EXCLUSIVE LICENSE AGREEMENT
REVISED DRAFT
Dated as of [●], 2023
REVISED DRAFT — September 15, 2023 — Prepared by Calderwood & Harkness LLP — 600 Lexington Avenue, 30th Floor, New York, NY 10022 — Privileged & Confidential — Subject to Contract
between
PENTERRA PHARMACEUTICALS CORP. (a Delaware corporation)
as Licensor
and
MERIDIAN BIO THERAPEUTICS LIMITED (a Hong Kong limited company)
as Licensee
EXCLUSIVE LICENSE AGREEMENT
This Exclusive License Agreement (this "Agreement") is entered into as of [●], 2023 (the "Signing Date"), by and between:
PENTERRA PHARMACEUTICALS CORP., a corporation duly organized and existing under the laws of the State of Delaware, United States of America, with its principal executive offices located at 400 Pharma Drive, Suite 800, Princeton, New Jersey 08540 (Employer Identification Number: 22-3948175) ("Penterra" or the "Licensor");
and
MERIDIAN BIO THERAPEUTICS LIMITED, a limited company duly organized and existing under the laws of Hong Kong Special Administrative Region, People's Republic of China (Company Registration No. 2847631), with its registered office and principal place of business located at 18/F, Blossom Tower, 88 Queen's Road Central, Hong Kong SAR ("Meridian" or the "Licensee").
Penterra and Meridian are each referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Penterra owns or Controls (as defined below) certain patents, know-how, trademarks, and other intellectual property rights relating to the proprietary small-molecule compound known as PPC-4187 (Proposed International Nonproprietary Name: Penteracitinib), a selective Janus kinase 1 (JAK1) inhibitor for the treatment of moderate-to-severe atopic dermatitis in adults;
WHEREAS, PPC-4187 has completed a Phase IIb clinical trial (Study PPC-4187-201; 420 patients enrolled; topline results announced June 2023 demonstrating statistically significant improvement versus placebo, with a p-value of less than 0.001, and an EASI-75 response rate at Week 16 that met the primary efficacy endpoint) conducted in the United States and European Union;
WHEREAS, PPC-4187 is formulated as 25 mg and 50 mg film-coated tablets, with the manufacturing process validated at the facilities of Alkerra Manufacturing Inc., located at 5200 Meridian Parkway, Research Triangle Park, North Carolina 27713;
WHEREAS, Meridian possesses significant commercialization capabilities across the Asia-Pacific region, including established regulatory approvals infrastructure and commercial operations in China (National Medical Products Administration, or "NMPA"), Japan (Pharmaceuticals and Medical Devices Agency, or "PMDA"), South Korea (Ministry of Food and Drug Safety, or "MFDS"), Australia (Therapeutic Goods Administration, or "TGA"), and additional markets in the Association of Southeast Asian Nations ("ASEAN"), and desires to obtain an exclusive license to develop, manufacture, and commercialize PPC-4187 in the Territory (as defined herein);
WHEREAS, Penterra desires to grant such exclusive license to Meridian on the terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 Definitions
As used in this Agreement, the following capitalized terms shall have the meanings set forth below:
"Affiliate" means, with respect to a Party, any Person that directly or indirectly controls, is controlled by, or is under common control with such Party. For purposes of this definition, "control" means (a) the direct or indirect ownership of fifty percent (50%) or more of the outstanding voting securities or equivalent equity interests of an entity, or (b) the power to direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities, by contract, or otherwise.
"Annual Net Sales" means the aggregate Net Sales of all Licensed Products in all countries of the Territory during a Calendar Year.
"API" means the active pharmaceutical ingredient for PPC-4187 (Penteracitinib), as manufactured in accordance with GMP and the specifications set forth in the Supply Agreement.
"Calendar Quarter" means each successive period of three (3) consecutive calendar months ending on March 31, June 30, September 30, and December 31 of each year, respectively; provided, however, that the first Calendar Quarter of the Term shall commence on the Effective Date and end on the last day of the then-current calendar quarter, and the last Calendar Quarter of the Term shall commence on the first day of the then-current calendar quarter and end on the date of termination or expiration of this Agreement.
"Calendar Year" means each successive period of twelve (12) consecutive calendar months commencing on January 1 and ending on December 31; provided, however, that the first Calendar Year of the Term shall commence on the Effective Date and end on December 31 of such year, and the last Calendar Year of the Term shall commence on January 1 of the year of termination or expiration and end on the date of termination or expiration of this Agreement.
"CMO" means a contract manufacturing organization engaged by either Party or their respective Affiliates or sublicensees for the manufacture, processing, packaging, testing, or storage of API, Licensed Products, or any component thereof.
"Commercially Reasonable Efforts" means, with respect to a Party's obligations under this Agreement, the level of efforts and resources consistent with those that would be used by a similarly situated pharmaceutical company of comparable size, capabilities, and financial resources for a pharmaceutical product at a similar stage of development or commercialization, taking into account, without limitation, the market potential and commercial viability of the product, the competitive landscape (including the availability of alternative therapies), regulatory considerations, the proprietary position of the product (including patent coverage and market exclusivity), the product's safety and efficacy profile, the anticipated profitability of the product (including pricing and reimbursement considerations), and all other relevant commercial, scientific, medical, regulatory, and technical factors that a prudent person would consider.
"Compound" means the small-molecule compound designated PPC-4187 (Proposed International Nonproprietary Name: Penteracitinib), a selective Janus kinase 1 (JAK1) inhibitor, including all salts, hydrates, solvates, polymorphs, metabolites, enantiomers, racemates, pro-drugs, crystalline forms, and amorphous forms thereof.
"Confidential Information" means all proprietary and confidential information and data (whether in written, oral, electronic, graphic, or any other form) disclosed by or on behalf of one Party (the "Disclosing Party") to the other Party (the "Receiving Party") in connection with this Agreement, including without limitation: (a) scientific, technical, pharmaceutical, regulatory, clinical, pre-clinical, and manufacturing information; (b) trade secrets, know-how, inventions, discoveries, and improvements; (c) business, financial, commercial, and strategic information and plans; (d) the terms and conditions of this Agreement; and (e) any information or materials identified as confidential at the time of disclosure. For the avoidance of doubt, all Licensed Know-How shall constitute Confidential Information of Penterra.
"Control" or "Controlled" means, with respect to any intellectual property right, the possession by a Party (whether by ownership or license, other than a license granted under this Agreement) of the ability to grant a license or sublicense to such intellectual property right to the other Party as provided herein without violating the terms of any agreement or other arrangement with any Third Party as of the time such license or sublicense would be granted.
"Development Milestone" means each of the milestone events specified in Section 5.2 of this Agreement.
"Development Plan" means the plan for the development of Licensed Products in the Territory, as set forth in Schedule E, as such plan may be amended from time to time by the JSC in accordance with the provisions of this Agreement.
"Effective Date" means the date on which all Closing Conditions set forth in Article XVIII have been satisfied or waived in accordance with the provisions thereof.
"EU5" means the Federal Republic of Germany, the French Republic, the Italian Republic, the Kingdom of Spain, and the United Kingdom of Great Britain and Northern Ireland.
"First Commercial Sale" means, with respect to a Licensed Product in a country in the Territory, the first sale of such Licensed Product to a Third Party for end-use consumption in such country following receipt of Regulatory Approval for such Licensed Product in such country. For the avoidance of doubt, sales for clinical trial purposes, compassionate use, named patient supply, or other pre-commercial activities shall not constitute a First Commercial Sale.
"Generic Product" means a pharmaceutical product that (a) contains the same active ingredient as a Licensed Product (i.e., PPC-4187 or Penteracitinib), (b) is approved by a Regulatory Authority in the Territory on the basis of bioequivalence, biosimilarity, or a similar abbreviated regulatory pathway referencing a Licensed Product, and (c) is marketed by a Third Party that is not an Affiliate or sublicensee of Meridian.
"Good Manufacturing Practices" or "GMP" means all applicable current good manufacturing practices, including as set forth in (a) the ICH Guidelines Q7, Q8, Q9, Q10, and Q11, (b) the applicable regulations promulgated by the U.S. Food and Drug Administration under 21 C.F.R. Parts 210 and 211, and (c) equivalent requirements of applicable Regulatory Authorities in the Territory.
"ICC" means the International Chamber of Commerce.
"Indemnified Party" means the Party entitled to indemnification pursuant to Article XII of this Agreement.
"Indemnifying Party" means the Party obligated to provide indemnification pursuant to Article XII of this Agreement.
"Joint Patent Committee" or "JPC" means the joint patent committee established by the Parties pursuant to Section 3.3 of this Agreement.
"Joint Steering Committee" or "JSC" means the joint steering committee established by the Parties pursuant to Section 3.2 of this Agreement.
"Know-How" means all proprietary information, materials, and data described in Schedule B, including without limitation scientific, technical, pharmaceutical, regulatory, clinical, pre-clinical, manufacturing, analytical, and commercial information and data, in whatever form.
"Licensed IP" means, collectively, the Licensed Patents, the Licensed Know-How, and the Licensed Trademarks.
"Licensed Know-How" means the Know-How set forth in Schedule B, including without limitation the pre-clinical and clinical data packages (including all data and results from Study PPC-4187-201), the proprietary manufacturing process for the Compound and Licensed Products, analytical methods, stability data, chemistry, manufacturing, and controls ("CMC") documentation, and all related regulatory documentation and correspondence, in each case as Controlled by Penterra as of the Effective Date or during the Term.
"Licensed Patents" means the patents and patent applications set forth in Schedule A, together with all continuations, continuations-in-part, divisionals, reissues, reexaminations, extensions (including any supplementary protection certificates and patent term extensions), renewals, substitutions, confirmations, registrations, re-validations, additions, and supplementary protection certificates thereof, and all foreign counterparts of any of the foregoing, in each case as Controlled by Penterra as of the Effective Date or during the Term. As of the Signing Date, the Licensed Patents comprise seven (7) patent families as set forth in Schedule A.
"Licensed Product" means any pharmaceutical product in any form (including finished dosage form, intermediate, or bulk drug substance) containing PPC-4187 (Penteracitinib) as an active ingredient, whether alone or in combination with one or more other active ingredients.
"Licensed Trademarks" means the PENTECLAR trademark and all associated marks, logos, trade dress, and domain names set forth in Schedule C, in each case as Controlled by Penterra as of the Effective Date or during the Term, and all registrations, applications, and renewals thereof.
"Losses" means any and all damages, liabilities, losses, costs, and expenses (including reasonable attorneys' fees, expert fees, court costs, and other expenses of investigation and litigation) actually incurred by the Indemnified Party.
"MFN Adjustment Payment" means the payment calculated and payable in accordance with Section 5.8(c) of this Agreement.
"MFN Floor Price" means the price calculated in accordance with the methodology set forth in Schedule F.
"Net Sales" means, with respect to any Licensed Product, the gross amount invoiced by Meridian, its Affiliates, and their respective sublicensees for sales of such Licensed Product to Third Parties in the Territory during a given period, less the following deductions actually incurred, allowed, accrued, or specifically allocated, in each case determined in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") or International Financial Reporting Standards ("IFRS"), as consistently applied by the selling entity:
(a) trade, quantity, and cash discounts actually allowed and taken;
(b) credits, allowances, and refunds actually granted for damaged, outdated, returned, rejected, or recalled Licensed Products;
(c) rebates and chargebacks actually paid or payable, including governmental rebates (such as Medicaid rebates or similar programs in the Territory), managed care rebates, and similar price concessions;
(d) sales, use, value-added, excise, and other taxes and governmental charges directly imposed on the sale, importation, or use of Licensed Products (excluding income taxes);
(e) costs of transportation, freight, shipping insurance, handling, and packaging directly attributable to the distribution of Licensed Products; and
(f) bad debt write-offs consistent with GAAP or IFRS, as applicable.
For the avoidance of doubt, transfers of Licensed Products between or among Meridian, its Affiliates, and their sublicensees for purposes of subsequent resale shall not be included in Net Sales, and Net Sales shall be calculated only upon the first arm's-length sale to a Third Party. In the event that a Licensed Product is sold as part of a bundle or combination of products or services, Net Sales shall be calculated by multiplying the gross amount invoiced for such bundle or combination by the fraction A/(A+B), where A is the weighted average stand-alone selling price of the Licensed Product and B is the weighted average stand-alone selling price of the other products or services in the bundle or combination, in each case during the applicable Calendar Quarter.
"Party" and "Parties" mean Penterra and Meridian, individually or collectively, as the context requires.
"Person" means any natural person, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, governmental authority, or other entity.
"Phase III Trial" means a controlled clinical trial of a Licensed Product that is designed to (a) confirm the efficacy and safety of such Licensed Product for the intended indication and (b) support Regulatory Approval for commercial sale of such Licensed Product, as described in 21 C.F.R. § 312.21(c) or any foreign equivalent thereof.
"Post-Patent Royalty Rate" means the reduced royalty rate applicable following the expiration of all Licensed Patents in a given country, as set forth in Section 5.6(c) of this Agreement.
"Regulatory Approval" means all approvals, licenses, registrations, certificates, permits, and authorizations (including pricing and reimbursement approvals where required for commercial sale) granted by any Regulatory Authority that are necessary for the commercial manufacture, use, storage, importation, marketing, distribution, offer for sale, and sale of a Licensed Product in a country in the Territory.
"Regulatory Authority" means any national, supra-national, regional, state, provincial, or local governmental or regulatory authority, agency, department, bureau, commission, council, or other body responsible for regulating the development, manufacture, marketing, distribution, pricing, reimbursement, or sale of pharmaceutical products in the Territory, including without limitation the NMPA, the PMDA, the MFDS, the TGA, and any equivalent authority in any other country in the Territory.
"Regulatory Milestone" means each of the milestone events specified in Section 5.3 of this Agreement.
"Retained Territory" means the United States of America, Canada, the European Union and the European Economic Area, the United Kingdom of Great Britain and Northern Ireland, Latin America (including Mexico, Central America, South America, and the Caribbean), the Middle East, Africa, and all other countries and territories worldwide that are not included in the Territory as defined herein and set forth in Schedule D.
"Royalty Term" has the meaning set forth in Section 5.6(b) of this Agreement.
"Sublicense Income" means any and all upfront payments, license fees, milestone payments (whether development, regulatory, or commercial), royalties, equity premiums (i.e., the excess of the amount paid for equity over the fair market value of such equity at the time of investment), or other monetary or non-monetary consideration received by Meridian or its Affiliates from any sublicensee in connection with any sublicense granted pursuant to Section 2.2, excluding (a) bona fide payments received solely for research, development, or manufacturing services performed by Meridian at fair market value, and (b) bona fide loans at arm's-length terms.
"Territory" means the countries and territories set forth in Schedule D, which as of the Signing Date includes: the People's Republic of China (including Hong Kong Special Administrative Region and Macau Special Administrative Region), Japan, the Republic of Korea, Australia, New Zealand, Singapore, Thailand, Malaysia, Indonesia, the Philippines, Vietnam, and Taiwan.
"Third Party" means any Person other than the Parties and their respective Affiliates.
"U.S." means the United States of America, including its territories and possessions.
Section 1.2 Interpretation
In this Agreement, unless the context otherwise requires:
(a) the singular includes the plural and vice versa, and reference to any gender includes the other gender and the neuter;
(b) "including" and "includes" mean "including without limitation" and "includes without limitation," respectively;
(c) headings and captions are for convenience of reference only and shall not be used in interpreting, construing, or enforcing any of the provisions of this Agreement;
(d) references to Sections, Articles, Schedules, and Exhibits are references to sections and articles of, and schedules and exhibits to, this Agreement, unless otherwise specified;
(e) all Schedules and Exhibits are incorporated herein by reference and shall be deemed to be part of this Agreement;
(f) references to any statute, regulation, or rule shall be deemed to include references to such statute, regulation, or rule as amended, modified, supplemented, or re-enacted from time to time, and any successor statute, regulation, or rule;
(g) references to "days" mean calendar days unless "Business Days" are expressly specified, and "Business Days" means any day other than a Saturday, Sunday, or day on which commercial banks in New York, New York or Hong Kong SAR are authorized or required by law to close;
(h) references to "dollars," "$," or "US$" mean United States Dollars; and
(i) the words "herein," "hereof," "hereunder," and words of similar import shall be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement.
ARTICLE II — LICENSE GRANT
Section 2.1 Exclusive License
Subject to the terms and conditions of this Agreement, Penterra hereby grants to Meridian an exclusive (even as to Penterra and its Affiliates), royalty-bearing license, with the right to sublicense in accordance with Section 2.2, under the Licensed Patents, the Licensed Know-How, and the Licensed Trademarks, to develop, manufacture, have manufactured, use, import, export (solely within the Territory), offer for sale, sell, distribute, and otherwise commercialize Licensed Products in the Territory for the treatment of moderate-to-severe atopic dermatitis in adults (the "Licensed Field"). The license granted under this Section 2.1 shall be exclusive within the Territory for the Licensed Field, meaning that Penterra shall not, and shall cause its Affiliates not to, (a) grant any license or other right under the Licensed IP to any Third Party for the development, manufacture, use, importation, offer for sale, sale, distribution, or commercialization of Licensed Products in the Territory for the Licensed Field, or (b) directly or indirectly engage in any such activities in the Territory for the Licensed Field, in each case during the Term.
Penterra retains all rights in the Licensed IP in the Retained Territory (i.e., the United States, Canada, the European Union and European Economic Area, the United Kingdom, Latin America, the Middle East, Africa, and all other countries and territories not included in the Territory), and nothing in this Agreement shall be construed to limit Penterra's right to develop, manufacture, use, import, offer for sale, sell, distribute, and otherwise commercialize Licensed Products in the Retained Territory.
Section 2.2 Sublicensing Rights
(a) Meridian shall have the right to grant sublicenses under the license granted in Section 2.1 to Affiliates and Third Parties in the Territory, subject in each case to the prior written consent of Penterra, which consent shall not be unreasonably withheld, conditioned, or delayed. Any request for consent shall be made in writing and shall include the identity of the proposed sublicensee, the proposed scope and territory of the sublicense, and the material financial terms thereof.
(b) Each sublicense granted by Meridian pursuant to this Section 2.2 must (i) be in writing, (ii) be consistent with and subordinate to the terms and conditions of this Agreement, (iii) contain terms and conditions no less protective of Penterra's rights and interests than those set forth in this Agreement (including without limitation the most favored nation pricing obligations set forth in Section 5.8 and the indemnification obligations set forth in Article XII), and (iv) provide that the sublicensee shall not further sublicense without Penterra's prior written consent.
(c) Meridian shall remain fully responsible and liable for the performance of all obligations under this Agreement, including obligations delegated or sublicensed to any sublicensee. The grant of any sublicense shall not relieve Meridian of any of its obligations hereunder, and any act or omission of a sublicensee that, if committed by Meridian, would constitute a breach of this Agreement shall be deemed a breach by Meridian.
(d) Sublicense Income Pass-Through. Meridian shall pay to Penterra fifty percent (50%) of any Sublicense Income received by Meridian or its Affiliates from sublicensees, net of Meridian's documented out-of-pocket development costs directly attributable to such sublicensee's territory within the Territory (which costs shall be subject to Penterra's reasonable review and verification). Such payments shall be made within forty-five (45) days of Meridian's receipt of the applicable Sublicense Income, accompanied by a written report detailing the nature and amount of the Sublicense Income received and any deductions claimed.
(e) Meridian shall provide Penterra with a true, correct, and complete copy of each executed sublicense agreement (and any amendments thereto) within fifteen (15) Business Days of execution. Penterra shall treat such copies as Confidential Information of Meridian.
Section 2.3 Retention of Rights by Penterra
(a) Penterra retains all rights to develop, manufacture, use, import, offer for sale, sell, distribute, and otherwise commercialize Licensed Products outside the Territory (i.e., in the Retained Territory) for any indication, either independently or through its Affiliates, licensees, or sublicensees.
(b) Penterra retains the right to use the Licensed IP for internal research, pre-clinical, and development purposes globally, including for the purpose of conducting clinical trials, developing new formulations or indications, and fulfilling its obligations under this Agreement and the ancillary agreements contemplated herein.
(c) No licenses or rights are granted by Penterra under this Agreement, whether by implication, estoppel, or otherwise, except for the licenses and rights expressly set forth in this Article II.
Section 2.4 Non-Compete
During the Term, (a) Meridian shall not, and shall cause its Affiliates not to, directly or indirectly develop, manufacture, use, import, offer for sale, sell, distribute, or otherwise commercialize any other selective JAK1 inhibitor for the treatment of atopic dermatitis in the Territory that would be competitive with Licensed Products, and (b) Penterra shall not, and shall cause its Affiliates not to, directly or indirectly develop, manufacture, use, import, offer for sale, sell, distribute, or otherwise commercialize any other selective JAK1 inhibitor for the treatment of atopic dermatitis in the Retained Territory that would be competitive with Licensed Products; provided, however, that this Section 2.4 shall not restrict either Party or its Affiliates from (i) acquiring a Third Party (whether by merger, acquisition of stock, acquisition of assets, or otherwise) that, at the time of such acquisition, is engaged in the development or commercialization of a competitive product, so long as such competitive product is divested within twelve (12) months of the closing of such acquisition, or (ii) conducting pre-clinical research on JAK1 inhibitors for indications other than atopic dermatitis.
Section 2.5 No Diversion
Meridian shall not, and shall cause its Affiliates and sublicensees not to, directly or indirectly sell, distribute, market, export, or otherwise transfer or divert Licensed Products outside the Territory. Without limiting the generality of the foregoing, Meridian shall implement and maintain commercially reasonable measures, including contractual restrictions with its distributors and sublicensees, to prevent the diversion of Licensed Products from the Territory to the Retained Territory or any other country or territory outside the Territory. Meridian shall promptly notify Penterra of any suspected or actual diversion and shall cooperate with Penterra in taking appropriate corrective action.
ARTICLE III — GOVERNANCE
Section 3.1 General
The Parties shall establish and maintain joint committees as described in this Article III to oversee and coordinate the development, regulatory, intellectual property, and commercialization activities contemplated by this Agreement. Each committee shall operate in accordance with the provisions of this Article III and shall serve in an advisory and oversight capacity, except to the extent that specific decision-making authority is expressly delegated to such committee hereunder. Neither committee shall have the authority to amend, modify, or waive any term of this Agreement.
Section 3.2 Joint Steering Committee (JSC)
(a) Establishment and Composition. Within thirty (30) days of the Effective Date, the Parties shall establish a Joint Steering Committee comprised of six (6) members, with three (3) representatives designated by Penterra and three (3) representatives designated by Meridian. Each Party's representatives shall have sufficient seniority and decision-making authority to enable the JSC to fulfill its functions effectively. Either Party may replace any of its JSC representatives upon written notice to the other Party.
(b) Initial Representatives. The initial Penterra representatives on the JSC shall be Leland J. Cho (Senior Vice President, Business Development), Dr. Priya Nandakumar (Vice President, intellectual Property), and one additional designee to be identified by Penterra in writing prior to the first JSC meeting. The initial Meridian representatives on the JSC shall be Angela C.Y. Fong (Chief Executive Officer), Dr. Kenji Morimoto (Chief Medical Officer), and one additional designee to be identified by Meridian in writing prior to the first JSC meeting.
(c) Meetings. The JSC shall meet at least once per Calendar Quarter, either in person or by videoconference. Meetings may be held at such times and locations as the co-chairs of the JSC shall mutually determine. Additional meetings may be convened at the request of either Party upon not less than ten (10) Business Days' prior written notice (or such shorter notice as the Parties may agree). Each Party shall designate one of its representatives as co-chair; the co-chairs shall be responsible for preparing and circulating the agenda for each meeting at least five (5) Business Days in advance.
(d) Responsibilities. The JSC shall be responsible for:
(i) overseeing the implementation and progress of the Development Plan set forth in Schedule E;
(ii) reviewing and providing guidance on regulatory strategy for Licensed Products in the Territory;
(iii) monitoring commercialization activities, including launch preparations, marketing strategies, and pricing approaches (subject to compliance with the most favored nation pricing obligations under Section 5.8);
(iv) reviewing and approving the annual commercialization plans submitted by Meridian pursuant to Section 10.2;
(v) coordinating data sharing between the Parties pursuant to Section 4.5;
(vi) reviewing and discussing any proposed amendments to the Development Plan;
(vii) overseeing the technology transfer contemplated by Section 9.2; and
(viii) resolving disputes between the Parties at the committee level, prior to escalation in accordance with Section 3.5.
(e) Decision-Making. The JSC shall seek to reach consensus on all matters within its purview. If the JSC is unable to reach consensus on a particular matter after good faith discussion at two (2) consecutive JSC meetings, the matter shall be escalated in accordance with the dispute escalation procedures set forth in Section 3.5; provided, however, that (i) Penterra shall have the tie-breaking vote on all matters relating to global intellectual property strategy (including patent prosecution, maintenance, and enforcement strategy with potential global implications), and (ii) Meridian shall have the tie-breaking vote on Territory-specific commercialization matters (including local pricing, marketing tactics, and distribution strategies), subject in each case to compliance with the most favored nation pricing obligations set forth in Section 5.8 and all other applicable provisions of this Agreement.
Section 3.3 Joint Patent Committee (JPC)
(a) Establishment and Composition. Within thirty (30) days of the Effective Date, the Parties shall establish a Joint Patent Committee comprised of four (4) members, with two (2) representatives designated by Penterra and two (2) representatives designated by Meridian. Each Party's JPC representatives shall have appropriate expertise in patent law, intellectual property management, or related disciplines.
(b) Responsibilities. The JPC shall be responsible for:
(i) overseeing the prosecution, maintenance, and defense of the Licensed Patents in the Territory;
(ii) reviewing and providing guidance on patent filing, prosecution, and enforcement strategy in the Territory, in coordination with Penterra's global patent strategy;
(iii) evaluating the patentability of inventions arising from development activities in the Territory;
(iv) monitoring potential infringement of the Licensed Patents by Third Parties in the Territory; and
(v) coordinating with Penterra's patent prosecution counsel, Whitford & Cascade Insurance Brokers, on matters relating to the Licensed Patents in the Territory.
(c) Decision-Making. The JPC shall seek to reach consensus on all matters within its purview. Penterra shall have the tie-breaking vote on all matters affecting global patent strategy, including decisions regarding the scope, prosecution, or abandonment of patent claims that may have implications outside the Territory.
Section 3.4 Committee Reports
(a) Each committee established pursuant to this Article III shall prepare written minutes of each meeting, which shall be circulated to all members of the applicable committee for review and approval within ten (10) Business Days of such meeting. In the event of any dispute regarding the accuracy of the minutes, the co-chairs of the applicable committee shall meet and confer to resolve such dispute promptly.
(b) The JSC shall prepare and deliver to the senior management of both Parties an annual summary report summarizing the key activities, decisions, and recommendations of the JSC and the JPC during the preceding Calendar Year. Such report shall be delivered within forty-five (45) days of the end of each Calendar Year.
Section 3.5 Dispute Escalation Within Committees
(a) In the event that the JSC or the JPC is unable to reach consensus on a matter within its purview, such matter shall be escalated to the Chief Executive Officer of each Party (Dr. Raymond K. Ostrowski for Penterra and Angela C.Y. Fong for Meridian, or their respective successors or designees) for attempted resolution through good faith discussion within thirty (30) days of such escalation.
(b) If the Chief Executive Officers are unable to resolve the matter within such thirty (30)-day period, the matter shall be resolved as follows: (i) if the matter is subject to a tie-breaking vote pursuant to Sections 3.2(e) or 3.3(c), the Party holding the tie-breaking vote shall make the final determination; or (ii) if the matter is not subject to a tie-breaking vote, the matter shall be referred to the dispute resolution procedures set forth in Article XVI.
ARTICLE IV — DEVELOPMENT AND REGULATORY
Section 4.1 Development Plan
Meridian shall use Commercially Reasonable Efforts to develop Licensed Products in the Territory in accordance with the Development Plan set forth in Schedule E, as such plan may be amended from time to time by the JSC in accordance with the provisions of this Agreement. The Development Plan shall include, among other things, the Phase III trial design (including the primary and secondary endpoints, target patient population, planned number of clinical trial sites, and statistical analysis plan), the anticipated timeline for trial initiation and completion, enrollment targets, and the planned timeline for NDA/BLA submissions to the NMPA and PMDA. Meridian shall provide the JSC with quarterly written progress reports on the status of development activities in the Territory.
Section 4.2 Development Diligence
(a) Meridian shall initiate at least one (1) Phase III Trial of a Licensed Product in the Territory within eighteen (18) months of the Effective Date (i.e., by no later than April 9, 2025, assuming an Effective Date of October 9, 2023). For purposes of this Section 4.2(a), "initiation" means the dosing of the first patient in such Phase III Trial.
(b) Meridian shall use Commercially Reasonable Efforts to obtain Regulatory Approval for at least one Licensed Product in each of China (from the NMPA) and Japan (from the PMDA). Meridian's failure to achieve Regulatory Approval in either such country, despite the exercise of Commercially Reasonable Efforts, shall not constitute a breach of this Agreement.
(c) In the event that Meridian fails to initiate a Phase III Trial within the timeframe specified in Section 4.2(a), Penterra shall have the right, upon ninety (90) days' written notice to Meridian, to convert the exclusive license granted under Section 2.1 to a non-exclusive license with respect to any country in the Territory in which Meridian has not commenced development activities. Meridian may cure such failure by initiating a Phase III Trial during such ninety (90)-day notice period.
Section 4.3 Regulatory Responsibilities
(a) Meridian shall be solely responsible for all regulatory submissions, filings, and interactions with Regulatory Authorities in the Territory with respect to Licensed Products, including all applications for Regulatory Approval, at Meridian's sole cost and expense. Meridian shall conduct all regulatory activities in compliance with applicable laws, regulations, and guidelines of the applicable Regulatory Authorities.
(b) Meridian shall provide Penterra with copies of all material regulatory submissions and correspondence with Regulatory Authorities in the Territory, including without limitation (i) all NDA/BLA submissions and supplements, (ii) all material correspondence with Regulatory Authorities (including requests for additional information, deficiency letters, and approval letters), and (iii) all periodic safety update reports and annual reports, in each case within fifteen (15) Business Days of submission or receipt.
(c) Meridian shall engage qualified local regulatory counsel as needed to support its regulatory activities in the Territory. Without limiting the generality of the foregoing, Meridian intends to engage Nakamura & Takeda Law Offices for regulatory submissions to the PMDA in Japan.
(d) With respect to the People's Republic of China, Meridian shall, through its Affiliate Meridian Pharma (Shanghai) Co., Ltd., evaluate whether a Technology Import/Export filing is required under the PRC Technology Import and Export Administration Regulations (技术进出口管理条例) and, if so, shall make such filing in a timely manner and in compliance with applicable PRC law. Meridian shall keep Penterra reasonably informed of the status of any such filing and shall promptly provide Penterra with copies of any approvals, registrations, or certifications obtained in connection therewith.
Section 4.4 Clinical Supply
Penterra shall supply API and reference standard to Meridian for use in clinical trials of Licensed Products in the Territory, in accordance with the terms and conditions of the Supply Agreement executed concurrently herewith, as further described in Article IX. The pricing, forecasting, ordering, delivery, and quality specifications for such clinical supply shall be governed exclusively by the Supply Agreement.
Section 4.5 Data Sharing
(a) Each Party shall share with the other Party all safety, efficacy, and CMC data relevant to the global development of Licensed Products, in a timely manner and in a format reasonably requested by the receiving Party. Such data sharing shall be subject to the confidentiality provisions of Article VII.
(b) Within thirty (30) days of the Effective Date, Penterra shall provide Meridian with a complete data package from Study PPC-4187-201, including without limitation the full clinical study report (CSR), the individual patient-level data, the statistical analysis plan and outputs, the topline results (420 patients, Phase IIb, EASI-75 response at Week 16, p<0.001 versus placebo), the safety database, and all related data, reports, and documentation. Penterra shall make its clinical development team available to Meridian for reasonable consultation regarding such data package.
(c) Each Party shall promptly notify the other Party of any material safety findings, regulatory actions, or clinical holds affecting the development or commercialization of Licensed Products worldwide.
Section 4.6 Regulatory Approvals — Territory Subsidiaries
Meridian may hold Regulatory Approvals in the Territory through its duly organized and validly existing Affiliates, including without limitation:
(a) Meridian Pharma (Shanghai) Co., Ltd., a limited liability company organized under the laws of the People's Republic of China, for Regulatory Approvals in the PRC;
(b) Meridian Japan K.K., a kabushiki kaisha organized under the laws of Japan and registered in Tokyo, for Regulatory Approvals in Japan;
(c) Meridian Korea Inc., a company organized under the laws of the Republic of Korea and registered in Seoul, for Regulatory Approvals in South Korea; and
(d) Meridian Bio Australia Pty Ltd, a proprietary limited company organized under the laws of Australia and registered in Sydney, for Regulatory Approvals in Australia.
Meridian shall ensure that each such Affiliate complies with all applicable terms and conditions of this Agreement as if it were a party hereto, and Meridian shall remain fully responsible and liable for the acts and omissions of its Affiliates.
ARTICLE V — FINANCIAL TERMS
Section 5.1 Upfront Payment
In consideration of the license granted under Section 2.1, Meridian shall pay to Penterra a non-refundable, non-creditable upfront payment of Eighteen Million United States Dollars (US$18,000,000) at Closing. Such payment shall be made via the escrow arrangement established under the Escrow Agreement entered into among Penterra, Meridian, and Velthorn National Bank, N.A. (the "Escrow Agent"), dated as of October 2, 2023. The upfront payment shall be deposited by Meridian into the escrow account established by the Escrow Agent not later than two (2) Business Days prior to the scheduled Closing Date, and shall be released to Penterra upon the occurrence of the Closing in accordance with the terms of the Escrow Agreement. Upon release from escrow, the upfront payment shall be non-refundable and non-creditable against any other payment obligations under this Agreement.
Section 5.2 Development Milestone Payments
Subject to the terms and conditions of this Agreement, Meridian shall pay to Penterra the following one-time, non-refundable, non-creditable development milestone payments upon the first achievement of each of the following Development Milestones, for a total aggregate amount of Thirty-Two Million United States Dollars (US$32,000,000):
Each Development Milestone payment shall be payable only once, regardless of the number of Licensed Products developed, the number of countries in the Territory in which such development occurs, or the number of Phase III Trials conducted. Meridian shall provide Penterra with written notice of the achievement of each Development Milestone within ten (10) Business Days of such achievement, and the corresponding milestone payment shall be due and payable within thirty (30) days of the date of such achievement.
Section 5.3 Regulatory Milestone Payments
Subject to the terms and conditions of this Agreement, Meridian shall pay to Penterra the following one-time, non-refundable, non-creditable regulatory milestone payments upon the first achievement of each of the following Regulatory Milestones in the corresponding country, for a total aggregate amount of Twenty-Five Million United States Dollars (US$25,000,000):
Each Regulatory Milestone payment shall be payable only once for each country specified above, regardless of the number of Licensed Products approved or the number of indications for which such Licensed Products are approved. Meridian shall provide Penterra with written notice of each Regulatory Approval within ten (10) Business Days of receipt thereof, and the corresponding milestone payment shall be due and payable within thirty (30) days of the date of such Regulatory Approval.
Section 5.4 Commercial / Sales Milestone Payments
Subject to the terms and conditions of this Agreement, Meridian shall pay to Penterra the following one-time, non-refundable, non-creditable commercial milestone payments upon the first achievement of each of the following Annual Net Sales thresholds, for a total aggregate amount of Forty-Five Million United States Dollars (US$45,000,000):
Each commercial milestone payment shall be payable only once, regardless of how many times the applicable Annual Net Sales threshold is subsequently exceeded. For the avoidance of doubt, if more than one Annual Net Sales threshold is exceeded in the same Calendar Year, all corresponding milestone payments shall be due. Each commercial milestone payment shall be due and payable within forty-five (45) days of the end of the Calendar Year in which the applicable Annual Net Sales threshold is first exceeded.
Section 5.5 Total Deal Value
The aggregate potential consideration payable by Meridian to Penterra under Sections 5.1 through 5.4, exclusive of royalties, Sublicense Income pass-through payments, and MFN Adjustment Payments, is One Hundred Twenty Million United States Dollars (US$120,000,000), comprising Eighteen Million Dollars (US$18,000,000) in upfront payments, Thirty-Two Million Dollars (US$32,000,000) in development milestone payments, Twenty-Five Million Dollars (US$25,000,000) in regulatory milestone payments, and Forty-Five Million Dollars (US$45,000,000) in commercial milestone payments.
Section 5.6 Royalties
(a) Tiered Royalties on Annual Net Sales in Territory
Subject to the terms and conditions of this Agreement, during the Royalty Term, Meridian shall pay to Penterra tiered royalties on Annual Net Sales of Licensed Products in the Territory, calculated on a Calendar Year basis across all countries in the Territory, at the following rates:
For the avoidance of doubt, the royalty rates set forth above are incremental (i.e., each rate applies only to the portion of Annual Net Sales falling within the applicable tier). Royalty payments shall be due and payable within sixty (60) days of the end of each Calendar Quarter, based on Net Sales achieved during such Calendar Quarter, with a quarterly true-up calculation to reconcile the tiered royalty rates on a Calendar Year basis. Any overpayment or underpayment resulting from such true-up shall be credited or paid, as applicable, in connection with the next regularly scheduled royalty payment.
(b) Royalty Term
The obligation to pay royalties under this Section 5.6 shall apply on a country-by-country basis during the "Royalty Term," which shall mean, with respect to each country in the Territory, the period commencing on the date of First Commercial Sale of a Licensed Product in such country and expiring on the later of: (i) the date of expiration of the last-to-expire Valid Claim of any Licensed Patent covering such Licensed Product in such country (including any patent term extension, supplementary protection certificate, or similar extension of patent term), and (ii) the twelfth (12th) anniversary of the date of First Commercial Sale of a Licensed Product in such country. For reference purposes, the composition-of-matter patents in the Licensed Patents are currently scheduled to expire on August 12, 2037 (before any patent term extension or supplementary protection certificate), and the crystalline form patent (U.S. Patent No. 11,345,678) is currently scheduled to expire on November 3, 2038.
(c) Post-Patent Royalty Reduction
Following the expiration of all Licensed Patents containing at least one Valid Claim covering a Licensed Product in a given country in the Territory, but during the remaining portion of the twelve (12)-year period from First Commercial Sale in such country pursuant to Section 5.6(b)(ii), the royalty rates applicable to Net Sales in such country shall be reduced by fifty percent (50%) of the rates otherwise applicable under Section 5.6(a), resulting in the following Post-Patent Royalty Rates:
(d) Minimum Annual Royalty
Commencing in the Calendar Year immediately following the Calendar Year in which the First Commercial Sale of a Licensed Product occurs in any country in the Territory, Meridian shall pay to Penterra a minimum annual royalty of Two Million United States Dollars (US$2,000,000) per Calendar Year (the "Minimum Annual Royalty"). The Minimum Annual Royalty shall be credited against earned royalties payable under Section 5.6(a) for the same Calendar Year. If earned royalties payable under Section 5.6(a) for a given Calendar Year are less than the Minimum Annual Royalty, Meridian shall pay the shortfall to Penterra within sixty (60) days of the end of such Calendar Year.
(e) Generic Entry Reduction
If, in any Calendar Quarter, one or more Generic Products achieve a combined market share of thirty percent (30%) or more by volume (measured by units sold) in a given country in the Territory, the royalties payable under Section 5.6(a) (or Section 5.6(c), as applicable) with respect to Net Sales in such country shall be reduced by forty percent (40%) for so long as such Generic Products maintain a combined market share of thirty percent (30%) or more by volume in such country. Market share shall be determined by reference to data obtained from Tidewater Holdings (or any successor thereto), or such other independent data source as the Parties may mutually agree in writing. In the event that the Generic Products' combined market share falls below thirty percent (30%) by volume in a given Calendar Quarter, the full royalty rates under Section 5.6(a) (or Section 5.6(c), as applicable) shall be reinstated for such country beginning with the immediately following Calendar Quarter.
Section 5.7 Royalty Reports and Records
(a) Quarterly Royalty Reports. Within sixty (60) days of the end of each Calendar Quarter during the Royalty Term, Meridian shall deliver to Penterra a written royalty report setting forth in reasonable detail, for each country in the Territory:
(i) the gross invoiced sales and Net Sales of each Licensed Product during such Calendar Quarter, including a breakdown of each deduction from gross invoiced sales to arrive at Net Sales;
(ii) the total number of units of each Licensed Product sold;
(iii) the applicable royalty rate for each tier;
(iv) the calculation of the royalties due for such Calendar Quarter; and
(v) the cumulative Annual Net Sales and royalties paid during the applicable Calendar Year.
(b) Record Keeping. Meridian shall, and shall cause its Affiliates and sublicensees to, maintain complete and accurate books and records sufficient to verify Net Sales and the accuracy of all royalty, milestone, and other payment calculations under this Agreement. Such books and records shall be maintained in accordance with GAAP or IFRS, as applicable, and shall be retained for a period of not less than five (5) years following the Calendar Year to which they relate.
(c) Audit Rights. Penterra shall have the right, at its own expense (subject to the provisions below), to have an independent, internationally recognized accounting firm mutually agreed upon by the Parties audit Meridian's books and records for the sole purpose of verifying the accuracy of the royalty reports and payment calculations under this Agreement. Such audit right may be exercised no more than once per Calendar Year and shall cover records for the three (3) most recently completed Calendar Years. Penterra shall provide Meridian with at least thirty (30) days' prior written notice of any such audit, and the audit shall be conducted during normal business hours and in a manner that minimizes disruption to Meridian's business operations. The independent accounting firm shall report to the Parties only its conclusions regarding the accuracy of the royalty reports and payments, without disclosing Meridian's underlying Confidential Information to Penterra (except to the extent necessary to support such conclusions). If the audit reveals that Meridian has underpaid royalties by more than five percent (5%) for any Calendar Year covered by the audit, Meridian shall (i) promptly pay the deficiency plus interest at the rate specified in Section 5.9, and (ii) reimburse Penterra for the reasonable out-of-pocket costs of such audit. If the audit reveals an overpayment by Meridian, such overpayment shall be credited against future royalty payments.
Section 5.8 Most Favored Nation Pricing