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License Agreement - G.D. Searle & Co. and BioMedicines Inc.

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                                LICENSE AGREEMENT


         THIS AGREEMENT (the "Agreement") is made and entered into this December
15, 1997 ("Effective Date") by and between G.D. SEARLE & CO., a Delaware
corporation with offices at 5200 Old Orchard Road, Skokie, Illinois 60077
("Searle"), and BIOMEDICINES, INC., a Delaware corporation, with offices at 909
Marina Village Parkway, #583, Alameda, CA 94501 ("BioMedicines").

         WHEREAS, Searle is the owner of certain Patent Rights, Know-How and the
Licensed Process (each as hereinafter defined) and has the right to grant the
license set forth herein under said Patent Rights, Know-How and Licensed
Process; and

         WHEREAS, Searle desires to have BioMedicines determine whether Licensed
Product (as hereinafter defined) is useful in treating patients with oncology-
or immunology-related disorders and is willing to grant an exclusive license to
BioMedicines to effect such determination and to proceed with commercial
development, as appropriate; and

         WHEREAS, BioMedicines desires to obtain an exclusive right and license
within the Fields (as hereinafter defined) under the Patent Rights, Licensed
Process and Know-How in the Territory (as hereinafter defined).

         NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein, and other good and valuable consideration, the Parties (as
hereinafter defined) hereto agree as follows:

SECTION 1.  DEFINITIONS

         Certain words or phrases used in the Agreement shall have meanings as
defined below:

         1.1 "AFFILIATE" shall mean any corporation or business entity
controlled by, controlling or under common control with Searle or BioMedicines,
as the case may be. For this purpose, control shall mean direct or indirect
beneficial ownership of more than fifty percent (50%) of the voting stock of, or
a fifty percent (50%) or greater interest in the income of such corporation or
other business entity, or fifty percent (50%) or greater management control over
a joint venture, or such other relationship as, in fact, constitutes actual
control.

         1.2 "CLINICAL TRIAL" shall mean a clinical trial conducted pursuant to
a Protocol.

         1.3 "COMPOUND" shall mean [*] (identified by Searle as [*]) and any
salts thereof.


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       1.
<PAGE>

         1.4 "DEVELOPMENTAL ACTIVITIES" shall mean any and all developments,
clinical trials data, improvements, formulation data, methods, processes and
techniques developed by BioMedicines in furtherance of this Agreement.

         1.5 "EFFECTIVE DATE" shall mean the date on which the Agreement is made
as set forth above.

         1.6 "FIELDS" shall mean the fields of treating patients with oncology
or immunology-related disorders.

         1.7 "KNOW-HOW" shall mean proprietary technical data and information,
which relates to the Licensed Product, Licensed Process, Compound, and Patent
Rights including, without limitation, all chemical, pharmacological,
toxicological, clinical, assay control, manufacturing data used or useful for
the development, manufacture, and/or marketing of the Licensed Product.

         1.8 "LICENSED PROCESS" shall mean any process for manufacturing
Licensed Product from Compound or any process for manufacturing Compound for use
in the manufacture of Licensed Product which is covered in whole or in part by a
claim contained in the Patent Rights or by Know-How.

         1.9 "LICENSED PRODUCT(S)" shall mean one or more pharmaceutical
products suitable for the treatment of humans which contain Compound as the
active ingredient.

         1.10 "NET SALES" shall mean the actual gross amount invoiced by a
Party, or its Affiliates or Sublicensees, for sales of the Licensed Product
within the Fields in the Territory to Third Parties during a calendar year;
provided that:

              (a)      Net Sales shall not include the following:

                       (i) direct transportation charges, including
insurance;

                       (ii) any sales, use, value-added taxes, excise taxes
and/or duties or allowances based on the selling price of the Licensed Product
which fall due and are paid as a consequence of such sales;

                       (iii) trade, quantity and cash discounts and rebates
actually allowed and taken to the extent customary in the trade, including,
without limitation, governmental rebates; or

                       (iv) allowances or credits, including but not limited
to, allowances or credits to customers on account of rejection or return of the
Licensed Product.

              (b) Moreover, a sale or transfer to an Affiliate of either
Party for re-sale by such Affiliate shall not be considered a sale for the
purpose of this provision, but the resale by such Affiliate shall be a sale for
such purposes, and a "sale" shall include a transfer or other disposition for
consideration, but not such transfers or dispositions for pre-clinical,
clinical, regulatory, or governmental purposes for which no consideration is
received whether before or after marketing approval; and


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       2.
<PAGE>

              (c) Licensed Product shall be considered sold upon receipt of
either Party of payment for such Licensed Product ("Sold").

         1.11 "OTHER INTELLECTUAL PROPERTY RIGHTS" shall mean all of the
following intellectual property of BioMedicines: the trademarks, service marks,
and tradenames, or any applications pertaining thereto, as shall be selected,
chosen, created or developed by BioMedicines pursuant to the Agreement.

         1.12 "PARTY(IES)" shall mean a person(s) or an entity(ies) who is (are)
a party to the Agreement.

         1.13 "PATENT RIGHTS" shall mean all of the following intellectual
property of Searle:

              (a) the patent and patent applications listed in Appendix A;

              (b) the patents issued from the applications listed in
Appendix A and from divisionals, continuations, and continuations-in-part, of
these applications;

              (c) any reissue, re-examination, or extension of said patents;

              (d) any improvement patent dominated by the claims of the
Patent Rights; and

              (e) any foreign counterparts of the foregoing.

         1.14 "PHASE Ib/II CLINICAL TRIAL" shall mean a Clinical Trial in
patients having a designated disease or disorder.

         1.15 "PROTOCOL" shall mean a protocol for a Clinical Trial of Licensed
Product.

         1.16 "PROPOSED REVERSION TERMS" shall mean terms proposed by Searle
upon exercise of its Reversion Option to BioMedicines under which Searle would
accept reversion of the License. In the event such terms are accepted by
BioMedicines such Proposed Reversion Terms become Reversion Terms.

         1.17 "REVERSION TERMS" shall mean the terms agreeable to the Parties
under which the License granted hereunder in Section 2 shall revert to Searle.

         1.18 "SUBLICENSE" shall mean a sublicense granted by BioMedicines
pursuant to the terms of Sections 3 of the Agreement.

         1.19 "SUBLICENSEE" shall mean any Third Party licensed to make, have
made, import, export, use or sell any Licensed Product.

         1.20 "TERRITORY" shall mean all countries worldwide.

         1.21 "THIRD PARTY(IES)" shall mean a person(s) or entity(ies) who or
which is (are) neither a Party nor an Affiliate of a Party.


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       3.
<PAGE>

SECTION 2.   GRANT

         2.1 Subject to the terms and conditions of the Agreement, and upon
receipt by Searle of the payment(s) pursuant to Section 6 herein, Searle hereby
grants to BioMedicines and BioMedicines hereby accepts from Searle an exclusive
(even as to Searle) royalty-bearing right and license within the Fields in the
Territory (the "License"), including the right to sublicense within the Fields
in the Territory, under the Patent Rights, Licensed Process and Know-How, to
develop, make or have made Licensed Product from Compound, and to use,
manufacture, market, and sell Licensed Product within the Fields in the
Territory.

SECTION 3.   DATA REVIEW, REVERSION OPTION, SUBLICENSING

         3.1 For each indication within the Fields ("Indication") developed by
BioMedicines using the Licensed Product, Searle shall have the right review the
data from the first Phase Ib/II Clinical Trial. The sole purpose of such review
shall be for Searle to determine whether it wishes to have the License granted
to BioMedicines by the Agreement revert to Searle for this Indication (the
"Reversion Option"). Within sixty (60) days of receipt of the data from said
Clinical Trial, Searle shall notify BioMedicines in writing of Searle's desire
to exercise the Reversion Option or its decision to decline to exercise the
Reversion Option.

         3.2 In the event that Searle exercises its Reversion Option for an
Indication, Searle and BioMedicines shall negotiate in good faith for a period
of not more than sixty (60) days the terms ("Reversion Terms") under which the
License shall revert for that Indication. Searle, at its sole discretion, may
offer Proposed Reversion Terms for each Indication upon exercise of the
Reversion Option. BioMedicines agrees to respond in writing within 15 days after
said offer of the Proposed Reversion Terms.

         3.3 In the event that BioMedicines and Searle agree to Reversion Terms
for a particular Indication, the current Agreement will be modified in
accordance with the mutually agreed Reversion Terms with regard to each such
Indication; and

             (a) All rights previously granted to BioMedicines pursuant to
Section 2 of the Agreement shall terminate and revert to Searle for such
Indication; and

             (b) BioMedicines shall grant to Searle an exclusive license to
use the data and materials resulting from Developmental Activities by
BioMedicines with Licensed Products solely for said reverted Indication; and

             (c) Searle shall use its good faith efforts to further
develop, obtain regulatory approvals and commercialize the Licensed Product for
the Indication in the Territory where such good faith efforts would be justified
by sound business judgment. Searle shall take such actions as are reasonably
necessary and customary to obtain and maintain the authorization and/or ability
to market the Licensed Product for the Indication in such countries in the
Territory in which Searle shall choose to introduce Licensed Product for the
Indication; and

             (d) Searle shall bear sole responsibility for all expenses of
such development, commercialization and regulatory compliance for the
Indication; and


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       4.
<PAGE>

                  (e) In the event that Searle does not make such good faith
efforts to pursue the further development and commercialization of the Licensed
Product for the Indication for any country in the Territory after exercising its
Reversion Option for the Indication, the Reversion Option with regard to the
Indication for each such country shall immediately expire and all rights
obtained by Searle with regard to the Indication through its exercise of the
Reversion Option shall be returned to BioMedicines under the terms of this
Agreement.

         3.4 If Searle elects not to exercise the Reversion Option for an
Indication, then BioMedicines shall be free thereafter, in its sole discretion,
to continue development on its own behalf or to offer a Sublicense to a Third
Party(ies) for that Indication and to conclude a sublicensing agreement with the
Third Party(ies) for that Indication consistent with BioMedicines' obligations
under this Agreement.

         3.5 If, however, Searle proposes to exercise the Reversion Option for
and Indication but BioMedicines shall decline to accept Searle's Proposed
Reversion Terms for that Indication or the Parties are unable to reach agreeable
Reversion Terms for that Indication after good-faith negotiations during the
sixty (60) day negotiating period of Section 3.2, BioMedicines shall be free; in
its sole discretion, to offer a Sublicense to a Third Party for that Indication.
Any resulting sublicensing agreement for an Indication with a Third Party,
however, may not be on terms more favorable to the Third Party than were the
Reversion Terms offered to Searle for that Indication unless BioMedicines shall
first offer said more favorable terms for that Indication ("Revised Terms") in
writing to Searle. Searle must respond in writing within thirty (30) days of
receipt of said offer of the Revised Terms whether it wishes to exercise the
Reversion Option for that Indication based on the Revised Terms. In the event
that Searle accepts the Revised Terms for that Indication, then the Parties will
promptly execute an agreement based on the Revised Terms for that Indication,
and the requirements of Section 3.3 shall then apply. In the event that Searle
declines the Revised Terms for an Indication, then BioMedicines shall be free to
conclude the aforesaid sublicensing agreement for that Indication with the Third
Party on the basis of the Revised Terms for that Indication.

SECTION 4.   DATA AND MATERIALS

         4.1 Searle shall make available to BioMedicines, to the best of
Searle's knowledge any and all preclinical and clinical data, formulation data,
manufacturing process information, or other data generated from preclinical or
clinical research with regard to the development of the Licensed Product, and
shall deliver to BioMedicines those documents relating to Compound or Licensed
Product requested by BioMedicines from time to time during the term of the
Agreement within thirty (30) days of such request; provided, however, that
Searle shall be obliged to make available only those data or documents already
in Searle's possession as of the Effective Date or which subsequently come into
Searle's possession. If BioMedicines requests non-U.S, data or reports from
Searle, BioMedicines agrees to be responsible for the translation of any such
data or reports into English if such translation would not otherwise be
performed by Searle.

         4.2 In the event that Searle exercises the Reversion Option,
BioMedicines likewise agrees to make available to Searle data or documents
generated by BioMedicines pursuant to BioMedicines' Developmental Activities
with Licensed Product.


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       5.
<PAGE>

         4.3 Searle shall, upon BioMedicines' reasonable request, deliver to
BioMedicines, free of charge to BioMedicines a total of [*].

         4.4 In addition to the report(s) identified in Section 3.1,
BioMedicines shall during the term of the Agreement periodically provide to
Searle reports regarding the developmental and regulatory status and progress
towards commercialization of Licensed Product. The content and frequency of such
reports shall be negotiated in good faith from time to time during the term of
the Agreement.

SECTION 5.   MANUFACTURING AND COMMERCIALIZATION

         5.1 BioMedicines will be solely responsible, as between BioMedicines
and Searle, for manufacturing of the Licensed Product from Compound unless the
rights granted hereunder to BioMedicines revert to Searle.

         5.2 BioMedicines shall have the exclusive right, but not the
obligation, at its sole option and in its sole discretion, to select, choose,
create or develop Other Intellectual Property Rights for any and all Licensed
Products unless the rights granted hereunder to BioMedicines revert to Searle.

         5.3 BioMedicines shall use its good faith efforts to develop, obtain
regulatory approval and commercialize the Licensed Product in the Field in each
country of the Territory where such good faith efforts would be justified by
sound business judgment and shall require any Affiliates and/or Sublicensees to
agree to be bound substantially by this obligation. BioMedicines shall take such
actions as are reasonably necessary or customary to obtain and maintain the
authorization and/or ability to market the Licensed Product in such countries in
the Territory in which BioMedicines shall choose to introduce the Licensed
Product. BioMedicines shall bear sole responsibility for all expenses of such
development, commercialization and regulatory compliance. In the event that
BioMedicines does not make such good faith efforts to pursue the development and
commercialization of the Licensed Product, all rights granted hereunder shall
revert to Searle, or in the event that an Affiliate or Sublicensee of
BioMedicines shall not make good faith efforts to pursue the development and
commercialization of the Licensed Product, all rights granted by BioMedicines to
such Affiliate or Sublicensee shall revert to Searle unless BioMedicines agrees
to re-assume responsibility for development and commercialization on behalf of
the Sublicensee.

SECTION 6.   ROYALTIES AND OTHER COMPENSATION; RECORDS

         6.1 In consideration of the grant of the License pursuant to Section
2.1 herein, BioMedicines shall pay to Searle the sum of [*] within 45 days of
the Effective Date.

         6.2 In the event that BioMedicines commences clinical trials with
Compound within the territory, BioMedicines shall pay to Searle the sum of [ * ]
within forty-five (45) days after the first such filing only.


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       6.
<PAGE>

         6.3 In the event that BioMedicines commences phase III clinical trials
or its equivalent for the Licensed Product in the Territory, BioMedicines shall
pay to Searle the sum of [ * ] within forty-five (45) days after the
commencement of the first such phase III trials only.

         6.4 Upon the receipt by BioMedicines of regulatory approval for the
Licensed Product for either the European Union or for the United States,
BioMedicines shall pay to Searle the sum of [ * ] within forty-five (45) days
after the first such approval only.

         6.5 The sums payable under Sections 6.1-6.4 shall not be refundable
unless there is a material breach of the Agreement by Searle which material
breach remains uncured for a period of sixty (60) days. Said sums paid by
BioMedicines to Searle shall then be refunded by Searle to BioMedicines within
thirty (30) days thereafter.

         6.6 (A)           Upon commercialization, BioMedicines shall pay to
Searle an earned patent royalty on BioMedicines' Net Sales in the Territory
as follows:

                           (1) If total Net Sales are less than [ * ], the
patent royalty rate shall be [ * ] of total Net Sales;

                           (2) If total Net Sales are from [ * ] the patent
royalty rate shall be [ * ] of total Net Sales;

                           (3) If total Net Sales are in excess of [ * ] the
patent royalty rate shall be [ * ] of total Net Sales;

             (B)           Upon commercialization, BioMedicines shall pay to
Searle an earned know-how royalty on BioMedicines' Net Sales in the Territory
as follows:

                           (1) If total Net Sales are less than [ * ], the
know-how royalty rate shall be [ * ] of total Net Sales;

                           (2) If total Net Sales are from [ * ] the know-how
royalty rate shall be [ * ] of total Net Sales;

                           (3) If total Net Sales are in excess of [ * ] the
know-how royalty rate shall be [ * ] of total Net Sales; and

             (C)           BioMedicines shall pay such patent royalty to
Searle until:

                           (1) the expiration of the last-to-expire or
become-abandoned of the Patent Rights in such country; or

                           (2) for [ * ] years from the date that Licensed
Product is first marketed in such country, whichever is longer; and

             (D)           BioMedicines shall pay such know-how royalty on
each sale of the Licensed Product.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       7.
<PAGE>

         6.7 In the event that BioMedicines shall sublicense to a Third Party
all or any part of the License granted hereunder, BioMedicines shall pay to
Searle [ * ] of all remuneration received from such Sublicensee for all or any
part of the Sublicense granted in lieu of the royalties set forth in Section 6.6
and BioMedicines shall continue to pay royalties in accordance with Section 6.6
for any portion of the License grant retained by BioMedicines. In the event any
remuneration to be received by BioMedicines pursuant to such Sublicense would
involve an element of non-cash consideration, BioMedicines shall, prior to
entering into such sublicense agreement, negotiate in good faith with Searle for
a period not to exceed thirty (30) days to obtain Searle's approval of the cash
value of said non-cash consideration to be paid by BioMedicines to Searle, such
approval not to be unreasonably withheld. If, after thirty (30 days) of good
faith negotiations between the Parties, the Parties cannot agree on the cash
value to be paid, the Parties agree to obtain an independent fairness opinion
regarding said cash value from a suitably qualified third party (chosen jointly
by the Parties) whose judgment shall be binding upon both Parties.

         6.8 In the event that Searle exercises the Reversion Option for an
Indication pursuant to Section 3 of the Agreement, Searle shall pay to
BioMedicines such sums as shall be mutually agreed.

         6.9 The Party marketing a Licensed Product for an Indication in the
Territory shall deliver to the other written reports (consistent with generally
accepted accounting principles) within sixty (60) days after the close of each
calendar quarter showing separately for each Licensed Product: (i) gross sales,
broken down both by units sold and revenue, and the calculation of Net Sales;
(ii) details of the quantities sold in each country where there are sales; and
(iii) royalties due pursuant to Section 6 hereof. Concurrently with the making
of such report, the Party selling Licensed Product shall pay the royalties due
on Net Sales during the preceding calendar quarter. The Party marketing a
Licensed Product for an Indication in the Territory shall deliver to the other a
written report (consistent with generally accepted accounting principles) within
sixty (60) days after the close of the calendar year showing (i), (ii), and
(iii) above for each Licensed Product for the calendar year. Any adjustment(s)
needed to adjust the royalty payments based on total Net Sales to be consistent
with Section 6.6 shall be made concurrently with the delivery of the report.

         6.10 All royalties to be paid under the Agreement shall be paid in U.S.
dollars. In the event that currency conversions shall be required, such
conversion shall be made using the foreign exchange rates published in the
Midwest edition of the Wall Street Journal (or a successor publication) as of
the last business day closest to the end of the quarter in question.

         6.11 If either Party shall fail to make a payment when due pursuant to
Section 6 of the Agreement, such Party shall have an additional five (5)
business days from the date such payment was due to cure such non-payment.

         6.12 The Party selling Licensed Product shall keep complete and
accurate records in sufficient detail to properly reflect all gross sales,
deductions from Net Sales, and to enable the royalties payable hereunder to be
determined. Upon the written request of the non-selling Party not more than once
in each calendar year, the selling Party shall permit an independent certified
public accounting firm of nationally recognized standing, selected by the
non-selling Party and


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       8.
<PAGE>

reasonably acceptable to the selling Party, and at the non-selling Party's
expense (except as provided below), to have access during normal business hours
to such of the records of the selling Party as may be reasonably necessary to
verify the accuracy of the royalty reports hereunder for any year ending not
more than twenty-four (24) months prior to the date of such request. The
accounting firm shall disclose all information gathered or concluded to the
selling Party. The accounting firm shall disclose to the non-selling Party only
whether the records are correct or not and the specific details concerning any
discrepancies. No other information shall be shared with the non-selling Party.
If the accounting firm concludes that additional royalties were owed during such
period (exceeding [ * ] of royalties paid during the period), the selling Party
shall pay all costs associated with the audit and the unpaid royalties within
thirty (30) days of the date the accounting firm delivers the firm's written
report to the Parties, with interest thereon at the prime rate reported by the
Citibank of New York, or another bank of nationally recognized standing in the
event that Citibank shall cease to exist, on the last calendar day of the
quarter in which such payments were due. Should the accounting firm conclude
that the selling Party has overpaid any royalties, the non-selling Party shall
credit any overpayment to the selling Party against amounts later due the
non-selling Party.

         6.13 Each Party shall deduct any withholding taxes from the payments
due under the Agreement and pay them to the proper tax authorities as required
by the laws applicable at the date of payment. Neither Party shall deduct any
other withholding or any other governmental charges from the payments due under
the Agreement. Each Party shall annually provide the other Party with official
receipts of payment of any withholding taxes and forward these receipts to such
other Party.

SECTION 7.   CONFIDENTIALITY

         7.1 Any information which is transmitted by one Party to the other
Party in connection with the entering into or the performance of the Agreement,
shall be kept confidential by the receiving Party and its Affiliates and/or
Sublicensees prior to the expiration or termination of the Agreement and for a
period of five (5) years after its expiration. The foregoing obligation shall
not apply to:

             (a) any information which at the time of disclosure or
acquisition is part of the public knowledge or literature, or thereafter becomes
part of the public knowledge or literature otherwise than by unauthorized
disclosure by the recipient;

             (b) any disclosure of information to the United States Food
and Drug Administration or other similar governmental authorities for the
purpose of complying with regulatory requirements with respect to the Licensed
Processes or Licensed Product;

             (c) any information which at the time of disclosure or
acquisition was in the recipient's possession as evidenced by its written
records;

             (d) any information which became available to the recipient
from another source not bound to secrecy to the disclosing Party with respect to
such information;


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       9.
<PAGE>

             (e) disclosure by the recipient to Third Parties under
provisions of confidentiality substantially similar to those contained in the
Agreement for the purposes of development or marketing of the Licensed Product;
and

             (f) any disclosure of information required by law.

         7.2 Notwithstanding the provisions of Section 7.1 herein, in the event
that either Party, its Affiliates and/or Sublicensees shall determine that it
wishes to disclose any information, the disclosure of which would be prohibited
by Section 7.1 herein, such Party shall present the other Party with a written
request to disclose such information. The other Party shall have a period of
thirty (30) calendar days to approve the disclosure contained in such written
request, which approval shall not be unreasonably withheld.

SECTION 8.   COMPETITION

         8.1 Unless Searle exercises the Reversion Option, Searle shall not,
during the term of the Agreement, develop, manufacture or market within the
Fields within the Territory any product or substance incorporating Compound
without the prior consent of BioMedicines.

SECTION 9.   PATENT MATTERS

         9.1 BioMedicines shall, subject to good business judgment, after the
Effective Date

             (a) maintain the Patent Rights in Appendix A and

             (b) prosecute and/or defend any infringement of and/or
challenge to the Patent Rights.

         9.2 INFRINGEMENT SUITS

             (a) In any infringement suit either Party may institute to
enforce the Patent Rights pursuant to the Agreement, or in any suit brought
by a Third Party in which either Party is defending the Patent Rights, the
other Party hereto shall, at the request and expense of the Party initiating
or defending such suit, as the case may be, cooperate in all reasonable
respects and, to the extent practicable, have its employees and, if
practicable, former employees, testify when requested and make available
relevant records, papers, information, samples, specimens and the like.

             (b) If, as a result of any such suit, the Patent Rights are held
in any country to be not enforceable or invalid pursuant to a judgment
rendered by a court of final determination and not subject to appeal, then,
from and after the date of the filing of the action which resulted in such
judgment, the royalties on Net Sales in that country payable pursuant to
Section 6 hereunder shall be reduced by [ * ]. If BioMedicines elects to
prosecute any alleged infringement, Searle hereby agrees that Searle, at the
request of BioMedicines, shall assist and cooperate with BioMedicines in any
suit in all reasonable respects and to the extent practicable have its
employees and former employees testify when requested and make available
relevant records, papers, information, samples specimens and the like.
BioMedicines alone shall retain any recovery or damages in excess of cost and
fees incurred in obtaining the same for past

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                      10.
<PAGE>

infringement derived from any such infringement action prosecuted or defended by
BioMedicines after first reimbursing Searle for such royalties and payments as
Searle may have lost under Section 9.4 hereunder.

         9.3 Each of the Parties shall notify the other promptly in the event
that it becomes aware of any alleged infringement of the Patent Rights by a
Third Party and of any available evidence thereof.

         9.4 In the event that BioMedicines shall undertake the enforcement or
defense of the Patent Rights in any country in the Territory by litigation
pursuant to Section 9 of the Agreement or otherwise, BioMedicines may withhold
any payments or royalties due Searle on Net Sales in such country hereunder,
pursuant to Section 6 of the Agreement, and apply the same toward reimbursement
of its expenses, including attorney's fees, in connection therewith, until
BioMedicines is reimbursed therefore provided that in no case that such payments
or royalties be reduced by more than [ * ].

SECTION 10.   REPRESENTATIONS, WARRANTIES, AND INDEMNIFICATIONS

         10.1 Each Party represents and warrants to the other Party that: (i) it
is free to enter into the Agreement and has the full right and authority to do
so; (ii) it has taken all corporate action necessary to authorize the execution
and delivery of the Agreement and the performance of its obligations under the
Agreement; (iii) it is not aware of any impediment that would inhibit its
ability to perform in all material respects its obligations under the Agreement;
and (iv) the execution, delivery and performance of the Agreement will not
violate any provision of, conflict with or result in any breach of any of the
terms of, or constitute a default under either Party's respective certificate of
incorporation, by-laws, or any material indenture, lease, agreement or other
material instrument to which it is a party, or any decree, judgment or order
applicable to such party or any law, statute, rule or regulation applicable to
such party.

         10.2 Searle hereby represents to BioMedicines that:

              (a) It is the assignee of the Patent Rights covered by the
Agreement;

              (b) It has the legal power to convey the rights granted to
BioMedicines in the Agreement;

              (c) It has no knowledge of any facts which would rebut the
presumption of validity accorded any issued patents within the Patent Rights and
it has disclosed to the United States Patent and Trademark office all
information "material to patentability," as such is defined in 37 C.F.R.
Section 1.56;

              (d) It has no knowledge of any adverse claims to the Patent
Rights;

              (e) All patent applications included in the Patent Rights are
pending and have not been abandoned and are enforceable pursuant to a valid
assignment;


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                      11.
<PAGE>

              (f) To its best knowledge and belief, as of the Effective
Date, there are no asserted or unasserted claim or demand which may be enforced
against any of the Patent Rights or Know-How;

              (g) To its best knowledge and belief, on the Effective Date
the practice of any processes and/or products disclosed in the Patent Rights or
Know-How do not infringe upon any Third Party patents;

              (h) Searle has not entered into any agreement with any Third
Party which is in conflict with the rights granted to BioMedicines pursuant to
the Agreement; and

              (i) To its best knowledge and belief, the reports and existing
good laboratory compliance (GLP) statements provided on the Compound and
Licensed Product are complete and accurate.

         10.3 BioMedicines shall obtain and maintain at all times and at its own
expense adequate insurance to cover any risk of injury to humans that may arise
out of activities contemplated in this Agreement with respect to the Compound or
Licensed Products.

         10.4 BioMedicines represents and warrants that it shall comply with all
applicable laws and regulations, including Food, Drugs and Cosmetics Act,
current Good Clinical Practices and investigational new drug regulations and
applicable guidelines.

         10.5 ANY MATERIALS PROVIDED BY SEARLE PURSUANT TO THE AGREEMENT ARE
PROVIDED "AS IS" WITHOUT ANY WARRANTY OF FITNESS OR MERCHANTABILITY FOR ANY
PARTICULAR PURPOSE. TO THE EXTENT PROVIDED BY LAW. SEARLE SHALL NOT BE LIABLE
UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABILITY
THEORY FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES.

         10.6 BioMedicines shall defend, indemnify and hold Searle and its
Affiliates and their respective officers, directors and employees harmless from
and against any and all claims, demands, losses, damages, liabilities (including
without limitation product liability), settlement amounts, costs or expenses
whatsoever (including reasonable attorneys' fees and costs) arising from or
relating to any claim, action or proceeding made or brought against such person
or party by a third party as a result of BioMedicines' development, use,
manufacture, marketing or sale of Licensed Product or Compound (including
without limitation product liability claims) unless such liability arises from
Searle's negligent act or omission.

SECTION 11.   ASSIGNMENT

         11.1 The Agreement shall not be assignable by BioMedicines without the
prior written consent of Searle, which consent shall not be unreasonably
withheld.

         11.2 Notwithstanding Section 11.1 herein, Searle agrees to waive its
rights to withhold consent for assignment by BioMedicines if a Sublicense has
been granted to a Third Party or if the Licensed Product for an Indication has
been approved for marketing in the U.S. or in the E.U.


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                      12.
<PAGE>

         11.3 Searle may freely assign this Agreement on notice to, but without
the necessity of securing the consent of BioMedicines.

SECTION 12.   TERM AND TERMINATION

         12.1 Except as otherwise specifically provided herein and unless sooner
terminated pursuant to Sections 3 or 11 of the Agreement, the Agreement and the
licenses and rights granted hereunder, shall remain in full force and effect for
as long as royalties are payable under Section 6 of the Agreement in any country
of the Territory.

         12.2 Either Party shall have the right to terminate the Agreement with
thirty (30) days notice in written form to the other Party in the event that the
other Party fails to remedy any material failure to fulfill its obligations
under the Agreement or remains in material breach of the terms or conditions
hereof within sixty (60) days after receipt of notice in written form specifying
the circumstances giving rise to such failure or breach.

         12.3 Either Party may terminate the Agreement with immediate effect by
notice in written form in the event that the other Party becomes insolvent, is
declared bankrupt or adopts a plan of liquidation and dissolution.

         12.4 Upon termination of the Agreement pursuant to Sections 12.2 or
12.3 herein, any licenses or sublicenses granted under the Agreement may
continue in effect at the option of the non-breaching or non-bankrupt Party, as
long as the non-breaching or non-bankrupt Party abides by the terms of the
license and the surviving provisions of the Agreement, including but not limited
to the obligation to pay milestone payments and royalties under Section 6, and
subject to later expiration under this Section 12. Any court-awarded damages
granted to one Party arising from material breach or bankruptcy of the other
Party may be deducted from milestone, royalty and/or other payments which may be
subsequently due to the other Party.

         12.5 Upon termination of the Agreement pursuant to Sections 12.2 or
12.3 herein, nothing herein shall be construed to release either Party from any
obligation that matured prior to the effective date of such termination. Either
Party or any Affiliate or Sublicensee thereof may after the effective date of
such termination sell all Licensed Products manufactured or in process of
manufacture on the effective date of such termination.

         12.6 Upon termination of the Agreement by either Party pursuant to
Section 12.2 herein, the other Party will transfer or have transferred to the
Party terminating the Agreement any authorizations for clinical trials or sale
of Licensed Product owned by the other Party, its Affiliates or Sublicensees,
such transfer to be free of charge to the terminating Party with the right to
use the same, subject to the provisions of Section 12.5 herein.

         12.7 Upon termination of the Agreement by either Party pursuant to
Section 12.3 herein, the other Party will transfer or have transferred to the
terminating Party any authorizations for clinical trials or sale of Licensed
Product owned by the other Party, its Affiliates or Sublicensees upon payment to
the other Party in cash an amount representing fair market value of the assets
to be transferred upon which payment the terminating Party shall have the right
to use the same.


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                      13.
<PAGE>

SECTION 13.   PAYMENTS, NOTICES AND OTHER COMMUNICATIONS

         13.1 Any payment, notice or other communication pursuant to the
Agreement shall be sufficiently made or given on the date of mailing if sent to
such Party by certified or registered first class mail, postage prepaid, or by
recognized public courier (e.g. Federal Express) addressed to it at its address
below or as it shall designate by written notice given to the other Party:

                In the case of Searle:                       with a copy to:

                G.D. Searle & Co.                            Legal Department
                5200 Old Orchard Road
                Skokie, IL 60077
                Attention: Corporate Licensing

                In the case of BioMedicines:                 with a copy to:

                BioMedicines, Inc.                           Corporate Legal
                909 Marina Village Blvd. #583
                Alameda, CA 94501


SECTION 14.   MISCELLANEOUS PROVISIONS

         14.1 The Agreement shall be construed, governed, interpreted and
applied in accordance with the laws of California, except that questions
affecting the construction and effect of any patent shall be determined by the
law of the country in which the patent was granted and disputes arising out of
the Agreement which cannot be settled between the Parties will be brought before
the courts of California.

         14.2 The Parties hereto acknowledge that the Agreement sets forth the
entire agreement and understanding of the Parties hereto as to the subject
matter hereof, and no oral or written communications between the Parties with
respect to the License granted hereunder shall be of any force or effect, nor
shall the Agreement be subject to any change or modification, except by the
execution of a subsequent written instrument subscribed to by the Parties
hereto.

         14.3 The provisions of the Agreement are severable, and in the event
that any provisions of the Agreement shall be determined to be invalid or
unenforceable under any controlling body of the law, such invalidity or
unenforceability shall not in any way affect the validity or enforceability of
the remaining provisions hereof.

         14.4 The failure of either Party to assert a right hereunder or to
insist upon compliance with any term or condition of the Agreement shall not
constitute a waiver of that right or excuse a subsequent failure to perform any
term or condition by the other Party.


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                      14.
<PAGE>

         14.5 Except as required by U.S. regulatory authorities, no press
releases, publicity, announcements or other disclosures of the Agreement shall
be made by either Party without the prior written consent of the other Party.

         14.6 The Agreement may be executed in any number of counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.



[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                      15.
<PAGE>

         IN WITNESS WHEREOF, the Parties have hereunto duly executed the
Agreement as of the day and year set forth above.


BIOMEDICINES, INC.                               G.D. SEARLE & CO.


By:  /s/ S. M. Moran                             By:  /s/ R. De Schutter
   -----------------------------------              ----------------------------
Name:    S. Mark Moran, M.D., M.B.A.             Name:    Richard U. De Schutter

Title:   President and CEO                       Title:   President and CEO


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                      16.
<PAGE>


                                   APPENDIX A

                              PATENTS/APPLICATIONS



PATENT NO.                    FILING DATE                            ISSUE DATE


                                        [ * ]




[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                      17.