to produce the Drug Product from Bulk Drug Substance,
provision of analytical methods, environmental testing, in-process testing,
and release testing of the Drug Product, generation of appropriate procedures
and controls in order to ensure compliance with GLP and GMP regulations, and
the procurement of necessary manufacturing facilities for production of the
Drug Product from Bulk Drug Substance for the supply of clinical studies.
Vertex shall provide advice with respect to the Product Development Program,
and the Project Team shall review and approve procedures and practices
required to ensure compliance with GLP, GMP, environmental and other
regulatory requirements.
6.5 Process Development Costs. [*].
Research and Development Agreement--Confidential--Page 23
ARTICLE 7
MANUFACTURING PROGRAM
7.1 Commencement; Roles. The Manufacturing Program shall commence as
soon as practicable after Lilly exercises the Development Option. Vertex
(assuming it exercises the Vertex Commercial Supply Option referenced in
Section 10.1; otherwise Lilly) shall have principal responsibility for the
Bulk Manufacturing Program, and Lilly shall have principal responsibility for
the Product Manufacturing Program. The Project Team shall coordinate the
efforts of the parties with respect to the Manufacturing Program.
7.2 Manufacturing Plan. The Project Team shall prepare and oversee the
implementation of a detailed, overall manufacturing plan, which shall address
fully, consistent with the terms of this Agreement, the key elements
necessary for the clinical and commercial manufacture of the Bulk Drug
Substance and the Drug Product and the activities of each party in the
Manufacturing Program (the "Manufacturing Plan").
The Manufacturing Plan shall include a manual, the "Manufacturing
Responsibilities Document" ("MRD"), a table of contents of which is attached
as Schedule 7.2, which will contain certain specifications, procedures,
methods, and personal contacts relating to the manufacture and supply of the
Bulk Drug Substance and the Drug Product that will be compiled and agreed
upon between the parties prior to the commencement of manufacture of the Bulk
Drug Substance and the Drug Product by Vertex and Lilly, or agreed Third
Party manufacturers. Sections of the MRD may be modified from time to time
through the issuance of a revised section incorporating the modification and
stating the reason and effective date of the modification. Each such revised
section shall be signed on behalf of each of the parties by a duly authorized
representative. The authorized representatives shall be of a management
level no lower than the management level of the authorized representative who
signed that section of the original MRD.
7.3 Manufacturing Bulk Drug Substance. To produce necessary quantities
of Bulk Drug Substance, Vertex will provide the following facilities and
services:
(i) As soon as practicable after Lilly exercises the Development Option
with respect to a particular Drug Product Candidate, Vertex shall secure
facilities, either on its own or through one or more Third Parties, as are
reasonably necessary to produce Bulk Drug Substance in accordance with
Lilly's quality and forecasted quantity requirements for all pre-clinical and
Research and Development Agreement -- Confidential -- Page 24
pre-market clinical trials, formulation studies and other development
activities. In the event that Vertex is unable to provide the Bulk Drug
Substance in sufficient quantity or quality necessary to reasonably meet the
objectives set forth in the Clinical Development Plan, Lilly, at its own
expense, may undertake its own production of Bulk Drug Substance for such
purposes (the "Lilly Clinical Production Option").
(ii) Vertex shall construct or retain through one or more Third Parties
additional facilities for the manufacture of such quantities of Bulk Drug
Substance as are necessary to meet forecasted demand at and for a reasonable
period (i.e., presumed to be no less than a two year period) after Product
Launch. Additional manufacturing capacity will be constructed or retained as
forecasted market demand requires.
(iii) All manufacturing facilities shall comply with and be operated
in accordance with the current GMP, GLP and other applicable regulatory
requirements and such further specifications as are determined from time to
time by the Project Team. Vertex will provide the Project Team with all
information pertinent to Regulatory Approvals for manufacturing facilities.
Vertex shall have principal responsibility for in-process and final Bulk Drug
Substance release assays.
(iv) Vertex shall not engage any Third Party to manufacture Bulk Drug
Substance without prior consultation and review with Lilly, and will refrain
from engaging any Third Party manufacturer to which Lilly has reasonable
objection, provided that Lilly notifies Vertex of its objection, and the
detailed basis therefor, within thirty (30) days of notice from Vertex of its
intention to employ the Third Party.
7.4 Processing Bulk Drug Substance into Drug Product. To produce
quantities of Drug Product from Bulk Drug Substance, Lilly shall provide the
following facilities and services:
(a) Lilly, either itself or through a Third Party, shall provide pilot
facilities and equipment for formulation, fill and finish activities
necessary for the manufacture of Drug Product from Bulk Drug Substance. The
location, scale and design of the facilities will be determined by Lilly.
Lilly shall comply with all applicable governmental requirements, and shall
provide the Project Team with all information pertinent to Regulatory
Approvals.
(b) Lilly shall either itself or through a Third Party construct or
otherwise provide additional facilities for the formulation, fill and finish
of Drug Product as necessary to meet the market demand. The Drug Product
shall be manufactured in accordance with then-current GMP, GLP and other
Research and Development Agreement -- Confidential -- Page 25
applicable regulatory requirements and such further specifications as are
determined from time to time by the Project Team.
7.5 Audit; Contract Manufacturers. Each party shall have the right to
inspect all manufacturing facilities utilized by the other party, and to
review manufacturing procedures and practices employed, in order to verify
their conformance with applicable GMP, GLP and other regulatory requirements.
Prior to consummating any Third Party manufacturing arrangement contemplated
hereunder, Vertex, Lilly and such Third Party shall promptly consider and
mutually agree on reasonable manufacturing audit procedures, appropriate and
customary under the circumstances, that may be implemented with respect to
the Third Party manufacturing arrangement. Either party may employ reputable
contract manufacturers to meet all or a part of their respective
manufacturing responsibilities under this Agreement. Any such contract
manufacturer shall have a previously demonstrated capacity to manufacture
acceptable quality and quantities of drug products for use in pharmaceuticals
sold in major industrial markets. Activities referred to a Third Party
contract manufacturer shall nevertheless remain the overall responsibility of
the referring party who will closely supervise the contract manufacturer and
participate with it as appropriate in the particular task referred.
7.6 Costs. Except as otherwise provided in this Section 7.6 or Section
7.3(i), [*]. In the event that information on direct labor and direct
materials costs is not made available by a contract manufacturer, it will be
presumed that the direct labor and materials cost in any case is equal to [*]
of the contract manufacturers' invoice price. [*].
ARTICLE 8
MUTUAL EXCLUSIVITY
During the term of the Research Program [*] Lilly and Vertex agree to
work exclusively with each other in the conception, discovery, evaluation,
identification, and development of compounds in the Field (including the
funding of any such activities). [*].
Research and Development Agreement -- Confidential -- Page 26
ARTICLE 9
COMMERCIALIZATION
9.1 Commercialization. Except as otherwise provided in Sections 9.3
and 9.4, and subject to Vertex's option to manufacture and supply Bulk Drug
Substance under Articles 7 and 10 hereof, Vertex hereby appoints Lilly as the
sole and exclusive (even as to Vertex) manufacturer and distributor of Drug
Product. Except as otherwise provided in this Agreement, Lilly shall have the
sole right to commercialize the Drug Product in each country of the world.
It being understood that Vertex may provide consultation and advice to Lilly
regarding the overall marketing plan for each Drug Product through the
Project Team, Steering Committee or as the parties may otherwise deem
appropriate. To facilitate communication between Vertex and Lilly within the
Project Team regarding marketing matters, at Vertex's written request, at
least one member of the Project Team appointed by Lilly shall be a Lilly
marketing professional. For avoidance of any doubt, all decisions regarding
commercialization and marketing of each Drug Product shall ultimately be
determined by Lilly, in its sole discretion.
9.2 Marketing Partners. Lilly shall have the right to appoint one or
more Third Party marketing partners to promote, co-promote, or co-market Drug
Product in any territory of the world. In the event Lilly elects to appoint
a marketing partner, Lilly shall have the right to supply Drug Product to
such partner at such prices as Lilly shall determine, subject always to its
royalty and Bulk Drug Substance purchase obligations to Vertex based on Net
Sales of Drug Product by Lilly or its Affiliates, sublicenses or marketing
partners. With the consent of Vertex, which consent will not be unreasonably
withheld, Lilly may, in connection with the appointment of a marketing
partner, assign to such partner some or all of Lilly's obligations under the
Clinical Development Program with respect to one or more countries, provided
that such assignment shall not release Lilly from any obligations it may have
under this Agreement.
9.3 Vertex United States Co-Promotion Option. Lilly hereby grants
Vertex an option to co-promote with Lilly in the United States each Drug
Product (the "United States Co-promotion Option") [*].
[*]. Drug Products (including labels, packaging and inserts) and
promotional materials shall bear both Lilly's and Vertex 's company names
with equal prominence or to the extent permitted by law.
[*]. Any sales training provided to Vertex representatives shall be at
locations designated by Lilly from among those locations where Lilly
Research and Development Agreement -- Confidential -- Page 27
customarily conducts training and any cost incurred in attending such
training shall be solely borne by Vertex.
[*].
All co-promotion efforts of Vertex under this Section 9.3, shall be
subject to the terms and conditions set forth in Schedule 9.3A and Schedule
9.3B.
9.4 Vertex European Co-Promotion Option.
(a) At least [*] prior to the initial Product Launch of the first Drug
Product in any country in the European Union (the "EU"), Vertex may present a
proposal to Lilly describing its co-promotion capabilities in the EU as of
the date of Product Launch, and Lilly will review that proposal in good
faith. If Lilly determines at its sole discretion that a level of
co-promotion by Vertex in the EU will complement and enhance its own
marketing effort with respect to that Drug Product, then Lilly and Vertex
will attempt to negotiate an appropriate and mutually agreeable co-promotion
arrangement with respect thereto.
(b) For all Drug Products commercialized by Lilly after the first Drug
Product, Lilly hereby grants Vertex an option to co-promote with Lilly each
such Drug Product in countries in the European Union as of the date of
Product Launch (the "European Union Co-promotion Option") provided: [*].
All co-promotion efforts of Vertex in any countries under this Section 9.4
shall be conducted in a manner not inconsistent with Lilly's standard
promotional efforts in such countries.
9.5 Compassionate Use Compensation Reduction. In the event that Lilly
pursues a Compassionate Use Program as described in 21 CFR Sections
312.34, 312.35 and 312.37 for treatment of patients for emergency use, or for
related use on a compassionate use basis (the "Compassionate Use Program")
for a particular Drug Product, Lilly and Vertex hereby agree to share all
reasonable direct costs associated with such Compassionate Program as
follows: [*]. If the Compassionate Program involves a multidrug combination,
Vertex will only be responsible for that portion of the direct costs
associated with the Drug Product. [*]. In any event, Vertex will only be
responsible for its allocable share of costs incurred [*]. Vertex shall
share in such cost [*] of its costs as described in this Section 9.5.
9.6 Commercial Diligence. Lilly shall work diligently and shall use
all reasonable efforts, consistent with prudent business judgment and legal
requirements, to obtain regulatory approval for and to market, sell and
distribute the Drug Product in all territories of the world where in the good
Research and Development Agreement -- Confidential -- Page 28
faith opinion of Lilly such marketing is feasible and commercially
justifiable, devoting the same degree of attention and diligence to such
efforts that it devotes to such activities for its own products of comparable
market potential. Lilly will promptly notify Vertex of those countries, if
any, in which it determines that marketing of a Drug Product is not feasible
or commercially justifiable.
ARTICLE 10
BULK DRUG SUBSTANCE COMMERCIAL SUPPLY OPTION
10.1 Vertex Commercial Supply Option. In connection with each Drug
Product, Lilly hereby grants Vertex an exclusive option to manufacture or
have manufactured (pursuant to the terms hereof) and to supply Lilly under
the licenses granted in Article 13 hereof with its entire commercial
requirements of Bulk Drug Substance for each Drug Product developed hereunder
("Vertex Commercial Supply Option"). The Vertex Commercial Supply Option
with respect to a particular Drug Product will be exercisable upon written
notice from Vertex to Lilly delivered by Vertex [*] with respect to such Drug
Product and making specific mention of this Vertex Commercial Supply Option.
The Vertex Commercial Supply Option may not be exercised if, at the time of a
purported exercise, a Trigger Event has occurred and is continuing.
Regardless of whether Vertex exercises the Vertex Commercial Supply Option,
under no circumstance shall Vertex sell or otherwise transfer (other than for
testing or analysis or for similar reasons) Bulk Drug Substance or Drug
Product to any person other than Lilly or its Affiliates or authorize any
person other than Lilly or its Affiliates to promote Drug Product without
Lilly's prior written consent.
In the event that Vertex does not exercise the Vertex Commercial Supply
Option with respect to a Drug Product, Vertex hereby appoints Lilly as the
sole and exclusive (even as to Vertex) manufacturer of the Bulk Drug
Substance for that Drug Product and shall transfer any and all rights and
interests that it may have to manufacture that Bulk Drug Substance to Lilly.
In either event, the parties hereby agree that the party responsible for
manufacturing (either Bulk Drug Substance or Drug Product manufacturing),
will be entitled to use, without charge, any manufacturing technology
reasonably useful in the manufacture of the Bulk Drug Substance and/or Drug
Product which the other party may possess, solely for the purpose of
manufacturing Bulk Drug Substance or Drug Product unless (a) access to that
technology is restricted by prior agreement with a Third Party, or (b) the
technology is licensed from a Third Party, in which event equitable sharing
of any applicable royalty shall be a condition to use of such technology.
The parties hereby agree to provide the manufacturing party reasonable
cooperation in transferring such manufacturing technology to the other party.
Research and Development Agreement -- Confidential -- Page 29
Vertex hereby agrees that in the event that it exercises the Vertex
Commercial Supply Option and desires to have one or more Third Parties
manufacture commercial supplies of Bulk Drug Substance (or intermediates
thereof) as described hereunder, it will consider Lilly as a Third Party
manufacturer, and will provide Lilly with a first right of negotiation,
during the [*]period following delivery of notice to Lilly, prior to
negotiating with any other Third Parties with respect to the commercial
manufacture of Bulk Drug Substance (or intermediates thereof). In the event
that Lilly and Vertex cannot reach agreement within this [*] period on terms
pursuant to which Lilly would be willing to manufacture Bulk Drug Substance
for Vertex, Vertex may undertake negotiations and enter into manufacturing
agreements with other Third Party manufacturers; provided that Vertex will
not enter into any manufacturing agreement with any such Third Party on
commercial terms substantially more favorable to that Third Party, when taken
as a whole, than those previously offered to Lilly, without first providing
Lilly with a further notice thereof and a right (extending for 7 days after
receipt of such further notice) to match those terms and to supply Bulk Drug
Substance or intermediates thereof to Vertex in accordance therewith. This
right shall be exercised by written notice to Vertex delivered during the 7
day period referenced above, and will expire if not duly exercised within
that period.
10.2 Vertex Exercises Commercial Supply Option. Subject to the other
provisions of this Agreement, in the event that Vertex exercises the Vertex
Commercial Supply Option with respect to a Drug Product, Vertex shall (itself
or through an approved Third Party contractor) have the limited right to
manufacture and sell to Lilly, its Affiliates and sublicensees and any Third
Party marketing partner of Lilly as contemplated by Section 9.2, and such
parties will purchase from Vertex, all of their respective requirements of
Bulk Drug Substance in accordance with the conditions and terms of a supply
agreement which the parties will negotiate in good faith within ninety (90)
days after exercise by Vertex of the Vertex Commercial Supply Option, which
agreement shall in any case contain those commercial terms and conditions set
forth on Schedule 10.2 hereto. The aggregate purchase price to be paid to
Vertex for Bulk Drug Substance shall be as follows:
(a) United States & Japan Territory. The purchase price of Bulk Drug
Substance to be processed into Drug Products for sales in the United States
and Japan shall be [*] unless the United States or Japan is a Competition
Territory (as defined below in Section 10.2(d)), in which case the purchase
price of Bulk Dug Substance to be processed into Drug Products for sales in
such Competition Territory shall be [*] the [*].
(b) Protected ROW Sales. The purchase price of Bulk Drug Substance to
be processed into Drug Products for sales in the Protected ROW Territory
shall be an amount equal to the following percentages multiplied by that
Research and Development Agreement -- Confidential -- Page 30
portion of annual Protected ROW Net Sales that fall into each of the
following applicable Net Sales volume categories:
_ [*] for that portion of Protected ROW Net Sales that are less than
[*].
_ [*] for that portion of Protected ROW Net Sales that exceed [*]
but are less than [*].
_ [*] for that portion of Protected ROW Net Sales that exceed [*].
For example, if annual Protected ROW Net Sales are [*] the aggregate purchase
price of the Bulk Drug Substance that is attributed to such sales shall be [*]
(c) Non-Protected ROW Net Sales. The purchase price of Bulk Drug
Substance to be processed into Drug Products for sale in the Non-Protected
ROW Territory shall be an amount equal to the following annual percentages
multiplied by that portion of annual Non-Protected ROW Net Sales that fall
into each of the following applicable categories:
_ [*] for that portion of Non-Protected ROW Net Sales that are less
than [*].
_ [*] for that portion of Non-Protected ROW Net Sales that exceed
[*] but are less than [*].
_ [*] for that portion of Non-Protected ROW Net Sales that exceed
[*].
*Solely for purposes of determining the appropriate incremental percentage to
apply to Non-Protected ROW Net Sales in determining the purchase price of
Bulk Drug Substance attributable to such sales under this Section 10.2,
annual ROW Net Sales (excluding Competition Territory Net Sales) shall be
used and Non-Protected ROW Net Sales shall be considered the last Net Sales
earned in the relevant year. For example, if during a particular year total
ROW Net Sales were [*] consisting of [*] of Protected ROW Net Sales and [*]
of Non-Protected ROW Net Sales the aggregate purchase price of such Bulk Drug
Substance attributable to such sales (i.e., for both Protected ROW Net Sales
and Non-Protected ROW Net Sales) shall be [*], calculated as follows:
_ Bulk Drug Substance with respect to Protected ROW Net Sales: the
purchase price shall be [*]; and
Research and Development Agreement -- Confidential -- Page 31
_ Bulk Drug Substance with respect to Non-Protected ROW Net Sales: the
purchase price shall be [*]
(d) Competition Territory. Notwithstanding anything to the contrary in
Section 10.2(b) and (c), in the event that a third party is marketing in a
particular country a product (a "Generic Product") [*] as a Drug Product
being marketed in that country by Lilly, and if neither Vertex nor Lilly have
a Valid Claim that would prevent such third party from legally marketing the
Generic Product (hereinafter such country(ies) shall be referred to as the
"Competition Territory"), the purchase price of Bulk Drug Substance to be
processed into Drug Products for sale in the Competition Territory shall
equal [*].
10.3 Re-Negotiation of Bulk Drug Substance Purchase Price. In the event
that [*] the parties hereby agree to re-negotiate in good faith a new
purchase price for supply of Bulk Drug Substance in the [*]. In addition, [*]
the parties will re-negotiate in good faith a new purchase price for Bulk
Drug Substance supplied with respect to Net Sales of Drug Product in that
country, [*].
10.4 Bulk Drug Substance Purchase Price and Payments. The purchase
price for Bulk Drug Substance supplied for processing into Drug Products for
sale under this Agreement shall be paid to Vertex by Lilly as follows:
(a) Within thirty (30) days of receipt of an invoice therefor (and, as
to late payments, subject to an additional 30 day grace period), an [*];
(b) Within [*]; and
(c) [*].
ARTICLE 11
ROYALTIES
11.1 Royalties - Vertex Supplying Bulk Drug Substance. Subject to the
terms set forth in this Agreement, in the event that Vertex is supplying Bulk
Drug Substance (either itself or through a Third Party manufacturer) to Lilly
under the terms described herein, in consideration for the licenses provided
hereunder, Lilly shall pay Vertex royalties equal to that percentage of
aggregate Net Sales of Drug Products in the United States/Japan Territory
calculated on an annual basis as follows:
Research and Development Agreement -- Confidential -- Page 32
_ [*] for that portion of United States/Japan Net Sales that are
less than or equal to [*].
_ [*] for that portion of United States/Japan Net Sales that exceed
$200 Million but are less than or equal to [*].
_ [*] for that portion of United States/Japan Net Sales that
exceed [*].
(a) Japan Co-Marketing. In the event that Lilly shall market Drug
Product in Japan under a "Co-marketing" arrangement with a Japanese company,
the sales of Drug Product by the Japanese company shall be considered [*].
"Co-marketing" means an arrangement under which a Japanese marketing partner
is given non-exclusive rights to market a Drug Product for its own account,
with marketing rights also retained by Lilly.
(b) United States/Japan Savings Differential. The foregoing royalty
percentages for Net Sales in any Calendar Year shall be [*] of any United
States/Japan Savings Differential for that Calendar Year, except that [*]
shall be made on account of any United States/Japan Savings Differential
which is [*]. For purposes of this Section 11.1, the "United States/Japan
Savings Differential" shall mean [*].
(c) Non-Protected United States/Japan Net Sales. Notwithstanding
anything to the contrary in this Section 11.1 of the Agreement, the royalty
percentages set forth in this Section 11.1 shall each be reduced by [*] with
respect to United States/Japan Net Sales that are Non-Protected United
States/Japan Net Sales, in accordance with the following:
Solely for purposes of determining the appropriate royalty percentage
applicable to any Non-Protected United States/Japan Net Sales in the United
States/Japan Territory under this Section 11.1, reference will be made to
aggregate annual Net Sales in that territory (excluding Competition Territory
Net Sales) and Non-Protected United States/Japan Net Sales shall be
considered the last Net Sales earned in such year. For example, if during a
particular year total United States/Japan Net Sales were [*], including [*]
of Non-Protected United States/Japan Net Sales, the aggregate purchase price
of Bulk Drug Substance contained in the Drug Product generating those sales
would be [*].
11.2 Royalties - Vertex NOT Supplying Bulk Drug Substance. Subject to
the terms set forth in this Agreement, in the event that Vertex is not
supplying Bulk Drug Substance (either itself or through a Third Party
manufacturer) to Lilly under the terms described herein, in consideration for
Research and Development Agreement -- Confidential -- Page 33
the licenses and services provided hereunder, Lilly shall pay Vertex the
following royalties:
(a) United States/Japan Territory. In the United States/Japan
Territory, Lilly shall pay Vertex royalties equal to that percentage of
aggregate Net Sales of Drug Products in the United States/Japan Territory
calculated on an annual basis as follows:
[*] for that portion of United States/Japan Net Sales that are less
than [*].
[*] for that portion of United States/Japan Net Sales that exceed [*]
but are less than [*].
[*] for that portion of United States/Japan Net Sales that exceed [*].
(b) ROW Territory. In connection with the ROW Territory, Lilly shall
pay Vertex royalties equal to that percentage of aggregate Net Sales of Drug
Products in the ROW Territory calculated on an annual basis as follows, [*]
attributable to such sales:
[*] for that portion of ROW Net Sales that are less than [*].
[*] for that portion of ROW Net Sales that exceed [*] but are less
than [*].
[*] for that portion of ROW Net Sales that exceed [*].
(c) Non-Protected Net Sales. Notwithstanding anything to the contrary
in this Section 11.2 of this Agreement, the royalty percentages set forth in
this Section 11.2 shall each be reduced by [*] with respect to United
States/Japan Net Sales and ROW Net Sales (as the case may be) that are
Non-Protected Net Sales, in accordance with the following:
Solely for purposes of determining the appropriate royalty percentage
applicable to any Non-Protected ROW Net Sales (or Non-Protected United
States/Japan Net Sales, as the case may be) under this Section 11.2,
reference will be made to aggregate annual Net Sales (excluding Competition
Territory Net Sales)in the applicable territory (i.e., either the United
States/Japan Territory or ROW Territory, as the case may be), and
Non-Protected Net Sales earned in such territory shall be considered the last
Net Sales earned in such year. For example, if during a particular year
total ROW Net Sales were [*] which includes [*] of Non-Protected ROW Net
Research and Development Agreement -- Confidential -- Page 34
Sales the aggregate royalty due with respect to the ROW Net Sales would be [*]
less the Bulk Cost attributable to such sales [*].
11.3 Competition Territory. Notwithstanding anything to the contrary in
this Article 11 (except that Section 11.4 may also be applicable), the
royalty percentages described under Sections 11.1 and 11.2, regardless of the
level of Net Sales, shall only be [*] with respect to Competition Territory
Net Sales.
11.4 Trigger Event - Royalty Reduction. In the event Lilly reasonably
incurs additional costs with respect to a Trigger Event, such as (a)
incremental costs to ensure that it has sufficient commercial supply of Bulk
Drug Substance; (b) incremental costs related to Lilly assuming Vertex's Bulk
Drug Substance clinical supply obligations under Article 6 (including
necessary scale-up of pilot facilities for this purpose); and (c) incremental
costs related to Lilly taking over Vertex's Bulk Process Development Program
in the event it exercises its Bulk Process Option, Lilly shall be fully
reimbursed for such incurred costs by reducing the royalties described
hereunder by [*]. Until Lilly is fully reimbursed, any balance not reimbursed
shall accrue interest at a rate, compounded quarterly, equal to the prime
rate as quoted in the Wall Street Journal plus [*] as determined on the date
of the Trigger Event.
11.5 Royalty Payments. Royalty payments under this Agreement shall be
made to the receiving party [*].
ARTICLE 12
EQUITY INVESTMENTS AND MILESTONE FEES
12.1 Equity Investment. Within five (5) business days after the
Effective Date and pursuant to a Stock Purchase Agreement dated as of the
same date hereof, Lilly shall purchase and Vertex shall sell to Lilly that
number of shares of Vertex Common Stock referenced in the Stock Purchase
Agreement, for an aggregate price of Ten Million ($10,000,000) Dollars.
12.2 Milestone Fees. Provided that Vertex is not then in breach of any
of its obligations under this Agreement, upon achievement of any milestone
event listed below with respect to a Project Compound, Lilly shall pay a
milestone fee to Vertex on or before the thirtieth (30th) day following
receipt of notice from Vertex that the milestone has been achieved, as
provided below:
Research and Development Agreement -- Confidential -- Page 35
Milestone 1:...............................................[*]
[*].
Milestone 2:...............................................[*]
[*].
Milestone 3:...............................................[*]
[*]
On the date any one milestone with respect to a Project Compound is achieved,
all lower numbered unachieved milestones shall be deemed to have been
achieved with respect to that Compound.
All milestones previously paid with respect to a Drug Product Candidate that
later fails in development hereunder shall be fully creditable and applied
towards subsequent Drug Product Candidates.
ARTICLE 13
LICENSES
13.1 Licenses.
(a) License to Lilly.
(i) Subject to the other provisions of this Agreement, Vertex
hereby grants to Lilly and its Affiliates an exclusive, worldwide right and
license, with the right to sublicense, to the Vertex Patents, Vertex
Technology, Program Patents (to the extent Vertex has an interest in such
Patents) and Program Technology (to the extent Vertex has an interest in such
Technology) to make, have made, use, have used, import, offer for sale, sell
and have sold Bulk Drug Substance and Drug Products and to otherwise comply
with its obligations under this Agreement. Notwithstanding the foregoing
grant, Vertex shall have the right to practice under Vertex Patents, Vertex
Technology, Vertex Program Patents, and Vertex Program Technology as
necessary to comply with its obligations and exercise its rights under this
Agreement, including but not limited to the right to develop, manufacture and
sell Bulk Drug Substance to Lilly, its Affiliates, sublicensees or any Third
Research and Development Agreement -- Confidential -- Page 36
Party marketing partner of Lilly subject to the provisions of Articles 7 and
10 hereof. In the event that Vertex exercises its Vertex Commercial Supply
Option as set forth in Article 10, and so long as Vertex retains its right to
manufacture pursuant thereto, Lilly may not exercise any of the rights to
manufacture Bulk Drug Substance under the license granted in this Subsection
(a)(i). Vertex shall retain all rights under Vertex Patents, Vertex
Technology, Vertex Program Patents and Vertex Program Technology not
explicitly granted to Lilly hereunder.
(ii) Vertex will use its best efforts to obtain, on or prior to the
Effective Date, a license to, and all consents necessary for the grant of a
sublicense to Lilly under, or assignment to Lilly of, any Third Party
intellectual property known to Vertex, rights to which Vertex believes will
be necessary for the manufacture, use, or sale of Bulk Drug Substance or Drug
Product, and Vertex shall promptly grant to Lilly a royalty-free sublicense,
or assignment of its rights, under any such license consistent with the terms
of this Agreement, for the manufacture, use, sale, distribution or promotion
of Bulk Drug Substance and Drug Product hereunder.
(b) Licenses to Vertex. Subject to the other provisions of this
Agreement, Lilly hereby grants to Vertex and its Affiliates a nonexclusive,
worldwide license in the Field, with the right to sublicense, to the Lilly
Patents, Lilly Technology, Program Patents (to the extent Lilly has an
interest in such Patents) and Program Technology (to the extent Lilly has an
interest in such Technology) to make, have made, use, have used, import,
offer for sale, sell and have sold Bulk Drug Substance and Drug Product in
the Field, subject to the following limitations:
(1) during the term of this Agreement, and subject to the other
provisions hereof, the foregoing nonexclusive license shall be
effective and may be exercised by Vertex only for the development,
manufacture and sale of Bulk Drug Substance to Lilly, its
Affiliates and any Third Party marketing partner of Lilly , and for
the exercise by Vertex of its rights and the discharge of its other
obligations hereunder, and may be sublicensed only to Third Party
contractors retained by Vertex as provided in Sections 6.3, 7.3 and
10.1 hereof.
(2) upon expiration or termination of this Agreement for any reason
other than pursuant to Section 19.2 or Section 19.4 hereof, the
license provided in subsection (b) above shall be immediately
effective, except that in such event the license to Lilly Patents
and Lilly Technology shall not extend to rights under any Lilly
Patent and Lilly Technology specifically identified as "Excluded
Technology" under Schedule 13.1(b)(2) hereof. For avoidance of any
doubt, notwithstanding anything to the contrary in this Agreement
Research and Development Agreement -- Confidential -- Page 37
(including Article 19 hereof), Vertex shall not receive or be
granted any license, right or title in Excluded Technology.
(c) Either party shall, upon request, transfer to a Third Party escrow
agent selected by mutual agreement of the parties samples of all materials
owned or controlled by it and subject to the provisions of this Agreement,
necessary for manufacture of Bulk Drug Substance and Drug Product, including
copies of all written manufacturing procedures or other items necessary
therefor. The escrow agent shall hold such items in escrow pursuant to a
written escrow agreement to be entered into among Lilly, Vertex and the
escrow agent, which agreement shall provide that such items shall be promptly
delivered to Lilly or Vertex, as the case may be, upon receipt of a written
certification by such party, that, with respect to any such certification by
Lilly, a Trigger Event has occurred or, with respect to any such
certification by Vertex, that an event described in Section 13.1(b)(i) has
occurred. The expense of the escrow agent shall be borne by the party
requesting the escrow, unless both parties request it, in which event the
expense shall be shared equally by the parties.
13.2 Manufacturing and Other Rights Following Certain Events.
(a) Vertex understands that Lilly will expend substantial monies in
reliance upon the availability of Bulk Drug Substance, and that continued
availability of Bulk Drug Substance will be important to Lilly's ability to
maintain its credibility as a supplier of products. Therefore, as part of
the consideration to induce Lilly to enter into this Agreement, Vertex agrees
as follows:
(i) Vertex hereby agrees that upon occurrence of a Trigger Event,
Lilly shall have the right to exercise the licenses granted in Section
13.1(a) to manufacture, use and sell Bulk Drug Substance, and Vertex shall
assign to Lilly any Regulatory Approvals and any trademarks related thereto;
provided, however, that Lilly may not exercise any of the rights granted
pursuant to this Section 13.2 (a)(i) to manufacture Bulk Drug Substance
unless a Trigger Event shall have occurred; and
(ii) Vertex shall provide such assistance as Lilly may reasonably
request to assist Lilly in obtaining an alternate source of supply of Bulk
Drug Substance.
(b) A "Trigger Event" shall be deemed to have occurred if:
(i) Lilly validly terminates this Agreement pursuant to Section
19.2; or
Research and Development Agreement -- Confidential -- Page 38
(ii) Vertex without proper cause provides notice to Lilly that
Vertex will not perform its obligations under this Agreement.
(iii) An Event of Default has occurred with respect to Vertex's
Bulk Drug Substance supply obligations, as set forth on Schedule 10.2 hereof.
(iv) A receiver for Vertex shall be appointed or applied for, or a
general assignment shall be made for the benefit of its creditors, or any
proceeding involving Vertex shall be voluntarily commenced by it under any
bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or
liquidation law or statute of the United States or any state thereof, or such
proceedings shall be involuntarily instituted against it and Vertex by any
action shall indicate its approval of or consent to, or acquiescence therein,
or the same shall remain undismissed for sixty (60) days.
(v) Vertex (if it is directly manufacturing Bulk Drug Substance) or
a contract manufacturer (other than Lilly) of Bulk Drug Substance for Vertex
(if Vertex is not directly manufacturing Bulk Drug Substance) shall receive
written warnings from the U.S. Food and Drug Administration or any other
regulatory authority concerning alleged violation of applicable laws or
regulations relating to the manufacture of Bulk Drug Substance, and such
alleged violations are not cured or the allegations withdrawn within a
reasonable time after receipt by Vertex of such written warnings (or notice
thereof in the case of a Third Party manufacturer); provided, that Lilly
shall reasonably believe that those warnings or the circumstances giving rise
to those warnings create a substantial likelihood that supplies of Bulk Drug
Substance will be materially disrupted; and Vertex is unable to demonstrate
to the reasonable satisfaction of Lilly that alternative manufacturing
capacity is available and could be accessed without material delay if
supplies from the original source were disrupted.
(vi) Vertex shall default in the payment of principal or interest
when due (after giving effect to any applicable grace period) with respect to
any indebtedness for borrowed money in an aggregate principal amount equal to
or exceeding [*], and as a consequence of that default the full amount of the
indebtedness shall be accelerated and become immediately due and payable
either automatically or upon notice from the lender, and the default shall
not be waived or cured and the acceleration withdrawn within 15 days after
the date of acceleration.
(vii) Lilly validly exercised its Bulk Process Option or Lilly
Clinical Production Option under Sections 6.3 and 7.3, respectively, of this
Agreement.
(c) Lilly understands that Vertex will expend substantial monies in
reliance upon the undertakings by Lilly under this Agreement to develop,
manufacture, market and sell Drug Product, and that availability of Drug
Product
Research and Development Agreement--Confidential--Page 39
will be important to Vertex's credibility as an innovative creator of
pharmaceutical products. Therefore, as part of the consideration to induce
Vertex to enter into this Agreement, Lilly agrees that upon occurrence of any
of the events described in Section 13.1(b)(i)(2), Vertex shall have the right
to exercise the licenses granted in Section 13.1(b) to manufacture, use and
sell Bulk Drug Substance and Drug Product, and Lilly shall assign to Vertex
any Regulatory Approvals and trademarks related thereto.
13.3 Specific Performance. Each party agrees that money damages would
not be a sufficient remedy for any breach of this Article 13 by the other
party and that, in addition to all other remedies, the injured party shall be
entitled to specific performance and injunctive or other equitable relief as
a remedy for any such breach, and each party further agrees in advance to the
granting of injunctive relief in the other party's favor without proof of
actual damages.
ARTICLE 14
TRADEMARKS
14.1 Selection; License; Expenses. Lilly may select one or more
trademarks, as appropriate, for the marketing of the Drug Product. Such
trademarks shall be owned solely by Lilly (collectively, the "Trademarks");
provided, however, that if required by law in any country, or to meet
regulatory requirements in order that Vertex's name may appear on the Drug
Product label and package inserts, Vertex shall own the Trademarks in that
country and grant an exclusive license to Lilly. Expenses for registration
of the Trademarks shall be borne solely by Lilly. In the event that Lilly
elects to terminate this Agreement under Section 19.3 hereof, Vertex
terminates this Agreement under Section 19.2 hereof, or the Agreement is
deemed to have been terminated by Lilly under Section 3.10 hereof, then Lilly
will provide to Vertex a license to use the Trademarks as set forth in, and
subject to the limitations of, Section 19.7 of this Agreement.
14.2 Infringement. Vertex shall notify Lilly promptly upon learning of
any actual, alleged or threatened infringement of any of the Trademarks or
any unfair trade practices, passing off of counterfeit goods, or like
offenses.
ARTICLE 15
IMPROVEMENTS; SUBSEQUENT PRODUCT IDEAS
(a) Improvements. During the term of this Agreement and not later
than the date of disclosure to any Third Party (it being understood that this
Article
Research and Development Agreement--Confidential--Page 40
15 does not authorize disclosure of any information that Vertex or Lilly is
not otherwise permitted to disclose), Vertex and Lilly shall each promptly
disclose to the other any significant improvement or enhancement to the Bulk
Drug Substance or Drug Product or any process used or useful in connection
with the manufacture thereof unless in the case of processes the same shall
have been developed as part of a collaboration with a Third Party, the terms
of which prohibit disclosure to others. The licenses granted to Vertex and
Lilly pursuant to this Agreement shall be deemed to include the right to
utilize any such improvement or enhancement solely in connection with the
Bulk Drug Substance and the Drug Product, and the manufacture and sale of
Drug Product for therapeutic purposes (including prevention) in the Field,
all in accordance with this Agreement.
(b) Subsequent Product Ideas. Vertex shall disclose to Lilly,
prior to the disclosure to any Third Party or the filing of information with
any regulatory agency any compound, product, invention, technique, process,
method or the like, in the Field, which is either developed independently by
Vertex outside of the Project, or licensed by Vertex from any Third Party
with the right to sublicense, unless in the case of techniques or processes
the same shall have been developed as part of a collaboration with a Third
Party, the terms of which prohibit disclosure to Lilly (a "Product Idea").
Lilly shall have a period of thirty (30) days following such disclosure to
advise Vertex whether Lilly desires to engage in negotiations with Vertex to
obtain the right to commercialize the Product Idea. If Lilly elects to
engage in such negotiations, Vertex shall thereafter negotiate in good faith
with Lilly on an exclusive basis for an additional period of ninety (90) days
in an effort to reach an agreement by which Lilly may commercialize the
Product Idea. The provisions of this subsection (b) shall not be construed
to create a right of first refusal or similar right, but shall be interpreted
as a commitment by Vertex, under the circumstances referenced, to discuss
Product Ideas with Lilly before commencing formal negotiations with any Third
Party with respect to that Product Idea.
ARTICLE 16
INFORMATION AND REPORTS
16.1 Information Disclosure. Lilly and Vertex will disclose and make
available to each other promptly (and in any event as soon as it is available
within their respective organizations) the results of the work conducted in
the Research Program, the Clinical Development Program, The Bulk Process
Development Program, the Product Development Program and the Manufacturing
Program, including without limitation all structural, preclinical, clinical,
regulatory, and other information known by Lilly or Vertex concerning the
Bulk Drug Substance and the Drug Product at any time during the term of this
Agreement. All
Research and Development Agreement--Confidential--Page 41
significant information, including clinical trial results, will be disclosed
to the other party promptly after it is learned or its significance is
appreciated. Lilly shall own and maintain its database of clinical trial
data and adverse drug event information accumulated from all clinical trials
of the Drug Product for which it was responsible.
16.2 Complaints. Each party shall maintain a record of all complaints
it receives with respect to the Drug Product. Except as otherwise provide in
Section 16.3, each party shall notify the responsible party of any complaint
received by it in reasonable detail and within five (5) days after the event,
and in any event in sufficient time to allow the responsible party to comply
with any and all regulatory requirements imposed upon it in any country.
16.3 Adverse Event Reporting. The party who has responsibility for and
sponsorship of the regulatory submission will also have responsibility for
submitting information and filing reports to various governmental agencies,
to the extent they are lawfully required, on Drug Product Candidates or Drug
Products. Information must be submitted at the time of initial filing for
investigational use in humans and at the time of NDA filing in the U.S., or
the foreign equivalent of any such filing. In addition, supplemental
information must be provided on Drug Products at periodic intervals and
adverse drug experiences must be reported at more frequent intervals
depending on the severity of the experience. Consequently, Lilly and Vertex
agree to provide each other with all information necessary or desirable to
comply with the laws and regulations of governmental regulatory authorities
in the applicable territory. In furtherance thereof, Lilly and Vertex agree
to follow the Adverse Experience Reporting Procedures set forth on Schedule
16.3 as well as:
(1) provide to the sponsor of the IND, NDA, or other regulatory
submission, for initial and/or periodic submission to governmental agencies,
significant information on any Drug Product Candidate and Drug Product from
preclinical laboratory, animal toxicology and pharmacology studies, as well
as serious or unexpected adverse experience reports from clinical trials and
commercial experiences with such Drug Product.
(2) report to one another in such a manner and time so as to enable
each party to comply with all governmental laws and regulations in
territories for which NDA or foreign equivalent approval is or will be sought.
16.4 Use of Information. Information contained in reports made pursuant
to this Article 16 or otherwise communicated between the parties will be
subject to the confidentiality provisions of Article 18 below. Lilly may use
any information obtained by it pursuant to this Agreement for the purposes of
obtaining Marketing Approvals for the Drug Product throughout the world.
Each party shall
Research and Development Agreement--Confidential--Page 42
have the right to use the Confidential Information disclosed by the other
party without charge, but only to the extent necessary to enable each party
to carry out their respective roles defined in this Agreement. Neither party
has a license to use Confidential Information disclosed by the other party
for the development, use, manufacture or sale of products other than the Drug
Product.
16.5 Publications. The parties acknowledge that scientific lead time is
a key element of the value of the research to be performed under this
Agreement and further agree that scientific publications must be strictly
monitored to prevent any adverse effect of premature publication. The
Project Team will establish a procedure consistent with internal Vertex and
Lilly policy for publication review and approval and each party shall first
submit to the Project Team or its designee an early draft of all such
publications, whether they are to be presented orally or in written form,
prior to submission for publication. The Project Team or its designee shall
review each such proposed publication in order to avoid the unauthorized
disclosure of a party's Confidential Information and to preserve the
patentability of inventions and data package exclusivity arising from the
research performed in the course of the Agreement. If, within thirty (30)
days of receipt of an advance copy of a party's proposed publication, the
Project Team or its designee informs such party that its proposed publication
contains Confidential Information of the other party, then such party shall
delete such Confidential Information from its proposed publication. If,
within thirty (30) days of receipt of an advance copy of a party's proposed
publication, the Project Team or its designee informs such party that its
proposed publication could be expected to have a material adverse effect on
any Program Patents or Program Technology, then such party shall delay such
proposed publication, sufficiently long to permit the timely preparation and
filing of a patent application(s) on the information involved if such
information pertains to a patentable invention or shall forego publication
altogether if such information pertains to a valuable trade secret or if
publication would adversely affect data package exclusivity. If, within
forty five (45) days of receipt of an advance copy of a party's proposed
publication, the Project Team has failed to act with respect to such party's
proposed publication, then such proposed publication shall be regarded as
approved by the Project Team and may be published.
16.6 Regulatory Reporting. The parties acknowledge that either or both
parties will be required to submit information and file reports with various
governmental agencies in addition to those contemplated by the preceding
sections. The Project Team shall establish procedures to be followed by the
parties which will allow each party to comply with its respective regulatory
obligations, and the parties agree to cooperate with each other as necessary
to allow each party to comply with its regulatory obligations. To the extent
practicable, Lilly shall coordinate all contacts with regulatory agencies
(except as provided in Section 4.3 hereof), keeping Vertex appropriately
advised of such contacts. Lilly shall consult
Research and Development Agreement--Confidential--Page 43
Vertex before responding to any inquiries from regulatory agencies regarding
Bulk Drug Substance or the manufacture thereof.
16.7 Sales Reports.
a) During the term of this Agreement and after the first commercial
sale of a Drug Product, Lilly shall furnish or cause to be furnished to
Vertex on a quarterly basis a written report or reports covering each
calendar quarter (each such calendar quarter being sometimes referred to
herein as a "reporting period") showing (i) the Net Sales of each Drug
Product in each country in each territory during the royalty period by Lilly
and each Affiliate, sublicensee and marketing partner; (ii) the royalties,
payable in United States Dollars ("Dollars"), which shall have accrued under
Article 11 hereof in respect of such sales and the basis (i.e., the royalty
rate tier and unit sales data) of calculating those royalties; (iii) amounts
due under Section 10.4 hereof on account of the purchase of Bulk Drug
Substance, with respect to Net Sales in the ROW, and the basis for
calculating those amounts due (including unit sales data); (iv) withholding
taxes, if any, required by law to be deducted in respect of any such sales;
(v) the quarterly average exchange rates with respect to the five (5)
countries with the greatest Net Sales for a particular quarter used in
converting into Dollars, from the currencies in which sales were made, any
payments due which are based on Net Sales; (vi) dispositions of Drug Products
other than pursuant to sale for cash. With respect to sales of Drug Products
invoiced in Dollars calculated by using Lilly's then-current standard
procedures and methodology, the Net Sales amounts and the amounts due to
Vertex hereunder shall be expressed in Dollars.
With respect to sales of Drug Products invoiced in a currency other than
Dollars, the Net Sales and amounts due to Vertex hereunder shall be expressed
Dollars equivalent of the amount payable to Vertex, calculated using Lilly's
then current standard exchange rate methodology for the translation of
foreign currency sales into U.S. dollars. In each report the methodology
will be identical to that employed by Lilly in its external financial
reporting, as reviewed and approved by its independent auditors and will be
in conformity with generally accepted accounting principles consistently
applied. Lilly will at Vertex's reasonable request made not more frequently
than once a year inform Vertex as to the specific exchange rate translation
methodology used for a particular country or countries.
Each quarterly report shall be due on the sixtieth (60th) day following
the close of each reporting period, or on the seventy-fifth (75th) day, in
the case that at least one sublicensee Net Sales is involved in the royalty
calculation. Lilly shall also provide Vertex with a rolling forecast for the
subsequent two quarters with respect to United States, Japan and ROW
Territory following each quarterly report of Net Sales, but only, reasonably
promptly after Lilly closes its books with respect to the quarterly reporting
period. Lilly shall keep accurate records in sufficient
Research and Development Agreement--Confidential--Page 44
detail to enable the amounts due hereunder to be determined and to be
verified by the independent auditors described hereunder. Lilly shall be
responsible for all payments that are due to Vertex but have not been paid by
Lilly's sublicensees or marketing partners. Lilly shall furnish annually to
Vertex appropriate evidence of payment of any tax or other amount required by
applicable laws or regulations to be deducted from any royalty payment,
including any tax or withholding levied by a foreign taxing authority in
respect of the payment or accrual of any royalty.
(b) Amounts shown to have accrued by each sales report provided for
under Section 16.7(a) of this Agreement shall be due and payable on the date
such sales report is due.
(c) All payments shall be made in Dollars. If at any time legal
restrictions prevent the prompt remittance of any payments with respect to
any country of the territory where Drug Products are sold, Lilly or its
sublicensees or marketing partners shall have the right and option to make
such payments by depositing the amount thereof in local currency to Vertex's
account in a bank or depository in such country.
(d) Upon the written request of Vertex, at Vertex's expense and not
more than once in or in respect of any Calendar Year, Lilly shall permit an
independent public accountant, selected by Vertex and reasonably acceptable
to Lilly, to have access during normal business hours to those records of
Lilly as may be reasonably necessary to verify the accuracy of the sales
reports furnished by Lilly pursuant to this Section 16.7, in respect of any
Calendar Year ending not more than twenty-seven (27) months prior to the date
of such notice. Lilly shall include in each sublicense or marketing
agreement entered into by it pursuant to this Agreement a provision requiring
the sublicensee or marketing partner to keep and maintain adequate records of
sales made pursuant to such sublicense or marketing agreement and to grant
access to such records by Lillly's independent public accountant for the
reasons specified in this Section 16.7. Upon the expiration of twenty-seven
(27) months following the end of any Calendar Year, the calculation of
amounts payable with respect to such fiscal year shall be binding and
conclusive upon Vertex, and Lilly and its sublicensees and marketing partners
shall be released from any liability or accountability with respect to
payments for such year. The report prepared by such independent public
accountant, a copy of which shall be sent or otherwise provided to Lilly by
such independent public accountant at the same time it is sent or otherwise
provided to Vertex, shall contain the conclusions of such independent public
accountant regarding the audit and will specify that the amounts paid to
Vertex pursuant thereto were correct or, if incorrect, the amount of any
underpayment or overpayment. If such independent public accountant's report
shows any underpayment, Lilly shall remit or shall cause its sublicensees or
marketing partners to remit to Vertex within thirty (30) days after Lilly's
receipt of such report, (i) the amount of such underpayment and (ii) if such
underpayment
Research and Development Agreement--Confidential--Page 45
exceeds five percent (5%) of the total amount owed for the Calendar Year then
being audited, the reasonable and necessary fees and expenses of such
independent public accountant performing the audit, subject to reasonable
substantiation thereof. Any overpayments shall be fully creditable against
amounts payable in subsequent payment periods. Vertex agrees that all
information subject to review under this Section 16.7 or under any
sublicensee or marketing agreement is confidential and that Vertex shall
retain and cause its accountant to retain all such information in confidence.
(e) In case of any delay in payment by Lilly to Vertex not occasioned
by Force Majeure, interest at the rate of one percent (1%) per month,
assessed from the thirty-first day after the due date of the said payment,
shall be due by Lilly without any special notice.
ARTICLE 17
INTELLECTUAL PROPERTY
17.1 Patentable Inventions and Know-How.
(a) Ownership. Any Program Technology made by either party will be
disclosed to the other party promptly after the disclosing party recognizes
the significance thereof unless in the case of process developments the same
shall have been developed as part of a collaboration with a Third Party, the
terms of which prohibit disclosure to the other party. All Program Patents
and Program Technology shall be owned by the party making the invention
claimed or contained therein or, if such invention is made jointly, shall be
owned jointly, all as determined in accordance with U.S. laws of
inventorship.
(b) Patent Prosecution. Vertex shall be responsible for preparing,
filing, prosecuting, maintaining and taking such other actions as are
reasonably necessary or appropriate with respect to the Vertex Patents and
any patentable inventions encompassed by Vertex Technology and Vertex Program
Technology, including jointly owned Program Technology. Lilly shall be
responsible for preparing, filing, prosecuting, maintaining and taking such
other actions as are reasonably necessary or appropriate with respect to the
Lilly Patents and any patentable inventions encompassed by Lilly Technology
and Lilly Program Technology other than jointly owned Program Technology. [*].
Each party will consult the other party with respect to its choice of
patent counsel and will keep that party continuously informed of all matters
relating to the preparation, filing, prosecution and maintenance of patents
and patent applications covered by this Agreement. Each party shall endeavor
in good faith to coordinate its efforts with those of the other
Research and Development Agreement--Confidential--Page 46
party to minimize or avoid interference with the prosecution of the other
party's patent applications. To the extent practicable, each party shall
provide the Project Team (if in existence, otherwise the Steering Committee)
with a copy of any patent application which first discloses any specific
Program Technology, prior to filing the first of such applications in any
jurisdiction, for review and comment by the Project Team (if in existence,
otherwise the Steering Committee) or its designees.
(c) Costs. Subject to the provisions of subsection (d) below, Lilly
shall bear all costs incurred in the preparation, filing, prosecution and
maintenance of Lilly Patents, and Vertex shall bear all costs incurred in the
preparation, filing, prosecution and maintenance of Vertex Patents and
Program Patents; provided, however, that Lilly shall pay one-half (1/2) of
all reasonable external expenses incurred by Vertex while prosecuting and
maintaining Vertex Patents and Program Patents. External expenses will
include patent office fees and taxes in connection with the filing,
prosecution and maintenance of any patent or patent application and the fees
of any patent attorneys or agents, external of Vertex, in connection with the
ex parte preparation, filing prosecution and maintenance thereof. The
allocation of such expenses will occur on an annual basis at the end of the
last quarter of each Calendar Year, at which time Vertex will provide Lilly
with an itemized list of external expenses denominated in United States
dollars incurred during the previous annual period. Lilly will then
reimburse Vertex's expenses within sixty (60) days of the date of receipt of
this itemized list. Notwithstanding the foregoing, upon written notice to
Vertex, Lilly may elect not to share in the prosecution or maintenance costs
as described in this Section 17.1(c) related to a patent or patent
application in a particular country and incurred by Vertex after receipt of
that notice; and in such event Lilly will grant to Vertex all of its patent
rights associated with such patent in such country.
(d) Discontinuance of Patent Prosecution. The party initially
responsible for preparation, filing, prosecution and maintenance (including
the costs or reimbursement of costs related thereto) of a particular Program
Patent, Lilly Patent or Vertex Patent (the "Initial Responsible Party")
shall give thirty (30) days advance notice (the "Discontinuance Election") to
the other party of any decision to cease preparation, filing, prosecution and
maintenance of that patent (a "Discontinued Patent"). In such case, the
other party may elect at its sole discretion to continue preparation, filing
and prosecution or maintenance of the Discontinued Patent at its sole
expense. The party so continuing shall own any such patent application and
patents maturing therefrom; and the Initial Responsible Party shall execute
such documents and perform such acts as may be reasonably necessary for the
other party to file or to continue prosecution or maintenance, including
assigning ownership of such patents and inventions to such electing party.
Discontinuance may be on a country-by-country basis or for a patent
application or patent series in total. [*].
Research and Development Agreement--Confidential--Page 47
17.2 Infringement Claims by Third Parties.
If the manufacture, use or sale of Bulk Drug Substance and/or Drug
Product results in a claim against a party for patent infringement or for
inducing or contributing to patent infringement ("Infringement Claim"), the
party first having notice of an Infringement Claim shall promptly notify the
other in writing. The notice shall set forth the facts of the Infringement
Claim in reasonable detail.
In the event that the sale of a Drug Product in any country necessarily
involves working within the scope of a Third Party's patent, then Vertex will
use reasonable efforts to obtain a required license under the Third Party's
patents with a right to sublicense to Lilly, under terms reasonably
acceptable to both Vertex and Lilly, and Vertex and Lilly will each bear
one-half of any royalty obligation payable under such license. If the terms
of a required license under a Third Party patent are unacceptable to Vertex,
Lilly may nonetheless elect to obtain the license, to continue sales of Drug
Product in such country and pay, itself, any royalties due under such
license. In such event, sales in that country shall be deemed to be
Non-Protected Net Sales and payments due to Vertex on account of Net Sales
may be reduced accordingly. If the required license is either unavailable or
its terms are unacceptable both to Vertex and to Lilly, then Lilly may elect
in its sole discretion to discontinue sales of the Drug Product in such
country or to undertake the defense of a patent infringement action with
respect to the Third Party patents.
The parties [*]. Provided that [*]. Except as otherwise provided in
this Agreement, any and all royalties, amounts paid in settlement and damages
resulting from settlement or a final nonappealable judgment pursuant to
litigation relating to an Infringement Claim shall be [*].
17.3 Infringement Claims Against Third Parties.
(a) Vertex and Lilly each agree to take reasonable actions to
protect their respective patents and technology from infringement and from
unauthorized possession or use.
(b) If any Vertex Technology, Lilly Technology, Program Patents or
Program Technology is infringed or misappropriated, as the case may be, by a
Third Party, the party to this Agreement first having knowledge of such
infringement or misappropriation, or knowledge of a reasonable probability of
such infringement or misappropriation, shall promptly notify the other in
writing. The notice shall set forth the facts of such infringement or
misappropriation in reasonable detail. The owner of the patent or technology
shall have the primary right, but not the obligation, to institute,
prosecute, and control any action or proceeding with respect to infringement
or misappropriation of such patent or technology by its own counsel and the
other party shall have the right, at its own expense, to be represented in
Research and Development Agreement--Confidential--Page 48
such action by its own counsel. The Steering Committee shall determine which
party shall have the primary responsibility to institute, prosecute, and
control any action or proceeding with respect to infringement or
misappropriation of jointly owned patents or technology and the other party
shall have the right, at its expense, to be represented by its counsel. If
the party having the primary right or responsibility to institute, prosecute,
and control such action or prosecution fails to do so within a period of one
hundred twenty (120) days after receiving notice of the infringement, the
other party shall have the right to bring and control any such action by
counsel of its own choice, and the other shall have the right, at its own
expense, to be represented in any such action by counsel of its own choice.
If one party brings any such action or proceeding, the second party may be
joined as a party plaintiff and, in case of joining, the second party agrees
to give the first party reasonable assistance and authority to file and to
prosecute such suit. The costs and expenses of all suits brought by a party
under this Section 17.3 shall be [*]. No settlement or consent judgment or
other voluntary final disposition of a suit under this Section 17.3 may be
entered into without the joint consent of Vertex and Lilly (which consent
shall not be unreasonably withheld).
17.4 Notice of Certification. Vertex and Lilly each shall immediately
give notice to the other of any certification filed under the U.S. "Drug
Price Competition and Patent Term Restoration Act of 1984" claiming that a
Program Patent is invalid or that any infringement will not arise from the
manufacture, use or sale of any product by a third party. If Vertex decides
not to bring infringement proceedings against the entity making such a
certification, Vertex shall give notice to Lilly of its decision not to bring
suit within twenty-one (21) days after receipt of notice of such
certification. Lilly may then, but is not required to, bring suit against
the party that filed the certification. Any suit by Lilly or Vertex shall
either be in the name of Lilly or in the name of Vertex, or jointly by Lilly
and Vertex, as may be required by law. For this purpose, the party not
bringing suit shall execute such legal papers necessary for the prosecution
of such suit as may be reasonably requested by the party bringing suit.
17.5 Patent Term Extensions. The parties shall cooperate with each
other in gaining patent term extension wherever applicable to Vertex Patents,
Lilly Patents or Program Patents covering Drug Products. Lilly shall
determine which patents shall be extended. All filings for such extension
shall be made by the party to whom the patent is assigned, provided, however,
that in the event that the party to whom the patent is assigned elects not to
file for an extension, such party shall (i) inform the other party of its
intention not to file and (ii) grant the other party the right to file for
such extension.
Research and Development Agreement--Confidential--Page 49
ARTICLE 18
CONFIDENTIALITY AND NONDISCLOSURE
18.1 Confidentiality. Unless otherwise set forth in this Agreement, for
a period from the Effective Date until [*] years following the later of: (a)
the termination of this Agreement or (b) if Lilly is marketing a Drug
Product, the date on which Lilly ceases to market any Drug Product, each
party shall maintain in confidence all Confidential Information disclosed by
the other party or generated during the Project, and shall not, except as
contemplated by this Agreement, use it for its benefit or the benefit of
others, without the consent of the disclosing party. Documents made
available to the receiving party shall remain the property of the disclosing
party and shall be returned upon written request, except that one copy of all
such information may be retained for legal archival purposes by the receiving
party.
18.2 Authorized Disclosure. Each party may disclose Confidential
Information disclosed by the other party or generated during the Project for
the purpose of making various regulatory filings and complying with
applicable governmental regulations, and to consultants and others having a
need to know for the purposes of development, manufacture or marketing of
Bulk Drug Substance or Drug Product pursuant to this Agreement, provided that
such consultants and others shall also agree to appropriate confidentiality
and non-use provisions.
18.3 Nondisclosure of Agreement. Neither party shall disclose any
information about this Agreement without the prior written consent of the
other. Consent shall not be required, however, for disclosures to tax
authorities or to bona fide potential sublicensees, to the extent required or
contemplated by this Agreement, provided, that in connection with such
disclosure, each party agrees to use its commercially reasonable efforts to
secure confidential treatment of such information. Each party shall have the
further right to disclose the terms of this Agreement as required by
applicable law, including the rules and regulations promulgated by the
Securities and Exchange Commission and to disclose such information to
shareholders or potential investors as is customary for publicly-held
companies, provided the disclosing party provides to the other party, to the
extent practicable, a copy of the information to be disclosed and an
opportunity to comment thereon prior to such disclosure, and, to the extent
practicable, consults within a reasonable time in advance of the proposed
disclosure with the other on the necessity for the disclosure and the text of
the proposed release.
18.4 Survival. The confidentiality obligations of this Article 18 shall
survive the termination or expiration of the Agreement.
Research and Development Agreement--Confidential--Page 50
18.5 Press Releases. Attached hereto as Schedule 18.5 is a form of press
release which the parties intend to release upon the execution of this
Agreement or shortly thereafter. All future press releases by either party
relating to the collaboration contemplated by this Agreement shall be
approved in advance by each party, except for those communications required
by law.
ARTICLE 19
TERM AND TERMINATION OF AGREEMENT
19.1 Term. This Agreement shall become effective on the Effective Date
and shall continue in effect, unless terminated earlier as described
hereunder or by mutual written agreement of the parties, until the earlier of
(a),(b) or (c), below:
(a) the later of either: (1) the expiration of the last issued [*] having
a Valid Claim covering a Drug Product; or (2) in the event that Lilly is
developing or marketing a Drug Product Candidate or Drug Product in
accordance with the terms of this Agreement but there is no issued [*] having
a Valid Claim covering a Drug Product, then ten (10) years from the date of
the most recent Product Launch with respect to a Drug Product;
(b) termination or expiration of the Research Program in accordance with
Section 3.10 of this Agreement, provided that such termination or expiration
occurs at least [*]; or
(c) voluntary termination by Lilly under Section 19.3 hereof provided
that such termination [*].
In the event that the term of the Agreement has expired or terminated as
described in 19.1(b) or (c), above, subject to the terms set forth herein,
the licenses under Vertex Patents and Vertex Technology granted to Lilly
under this Agreement shall terminate and Lilly hereby grants to Vertex and
its Affiliates [*] right and license in the Field [*].
In consideration for the license granted above, Vertex shall pay Lilly [*]
royalty on the annual Net Sales of any Bulk Drug Substance and/or Drug
Products sold by Vertex or its Affiliates [*] provided that at least one [*]
covers the manufacture, use or sale of said Bulk Drug Substance and/or Drug
Product. In the event that [*] then Vertex or its Affiliates [*] shall pay
Lilly the royalty as described [*].
Research and Development Agreement--Confidential--Page 51
19.2 Termination for Material Breach. Either party shall have the right
to terminate this Agreement after ninety (90) days written notice to the
other in the event the other is in material breach of this Agreement, unless
the other party cures the breach before the expiration of such period of
time. Such notice shall set forth in reasonable detail the specifics of the
breach. In the event of termination hereunder by Lilly, all licenses granted
under this Agreement to Lilly shall not be affected and shall continue in
full force and effect, and Lilly shall have the right to exercise all
licenses provided for in Section 13.2. All licenses granted under this
Agreement to Vertex shall automatically terminate upon such termination by
Lilly. In the event of termination hereunder by Vertex, all licenses granted
to Lilly under this Agreement to Vertex Patents and Vertex Technology shall
automatically terminate, and Vertex shall have the same license and rights to
[*] as are provided to Vertex under Section 19.3 hereof in the event of a
voluntary termination of this Agreement by Lilly. Notwithstanding the
foregoing, Lilly shall be permitted to distribute and sell all supplies of
Drug Product in its inventory at the time of termination until such supplies
are exhausted. For purposes of this Agreement, insolvency as set forth in
Section 19.4 shall be deemed a material breach.
19.3 Lilly Voluntary Termination. Any time after the [*] of the
Effective Date, Lilly may terminate this Agreement by giving Vertex [*]
written notice of its intent to terminate. Upon termination by Lilly under
this Section 19.3, subject to the terms set forth herein, the licenses under
Vertex Patents and Vertex Technology granted to Lilly under this Agreement
shall terminate and Lilly hereby grants to Vertex and its Affiliates an [*]
right and license in the Field, [*] to the [*].
In the consideration for the license granted above, Vertex shall pay
Lilly a [*] royalty on the annual Net Sales of any Drug Products and/or
Bulk Drug Substance sold by Vertex or its Affiliates or any sublicencee
thereof, [*].
19.4 Termination Upon Insolvency. This Agreement may be terminated by
either party upon notice to the other should the other party:
(a) become insolvent; or
(b) file a petition under any bankruptcy or insolvency law or have any
such petition filed against it which has not been stayed within 60 days of
such filing.
19.5 Accrued Rights, Surviving Obligations. Termination of the Agreement
shall not affect any accrued rights of either party. As provided herein,
certain provisions, including, in certain circumstances, provisions relating
to licensing of intellectual property and confidentiality are intended to
survive termination of this Agreement.
Research and Development Agreement--Confidential--Page 52
19.6 Additional Rights Upon Termination For Breach. If a party (the
"Non-Breaching Party") terminates this Agreement under Section 19.2 hereof
following material breach by the other party (the "Breaching Party"), (a) the
Breaching Party shall return to the Non-Breaching Party all Confidential
Information and materials received from the Non-Breaching Party during the
Agreement, except that the Breaching Party may keep a copy of all documents
for record keeping purposes only, (b) the Breaching Party shall cease all use
of the Confidential Information and materials received from the Non-Breaching
Party for any purpose, and (c) the Breaching Party shall deliver to the
Non-Breaching Party all data and information developed by the Breaching Party
prior to such termination as a result of the activities under this Agreement
which can reasonably be viewed as necessary or useful to obtain governmental
regulatory approvals.
19.7 Assistance following Termination. In the event Lilly elects to
terminate this Agreement pursuant to Section 19.3, this Agreement is deemed
to have been terminated by Lilly under Section 3.10, or Vertex terminates
this Agreement under Section 19.2 following a material breach by Lilly, and
if Vertex so requests, Lilly shall provide reasonable assistance to Vertex
for a period of six (6) months following the date of notice of termination.
During this period, Lilly shall provide Vertex with copies of its
registration dossier for the Drug Product, clinical data and unrestricted
permission to use the dossier and data for development, registration and
commercialization of the Drug Product; written Drug Product process
procedures and training in these procedures; assistance in transferring
contracts with Third Parties (e.g. clinical test sites, contract research
organizations, manufacturers of Drug Product, and marketers) to Vertex; and
all reasonable information not previously delivered to Vertex concerning Bulk
Drug Substance and Drug Product manufacture. Lilly will permit Vertex to
cross reference all regulatory filings made in connection with the Project
and will assign or otherwise transfer those filings to Vertex, where
reasonably feasible, as necessary to facilitate continuation of the Project
by Vertex. Lilly will also agree to negotiate in good faith the sale of any
dedicated equipment, work in process, and finished product inventories and
supplies then owned by Lilly provided that the same would not be disruptive
to Lilly's other operations. In the event Lilly has registered a trademark
or tradename for use in connection with the Drug Product, Vertex shall also
have a paid-up license to use such trademark or tradename, provided however
that Vertex shall not be entitled to such license in the event the trademark
or tradename chosen by Lilly is also associated with other Lilly products
(such as the "huma" association between Humatrope-Registered Trademark- and
Humalog-Registered Trademark-.)
Research and Development Agreement--Confidential--Page 53
ARTICLE 20
INDEMNITY
(a) Each party hereby agrees to indemnify, defend and hold harmless the
other party and its Affiliates, and their respective officers, directors,
agents and employees from and against any and all suits, claims, actions,
demands, liabilities, expenses and/or losses, including reasonable attorneys'
fees and other costs of defense other than claims for infringement as
provided in Section 14.2, ("Claims") resulting directly or indirectly from
the manufacture, use, handling, storage, sale or other disposition of Bulk
Drug Substance or Drug Product by the indemnifying party, its Affiliates,
agents or sublicensees, but only to the extent such Claims result from the
negligence or intentional misconduct of the indemnifying party or its
employees and agents and do not result from the negligence or intentional
misconduct of the party seeking indemnification.
(b) Lilly shall indemnify defend and hold harmless Vertex, its
Affiliates, and their respective officers, directors, agents and employees
from and against all Claims based upon the death or actual bodily injury or
property damage resulting from the manufacturing (but not including
manufacture by Vertex of the Bulk Drug Substance), packaging, labeling,
handling and storage (other than by Vertex or its employees or agents),
promotion, marketing, distribution, use or sale of the Drug Product, except
to the extent caused by the negligence or willful misconduct of Vertex or the
material breach by Vertex of this Agreement.
(c) Vertex shall indemnify, defend and hold harmless Lilly, its
Affiliates, and their respective officers, directors, agents and employees
from and against all Claims based upon the death or actual bodily injury or
property damage resulting from its manufacture or handling of Bulk Drug
Substance (including, without limitation, any Claims relating to release of
materials into the environment) except to the extent caused by the negligence
or willful misconduct of Lilly or the material breach by Lilly of this
Agreement.
(d) Any entity entitled to indemnification under this Article shall give
prompt written notice to the indemnifying party of any Claims with respect to
which it seeks indemnification, and the indemnifying party shall have the
option to assume the defense of such Claims with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed by the
indemnifying party with counsel so selected, the indemnifying party will not
be obligated to pay the fees and expenses of any separate counsel retained by
the indemnified party with respect to such Claims. Except with the prior
consent of the indemnified party, which consent shall not be unreasonably
withheld, the indemnifying party may not enter into any settlement of such
litigation unless such settlement includes an unqualified release of the
indemnified party.
Research and Development Agreement--Confidential--Page 54
(e) Vertex and Lilly shall each have and maintain such type and amounts
of liability insurance covering the manufacture, supply, use and sale of Drug
Product Candidates and Drug Products as is normal and customary in the
pharmaceutical industry generally for parties similarly situated, and will
upon request provide the other party with a copy of its policies of insurance
in that regard, along with any amendments and revisions thereto.
ARTICLE 21
REPRESENTATIONS AND WARRANTIES
21.1 Right, Power and Authority. Each of Vertex and Lilly represents and
warrants to the other that as of the Effective Date it has full right, power
and authority to enter into this Agreement, including the right to grant the
licenses granted hereunder.
21.2 Absence of Litigation. As of the Effective Date, each party
represents and warrants to the other that it is not aware of any pending or
threatened litigation (and has not received any communication) which alleges
that such party's activities related to this Agreement have violated, or that
by conducting the activities as contemplated herein such party would violate,
any of the intellectual property rights of any other person. To the best of
Vertex's and Lilly's knowledge, there is no material unauthorized use,
infringement or misappropriation of any of its intellectual property rights
licensed hereunder.
21.3 No Approvals or Consents. Except as otherwise described in this
Agreement (including certain requirements of the Clayton Act as referenced on
the first page hereof), each party represents and warrants to the other that
no approval or consent of a governmental agency or instrumentality is
required for the authorization, execution, or delivery by it of this
Agreement.
21.4 Patents; Prior Art. Except as each party has otherwise advised the
other party in writing, each of Vertex and Lilly represents and warrants to
the other that as of the Effective Date, to the best of its knowledge, it has
sufficient legal and/or beneficial title and ownership under its intellectual
property rights necessary for it to fulfill its obligations under this
Agreement and that it is not aware of any communication alleging that it has
violated or by conducting its business as contemplated by this Agreement
would violate any of the intellectual property rights of any other person,
and that to the best of its knowledge there is no material unauthorized use,
infringement or misappropriation of any of its intellectual property rights
relevant to this Agreement. As used herein, "intellectual property rights"
means all patent rights, copyrights, trademarks, trade
Research and Development Agreement--Confidential--Page 55
secret rights, chemical and biological material rights and know-how rights
necessary or useful to make, use or sell Bulk Drug Substance and/or Drug
Product.
21.5 Prior Data. Vertex represents and warrants to Lilly that it has
made (or will make) available to Lilly (to the extent the same exists and is
material to accessing the commercial, medical, clinical or regulatory
potential of the Drug Product) all toxicology studies, clinical data,
manufacturing process data and other information in its possession regarding
any existing Bulk Drug Substance including all events or information that
would be reportable to the FDA under 21 C.F.R. 200 et. seq., and that to the
best of its knowledge, such data and information is accurate and complete and
is what it purports to be.
21.6 No Debarment. Each party represents and warrants to the other that
it will comply at all times with the provisions of the Generic Drug
Enforcement Act of 1992 and will upon request certify in writing to the other
that none of it, its employees, or any person providing services to such
party in connection with the collaboration contemplated by this Agreement
have been debarred under the provisions of such Act.
ARTICLE 22
GOVERNING LAW; DISPUTE RESOLUTION
22.1 Governing Law. The Agreement shall be governed by the laws of the
State of Indiana, without regard to Indiana choice of law provisions.
22.2 Dispute Resolution Process.
(a) General. In the event of any dispute relating to this Agreement
or the collaborative effort contemplated hereby, the parties shall prior to
instituting any lawsuit or Third Party Referral hereunder on account of such
dispute, refer such dispute to the Chief Executive Officer of Vertex and the
President of Lilly's Infectious Diseases and Generics Global Business Unit
(or any successor position having principal responsibility for Lilly's
infectious diseases products) who shall, as soon as practicable, attempt in
good faith to resolve the dispute. If such dispute is not resolved within
ninety (90) days of the first written request for dispute resolution under
this Article 22, either party shall be free to institute litigation with
respect to any dispute not explicitly subject to Third Party Referral as
provided below. Notwithstanding anything in this Agreement to the contrary,
either party shall be entitled to institute litigation immediately if the
same shall be necessary to prevent irreparable harm to any party.
Research and Development Agreement--Confidential--Page 56
(b) Third Party Referral. Any dispute or claim relating to the
"Referral Matters" as defined below which the parties are unable to resolve
pursuant to the other dispute resolution mechanisms provided in this
Agreement (other than litigation) shall, upon the written request of one
party delivered to the other party, be submitted to and settled by a Third
Party Panel appointed by the parties as provided below. The "Referral
Matters" shall consist solely of disagreements concerning the definition of
Drug Product Criteria as referenced in Section 3.3 of this Agreement. Within
15 days after delivery of the above-referenced written request, each party
will appoint one person knowledgeable in the areas of pharmaceutical science,
business and commercial aspects of drug development and sale, or the clinical
development of pharmaceuticals, to hear and determine the dispute. The
parties acknowledge that each of the persons listed on the attached Schedule
22.2(b) are acceptable members of the Third Party Panel, although the list is
not exclusive and other qualified persons may be chosen by either of the
parties. The two persons so chosen will select another impartial Third Party
and their majority decision will be final and conclusive upon the parties
hereto. If either party fails to designate its appointee within the 15 day
period referenced above, then the appointee who has been designated will
serve as the sole member of the Third Party Panel and will be deemed to be
the single, mutually approved party to resolve the dispute. Each party will
bear its own costs in the Third Party Referral process, and will split
equally the costs of the Third Party panel members. The Third Party panel
will upon the request of either party, issue its final determination in
writing.
ARTICLE 23
MISCELLANEOUS PROVISIONS
23.1 Notices. All notices required or permitted to be given under this
Agreement shall be in writing and shall be mailed by registered or certified
mail addressed to the signatory to whom such notice is required or permitted
to be given and transmitted by facsimile to the number indicated below. All
notices shall be deemed to have been given when mailed as evidenced by the
postmark at the point of mailing or a confirmed facsimile transmission.
All notices to Lilly shall be addressed to Lilly as follows:
Eli Lilly and Company
Lilly Corporate Center
Indianapolis, IN 46285
Attention: General Counsel
Fax: (317) 276-9152
Research and Development Agreement--Confidential--Page 57
All notices to Vertex shall be addressed as follows:
Vertex Pharmaceuticals Incorporated
130 Waverly Street
Cambridge, MA 02139-4211
Attention: Richard H. Aldrich, Senior Vice President
and Chief Business Officer
Fax: (617) 577-6680
With a copy to:
Warner & Stackpole LLP
75 State Street
Boston, MA 02109
Attention: Kenneth S. Boger, Esq.
Fax: (617) 951-9151
Any party may, by written notice to the others, designate a new address or
fax number to which notices to the party giving the notice shall thereafter
be mailed or faxed.
23.2 Foreign Exchange. Except as otherwise specified herein, sales and
expenses of the parties under this Agreement which are in currencies other
than United States dollars shall be converted into United States dollars
according to the parties' customary and usual currency translation procedures
which shall be consistent with the procedures used throughout the parties'
operations and shall be in accordance with GAAP, consistently applied.
23.3 Force Majeure. If either party is affected by any extraordinary,
unexpected and unavoidable event such as acts of God, floods, fires, riots,
war, accidents, labor disturbances, breakdown of plant or equipment, lack or
failure of transportation facilities, unavailability of equipment, sources of
supply or labor, raw materials, power or supplies, infectious diseases of
animals, or by the reason of any law, order, proclamation, regulation,
ordinance, demand or requirement of the relevant government or any
sub-division, authority or representative thereof, or by reason of any other
cause whatsoever (provided that in all such cases the party claiming relief
on account of such event can demonstrate that such event was extraordinary,
unexpected and unavoidable by the exercise of reasonable care) ("Force
Majeure") it shall as soon as reasonably practicable notify the other party
of the nature and extent thereof and take all reasonable steps to overcome
the Force Majeure and to minimize the loss occasioned to that other party.
Neither party shall be deemed to be in breach of this Agreement or otherwise
be liable to the other party by reason of any delay in performance or
nonperformance of any of its obligations hereunder to the extent that such
delay and nonperformance is due to
Research and Development Agreement--Confidential--Page 58
any Force Majeure of which it has notified the other party and the time for
performance of that obligation shall be extended accordingly, subject
however, to the rights of Lilly to exercise the licenses granted pursuant to
Section 13.2 should a Trigger Event occur. During any period that adequate
supply of Bulk Drug Substance is not available as a result of any Force
Majeure, Lilly may purchase and use Bulk Drug Substance from any other
supplier.
23.4 Withholding Taxes. If either party is required by the United States
government or other authorities to withhold any tax on the amounts payable by
that party to the other party under this Agreement, that party shall be
allowed to do so, and shall in such case remit payments to the other party
net of such withheld amount, provided that the withholding party furnishes
the other party with reasonable evidence of such withholding payment in
electronic or written form as soon as practicable after such withholding in
order that the other party may use the withholding tax paid as a tax credit.
23.5 Entirety of Agreement. This Agreement, its exhibits and schedules
and the Stock Purchase Agreement of even date herewith, sets forth the entire
agreement and understanding of the parties relating to the subject matter
contained herein and merges all prior discussions and agreements between
them. No party shall be bound by any representation other than as expressly
stated in this Agreement, or by a written amendment to this Agreement signed
by authorized representatives of both parties.
23.6 Non-Waiver. The failure of a party in any one or more instances to
insist upon strict performance of any of the terms and conditions of this
Agreement shall not be construed as a waiver or relinquishment, to any
extent, of the right to assert or rely upon any such terms or conditions on
any future occasion.
23.7 Disclaimer of Agency. This Agreement shall not constitute any party
the legal representative or agent of another, nor shall any party have the
right or authority to assume, create, or incur any Third Party liability or
obligation of any kind, express or implied, against or in the name of or on
behalf of another except as expressly set forth in this Agreement.
23.8 Severability. In the event any term of this Agreement is or becomes
or is declared to be invalid or void by any court of competent jurisdiction,
such term or terms shall be null and void and shall be deemed deleted from
this Agreement, and all the remaining terms of the Agreement shall remain in
full force and effect.
23.9 Assignment. Lilly may discharge any obligations and exercise any
right hereunder through an Affiliate, although Lilly shall remain ultimately
responsible for the proper discharge of all obligations hereunder
notwithstanding any assignment or delegation to any such Affiliate.
References to Lilly shall include
Research and Development Agreement--Confidential--Page 59
any Affiliate of Lilly to whom such an assignment or delegation has been made
or ratified. Except as provided in this Section, neither Lilly, nor Vertex
shall delegate duties of performance or assign, in whole or in part, rights
or obligations under this Agreement without the prior written consent of the
other party, and any attempted delegation or assignment without such written
consent shall be of no force or effect. Subject to the restrictions
contained in the preceding sentence, this Agreement shall be binding upon the
successors and assigns of the parties.
23.10 Headings. The headings contained in this Agreement have been
added for convenience only and shall not be construed as limiting.
23.11 Limitation of Liability. No party shall be liable to another
for indirect, incidental, consequential or special damages, including but not
limited to lost profits, arising from or relating to any breach of this
Agreement, regardless of any notice of the possibility of such damages.
Nothing in this Section is intended to limit or restrict the indemnification
rights or obligations of any party.
23.12 Interpretation This Agreement has been jointly prepared by the
parties and their respective legal counsel and shall not be strictly
construed against either party.
23.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
23.14 Compliance with Laws. Each party shall, and shall cause its
respective Affiliates to, comply in all material respects with all federal,
state, local and foreign laws, statutes, rules and regulations applicable to
the parties and their respective activities under this Agreement.
Research and Development Agreement--Confidential--Page 60
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first written above.
ELI LILLY AND COMPANY
By: ------------------------
August M. Watanabe
Executive Vice President
VERTEX PHARMACEUTICALS INCORPORATED
By: -------------------------
Richard H. Aldrich
Senior Vice President and
Chief Business Officer
Research and Development Agreement--Confidential--Page 61
Schedule 1.32
to
RESEARCH AND DEVELOPMENT AGREEMENT
between
VERTEX PHARMACEUTICALS INCORPORATED
and
ELI LILLY AND COMPANY
LILLY PATENTS
- -------------------------------------------------------------------------------
U.S. Patents 4,569,794
Expires December 5, 2004
Title: Process for Purifying Proteins and Compounds Useful in such Process
Research and Development Agreement -- Confidential -- Schedule 1.32
Schedule 1.84
to
RESEARCH AND DEVELOPMENT AGREEMENT
between
VERTEX PHARMACEUTICALS INCORPORATED
and
ELI LILLY AND COMPANY
VERTEX PATENTS
- -------------------------------------------------------------------------------
HCV NS3 Serine Protease Inhibitor Program
VERTEX PATENT APLICATIONS
TITLE PATENT NUMBERS COUNTRIES INVENTORS
Methods, Nucleotide 08/432,693 US (5/1/95) Su et al.
Sequences and (US)
Host Cells for PCT (5/1/96)
Assaying WO
Exogenous and 96/34
Endogenous 976
Protease
Activity
[*]
Research and Development Agreement -- Confidential -- Schedule 1.84
Schedule 2.3(b)
to
RESEARCH AND DEVELOPMENT AGREEMENT
between
VERTEX PHARMACEUTICALS INCORPORATED
and
ELI LILLY AND COMPANY
INITIAL MEMBERS OF RESEARCH TEAM
- ------------------------------------------------------------------------------
VERTEX
Dr. Vicki Sato
Dr. John Thomson
Dr. Roger Tung
Dr. Mark Murcko
ONE TO BE DETERMINED
Lilly Research Team Members:
Joseph M. Colacino, Ph.D.
HEAD, BIOLOGY FOR INFECTIOUS DISEASES RESEARCH
Carlos Lopez, Ph.D.
RESEARCH FELLOW, VIROLOGY RESEARCH, INFECTIOUS DISEASES
John E. Munroe, Ph.D.
HEAD OF CHEMISTRY AND BIOCHEMISTRY, INFECTIOUS DISEASES RESEARCH
Donald G. Therasse, M.D.
DIRECTOR, INFECTIOUS DISEASES RESEARCH AND DECISION PHASE MEDICAL
Research and Development Agreement -- Confidential -- Schedule 2.3(b)
Schedule 3.3
to
RESEARCH AND DEVELOPMENT AGREEMENT
between
VERTEX PHARMACEUTICALS INCORPORATED
and
ELI LILLY AND COMPANY
Hepatitis C Viris (HCV) [*] Inhibitor Program
Vertex Research Activities: 1997-2000
- --------------------------------------------------------------------------------
The accompanying list summarizes planned Vertex research activities for the
design and development of novel, potent inhibitors of the Hepatitis C Virus
(HCV) [*]. Changes to this schedule can and will be incorporated based on
research findings published in the literature or from Vertex's own
published or unpublished research findings. The compound goals are also
expected to be dynamic and subject to revision and extension as additional
preclinical data is gained, as clinical data becomes available, and as
updated competitive and market information is considered.
[*]
Table I: Drug Candidate Criteria
[*]
Table I Footnotes:
[*]
1997-2000 Scientific Objectives
ONGOING ACTIVITY
EXPECTED EVENT OR EXPECTED COMPLETION OF ACTIVITY
[*]
[*]
[*]
[*]
[*]
[*]
[* 7 pages of confidential text deleted and filed separately with the
Commission]
Research and Development Agreement--Confidential--Schedule 3.3
Schedule 7.2
to
RESEARCH AND DEVELOPMENT AGREEMENT
between
VERTEX PHARMACEUTICALS INCORPORATED
and
ELI LILLY AND COMPANY
MANUFACTURING RESPONSIBILITIES DOCUMENT
1.0 INTRODUCTION
The Manufacturing Responsibilities Document (MRD) describes certain
specifications procedures, assay methods, personnel contacts and other
matters relating to the manufacturing and supplying of Product(s)
(Attachment I) by VERTEX PHARMACEUTICALS INCORPORATED (VERTEX) to Eli
Lilly and Company (LILLY). The following elements of an MRD (Section
3.0 below) will be developed and understood by both VERTEX and LILLY
prior to the first manufacture of Phase I Clinical Trial material.
2.0 ADMINISTRATION
The MRD should be considered a "living document." Sections of the MRD
may be added, deleted, or otherwise modified from time to time through
the issuance of a revised section incorporating the modification and
stating the effective date of the modification. Initial development, as
well as periodic review and revision, should be coordinated by one
LILLY representative and one VERTEX representative, yet to be
determined. Each revision shall be signed on behalf of LILLY and VERTEX
by their respective representatives, or by an authorized representative
of equal or greater management level.
3.0 ELEMENTS OF MANUFACTURING REQUIREMENTS DOCUMENTS
VERTEX and LILLY will mutually agree on responsibilities and procedures
for the following:
3.1 QUALITY ASSURANCE/REGULATORY REQUIREMENTS
3.1.0 Product Specifications
3.1.1 Incoming Component Inspections/Testing
3.1.2 Stability
3.1.3 Batch Documentation and Quality Records
3.1.4 Change Control
3.1.5 Reserve Samples
Research and Development Agreement--Confidential--Schedule 7.2
SCHEDULE 7.2 (CONTINUED)
3.1.6 Material Storage/Control/Accountability
3.1.7 Laboratory Analysis
3.1.8 Regulatory Responsibility
3.1.9 Batch Release Responsibility
3.2 SHIPMENT OF FINISHED GOODS
3.2.1 Packaging, Labeling
3.2.2 Transportation
3.2.3 Warehousing
4.0 KEY CONTACTS
KEY CONTACT LIST
Research and Development Agreement--Confidential--Schedule 7.2
Schedule 9.3A to
RESEARCH AND DEVELOPMENT AGREEMENT
between
VERTEX PHARMACEUTICALS INCORPORATED
and
ELI LILLY AND COMPANY
TERMS OF CO-PROMOTION
- -------------------------------------------------------------------------------
The parties agree that should the Drug Product be marketed in accordance
with Section 9.3 of the Agreement, the following terms and conditions will
govern such promotion.
A. Definitions for Appendix.
(1) For the purposes of this Appendix, "Promotional Materials" shall mean
any tangible advertising and promotional labeling bearing the Drug Product(s)
name (trade name or generic name) used in the promotion of the Drug
Product(s) including, but not limited to, promotional materials produced by
either Lilly or Vertex (examples include, but are not limited to, journal
ads, sales aids, product or disease state brochures, service items, managed
care pull-through sheets, formulary presentations, price lists, monographs,
internet pages, television and telephone advertisements and "dear doctor"
letters), materials produced by outside sources to the extent funded by,
created in cooperation with, reviewed or distributed by Lilly or Vertex
(examples include, but are not limited to, medical reprints, textbooks, and
continuing medical educational materials) and any other written, graphic,
broadcast or audio materials that could be deemed to constitute labeling or
advertising as those terms are defined under the federal Food, Drug, and
Cosmetic Act of 1938, as amended or regulations promulgated thereunder, and
any guidance documents issued by the U.S. Food and Drug Administration.
(2) For the purposes of this Appendix, "Drug Product" shall have the same
definition as contained in Section 1.16 of the Agreement.
(3) For the purposes of this Appendix, "Product Labeling" shall mean the
labeling (as amended) for the Drug Product which has been reviewed and
approved by the appropriate review division at the U.S. Food and Drug
Administration in connection with the clearance to market the Drug Product in
the United States.
B. Promotion of Drug Product
(1) Vertex shall make no statement, representation or warranty, oral or
written, concerning the Drug Products for use or treatment or any
Research and Development Agreement--Confidential--Schedule 9.3A
Schedule 9.3A (continued)
- ------------------------------------------------------------------------------
subsequently approved indication for the Drug Products which is inconsistent
with, or contrary to, the Product Labeling or the Approved Promotional
Materials.
(2) The determination of content, the quantity, and the method of
distribution of Product Promotional Materials and literature related to the
Drug Product shall be determined by Lilly. Any and all Product Promotional
Materials regarding the Drug Product and other literature and sales aids
regarding the Drug Product shall be subject to review and approval of Lilly.
Vertex shall not add, delete, or modify the Promotional Materials provided by
Lilly. Vertex shall not utilize any Promotional Material for any purpose
unless or until a complete Form 2253 for such Promotional Materials has been
properly submitted to the FDA in accordance with 21 C.F.R. 314.81(b)(3), as
amended. Vertex shall also not use any Promotional Materials that have not
been reviewed and approved by Lilly in accordance with Lilly's standard
review process. In countries in which Vertex co-promotes a Drug Product,
Vertex may provide consultation and advice regarding co-promotion matters. To
facilitate communication between Vertex and Lilly regarding such co-promotion
matters, Lilly, at Vertex's written request, shall designate at least one (1)
marketing professional as a contact person in each country in which Vertex
co-promotes a Drug Product. For avoidance of any doubt, all decisions
regarding commercialization and marketing of each Drug Product, including
co-promotion matters, shall ultimately be determined by Lilly, in its sole
discretion consistent with the provisions of this Agreement.
(3) Vertex shall promote the Drug Product in strict adherence to the
applicable regulatory, professional, and legal requirements, including, but
not limited to, the American Medical Association's Gifts to Physicians from
Industry Guidelines. Any material breach of this provision by Vertex shall
constitute a basis for termination of Vertex's co-promotion rights under
Article 9 of this Agreement, upon thirty (30) days' prior written notice from
Lilly (during which time Vertex may attempt to cure the breach).
(4) If either party (the "first party") shall in its reasonable judgment
determine that any of the personnel, employees or subcontractors of the other
party performing obligations pursuant to this Agreement are being used for
purposes which are, or are involved in any activity which is, unethical,
illegal, immoral or which may harm the first party's standing or reputation,
then the first party shall be entitled to give written notice to the other
party specifying the purpose or activity constituting the subject matter of
the complaint and requiring that the other cease or use all reasonable
efforts to obtain cessation of such activity within fourteen days of receipt
of the notice. Cessation of the activity and/or termination of the offending
personnel, employee or subcontractor will generally be a reasonable response
to such a complaint.
Research and Development Agreement--Confidential--Schedule 9.3A
Schedule 9.3A (continued)
- ------------------------------------------------------------------------------
C. Additional Provisions. The parties will modify and amend the
provisions of this Appendix to the extent reasonably necessary to ensure
appropriate compliance with applicable laws, or regulatory industry
guidelines as such laws, regulations or guidelines are in force during the
period the Drug Product is marketed under this Agreement. Lilly shall
implement in a timely fashion policies to handle medical requests, government
inquiries and handling Adverse Events, including reasonable periodic audits
of sales activities related to Drug Products.
Research and Development Agreement--Confidential--Schedule 9.3A
Schedule 9.3B to
RESEARCH AND DEVELOPMENT AGREEMENT
between
VERTEX PHARMACEUTICALS INCORPORATED
and
ELI LILLY AND COMPANY
Compliance with Prescription Drug Marketing Act
- ------------------------------------------------------------------------------
Vertex shall comply with all federal, state and local laws and
regulations applicable to the distribution of samples under this Agreement,
including without limitation the Federal Food, Drug and Cosmetic Act, as
amended, and the Prescription Drug Marketing Act of 1987, as amended
("PDMA"). Prior to distributing any samples of the Drug Product, Lilly shall
review all of Vertex's policies and procedures related to pharmaceutical
sampling, and the parties must reach agreement that Vertex's policies and
procedures comply with the PDMA and are consistent with Lilly's sampling
procedures and policies. Lilly shall have the right to review on a periodic
basis Vertex's policies and procedures related to pharmaceutical sampling to
assure compliance with applicable laws and regulations as well as Lilly's
sampling procedures and policies. Vertex shall keep all records and reports
required to be kept by applicable laws and regulations, and make its
facilities available at reasonable times during business hours for inspection
by representatives of Lilly and representatives of governmental agencies.
Vertex shall send to Lilly a copy of all correspondence with FDA related to
PDMA compliance. Vertex shall notify Lilly within twenty-four (24) hours of
receipt of any notice or any other indication whatsoever of any FDA or other
governmental agency inspection, investigation or other inquiry, or other
material notice or communication of any type, involving the Drug Product.
Vertex shall cooperate with Lilly during any inspection, investigation or
other inquiry involving the Product, including, but not limited to, allowing
upon request a representative of Lilly to be present during the applicable
portions of any such inspection, investigation or other inquiry and providing
copies of all relevant documents. Vertex and Lilly shall discuss any response
to observations or notifications received in connection with any such
inspection, investigation or other inquiry and each shall give the other an
opportunity to comment upon any proposed response before it is made. In the
event of disagreement concerning the form or content of any response,
however, Lilly shall be responsible for deciding the appropriate form and
content of any response with respect to any of its cited activities and
Vertex shall be responsible for deciding the appropriate form and content of
any response with respect to any of its cited activities.
Research and Development Agreement--Confidential--Schedule 9.3B
Schedule 10.2
to
RESEARCH AND DEVELOPMENT AGREEMENT
between
VERTEX PHARMACEUTICALS INCORPORATED
and
ELI LILLY AND COMPANY
TERMS AND CONDITIONS OF SALE OF BULK DRUG SUBSTANCE
BULK DRUG SUBSTANCE SUPPLY
All sales of Bulk Drug Substance from Vertex to Lilly shall be subject to
the following terms and conditions.
Section 1. Definitions
As used in this Schedule 10.2, the following terms shall have the meanings
set forth below. Capitalized terms used but not defined in this Schedule
10.2 shall have the meanings set forth in the Agreement.
1.1. "Contract Requirements" shall mean one hundred percent (100%) of
Lilly's requirements for Bulk Drug Substance.
1.2. "Latent Defects" shall mean defects that cause the Bulk Drug
Substance to fail to conform to the Bulk Drug Substance Specifications or
otherwise fail to conform to the warranties provided by Vertex hereunder,
which defects are not discoverable upon reasonable physical inspection and
testing using the methodology specified in the Manufacturing Requirements
Document.
1.3. "Manufacturing Requirements Document" shall mean a manual containing
certain specifications, procedures, methods and personnel contacts relating
to the manufacturing and supply of the Bulk Drug Substance as more fully
described in Section 7.2 of the Agreement. Sections of the Manufacturing
Requirements Document may be modified from time to time by the Project
Team.
1.4. "Bulk Drug Substance Specifications" shall mean the specifications
for Bulk Drug Substance that are included in the Manufacturing Requirements
Document.
Research and Development Agreement--Confidential--Schedule 10.2
Schedule 10.2 (continued)
Section 2. Manufacture and Supply of Bulk Drug Substance
2.1. Pursuant to the terms and conditions of this Agreement, Lilly shall
purchase or have purchased from Vertex the Contract Requirements, and
Vertex shall manufacture, sell and deliver to Lilly such quantities of
Bulk Drug Substance. Vertex shall not manufacture or sell Bulk Drug
Substance for or to any other person.
2.2. Bulk Drug Substance shall be manufactured to conform with the Bulk
Drug Substance Specifications. The Bulk Drug Substance Specifications may
be modified from time to time by the Project Team.
Section 3. Forecasts and Orders
3.1. At the time of commencement of Phase III Clinical Trials, Lilly will
supply Vertex with a non-binding estimate of Bulk Drug Substance
requirements for the first two (2) years following first commercial sale.
Beginning with first commercial sale, Lilly shall provide Vertex on a
quarterly basis with a non-binding rolling forecast of its Bulk Drug
Substance requirements for each of the next four quarters. If Lilly
believes that market demand will require Vertex to expand its manufacturing
capacity, it will advise Vertex as soon as possible.
3.2. Orders for Bulk Drug Substance may be submitted to Vertex by Lilly or
by one or more Affiliates of Lilly. Lilly will guarantee payment by its
Affiliates. All orders shall be submitted in the form of purchase orders,
which shall be irrevocable, and which shall be delivered to Vertex, when
possible, at least one hundred eighty (180) days in advance of expected
shipment. Any such irrevocable order placed one hundred eighty (180) days
in advance of the requested shipment date shall be an "Irrevocable Order"
for purposes of Section 9 hereof.
3.3. Each Lilly order shall be governed by the terms of the Agreement
(including this Schedule 10.2), and any supply agreement subsequently
entered into between the parties, and none of the terms or conditions of
Lilly's purchase order or any acknowledgment form from Vertex shall be
applicable, except those specifying quantity ordered, delivery dates,
special supply instructions and invoice information.
Timing of shipments shall be agreed upon between the parties.
Research and Development Agreement--Confidential--Schedule 10.2
Schedule 10.2 (continued)
Section 4. Price
4.1. The price for Bulk Drug Substance to be delivered during the term of
this Agreement is set forth in Section 10.4 of this Agreement.
4.2. Bulk Drug Substance shall be delivered to [*]. Shipping charges will
be [*].
4.3. Vertex shall invoice Lilly or the Lilly Affiliate designated on each
order upon shipment of Bulk Drug Substance in accordance with Section 10.4
of this Agreement. Invoicing and payment shall be in United States Dollars.
Lilly shall guarantee timely payment by its Affiliates.
4.4. Any federal, state, county, or municipal sales or use tax, excise or
similar charge, or other tax assessment, foreign or domestic, (other than
that assessed against income), assessed or charged on the sale of Bulk Drug
Substance sold pursuant to this Agreement shall be paid by Lilly or its
Affiliate.
4.5. If Bulk Drug Substance Specifications are modified pursuant to
Subsection 2.2 hereof and such modification results in the requirement to
rework otherwise acceptable Bulk Drug Substance, Vertex shall only be
responsible for the rework costs resulting from the Bulk Drug Substance
specification changes initiated by Vertex. If revalidation is necessary
because of changes in regulatory requirements from those in effect at the
time of construction of the manufacturing facility, Vertex shall be
responsible for costs incurred in connection with the revalidation.
Section 5. Manufacture of Bulk Drug Substance
5.1. Bulk Drug Substance shall be manufactured in accordance with GMP.
Vertex shall promptly advise Lilly of any proposed process change, which
change must be approved by Lilly (and if necessary the appropriate
regulatory authorities) prior to its implementation by Vertex. Such
approvals shall not be unreasonably withheld by Lilly.
5.2. Lilly shall have the right to audit Vertex and its contractors for
compliance with the manufacturing process referenced in the appropriate
regulatory filings, GMP's, GLP's and applicable regulatory requirements at
reasonable intervals. Such audits shall be scheduled at mutually agreeable
times upon at least ten (10) days advance written notice to Vertex. Vertex
agrees to inform Lilly in advance of any regulatory inspection which affects
the manufacture of the Bulk Drug Substance, to permit a Lilly representative
to be present at the time of such
Research and Development Agreement--Confidential--Schedule 10.2
Schedule 10.2 (continued)
inspection and to promptly advise Lilly of the results of such inspection.
In the event of an FDA inspection (or other regulatory authority) which
involves the Bulk Drug Substance, Lilly shall be immediately informed of
the issuance of a notice of inspection. In the event that there are
inspectional observations (or their equivalent), Lilly shall be informed
immediately and shall have the opportunity to review and have input to the
response. If during manufacture of any lot of Bulk Drug Substance, any
rework or remanufacture is required in order to meet the Bulk Drug Substance
Specifications, Vertex shall conduct such reworks or remanufacture only
pursuant to the referenced procedures in the appropriate regulatory filings.
Vertex shall inform Lilly of any inadvertent deviation from the
manufacturing process referenced in the appropriate regulatory filings for
the Bulk Drug Substance or from GMP. Both the notification and the Lilly
response shall be in writing before the lot will be given final disposition.
Lilly, at its option, upon 10 days prior notice to Vertex, may have Lilly
personnel present at the Vertex facility where Bulk Drug Substance is
manufactured to monitor manufacturing activities. The observing and
monitoring of Vertex's operations by Lilly personnel, or the consultation
by Lilly personnel with personnel of Vertex, shall in no way relieve Vertex
of its responsibility hereunder.
5.3. Vertex shall provide certificates of analysis to Lilly for each
shipment of Bulk Drug Substance delivered hereunder as specified in the
Manufacturing Requirements Document.
5.4. Each party shall promptly advise the other of any safety or toxicity
problem of which either party becomes aware regarding Bulk Drug Substance
or intermediates used in the manufacture of Bulk Drug Substance.
Section 6. Acceptance of Bulk Drug Substance
(a) Lilly shall have a period of thirty (30) days from the date of receipt
of Bulk Drug Substance at the Lilly facility designated in the purchase
order to inspect any shipment of Bulk Drug Substance to determine whether
that shipment conforms to the Bulk Drug Substance Specifications. That
inspection shall be performed in accordance with the Manufacturing
Requirements Document. The parties may agree from time to time to revise
the analytical methods with the revisions to become effective as of the
date agreed by the parties.
(b) If Lilly determines the Bulk Drug Substance does not conform to the
Bulk Drug Substance specifications it shall notify Vertex by telephone with
a written confirmation. If Vertex agrees that the Bulk Drug Substance does
not conform to the Bulk Drug Substance, Lilly shall have the right to return
that non-conforming Bulk Drug Substance to Vertex. All or any part of any
shipment which does not
Research and Development Agreement--Confidential--Schedule 10.2
Schedule 10.2 (continued)
conform to the Bulk Drug Substance may be held for Vertex's disposition and
at Vertex's expense. If Vertex does not agree with Lilly's determination
that the Bulk Drug Substance does not conform to the Bulk Drug Substance,
Vertex shall as quickly as possible, but in any event within thirty (30)
days, so advise Lilly by telephone with written confirmation. Lilly and
Vertex shall meet and attempt to agree whether the Bulk Drug Substance
conforms to the Bulk Drug Substance Specifications.
(c) Vertex shall use its best efforts to replace any non-conforming Bulk
Drug Substance within the shortest possible time. Lilly shall have no
responsibility to Vertex for the price of non-conforming Bulk Drug Substance
but shall pay Vertex the price for the replacement Bulk Drug Substance. As
to quantities of Bulk Drug Substance in relation to which Lilly and Vertex
are unable to agree as to whether they conform to the Bulk Drug Substance
Specifications, the parties may submit appropriate samples of that Bulk Drug
Substance to a mutually acceptable third party testing laboratory that will
perform testing to determine whether the Bulk Drug Substance conforms to the
Bulk Drug Substance Specifications, using the test protocols and methodology
provided in the Manufacturing Requirements Document. If the third party
testing laboratory determines that the Bulk Drug Substance conforms to the
Bulk Drug Substance Specifications, Lilly shall pay Vertex the price
established under this Agreement for that Bulk Drug Substance. The parties
hereto recognize that it is possible for a shipment of Bulk Drug Substance
to have Latent Defects. As soon as either party becomes aware of a Latent
Defect in any lot of Bulk Drug Substance, it shall immediately notify the
other party and the lot or batch involved shall, at Lilly's election, be
deemed rejected as of the date of such notice. The party shall then
investigate to determine whether latent defects are caused by a party of
negligence in production of Bulk Drug Substance or handling of Bulk Drug
Substance after shipment from Vertex, or whether there is unforeseen
variability in the process requiring revalidation. The rejected lot will be
paid for by the non-compliant party or shared by both parties if the
process requires revalidation.
Section 7. Guarantee and Warranty
7.1. Vertex guarantees and warrants that Bulk Drug Substance delivered to
Lilly pursuant to this Agreement shall, at the time of delivery, not be
adulterated or misbranded within the meaning of the Federal Food, Drug and
Cosmetic Act, as amended, or within the meaning of any applicable foreign,
state or municipal law, as such Act and such laws are constituted and
effective at the time of delivery and will not be an article which may not
under the provisions of Sections 404 and 505 of such Act, be introduced into
interstate commerce.
Research and Development Agreement--Confidential--Schedule 10.2
Schedule 10.2 (continued)
7.2. Vertex warrants that Bulk Drug Substance delivered to Lilly pursuant
to this Agreement shall conform with the Bulk Drug Substance Specifications.
VERTEX MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO BULK
DRUG SUBSTANCE. ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE ARE HEREBY DISCLAIMED BY VERTEX. IN NO EVENT SHALL VERTEX
BE LIABLE FOR INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING,
WITHOUT LIMITATION, LOST REVENUES OR PROFITS.
Section 8. Recalls
8.1. In the event of a recall ordered by a government agency or a
confirmed failure of the Drug Product ("Recall"), Lilly shall be responsible
for the coordination of Recall activities.
8.2. Where the Recall is caused by Vertex's negligence or willful
misconduct or its material breach of this Agreement, Vertex agrees to
pay all costs and expenses of any Recall, including costs of retrieving
Bulk Drug Substance or the Drug Product already delivered to Lilly's
customers. Vertex further agrees to reimburse Lilly for costs and
expenses Lilly is required to pay for notification, shipping and
handling charges. Prior to any such reimbursement, Lilly shall provide
Vertex with supporting documentation of all reimbursable costs and
expenses. If the Recall is caused by reasons other than Vertex's
negligence, willful misconduct or material breach, Lilly shall pay all
of the costs and expenses described above for such Recall.
Section 9. In addition to any other provisions of a supply agreement between
Vertex and Lilly, the following events shall be considered "Events of
Default" under any such agreement and under the provisions of Section
13.2(b)(iii) of this Agreement:
(a) Vertex shall fail, other than as a result of Force Majeure as referred
to in Section 23.3 hereof, to supply Lilly with the amount of Bulk Drug
Substance for commercial sale specified in three consecutive Irrevocable
Orders; except to the extent that any such failure is the result of (A)
significant and unexpected increases in demand for Bulk Drug Substance over
forecasted amounts (provided that Vertex is using commercially reasonable
efforts to increase its supply capacity as soon as practicable); or (B)
changes to processes or methods agreed to by the Project Team or imposed by
law or regulatory requirements (provided that
Research and Development Agreement--Confidential--Schedule 10.2
Schedule 10.2 (continued)
Vertex is using commercially reasonable efforts to implement such changes
as soon as practicable), and provided that Vertex can demonstrate to the
reasonable satisfaction of Lilly that it has or can obtain the resources
necessary to increase capacity or implement the changes called for in (A)
and (B) above within a reasonable period of time.
(b) Vertex shall fail as a result of Force Majeure to supply Lilly with the
amount of Bulk Drug Substance for commercial sale specified in six
consecutive Irrevocable Orders, and Vertex is unable to demonstrate to the
reasonable satisfaction of Lilly that it is undertaking all commercially
reasonable efforts to resume supply in conformity herewith.
(c) On or before the date of Lilly's first submission in the United States
for Drug Product marketing approval, Vertex shall fail to provide Lilly at
its request, with reasonable assurance that it has obtained sources of
supply of Bulk Drug Substance reasonably necessary to meet the needs of the
Commercialization Program for the two (2) year period following Product
Launch, as those needs were projected by Lilly in good faith within sixty
(60) days prior to exercise by Vertex of the Vertex Commercial Supply
Option, in writing, a copy of which was provided to Vertex and attached
hereto as part of this Schedule 10.2.
Research and Development Agreement--Confidential--Schedule 10.2
Schedule 13.1(b)(i)(2)
to
RESEARCH AND DEVELOPMENT AGREEMENT
between
VERTEX PHARMACEUTICALS INCORPORATED
and
ELI LILLY AND COMPANY
Excluded Technology
- -------------------------------------------------------------------------------
U.S. Patent 4,569,794
Expires December 5, 2004
Title: Process for Purifying Proteins and Compounds Useful in such Process
Research and Development Agreement--Confidential--Schedule 13.1(b)(i)(2)
Schedule 16.3
to
Research and Development Agreement
between
Vertex Pharmaceuticals Incorporated
and
Eli Lilly and Company
Adverse Experience Reporting Procedures
- -------------------------------------------------------------------------------
The following are the procedures for handling reporting of adverse drug
experiences with the Drug Product.
1. Definition: An adverse drug experience (ADE) is any untoward happening or
failure of an expected pharmacological action in a patient after onset
of therapy without regard t the possibility of a causal relationship.
2. If Vertex or any employee, representative or agent thereof is contacted
with an ADE report, Vertex shall record the information set forth below
and FAX a report to the Lilly Global Safety Monitoring Team (GSMT)
(FAX 317-277-0853) within two (2) working days of the day received by
Vertex.
3. This includes:
- Serious and non-serious experiences
- Labeled and non-labeled experiences in the package insert
- Experiences that may or may not be drug related
4. Minimum information required includes:
- Vertex employee's, representative's or agent's name
- Reporter status (e.g. physician) with name, full address and telephone
number
- Drug/medical device information
- Adverse experience
- Patient outcome (Did the event result in any of the following):
- Death
- Life-threatening
- Hospitalization or prolong a hospitalization
- Severe or permanent disability
- Cancer
- Overdose
- Congenital anomaly
- Require intervention
- HCPS opinion of event(s) relatedness to Drug Product
Research and Development Agreement--Confidential--Schedule 16.3
Schedule 16.3 (continued)
- -------------------------------------------------------------------------------
5. Secondary Information
- Patient's name or initials
- Sex/age
- Therapy dates
- Therapy duration
- Daily dosage
- Indication for use
- Concomitant medications
- Relevant medical history
- Drug continued or discontinued
- Did event abate
- Control (Lot #) if known
6. Lilly GSMT to contact reporter to complete information and be responsible
for all regulatory reporting.
Research and Development Agreement--Confidential--Schedule 16.3
Schedule 17.1(b)
to
RESEARCH AND DEVELOPMENT AGREEMENT
between
VERTEX PHARMACEUTICALS INCORPORATED
and
ELI LILLY AND COMPANY
[*]
- ------------------------------------------------------------------------------
[*]
Research and Development Agreement--Confidential--Schedule 17.1(b)
Schedule 18.5
to
RESEARCH AND DEVELOPMENT AGREEMENT
between
VERTEX PHARMACEUTICALS INCORPORATED
and
ELI LILLY AND COMPANY
FORM OF PRESS RELEASE
- -------------------------------------------------------------------------------
Contacts:
Lynn Brum
Senior Director, Corporate Communications
Vertex Pharmaceuticals Incorporated
(617) 577-6000
Amy Magan
Communications Associate
Eli Lilly and Company
(317) 276-6337
FOR IMMEDIATE RELEASE
Vertex and Eli Lilly Form Strategic Alliance to Develop Drugs to Treat
Hepatitis C Infection
Cambridge, Massachusetts, June xx, 1997 ---- Vertex Pharmaceuticals
Incorporated (NASDAQ:VRTX) and Eli Lilly and Company (NYSE:LLY) announced
today that they have signed an agreement to collaborate on the research,
development and commercialization of novel, orally active protease
inhibitors for the treatment of chronic infection caused by the hepatitis
C virus. Under the terms of the agreement, Lilly will make research
support and milestone payments to Vertex that could total over $40
million. Vertex has also agreed to sell Lilly $10 million worth of its
stock.
Dr. Joshua Boger, President and Chief Executive Officer of Vertex, commented,
"This collaboration combines Vertex's drug discovery capabilities with
Lilly's clinical development and marketing expertise. We are confident
that Lilly's participation in this program will accelerate our effort to
develop and introduce a new treatment for the millions of people infected
with hepatitis C worldwide."
"Chronic hepatitis C is an enormous medical problem for which existing
therapies are unsatisfactory," said August M. Watanabe, M.D., Lilly Executive
Vice-President of Science and Technology. "Research to discover new
treatments for hepatitis C is very competitive. We are excited about
partnering with Vertex, which has a leading scientific position in the field,
and a proven ability to bring promising drug candidates into development."
"This alliance also underscores Lilly's commitment to develop novel
treatments for infectious diseases for which there are no satisfactory
therapies available," Watanabe continued.
Under the terms of the agreement, Vertex and Lilly will jointly manage the
research, development, manufacturing and marketing of drug candidates
emerging from the collaboration. Vertex will have primary responsibility for
drug design, process development and pre-
Research and Development Agreement--Confidential--Schedule 18.5
Schedule 18.5 (continued)
- -------------------------------------------------------------------------------
commercial drug substance manufacturing. Lilly will have primary
responsibility for formulation, preclinical and clinical development, and
global marketing. In addition, Vertex has the option to supply 100 percent of
Lilly's commercial drug substance supply needs. Vertex will receive royalties
on product sales. If Vertex exercises the commercial supply option, the
Company will receive drug supply payments rather than royalties outside of
the United States and Japan. Vertex has retained options to assist with the
promotion of drugs from the collaboration in the United States and other
selected territories.
Research and Development Agreement--Confidential--Schedule 18.5
Schedule 18.5 (continued)
- -------------------------------------------------------------------------------
Richard Aldrich, Senior Vice President and Chief Business Officer at Vertex
said, "The structure of this alliance allows Vertex to play an important role
in the development and commercialization of drugs from this collaboration,
and to obtain a significant piece of the downstream value. It is a true
partnership, where both companies have the opportunity to be heavily involved
in strategic and operational decision-making."
Vertex is conducting research to design orally deliverable drugs which
inhibit hepatitis C protease, an enzyme believed to be essential for
replication of the hepatitis C virus (HCV). In September 1996,
Vertex's scientists reported the first solution of the atomic
structure of hepatitis C protease, using X-ray crystallography.
Chronic hepatitis C afflicts nearly four million Americans, most of whom
don't know they have the disease. Worldwide, the disease strikes as many as
60 million people. Hepatitis C often affects intravenous drug users, people
who have had multiple sexual partners and people who received blood
transfusions prior to 1990. Approximately 8,000 Americans die annually from
complications of hepatitis C, primarily cirrhosis and liver failure. Current
treatments for the disease are not effective for most patients and cause
significant side effects.
Lilly is a global research-based pharmaceutical corporation headquartered
in Indianapolis, Indiana, dedicated to creating and delivering
superior health care solutions--by combining pharmaceutical
innovations, existing pharmaceutical technology, disease prevention
and management, and information technologies -in order to provide
customers worldwide with optimal clinical and economic outcomes.
Vertex Pharmaceuticals Incorporated is engaged in the discovery,
development and commercialization of novel, small molecule
pharmaceuticals for the treatment of diseases for which there are
currently limited or no effective treatments. The Company is a leader
in the use of structure-based drug design, an approach to drug
discovery that integrates advanced biology, biophysics and chemistry.
The Company is concentrating on the discovery and development of
drugs for the treatment of viral diseases, multidrug resistance in
cancer, autoimmune diseases, inflammatory diseases, and
neurodegenerative diseases.
Research and Development Agreement--Confidential--Schedule 18.5
Schedule 22.2(b)
to
RESEARCH AND DEVELOPMENT AGREEMENT
between
VERTEX PHARMACEUTICALS INCORPORATED
and
ELI LILLY AND COMPANY
ACCEPTABLE MEMBERS OF THE THIRD PARTY PANEL
- -------------------------------------------------------------------------------
Dr. Robert Mueller
Dr. J. Hoofnagle
Dr. Teresa Wright
Dr. Robert Perillo
Dr. Michael Gerber
Dr. Jules Dienstag
Dr. Robert Schooley
Dr. Stanley Lemon
Research and Development Agreement--Confidential--Schedule 22.2(b)