NON-BINDING TERM SHEET

NON-BINDING TERM SHEET
Exclusive License Agreement for PPC-4187 (Penteracitinib)
August 4, 2023
CONFIDENTIAL — FOR DISCUSSION PURPOSES ONLY
This Term Sheet is non-binding and is intended solely to outline the principal terms under which the parties would enter into a definitive Exclusive License Agreement (the "Definitive Agreement"). Except for the provisions regarding Exclusivity (Section 28), Confidentiality (Section 23), and Governing Law (Section 27), this Term Sheet does not create any legally binding obligations on either party. The terms set forth herein represent the current mutual understanding of the parties and are subject in all respects to the negotiation, execution, and delivery of the Definitive Agreement and ancillary documents referenced herein.
Section 1: Parties
Licensor: Penterra Pharmaceuticals Corp. ("Penterra" or "Licensor"), a corporation organized and existing under the laws of the State of Delaware, publicly traded on the Nasdaq Global Select Market under the ticker symbol PNTR, with its principal executive offices located at 400 Pharma Drive, Suite 800, Princeton, New Jersey 08540, United States.
Licensee: Meridian Bio Therapeutics Limited ("Meridian" or "Licensee"), a limited company organized and existing under the laws of the Hong Kong Special Administrative Region of the People's Republic of China (Company Registration No. 2847631), with its principal executive offices located at 18/F, Blossom Tower, 88 Queen's Road Central, Hong Kong SAR.
Penterra and Meridian are referred to herein individually as a "Party" and collectively as the "Parties."
Section 2: Background and Recitals
The following recitals provide the background and context for the transactions contemplated by this Term Sheet:
A. Penterra is the owner of proprietary rights relating to the small-molecule compound designated PPC-4187, for which the proposed International Nonproprietary Name (INN) is Penteracitinib. PPC-4187 is a selective Janus kinase 1 (JAK1) inhibitor currently being developed for the treatment of moderate-to-severe atopic dermatitis in adult patients. Penterra has invested substantial resources in the research, development, and clinical evaluation of PPC-4187 over the course of the past seven years.
B. PPC-4187 has completed Phase IIb clinical development in the United States and the European Union. The pivotal Phase IIb study (Penterra-sponsored Study PPC-4187-201) enrolled 420 patients with moderate-to-severe atopic dermatitis and was conducted at 68 clinical sites across the U.S. and EU. Topline results were reported in June 2023 and demonstrated a statistically significant improvement versus placebo (p<0.001) on the primary endpoint of EASI-75 response (Eczema Area and Severity Index, 75% improvement from baseline) at Week 16. The safety profile observed in Study PPC-4187-201 was consistent with prior Phase I and Phase IIa findings and supportive of further clinical development.
C. The current clinical formulation of PPC-4187 consists of 25 mg and 50 mg film-coated tablets intended for oral, once-daily dosing. Both dosage strengths were evaluated in Study PPC-4187-201 and showed dose-dependent efficacy.
D. Penterra's intellectual property portfolio covering PPC-4187 includes seven (7) patent families encompassing claims directed to composition of matter, crystalline forms, methods of use, pharmaceutical formulation, and manufacturing process, as well as proprietary know-how, trade secrets, and trademarks. Penterra has proposed the trade name PENTECLAR for the commercial product and has secured or applied for trademark registrations in multiple jurisdictions worldwide.
E. Meridian is an integrated biopharmaceutical company with established commercialization capabilities across the Asia-Pacific region. Meridian holds regulatory approvals and maintains commercial infrastructure and dedicated commercial teams in the People's Republic of China (National Medical Products Administration, or NMPA), Japan (Pharmaceuticals and Medical Devices Agency, or PMDA), the Republic of Korea (Ministry of Food and Drug Safety, or MFDS), Australia (Therapeutic Goods Administration, or TGA), and additional ASEAN markets. Meridian has a demonstrated track record of successfully developing, registering, and commercializing licensed pharmaceutical products across these markets.
F. The Parties wish to outline the principal terms and conditions under which Penterra would grant to Meridian an exclusive license to develop, manufacture, and commercialize PPC-4187 in certain countries and territories within the Asia-Pacific region, as more fully described herein.
Section 3: Licensed Compound and Products
Compound: PPC-4187 (Penteracitinib), a selective Janus kinase 1 (JAK1) inhibitor. For purposes of this Term Sheet, "PPC-4187" refers to the free base form of Penteracitinib as well as all pharmaceutically acceptable salts, hydrates, solvates, polymorphs, enantiomers, metabolites, and prodrugs thereof.
Licensed Product: Any pharmaceutical product containing PPC-4187 as an active pharmaceutical ingredient, whether alone or in combination with one or more other active pharmaceutical ingredients, in any dosage form, formulation, dosage strength, method of delivery, or presentation, including but not limited to the current 25 mg and 50 mg film-coated tablet formulations (each, a "Licensed Product" and collectively, the "Licensed Products").
Indication: The initial therapeutic indication for development and commercialization under the Definitive Agreement shall be moderate-to-severe atopic dermatitis in adult patients. The expansion of the license to include additional therapeutic indications (including, without limitation, other dermatological conditions, rheumatological disorders, and other immune-mediated inflammatory diseases) shall be subject to the mutual written agreement of the Parties, with such decisions to be coordinated and approved through the Joint Steering Committee described in Section 17 below. The Definitive Agreement will set forth the process and financial terms applicable to any such indication expansion, including the allocation of development costs, additional milestone payments (if any), and royalty adjustments.
Section 4: Licensed intellectual Property
4.1 Licensed Patents
Penterra's patent portfolio covering PPC-4187 consists of seven (7) patent families, as summarized below (collectively, the "Licensed Patents"):
(a) U.S. Patent No. 11,234,567 — Composition of Matter; issued March 15, 2022; expires August 12, 2037 (before any patent term extension or supplemental protection certificate). This patent covers the PPC-4187 compound and pharmaceutically acceptable salts thereof.
(b) U.S. Patent No. 11,345,678 — Crystalline Form A; issued July 22, 2022; expires November 3, 2038. This patent covers the preferred crystalline polymorph of PPC-4187 used in the current clinical formulation.
(c) PCT/US2019/045123 — International patent application with national phase entries filed and pending or granted in Japan, China, Republic of Korea, Australia, Singapore, and six (6) additional ASEAN countries within the Territory. This patent family covers methods of use of PPC-4187 for the treatment of atopic dermatitis and other JAK1-mediated conditions.
(d) CN Patent No. ZL 2020 1 0456789.0 — Composition of Matter; granted by the China National intellectual Property Administration (CNIPA); expires August 12, 2037. This patent is the Chinese national phase counterpart covering the PPC-4187 compound.
(e) JP Patent No. 7,012,345 — Composition of Matter; granted by the Japan Patent Office (JPO); expires August 12, 2037. This patent is the Japanese national phase counterpart covering the PPC-4187 compound.
(f) KR Patent No. 10-2345678 — Composition of Matter; granted by the Korean intellectual Property Office (KIPO); expires August 12, 2037. This patent is the Korean national phase counterpart covering the PPC-4187 compound.
(g) AU Patent No. 2020234567 — Composition of Matter; granted by IP Australia; expires August 12, 2037. This patent is the Australian national phase counterpart covering the PPC-4187 compound.
A complete summary of all Licensed Patent families, including patent and application numbers, filing dates, grant dates, jurisdictions, claim types, and expiration dates, is set forth in Exhibit B attached hereto for indicative purposes.
4.2 Licensed Know-How
"Licensed Know-How" means all proprietary and confidential information, data, know-how, trade secrets, and technical information owned or controlled by Penterra relating to PPC-4187 or any Licensed Product, including, without limitation:
(a) Penterra's proprietary manufacturing process for PPC-4187 active pharmaceutical ingredient (API) and finished dosage form;
(b) Analytical methods, specifications, stability data, and quality control procedures;
(c) Pre-clinical data packages, including pharmacology, toxicology, pharmacokinetics, and drug metabolism studies;
(d) Clinical data packages, including all data, reports, analyses, and regulatory submissions relating to Study PPC-4187-201 and any prior clinical studies of PPC-4187;
(e) Chemistry, manufacturing, and controls (CMC) documentation, including the Drug Master File (DMF), manufacturing batch records, process validation reports, and related documentation; and
(f) Any other technical, scientific, or regulatory information reasonably necessary for the development, manufacture, and commercialization of Licensed Products in the Territory.
4.3 Licensed Trademarks
"Licensed Trademarks" means the trademark PENTECLAR and any associated logos, trade dress, and domain names owned or controlled by Penterra for use in connection with Licensed Products, including:
(a) U.S. Registration No. 6,789,012 for PENTECLAR;
(b) Trademark filings and/or registrations for PENTECLAR in Hong Kong SAR, the People's Republic of China, Japan, the Republic of Korea, Australia, and additional jurisdictions within the Territory; and
(c) Any additional trademarks adopted by Penterra for use in connection with PPC-4187 or Licensed Products during the term of the Definitive Agreement.
The Definitive Agreement will address the terms and conditions under which Meridian may use the Licensed Trademarks in the Territory, including quality control standards, brand guidelines, and co-branding arrangements (if any).
Section 5: Licensed Territory
Territory: For purposes of this Term Sheet, the "Territory" means the following countries and jurisdictions within the Asia-Pacific region:
People's Republic of China (including Hong Kong Special Administrative Region and Macau Special Administrative Region), Japan, Republic of Korea, Australia, New Zealand, Singapore, Thailand, Malaysia, Indonesia, Philippines, Vietnam, and Taiwan.
A complete list of Territory countries is set forth in Exhibit A attached hereto.
Retained Territory: Penterra shall retain all rights to PPC-4187 and Licensed Products in all countries and territories outside the Territory, including, without limitation, the United States, Canada, European Union and European Economic Area member states, the United Kingdom, Latin America (including Mexico, Brazil, Argentina, and all other countries in Central and South America), the Middle East, Africa, and all other countries and jurisdictions not specifically listed as part of the Territory (collectively, the "Retained Territory").
Section 6: Grant of License
Subject to the terms and conditions of the Definitive Agreement, Penterra shall grant to Meridian an exclusive license (exclusive even as to Penterra within the Territory) under the Licensed Patents, Licensed Know-How, and 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 duration of the Royalty Term described in Section 12.2 below.
The license shall include the right to grant sublicenses within the Territory, subject to the conditions and limitations described in Section 14 below.
For the avoidance of doubt, Penterra retains all rights to develop, manufacture, commercialize, and otherwise exploit PPC-4187 and Licensed Products in the Retained Territory, including the right to grant licenses to third parties in the Retained Territory without the consent of Meridian.
Section 7: Upfront Payment
Amount: Eighteen million U.S. dollars ($18,000,000).
Timing: The upfront payment shall be due and payable upon the closing of the Definitive Agreement (the "Closing"), subject to the satisfaction or waiver of the conditions to Closing described in Section 29 below.
Mechanism: The upfront payment shall be deposited by Meridian into an escrow account established with a mutually agreed, nationally recognized escrow agent (the "Escrow Agent") pending satisfaction of the conditions to Closing, including verification of the transfer and recordation of Licensed IP rights in applicable Territory jurisdictions. Upon satisfaction of all Closing conditions, the Escrow Agent shall release the escrowed funds to Penterra in accordance with the terms of the Escrow Agreement described in Section 26 below. If the Closing does not occur by the outside date to be agreed in the Definitive Agreement, the escrowed funds shall be returned to Meridian, less any Escrow Agent fees attributable to Meridian's share.
The upfront payment is non-refundable and non-creditable against any milestone payments, royalties, or other amounts payable under the Definitive Agreement, except as may otherwise be expressly provided therein.
Section 8: Development Milestone Payments
Meridian shall make the following non-refundable, non-creditable development milestone payments to Penterra upon the first achievement of each of the milestone events set forth below:
Total Development Milestones: $32,000,000
Each development milestone payment shall be payable only once, regardless of the number of Licensed Products developed, the number of indications pursued, or the number of countries in the Territory in which such milestone events are achieved. For the avoidance of doubt, if the same milestone event is achieved by more than one Licensed Product or in more than one indication, no additional development milestone payment shall be due with respect to the subsequent achievement of such milestone event.
Each development milestone payment shall be due and payable within thirty (30) days following the date on which Meridian provides written notice to Penterra of the achievement of the applicable milestone event. Meridian shall promptly notify Penterra of the achievement of each milestone event, and in no event later than fifteen (15) business days following such achievement.
Subtotal verification: $6,000,000 + $8,000,000 + $10,000,000 + $8,000,000 = $32,000,000.
Section 9: Regulatory Milestone Payments
Meridian shall make the following non-refundable, non-creditable regulatory milestone payments to Penterra upon the first achievement of each of the milestone events set forth below:
Total Regulatory Milestones: $25,000,000
For purposes of this Term Sheet, "Regulatory Approval" means the receipt of all approvals, licenses, registrations, or authorizations from the applicable regulatory authority in a country that are necessary for the commercial manufacture, distribution, marketing, promotion, offer for sale, use, import, and sale of a Licensed Product in such country, including pricing and reimbursement approvals where required for commercial launch.
Each regulatory milestone payment shall be payable only once per jurisdiction, regardless of the number of Licensed Products approved, the number of indications for which approval is obtained, or the number of dosage forms or strengths approved in such jurisdiction.
Each regulatory milestone payment shall be due and payable within thirty (30) days following the date on which Meridian receives written confirmation of the applicable Regulatory Approval from the relevant regulatory authority. Meridian shall promptly notify Penterra of the receipt of each Regulatory Approval, and in no event later than ten (10) business days following such receipt.
Subtotal verification: $10,000,000 + $8,000,000 + $4,000,000 + $3,000,000 = $25,000,000.
Section 10: Commercial / Sales Milestone Payments
Meridian shall make the following non-refundable, non-creditable commercial milestone payments to Penterra upon the first achievement of each of the milestone events set forth below, based on aggregate Annual Net Sales of all Licensed Products in the Territory:
Total Commercial Milestones: $45,000,000
For purposes of this Term Sheet, "Annual Net Sales" means the gross amount invoiced by Meridian, its Affiliates, and its sublicensees for sales of Licensed Products in the Territory during a calendar year, less customary deductions for trade discounts, rebates, returns, chargebacks, allowances, credits, and government-mandated price reductions, calculated in accordance with U.S. GAAP or IFRS (as applicable to Meridian) applied on a consistent basis.
Each commercial milestone payment shall be payable only once, regardless of the number of calendar years in which the applicable Annual Net Sales threshold is exceeded. Each commercial milestone payment shall be due and payable within forty-five (45) days following the end of the calendar year in which the applicable Annual Net Sales threshold is first exceeded, together with Meridian's annual sales report for such calendar year.
Subtotal verification: $10,000,000 + $15,000,000 + $20,000,000 = $45,000,000.
Section 11: Total Deal Value Summary
The total potential consideration payable by Meridian to Penterra under the Definitive Agreement, inclusive of the upfront payment and all milestone payments (but exclusive of royalties), is summarized as follows:
The foregoing total of one hundred twenty million U.S. dollars ($120,000,000) represents the maximum aggregate non-royalty consideration payable upon achievement of all milestones and does not include royalties on Net Sales, sublicense income pass-through payments, API supply payments, or other amounts that may become payable under the Definitive Agreement or ancillary agreements.
Section 12: Royalties
12.1 Tiered Royalties on Annual Net Sales in Territory
Meridian shall pay to Penterra tiered royalties on aggregate Annual Net Sales of all Licensed Products in the Territory during each calendar year, at the following rates:
For clarity, the royalty rates are marginal and apply incrementally to the portion of Annual Net Sales falling within each tier. By way of example, if Annual Net Sales in a given calendar year are $120,000,000, the royalty payable would be calculated as follows: (i) 8% on the first $50,000,000 ($4,000,000), plus (ii) 11% on the remaining $70,000,000 ($7,700,000), for an aggregate royalty payment of $11,700,000 for such calendar year.
Royalty payments shall be calculated and paid on a quarterly basis, within sixty (60) days following the end of each calendar quarter. Each quarterly royalty payment shall be accompanied by a detailed written report setting forth, on a country-by-country and product-by-product basis, the gross sales, permitted deductions, Net Sales, and royalty calculations for the applicable quarter.
12.2 Royalty Term
Royalties shall be payable on a country-by-country basis for a period equal to the longer of:
(a) the expiration of the last-to-expire Valid Claim of a Licensed Patent covering the composition of matter, method of use, or formulation of a Licensed Product in such country; or
(b) twelve (12) years from the date of the first commercial sale of a Licensed Product in such country
(the "Royalty Term").
Following the expiration of the Royalty Term in a given country, the license granted to Meridian with respect to such country shall become a fully paid-up, irrevocable, non-exclusive license.
12.3 Post-Patent Royalty Reduction
In any country within the Territory where all Licensed Patents covering a Licensed Product have expired but the twelve (12)-year period described in Section 12.2(b) has not yet elapsed, the applicable royalty rates shall be reduced by fifty percent (50%) for the remainder of the Royalty Term in such country. The reduced royalty rates shall be as follows:
The post-patent royalty reduction shall apply only to the specific country in which all Licensed Patents have expired and shall not affect the royalty rates applicable to other countries in the Territory where Licensed Patents remain in force.
12.4 Minimum Annual Royalty
Beginning in the first full calendar year following the date of the first commercial sale of a Licensed Product in any country in the Territory, Meridian shall pay to Penterra a minimum annual royalty of two million U.S. dollars ($2,000,000) per calendar year (the "Minimum Annual Royalty").
The Minimum Annual Royalty shall be fully creditable against earned royalties payable by Meridian for the applicable calendar year. If earned royalties for a given calendar year exceed the Minimum Annual Royalty, Meridian shall pay only the earned royalties (and no separate Minimum Annual Royalty payment shall be due). If earned royalties for a given calendar year are less than the Minimum Annual Royalty, Meridian shall pay the difference between earned royalties and the Minimum Annual Royalty as a true-up payment, due within sixty (60) days following the end of the applicable calendar year.
12.5 Generic Entry Reduction
In the event that one or more Generic Products achieve a combined market share of thirty percent (30%) or more by volume (measured in units) of all pharmaceutical products containing PPC-4187 (or a bioequivalent compound) sold in a given country within the Territory during any calendar quarter, the royalty rates applicable to Net Sales in such country shall be reduced by forty percent (40%) for so long as such Generic Products maintain the requisite market share threshold.
For purposes of this Section 12.5, "Generic Product" means any pharmaceutical product containing PPC-4187 (or a compound that is bioequivalent to PPC-4187 as determined by the applicable regulatory authority) that is marketed by a third party that is not an Affiliate or sublicensee of either Party, and that has received regulatory approval through an abbreviated or generic regulatory pathway (or similar process) in the applicable country.
The determination of Generic Product market share shall be based on independent, audited third-party data sources (such as Tidewater Holdings or equivalent data providers) and shall be reviewed and reconciled on a quarterly basis. The Definitive Agreement will set forth the methodology and dispute resolution process for determining Generic Product market share.
Section 13: Most Favored Nation Pricing
Meridian shall not offer, or cause any of its Affiliates or sublicensees to offer, PPC-4187 (under the PENTECLAR trade name or any other trade name) in any country in the Territory at a net price that is more than fifteen percent (15%) below the lowest net price at which Penterra (or any of Penterra's licensees in the Retained Territory) sells PPC-4187 in the United States or any EU5 country (Germany, France, Italy, Spain, and the United Kingdom) for the same dosage strength and comparable pack size (the "MFN Floor Price"). This most favored nation pricing obligation is intended to protect the pricing integrity of PPC-4187 across global markets and to prevent parallel trade or reference pricing arbitrage that could adversely affect the value of the compound.
If Meridian breaches the most favored nation pricing obligation in any calendar quarter, Penterra shall be entitled to receive from Meridian an MFN adjustment payment equal to the difference between the MFN Floor Price and the actual net price charged by Meridian (or its Affiliate or sublicensee), multiplied by the total number of units of the applicable Licensed Product sold in such country during such calendar quarter. Penterra shall provide Meridian with written notice of any claimed MFN breach, and Meridian shall have thirty (30) days to cure such breach prospectively by adjusting its pricing to comply with the MFN Floor Price.
Most favored nation pricing shall be reviewed and reconciled on a quarterly basis. Within forty-five (45) days following the end of each calendar quarter, Meridian shall provide Penterra with a detailed report setting forth the net price at which Licensed Products were sold in each country in the Territory during such quarter, together with supporting documentation sufficient to enable Penterra to verify compliance with the most favored nation pricing obligation. Penterra shall concurrently provide Meridian with the applicable reference pricing data from the United States and EU5 countries.
The detailed pricing methodology, reference price definitions, currency conversion mechanisms, and procedures for resolving pricing disputes shall be set forth in a schedule to the Definitive Agreement.
Section 14: Sublicensing
Meridian may grant sublicenses under the license granted pursuant to Section 6 to third parties within the Territory, subject to the prior written consent of Penterra, which consent shall not be unreasonably withheld, conditioned, or delayed. Penterra acknowledges that Meridian may seek to sublicense rights in certain countries within the Territory where Meridian does not maintain direct commercial operations, and Penterra agrees to consider sublicensing requests in good faith.
Each sublicense agreement entered into by Meridian shall contain terms and conditions that are no less protective of Penterra's rights and interests than those set forth in the Definitive Agreement, including, without limitation:
(a) the most favored nation pricing clause described in Section 13;
(b) indemnification obligations in favor of Penterra;
(c) audit and inspection rights for the benefit of Penterra;
(d) intellectual property protection, confidentiality, and non-compete provisions; and
(e) requirements for compliance with all applicable laws and regulatory requirements.
Meridian shall provide Penterra with a complete, unredacted copy of each sublicense agreement within fifteen (15) business days following execution thereof. Meridian shall remain fully responsible for the performance of its sublicensees and shall be liable for any breach of the Definitive Agreement arising from the acts or omissions of its sublicensees.
Sublicense Income Pass-Through: Fifty percent (50%) of any sublicense income received by Meridian from sublicensees, including upfront payments, milestone payments, royalties, license fees, option fees, and any other consideration of any kind (collectively, "Sublicense Income"), shall be paid to Penterra, net of Meridian's documented, reasonable, out-of-pocket development costs directly attributable to the sublicensee's territory (the "Sublicense Income Pass-Through"). Sublicense Income shall not include payments received by Meridian from sublicensees that constitute reimbursement of Meridian's actual costs of API supply, technology transfer, or clinical supply activities on a pass-through basis.
Sublicense Income Pass-Through payments shall be due and payable to Penterra within thirty (30) days following the end of the calendar quarter in which the applicable Sublicense Income is received by Meridian, together with a detailed written report describing the nature and amount of all Sublicense Income received and the calculation of the Sublicense Income Pass-Through payment.
Section 15: Supply of API and Technology Transfer
15.1 API Supply
Penterra shall supply (or cause to be supplied) active pharmaceutical ingredient (PPC-4187 API) and reference standard material to Meridian at a price equal to Penterra's fully loaded cost of goods manufactured (including direct materials, direct labor, manufacturing overhead, quality control and release testing costs, and applicable regulatory compliance costs) plus a fifteen percent (15%) markup, for an initial supply term of three (3) years commencing on the Effective Date of the Definitive Agreement (the "Initial Supply Term"). Following the Initial Supply Term, the Parties may extend the supply arrangement by mutual written agreement, or Meridian may elect to source API from Meridian's designated manufacturer following completion of the technology transfer described in Section 15.2 below.
Penterra's current contract manufacturer for PPC-4187 API is Alkerra Manufacturing Inc., located in Research Triangle Park, North Carolina, United States. Alkerra Manufacturing currently operates the validated manufacturing process for PPC-4187 API and maintains the applicable Drug Master File (DMF) filed with the U.S. Food and Drug Administration. Penterra shall use commercially reasonable efforts to ensure the continued availability of PPC-4187 API from Alkerra Manufacturing (or an alternative qualified manufacturer approved by Penterra) during the Initial Supply Term.
The detailed terms and conditions governing the supply of PPC-4187 API, including quality specifications, packaging and labeling requirements, delivery terms, shipping and logistics, forecasting and ordering procedures, minimum order quantities, lead times, acceptance and rejection procedures, and force majeure provisions, shall be set forth in a separate Supply Agreement to be negotiated and executed by the Parties concurrently with the Definitive Agreement.
15.2 Technology Transfer
Penterra shall transfer to Meridian (or to a manufacturer designated by Meridian and approved by Penterra, such approval not to be unreasonably withheld) all manufacturing process know-how, analytical methods, in-process testing procedures, quality control specifications, stability protocols, and CMC documentation reasonably necessary for Meridian (or its designated manufacturer) to independently manufacture PPC-4187 API and Licensed Product finished dosage form in the Territory.
The technology transfer shall be completed within twenty-four (24) months of the Effective Date of the Definitive Agreement (the "Technology Transfer Period"). The technology transfer process shall include on-site training at Penterra's (or Alkerra Manufacturing's) facilities, remote technical support, and review of Meridian's designated manufacturer's validation batches. Penterra shall make its technical personnel reasonably available to support the technology transfer during the Technology Transfer Period.
The detailed terms and conditions governing the technology transfer, including the scope of technology to be transferred, project plans and timelines, acceptance criteria, personnel responsibilities, confidentiality protections, cost allocation (with Meridian bearing the costs of its own personnel, travel, and manufacturing facility preparation and Penterra bearing the costs of its own technical personnel), and dispute resolution, shall be set forth in a separate Technology Transfer Agreement to be negotiated and executed by the Parties concurrently with or promptly following the Definitive Agreement.
15.3 Quality Agreement
The Parties shall execute a Quality Agreement within sixty (60) days of the Effective Date of the Definitive Agreement, which Quality Agreement shall govern the quality specifications, quality systems requirements, change control procedures, deviation and CAPA management, release testing responsibilities, stability testing obligations, and regulatory compliance obligations applicable to the supply of PPC-4187 API and reference standard material by Penterra (or its contract manufacturer) to Meridian.
Section 16: Development and Commercialization Obligations
Meridian shall use commercially reasonable efforts to develop and commercialize Licensed Products in the Territory in accordance with a comprehensive development and commercialization plan (the "Development Plan") to be mutually agreed by the Parties and attached as a schedule to the Definitive Agreement. The Development Plan shall include, at a minimum, proposed timelines for regulatory submissions and clinical trials in each major market within the Territory, anticipated patient enrollment targets, budgets and resource allocations, and key decision points.
Meridian shall be solely responsible for all regulatory submissions, regulatory interactions, clinical trial design and conduct, manufacturing (following completion of the technology transfer), marketing, distribution, and commercialization activities for Licensed Products in the Territory, and shall bear all costs and expenses associated therewith. Penterra shall have no financial obligation with respect to Meridian's development or commercialization activities in the Territory, except as expressly set forth in the Definitive Agreement or ancillary agreements.
Meridian anticipates that the following regional subsidiaries will be involved in carrying out its development and commercialization obligations in the Territory:
(a) Meridian Pharma (Shanghai) Co., Ltd. — a wholly foreign-owned enterprise organized under the laws of the People's Republic of China, responsible for development, regulatory, and commercial activities in mainland China;
(b) Meridian Japan K.K. — a kabushiki kaisha organized under the laws of Japan, responsible for development, regulatory, and commercial activities in Japan;
(c) Meridian Korea Inc. — a corporation organized under the laws of the Republic of Korea, responsible for development, regulatory, and commercial activities in South Korea; and
(d) Meridian Bio Australia Pty Ltd — a proprietary limited company organized under the laws of Australia, responsible for development, regulatory, and commercial activities in Australia and New Zealand.
Meridian shall ensure that each such subsidiary is bound by the terms and conditions of the Definitive Agreement, either through direct joinder or through appropriate intra-group agreements, and Meridian shall remain fully liable for the performance of its subsidiaries and Affiliates.
Section 17: Governance
17.1 Joint Steering Committee (JSC)
The Parties shall establish a Joint Steering Committee (the "JSC") within thirty (30) days of the Effective Date of the Definitive Agreement. The JSC shall serve as the primary governance body for overseeing and coordinating the development, regulatory, and commercialization activities for Licensed Products in the Territory.
The JSC shall be comprised of three (3) senior representatives from each Party, with each Party designating one of its representatives as co-chairperson. The composition of the JSC may be changed from time to time by written notice from the applicable Party, provided that each Party's representatives shall have sufficient seniority and authority to make decisions on behalf of such Party with respect to matters within the JSC's purview.
The JSC shall meet at least once per calendar quarter, with meetings alternating between in-person (at mutually agreed locations) and videoconference, unless the Parties agree otherwise. Special meetings may be convened by either Party upon fifteen (15) business days' prior written notice. The co-chairpersons shall jointly prepare and circulate meeting agendas at least ten (10) business days prior to each meeting, and meeting minutes shall be prepared and distributed within ten (10) business days following each meeting.
The JSC's responsibilities shall include, without limitation:
(a) overseeing the implementation of the Development Plan and any amendments thereto;
(b) reviewing and discussing regulatory strategy and submissions in the Territory;
(c) coordinating commercialization strategy, launch timelines, and market access planning;
(d) reviewing Meridian's quarterly development and commercial progress reports;
(e) approving indication expansion requests;
(f) addressing and resolving operational issues and disputes arising under the Definitive Agreement; and
(g) such other matters as may be agreed by the Parties.
All decisions of the JSC shall be made by consensus. In the event of a deadlock on any matter relating to Territory-specific commercialization (including, without limitation, launch timing, promotional strategy, pricing within the bounds of the most favored nation pricing obligations, and market access activities), Meridian shall have the tie-breaking vote, provided that Meridian's exercise of such tie-breaking authority shall not conflict with or result in a breach of the most favored nation pricing obligations set forth in Section 13 or any other material provision of the Definitive Agreement.
17.2 Joint Patent Committee (JPC)
The Parties shall establish a Joint Patent Committee (the "JPC") within thirty (30) days of the Effective Date of the Definitive Agreement. The JPC shall oversee and coordinate all matters relating to the prosecution, maintenance, defense, and enforcement of Licensed Patents in the Territory.
The JPC shall be comprised of two (2) representatives from each Party, with at least one representative from each Party having expertise in intellectual property law or patent prosecution. The JPC shall meet at least twice per calendar year, or more frequently as circumstances warrant.
The JPC's responsibilities shall include, without limitation:
(a) overseeing the prosecution and maintenance of Licensed Patents in Territory countries;
(b) coordinating patent filing strategy for any new patent applications relating to PPC-4187 or Licensed Products in the Territory;
(c) monitoring third-party patent activity in the Territory that may affect the Licensed Patents or Licensed Products;
(d) coordinating enforcement actions against third-party infringers of Licensed Patents in the Territory; and
(e) advising the JSC on intellectual property matters relevant to development and commercialization strategy.
In the event of a deadlock on any matter within the JPC's purview relating to global intellectual property strategy (including patent prosecution strategy, claim scope, and enforcement decisions that could have implications outside the Territory), Penterra shall have the tie-breaking vote, reflecting Penterra's status as the owner of the Licensed IP and its interest in maintaining a consistent global intellectual property strategy.
Section 18: Representations and Warranties
Each Party shall make the following customary representations and warranties in the Definitive Agreement:
(a) such Party is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its organization;
(b) such Party has full corporate power and authority to enter into and perform its obligations under the Definitive Agreement and all ancillary agreements;
(c) the execution, delivery, and performance of the Definitive Agreement have been duly authorized by all necessary corporate action on the part of such Party;
(d) the Definitive Agreement, when executed and delivered, shall constitute the legal, valid, and binding obligation of such Party, enforceable in accordance with its terms;
(e) the execution, delivery, and performance of the Definitive Agreement will not conflict with or result in a breach of such Party's organizational documents, any material agreement to which such Party is a party, or any applicable law, regulation, or order; and
(f) there is no pending or, to such Party's knowledge, threatened litigation, arbitration, or governmental investigation that would materially impair such Party's ability to perform its obligations under the Definitive Agreement.
Additional Representations and Warranties of Penterra (Licensor). Penterra shall make the following additional representations and warranties:
(a) Penterra is the sole and exclusive owner of the Licensed Patents, Licensed Know-How, and Licensed Trademarks, and has the full right, power, and authority to grant the license contemplated hereby;
(b) to Penterra's knowledge, the Licensed Patents are valid and enforceable, and no proceedings are pending or threatened challenging the validity, enforceability, or scope of any Licensed Patent;
(c) there are no encumbrances, liens, security interests, or third-party rights on or in the Licensed IP that would impair or restrict the grant of the license contemplated hereby;
(d) the clinical data and other scientific information provided by Penterra to Meridian in connection with PPC-4187, including the data from Study PPC-4187-201, is accurate and complete in all material respects and has not been materially altered, falsified, or misrepresented;
(e) all Licensed Patents have been prosecuted and maintained in compliance with all applicable laws, rules, and regulations, including all applicable duty-of-disclosure requirements; and
(f) to Penterra's knowledge, the practice of the Licensed Patents and the use of the Licensed Know-How in the manufacture, use, and sale of Licensed Products in the Territory as contemplated hereby does not infringe any valid patent or other intellectual property right of any third party.
Additional Representations and Warranties of Meridian (Licensee). Meridian shall make the following additional representations and warranties:
(a) Meridian has the regulatory capabilities, commercial infrastructure, and experienced personnel necessary to develop, obtain regulatory approvals for, and commercialize Licensed Products in the Territory in accordance with the Development Plan;
(b) Meridian has the financial capacity and resources to perform its development and commercialization obligations under the Definitive Agreement, including the ability to fund all anticipated clinical trials, regulatory submissions, and commercial launch activities in the Territory; and
(c) Meridian is not a party to any agreement that would conflict with or restrict its ability to perform its obligations under the Definitive Agreement.
The scope, qualifications, knowledge limitations, and survival periods applicable to the foregoing representations and warranties shall be specified in the Definitive Agreement.
Section 19: Indemnification
19.1 Indemnification by Penterra (Licensor)
Penterra shall indemnify, defend, and hold harmless Meridian and its Affiliates, and their respective officers, directors, employees, agents, successors, and permitted assigns (collectively, the "Meridian Indemnitees"), from and against any and all losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees and costs of litigation) (collectively, "Losses") arising out of, resulting from, or relating to:
(a) any breach of Penterra's representations and warranties set forth in the Definitive Agreement;
(b) Penterra's negligence or willful misconduct in the performance of its obligations under the Definitive Agreement or any ancillary agreement;
(c) any third-party claim alleging that the Licensed IP, as existing on the Effective Date of the Definitive Agreement, infringes, misappropriates, or otherwise violates any intellectual property right of such third party; and
(d) any claim arising from Penterra's manufacture, handling, storage, or supply of clinical supply material, PPC-4187 API, or reference standard material to Meridian, to the extent such claim is attributable to defects in the material supplied by Penterra or Penterra's contract manufacturer.
19.2 Indemnification by Meridian (Licensee)
Meridian shall indemnify, defend, and hold harmless Penterra and its Affiliates, and their respective officers, directors, employees, agents, successors, and permitted assigns (collectively, the "Penterra Indemnitees"), from and against all Losses arising out of, resulting from, or relating to:
(a) any breach of Meridian's representations and warranties set forth in the Definitive Agreement;
(b) Meridian's development, manufacture (including manufacture by Meridian's designated contract manufacturers), formulation, packaging, labeling, storage, distribution, marketing, promotion, or commercialization of Licensed Products in the Territory;
(c) Meridian's negligence or willful misconduct in the performance of its obligations under the Definitive Agreement or any ancillary agreement; and
(d) any product liability claims, personal injury claims, or wrongful death claims arising from the commercial sale, distribution, or use of Licensed Products in the Territory.
19.3 Limitations on Indemnification
Cap. Each Party's aggregate indemnification liability under the Definitive Agreement shall be capped at an amount equal to two hundred percent (200%) of the total payments actually received by Penterra from Meridian as of the date on which the applicable indemnification claim is first asserted (the "Indemnity Cap"). The Indemnity Cap shall have a floor of thirty-six million U.S. dollars ($36,000,000), calculated as 200% of the $18,000,000 upfront payment, and shall increase proportionately as additional milestone payments, royalties, and other amounts are paid by Meridian to Penterra during the term of the Definitive Agreement.
Carve-Outs from Cap. Notwithstanding the foregoing, the Indemnity Cap shall not apply to Losses arising from:
(a) fraud or intentional misrepresentation by the indemnifying Party;
(b) willful misconduct by the indemnifying Party; or
(c) Penterra's indemnification obligation with respect to third-party intellectual property infringement claims under Section 19.1(c) above.
De Minimis Threshold. No indemnification claim may be asserted for any individual Loss that does not exceed one hundred fifty thousand U.S. dollars ($150,000) (the "De Minimis Threshold"). Losses falling below the De Minimis Threshold shall not be counted toward the Aggregate Deductible Basket described below.
Aggregate Deductible Basket. The indemnifying Party's indemnification obligations shall not attach until the aggregate amount of qualifying Losses (i.e., Losses that individually exceed the De Minimis Threshold) exceeds seven hundred fifty thousand U.S. dollars ($750,000) (the "Aggregate Deductible Basket"), at which point the indemnifying Party shall be liable for the full amount of all qualifying Losses in excess of the Aggregate Deductible Basket (i.e., on a "tipping basket" basis, not a true deductible).
The Definitive Agreement shall set forth additional customary provisions regarding indemnification procedures, including notice requirements, defense and control of claims, cooperation obligations, settlement authority, and the right to seek contribution.
Section 20: Insurance
Meridian shall obtain and maintain, at its own cost and expense, the following insurance coverage for its activities under the Definitive Agreement:
(a) Clinical Trial Insurance: Coverage for clinical trial activities conducted by Meridian (or on Meridian's behalf) in the Territory, with policy limits and terms reasonably acceptable to Penterra, in amounts no less than customary for comparable clinical trials in each applicable jurisdiction within the Territory.
(b) Product Liability Insurance: Commercial product liability insurance covering the manufacture, distribution, marketing, sale, and use of Licensed Products in the Territory, with policy limits and terms reasonably acceptable to Penterra, in amounts no less than customary for comparable pharmaceutical products in each applicable jurisdiction within the Territory.
Meridian shall provide Penterra with certificates of insurance evidencing the foregoing coverage promptly upon request. Meridian anticipates obtaining product liability and clinical trial coverage from its existing insurance carriers with experience in the Asia-Pacific pharmaceutical market. The specific insurers, policy limits, deductibles, and coverage terms shall be subject to Penterra's reasonable approval and shall be documented in the Definitive Agreement.
Section 21: Intellectual Property Ownership and Prosecution
Ownership. All Licensed IP, including the Licensed Patents, Licensed Know-How, and Licensed Trademarks, shall remain the sole and exclusive property of Penterra. Nothing in this Term Sheet or the Definitive Agreement shall be construed as transferring ownership of any Licensed IP to Meridian, except to the extent of the license expressly granted hereunder.
Improvements and Joint Inventions. Any improvements, modifications, enhancements, or inventions (whether or not patentable) conceived, discovered, developed, or reduced to practice by Meridian (alone or jointly with Penterra) arising from Meridian's development, manufacturing, or commercialization activities in the Territory relating to PPC-4187 or Licensed Products ("Improvements") shall be jointly owned by the Parties. Penterra shall have the first right (but not the obligation) to prepare, file, prosecute, and maintain patent applications and patents claiming such jointly owned Improvements worldwide, at Penterra's cost for filings outside the Territory and at the Parties' shared cost for filings within the Territory. Meridian shall cooperate fully with Penterra in the prosecution of any such patent applications, including by providing all necessary declarations, assignments, and supporting documentation.
Patent Prosecution and Maintenance. Penterra shall be responsible for the prosecution and maintenance of the Licensed Patents worldwide, using patent counsel selected by Penterra. Penterra shall keep Meridian reasonably informed of the status of Licensed Patent prosecution and maintenance in Territory countries through the JPC, and shall consider in good faith Meridian's comments and suggestions regarding prosecution strategy in the Territory. Meridian shall bear a pro rata share of the costs associated with patent prosecution and maintenance in Territory countries, based on the number of Territory countries as a proportion of the total number of countries in which Licensed Patents are prosecuted and maintained.
Enforcement. Enforcement of Licensed Patents against third-party infringers in the Territory shall be coordinated through the JPC. Penterra shall have the first right to initiate and control enforcement actions in the Territory, at its own cost. If Penterra declines to enforce a Licensed Patent in a Territory country, Meridian shall have the right (but not the obligation) to initiate and control such enforcement action at Meridian's cost, subject to Penterra's prior written consent (not to be unreasonably withheld). Any recoveries from enforcement actions in the Territory shall be allocated first to reimburse the enforcing Party's costs and expenses, with any remaining amounts shared equally between the Parties.
Section 22: Term and Termination
Term. The Definitive Agreement shall commence on the Effective Date and shall continue in full force and effect on a country-by-country basis until the expiration of the Royalty Term for each country in the Territory, unless earlier terminated in accordance with the provisions of this Section 22.
Termination for Convenience. Meridian may terminate the Definitive Agreement on a country-by-country basis or on an agreement-wide basis, in its sole discretion, upon one hundred eighty (180) days' prior written notice to Penterra. In the event of termination for convenience, Meridian's obligation to pay any milestone payments or royalties that have not yet accrued as of the effective date of termination shall terminate, but all accrued and unpaid obligations shall survive.
Termination for Cause. Either Party may terminate the Definitive Agreement upon the material breach thereof by the other Party if such breach remains uncured for a period of ninety (90) days following the breaching Party's receipt of written notice specifying the nature of the breach in reasonable detail; provided, however, that the cure period for any payment breach shall be thirty (30) days. If a material breach relates to only certain countries within the Territory, the non-breaching Party may elect to terminate the Definitive Agreement solely with respect to the affected countries, rather than terminating on an agreement-wide basis.
Termination for Insolvency. Either Party may terminate the Definitive Agreement upon written notice to the other Party in the event that the other Party:
(a) becomes insolvent or admits in writing its inability to pay its debts as they become due;
(b) files a voluntary petition in bankruptcy or has an involuntary petition in bankruptcy filed against it that is not dismissed within sixty (60) days;
(c) makes a general assignment for the benefit of creditors;
(d) has a receiver, trustee, or similar officer appointed for substantially all of its assets; or
(e) undergoes any analogous proceedings under the laws of any applicable jurisdiction.
Effects of Termination. Upon the effective date of termination (whether in whole or with respect to specific countries):
(a) all rights granted to Meridian under the Definitive Agreement with respect to the Licensed IP shall immediately revert to Penterra for the affected countries;
(b) Meridian shall promptly cease all development, manufacturing, and commercialization activities for Licensed Products in the affected countries, subject to a reasonable wind-down period (not to exceed one hundred eighty (180) days) to sell off existing inventory and fulfill existing contractual obligations;
(c) Meridian shall provide reasonable transition assistance to Penterra (or Penterra's designee) to facilitate an orderly transfer of development and commercialization activities, including the transfer of regulatory filings, clinical trial data, and ongoing clinical trial obligations;
(d) Meridian shall return or destroy all Licensed Know-How and confidential information of Penterra in its possession or control (at Penterra's election);
(e) any accrued and unpaid milestone payments, royalties, Sublicense Income Pass-Through payments, and other payment obligations shall survive termination and remain due and payable in accordance with their terms; and
(f) the provisions of the Definitive Agreement relating to indemnification, confidentiality, representations and warranties (to the extent of their stated survival periods), intellectual property ownership, governing law, and dispute resolution shall survive any expiration or termination of the Definitive Agreement.
Section 23: Confidentiality
This Section 23 is legally binding on the Parties.
The Parties acknowledge that they are party to an existing Confidential Disclosure Agreement (the "CDA") and that confidential information has been and will continue to be exchanged between them in connection with the transactions contemplated by this Term Sheet. The confidentiality obligations set forth in this Section 23 shall be in addition to, and not in limitation of, the Parties' obligations under the CDA.
Each Party (the "Receiving Party") shall maintain in strict confidence all non-public, proprietary, and confidential information disclosed by the other Party (the "Disclosing Party") in connection with the transactions contemplated hereby and by the Definitive Agreement (collectively, "Confidential Information"), and shall not disclose such Confidential Information to any third party without the prior written consent of the Disclosing Party, except as otherwise permitted herein. The Receiving Party shall use Confidential Information solely for the purposes contemplated by this Term Sheet and the Definitive Agreement and shall limit access to Confidential Information to those of its employees, officers, directors, Affiliates, advisors, and agents who have a need to know such information and who are bound by confidentiality obligations no less restrictive than those set forth herein.
The confidentiality obligations set forth herein shall continue for a period of five (5) years following the date of disclosure of the applicable Confidential Information; provided, however, that with respect to any Confidential Information that constitutes a trade secret under applicable law, the confidentiality obligations shall continue for so long as such information qualifies as a trade secret.
The foregoing confidentiality obligations shall not apply to Confidential Information that:
(a) is or becomes publicly available through no fault of the Receiving Party;
(b) was known to the Receiving Party prior to disclosure by the Disclosing Party, as evidenced by the Receiving Party's written records;
(c) is independently developed by the Receiving Party without use of or reference to the Disclosing Party's Confidential Information, as evidenced by the Receiving Party's written records;
(d) is rightfully received by the Receiving Party from a third party without restriction on disclosure and without breach of any obligation of confidentiality owed to the Disclosing Party; or
(e) is required to be disclosed by applicable law, regulation, or court order, provided that the Receiving Party gives the Disclosing Party prompt written notice of such requirement (to the extent legally permissible) and cooperates with the Disclosing Party's efforts to obtain a protective order or other appropriate remedy.
Section 24: Regulatory and Tax Considerations
24.1 Antitrust / Regulatory Approvals
The Parties shall assess whether the transactions contemplated by this Term Sheet and the Definitive Agreement require any antitrust filings, competition law notifications, or other regulatory or governmental approvals in any relevant jurisdiction, including, without limitation:
(a) an analysis of whether a filing is required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), based on the size-of-transaction and size-of-person thresholds applicable at the time of the Definitive Agreement;
(b) an assessment of whether a filing with or review by the Committee on Foreign Investment in the United States ("CFIUS") is required or advisable, given the nature of the Licensed IP and the foreign ownership structure of Meridian;
(c) an analysis of any technology import/export filings or approvals required under PRC law with the Ministry of Commerce ("MOFCOM"), the State Administration for Market Regulation ("SAMR"), or other relevant PRC governmental authorities; and
(d) an assessment of any other competition law filings or regulatory approvals required in Japan, South Korea, Australia, or other Territory countries.
The Parties shall cooperate in good faith in preparing and submitting any required filings and in obtaining any required approvals on a timely basis. Each Party shall bear its own costs in connection with the preparation and submission of such filings, unless the Parties agree otherwise.
24.2 Withholding Tax
All payments made by Meridian to Penterra under the Definitive Agreement shall be subject to applicable withholding taxes imposed by the jurisdiction from which such payments are made. The Parties acknowledge the following tax considerations and intend to structure the transactions contemplated hereby in a tax-efficient manner:
(a) U.S.–Hong Kong: Under current applicable law, royalty payments made from Hong Kong to the United States may benefit from a zero percent (0%) withholding rate, subject to confirmation of the applicable tax treatment and any required filings or certifications.
(b) PRC Withholding: Payments routed through Meridian Pharma (Shanghai) Co., Ltd. to Penterra may be subject to a ten percent (10%) PRC withholding tax on royalties and license fees under PRC domestic law, unless reduced by an applicable bilateral tax treaty between the PRC and the United States or the PRC and Hong Kong. The Parties shall evaluate the availability of treaty benefits and the optimal payment routing structure.
Detailed tax structuring, including the allocation of payments among various categories (upfront, milestones, royalties, and cost-plus supply payments), tax gross-up provisions (if any), and the Parties' respective obligations regarding tax filings, withholding certificates, and tax refund claims, shall be addressed in the Definitive Agreem