EXCLUSIVE LICENSE AGREEMENT
EXECUTION VERSION
Dated as of October 2, 2023
by and between
PENTERRA PHARMACEUTICALS CORP. a Delaware corporation
and
MERIDIAN BIO THERAPEUTICS LIMITED a Hong Kong limited company
Effective Date: October 20, 2023
CONFIDENTIAL — This document constitutes confidential information of the Parties and is subject to the confidentiality provisions set forth herein. Unauthorized reproduction or distribution is strictly prohibited.
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RECITALS
WHEREAS, Penterra Pharmaceuticals Corp. ("Licensor") is a specialty pharmaceutical company duly organized and existing under the laws of the State of Delaware, publicly traded on the Nasdaq Stock Market (ticker symbol: PNTR), with its principal executive offices located at 400 Pharma Drive, Suite 800, Princeton, New Jersey 08540, and is the sole owner of certain proprietary intellectual property rights relating to the compound designated as PPC-4187 (proposed International Nonproprietary Name: Penteracitinib), a selective Janus kinase 1 (JAK1) inhibitor being developed for the treatment of moderate-to-severe atopic dermatitis in adults;
WHEREAS, Licensor has successfully completed a Phase IIb clinical trial (Study PPC-4187-201), enrolling four hundred twenty (420) patients, with topline results announced in June 2023 demonstrating statistically significant improvement versus placebo (p<0.001) for the primary endpoint of EASI-75 response at Week 16, and Licensor possesses a comprehensive portfolio of patents, trademarks, know-how, and clinical data relating to PPC-4187;
WHEREAS, Meridian Bio Therapeutics Limited ("Licensee") is a pharmaceutical company duly organized and existing under the laws of the Hong Kong Special Administrative Region (Company Registration No. 2847631), with its principal offices located at 18/F, Blossom Tower, 88 Queen's Road Central, Hong Kong SAR, and possesses demonstrated commercialization capabilities across the Asia-Pacific region, including established regulatory relationships and commercial infrastructure with the National Medical Products Administration of the People's Republic of China (NMPA), the Pharmaceuticals and Medical Devices Agency of Japan (PMDA), the Ministry of Food and Drug Safety of the Republic of Korea (MFDS), the Therapeutic Goods Administration of Australia (TGA), and regulatory authorities in additional markets within the Association of Southeast Asian Nations;
WHEREAS, Licensor desires to grant to Licensee, and Licensee desires to obtain from Licensor, an exclusive license to develop, manufacture, and commercialize Licensed Products (as defined herein) in the Territory (as defined herein), subject to and in accordance with the terms and conditions set forth in this Agreement;
WHEREAS, the Board of Directors of Licensor duly authorized the negotiation and execution of this Agreement at a meeting held on July 18, 2023, and the Board of Directors of Licensee has similarly duly authorized the negotiation and execution of this Agreement; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, the representations and warranties contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each Party, Licensor and Licensee hereby agree as follows:
ARTICLE 1 — DEFINITIONS
Section 1.1 Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with such Person, where "control" means ownership, directly or indirectly, of fifty percent (50%) or more of the outstanding voting securities of such Person, or the equivalent power to direct the management and policies of such Person, whether through ownership of securities, by contract, or otherwise. Without limiting the generality of the foregoing, the following entities are, as of the Effective Date, Affiliates of Licensee: Meridian Pharma (Shanghai) Co., Ltd., a company organized under the laws of the People's Republic of China; Meridian Japan K.K., a company organized under the laws of Japan; Meridian Korea Inc., a company organized under the laws of the Republic of Korea; and Meridian Bio Australia Pty Ltd, a company organized under the laws of the Commonwealth of Australia.
"Annual Net Sales" means the aggregate Net Sales of Licensed Products in all countries in the Territory during a given calendar year (January 1 through December 31).
"API" means the active pharmaceutical ingredient PPC-4187 (Penteracitinib).
"Applicable Law" means all applicable laws, statutes, rules, regulations, ordinances, guidelines, codes, orders, permits, licenses, decrees, judgments, injunctions, and governmental requirements, whether local, national, regional, or international, applicable in any country of the Territory or to a Party's obligations under this Agreement, including without limitation all applicable requirements of Regulatory Authorities.
"BLA" means a Biologics License Application filed with a Regulatory Authority, or the equivalent thereof, as applicable to the Licensed Products in any country of the Territory.
"Calendar Quarter" means each successive period of three (3) consecutive calendar months ending on March 31, June 30, September 30, and December 31, respectively; provided that the first Calendar Quarter of the Term shall commence on the Effective Date and end on the first to occur of March 31, June 30, September 30, or December 31 thereafter, and the last Calendar Quarter of the Term shall end on the effective date of expiration or termination of this Agreement.
"Clinical Supply Material" means clinical-grade API and reference standard supplied by Licensor (or its designee) to Licensee for use in clinical trials of Licensed Products, as further described in the Supply Agreement.
"CMO" means a contract manufacturing organization engaged by a Party to manufacture API, intermediates, or finished dosage form of Licensed Products. The initial CMO for the manufacture of API as of the Effective Date is Alkerra Manufacturing Inc., located at 5200 Meridian Parkway, Research Triangle Park, North Carolina 27713.
"Commercialization" or "Commercialize" means all activities directed to the marketing, promotion, detailing, distribution, offering for sale, sale, importation, exportation, and post-marketing support of Licensed Products, including activities related to pricing, reimbursement, health economics and outcomes research, medical affairs, market access, and lifecycle management. When used as a verb, "Commercialize" means to engage in Commercialization activities.
"Commercially Reasonable Efforts" means, with respect to a particular objective, efforts and resources that are consistent with those typically used by a similarly situated pharmaceutical company of comparable size, resources, and capabilities for a product at a similar stage of development or commercialization, taking into account all relevant factors, including without limitation the product's commercial potential, the competitive landscape, the regulatory environment, the patent and other proprietary position, the profitability of the product (including pricing and reimbursement status), and all other relevant scientific, technical, commercial, legal, and medical factors.
"Compound" means the chemical compound designated as PPC-4187, also known by the proposed International Nonproprietary Name (INN) Penteracitinib, which is a selective Janus kinase 1 (JAK1) inhibitor, including any salt, ester, hydrate, solvate, polymorph, enantiomer, racemate, prodrug, metabolite, or isotopically labeled variant thereof.
"Confidential Information" means all information, data, materials, know-how, trade secrets, and other proprietary information, whether written, oral, electronic, visual, or in any other form, that is 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 scientific, technical, regulatory, clinical, financial, commercial, and business information, and the terms and conditions of this Agreement. Confidential Information shall not include information that the Receiving Party can demonstrate by competent written evidence: (a) was in the public domain at the time of disclosure or thereafter enters the public domain through no fault of the Receiving Party; (b) was in the Receiving Party's possession prior to disclosure hereunder without any obligation of confidentiality; (c) was independently developed by the Receiving Party without use of or reference to the Disclosing Party's Confidential Information; or (d) was lawfully received from a Third Party without restriction on disclosure and without breach of any obligation of confidentiality.
"Control" or "Controlled" means, with respect to any Person, ownership, directly or indirectly, of fifty percent (50%) or more of the outstanding voting securities of such Person, or the equivalent power to direct the management and policies of such Person, whether through ownership of securities, by contract, or otherwise.
"Development" or "Develop" means all pre-clinical, non-clinical, clinical, regulatory, and chemistry, manufacturing, and controls (CMC) activities directed to the research, development, and optimization of Licensed Products, including without limitation preclinical studies, toxicology studies, pharmacokinetic studies, formulation development, clinical trials (Phase I, Phase II, Phase III, and Phase IV), regulatory submissions, and regulatory interactions. When used as a verb, "Develop" means to engage in Development activities.
"Development Milestone" means each of the milestone events set forth in Section 5.2 of this Agreement.
"Development Plan" means the development plan attached hereto as Schedule E, as the same may be amended from time to time in accordance with this Agreement.
"Effective Date" means October 20, 2023.
"EU5" means, collectively, Germany, France, Italy, Spain, and the United Kingdom of Great Britain and Northern Ireland.
"First Commercial Sale" means, with respect to any Licensed Product in any country of the Territory, the first bona fide, arm's-length sale of such Licensed Product by Licensee, any of its Affiliates, or any sublicensee to a Third Party in such country following receipt of Regulatory Approval for such Licensed Product in such country. Sales for compassionate use, named patient supply, clinical trial purposes, or other pre-commercial supply shall not constitute a First Commercial Sale.
"Generic Product" means a pharmaceutical product that: (a) contains the same active pharmaceutical ingredient as PPC-4187 (Penteracitinib); (b) is approved by a Regulatory Authority in a country of the Territory through an abbreviated, generic, or biosimilar regulatory pathway (or through reliance on the safety and efficacy data of a Licensed Product); and (c) is marketed by a Third Party that is not an Affiliate of or sublicensee of either Party.
"Good Manufacturing Practices" or "GMP" means current Good Manufacturing Practices as promulgated by the U.S. Food and Drug Administration, the European Medicines Agency, and all applicable Regulatory Authorities in the Territory, including without limitation the guidelines set forth in ICH Q7 and the applicable requirements of each Regulatory Authority in the Territory, in each case as the same may be amended from time to time.
"ICC" means the International Chamber of Commerce.
"Improvement" means any enhancement, modification, adaptation, invention, discovery, development, or derivative of any Licensed IP, or any improvement thereto, that is conceived, developed, reduced to practice, or otherwise made by or on behalf of either Party (or its Affiliates, sublicensees, employees, agents, or contractors) during the Term, whether or not patentable.
"IND" means an Investigational New Drug application filed with a Regulatory Authority, or the equivalent thereof (including a Clinical Trial Application), in any country of the Territory, that is required to be filed before commencing clinical trials of a Licensed Product in such country.
"Joint Patent Committee" or "JPC" means the joint patent committee established pursuant to Section 3.3 of this Agreement.
"Joint Steering Committee" or "JSC" means the joint steering committee established pursuant to Section 3.2 of this Agreement.
"Know-How" means all proprietary information, data, results, trade secrets, inventions, techniques, methods, procedures, processes, formulas, protocols, analytical methods, manufacturing processes, specifications, stability data, clinical data packages, regulatory correspondence, and other technical information and materials, whether or not patentable, relating to the Compound or Licensed Products, as more specifically described in Schedule B hereto.
"Licensed IP" means, collectively, the Licensed Patents, the Licensed Know-How, and the Licensed Trademarks.
"Licensed Know-How" means all Know-How that is Controlled by Licensor as of the Effective Date or that comes under the Control of Licensor during the Term, to the extent relating to the Compound or Licensed Products, as more specifically described in Schedule B hereto.
"Licensed Patents" means all patents and patent applications listed in Schedule A hereto, together with all continuations, continuations-in-part (to the extent the claims thereof are entitled to the priority date of the parent application listed in Schedule A), divisionals, reissues, re-examinations, renewals, extensions (including supplementary protection certificates), and foreign counterparts thereof, and any patents issuing therefrom, in each case to the extent Controlled by Licensor.
"Licensed Product(s)" means any pharmaceutical product containing the Compound as an active ingredient, including without limitation the 25 mg and 50 mg film-coated tablet formulations of PPC-4187 and any other formulation or dosage form thereof developed by or on behalf of either Party.
"Licensed Trademarks" means the trademarks and service marks listed in Schedule C hereto, including the trademark PENTECLAR (U.S. Registration No. 6,789,012) and all registrations, applications, and common-law rights in the Territory, together with all goodwill associated therewith.
"Losses" means any and all damages, liabilities, losses, costs, and expenses (including reasonable attorneys' fees and expert witness fees), judgments, fines, penalties, settlements, awards, and other amounts incurred or suffered by an indemnified Party.
"MFN Adjustment Payment" has the meaning set forth in Section 5.8(c) of this Agreement.
"MFN Floor Price" has the meaning set forth in Section 5.8(a) of this Agreement.
"Most Favored Nation" or "MFN" means the pricing obligation set forth in Section 5.8 of this Agreement.
"NDA" means a New Drug Application filed with a Regulatory Authority, or the equivalent thereof, in any country of the Territory, seeking Regulatory Approval to market and sell a Licensed Product.
"Net Sales" means the gross amounts invoiced by Licensee, its Affiliates, or its sublicensees for sales or other dispositions of Licensed Products to Third Parties in arm's-length transactions in the Territory during a particular period, less the following deductions to the extent actually incurred, allowed, accrued, or specifically allocated to such Licensed Product in accordance with International Financial Reporting Standards (IFRS) or generally accepted accounting principles (GAAP) in the applicable jurisdiction, consistently applied:
(a) trade, quantity, and cash discounts actually granted and taken;
(b) rebates, credits, allowances, and chargebacks actually paid or accrued, including those granted to wholesalers, distributors, managed care organizations, governmental authorities, and other purchasers;
(c) credits, allowances, and refunds for returns of Licensed Products;
(d) customs duties, excise taxes, sales taxes, value-added taxes (VAT), goods-and-services taxes (GST), and other governmental charges or levies directly imposed on the sale, importation, or exportation of Licensed Products (excluding income taxes);
(e) freight, insurance, shipping, handling, and distribution charges actually paid or incurred in connection with the delivery of Licensed Products to customers; and
(f) allowances for bad debts or uncollectible amounts, to the extent actually written off in accordance with applicable accounting standards.
In no event shall any particular amount be deducted more than once in calculating Net Sales. Sales or transfers of Licensed Products between or among Licensee, its Affiliates, and its sublicensees shall not be included in Net Sales unless such Licensed Products are consumed by the transferee and not resold to a Third Party. Transfers of Licensed Products for charitable, compassionate use, promotional, clinical trial, or sampling purposes shall be excluded from Net Sales. In the event of any sale or other disposition of Licensed Products in a non-arm's-length transaction, Net Sales shall be calculated based on the fair market value of such Licensed Products as if sold in an arm's-length transaction.
"Party" means Licensor or Licensee, individually, and "Parties" means Licensor and Licensee, collectively.
"Person" means any natural person, corporation, general partnership, limited partnership, limited liability company, joint venture, trust, association, unincorporated organization, or any governmental entity or instrumentality thereof.
"Phase III" means a pivotal clinical trial of a Licensed Product designed to establish the efficacy and safety of such Licensed Product in patients for the purpose of obtaining Regulatory Approval, as further described in 21 C.F.R. § 312.21(c) or its foreign equivalent.
"Quality Agreement" means the quality agreement between the Parties substantially in the form attached hereto as Exhibit A, to be executed in accordance with Section 6.4 of this Agreement.
"Regulatory Approval" means any approval, registration, license, authorization, or other permission granted by a Regulatory Authority in any country of the Territory that is required for the marketing, promotion, distribution, and sale of a Licensed Product in such country.
"Regulatory Authority" means any governmental authority or agency responsible for the regulation of pharmaceutical products in any country of the Territory, including without limitation the NMPA (People's Republic of China), PMDA (Japan), MFDS (Republic of Korea), TGA (Australia), and the equivalent regulatory authorities in New Zealand, Singapore, Thailand, Malaysia, Indonesia, the Philippines, Vietnam, and Taiwan.
"Regulatory Milestone" means each of the milestone events set forth in Section 5.3 of this Agreement.
"Retained Territory" means all countries and territories worldwide other than the Territory, including without limitation the United States of America, Canada, the member states of the European Union, the member states of the European Economic Area, the United Kingdom of Great Britain and Northern Ireland, all countries of Latin America, the Middle East, and Africa.
"Royalty Term" has the meaning set forth in Section 5.7(a) of this Agreement.
"Signing Date" means October 2, 2023, the date on which this Agreement is executed by both Parties.
"Sublicense Income" means all upfront payments, milestone payments, royalties, license fees, option fees, and any other consideration of any kind received by Licensee or its Affiliates from sublicensees in consideration for the grant of a sublicense under this Agreement, whether in cash or in kind; provided, however, that Sublicense Income shall not include: (a) amounts received for the supply of Licensed Products at cost or a reasonable markup thereon; (b) amounts received as bona fide reimbursement of Licensee's out-of-pocket research and development costs; or (c) amounts received for equity investments in Licensee at fair market value.
"Supply Agreement" means the API supply agreement between the Parties, executed concurrently with this Agreement, governing the terms and conditions for the supply of API and reference standard by Licensor (or its designee) to Licensee.
"Technology Transfer" means the transfer of manufacturing process know-how, analytical methods, specifications, CMC documentation, and all other information and materials necessary for Licensee (or its designated APAC manufacturer) to independently manufacture Licensed Products, as further described in the Technology Transfer Agreement.
"Technology Transfer Agreement" means the technology transfer agreement between the Parties, executed concurrently with this Agreement, governing the terms and conditions for the transfer of manufacturing know-how and CMC documentation from Licensor to Licensee.
"Term" has the meaning set forth in Section 12.1 of this Agreement.
"Territory" means the countries and jurisdictions set forth in Schedule D hereto, consisting of: 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 a Party or an Affiliate of a Party.
"Trademark License Agreement" means the trademark license agreement between the Parties, executed concurrently with this Agreement, governing the terms and conditions for the use of Licensed Trademarks by Licensee in the Territory.
"U.S." means the United States of America, including its territories and possessions.
Section 1.2 Rules of Interpretation
In this Agreement, unless the context otherwise requires:
(a) the singular shall include the plural and vice versa, and the masculine gender shall include the feminine and neuter genders and vice versa;
(b) the words "herein," "hereof," "hereunder," and words of similar import shall refer to this Agreement as a whole, including all Schedules and Exhibits hereto, and not to any particular Article, Section, or provision hereof;
(c) all references to "Articles," "Sections," "Schedules," and "Exhibits" shall refer to Articles, Sections, Schedules, and Exhibits of this Agreement unless otherwise specified;
(d) all headings and captions contained in this Agreement are for convenience of reference only and shall not be deemed to define, limit, or describe the scope or intent of any provision hereof;
(e) the word "including" (and all grammatical variations thereof) shall mean "including, without limitation" and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it;
(f) all references to "days" shall mean calendar days unless otherwise specified, and all references to "business days" shall mean any day that is not a Saturday, Sunday, or public holiday in both New York, New York and Hong Kong SAR;
(g) all references to currency and dollar amounts shall refer to United States Dollars (US$) unless otherwise expressly specified;
(h) all references to any agreement, instrument, or other document shall be deemed to refer to such agreement, instrument, or document as amended, supplemented, modified, or restated from time to time in accordance with the terms thereof; and
(i) the Parties have participated jointly in the negotiation and drafting of this Agreement, and, in the event of any ambiguity or question of intent or interpretation, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.
ARTICLE 2 — GRANT OF LICENSE
Section 2.1 Exclusive License Grant
Subject to the terms and conditions of this Agreement, Licensor hereby grants to Licensee an exclusive (even as to Licensor), royalty-bearing license, with the right to sublicense in accordance with Section 2.3, under the Licensed IP to Develop, manufacture, have manufactured, use, import, export, offer for sale, sell, distribute, promote, market, and otherwise Commercialize Licensed Products in the Territory during the Term. The license granted pursuant to this Section 2.1 shall extend to all dosage forms and formulations of pharmaceutical products containing the Compound, for all indications within the field of dermatology, with the initial therapeutic indication being moderate-to-severe atopic dermatitis in adults. Any expansion of the licensed field beyond dermatology shall require the prior written agreement of both Parties. The license granted hereunder is exclusive in the Territory, meaning that Licensor shall not grant to any Third Party, and Licensor shall not itself exercise, any rights under the Licensed IP within the Territory that are inconsistent with the exclusive license granted to Licensee hereunder, subject to Licensor's retained rights set forth in Section 2.2.
Section 2.2 Retained Rights
Notwithstanding the exclusive license granted in Section 2.1, Licensor hereby expressly retains all right, title, and interest in and to the Licensed IP in the Retained Territory, including without limitation the right to develop, manufacture, have manufactured, use, import, export, offer for sale, sell, and Commercialize Licensed Products in 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 expressly included in the Territory as defined herein and set forth in Schedule D. Licensor further retains the right to perform, and to engage Third Parties to perform, its obligations under this Agreement, the Supply Agreement, the Technology Transfer Agreement, the Quality Agreement, and the other ancillary agreements executed in connection herewith. Nothing in this Agreement shall be construed to limit Licensor's right to research, develop, manufacture, or commercialize Licensed Products or other products containing the Compound in the Retained Territory, or to grant licenses to Third Parties with respect to the Retained Territory.
Section 2.3 Sublicensing
(a) Licensee shall have the right to grant sublicenses under the license granted in Section 2.1 in the Territory, subject to the prior written consent of Licensor, which consent shall not be unreasonably withheld, conditioned, or delayed. Licensee shall provide Licensor with a written request for sublicensing consent at least thirty (30) days prior to the intended grant of any sublicense, together with a summary of the proposed sublicensee's identity, qualifications, financial condition, and the key terms of the proposed sublicense.
(b) Each sublicense granted by Licensee hereunder shall: (i) be in writing and consistent with the terms and conditions of this Agreement; (ii) contain terms and conditions no less protective of Licensor's rights, interests, and intellectual property than those set forth in this Agreement; (iii) include the most favored nation pricing obligation set forth in Section 5.8 and indemnification obligations no less favorable to Licensor than those set forth in Article 10; and (iv) provide that such sublicense shall automatically terminate upon termination of this Agreement (unless Licensor elects to assume the sublicense as a direct license).
(c) With respect to Sublicense Income, Licensee shall pay to Licensor fifty percent (50%) of all Sublicense Income received by Licensee from sublicensees, net of Licensee's documented out-of-pocket development costs directly attributable to the sublicensee's specific territory or activities, in accordance with Section 5.11.
(d) Licensee shall remain fully responsible and liable for the performance of all obligations of its sublicensees under any sublicense, and any act or omission of a sublicensee shall be deemed an act or omission of Licensee for purposes of this Agreement. Licensee shall promptly provide Licensor with a complete and accurate copy of each sublicense agreement (which may be redacted to remove financial terms not relevant to the calculation of Sublicense Income).
Section 2.4 No Implied Licenses
Except as expressly granted in this Agreement, no license or other right is granted or implied under any patent, patent application, trade secret, know-how, trademark, copyright, or other intellectual property right of either Party, whether by implication, estoppel, or otherwise. Each Party retains all rights not expressly granted to the other Party hereunder.
Section 2.5 Exclusivity Covenant
During the Term, Licensor shall not, directly or indirectly, grant to any Third Party a license, option, right of first refusal, or any other right under the Licensed IP in the Territory. Licensor shall not itself develop, manufacture, or commercialize Licensed Products in the Territory except as expressly provided in this Agreement. Licensor shall promptly notify Licensee in writing of any approach by a Third Party seeking rights under the Licensed IP in the Territory.
ARTICLE 3 — GOVERNANCE
Section 3.1 Overview
To facilitate effective oversight, coordination, and communication between the Parties regarding the development and commercialization activities contemplated by this Agreement, the Parties shall establish and maintain a Joint Steering Committee ("JSC") and a Joint Patent Committee ("JPC") in accordance with the provisions of this Article 3. Each committee shall operate in accordance with its charter as set forth herein and shall serve as the primary forum for the exchange of information and the coordination of activities between the Parties.
Section 3.2 Joint Steering Committee (JSC)
(a) Establishment and Composition. Within thirty (30) days of the Effective Date, the Parties shall establish the JSC, which shall consist of three (3) representatives designated by Licensor and three (3) representatives designated by Licensee. Each Party's representatives shall be senior employees or officers with sufficient authority and expertise to address the matters within the JSC's responsibilities. The initial representatives of Licensor on the JSC shall be: Leland J. Cho, Senior Vice President, Business Development; Dr. Priya Nandakumar, Vice President, intellectual Property; and one (1) additional designee to be identified by Licensor in writing prior to the first meeting of the JSC. The initial representatives of Licensee on the JSC shall be: Angela C.Y. Fong, Chief Executive Officer; Dr. Kenji Morimoto, Chief Medical Officer; and one (1) additional designee to be identified by Licensee in writing prior to the first meeting of the JSC. Each Party may change its representatives on the JSC by written notice to the other Party.
(b) Meetings. The JSC shall meet at least once per Calendar Quarter, with meetings alternating between in-person meetings and videoconference meetings, or as otherwise agreed by the Parties. In-person meetings shall alternate between locations designated by Licensor and Licensee, respectively, or shall be held at such other locations as the Parties may agree. Either Party may call additional special meetings of the JSC upon fifteen (15) days' prior written notice to the other Party, or upon shorter notice in the event of an emergency. A quorum for any JSC meeting shall require at least two (2) representatives from each Party.
(c) Responsibilities. The JSC shall be responsible for: (i) overseeing development activities conducted by Licensee under the Development Plan; (ii) reviewing and providing guidance on regulatory strategy for Licensed Products in the Territory; (iii) coordinating Commercialization activities in the Territory with Licensor's commercialization activities in the Retained Territory; (iv) reviewing and approving any material amendments to the Development Plan; (v) reviewing reports from the JPC regarding patent prosecution and enforcement matters; (vi) addressing any other matters referred to the JSC by the Parties or by the JPC; and (vii) facilitating the exchange of information between the Parties regarding the progress and status of development and commercialization of Licensed Products.
(d) Decision-Making. The JSC shall use good faith efforts to reach consensus on all matters within its authority. In the event the JSC is unable to reach consensus on any matter after good faith discussion at two (2) consecutive meetings (or within thirty (30) days of the initial discussion, whichever is shorter), the matter shall be resolved as follows: (i) with respect to Territory-specific commercialization matters (subject at all times to compliance with the MFN pricing obligation set forth in Section 5.8), Licensee shall have the tie-breaking vote; and (ii) with respect to matters relating to global intellectual property strategy or matters with potential impact on Licensor's rights in the Retained Territory, Licensor shall have the tie-breaking vote.
(e) Minutes. Licensee shall be responsible for preparing written minutes of each JSC meeting, which minutes shall summarize all material discussions and record all decisions made. Draft minutes shall be circulated to all JSC members within fifteen (15) business days following each meeting. Each Party shall have ten (10) business days to review and provide comments on the draft minutes. Final minutes shall be approved by at least one (1) representative of each Party and shall be maintained by Licensee.
Section 3.3 Joint Patent Committee (JPC)
(a) Establishment and Composition. Within thirty (30) days of the Effective Date, the Parties shall establish the JPC, which shall consist of two (2) representatives designated by Licensor and two (2) representatives designated by Licensee. Each Party's representatives shall be employees or officers with expertise in patent prosecution, patent strategy, and intellectual property law. Each Party may change its representatives on the JPC by written notice to the other Party.
(b) Meetings. The JPC shall meet at least twice per calendar year, or more frequently as needed, by videoconference or in person, as the Parties may agree. Either Party may call additional meetings of the JPC upon fifteen (15) days' prior written notice.
(c) Responsibilities. The JPC shall be responsible for: (i) overseeing and coordinating patent prosecution and maintenance strategy for the Licensed Patents in the Territory; (ii) reviewing and providing recommendations regarding the filing, prosecution, and maintenance of patent applications and patents relating to the Compound and Licensed Products in the Territory; (iii) coordinating with Licensor's patent prosecution counsel, Whitford & Cascade Insurance Brokers (lead counsel: Dr. Alan J. Whitford), regarding prosecution activities in the Territory; (iv) monitoring and evaluating Third-Party patent activities that may affect the Licensed Products in the Territory; and (v) reporting to the JSC on patent-related matters.
(d) Decision-Making. The JPC shall use good faith efforts to reach consensus on all matters within its authority. In the event the JPC is unable to reach consensus, Licensor shall have the tie-breaking vote on all matters relating to global intellectual property strategy and patent prosecution decisions that may have a potential impact on the Retained Territory. On all other JPC matters relating exclusively to prosecution and maintenance of patents in the Territory with no potential impact on the Retained Territory, the matter shall be escalated to the JSC for resolution.
Section 3.4 Limitations on Committee Authority
Neither the JSC nor the JPC shall have the authority to amend, modify, or waive any provision of this Agreement or any ancillary agreement executed in connection herewith. The authority of each committee shall be advisory and coordinative in nature, except to the extent that specific decision-making authority is expressly granted to such committee under this Agreement. Neither committee shall have the authority to bind either Party to any obligation or commitment not contemplated by this Agreement, and all decisions of each committee shall be subject to the express terms and conditions of this Agreement.
ARTICLE 4 — DEVELOPMENT AND REGULATORY
Section 4.1 Development Obligations
Licensee shall use Commercially Reasonable Efforts to Develop Licensed Products in the Territory in accordance with the Development Plan attached hereto as Schedule E. Licensee shall bear all costs and expenses associated with the Development of Licensed Products in the Territory, including without limitation costs associated with clinical trials, regulatory submissions, manufacturing for clinical supply (except as otherwise provided in the Supply Agreement), and related activities. Without limiting the foregoing, Licensee shall initiate at least one (1) Phase III clinical trial of a Licensed Product in the Territory within eighteen (18) months of the Effective Date (i.e., on or before April 20, 2025). For purposes of this Section 4.1, "initiate" means the dosing of the first patient enrolled in such Phase III clinical trial. Licensee shall keep Licensor reasonably informed of the status and progress of all Development activities in the Territory and shall provide written progress reports to the JSC on a quarterly basis.
Section 4.2 Development Plan
The Development Plan is attached hereto as Schedule E and outlines, among other things, the Phase III trial design (including study endpoints, randomization protocol, and blinding methodology), patient enrollment targets, the countries in which clinical trial sites will be established, the anticipated timelines for regulatory submissions to the NMPA and PMDA, and the key milestone trigger events. The Development Plan shall be reviewed by the JSC on at least an annual basis. Any material amendments to the Development Plan shall require the prior approval of the JSC. The Parties acknowledge that the Development Plan is intended to serve as a reasonable guide for the conduct of Development activities and that adjustments may be necessary in light of evolving scientific, clinical, and regulatory circumstances.
Section 4.3 Regulatory Responsibilities
(a) Licensee shall be the sole regulatory sponsor and shall hold (or cause its applicable Affiliate to hold) all INDs, NDAs, BLAs, and other regulatory filings for Licensed Products in each country of the Territory. Licensee shall be responsible for all regulatory filings, correspondence, communications, and interactions with Regulatory Authorities in the Territory, and shall bear all costs and expenses associated therewith.
(b) Licensee shall keep Licensor promptly and fully informed of all material regulatory developments in the Territory, including without limitation: (i) the submission and status of any IND, NDA, BLA, or other regulatory filing; (ii) any request or requirement from a Regulatory Authority for additional data, studies, or information; (iii) any communication from a Regulatory Authority regarding safety or efficacy concerns; (iv) the receipt of any Regulatory Approval, conditional approval, or rejection; and (v) any post-marketing requirements or commitments imposed by a Regulatory Authority.
(c) Licensor shall provide reasonable cooperation and support to Licensee in connection with Licensee's regulatory activities in the Territory, including without limitation providing access to and copies of all pre-clinical data, clinical data from Study PPC-4187-201, CMC data, and any other data or information in Licensor's Control that is reasonably necessary for Licensee's regulatory submissions in the Territory. Licensor shall respond to reasonable requests for information or assistance from Licensee within thirty (30) days of receipt of such requests, or within such shorter period as may be required by the applicable Regulatory Authority.
Section 4.4 Regulatory Data Sharing
(a) All regulatory data, clinical data, non-clinical data, CMC data, and regulatory filings generated by or on behalf of Licensee in the Territory during the Term shall be promptly shared with Licensor for Licensor's use in connection with global regulatory purposes, including regulatory submissions in the Retained Territory. Licensee hereby grants to Licensor a non-exclusive, royalty-free, perpetual, irrevocable right of reference to all such regulatory data and filings.
(b) Licensor hereby grants to Licensee a right of reference to all of Licensor's regulatory filings in the Retained Territory, including without limitation Licensor's IND, CMC data, Phase IIb clinical data from Study PPC-4187-201, and any other pre-clinical or clinical data, to the extent necessary for Licensee's regulatory submissions in the Territory. Such right of reference shall be memorialized in a letter of authorization in the form reasonably acceptable to both Parties and the applicable Regulatory Authority.
Section 4.5 Clinical Supply
Licensor shall supply, or cause its designated CMO (initially Alkerra Manufacturing Inc.) to supply, API and reference standard to Licensee for use in clinical trials of Licensed Products in the Territory during the first three (3) years following the Effective Date (i.e., through October 20, 2026), in accordance with the terms and conditions of the Supply Agreement. The supply price for API and reference standard shall be Licensor's fully loaded cost of goods plus a markup of fifteen percent (15%). All API and reference standard supplied by Licensor shall comply with the specifications and quality standards set forth in the Quality Agreement. Licensor shall use Commercially Reasonable Efforts to supply Licensee's requirements in a timely manner and in accordance with Licensee's forecasts submitted pursuant to the Supply Agreement.
Section 4.6 Diligence Milestones
Licensee shall use Commercially Reasonable Efforts to achieve First Commercial Sale of at least one Licensed Product in at least one Major Market Country within five (5) years of the Effective Date (i.e., on or before October 20, 2028). For purposes of this Agreement, "Major Market Country" means each of the People's Republic of China, Japan, the Republic of Korea, and Australia. In the event that Licensee fails to achieve First Commercial Sale in at least one Major Market Country within such five-year period, Licensor shall have the right, in its sole discretion, to convert the exclusive license granted under Section 2.1 into a non-exclusive license for the Territory or to terminate this Agreement in its entirety upon one hundred eighty (180) days' prior written notice to Licensee, subject to Licensee's right to demonstrate to Licensor's reasonable satisfaction that such failure was attributable to circumstances beyond Licensee's reasonable control (including, without limitation, regulatory delays or clinical safety signals).
ARTICLE 5 — FINANCIAL TERMS
Section 5.1 Upfront Payment
In partial consideration for the rights and licenses granted hereunder, Licensee shall pay to Licensor a one-time, non-refundable, non-creditable upfront payment of Eighteen Million United States Dollars ($18,000,000) (the "Upfront Payment"). The Upfront Payment shall be made in accordance with the Escrow Agreement entered into by the Parties with Velthorn National Bank, N.A. (the "Escrow Agent") dated as of the Signing Date. Licensee shall deposit the Upfront Payment into the escrow account maintained by the Escrow Agent on or before October 6, 2023. The Escrow Agent shall release the Upfront Payment to Licensor on the Effective Date (October 20, 2023) upon satisfaction or waiver of all conditions precedent to closing as set forth in the Escrow Agreement, including without limitation: (a) receipt by the Escrow Agent of joint written instructions from both Parties; (b) confirmation that all representations and warranties remain true and correct in all material respects as of the Effective Date; and (c) delivery of all ancillary agreements duly executed by both Parties. The Upfront Payment shall not be refundable under any circumstances, including termination of this Agreement, and shall not be creditable against any other payment obligations of Licensee hereunder.
Section 5.2 Development Milestone Payments
Licensee shall pay to Licensor the following non-refundable, non-creditable development milestone payments within thirty (30) days following the first achievement of each of the corresponding development milestone events, as applicable:
Each development milestone payment shall be payable only once upon the first occurrence of the applicable milestone event, regardless of the number of Licensed Products, indications, or countries in the Territory for which such milestone event may be achieved. Licensee shall promptly notify Licensor in writing of the achievement of each development milestone event, and in no event later than ten (10) business days following such achievement. In the event that any milestone event is achieved prior to the achievement of a preceding milestone event in the table above (e.g., positive topline data is obtained prior to full enrollment due to interim analysis), all prior unpaid milestone payments shall become due and payable concurrently with the later-achieved milestone.
Section 5.3 Regulatory Milestone Payments
Licensee shall pay to Licensor the following non-refundable, non-creditable regulatory milestone payments within thirty (30) days following the first achievement of each of the corresponding regulatory milestone events:
Each regulatory milestone payment shall be payable only once upon the first occurrence of the applicable milestone event for the first Licensed Product to achieve Regulatory Approval in the relevant country, regardless of the number of Licensed Products, indications, or dosage forms for which Regulatory Approval may be obtained. Licensee shall promptly notify Licensor in writing of the receipt of each Regulatory Approval, and in no event later than ten (10) business days following such receipt.
Section 5.4 Commercial / Sales Milestone Payments
Licensee shall pay to Licensor the following non-refundable, non-creditable commercial milestone payments within forty-five (45) days following the end of the calendar year in which Annual Net Sales of Licensed Products in the Territory first exceed the applicable threshold:
Each commercial milestone payment shall be payable only once, upon the first calendar year in which the applicable Annual Net Sales threshold is exceeded. For the avoidance of doubt, if Annual Net Sales in a single calendar year exceed more than one of the above thresholds for the first time, all corresponding milestone payments for such exceeded thresholds shall become due and payable with respect to such calendar year. Licensee shall notify Licensor in writing of the achievement of each commercial milestone within thirty (30) days following the end of the calendar year in which such milestone is first achieved.
Section 5.5 Total Deal Value
The total potential consideration payable by Licensee to Licensor under this Agreement consists of: (a) the Upfront Payment of $18,000,000; (b) aggregate development milestone payments of up to $32,000,000; (c) aggregate regulatory milestone payments of up to $25,000,000; and (d) aggregate commercial milestone payments of up to $45,000,000, for a total of up to One Hundred Twenty Million United States Dollars ($120,000,000) in milestone-based payments, in addition to royalties on Net Sales as set forth in Section 5.6 and Sublicense Income payments as set forth in Section 5.11. The Parties acknowledge that the foregoing amounts represent the maximum potential milestone payments and that actual payments will depend on the achievement of the applicable milestone events.
Section 5.6 Royalties on Net Sales
(a) During the Royalty Term, Licensee shall pay to Licensor tiered royalties on Annual Net Sales of Licensed Products in the Territory, calculated on an incremental (marginal) basis as follows:
(b) For the avoidance of doubt, the royalty rates set forth above shall apply only to the incremental portion of Annual Net Sales within each respective tier. By way of example, if Annual Net Sales of Licensed Products in the Territory in a given calendar year are $180,000,000, the royalty payable for such year would be: (i) 8% × $50,000,000 = $4,000,000; plus (ii) 11% × $100,000,000 = $11,000,000; plus (iii) 14% × $30,000,000 = $4,200,000; for a total royalty payment of $19,200,000.
(c) Royalty payments shall be calculated and payable on a Calendar Quarter basis. Within forty-five (45) days following the end of each Calendar Quarter, Licensee shall deliver to Licensor a written royalty report setting forth in reasonable detail, on a country-by-country basis: (i) gross sales of Licensed Products; (ii) itemized deductions from gross sales in computing Net Sales; (iii) Net Sales; (iv) the applicable royalty rate(s); and (v) the royalty payment due. Concurrent with the delivery of each royalty report, Licensee shall remit to Licensor the total royalty payment due for such Calendar Quarter. To the extent that cumulative Annual Net Sales for a calendar year cross from one tier into a higher tier during a Calendar Quarter, the applicable royalty rate for each portion of Net Sales within each tier shall be applied incrementally.
Section 5.7 Royalty Term, Adjustments, and Minimum Royalty
(a) Royalty Term. The obligation to pay royalties under Section 5.6 shall continue, on a country-by-country basis, for the period commencing on the date of First Commercial Sale of a Licensed Product in such country and ending on the later of: (i) the date of expiration of the last-to-expire Valid Claim of a Licensed Patent Covering such Licensed Product in such country; or (ii) twelve (12) years from the date of First Commercial Sale of such Licensed Product in such country (the "Royalty Term"). Upon expiration of the Royalty Term in a given country, the license granted to Licensee with respect to such country shall become fully paid-up, perpetual, irrevocable, and non-exclusive.
(b) Post-Patent Royalty Reduction. Following the expiration of all Licensed Patents containing a Valid Claim Covering a Licensed Product in a given country of the Territory, but during the remaining portion of the twelve (12)-year period from the date of First Commercial Sale of such Licensed Product in such country (i.e., where clause (ii) of Section 5.7(a) determines the Royalty Term), the royalty rates applicable to Net Sales of Licensed Products in such country shall be reduced by fifty percent (50%) as follows:
(c) Generic Entry Reduction. If, in any Calendar Quarter, one or more Generic Products have achieved a combined market share equal to or greater than thirty percent (30%) of the total unit volume of all pharmaceutical products containing the Compound (including both Licensed Products and Generic Products) sold in a given country of the Territory (as measured by Tidewater Holdings or a comparable third-party data source mutually agreed by the Parties), the royalties payable by Licensee with respect to Net Sales of Licensed Products in such country shall be reduced by forty percent (40%) for so long as such market share threshold is maintained. The determination of Generic Product market share shall be reviewed and reconciled on a Calendar Quarter basis. If the combined market share of Generic Products in such country subsequently falls below thirty percent (30%) for two (2) consecutive Calendar Quarters, the full (unreduced) royalty rates shall be reinstated.
(d) Minimum Annual Royalty. Beginning in the first full calendar year following the calendar year in which First Commercial Sale of any Licensed Product occurs in any country of the Territory, Licensee shall pay to Licensor a minimum annual royalty of Two Million United States Dollars ($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 for such calendar year. If earned royalties for any calendar year equal or exceed the Minimum Annual Royalty, no additional payment shall be required under this Section 5.7(d). If earned royalties for any calendar year are less than the Minimum Annual Royalty, Licensee shall pay the shortfall within forty-five (45) days following the end of such calendar year.
Section 5.8 Most Favored Nation Pricing
(a) MFN Obligation. Licensee shall not, and shall cause each of its Affiliates and sublicensees not to, offer, sell, or otherwise make available Licensed Products in any country of the Territory at a net price (calculated as Net Sales divided by units sold for the applicable dosage strength and comparable pack size) that is more than fifteen percent (15%) below the lowest net price at which Licensor (or its licensees or distributors) sells Licensed Products in the United States or any EU5 country (Germany, France, Italy, Spain, or the United Kingdom) for the same dosage strength and comparable pack size during the same Calendar Quarter (the "MFN Floor Price"). For purposes of this Section 5.8, "net price" means the weighted average net selling price per unit, calculated by dividing Net Sales by the total number of units of the applicable dosage strength and pack size sold during the relevant Calendar Quarter. The MFN obligation set forth in this Section 5.8 is intended to protect the integrity of Licensor's global pricing strategy and to prevent the erosion of reference pricing in the Retained Territory.
(b) Quarterly Reconciliation. MFN pricing compliance shall be reviewed and reconciled on a quarterly basis. Within forty-five (45) days following the end of each Calendar Quarter, Licensee shall deliver to Licensor a written report setting forth, on a country-by-country basis, the weighted average net selling price per unit for each dosage strength and pack size of Licensed Products sold in the Territory during such Calendar Quarter. Concurrently, Licensor shall provide Licensee with the corresponding weighted average net selling price data for Licensed Products sold in the United States and EU5 countries during such Calendar Quarter. The Parties shall review and reconcile the pricing data in accordance with the methodology set forth in Schedule F. In the event of any dispute regarding the calculation of MFN Floor Prices or compliance therewith, the Parties shall first attempt to resolve such dispute through the JSC, and thereafter through the dispute resolution procedures set forth in Article 14.
(c) MFN Adjustment Payment. If the quarterly reconciliation process reveals that Licensee has breached the MFN pricing obligation in any Calendar Quarter with respect to any country of the Territory, Licensor shall be entitled to an MFN Adjustment Payment equal to: (i) the positive difference between the MFN Floor Price and the actual weighted average net selling price charged by Licensee (or its Affiliate or sublicensee) in such country during such Calendar Quarter, multiplied by (ii) the total number of units of the applicable dosage strength and pack size sold by Licensee (or its Affiliate or sublicensee) in such country during such Calendar Quarter. The MFN Adjustment Payment shall be due and payable by Licensee to Licensor within thirty (30) days following Licensor's delivery of a written notice to Licensee setting forth the calculation of such MFN Adjustment Payment in reasonable detail. For the avoidance of doubt, the MFN Adjustment Payment is in addition to, and not in lieu of, any other remedies available to Licensor under this Agreement or at law or in equity.
(d) Reference to Schedule F. The detailed calculation methodology for determining MFN Floor Prices, the definition of reference prices in the United States and EU5 countries, the reconciliation process, and the mechanics for determining and calculating MFN Adjustment Payments are set forth in Schedule F attached hereto, which is incorporated herein by reference.
Section 5.9 Payment Terms
(a) All payments due under this Agreement shall be made in United States Dollars (US$) by wire transfer of immediately available funds to the bank account(s) designated in writing by Licensor from time to time. Licensor shall provide Licensee with written wire transfer instructions at least ten (10) business days prior to the first payment due hereunder, and shall promptly notify Licensee in writing of any changes to such wire transfer instructions.
(b) Any payment not made when due shall bear interest from the date such payment was due until the date of actual payment at a rate equal to the lesser of: (i) one and one-half percent (1.5%) per month (18% per annum); or (ii) the maximum rate permitted by Applicable Law. The payment of such interest shall not limit or waive any other rights or remedies of the non-defaulting Party.
(c) Royalty reports, including all supporting details required by Section 5.6(c), shall be delivered by Licensee to Licensor within forty-five (45) days following the end of each Calendar Quarter.
Section 5.10 Taxes and Withholding
(a) All payments under this Agreement are inclusive of, and subject to, all applicable withholding taxes. Licensee shall withhold and remit to the appropriate governmental authority any and all withholding taxes required to be withheld from payments to Licensor under Applicable Law, and shall provide Licensor with official tax receipts or other documentation evidencing the payment of such withholding taxes promptly following each such payment.
(b) The Parties acknowledge that, under current Applicable Law, the United States and the Hong Kong Special Administrative Region do not have a comprehensive income tax treaty; however, Hong Kong does not impose withholding taxes on outbound royalty payments, and accordingly no withholding is expected to apply to royalty payments made directly from Licensee in Hong Kong to Licensor. To the extent that royalty payments or other payments under this Agreement are routed through or originate from Meridian Pharma (Shanghai) Co., Ltd. or any other Affiliate of Licensee domiciled in the People's Republic of China, such payments shall be subject to PRC withholding tax at the applicable rate, currently ten percent (10%), unless reduced pursuant to an applicable bilateral tax treaty or arrangement.
(c) Licensee shall be responsible for all value-added taxes (VAT), goods-and-services taxes (GST), and similar indirect taxes imposed in any country of the Territory in connection with the transactions contemplated by this Agreement.
(d) The Parties agree to cooperate in good faith to minimize withholding taxes and other tax liabilities to the extent permitted by Applicable Law, including by providing such forms, certifications, and other documentation as may be reasonably required or requested. Each Party shall provide the other with reasonable assistance and cooperation in connection with any tax audit or examination relating to payments made under this Agreement.
(e) Notwithstanding anything to the contrary herein, Licensor shall not be entitled to any gross-up payment in respect of withholding taxes. Any withholding taxes properly withheld and remitted by Licensee in accordance with Applicable Law shall reduce the amount of the corresponding payment otherwise due to Licensor hereunder.
Section 5.11 Sublicense Income
Licensee shall pay to Licensor fifty percent (50%) of all Sublicense Income received by Licensee or its Affiliates from sublicensees, net of Licensee's documented, verifiable out-of-pocket development costs (excluding internal costs and overhead) directly and solely attributable to the development of Licensed Products in the sublicensee's specific territory. Such payments shall be due within th