WHEREVER CONFIDENTIAL INFORMATION
IS OMITTED HEREIN (SUCH
OMISSIONS ARE DENOTED BY AN
ASTERISK), SUCH CONFIDENTIAL
INFORMATION HAS BEEN SUBMITTED
SEPARATELY TO THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT
COLLABORATION AGREEMENT
GENENTECH, INC. AND
XOMA CORPORATION
COLLABORATION AGREEMENT
THIS COLLABORATION AGREEMENT is made effective as of the 22nd day of April,
1996 (the "Effective Date") by and between Xoma Corporation, a Delaware
corporation having its principal place of business at 2910 7th Street, Berkeley,
California 94710 ("Xoma") and GENENTECH, INC., a Delaware corporation having its
principal place of business at 460 Point San Bruno Boulevard, South San
Francisco, California 94080 ("Genentech"), each on behalf of itself and its
Affiliates. Xoma and Genentech are sometimes referred to herein individually as
a "Party" and collectively as the "Parties," and references to "Xoma" and
"Genentech" shall include their respective Affiliates.
RECITALS
1. Genentech has licensed a monoclonal antibody (known as MHM-24) to the
CD11a cell adhesion molecule on the surface of leucocytes under the terms of an
Evaluation and License Agreement dated July 1, 1991 among Genentech, The
Chancellor Masters and Scholars of the University of Oxford, Andrew J. McMichael
and James E.K. Hildreth (the "Oxford Agreement"). Genentech has humanized such
antibody and begun its preclinical development including the development of a
pilot process for producing the antibody.
2. Genentech and Xoma wish to continue development of and eventually market
such antibody in a collaborative fashion so that the resources and expertise of
each is put to good use.
3. Genentech wishes to grant to Xoma a sublicense under the Oxford
Agreement to permit Xoma to participate in such collaborative effort.
4. Simultaneously with the execution of this Agreement, Genentech will
purchase shares of Common Stock of Xoma for an aggregate purchase price of $ *
according to the terms and conditions of a Common Stock and Convertible Note
Purchase Agreement (the "Stock Purchase Agreement") of even date herewith.
Genentech will also loan Xoma funds in an initial amount of $5,000,000 according
to the terms and conditions of a Convertible Subordinated Note Agreement (the
"Note Purchase Agreement") of even date herewith.
ARTICLE 1.
DEFINITIONS
The following terms shall have the following meanings as used in this
Agreement:
1.1 "Administration Costs" shall have the meaning defined in Exhibit A.
1.2 "Affiliate" means an entity that, directly or indirectly, through one
or more intermediaries, is controlled by Xoma or Genentech. As used herein, the
term "control" will mean the direct or indirect ownership of fifty percent (50%)
or more of the stock having the
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right to vote for directors thereof or the ability to otherwise control the
management of the corporation or other business entity.
1.3 "Allocable Overhead" shall have the meaning defined in Exhibit A.
1.4 "Anti-CD11a" means that certain monoclonal antibody, which recognizes
the CD11a cell adhesion molecule on leucocytes, more particularly described on
Exhibit B attached hereto.
1.5 "Control" means possession of the ability to grant a license or
sublicense as provided for herein without violating the terms of any agreement
or other arrangement with any Third Party.
1.6 "Combination Product Adjustment" means the following: in the event a
Licensed Product is sold in the form of a combination product containing one or
more active ingredients in addition to a Licensed Product, Royalty-Bearing Sales
or Net Sales for such combination product will be adjusted by multiplying actual
Royalty-Bearing Sales, or Net Sales as applicable, of such combination product
by the fraction A/(A + B) where A is the invoice price of the Licensed Product,
if sold separately, and B is the invoice price of any other active component or
components in the combination, if sold separately. If, on a country-by-country
basis, the other active component or components in the combination are not sold
separately in said country, Royalty-Bearing Sales or Net Sales shall be
calculated by multiplying actual Royalty-Bearing Sales or Net Sales of such
combination product by the fraction A/C where A is the invoice price of the
Product if sold separately, and C is the invoice price of the combination
product. If, on a country-by-country basis, neither the Product nor the other
active component or components of the combination product is sold separately in
said country, Royalty- Bearing Sales or Net Sales shall be determined by the
Parties in good faith.
1.7 "Competing Product" shall mean any monoclonal antibody whose mechanism
of action is initiated by interaction with the CD11a determinant on leucocytes
developed or acquired by either Party.
1.8 "Co-Promote" means to promote jointly Licensed Products through
Genentech, Xoma and their respective sales forces under a single trademark in
the Co-Promotion Territory.
1.9 "Co-Promotion Profits" shall have the same meaning as "Operating
Profits and Losses" as defined in Exhibit A.
1.10 "Co-Promotion Territory" means the * .
1.11 "Cost of Goods Sold" in the Co-Promotion Territory shall have the
meaning defined in Exhibit A.
1.12 "Development Costs" shall have the meaning defined in Exhibit A.
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1.13 "Development Plan" means the comprehensive plan for the development of
Anti- CD11a, designed to generate the preclinical, process
development/manufacturing scale-up, clinical and regulatory information required
for filing Drug Approval Applications in the Co- Promotion Territory, and is
attached hereto as Exhibit C but will be modified at least annually by the
Project Core Team. Development shall refer to all activities related to
preclinical testing, toxicology, formulation, process development, manufacturing
scale-up, quality assurance/quality control, clinical studies and regulatory
affairs for a Licensed Product in connection with obtaining Regulatory Approvals
of such Products.
1.14 "Distribution Costs" shall have the meaning defined in Exhibit A.
1.15 "Drug Approval Application" means an application for Regulatory
Approval required for commercial sale or use of a Licensed Product as a drug in
the Field in a regulatory jurisdiction.
1.16 "Field" means * .
1.17 "Genentech Know-how" means Information which (i) Genentech discloses
to Xoma under this Agreement and (ii) is within the Control of Genentech.
1.18 "Genentech Patent" means the rights granted by any governmental
authority under a Patent which covers a method, apparatus, material,
manufacture, use, treatment, process, compound, composition, or
product-by-process necessary to make, use or sell a Licensed Product in the
Field, which Patent is owned or Controlled by Genentech, including its interest
in any Patents owned jointly by the Parties as provided hereunder.
1.19 "Genentech Territory" means * .
1.20 "Gross Sales" shall have the meaning defined in Exhibit A.
1.21 "Information" means techniques and data relating to the Licensed
Products, including, but not limited to, biological materials, inventions,
practices, methods, knowledge, knowhow, skill, experience, test data including
pharmacological, toxicological and clinical test data, analytical and quality
control data, marketing, pricing, distribution, cost, sales, manufacturing,
patent data or descriptions.
1.22 "Initial Indications" means the indications for Licensed Products set
forth in Section 2.1.
1.23 "Licensed Product" means a formulation for use in the Field containing
Anti- CD11a or any molecule derived from Anti-CD11a that is substituted by the
Steering Committee as the subject of this collaboration, except as otherwise set
forth in Section 2.2.
1.24 "Marketing Costs" shall have the meaning defined in Exhibit A.
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1.25 "Net Sales" shall have the meaning defined in Exhibit A.
1.26 "Operating Profits or Losses" shall have the meaning defined in
Exhibit A.
1.27 "Patent" means (i) valid and enforceable letters patent, including any
extension, registration, confirmation, reissue, continuation, division,
continuation-in-part, re-examination or renewal thereof and (ii) pending
applications for letters patent.
1.28 "Patent Costs" shall have the meaning defined in Exhibit A.
1.29 "Phase II Clinical Trial" means such studies in humans of the safety,
dose ranging and efficacy of a Licensed Product which have generated sufficient
data to commence Phase III Clinical Trials.
1.30 "Phase III Clinical Trial" means a controlled study in humans of the
efficacy and safety of a Licensed Product which is prospectively designed to
demonstrate statistically whether the Licensed Product is effective for use in a
particular indication in a manner sufficient to obtain regulatory approval to
market that Licensed Product and which the Project Core Team designates as a
Phase III Clinical Trial.
1.31 "Project Core Team" means that body established pursuant to Section
3.2 below.
1.32 "Regulatory Approval" means any approvals (including pricing and
reimbursement approvals), licenses, registrations or authorizations of any
federal, state or local regulatory agency, department, bureau or other
governmental entity, necessary for the manufacture and sale of Products in a
regulatory jurisdiction.
1.33 "Royalty-Bearing Sales" means the gross amount invoiced by Genentech
or its permitted sublicensees for sales to an unrelated Third Party of a
Licensed Product in the Genentech Territory, less (i) trade, cash and quantity
discounts or rebates, (ii) credits or allowances given or made for rejection or
return of, and for uncollectible amounts on, previously sold products or for
retroactive price reductions (including rebates similar to Medicare), (iii)
taxes, duties or other governmental charges levied on or measured by the billing
amount, as adjusted for rebates and refunds, (iv) charges for freight and
insurance directly related to the distribution of Licensed Products (to the
extent not paid by the Third Party customer), and (v) credits or allowances
given or made for wastage replacement, indigent patient and similar programs, to
the extent actually deducted from the gross amount invoiced. Such amount shall
then be adjusted by the Combination Product Adjustment, if applicable.
1.34 "Sales Costs" shall have the meaning defined in Exhibit A.
1.35 "Sales Representative" means an employee of either Party or its
Affiliates (i) who is responsible for contacting customers and others who can
buy or influence the buying decision on the applicable Licensed Product in the
applicable country in the Co-Promotion Territory, and
-5-
(ii) whose success at such activities is a significant factor in the
ongoing employment of the individual, and shall exclude an employee of either
Party or an Affiliate engaged in telemarketing, professional education, and
similar indirect activities in support of direct selling.
1.36 "Steering Committee" means that committee established pursuant to
Section 3.1 below.
1.37 "Third Party" means any entity other than Xoma or Genentech.
1.38 "Third Party Royalties" means royalties payable to a Third Party in
connection with Licensed Products.
1.39 "Xoma Know-how" means Information which (i) Xoma discloses to
Genentech under this Agreement and (ii) is within the Control of Xoma.
1.40 "Xoma Patent" means the rights granted by any governmental authority
under a Patent which covers a method, apparatus, material, manufacture, use,
treatment, process, compound, composition or product-by-process necessary to
make, use or sell a Licensed Product in the Field, which Patent is owned or
Controlled by Xoma, including its interest in any Patents owned jointly by the
Parties as provided hereunder.
ARTICLE 2.
SCOPE OF COLLABORATION
2.1 Initial Indications. The Parties will focus their initial efforts on
the development of Licensed Products to treat psoriasis and prevent or decrease
the rejection of organ transplants.
2.2 Option to Include Competing Products. Neither Party shall , alone or
with any Third Party, conduct any human clinical trial of any Competing Product
without first giving the other Party (the "Electing Party") advance written
notice. The Electing Party shall have 120 days from the date the first Party
delivers such notice to elect to include such Competing Product as a Licensed
Product. The terms and conditions governing the development and
commercialization of Competing Products shall be similar to the terms and
conditions set forth in this Agreement for the development and commercialization
of Anti-CD11a, taking into account the relative commercial value of the
Competing Product compared to Anti-CD11a. If the Electing Party does not notify
the first Party of its election to so include a Competing Product within such
120-day period, the first Party shall be free to proceed with the development
and commercialization of such Competing Product without any obligation to the
Electing Party.
2.3 Development Costs.
(a) Xoma shall bear all Development Costs of Anti-CD11a in the Field
in the Co-Promotion Territory through the successful completion of Phase II
Clinical Trials, including but not limited to certain IND-enabling studies and
supplying Anti-CD11a and all costs of
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activities set forth in the Development Plan, as amended from time to time
by the Project Core Team.
(b) If Xoma elects the option set forth in Section 5.1(b) below, all
Development Costs incurred by the Parties in the Co-Promotion Territory after
the first Regulatory Approval for Anti-CD11a in the United States shall be
charged against Operating Profits (or Losses).
(c) Genentech shall bear all costs for development of Anti-CD11a in
the Field not incurred in the Co-Promotion Territory.
ARTICLE 3.
MANAGEMENT OF THE COLLABORATION
3.1 Steering Committee.
(a) Within thirty (30) days of the Effective Date, the Parties will
establish a Steering Committee to oversee and manage the collaboration in the
Co-Promotion Territory contemplated by this Agreement. The Steering Committee
will be composed of two representatives appointed and replaced by Xoma and two
representatives appointed and replaced by Genentech. Such representatives will
be senior officers and/or managers of their respective companies. Any member of
the Steering Committee may designate a substitute to attend and perform the
functions of that member at any meeting of the Steering Committee. The Steering
Committee will meet at least once each calendar quarter, or at any frequency
agreed by the Steering Committee, and will operate by consensus.
(b) The Steering Committee shall perform the following functions:
(i) determine the overall strategy for and monitor the
collaboration in the manner contemplated by this Agreement;
(ii) review and approve development and commercialization plans
and annual budgets formulated by the Project Core Team and annual budgets
formulated by the Project Core Team or the Finance Committee.
(iii) settle disputes or disagreements that are unresolved by the
Project Core Team or Finance Committee unless otherwise indicated in this
Agreement; and
(iv) perform such other functions as appropriate to further the
purposes of this Agreement as determined by the Parties.
If the Steering Committee is unable to resolve a dispute regarding any
issue presented to it, such dispute shall be resolved in accordance with Article
17 below.
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3.2 Project Core Team.
(a) Within thirty (30) days of the Effective Date, the Parties will
establish the Project Core Team to oversee and control all development and
commercialization of Anti-CD11a in the Co-Promotion Territory, in the Field,
including pre-clinical research, clinical research, manufacturing, regulatory
filings, and post-approval development studies. If the Parties Co- Promote
Licensed Products, the Product Core Team will also (i) monitor, review and
direct the commercialization of Licensed Products in the Co-Promotion Territory,
including annual marketing and sales budgets, annual forecasts of sales and
production requirements, the annual marketing plan, the appropriate role for
Genentech and Xoma to play in commercialization activities in the Co-Promotion
Territory, broad product positioning and creative campaign strategies, pricing,
managed care contract strategies, Phase IV clinical support (especially
strategic direction), and allocation of Marketing Costs, Sales Costs and
Administration Costs of each company as well as (ii) select trademarks for
Licensed Products. The Project Core Team will be composed of three
representatives appointed by each of Xoma and Genentech. Each representative
will have one vote on all matters within the Project Core Team's purview. Such
representatives will include individuals with expertise and responsibilities in
the areas of preclinical development, clinical development, process sciences,
manufacturing, regulatory affairs or product development and marketing. Either
Party may replace any or all of its representatives at any time upon written
notice to the other Party. Any member of the Project Core Team may designate a
substitute to attend and perform the functions of that member at any meeting of
the Project Core Team. The Project Core Team will meet at least once each
calendar quarter, or more frequently, as agreed by the Project Core Team. The
Project Core Team will operate by consensus. If the Project Core Team is unable
to resolve a dispute regarding any issue presented to it, such dispute shall be
resolved in accordance with Article 17 below.
(b) The Project Core Team shall be responsible for formulating
development and commercialization plans and an annual budget and for
implementing all activities approved by the Steering Committee, except that Xoma
shall formulate the first annual budget and submit it for approval to the
Project Core Team within thirty (30) days of the Effective Date. The Project
Core Team will finalize each subsequent annual budget and modify the Development
Plan at least four months prior to the end of the then-current development year.
(c) If any Genentech European development partner so requests, Xoma
will consider in good faith allowing a representative of such partner to be a
non-voting member of the Project Core Team.
(d) The Project Core Team will cease operations and have no further
function hereunder on the later of (i) the date on which the Parties are no
longer developing any Licensed Product in the Co-Promotion Territory, or (ii)
the date on which the Parties are no longer sharing Operating Profits or Losses
with respect to any Licensed Product in the Co-Promotion Territory.
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3.3 Finance Committee. (a) Within thirty (30) days of the date Xoma elects
the option set forth in Section 5.1(b) below, the Parties will establish the
Finance Committee to be composed of two representatives appointed and replaced
by each of Xoma and Genentech. Such representatives will include individuals
with expertise and responsibilities in the areas of accounting, cost allocation,
budgeting and financial reporting. Any member of the Finance Committee may
designate a substitute to attend and perform the functions of that member at any
meeting of the Finance Committee. The Finance Committee will operate by
consensus. If the Finance Committee is unable to resolve a dispute regarding any
issue presented to it, such dispute shall be resolved in accordance with Article
17.
(b) The Finance Committee shall operate under the direction of the Steering
Committee to provide services to and consult with the Project Core Team in order
to address the financial, budgetary and accounting issues which arise in
connection with the Development Plan and updates thereto as described in Exhibit
A.
(c) The Finance Committee shall have no involvement in the development of
Licensed Products in the Genentech Territory, which shall be the responsibility
of Genentech, subject to the terms and conditions of this Agreement.
(d) The Finance Committee will cease operating and have no further function
hereunder on the date on which the Parties are no longer sharing Operating
Profits or Losses with respect to any Licensed Product in the Co-Promotion
Territory.
3.4
*
ARTICLE 4.
DEVELOPMENT IN THE CO-PROMOTION TERRITORY
4.1 Development Efforts. Xoma and Genentech each agree to collaborate
diligently in the development of Licensed Products in the Field and to use
commercially reasonable and diligent efforts to develop and bring Licensed
Products to market in the Field as soon as practicable. The Parties further
agree to execute and substantially perform the Development Plan and to cooperate
with the other in carrying out the Development Plan. As used in this Agreement,
the term commercially reasonable and diligent efforts will mean those efforts
consistent with the exercise of prudent scientific and business judgment, as
applied to other pharmaceutical products of similar potential and market size by
the Party in question.
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4.2 Genentech Development Responsibilities. Genentech agrees to be
responsible for the following specific activities necessary to complete
development of Anti-CD11a up to completion of Phase II Clinical Trials:
(a) Transfer all preclinical data, assays and associated materials,
protocols, procedures and any other information in Genentech's possession
required to initiate clinical development of Anti-CD11a at no cost to Xoma.
(b) Complete its development of a pilot process to manufacture
Anti-CD11a. Transfer the cell bank for Anti-CD11a production as well as all
associated assays, procedures and other information required for Xoma to supply
Licensed Product for any IND-enabling studies and human clinical trials to the
end of Phase II Clinical Trials. The Project Core Team will determine if any
process improvements or refinements are required and which Party will be
responsible for such improvements or refinements. Xoma will pay all costs
incurred in making such improvements or refinements after Genentech has
transferred the pilot process to Xoma and Xoma has accepted it, such acceptance
not to be unreasonably withheld.
(c) Conduct additional preclinical research as agreed upon by the
Project Core Team and approved by the Steering Committee to develop Anti-CD11a
for indications additional to the Initial Indications at Xoma's expense.
Development Costs shall exclude the costs incurred by Genentech pursuant to (a)
and (b) above.
4.3 Xoma Development Responsibilities. Xoma agrees to be responsible
for the following specific activities necessary to complete development of
Anti-CD11a up to the successful completion of Phase II Clinical Trials:
(a) Use commercially reasonable and diligent efforts to conduct all
IND- enabling studies and human clinical studies for the Initial Indications
through the successful completion of Phase II Clinical Trials and make all
filings with and supporting all communications with the US Food and Drug
Administration ("FDA") necessary to conduct such studies.
(b) Upon transfer of manufacturing technology by Genentech, Xoma will
use Genentech's process at Xoma's manufacturing facilities (upgrading such
facilities if necessary) to supply all requirements of Licensed Product for
preclinical and human clinical trials up to the successful completion of Phase
II Clinical Trials in the Co-Promotion Territory.
4.4 Drug Approval Applications. Consistent with the Development Plan,
Genentech shall use commercially reasonable and diligent efforts to file Drug
Approval Applications and seek Regulatory Approvals for Licensed Products in the
Co-Promotion Territory. Prior to submitting any Drug Approval Application, the
Parties, through the Project Core Team, shall consult, cooperate in preparing
and mutually agree on such Applications and their content and scope. Genentech
shall own all regulatory submissions including all Drug Approval
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Applications for Licensed Products in the Co-Promotion Territory. If the
Parties Co-Promote Licensed Products, the Parties will include on all package
labels and inserts for Licensed Products sold in the Co-Promotion Territory the
names and logos of Xoma and Genentech with equal prominence, to the extent
permitted by the applicable regulatory authorities.
4.5 Development Delays. The Development Plan and the Parties contemplate
that Xoma will successfully complete a Phase II Clinical Trial for one of the
Initial Indications by December 31, 1998, assuming that Genentech provides
necessary materials on a timely basis to Xoma and completes the transfer
described in Section 4.2(a) by June 1, 1996. Any delay in such transfer will
cause the December 31, 1998 date to be extended by the length of time of such
delay. In addition, any material delay by Genentech in performing any of its
obligations under this Agreement that actually causes Xoma not to be able to
meet the timelines set forth in the Development Plan will cause the December 31,
1998 or extended date to be extended by the length of time of the delay by
Genentech.
ARTICLE 5.
COMMERCIALIZATION IN THE CO-PROMOTION TERRITORY
5.1 Xoma Options for Commercialization. If Xoma successfully completes a
Phase II Clinical Trial for one of the Initial Indications by December 31, 1998
(or such other date set pursuant to Section 4.5) as determined by the Steering
Committee, then Xoma may choose either option A or option B as described below
for continuing development and commercialization of Licensed Products:
(a) Under Option A, Xoma will continue to participate in the
development of Anti-CD11a to the extent elected by Genentech under Section
5.2(b) below. Genentech may elect to have Xoma participate in activities leading
to Regulatory Approval in the Co-Promotion Territory. If Xoma incurs any further
Development Costs due to such participation (elected by Genentech) during the
period ending on the date on which Regulatory Approval by the FDA is first
received for a Licensed Product, such costs will be funded by a loan from
Genentech under the mechanism set forth in the Note Agreement. Upon such
Regulatory Approval, all outstanding balances then due and owing to Genentech
under the provisions of the Note Agreement would be accelerated and converted
into the non-voting preferred stock described in the Note Agreement. Under
Option A, Xoma would *
(b) Under Option B, Xoma will continue to participate in the
development of Anti-CD11a to the extent elected by Genentech under Section
5.2(b) below. Xoma will * receive the right to Co-Promote Licensed Products.
Xoma may elect to have * . In such event, * , all amounts previously loaned to
Xoma by Genentech will become immediately due and payable in cash, or, at Xoma's
option, will be convertible into equity based on the fair market value of Xoma
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Common Stock on such date. Upon receipt of Regulatory Approval from
the FDA, all outstanding balances due and owing to Genentech would be
accelerated as described in (a) above. Under Option B, Xoma would receive
*
Xoma will notify Genentech whether it elects Option A or Option B
above within thirty (30) days after the successful completion of a Phase II
Clinical Trial for one of the Initial Indications.
5.2 Genentech Options for Commercialization. (a) If Xoma elects the
option set forth in Section 5.1(a) above, Genentech may choose to either (1) *
or (2) * . Genentech shall notify Xoma of its election of option (1)
or option (2) within thirty (30) days of receipt of notice from Xoma of its
election under Section 5.1. If Genentech selects option (1), * .
(b) Within fifteen days of receipt of Xoma's notice pursuant to
Section 5.1 above, Genentech shall notify Xoma whether Genentech elects to
assume all or some part of the responsibility (subject to * for the development
of Licensed Products under either of the options selected by Xoma under Section
5.1 above, including scale-up of the commercial manufacturing process, conduct
of Phase III Clinical Trials and activities associated with making the Drug
Approval Application in the Co-Promotion Territory. Such election shall be at
Genentech's sole discretion. All other development responsibilities will be
determined by the Project Core Team.
(c) In the event that Xoma does not successfully complete a Phase II
Clinical Trial for one of the Initial Indications by December 31, 1998 (or such
other date set under Section 4.5), Genentech may select from one of the
following two options: (1) extend the period for successful completion of a
Phase II Clinical Trial for one of the Initial Indications past December 31,
1998 to any date it wishes, thereby also extending the right of Xoma to select
an option under Section 5.1 above, or (2) select the option set forth in Section
5.1(a) above.
5.3 Commercialization Efforts. If Xoma elects the option set forth in
Section 5.1(b) above, Xoma and Genentech each agree to (i) collaborate
diligently in the commercialization of the Licensed Products and (ii) use
commercially reasonable and diligent efforts to commercialize the Licensed
Products promptly and in such a manner as to maximize Operating Profits. The
Parties agree that Genentech will play the primary role and Xoma the secondary
role in all sales, marketing and product launch activities and tactical
execution of marketing and sales promotional programs in the Co-Promotion
Territory. The Parties shall be guided by a standard of reasonableness in
economic terms and of fairness to each of the Parties, striving to balance as
best they can the legitimate interests and concerns of the Parties and to
realize the economic
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potential of the Licensed Products. The Project Core Team (subject to
approval by the Steering Committee) shall develop a plan for commercialization
of Licensed Product at such time as the members of the Project Core Team decide
it is useful to do so. Such plan shall, among other things, determine the
responsibilities for sales of and distributing Licensed Products, development of
marketing and promotional materials and conduct of training programs for Sales
Representatives of both Parties. Unless otherwise agreed, Genentech shall have
the sole responsibility with respect to the following:
(a) Booking sales for and distributing the Licensed Products.
(b) Handling all returns of the Licensed Products.
(c) Handling all recalls of the Licensed Products.
(d) Handling all aspects of order processing, invoicing and
collection, Licensed Product distribution, warehousing, inventory and
receivables, and collection of data of sales to hospitals and other end users
(e.g., DDD data).
(e) Handling all other customer service related functions.
5.4 Sales Efforts in the Co-Promotion Territory.
(a) Although Genentech has the primary marketing role, Xoma shall be
permitted to deploy Sales Representatives in the Co-Promotion Territory to the
extent that such deployment will enhance the Parties' ability to maximize
Operating Profits, but in no event may Xoma * in the Co-Promotion Territory. The
Parties agree to allocate markets and accounts in an unbiased manner based on
objective, quantifiable information and market research data with the objectives
of allocating to each Party markets and accounts from which each such Party will
have the opportunity to maximize Operating Profits.
(b) The Parties shall recover their Sales Costs in accordance with
Exhibit A.
ARTICLE 6.
DEVELOPMENT AND COMMERCIALIZATION IN GENENTECH TERRITORY
6.1 Development Costs, Marketing Costs and Cost of Goods Sold. Genentech
shall bear all costs related to the development and commercialization of the
Licensed Products in the Genentech Territory. Genentech shall have the sole
responsibility for, and right to make all decisions regarding, all development
and marketing activities in the Genentech Territory.
6.2 Cooperation on Development Efforts. To facilitate cooperation between
the Parties on the worldwide development and marketing of Licensed Products,
Genentech shall keep Xoma informed of all substantive development activities in
the Genentech Territory. Genentech
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shall consider in good faith any comments made by Xoma. Both Parties agree
that they will do nothing during Licensed Product development activities to
imperil Regulatory Approvals in any country in any territory.
ARTICLE 7.
EQUITY AND DEBT PURCHASES, MILESTONES, PROFIT SHARING, AND ROYALTIES
7.1 Payments upon Execution. On the Effective Date, Genentech shall make
the following payments to Xoma:
(a) $ * to purchase shares of Xoma Common Stock as set forth in the
Stock Purchase Agreement.
(b) $5,000,000 as an interest-bearing loan under the terms and
conditions of the Note Agreement one of the terms of which is convertibility to
the non-voting Preferred Stock of Xoma upon the earlier of (i) the date of
receipt of any Regulatory Approval in the United States or (ii) the date that is
ten days after the date the loan is due and payable, assuming the loan is not
paid in full before such date. The purpose of Genentech's making such $5,000,000
loan is to provide Xoma the necessary funds to permit it to fulfill its initial
development obligations under this Agreement, and, accordingly, one condition
contained in the Note Purchase Agreement is a condition that any loans made
under the Note Purchase Agreement are to be used solely for the development of
Licensed Product as set forth in the Development Plan. The Parties believe that
the $5,000,000 loan will be sufficient to support development for the first
year, but Genentech will make up any shortfall between the $5,000,000 and the
actual budget for the first year by increasing the loan by that amount when the
next year's budget and modifications to the Development Plan are approved by the
Steering Committee. Similarly, any amount of the $5,000,000 that is over the
first year's budget will be carried forward to fund the next year's budget.
7.2 Other Note Purchases. Genentech will increase the amount loaned to Xoma
under the terms and conditions of the Note Purchase Agreement for the purposes
of developing Licensed Products at the beginning of each year to cover the
budget formulated by the Project Core Team for that year until the earlier of
(1) December 31, 1998 (or any later date selected by Genentech under Section
5.2(c)(1)) and (2) the completion of a Phase II Clinical Trial for an Initial
Indication. In addition, if Xoma selects the option set forth in Section 5.1 (a)
or Genentech selects such option for Xoma under Section 5.2(c)(2), Genentech
will loan Xoma the amount necessary to fund its development obligations under
the Development Plan based on the annual budget in a similar fashion each year
until the receipt of Regulatory Approval (unless Genentech earlier terminates
this Agreement) under the terms and conditions of the Note Purchase Agreement.
7.3 Milestone Payment. Genentech shall make a milestone payment to Xoma of
$ * within thirty (30) days after the successful completion of a Phase II
Clinical Trial for one of the Initial Indications, as recommended by the Project
Core Team and approved by the
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Steering Committee, but such milestone payment will be made if and only if
such successful completion occurs on or before December 31, 1998 (as may be
extended pursuant to Section 4.5).
7.4 Share of Operating Profits or Losses. If Xoma selects the option set
forth in Section 5.1(b), Xoma and Genentech shall share in Operating Profits or
Losses from sales of Licensed Products in the Co-Promotion Territory as provided
in Exhibit A. The Parties shall share Operating Profits or Losses hereunder in
the Co-Promotion Territory until the earlier of the date the Parties mutually
agree to terminate the collaboration in the Co-Promotion Territory or * after
the first commercial sale of Licensed Product in the Co-Promotion Territory. At
the end of such period, Xoma's rights to Co-Promote shall cease. Genentech may
continue to market Licensed Products and will pay Xoma a royalty of * of
Royalty- Bearing sales worldwide in any year.
7.5 Royalties.
(a) Genentech shall pay Xoma a royalty on Royalty-Bearing Sales of
Licensed Products in the Genentech Territory as follows:
*
(b) Genentech shall pay any Third Party royalties owed on account of
sales of Licensed Product in the Genentech Territory, including royalties owed
due to the manufacture of Licensed Products by Genentech. Genentech shall
receive a credit of * % of the royalties it pays on account of the manufacture,
use or sale of Licensed Products against royalties due to Xoma * provided,
however, that in no event shall royalties due to Xoma be reduced to *
7.6 Royalty Payment Reports. Royalty payments under this Agreement shall be
made to Xoma or its designee quarterly within ninety (90) days following the end
of each calendar quarter for which royalties are due. Each royalty payment shall
be accompanied by a report summarizing the Royalty-Bearing Sales during the
relevant three-month period.
7.7 Term of Royalty Obligations.
(a) Genentech shall pay royalties hereunder with respect to each
Licensed Product in each country in the Genentech Territory for * from the date
of first commercial sale in such country.
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(b) Upon expiration of the royalty term for a Licensed Product in a
country as described above, Genentech shall thereafter have an exclusive,
paid-up irrevocable license to make, use, sell, offer for sale, have sold and
import that Licensed Product in that country.
7.8 Taxes. Xoma shall pay any and all taxes levied on account of, or
measured exclusively by, any payment including royalties it receives under this
Agreement. If laws or regulations require that taxes be withheld, Genentech will
(i) deduct those taxes from the remittable royalty, (ii) timely pay the taxes to
the proper taxing authority, and (iii) send proof of payment to Xoma within
sixty (60) days following that payment.
7.9 Blocked Currency. In each country where the local currency is blocked
and cannot be removed from the country, royalties shall continue to be accrued
in such country and Royalty-Bearing Sales in such country shall continue to be
reported, but such royalties will not be paid until they may be removed from the
country. At such time as Genentech is able to remove currency from such country
it shall also remove and pay the royalties accrued on Xoma's behalf.
7.10 Foreign Exchange. For the purpose of computing Royalty-Bearing Sales
for Licensed Products sold in a currency other than United States Dollars, such
currency shall be converted into United States Dollars in accordance with
Genentech's customary and usual translation procedures consistently applied.
7.11 Payments to or Reports by Affiliates. Any payment required under any
provision of this Agreement to be made to either Party or any report required to
be made by any Party shall be made to or by an Affiliate of that Party if
designated by that Party as the appropriate recipient or reporting entity.
7.12 Sales By Sublicensees. In the event Genentech grants licenses or
sublicenses to others to make or sell Licensed Products in the Genentech
Territory and such licenses or sublicenses are granted to an unrelated Third
Party (understanding that Roche (as defined in Section 6(b) of the Stock
Purchase Agreement) is not an unrelated Third Party), then Genentech *
. Any licenses or sublicenses granted by Genentech shall include an
obligation for the licensee or sublicensee to account for and report its
Royalty-Bearing Sales of such Products on the same basis as if such sales were
Royalty-Bearing Sales by Genentech, and Genentech shall pay royalties to Xoma as
if the Royalty-Bearing Sales of the sublicensee were Royalty-Bearing Sales of
Genentech. Genentech shall provide Xoma with copies of any licenses or
sublicenses it grants, with any financial or other confidential terms redacted.
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ARTICLE 8.
MANUFACTURE AND SUPPLY
8.1 Transfer of Materials and Knowhow.
No later than April 23, 1996, Genentech will transfer to Xoma the
pre-master cell bank cells and associated media necessary for Xoma to undertake
the manufacture of Licensed Products for preclinical development and provide
know-how and expertise to help Xoma with such manufacture in a timely fashion
provided that Xoma only uses such biological materials, know-how, reagents and
expertise to manufacture Licensed Products. If Xoma is unable to use the
pre-bank cells and must instead use cells from the master cell bank to be
developed on or about May 1, 1996, the Project Core Team (with the approval of
the Steering Committee) will discuss in good faith whether the delay in
obtaining a cell line has caused a delay in the project timeline of the kind
described in Section 4.5. All transfers of materials and information to Xoma
shall be free of charge to Xoma; provided, however, that Genentech's obligation
to train Xoma personnel in the use of such materials or information shall be
limited to a reasonable number of hours.
8.2 Manufacture of Licensed Products for Clinical Trials.
(a) Xoma will supply all quantities of Anti-CD11a for pre-clinical
studies and clinical trials in the Co-Promotion Territory directed toward the
successful completion of a Phase II Clinical Trial for the Initial Indications.
(b) Xoma shall supply to Genentech, at Xoma's actual Cost of Goods
Sold, all quantities of Licensed Products for preclinical studies and clinical
trials in the Genentech Territory or for expanded needs recommended by the
Project Core Team and approved by the Steering Committee (and budgeted) beyond
the successful completion of a Phase II Clinical Trial for one of the Initial
Indications subject to the election of Genentech under 5.2(b) on providing
Licensed Products.
8.3 Termination of Participation. If Genentech elects to assume
responsibility for manufacturing under Section 5.2(b), Xoma shall immediately
provide to Genentech at Genentech's request all process and manufacturing
technology, material and data and, provide access to regulatory filings
sufficient to enable Genentech concurrently to produce and supply Licensed
Product. Xoma shall provide reasonable assistance to Genentech with respect to
such transfer so as to permit Genentech to begin manufacturing and supplying its
requirements as soon as possible to minimize any disruption in the continuity of
supply.
ARTICLE 9.
LICENSES
9.1 Licenses To Xoma Within The Field. Genentech grants to Xoma a
co-exclusive royalty-free license under the Genentech Patents and Genentech
Know-how in the Field to
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develop, make, use, sell, and offer for sale Licensed Products in the
Co-Promotion Territory. Xoma covenants and agrees not to develop, make, have
made, use, sell, offer for sale, have sold or import any product using the
Genentech Patents or Know-how outside of the Field. Xoma's rights to sell
Licensed Products are subject to its having made the election to Co-Promote
under Section 5.1(b).
9.2 License To Genentech Within the Field. Xoma grants to Genentech a
worldwide royalty-free license under the Xoma Patents and Xoma Know-how in the
Field to develop, make, use, sell, offer for sale, have sold and import Licensed
Products. Such license shall be co-exclusive with Xoma in the Co-Promotion
Territory and exclusive even as to Xoma in the Genentech Territory. Genentech
covenants and agrees not to develop, make, have made, use, sell, offer for sale,
have sold or import any product using the Xoma Patents or Know-how outside of
the Field.
9.3 Sublicensing. Genentech may grant sublicenses *
Unless otherwise agreed, each sublicensee shall be subject to all of the
obligations of Genentech hereunder applicable to that part of the territory
being licensed.
ARTICLE 10.
TRADEMARKS
10.1 Product Trademarks. All Licensed Products shall be sold in the
Co-Promotion Territory under trademarks selected by the Project Core Team and
owned by Genentech. Genentech hereby grants Xoma a fully-paid up co-exclusive
license to use its trademarks in the Co-Promotion Territory for the Co-Promotion
activities provided for in this Agreement.
10.2 Infringement of Trademarks. Xoma shall notify the Project Core Team
promptly upon learning of any actual, alleged or threatened infringement of a
trademark applicable to a Licensed Product (the "Trademark") in the Co-Promotion
Territory or of any unfair trade practices, trade dress imitation, passing off
of counterfeit goods, or like offenses in the Co-Promotion Territory. The
Project Core Team shall confer with Genentech regarding the defense of such
Trademark. The decision whether and how to defend such a Trademark will rest
with Genentech; provided, however that if Genentech fails to bring an action or
proceeding in the Co-Promotion Territory within a period of sixty (60) days of
notice by Xoma to Genentech requesting action, Xoma will have the right, at its
own expense, to bring and control any such action or proceeding in the
Co-Promotion Territory by counsel of its own choice.
10.3 Costs of Defense for Solely Owned Trademarks. All of the costs,
expenses and legal fees in bringing, maintaining and prosecuting any action to
maintain, protect or defend a Trademark shall be borne solely by the Party
bringing the action and any recovery shall be solely for that Party's account.
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ARTICLE 11.
CONFIDENTIALITY
11.1 Confidentiality; Exceptions. Except to the extent expressly authorized
by this Agreement or otherwise agreed in writing, the Parties agree that, for
the term of this Agreement and for * thereafter, the receiving Party shall keep
confidential and shall not publish or otherwise disclose or use for any purpose
other than as provided for in this Agreement any Information and other
information and materials furnished to it by the other Party pursuant to this
Agreement (collectively, "Confidential Information"), except to the extent that
it can be established by the receiving Party that such Confidential Information:
(a) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the other Party;
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;
(c) became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or omission of
the receiving Party in breach of this Agreement;
(d) was disclosed to the receiving Party, other than under an
obligation of confidentiality, by a Third Party who had no obligation to the
disclosing Party not to disclose such information to others; or.
(e) was subsequently developed by the receiving Party without use of
the Confidential Information as demonstrated by competent written records.
11.2 Authorized Disclosure. Each Party may disclose Confidential
Information hereunder to the extent such disclosure is reasonably necessary in
filing or prosecuting patent applications, prosecuting or defending litigation,
complying with applicable governmental regulations or conducting preclinical or
clinical trials, provided that if a Party is required by law or regulation to
make any such disclosure of the other Party's Confidential Information it will,
except where impracticable for necessary disclosures, for example in the event
of medical emergency, give reasonable advance notice to the other Party of such
disclosure requirement and, except to the extent inappropriate in the case of
patent applications, will use its reasonable efforts to secure confidential
treatment of such Confidential Information required to be disclosed. In
addition, each Party shall be entitled to disclose, under a binder of
confidentiality containing provisions as protective as those of this Article 11,
Confidential Information to consultants, potential sublicensees and other Third
Parties only for any purpose provided for in this Agreement. Nothing in this
Article 11 shall restrict any Party from using for any purpose any Information
developed by it during the course of the collaboration hereunder.
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11.3 Survival. This Article 11 shall survive the termination or expiration
of this Agreement for a period of * .
11.4 Termination of Prior Agreement. This Agreement supersedes the
Confidentiality Agreements between the Parties dated October 11, 1995, one of
which was last signed on October 20, 1995 and one of which was last signed on
January 11, 1996 and both of which were amended on April 11, 1996, except that
the Research Scientists, as defined in the Oxford Agreement, shall continue to
be third party beneficiaries under this Agreement to the extent such previous
Confidentiality Agreement is superseded. All Information exchanged between the
Parties under that Agreement shall be deemed Confidential Information and shall
be subject to the terms of this Article 11.
11.5 Publications. Prior to the launch of any Licensed Product in the
Co-Promotion Territory, the Project Core Team will determine the overall
strategy for publication in support of such Licensed Products in the
Co-Promotion Territory. Except as required by law, each Party agrees that it
shall not publish or present the results of studies carried out as part of the
collaboration without the opportunity for prior review by the other Party. Each
Party shall provide to the other the opportunity to review any proposed
abstracts, manuscripts or presentations (including information to be presented
verbally) which relate to the Field at least forty-five (45) days prior to their
intended submission for publication and such submitting Party agrees, upon
written request from the other Party, not to submit such abstract or manuscript
for publication or to make such presentation until the other Party is given a
reasonable period of time to seek patent protection for any material in such
publication or presentation which it believes is patentable.
ARTICLE 12.
OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS
12.1 Ownership of Intellectual Property. Xoma shall own all inventions made
under this Agreement solely by its employees. Genentech shall own all inventions
made under this Agreement solely by its employees. All inventions made under
this Agreement jointly by employees of Xoma and Genentech will be owned jointly
by Xoma and Genentech and each Party shall retain full ownership under any
Patents resulting therefrom, with full ownership rights in any field and the
right to sublicense without the consent of the other Party, without accounting.
The laws of the United States with respect to joint ownership of inventions
shall apply in all jurisdictions giving force and effect to this Agreement.
12.2 Disclosure of Patentable Inventions. In addition to the disclosures
required under Article 14, each Party shall provide to the other any invention
disclosure submitted in the normal course and disclosing an invention useful in
the Field and relating to a Licensed Product. Such invention disclosures shall
be provided to the other Party within thirty (30) days after the Party
determines that an invention has been made.
-20-
12.3 Patent Filings. Each Party, at its sole discretion and responsibility
shall file, prosecute and maintain Patents to cover its own discoveries and
inventions relating to any Product in the Field and use reasonable efforts to
file initially all applications in the United States. The determination of the
countries in the Genentech Territory in which to file shall be made by
Genentech, which shall have the right to direct and control all material actions
relating to the prosecution or maintenance of patents in the Genentech Territory
that are being presented by Xoma, including patent interferences,
reexaminations, reissuances, oppositions and revocation proceedings. Genentech
shall file, prosecute and maintain Patents to cover any joint discoveries and
inventions relating to the Field in the United States. Genentech will also file,
prosecute and maintain Patents to cover any joint discoveries and inventions
relating to the Field in such countries in the Genentech Territory as it may
determine. If Genentech elects not to file a joint Patent, it shall so inform
Xoma. Xoma may then file, prosecute and maintain any such joint Patents. The
Party which is responsible for filing such a joint Patent will be termed the
"filing Party." The filing Party shall keep the other Party apprised of the
status of each Patent and shall seek the advice of the other Party with respect
to Patent strategy and draft applications and shall give reasonable
consideration to any suggestions or recommendations of the other party
concerning the preparation, filing, prosecution, maintenance and defense
thereof. The Parties shall cooperate reasonably in the prosecution of all
Patents covering joint inventions and covering Licensed Products and shall share
all material information relating thereto promptly after receipt of such
information. If, during the term of this Agreement, the filing Party intends to
allow any Patent covering a Licensed Product to lapse or become abandoned
without having first filed a substitute, the filing Party shall make reasonable
efforts to notify the other Party of such intention at least sixty (60) days
prior to the date upon which such Patent shall lapse or become abandoned, and
the other Party shall thereupon have the right, but not the obligation, to
assume responsibility for the prosecution, maintenance and defense thereof. Each
Party agrees to bring to the attention of the other Party any patent or patent
application it discovers, or has discovered, and which relates to the subject
matter of this Agreement.
12.4 Initial Filings If Made Outside of the United States. The Parties
agree to use reasonable efforts to ensure that any Patent filed outside of the
United States prior to a U.S. filing will be in a form sufficient to establish
the date of original filing as a priority date for the purposes of a subsequent
U.S. filing.
12.5 Patent Costs.
(a) Patent Costs arising in the Co-Promotion Territory after the
election of Xoma under Section 5.1(b) shall be chargeable to the collaboration
as Other Operating Income/Expense.
(b) Patent Costs arising in the Genentech Territory after the
Effective Date shall be borne by the Party responsible for filing, as will all
Patent Costs arising in the Co- Promotion Territory unless and until the
election of Xoma under Section 5.1(b).
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12.6 Enforcement Rights.
(a) Notification of Infringement. If either Party learns of any
infringement or threatened infringement by a Third Party of the Xoma Patents or
Genentech Patents, such Party shall promptly notify the other Party and shall
provide such other Party with available evidence of such infringement.
(b) Enforcement. Genentech shall have the right, but not the
obligation, to institute, prosecute and control at its own expense any action or
proceeding with respect to infringement of any of the Genentech Patents, by
counsel of its own choice. Xoma shall have the right, at its own expense, to be
represented in any action by counsel of its own choice. Xoma shall have the
right, but not the obligation, to institute, prosecute and control at its own
expense any action or proceeding with respect to infringement of any of the Xoma
Patents, by counsel of its own choice. Genentech shall have the right, at its
own expense, to be represented in any action by counsel of its own choice. In
the event of an infringement of a Joint Patent, the Steering Committee shall
decide the best way for the Parties to proceed. If one Party brings any such
action or proceeding, the other Party agrees to be joined as a party plaintiff
if necessary to prosecute the action or proceeding and to give the first Party
reasonable assistance and authority to file and prosecute the suit. Any damages
or other monetary awards recovered pursuant to this Section 12.6(b) shall be
allocated first to the costs and expenses of the Party bringing suit, then to
the costs and expenses, if any, of the other Party. Any amounts remaining shall
be allocated three-quarters (3/4) to the Party bringing suit and one-quarter
(1/4) to the other Party.
(c) Settlement with a Third Party. The Party that controls the
prosecution of a given claim with respect to a Licensed Product shall also have
the right to control settlement of such claim; provided, however, that if one
Party controls, no settlement shall be entered into without the written consent
of the other Party if such settlement would materially and adversely affect the
interests of such other Party. If there is no agreement between the Parties,
then the dispute will be resolved pursuant to Section 17. If the dispute is not
resolved pursuant to Section 17, then the case may not be settled.
12.7 Infringement Defense.
If a Third Party asserts that a patent or other right owned by it is
infringed by any Licensed Product, Genentech will be solely responsible for
deciding how and whether to defend against any such assertions at its cost and
expense. Xoma shall have the right, at its own expense, to be represented in any
such action by counsel of its choice. If Genentech is required to pay royalties
to such Third Party as a result of such action, it will be entitled to credit
such royalties against royalties owing to Xoma as described in Section 7.5(b).
No settlement of such an action shall be entered into by Genentech without
Xoma's written consent if such settlement would materially and adversely affect
Xoma's interests.
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ARTICLE 13.
REPRESENTATIONS AND WARRANTIES
13.1 Representations and Warranties. Each of the Parties hereby represents
and warrants as follows:
(a) This Agreement is a legal and valid obligation binding upon such
Party and enforceable in accordance with its terms. The execution, delivery and
performance of the Agreement by such Party does not conflict with any agreement,
instrument or understanding, oral or written, to which it is a Party or by which
it is bound, nor violate any law or regulation of any court, governmental body
or administrative or other agency having jurisdiction over it.
(b) Such Party has not, and during the term of the Agreement will not,
grant any right to any Third Party relating to its respective Patents and
Know-how in the Field which would conflict with the rights granted to the other
Party hereunder.
(c) In addition, Genentech represents and warrants that it has the
right to grant the licenses granted herein.
13.2 Performance by Affiliates. The Parties recognize that each may perform
some or all of its obligations under this Agreement through Affiliates,
provided, however, that each Party shall remain responsible and be guarantor of
the performance by its Affiliates and shall cause its Affiliates to comply with
the provisions of this Agreement in connection with such performance.
ARTICLE 14.
INFORMATION AND REPORTS
14.1 Information. Genentech and Xoma will disclose and make available to
each other all preclinical, clinical, regulatory, commercial and other
information, including without limitation all information relevant to the joint
promotion of Licensed Products, known by Genentech or Xoma concerning Licensed
Products at any time during co-development of Licensed Products by the Parties
and during Co-Promotion if Xoma elects the option set forth in Section 5.1(b).
Xoma will disclose any such information to Genentech at any time during the term
of this Agreement. Each Party will use commercially reasonable and diligent
efforts to disclose to the other Party all significant information promptly
after it is learned or its significance is appreciated. Each Party shall own and
maintain its own database of clinical trial data accumulated from all clinical
trials of Licensed Products for which it was responsible and of adverse drug
event information for all Licensed Products. At the option of the requesting
Party, such data shall be provided in a computer readable format by the
providing Party, to the extent available, which shall also assist in the
transfer and validation of such data to the receiving Party.
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14.2 Complaints. Xoma shall maintain a record of all complaints it receives
with respect to any Licensed Product. Xoma shall notify Genentech of any
complaint received by Xoma in sufficient detail and within five (5) business
days after the event, and in any event in sufficient time to allow Genentech to
comply with any and all regulatory requirements imposed upon it in any country.
Genentech shall notify Xoma of any complaint received by Genentech in the
Co-Promotion Territory within forty-five (45) business days after the event.
14.3 Adverse Drug Events. The Parties recognize that the holder of a Drug
Approval Application may be required to submit information and file reports to
various governmental agencies on compounds under clinical investigation,
compounds proposed for marketing, or marketed drugs. Information must be
submitted at the time of initial filing for investigational use in humans and at
the time of a request for market approval of a new drug. In addition,
supplemental information must be provided on compounds at periodic intervals and
adverse drug experiences must be reported at more frequent intervals depending
on the severity of the experience. Consequently, each Party agrees to:
(a) provide to the other for initial and/or periodic submission to
government agencies significant information on the drug from preclinical
laboratory, animal toxicology and pharmacology studies, as well as adverse drug
experience reports from clinical trials and commercial experiences with the
compound;
(b) in connection with investigational drugs, report to the other
within three (3) days of the initial receipt of a report of any unexpected or
serious experience with the drug, or sooner if required for either Party to
comply with regulatory requirements; and
(c) in connection with marketed drugs, report to the other within five
(5) business days of the initial receipt of a report of any adverse experience
with the drug that is serious and unexpected or sooner if required for either
Party to comply with regulatory requirements. Serious adverse experiences mean
any experience that suggests a significant hazard, contraindication, side effect
or precaution, or any experience that is fatal or life threatening, is
permanently disabling, requires or prolongs inpatient hospitalization, or is a
congenital anomaly, cancer, or overdose. An unexpected adverse experience is one
not identified in nature, specificity, severity or frequency in the current
investigator brochure or the U.S. labeling for the drug. Each Party also agrees
that if it contracts with a Third Party for research to be performed by such
Third Party on the drug, that Party agrees to require such Third Party to report
to contracting Party the information set forth in subparagraph (i), (ii), and
(iii) above.
14.4 Records of Net Sales and Costs. Each Party will maintain complete and
accurate records which are relevant to costs, expenses, sales and payments under
this Agreement and such records shall be open during reasonable business hours
for a period of five (5) years from creation of individual records for
examination at the other Party's expense and not more often than once each year
by an independent public accountant selected by the other Party as described in
A.6 of Exhibit A. Any records or accounting information received from the other
Party shall
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be Confidential Information for purposes of Article 11. Results of any such
audit shall be provided to both Parties, subject to Article 11.
14.5 Contribution of Information. It is the intention of the Parties that
each will bring to the collaboration such information in its possession that is
useful to the development and commercialization of Licensed Products.
14.6 Publicity Review. The Parties agree that the public announcement of
the execution of this Agreement shall be in the form of a press release to be
agreed upon on or before the Effective Date and thereafter each Party shall be
entitled to make or publish any public statement consistent with the contents
thereof. Thereafter, Xoma and Genentech will jointly discuss and agree, based on
the principles of this Section 14.6, on any statement to the public regarding
this Agreement or any aspect of this Agreement subject in each case to
disclosure otherwise required by law or regulation as determined in good faith
by each Party. The principles to be observed by Xoma and Genentech in such
public disclosures will be: accuracy, the requirements for confidentiality under
Article 10, the advantage a competitor of Xoma or Genentech may gain from any
public statements under this Section 14.6, and the standards and customs in the
biotechnology and pharmaceutical industries for such disclosures by companies
comparable to Xoma and Genentech. The terms of this Agreement may also be
disclosed to (i) government agencies where required by law, including filings
required to be made by law with the Securities and Exchange Commission, the New
York Stock Exchange, or any national exchange, or (ii) Third Parties with the
prior written consent of the other Party, which consent shall not be
unreasonably withheld, so long as such disclosure is made under a binder of
confidentiality (in the case of Third Parties), so long as highly sensitive
terms and conditions such as financial terms are extracted from the Agreement or
not disclosed upon the request of the other Party and the disclosing Party gives
reasonable advance notice of the disclosure under the circumstances requiring
the disclosure.
ARTICLE 15.
TERM AND TERMINATION
15.1 Term. This Agreement shall commence as of the Effective Date. The
Parties have specifically provided elsewhere in this Agreement the term during
which certain rights and obligations hereunder shall apply. Unless sooner
terminated as provided herein and except as provided in Section 15.4 below, (a)
the remaining provisions of this Agreement relating to activities in the
Co-Promotion Territory shall continue in effect until the date on which the
Parties are no longer entitled to receive a share of Operating Profits or Losses
on any Licensed Product and (b) the remaining provisions of this Agreement
relating to activities in the Genentech Territory shall continue in effect until
the date on which Genentech is no longer paying a royalty on Royalty-Bearing
Sales in the Genentech Territory. Those provisions shall govern the term of the
rights and obligations specifically covered thereby. Upon the expiration of the
term of this Agreement, all licenses granted to Genentech hereunder shall become
fully paid up and irrevocable.
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15.2 Termination by either Party.
(a) Either Party shall have the right to terminate this Agreement
after December 31, 1998 (or such other date determined pursuant to Section 4.5),
and the rights and obligations of the Parties shall be as follows:
(i) if either Party terminates this Agreement after the
successful completion of a Phase II Clinical Trial for one of the
Initial Indications as determined by the Steering Committee, and Xoma
had previously selected Option A under Section 5.1, then the
non-terminating Party may elect, on the date of termination,
*
(ii) if Xoma terminates this Agreement after the successful
completion of a Phase II Clinical Trial for one of the Initial
Indications as determined by the Steering Committee, and Xoma had
previously selected Option B under Section 5.1, then Genentech may
elect, on the date of termination,
*
(iii) if Genentech terminates this Agreement after the successful
completion of a Phase II Clinical Trial for one of the Initial
Indications as determined by the Steering Committee, and Xoma had
previously selected Option B under Section 5.1, then Xoma may elect,
on the date of termination,
*
(iv) if Xoma terminates this Agreement and it has not yet
successfully completed a Phase II Clinical Trial as determined by the
Steering Committee, then Genentech may elect, on the date of
termination,
*
(v) if Genentech terminates this Agreement and Xoma has not yet
successfully completed a Phase II Clinical Trial as determined by the
Steering Committee, then Xoma may elect, on the date of termination,
*
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Under any of (i) through (v) above, the provisions of the Note Agreement
shall remain in full force and effect. Any such termination shall be effective
six months after written notice thereof. The terminating Party shall reimburse
the other Party for any costs the other Party incurs due to non-cancelable
commitments made under this Agreement so long as the other Party does not make
any such commitments after receiving notice of termination.
(b) In the event of termination by Xoma pursuant to Section 15.2 or by
Genentech pursuant to Section 15.2(a)(v) or Section 15.3 due to Xoma's material
breach, Xoma shall (i) remain responsible for (A) its share of Development Costs
in the Co-Promotion Territory and (B) for its supply obligations hereunder;
until, in the case of both (A) and (B), Xoma has fully transferred, and enabled
Genentech to perform, all of Xoma's responsibilities under this Agreement,
including but not limited to supplying Genentech's requirements for Anti- CD11a
for a reasonable period of time to allow Genentech to find an alternate source
of supply; and (ii) make its personnel and other resources reasonably available
to Genentech as necessary to effect an orderly transition of development and/or
commercialization responsibilities, with the cost of such personnel and
resources to be borne by Genentech after the effective date of termination.
(c) In the event of termination by Xoma pursuant to Section 15.3 due
to Genentech's material breach, Genentech will make its personnel and other
resources reasonably available to Xoma as necessary to effect an orderly
transition of development and/or commercialization responsibilities, with the
cost of such personnel and resources to be borne by Xoma after the effective
date of termination.
(d) Upon any termination under this Section 15.2, the Parties shall
have no further rights or obligations under this Agreement except as set forth
in Sections 15.4 and 15.5.
15.3 Termination for Breach. If either Party materially breaches this
Agreement at any time, which breach is not cured within sixty (60) days of
written notice thereof from the non-breaching Party (or if such breach is not
susceptible of cure within such period, the breaching Party is not making
diligent good faith efforts to cure such breach), the non-breaching Party shall
have the right to terminate this Agreement. Upon such termination, the Parties
shall have no further rights or obligations under this Agreement except as set
forth herein or in Section 15.5. The Parties acknowledge and agree that failure
to exercise any right or option with respect to any Licensed Product or to take
any action expressly within the discretion of a Party shall not be deemed to be
material breach hereunder.
15.4 Surviving Rights. Except as modified above in Sections 15.2 and 15.3,
the obligations and rights of the Parties under Articles 1, 11, 12, 16, 17 and
18 and Sections 14.4, 15.2 and 15.3 of this Agreement will survive termination
or expiration (in the case of Article 11 and Section 14.4 for the periods set
forth therein). If Genentech must continue to pay a royalty to Xoma after
termination, the provisions of Sections 7.5(b) through and including 7.12 shall
survive such termination.
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15.5 Accrued Rights, Surviving Obligations. Termination, relinquishment or
expiration of the Agreement for any reason shall be without prejudice to any
rights which shall have accrued to the benefit of either party prior to such
termination (including paid up irrevocable licenses), relinquishment or
expiration, including damages arising from any breach hereunder. Such
termination, relinquishment or expiration shall not relieve either Party from
obligations which are expressly indicated to survive termination or expiration
of the Agreement.
ARTICLE 16.
INDEMNIFICATION
16.1 Indemnification in the Genentech Territory.
(a) Genentech hereby agrees to save, defend and hold Xoma and its
agents and employees harmless from and against any and all suits, claims,
actions, demands, liabilities, expenses and/or loss, including reasonable legal
expense and attorneys' fees ("Losses") resulting directly from the manufacture,
use, handling, storage, sale or other disposition of chemical agents or Licensed
Products sold or used in the Genentech Territory by Genentech, its Affiliates,
agents or sublicensees except to the extent such Losses result from the
negligence or willful misconduct of Xoma, and from any Losses resulting directly
from Xoma's use of technology supplied to Xoma by Genentech except to the extent
any such Losses result from modifications by Xoma (without Genentech's written
consent) or a Third Party of such technology.
(b) In the event that Xoma is seeking indemnification under Section
16.1(a), it shall inform Genentech of a claim as soon as reasonably practicable
after it receives notice of the claim, shall permit Genentech to assume
direction and control of the defense of the claim (including the right to settle
the claim solely for monetary consideration), and shall cooperate as requested
(at the expense of Genentech) in the defense of the claim.
(c) Xoma hereby agrees to save, defend and hold Genentech and its
agents and employees harmless from and against any and all suits, claims,
actions, demands, liabilities, expenses and/or loss, including reasonable legal
expense and attorneys' fees ("Losses") resulting directly from the manufacture
by Xoma of Licensed Products sold or used in the Genentech Territory by
Genentech, its Affiliates, agents or sublicensees or otherwise from the
negligence or willful misconduct of Xoma and from any Losses resulting directly
from Genentech's use of any technology supplied to Genentech by Xoma except to
the extent any such Losses result from modifications by Genentech (without
Xoma's written consent) or a Third Party of such technology.
(d) In the event Genentech is seeking indemnification under Section
16.1(c), it shall inform Xoma of a claim as soon as reasonably practicable after
it receives notice of the claim, shall permit Xoma to assume direction and
control of the defense of the claim (including the right to settle the claim
solely for monetary consideration), and shall cooperate as requested (at the
expense of Xoma) in the defense of the claim.
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16.2 Indemnification in the Co-Promotion Territory.
(a) If the Parties Co-Promote Licensed Product, then each Party agrees
to save, defend and hold the other Party and its agents and employees harmless
from and against any and all losses resulting directly or indirectly from the
manufacture, use, handling, storage, sale or other disposition of chemical
agents or Licensed Products sold or used in the Co- Promotion Territory by the
indemnifying Party, its Affiliates, agents or sublicensees, but only to the
extent such losses result from the negligence or willful misconduct of the
indemnifying Party or its employees and agents and do not also result from the
negligence or willful misconduct of the Party seeking indemnification. Any other
losses resulting directly or indirectly from the manufacture, use, handling,
storage, sale or other disposition of chemical agents or Licensed Products in
the Co-Promotion Territory shall be charged to the collaboration as an Other
Operating Income/Expense at the time such claim is finally determined, whether
by judgment, award, decree or settlement.
(b) In the event that either Party receives notice of a claim with
respect to a Licensed Product in the Co-Promotion Territory, such Party shall
inform the other Party as soon as reasonably practicable. The Parties shall
confer how to respond to the claim and how to handle the claim in an efficient
manner.
ARTICLE 17.
DISPUTE RESOLUTION
17.1 Disputes. The Parties recognize that disputes as to certain matters
may from time to time arise during the term of this Agreement which relate to
either Party's rights and/or obligations hereunder. It is the objective of the
Parties to establish procedures to facilitate the resolution of disputes arising
under this Agreement in an expedient manner by mutual cooperation and without
resort to litigation. To accomplish this objective, the Parties agree to follow
the procedures set forth in this Article 17 if and when a dispute arises under
this Agreement.
Unless otherwise specifically recited in this Agreement, disputes among
members of the Project Core Team or the Finance Committee will be resolved as
recited in this Article 17. Any disputes relating to the collaboration shall be
first referred to the Steering Committee by either Party at any time after such
dispute has arisen and such Party believes that there has been sufficient
discussion of the matter at the Project Core Team level. If the Steering
Committee is unable to resolve such a dispute within ninety (90) days of being
requested by a Party to resolve the dispute or the Steering Committee is unable
to resolve a dispute among its members, any Party may, by written notice to the
other, invoke the provisions of Section 17.2 hereinafter.
17.2 Mediation. The Parties agree that any dispute, controversy or claim
(except as to any issue relating to intellectual property owned in whole or in
part by Xoma or Genentech or any equitable claim) arising out of or relating to
this Agreement, or the breach, termination, or invalidity thereof, shall be
resolved through negotiation and mediation. If a dispute arises
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between the parties, and if said dispute cannot be resolved pursuant to
Section 17.1, the Parties agree to try in good faith to resolve such dispute by
mediation administered by the American Arbitration Association in accordance
with its Commercial Mediation Rules. The mediation proceeding shall be conducted
at the location of the party not originally requesting the resolution of the
dispute. The parties agree that they shall share equally the cost of the
mediation filing and hearing fees, and the cost of the mediator. Each party must
bear its own attorney's fees and associated costs and expenses.
17.3 Jurisdiction. For the purposes of this Article 17, the Parties agree
to accept the jurisdiction of the federal courts located in the Northern
District of California for the purposes of enforcing the agreements reflected in
this Article.
17.4 Determination of Patents and Other Intellectual Property. Any dispute
relating to the determination of validity of a Party's Patents or other issues
relating solely to a Party's intellectual property shall be submitted
exclusively to the federal courts located in San Francisco County, California,
and the Parties hereby consent to the jurisdiction and venue of such court.
ARTICLE 18.
MISCELLANEOUS
18.1 Assignment.
(a) Either Party may assign any of its rights under this Agreement in
any country to any Affiliates and, with the prior written consent of the other
Party, may delegate its obligations under this Agreement in any country to any
Affiliates; provided, however, that any such assignment shall not relieve the
assigning Party of its responsibilities for performance of its obligations under
this Agreement.
(b) Either Party may assign all of its rights and obligations under
this Agreement in connection with a merger or similar reorganization or the sale
of all or substantially all of its assets, or otherwise with the prior written
consent of the other Party; provided, however, that Xoma may not so assign its
rights and obligations if it is not the surviving company and the acquiror of
Xoma is a direct competitor of Genentech. This Agreement shall survive any such
merger or reorganization of either Party with or into, or such sale of assets
to, another party and no consent (except as otherwise set forth above) for such
merger, reorganization or sale shall be required hereunder.
(c) This Agreement shall be binding upon and inure to the benefit of
the successors and permitted assigns of the Parties. Any assignment not in
accordance with this Agreement shall be void.
18.2 Non-Solicitation. The Parties recognize that each Party has a
substantial interest in preserving and maintaining confidential its Confidential
Information hereunder. Each Party recognizes that certain of the other Party's
employees, including those engaged in development,
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marketing and sale of any Licensed Product, may have access to such
Confidential Information of the other Party. The Parties therefore agree not to
solicit or otherwise induce or attempt to induce for purposes of employment, any
employees from the other Party involved in the development, marketing or sales
of any Licensed Product during the period in which any Party is developing or
commercializing a Licensed Product in the Co-Promotion Territory hereunder and
for a period of two years thereafter.
18.3 Consents Not Unreasonably Withheld. Whenever provision is made in this
Agreement for either Party to secure the consent or approval of the other, that
consent or approval shall not unreasonably be withheld, and whenever in this
Agreement provision is made for one Party to object to or disapprove a matter,
such objection or disapproval shall not unreasonably be exercised.
18.4 Retained Rights. Nothing in this Agreement shall limit in any respect
the right of either Party to conduct research and development with respect to
and market products outside the Field using such Party's technology.
18.5 Force Majeure. Neither Party shall lose any rights hereunder or be
liable to the other Party for damages or losses on account of failure of
performance by the defaulting Party if the failure is occasioned by government
action, war, fire, explosion, flood, strike, lockout, embargo, act of God, or
any other cause beyond the control of the defaulting Party, provided that the
Party claiming force majeure has exerted all reasonable efforts to avoid or
remedy such force majeure; provided, however, that in no event shall a Party be
required to settle any labor dispute or disturbance.
18.6 Further Actions. Each Party agrees to execute, acknowledge and deliver
such further instruments, and to do all such other acts, as may be necessary or
appropriate in order to carry out the purposes and intent of this Agreement.
18.7 No Right to Use Names. Except as otherwise provided herein, no right,
express or implied, is granted by the Agreement to use in any manner the name
"Xoma," "Genentech" or any other trade name or trademark of the other Party or
its Affiliates in connection with the performance of the Agreement.
18.8 Notices. All notices hereunder shall be in writing and shall be deemed
given if delivered personally or by facsimile transmission (receipt verified),
telexed, mailed by registered or certified mail (return receipt requested),
postage prepaid, or sent by express courier service, to the Parties at the
following addresses (or at such other address for a party as shall be specified
by like notice; provided, that notices of a change of address shall be effective
only upon receipt thereof).
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If to XOMA,
addressed to: XOMA CORPORATION
2910 7th Street, Berkeley
California 94710
Attention: Corporate Secretary
Telephone: (510) 644-1170
Telecopy: (510) 649-7571
with a copy to: C.L. Dellio
If to Genentech,
addressed to: GENENTECH, INC.
460 Point San Bruno Boulevard
South San Francisco, CA 94080
Attention: Corporate Secretary
Telephone: (415) 225-1000
Telecopy: (415) 952-9881
18.9 Waiver. Except as specifically provided for herein, the waiver from
time to time by either of the Parties of any of their rights or their failure to
exercise any remedy shall not operate or be construed as a continuing waiver of
same or of any other of such Party's rights or remedies provided in this
Agreement.
18.10 Severability. If any term, covenant or condition of this Agreement or
the application thereof to any Party or circumstance shall, to any extent, be
held to be invalid or unenforceable, then (i) the remainder of this Agreement,
or the application of such term, covenant or condition to Parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent permitted by law;
and (ii) the Parties hereto covenant and agree to renegotiate any such term,
covenant or application thereof in good faith in order to provide a reasonably
acceptable alternative to the term, covenant or condition of this Agreement or
the application thereof that is invalid or unenforceable, it being the intent of
the Parties that the basic purposes of this Agreement are to be effectuated.
18.11 Ambiguities. Ambiguities, if any, in this Agreement shall not be
construed against any Party, irrespective of which Party may be deemed to have
authorized the ambiguous provision.
18.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
18.13 Entire Agreement. This Agreement, including all Exhibits attached
hereto which are hereby incorporated herein by reference, sets forth all the
covenants, promises, agreements, warranties, representations, conditions and
understandings between the Parties hereto and
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supersedes and terminates all prior agreements and understandings between
the Parties. There are no covenants, promises, agreements, warranties,
representations, conditions or understandings, either oral or written, between
the Parties other than as set forth herein and therein. No subsequent
alteration, amendment, change or addition to this Agreement shall be binding
upon the Parties hereto unless reduced to writing and signed by the respective
authorized officers of the Parties.
IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals by their proper officers as of the date and year first above written.
XOMA CORPORATION GENENTECH, INC.
By:---------------------------------- By:---------------------------
Clarence L. Dellio John P. McLaughlin
Senior Vice President, Operation Executive Vice President
EXHIBIT A
FINANCIAL PLANNING, ACCOUNTING AND REPORTING
FOR THE XOMA/GENENTECH COLLABORATION AGREEMENT
This Exhibit A to the Collaboration Agreement (the "Agreement") dated as of
April 22, 1996, between Xoma Corporation ("Xoma") and Genentech, Inc.
("Genentech") addresses the financial planning, accounting policies and
procedures to be followed in determining Operating Profits or Losses and related
sharing of revenue and expenses in the Co-Promotion Territory if Xoma elects the
option set forth in Section 5.1(b) of the Agreement. Terms not defined in this
Exhibit shall have the meanings set forth in the Agreement.
This Exhibit sets forth the principles for reporting actual results and
budgeted plans of the combined operations in the Co-Promotion Territory, the
frequency of reporting, and the methods of determining payments to the parties
and auditing of accounts.
For purposes of this Exhibit only, the consolidated accounting of
operations for the collaboration in the Co-Promotion Territory shall be referred
to as GenXoma. GenXoma is not a legal entity and has been defined for
identification purposes only.
A.1. Principles of Reporting
The results of operations of GenXoma will be presented in the following
format, with the categories as defined in Section A.4 below:
Xoma Genentech Total
Gross Sales
less Sales Returns and Allowances
= Net Sales
less Cost of Sales
= Gross Profits
less Marketing Costs
less Sales Costs
less Development Costs chargeable to GenXoma
less Other Operating Income/Expense
= Contribution
less Distribution Costs
less Administration Costs
= Operating Profit (Loss)
It is the intention of the Parties that the interpretation of these
definitions will be consistent with generally accepted accounting principles in
the United States.
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A.2. Frequency of Reporting
The fiscal year of GenXoma will be a calendar year.
Reporting by each Party for GenXoma revenues and expenses will be
performed as follows:
Reporting Event Frequency Timing of Submission
Actuals Quarterly Q1-Q3: +30 days
Q4: +45 days
Forecasts Quarterly Mid Quarter
(rest of year - by quarter)
Budgets Annually October 15th
(one year - by month)
Long Range Plan Annually May 1st
(current year plus 5 years)
Genentech will be responsible for the preparation of consolidated
reporting, calculation of the profit/loss sharing and determination of the cash
settlement. Genentech will provide the Finance Committee within five working
days of the submission date shown above, a statement showing the consolidated
results and calculations of the profit/loss sharing and cash settlement required
in a format agreed to by the Parties.
Reports of actual results compared to budget will be made to the Project
Core Team on a quarterly basis. After approval by the Finance Committee as to
amounts, the Finance Committee will forward the report to the Steering Committee
for its approval. Line item variances from budgets judged to be significant by
the Finance Commitee will only be included in calculation of Operating Profit
and Loss when approved by the Project Core Team and the Steering Committee.
On a monthly basis Genentech will supply Xoma with Gross Sales in units of
each month's sales according to Genentech's sales reporting system, which shall
be consistent with the definitions in Section A.4.
The Finance Committee will meet as appropriate but at least quarterly to
review and approve the following:
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- Actual Results
- Forecasts
- Budget
- Inventory Levels
- Sales Returns and Allowances
- Other financial matters, including each
Party's methodologies for charging costs and
allocating Sales Representatives to GenXoma
for actuals, forecasts, budgets and long
range plans and the results of applying such
methodologies.
A.3. Budget and Long Range Plan
Responsibility for the Budget and Long Range Plan will rest with the
Project Core Team, who will develop budgets for development and
commercialization in coordination with the Finance Committee, subject to final
approval by the Steering Committee.
Budgets will be prepared annually. In addition, headcount chargeable to
GenXoma will be agreed to annually.
Budgets will be supplemented with detailed business plans for clinical
trials, registration applications, and detailed plans for product introduction,
sales efforts and promotion as determined by the Project Core Team. Budgets,
once approved by the Steering Committee, can only be changed with the approval
of the Steering Committee.
A five-year Long Range Plan for GenXoma will be established on a yearly
basis under the direction of the Steering Committee and submitted to Genentech
and Xoma by May 1st.
A.4. Definitions
A.4.1 "Administration Costs" means costs chargeable to GenXoma equal to * %
of the sum of each party's own Marketing Costs and Sales Costs (both only to the
extent chargeable to GenXoma).
A.4.2 "Allocable Overhead" means costs incurred by a Party or for its
account which are attributable to a Party's supervisory, services, occupancy
costs, corporate bonus (to the extent not charged directly to department), and
its payroll, information systems, human relations or purchasing functions and
which are allocated to company departments based on space occupied or headcount
or other activity-based method. Allocable Overhead shall not include any costs
attributable to general corporate activities including, by way of example,
executive management, investor relations, business development, legal affairs
and finance.
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A.4.3. "Cost of Goods Sold" means the fully burdened cost of the Licensed
Product in final therapeutic form. The fully burdened cost of the Licensed
Product will be determined in accordance with generally accepted accounting
principles in the United States as applied by the Party performing or
contracting for each stage of the manufacturing process and will include direct
labor, material, product testing costs and Allocable Overhead.
A.4.4. "Cost of Sales" means Cost of Goods Sold, Third Party Royalties *
(i.e., any allocable intellectual property acquisition and licensing costs) and
outbound freight on sales if borne by the seller.
A.4.5. "Development Costs" means costs, including Allocable Overhead,
incurred in any phase of the activities required to obtain the authorization
and/or ability to manufacture, formulate, fill, ship and/or sell a Licensed
Product in the Field in commercial quantities in the Co-Promotion Territory.
Development Costs shall include but are not limited to the cost of studies on
the toxicological, pharmacokinetic, metabolic or clinical aspects of a Licensed
Product conducted internally or by individual investigators, or consultants
necessary for the purpose of obtaining and/or maintaining approval of a Licensed
Product in the Field by a government organization in a country of the
Co-Promotion Territory, and costs for preparing, submitting, reviewing or
developing data or information for the purpose of submission to a governmental
authority to obtain and/or maintain approval of a Licensed Product in the Field
in a country of the Co-Promotion Territory as well as costs of process
development scale-up and recovery (including allocable depreciation and plant
operating costs). In addition, Development Costs in the Co-Promotion Territory
shall include the cost of post-launch clinical studies in support of a Licensed
Product in the Field in the Co- Promotion Territory. Development Costs in the
Co-Promotion Territory shall include expenses for compensation, benefits and
travel and other employee-related expenses, as well as data management,
statistical designs and studies, document preparation, and other expenses
associated with the clinical testing program.
A.4.6. "Distribution Costs" means the costs, including Allocable Overhead,
specifically identifiable to the distribution of a Licensed Product including
customer services, collection of data of sales to hospitals and other end users
(e.g. DDD sales data), order entry, billing, credit and collection and other
activities described in Section 5.3 of the Agreement. For the purpose of this
Agreement, only Genentech will charge GenXoma for Distribution Costs an amount
of * % of Net Sales in a lump sum.
A.4.7. "Gross Sales" means the gross amount invoiced by either Party or
their Affiliates or permitted sublicensees for sales of a Licensed Product to
Third Parties in the Co- Promotion Territory.
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A.4.8. "Marketing Costs" means the costs, excluding Allocable Overhead, of
marketing, promotion, advertising, professional education, product related
public relations, relationships with opinion leaders and professional societies,
market research, healthcare economics studies and other similar activities
directly related to the Licensed Products and approved by the Joint
Commercialization Committee. Such costs will include both internal costs (e.g.,
salaries, benefits, supplies and materials, etc.) as well as outside services
and expenses (e.g., consultants, agency fees, meeting costs, etc.). Marketing
Costs shall also include activities related to obtaining reimbursement from
payers and costs of sales and marketing data. Marketing Costs will specifically
exclude the costs of activities which promote either Party's business as a whole
without being product specific (such as corporate image advertising).
A.4.9. "Net Sales" means Gross Sales less the sum of (a), (b) and (c) where
(a) is a provision, determined under generally accepted accounting principles in
the United States, for (i) trade, cash and quantity discounts or rebates (other
than price discounts granted at the time of invoicing and which are included in
the determination of Gross Sales), (ii) credits or allowances given or made for
rejection or return of, and for uncollectible amounts on, previously sold
products or for retroactive price reductions (including Medicare and similar
types of rebates), (iii) taxes, duties or other governmental charges levied on
or measured by the billing amount, as adjusted for rebates and refunds, (iv)
charges for freight and insurance directly related to the distribution of
Products, and (v) credits or allowances given or made for wastage replacement,
indigent patient and any other sales programs agreed to by the Parties, (b) is a
periodic adjustment of the provision determined in (a) to reflect amounts
actually incurred for (i), (ii), (iii), (iv) and (v), and (c) is the Combination
Product Adjustment as defined in the Agreement, if any. Provisions allowed in
(a) and adjustments made in (b) and (c) will be reviewed by the Finance
Committee.
A.4.10. "Operating Profit or Loss" means GenXoma's Net Sales less the
following items: Cost of Sales, Marketing Costs, Sales Costs, Development Costs,
(to the extent chargeable to GenXoma), Other Operating Income/Expense,
Distribution Costs and Administrative Costs, for a given period.
A.4.11. "Other Operating Income/Expense" means other operating income or
expense from or to third parties which is not part of the primary business
activity of GenXoma, but is considered and approved by the Finance Committee as
income or expense generated from GenXoma operations, and limited to the
following:
- Inventory Write-Offs
- Patent Costs (as limited byArticle 12 of the Agreement)
- Product liability insurance to the extent the Parties obtain a
joint policy
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- Indemnification costs (as defined in Article 16 of the Agreement)
- Other (To be approved by Steering Committee)
A.4.12. "Patent Costs" means the fees and expenses paid to outside legal
counsel and experts, and filing and maintenance expenses, incurred after the
Effective Date in connection with the establishment and maintenance of rights
under Patents covering any Licensed Product, including costs of patent
interference, reexamination, reissue, opposition and revocation proceedings.
A.4.13. "Sales Costs" means costs, including Allocable Overhead, approved
by the Project Core Team and the annual budget and specifically identifiable to
the sales of Licensed Products to all markets in the Co-Promotion Territory
including the managed care market. Sales Costs shall include costs associated
with Sales Representatives, including compensation, benefits and travel,
supervision and training of the Sales Representatives, sales meetings, and other
sales expenses. Sales Costs will not include the start-up costs associated with
either Party's sales force, including recruiting, relocation and other similar
costs.
A.4.14. "Sales Returns and Allowances" means Gross Sales less Net Sales.
A.5. Audits and Interim Reviews
Either Party shall have the right to request that the other Party's
independent accounting firm perform an audit or interim review of the other
Party's books in order to express an opinion regarding said Party's compliance
with generally accepted accounting principles. Such audits or review will be
conducted at the expense of the requesting Party.
Either Party shall have the right to request that its independent
accounting firm perform an audit of the other Party's books of accounts for the
sole purpose of verifying compliance with the Agreement. Such audits will be
conducted at the expense of the requesting Party; provided, however, that if the
audit results in an adjustment of greater that * % of Operating Losses or
Profits in any period, the cost of the audit will be borne by the Party audited.
Audit results will be shared with both Parties.
A.6. Payments between the Parties
Balancing payments between the Parties will be approved by the Steering
Committee based on Operating Profit or Loss. Payments will be made quarterly
based on actual results within 90 days after the end of each quarter, adjusted
for reimbursement of the net expenses or income incurred or received by each
Party.
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A.7. Accounting for Development Costs, Marketing Costs and Sales Costs
All Development Costs, Marketing Costs and Sales Costs will be based on the
appropriate costs definition stated in Section A.4 of this Exhibit.
Each party shall report Development Costs in a manner consistent with its
Project Cost System. In general, these project cost systems report actual time
spent on specific projects, apply the actual labor costs, capture actual costs
of specific projects and allocate other expenses to projects. For Marketing
Costs, the Parties will report costs based on spending in Marketing departments.
The Parties acknowledge that the methodologies used will be based on systems in
place and consistent with Section A.10 of this Exhibit.
For the purpose of determining actual and budgeted Sales Costs, the
Parties, through the Project Core Team and the Finance Committee shall determine
the number of Sales Representatives selling Licensed Products during the period
and develop a method consistent with Section A.4 and A.10 of this Exhibit to
allocate Sales Costs to those Sales Representatives.
A.8. Sharing of Operating Profits and Losses
The Parties agree to share the Operating Profit or loss resulting from the
collaborative arrangement in the Co-Promotion Territory according to the
following manner:
For each calendar year, Xoma shall receive * % of the Operating Profits. To
the extent there is an Operating Loss on sales of Licensed Product in the
Co-Promotion Territory in any calendar year, Xoma shall absorb * % of such loss.
A.9. Start of Operations
Operation of GenXoma will be deemed to commence on the date that Xoma
selects the option set forth in Section 5.1(b) of the Agreement. Costs incurred
prior to that date are not chargeable to GenXoma.
A.10. Guidelines for Charging Costs
The following guidelines shall be used in determining amounts chargeable to
GenXoma.
10.1 If an expense is specifically and exclusively (i.e., for no other
product) used for the development or commercialization of a
Licensed Product in
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the Field in the Co-Promotion Territory, then 100% of the expense
will be charged to GenXoma.
10.2 If an expense is specifically and exclusively (i.e., for no other
product) used for the development or commercialization of a
Licensed Product in the Field in both the Co-Promotion Territory
and the Genentech Territory, then the following shall apply:
(a) If the portion of that expense used for the development or
commercialization of a Licensed Product in the Field in the
Genentech Territory can be objectively determined through
specific means (e.g., man hours of effort, amounts consumed,
etc.), then the amount so used will be charged to Genentech and
the remaining portion will be charged to GenXoma.
(b) If the portion of that expense used for the development or
commercialization of a Licensed Product in the Field in the
Genentech Territory cannot be objectively determined through
specific means, then only the direct and incremental costs
related to the Licensed Product in the Field in the Genentech
Territory will be charged to Genentech and the remaining portion
will be charged to GenXoma.
10.3 If an expense within the Co-Promotion Territory is not
specifically and exclusively (i.e., for other products in
addition to a Licensed Product) used for the development or
commercialization of a Licensed Product in the Field in the
Co-Promotion Territory, then the following shall apply:
(a) If the portion of that expense used for the development or
commercialization of a Licensed Product in the Field in the Co-
Promotion Territory can be objectively determined through
specific means (e.g., man hours of effort, amounts consumed,
etc.), then the amount so used will be charged to GenXoma.
(b) If the portion of that expense used for the development or
commercialization of a Licensed Product in the Field in the Co-
Promotion Territory cannot be objectively determined through
specific means, then only the direct and incremental costs
related to the Licensed Product in the Field shall be charged to
GenXoma.
EXHIBIT B
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EXHIBIT C
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