License Agreement - Elan Pharmaceutical Technologies and Ligand Pharmaceuticals Inc.
TERM SHEET(1) LIGAND LICENSE LICENSE An exclusive license (the "License") from Elan Pharmaceutical Technologies, a division of Elan Corporation, plc ("Elan"), to Ligand Pharmaceuticals Incorporated (collectively "Ligand") of Elan's patent rights and know-how ("Intellectual Property") required to package, use, promote, distribute, offer for sale and sell Elan's once-daily solid oral dosage form of morphine (the "Product"). For the avoidance of doubt, Elan's Intellectual Property shall exclude patent rights and know-how owned and licensed by *** *** *** PRODUCT PRESENTATIONS *** capsules. *** Ligand and its affiliates undertake *** *** *** *** in the Territory during the Term and for *** thereafter. TRADEMARK Elan shall grant to Ligand a non-exclusive royalty free license in the Territory (as defined below) for the Term to use Elan's Morphelan(TM) trademark (the "Trademark") solely for the purposes of exercising its rights and performing its obligations under this License. COMMERCIALIZATION Ligand will diligently pursue the commercialization of the Product and shall use all *** efforts to market and promote the Product in the Territory and in doing so, shall use the same level of effort as with other similar products of similar sales potential which it markets. Within *** of the submission of the New Drug Application ------------ (1) Capitalized terms used in this Term Sheet and not otherwise defined herein shall have the meanings set forth in Letter of Intent to which this Term Sheet is attached. *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. <PAGE> 9 or its foreign equivalent (the "NDA") in each country of the Territory, Elan and Ligand shall agree upon appropriate due diligence obligations on Ligand for marketing the Product including a promotional support budget and minimum sales figures for the Product for the *** following commercial launch of the Product having regard to standard industry practices. In the event that the parties are unable to agree upon such due diligence obligations for the Product within the time period as set out above, the parties shall appoint an arbitrator who is technically knowledgeable in the pharmaceutical industry to choose either Elan's proposed terms or Ligand's proposed terms on the basis of which terms he determines to be closer to standard industry practice. Ligand shall make a full scale commercial launch of the Product in each country of the Territory within *** of NDA approval, including marketing approvals, where applicable, being granted in such country. Elan shall not unreasonably withhold its agreement to a request by Ligand for an extension of the said *** period if there are legitimate commercial reasons for such an extension or Elan is unable to timely supply Product for launch. CO-PROMOTION ELAN For the period from the date of execution of the Definitive Agreements up until *** of the Product in each country of the Territory, Elan shall have a *** to co-promote the Product in such country of the Territory for *** *** and on other terms to be agreed in good faith between the parties and having regard to standard industry practices in such country of the Territory. LIGAND For the period from the date of execution of the Definitive Agreements up until *** *** for the Product in each Member State of the European Union (excluding Ireland and the United Kingdom), whether on an individual approval basis or through the European centralized procedure, Ligand shall have a *** to co-promote the Product in such Member State of the European Union for *** 2 *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. <PAGE> 10 *** on terms to be agreed in good faith between the parties and having regard to standard industry practices in such Member State of the European Union; provided that Ligand has established an appropriate sales force in such Member State. In the event that the parties are unable to agree upon the terms for co-promotion of the Product by either party as set out above, the parties shall appoint an arbitrator who is technically knowledgeable in the pharmaceutical industry to choose either Elan's proposed terms or Ligand's proposed terms for the co-promotion on the basis of which terms he determines to be closer to standard industry practice. PROJECT TEAM Elan and Ligand shall establish a project team (on which they shall have equal representation) to supervise the day-to-day activities related to the co-operative aspects of the research, development and commercialization of the Product. Disputes within the project team that cannot be resolved by consensus will be resolved by a management committee team (on which they shall have equal representation) from Ligand and Elan. If such management committee team cannot resolve the matter, the dispute will be referred to a designated senior officer of each of Elan and Ligand. LICENSED TERRITORY United States of America and its territories and Canada (the "Territory"). TERM The greater of (a) the life of the patent rights in the relevant country or countries within the Territory and (b) *** Not later than *** prior to the expiration of the Term for a given country, Elan and Ligand shall enter into a long-term supply agreement upon terms and conditions to be mutually agreed between the parties. If the parties fail to enter into such a long-term supply agreement, Elan shall grant Ligand a license to the know-how to manufacture the Product upon terms and conditions to be mutually agreed between the parties. 3 *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. <PAGE> 11 SUBLICENSE AND ASSIGNMENT RIGHTS *** shall *** *** Neither party shall be entitled to assign this agreement without the prior written consent of the other party, save that either party may assign the License to their respective affiliates provided that there is not an adverse tax consequence for the other party. CERTAIN CHANGES OF CONTROL In the event that (a) a technological competitor to Elan or its affiliates *** shall, directly or indirectly, acquire ***% or more of the capital stock of Ligand, or otherwise control or influence in any material respect their management or business, or (b) any other person or entity shall acquire ***% or more of the voting stock of Ligand, or otherwise merge, consolidate or enter into any similar transaction (or binding agreement in respect thereof) with any of such entities, the License, at *** *** provided, however, that the foregoing shall not apply in relation to any exercise of any options by Elan as contemplated by the definitive documents. LICENSE ROYALTIES PAYABLE BY LIGAND TO ELAN In consideration of the rights and license of the Elan patent rights for the Product, Ligand shall pay the following amounts to Elan: $5,000,000 in cash or in Common Stock (valued at $11.65 per share), at Ligand's option, upon signing of the License; $10,000,000 payable through an increase in the Notes, as described in Exhibit C to the Letter of Intent, upon signing of the License; $*** in cash or in Common Stock (valued at a price per share equal to the *** *** *** *** *** and $*** in cash or in Common Stock (valued at a price per share equal to the *** 4 *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. <PAGE> 12 *** *** *** at Ligand's option, upon *** PATENTS The substantive documents shall contain mutually- agreeable provisions on filing, prosecution, enforcement and maintenance. REGULATORY APPROVALS Regulatory approvals for the Product in the Territory shall be prosecuted and owned by Elan. SUPPLY OF PRODUCT Ligand shall purchase the Product exclusively from Elan. Product shall be supplied to Ligand in finished market packs Ex Works the manufacturing facility designated by Elan. Elan shall advise Ligand of a minimum batch size for the manufacture and supply of each dosage strength of Product. Ligand shall provide quarterly forecast updates on a rolling *** basis to Elan. The *** of such forecast will be binding. In the event of a failure to supply (to be defined) by Elan, Elan shall grant to Ligand a production license to manufacture the Product. PRICE OF PRODUCT The price to be charged by Elan to Ligand for the supply of Product for commercial sale in the Territory shall be: - ***% of NSP for the *** *** for Product in the Territory; - ***% of NSP for the *** *** for Product in the Territory; and - ***% of NSP for *** during the Term of the Agreement. Product for distribution as *** promotional samples shall be supplied by Elan to Ligand at *** *** 5 *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. <PAGE> 13 In no event shall Elan be required to supply Product for commercial sale to Ligand *** *** NSP shall mean in the case of Product sold by Ligand or an affiliate, that sum determined by *** *** *** for the Product by Ligand or, its affiliate, as the case may be, in accordance with standard accounting principles, a maximum deduction of ***% to cover the following:- (a) customs duties or other taxes (excluding income or corporation tax), directly related to the sale of the Product which are paid by Ligand or its affiliates as the case may be; (b) a discount from the gross sales proceeds to cover such normal costs as are incurred by Ligand or its affiliates, as the case may be, in respect of transport, shipping insurance, returns, discounts directly related to the sale of the Product. In Market shall mean the sale of the Product in the Territory by Ligand or its Affiliates, to an unaffiliated third party, including but not limited to a wholesaler, chain store, distributor, managed care organization, hospital or pharmacy. Fully Allocated Cost shall include direct labour, direct materials and supplies, variable labor, overhead and attributable administration, quality control, quality assurance and other costs; such costs to be calculated in accordance with *** PRODUCT SUPPORT Elan shall be responsible, ***, for the completion of the clinical studies for the Product listed in Schedule I, which are currently in progress. For the avoidance of doubt, Ligand shall be responsible for the cost of all development work and/or clinical trials on the Product in addition to such ongoing clinical studies. *** Ligand shall commit to undertake additional clinical 6 *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. <PAGE> 14 expenditure, including *** *** *** *** which shall include direct labor, overhead and attributable administration, quality control, quality assurance and other costs, calculated in accordance with *** during the *** following submission of the NDA in the United States. CUSTOMARY TERMS The License will contain customary terms, including terms and conditions relating to payments; patent rights and related protection and prosecutions; auditing and review rights, confidentiality; representations and warranties; indemnities; and other customary provisions. 7 *** Portions of this page have been omitted pursuant to a request for Confidential Treatment and filed separately with the Commission. <PAGE> 15 SCHEDULE I MORPHLEAN CLINICAL DEVELOPMENT PROGRAM STUDY I.D. TRIAL NAME LOCATION COMPARATOR STUDY VOLUNTEERS/ CRO ESTIMATED ESTIMATED STATUS/ DESIGN PATIENTS START COMPLETE COMMENTS ----------- --------------- ------------ --------------- --------- --------------- -------- ------------- ------------- ------------ ***