UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-12957
ENZON PHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 22-2372868
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
685 Route 202/206, Bridgewater, New Jersey 08807
(Address of Principal Executive Offices) (Zip Code)
(908) 541-8600
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No |_|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes |X| No |_|
As of May 10, 2004, there were 43,848,057 shares of Common Stock, par
value $.01 per share, outstanding.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except shares and per share amounts)
(Unaudited)
March 31, 2004 June 30, 2003
-------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 83,370 $ 66,752
Short-term investments 9,741 25,047
Accounts receivable, net 29,623 33,173
Inventories 10,586 11,786
Deferred tax and other current assets 20,798 16,089
--------- ---------
Total current assets 154,118 152,847
--------- ---------
Property and equipment 48,287 43,896
Less: Accumulated depreciation and amortization 14,109 11,303
--------- ---------
34,178 32,593
--------- ---------
Other assets:
Marketable securities 81,358 61,452
Investments in equity securities and convertible note 65,274 56,364
Amortizable intangible assets, net 198,544 211,975
Goodwill 150,985 150,985
Deferred tax and other assets 53,132 62,350
--------- ---------
549,293 543,126
--------- ---------
Total assets $ 737,589 $ 728,566
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,001 $ 12,809
Accrued expenses 18,516 21,536
--------- ---------
Total current liabilities 26,517 34,345
--------- ---------
Notes payable 400,000 400,000
Other liabilities 6,671 2,637
--------- ---------
406,671 402,637
--------- ---------
Commitments and contingencies
Stockholders' equity:
Common stock-$.01 par value, authorized 90,000,000 shares;
issued and outstanding 43,840,746 shares at March 31, 2004
and 43,518,359 shares at June 30, 2003 438 435
Additional paid-in capital 326,170 322,488
Accumulated other comprehensive income (loss) 1,446 (159)
Deferred compensation (6,702) (4,040)
Accumulated deficit (16,951) (27,140)
--------- ---------
Total stockholders' equity 304,401 291,584
--------- ---------
Total liabilities and stockholders' equity $ 737,589 $ 728,566
========= =========
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
2
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Nine Months Ended March 31, 2004 and 2003
(In thousands, except per share data)
(Unaudited)
Three months ended Nine months ended
March 31, March 31,
----------------------- ------------------------
2004 2003 2004 2003
-------- -------- --------- --------
Revenues:
Product sales, net $ 27,993 $ 21,875 $ 80,665 $ 36,250
Manufacturing revenue 5,035 4,762 8,826 5,496
Royalties 11,103 16,242 36,461 57,565
Contract revenue 248 284 769 417
-------- -------- --------- --------
Total revenues 44,379 43,163 126,721 99,728
-------- -------- --------- --------
Costs and expenses:
Cost of sales and manufacturing revenue 12,458 11,080 35,195 17,859
Research and development 10,772 5,132 24,711 14,886
Acquired in-process research and development 12,000 -- 12,000 --
Selling, general and administrative 12,500 9,481 35,187 20,786
Merger expenses -- 1,398 -- 1,398
Amortization of acquired intangible assets 3,358 3,960 10,074 5,288
Write-down of carrying value of investments -- -- -- 27,237
-------- -------- --------- --------
Total costs and expenses 51,088 31,051 117,167 87,454
-------- -------- --------- --------
Operating income (loss) (6,709) 12,112 9,554 12,274
-------- -------- --------- --------
Other income (expense):
Investment income, net 11,564 632 12,744 8,430
Interest expense (4,957) (4,957) (14,871) (14,871)
Other, net (337) 3 71 3
-------- -------- --------- --------
6,270 (4,322) (2,056) (6,438)
-------- -------- --------- --------
Income (loss) before tax provision (439) 7,790 7,498 5,836
Income tax provision (benefit) (5,505) 156 (2,691) 662
-------- -------- --------- --------
Net income $ 5,066 $ 7,634 $ 10,189 $ 5,174
======== ======== ========= ========
Basic earnings per common share $ 0.12 $ 0.18 $ 0.24 $ 0.12
======== ======== ========= ========
Diluted earnings per common share $ 0.12 $ 0.17 $ 0.23 $ 0.12
======== ======== ========= ========
Weighted average number of common shares
outstanding-basic 43,368 43,192 43,322 43,061
======== ======== ========= ========
Weighted average number of common shares and
dilutive potential common shares outstanding 43,817 43,634 43,657 43,611
======== ======== ========= ========
The accompanying notes are an integral part of these unaudited consolidated
condensed financial statements.
3
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ending
March 31,
------------------------
2004 2003
-------- ---------
Cash flows from operating activities:
Net income $ 10,189 $ 5,174
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 16,487 7,895
Non-cash expense for issuance of common stock 1,132 468
Non-cash income relating to equity collar arrangement (82) --
Gain on sale of equity investments (10,997) --
Amortization of bond premium/discount 409 1,154
Non-cash write-down of carrying value of investment -- 27,237
Deferred income taxes (4,618) (2,272)
Changes in operating assets and liabilities (4,062) 1,255
-------- ---------
Net cash provided by operating activities 8,458 40,911
-------- ---------
Cash flows from investing activities:
Purchase of property and equipment (4,640) (5,306)
Purchase of ABELCET business -- (369,062)
Purchase of DEPOCYT product -- (12,181)
Proceeds from sale of NEKTAR equity investment 17,375 --
Proceeds from sale of marketable securities 32,444 350,318
Maturities of marketable securities -- 53,000
Purchases of marketable securities (37,450) (101,203)
-------- ---------
Net cash provided by (used in) investing activities 7,729 (84,434)
-------- ---------
Cash flows from financing activities:
Proceeds from exercise of common stock options 431 1,472
-------- ---------
Net increase (decrease) in cash and cash equivalents 16,618 (42,051)
Cash and cash equivalents at beginning of period 66,752 113,858
-------- ---------
Cash and cash equivalents at end of period $ 83,370 $ 71,807
======== =========
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
4
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes To Condensed Consolidated Financial Statements
(Unaudited)
(1) Organization and Basis of Presentation
The unaudited condensed consolidated financial statements have been
prepared from the books and records of Enzon Pharmaceuticals, Inc. (the
"Company") and its subsidiaries in accordance with accounting principles
generally accepted in the United States of America for interim financial
information pursuant to Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required for complete annual
financial statements. In the opinion of management, all adjustments (consisting
only of normal and recurring adjustments) considered necessary for a fair
presentation have been included. Interim results are not necessarily indicative
of the results that may be expected for the year. The interim consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's latest
annual report on Form 10-K.
(2) Comprehensive Income
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income", requires unrealized gains and losses on the Company's
available-for-sale securities to be included in other comprehensive income.
The following table reconciles net income to comprehensive income (loss)
(in thousands):
Three months ended Nine months ended
March 31, March 31,
---------------------- -----------------------
2004 2003 2004 2003
-------- -------- -------- --------
Net income $ 5,066 $ 7,634 $ 10,189 $ 5,174
Other comprehensive income:
Unrealized gain (loss) on marketable
securities arising during the
period, net of tax 324 167 3 966
Unrealized gain on NPS investment
arising during the period, net of tax
(see note 13) -- -- 1,824 --
Reclassification adjustment
for net gain realized in net
income, net of tax 227 (203) (222) (2,318)
-------- -------- -------- --------
Total other comprehensive income (loss) 551 (36) 1,605 (1,352)
-------- -------- -------- --------
Comprehensive income $ 5,617 $ 7,598 $ 11,794 $ 3,822
======== ======== ======== ========
5
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes To Condensed Consolidated Financial Statements
(Unaudited)
(3) New Accounting Pronouncements
In December 2003, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation No. 46 (revised December 2003) ("FIN46-R"), Consolidation of
Variable Interest Entities, which addresses how a business enterprise should
evaluate whether it has a controlling financial interest in an entity through
means other than voting rights and accordingly should consolidate the entity.
FIN 46-R replaces FASB Interpretation No. 46, Consolidation of Variable Interest
Entities ("FIN 46"), which was issued in January 2003. FIN 46-R requires that if
an entity has a controlling financial interest in a variable interest entity,
the assets, liabilities and results of activities of the variable interest
entity should be included in the consolidated financial statements of the
entity. The provisions of FIN 46-R are effective immediately to those entities
that are considered to be special-purpose entities. For all other arrangements,
the FIN 46-R provisions are required to be adopted at the beginning of the first
interim or annual period ending after March 15, 2004. As of March 31, 2004 the
Company is not a party to transactions contemplated under FIN 46-R.
In November 2002, the Emerging Issues Task Force ("EITF") reached a
consensus opinion on EITF 00-21, Revenue Arrangements with Multiple
Deliverables. The consensus provides that revenue arrangements with multiple
deliverables should be divided into separate units of accounting if certain
criteria are met. The consideration for the arrangement should be allocated to
the separate units of accounting based on their relative fair values, with
different provisions if the fair value of all deliverables is not known or if
the fair value is contingent on delivery of specified items or performance
conditions. Applicable revenue recognition criteria should be considered
separately for each separate unit of accounting. EITF 00-21 is effective for
revenue arrangements entered into in fiscal periods beginning after June 15,
2003. This adoption did not have any impact on our financial position or results
of operations.
(4) Earnings Per Common Share
Basic earnings per share is computed by dividing the net income available
to common shareholders adjusted for cumulative undeclared preferred stock
dividends for the relevant period, by the weighted average number of shares of
Common Stock issued and outstanding during the periods. For purposes of
calculating diluted earnings per share for the three and nine months ended March
31, 2004 and 2003, the denominator includes both the weighted average number of
shares of Common Stock outstanding and the number of dilutive Common Stock
equivalents. The number of dilutive Common Stock equivalents includes the effect
of non-qualified stock options calculated using the treasury stock method and
the number of shares issuable upon conversion of certain Series A Preferred
Stock that were outstanding as of March 31, 2003. The number of shares issuable
upon conversion of the Company's 4.5% Convertible Subordinated Notes due 2008
(the "Notes") and the effect of the vesting of certain restricted stock using
the treasury stock method have not been included as the effect of their
inclusion would be antidilutive. As of March 31, 2004, the Company had
10,797,000 dilutive common shares outstanding that could potentially dilute
future earnings per share calculations.
6
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes To Condensed Consolidated Financial Statements
(Unaudited)
The following table reconciles the basic and diluted earnings per share
calculations (in thousands):
Three months ended Nine months ended
March 31, March 31,
---------------------- ----------------------
2004 2003 2004 2003
-------- -------- -------- --------
Net income $ 5,066 $ 7,634 $ 10,189 $ 5,174
Less: Preferred stock dividends -- 4 -- 11
-------- -------- -------- --------
Net income available to common
stockholders $ 5,066 $ 7,630 $ 10,189 $ 5,163
======== ======== ======== ========
Weighted average number of
common shares outstanding - basic 43,368 43,192 43,322 43,061
Effect of dilutive securities:
Conversion of preferred stock -- 16 -- 16
Assumed exercise of non-
qualified stock options and
restricted stock 449 426 335 534
-------- -------- -------- --------
Weighted average number of
common shares outstanding and
dilutive potential common shares 43,817 43,634 43,657 43,611
======== ======== ======== ========
(5) Stock Based Compensation
As permitted by Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock Based Compensation", the Company accounts for
stock-based compensation arrangements in accordance with the provisions of
Accounting Principals Board ("APB") Opinion No. 25 "Accounting for Stock Issued
to Employees". Compensation expense for stock options issued to employees is
based on the difference on the date of grant between the fair value of the
Company's stock and the exercise price of the option. No stock option-based
employee compensation cost is reflected in net income, as all options granted to
employees had exercise prices equal to the market value of the underlying common
stock at the date of grant.
7
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes To Condensed Consolidated Financial Statements
(Unaudited)
The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of SFAS
No. 123 to stock based compensation (in thousands, except per share data):
Three months ended Nine months ended
March 31, March 31,
---------------------- ----------------------
2004 2003 2004 2003
-------- -------- -------- --------
Net income $ 5,066 $ 7,634 $ 10,189 $ 5,174
Less: Preferred stock dividends -- 4 -- 11
-------- -------- -------- --------
Net income available to common
stockholders $ 5,066 $ 7,630 $ 10,189 $ 5,163
======== ======== ======== ========
Add: Stock-based employee
compensation expense included in
reported net income, net of related
tax effects 277 250 718 458
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for all
awards, net of related tax effects (3,040) (4,609) (8,588) (11,844)
-------- -------- -------- --------
Pro forma net income (loss) available to common
stockholders $ 2,303 $ 3,271 $ 2,319 ($6,223)
======== ======== ======== ========
Earnings (loss) per common share - basic:
as reported $ 0.12 $ 0.18 $ 0.24 $ 0.12
======== ======== ======== ========
pro forma $ 0.05 $ 0.08 $ 0.05 ($0.14)
======== ======== ======== ========
Earnings (loss) per common share - diluted:
as reported $ 0.12 $ 0.17 $ 0.23 $ 0.12
======== ======== ======== ========
pro forma $ 0.05 $ 0.08 $ 0.05 ($0.14)
======== ======== ======== ========
During the nine months ended March 31, 2004, the Company issued 312,500
shares of restricted common stock and restricted common stock units to certain
members of management. Total compensation expense of approximately $3.7 million
is being recognized over a five year vesting period.
During the nine months ended March 31, 2004, the Company granted 2,028,000
stock options to its employees at an average exercise price of $13.82 under its
stock option plans (fair value on the date of grants) of which 300,000 were
granted to executive officers and 25,000 were granted to non-employee directors
of the Company. The options vest over a period between one and four years.
In December 2003, the stockholders of the Company approved amendments to
the Company's 2001 Incentive Stock Plan ("Plan") to increase the number of
shares of common stock available for issuance under the Plan from 2,000,000 to
6,000,000 and to limit the maximum number of shares of restricted stock and
restricted stock units that may be granted under the Plan to 50% of the total
number of shares available for issuance.
8
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes To Condensed Consolidated Financial Statements
(Unaudited)
(6) Inventories
The composition of inventories is as follows (in thousands):
March 31, 2004 June 30, 2003
-------------- -------------
Raw materials $ 3,960 $ 4,349
Work in process 3,446 3,392
Finished goods 3,180 4,045
------- -------
$10,586 $11,786
======= =======
(7) Acquisition of the ABELCET Product Line
On November 22, 2002, the Company acquired the North American rights and
operational assets associated with the development, manufacture, sales and
marketing of ABELCET(R) (Amphotericin B Lipid Complex Injection) (the "ABELCET
Product Line") from Elan Corporation, plc, for $360.0 million plus acquisition
costs of approximately $9.3 million.
The following unaudited pro forma results of operations of the Company for
the nine month period ended March 31, 2003, assumes the acquisition of the
ABELCET Product Line occurred as of July 1, 2002 and assumes the purchase price
has been allocated to the assets purchased based on fair values at the date of
acquisition (in thousands, except per share amounts):
Nine months ended
March 31,
------------------
2003
------------------
Product Sales, net $ 78,148
Total revenues 136,130
Net income (loss) (8,028)
Pro forma earnings (loss) per share:
Basic $ (0.19)
Diluted $ (0.19)
(8) Intangible Assets
The Company's intangible assets are primarily related to its November 22,
2002 acquisition of the ABELCET Product Line, DEPOCYT and ONCASPAR and are
amortized over their estimated useful lives. The gross carrying amount,
estimated lives and accumulated amortization, by major intangible asset class at
March 31, 2004 were as follows:
9
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes To Condensed Consolidated Financial Statements
(Unaudited)
Gross
Estimated Carrying Accumulated Net
Lives Amount Amortization Assets
-------------- --------------- --------------- --------------
Product patented technology 12 years $ 64,400 $ 7,156 $ 57,244
Manufacturing patent 12 years 18,300 2,033 16,267
NDA Approval 12 years 31,100 3,455 27,645
Trade name and other
product rights 15 years 80,000 7,111 72,889
Product acquisition costs 10-14 years 26,194 3,274 22,920
Patents 1-5 years 2,092 1,735 357
Manufacturing contract 3 years 2,200 978 1,222
-------- ------- --------
Total $224,286 $25,742 $198,544
======== ======= ========
Amortization of intangible assets for the three and nine month period
ended March 31, 2004 was $4.5 million and $13.4 million, respectively, a portion
of which is included in cost of goods sold. Assuming no changes in the gross
carrying amount of intangible assets, the amortization of intangible assets for
the next five fiscal years is estimated to be approximately $17.9 million per
year. Amortization of intangible assets for both the three and nine month period
ended March 31, 2003 was $4.5 million and $6.3 million, respectively.
(9) Goodwill
The amount assigned to goodwill in connection with the ABELCET Product
Line acquisition was recorded at $151.0 million. In accordance with SFAS No.
142, "Goodwill and Other Intangible Assets," goodwill is not amortized, but
rather is reviewed at least annually for impairment.
(10) Cash Flow Information
The Company considers all highly liquid securities with original
maturities of three months or less to be cash equivalents. Cash payments for
interest were approximately $9.0 million for the nine months ended March 31,
2004 and 2003. Income tax payments for the nine months ended March 31, 2004 were
$3.6 million. There were no income tax payments made for the nine months ended
March 31, 2003.
(11) Income Taxes
During the three months ended March 31, 2004 the Company recorded a net
tax benefit of approximately $5.5 million related primarily to the reversal of a
deferred tax asset valuation allowance of approximately $3.8 million for the
write-down in a prior year of our investment in NEKTAR Therapeutics Convertible
Preferred Stock which was converted and the underlying common stock was sold
during the quarter, resulting in a financial reporting gain of approximately
$11.0 million. The benefit was also due to the reduction of our estimated
taxable income and effective tax rate to 29% as compared to 35% used in the
previous two quarters, due to a payment during the three months ended March 31,
2004 of $12.0 million to INEX Pharmaceuticals related to acquired in-process
research and development for Onco TCS (See Note 14). The tax provision
recognized for the nine months ended March 31, 2004 is based on the estimated
annual effective tax rate of 29%. In addition, the tax effect of the financial
reporting gain on the sale of NEKTAR Convertible Preferred Stock and the
acquired in process research and development charge was recognized during the
three months ended March 31, 2004, the period in which the items occurred.
10
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes To Condensed Consolidated Financial Statements
(Unaudited)
At June 30, 2003, the Company recognized approximately $67.5 million as a
net deferred tax asset related to expected future profits, because management
concluded that it is more likely than not that the deferred tax assets will be
realized, including the net operating losses from operating activities and stock
option exercises, based on future operations. As of June 30, 2003 the Company
retained a valuation allowance of $12.8 million with respect to certain capital
losses and federal research and development credits as the ultimate utilization
of such losses and credits is uncertain. As discussed above, during February
2004, the Company reversed a portion of the valuation allowance associated with
the NEKTAR investment. The Company will continue to reassess the need for such
valuation allowance based on the future operating performance of the Company.
The tax provision for the three and nine month period ended March 31, 2003
represents the Company's anticipated Alternative Minimum Tax liability based on
the anticipated taxable income for the full fiscal year.
During the three and nine month period ended March 31, 2004, the Company
received $254,000 for the sale of certain New Jersey state net operating loss
carryforwards and also purchased certain New Jersey state net operating loss
carryforwards for $1.5 million.
(12) Business Segments
A single management team that reports to the Chief Executive Officer
comprehensively manages the business operations. The Company does not operate
separate lines of business or separate business entities with respect to any of
its approved products or product candidates. In addition, the Company does not
conduct any operations outside of the United States and Canada. The Company does
not prepare discrete financial statements with respect to separate product
areas. Accordingly, the Company does not have separately reportable segments as
defined by SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information".
(13) Derivative Instruments
In August 2003, the Company entered into a Zero Cost Protective Collar
arrangement (the "Collar") with a financial institution to reduce the exposure
associated with the 1.5 million shares of common stock of NPS Pharmaceuticals,
Inc. ("NPS") it received as part of the merger termination agreement between the
Company and NPS. By entering into this equity collar arrangement and taking into
consideration the underlying put and call option strike prices, the terms are
structured so that the Company's investment in NPS stock, when combined with the
value of the Collar, should secure ultimate cash proceeds in the range of
85%-108% of the negotiated fair value per share of $23.47 (representing a 4.85%
discount off of the closing price of NPS common stock on the day before the
Company executed the Collar). The Collar is considered a derivative hedging
instrument under SFAS No. 133 and as such, the Company periodically measures its
fair value and recognizes the derivative as an asset or a liability. The change
in fair value is recorded in other comprehensive income (See Note 2) or in the
Statement of Operations depending on its effectiveness. As of March 31, 2004,
the market value of NPS' common stock was $28.52 per share. When the underlying
shares become unrestricted and freely tradable, the Company is required to
deliver to the financial institution as posted collateral, a corresponding
number of shares of NPS common stock. During the three and nine month period
ended March 31, 2004, the Company sold and re-purchased 315,100 shares and
690,100 shares, respectively, of common stock of NPS. The unrealized gain
previously recognized under other comprehensive income with respect to these
shares aggregating $504,000 and $1.1 million for the three and nine months ended
March 31, 2004, respectively, was recognized in the Statements of Operations and
is being shown as "Other Income". With respect to the remaining 809,900 shares
of NPS common stock as of March 31, 2004, the increase in the aggregate value
above the base price of $23.47 per share up to the $25.35 per share Collar
limit, or $989,000, has been recorded in comprehensive income for the nine
months ended March 31, 2004, net of income taxes. The fair value of the Collar
above the $25.35 per share dollar limit represented a liability of $4.8 million
at March 31, 2004, which is included under "Other Liabilities" in the Condensed
Consolidated Balance Sheet. In addition, the difference in the fair value of the
Collar compared to the fair market value of the NPS common stock
11
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes To Condensed Consolidated Financial Statements
(Unaudited)
representing a loss of $318,000 for the three months ended March 31, 2004 and a
gain of $83,000 for the nine month period ended March 31, 2004, was recorded as
"Other Income" in the Statement of Operations. The Collar will mature in four
separate three-month intervals beginning November 2004 through August 2005, at
which time the Company will receive the proceeds from the sale of the
securities. The amount due at each maturity date will be determined based on the
market value of NPS' common stock on such maturity date. The contract requires
the Company to maintain a minimum cash balance of $30.0 million and additional
collateral up to $10.0 million (as defined) under certain circumstances with the
financial institution. The strike prices of the put and call options are subject
to certain adjustments in the event the Company receives a dividend from NPS.
(14) INEX Agreement
During January 2004, the Company and Inex Pharmaceuticals Corporation
("INEX") entered into a strategic partnership to develop and commercialize
INEX's proprietary oncology product Onco TCS. The Company and INEX entered into
a Product Supply Agreement, a Development Agreement, and a Co-Promotion
Agreement. The agreements contain cross termination provisions under which
termination of one agreement triggers termination of all the agreements.
Under the terms of the agreements, the Company received the exclusive
commercialization rights for Onco TCS for all indications in the United States,
Canada and Mexico. The lead indication for Onco TCS is relapsed aggressive
non-Hodgkin's lymphoma (NHL) for which a "rolling" New Drug Application (NDA) to
the United States Food and Drug Administration (FDA) was filed on March 15,
2004. The product is also in numerous phase II clinical trials for several other
cancer indications, including first-line NHL.
Upon execution of the related agreements the Company made a $12.0 million
up-front payment to INEX which has been determined to be an acquisition of
in-process research and development as the payment was made prior to FDA
approval, and therefore expensed in the Company's Statement of Operations for
the quarter ended March 31, 2004. In addition, the Company will be required to
pay up to $20.0 million upon Onco TCS being approved by the FDA and development
milestones and sales based bonus payments could total $43.75 million, of which
$10.0 million is payable upon annual sales first reaching $125.0 million, and
$15.0 million is payable upon annual sales first reaching $250.0 million. The
Company will also be required to pay INEX a percentage of commercial sales of
Onco TCS and this percentage will increase as sales reach certain predetermined
thresholds.
The Company and INEX will share equally the future development costs to
obtain and maintain marketing approvals in North America for Onco TCS, and the
Company will pay all sales and marketing costs and certain other post-approval
clinical development costs typically associated with commercialization
activities. The Company plans to market Onco TCS to the oncology market through
its North American sales force, which currently markets ABELCET(R), ONCASPAR(R),
and DEPOCYT(R). INEX has the option of complementing the Company's sales efforts
by co-promoting Onco TCS through the formation of a dedicated North American
sales and medical science liaison force. The costs of building INEX's
co-promotion force will be shared equally by both companies and the Company will
record all sales in the licensed territories. INEX retains manufacturing rights
and the Company will reimburse INEX for the manufacture and supply of the drug
at manufacturing cost plus five percent.
The agreements will expire on a country by country basis upon the
expiration of the last patent covering the licensed product in each particular
country or 15 years after the first commercial sale in such country, whichever
is later. The agreements are also subject to earlier termination under various
circumstances. The Company may terminate the agreements at any time upon 90 days
notice, in connection with which the Company must pay a $2.0 million termination
fee. INEX has completed the submission of its NDA, therefore if Enzon terminates
it must pay the $2.0 million fee. In addition, if at any time the Company
determines that it has no interest in commercializing the product in any
country, then INEX may terminate the agreement with respect to such country.
Either party may
12
ENZON PHARMACEUTICALS, INC. AND SUBSIDIARIES
Notes To Condensed Consolidated Financial Statements
(Unaudited)
terminate the agreements upon a materialbreach and failure to cure by the other
party. In addition, either party may terminate the agreements upon the other
party's bankruptcy. Generally, the termination of the agreements with respect to
a particular country shall terminate the Company's license with respect to Onco
TCS, and preclude the Company from marketing the product, in that country.
However, if the Company terminates the agreements because of INEX's breach or
bankruptcy, INEX will be obligated to provide the Company a right of reference
to INEX's regulatory dossiers and facilitate a transfer to the Company of the
technology necessary to manufacture the product. In addition, after such
termination, INEX will be obligated to exercise commercially reasonable efforts
to ensure that the Company has a continuous supply of product until the Company,
exercising commercially reasonable efforts, has secured an alternative source of
supply.
(15) Elan/Medeus Manufacturing Agreements
During February 2004 Elan Corporation, plc, sold its ABELCET and MYOCET
European business to Medeus Pharma, Ltd. ("Medeus") As part of this transaction
the Company's long-term manufacturing and supply agreement with Elan was
assigned to Medeus. In connection with the closing of this sale the Company and
Elan settled a dispute over the manufacturing cost of products produced for Elan
resulting in the payment and recognition of manufacturing revenue related to
approximately $1.7 million of revenue not previously recognized given the
uncertainty of the contractual amount.
(16) Investment Income
During the three months ended March 31, 2004, the Company converted 20,055
shares or approximately 50% of its Nektar Therapeutics convertible preferred
stock investment to common stock which it sold resulting in gross proceeds of
approximately $17.4 million and a net gain of approximately $11.0 million.
(17) Subsequent Events
In connection with Mr. Higgins' departure as the Company's CEO the board
appointed a committee of four independent directors (Dr. Rosina Dixon, Robert
LeBuhn, Dr. David Golde and Robert Parkinson) to review and approve the terms of
Mr. Higgins departure. This committee negotiated and approved a separation
payment of $1.25 million, which is payable to Mr. Higgins upon his departure in
May 2004. Concurrent with Mr. Higgins' departure as CEO in May 2004, the Company
will reverse approximately $1.29 million of compensation expense previously
recorded related to restricted stock of the Company that will be forfeited by
Mr. Higgins as a result of his departure as the Company's CEO.
13
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Information contained herein contains forward-looking statements which can
be identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," or "anticipates" or the negative thereof or
other variations thereon or comparable terminology, or by discussions of
strategy. These forward looking statements are subject to various risks and
uncertainties that may cause actual results to differ materially from the
results predicted by the forward looking statements. The matters set forth in
the "Risk Factors" section of the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 2003, which is incorporated herein by reference,
contain cautionary statements identifying important risks, uncertainties and
other factors, that could prevent the future results indicated in such
forward-looking statements from being achieved. Other factors could also cause
actual results to vary materially from the future results indicated in such
forward-looking statements.
Liquidity and Capital Resources
Total cash reserves, which include cash, cash equivalents, short-term
investments, and marketable securities, were $174.5 million as of March 31,
2004, as compared to $153.3 million as of June 30, 2003. The increase is
primarily due to net proceeds from the sale of shares of common stock issuable
upon our conversion of preferred shares of Nektar Therapeutics of approximately
$17.4 million and cash flow from operations. We invest our excess cash primarily
in United States government-backed securities and investment-grade corporate
debt securities.
During the nine months ended March 31, 2004, net cash generated from
operating activities was $8.5 million, compared to $40.9 million for the nine
months ended March 31, 2003. The reduction in net cash generated operating
activities in 2004 compared to 2003 was primarily due to a reduction in net
income related to the deduction of a non-cash write-down of the carrying value
of investments in 2003 as well as purchase of $12.0 million of acquired in
process research and development related to the Onco TCS strategic partnership
and a decrease in income. During the nine months ended March 31, 2003, we
recorded as a non-cash write-down of approximately $27.2 million of our
investment in NEKTAR Therapeutics
Cash provided by investing activities totaled $7.7 million for the nine
months ended March 31, 2004 compared to cash utilization of $84.4 million for
the nine months ended March 31, 2003. Cash provided by investing activities
during the nine months ended March 31, 2004, was principally due to purchases
and sales from investments and marketable securities of $12.3 million
principally due to the sale of Nektar Therapeutics stock of $17.4 million offset
by $4.6 million of capital expenditures.
As of March 31, 2004, we had $400.0 million of 4.5% convertible
subordinated notes outstanding. The notes bear interest at an annual rate of
4.5%. Interest is payable on January 1 and July 1 of each year. Accrued interest
on the notes was $4.5 million as of March 31, 2004. The holders may convert all
or a portion of the notes into common stock at any time on or before July 1,
2008. The notes are convertible into our common stock at a conversion price of
$70.98 per share, subject to adjustment in certain events. The notes are
subordinated to all existing and future senior indebtedness. On or after July 7,
2004, we may redeem any or all of the notes at specified redemption prices, plus
accrued and unpaid interest to the day preceding the redemption date. The notes
will mature on July 1, 2008 unless earlier converted, redeemed at our option or
redeemed at the option of the note-holder upon a fundamental change, as
described in the indenture for the notes. Neither we nor any of our subsidiaries
are subject to any financial covenants under the indenture. In addition, neither
we nor any of our subsidiaries are restricted under the indenture from paying
dividends, incurring debt, or issuing or repurchasing our securities.
In August 2003, we entered into a Zero Cost Protective Collar arrangement
with a financial institution to reduce the exposure associated with the 1.5
million shares of common stock of NPS we received as part of the merger
termination agreement with NPS. By entering into this equity collar arrangement
and taking into consideration the underlying put and call option strike prices,
the terms are structured so that our investment in NPS stock, when combined with
the value of the Collar, should secure ultimate cash proceeds in the range of
85%-108%
14
of the negotiated fair value per share of $23.47 (representing a 4.85% discount
off of the closing price of NPS common stock on the day before we executed the
Collar). The Collar is considered a derivative hedging instrument under SFAS No.
133 and as such, we periodically measure its fair value and recognizes the
derivative as an asset or a liability. The change in fair value is recorded in
other comprehensive income (See Note 2) or in the Statement of Operations
depending on its effectiveness. As of March 31, 2004, the market value of NPS'
common stock was $28.52 per share. When the underlying shares become
unrestricted and freely tradable, we are required to deliver to the financial
institution as posted collateral, a corresponding number of shares of NPS common
stock. During the three and nine month period ended March 31, 2004, we sold and
re-purchased 315,100 shares and 690,100 shares respectively of common stock of
NPS. The unrealized gain previously recognized under other comprehensive income
with respect to these shares aggregating $504,000 and $1.1 million for the three
and nine months ended March 31, 2004, respectively, was recognized in the
Statements of Operations and is being shown as "Other Income". With respect to
the remaining 809,900 shares of NPS common stock as of March 31, 2004, the
increase in the aggregate value above the base price of $23.47 per share up to
the $25.35 per share Collar limit, or $989,000, has been recorded in
comprehensive income for the nine months ended March 31, 2004, net of income
taxes. The fair value of the Collar above the $25.35 per share Collar limit
represented a liability of $4.8 million at March 31, 2004, which is included
under "Other Liabilities" in the Condensed Consolidated Balance Sheet. In
addition, the difference in the fair value of the Collar compared to the fair
market value of the NPS common stock representing a loss of $318,000 for the
three months ended March 31, 2004 and a gain of $83,000 for the nine month
period ended March 31, 2004, was recorded as "Other Income" in the Statement of
Operations. The Collar will mature in four separate three-month intervals
beginning November 2004 through August 2005, at which time we will receive the
proceeds from the sale of the securities. The amount due at each maturity date
will be determined based on the market value of NPS' common stock on such
maturity date. The contract requires us to maintain a minimum cash balance of
$30.0 million and additional collateral up to $10.0 million (as defined) under
certain circumstances with the financial institution. The strike prices of the
put and call options are subject to certain adjustments in the event we receive
a dividend from NPS.
Our current sources of liquidity are our cash reserves, and interest
earned on such cash reserves, short-term investments, marketable securities,
sales of ADAGEN(R), ONCASPAR(R), DEPOCYT(R) and ABELCET(R), royalties earned
primarily on sales of PEG-INTRON(R), sales of our products for research purposes
and license fees. Based upon our currently planned research and development
activities and related costs and our current sources of liquidity, we anticipate
our current cash reserves and expected cash flow from operations will be
sufficient to meet our capital, debt service and operational requirements for
the foreseeable future.
While we believe that our cash, cash reserves and investments will be
adequate to satisfy our capital needs for the foreseeable future, we may seek
additional financing, such as through future offerings of equity or debt
securities or agreements with collaborators with respect to the development and
commercialization of products, to fund future operations and potential
acquisitions. We cannot assure you, however, that we will be able to obtain
additional funds on acceptable terms, if at all.
Off-Balance Sheet Arrangements
As part of our ongoing business, we do not participate in transactions
that generate relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance or
special purpose entities ("SPE"), which would have been established for the
purpose of facilitating off-balance sheet arrangements or other contractually
narrow limited purposes. As of March 31, 2004, we are not involved in any SPE
transactions.
Contractual Obligations
Our major outstanding contractual obligations relate to our operating
leases, our convertible debt and our license and development agreements with
collaborative partners. Under our strategic partnership with INEX which was
entered into during the three months ended March 31, 2004 we are obligated to
pay up to $20.0 million payment upon Onco TCS receiving approval from the FDA
and additional development milestones and sales based bonus
15
payments could total $43.75 million, of which $10.0 million is payable upon
annual sales first reaching $125.0 million and $15.0 million is payable upon
annual sales first reaching $250.0 million. INEX will also receive a percentage
of commercial sales of Onco TCS and this percentage will increase as sales reach
certain predetermined thresholds. Other than the additional INEX contracted
obligations our contractual obligations as of March 31, 2004 are not materially
different from our contractual obligations as of June 30, 2003 as disclosed
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations - Contractual Obligations" in our annual report on Form 10-K for
the fiscal year ended June 30, 2003.
Results of Operations
Three months ended March 31, 2004 and March 31, 2003
Revenues. Total revenues for the three months ended March 31, 2004
increased by 3% to $44.4 million, as compared to $43.2 million for the three
months ended March 31, 2003. The components of revenues are product sales and
certain contract manufacturing revenues, royalties we earn on the sale of
products by others and contract revenues.
Net product sales and manufacturing revenue increased by 24% to $33.0
million for the three months ended March 31, 2004, as compared to $26.6 million
for the three months ended March 31, 2003. The increase in net sales was due to
increased sales of ABELCET and DEPOCYT in North America and increased sales of
ONCASPAR. During the three months ended March 31, 2004, we recorded $22.6
million of sales related to the ABELCET Product Line as compared to $18.3
million for the corresponding period in the prior year. Of the total ABELCET
Product Line sales, sales in North America accounted for $17.6 million for the
three months ended March 31, 2004 as compared to $13.5 for the three months
ended March 31, 2003. Contract manufacturing revenue related to the manufacture
and sale of ABELCET for the international market and other contract
manufacturing revenue was $5.0 million for the three month period ended March
31, 2004 as compared to $4.8 for the three months ended March 31, 2003.
Approximately $1.7 million of the $5.0 million of revenues recorded during the
three months ended March 31, 2004 related to the settlement of amounts
previously disputed by Elan. During the three months ended March 31, 2004, we
recorded DEPOCYT sales of $1.4 million as compared to $1.2 million in the
corresponding period in the prior year. Sales of ONCASPAR increased by 73% to
$4.9 million for the three months ended March 31, 2004 from $2.8 million in the
corresponding period in the prior year. This was a result of our resumption of
marketing efforts in connection with our reacquiring from Aventis in June 2002
the right to market and distribute ONCASPAR for certain territories previously
licensed to Aventis. Sales of ADAGEN decreased by 4% for the three months ended
March 31, 2004 to $4.1 million as compared to $4.3 million for the three months
ended March 31, 2003 due to the timing of shipments.
Royalties for the three months ended March 31, 2004, decreased to $11.1
million as compared to $16.2 million in the same period in the prior year. The
decrease was primarily due to decreased sales of PEG-INTRON by Schering-Plough,
our marketing partner, due to sales of a competitive product, PEGASYS(R).
During December 2002, Hoffman-LaRoche launched PEGASYS(R), a pegylated
version of its interferon product ROFERON-A(R). Since its launch, PEGASYS has
taken market share away from PEG-INTRON. As a result, quarterly sales of
PEG-INTRON and the royalties we receive on those sales have declined in recent
quarters. We have no involvement in the marketing and sales of PEG-INTRON, which
are the responsibility of Schering-Plough. We cannot assure you that PEGASYS
will not continue to gain market share at the expense of PEG-INTRON, which could
result in lower PEG-INTRON sales and lower royalties.
As a result of our focused marketing efforts for ABELCET, we believe that
we have been able to stabilize the pressure from the introduction of new
products in the antifungal market and that the product is now back on a growth
pattern. We expect sales of DEPOCYT, which are currently running at an annual
rate of approximately $5.0 million, to increase as we continue to roll out our
focused marketing efforts. We expect ADAGEN and ONCASPAR sales to grow in this
fiscal year at levels similar to those achieved during the last fiscal year.
However, we cannot assure you that any particular sales levels of ABELCET,
ADAGEN, ONCASPAR, DEPOCYT or PEG-INTRON will be achieved or maintained.
16
Contract revenues for the three months ended March 31, 2004, remained
relatively stable at $248,000 as compared to $284,000 in the corresponding
period in the previous year. Contract revenue is principally comprised of a
portion of the $3.5 million licensing payment received in January 2003 from the
licensing of our PEG technology to SkyePharma which is being recognized as
revenue over the term of the related agreement.
During the three months ended March 31, 2004, we had export sales and
royalties on export sales of $9.0 million, of which $7.4 million were sales in
Europe or royalties on sales in Europe. Export sales and royalties on export
sales for the three months ended March 31, 2003 were $8.6 million, of which $7.5
million were in Europe.
Cost of Sales and Manufacturing Revenue. Cost of sales and manufacturing
revenue, as a percentage of net sales and manufacturing revenue decreased to 38%
for the three months ended March 31, 2004 as compared to 42% for the same period
last year. The decrease was principally due to higher 2003 inventory costs as a
result of certain purchase accounting adjustments to the inventory acquired with
the ABELCET Product Line, which was sold during the three months ended March 31,
2003, as well as lower cost of manufacturing revenue due to the settlement of
$1.7 million in disputed Elan invoices previously discussed.
Research and Development. Research and development expenses increased by
110% to $10.8 million for the three months ended March 31, 2004 from $5.1
million for the same period last year. The increase was primarily due to (i)
increased spending of approximately $1.6 million related to our strategic
partnership with INEX on INEX's proprietary oncology product Onco TCS, (ii)
increased spending of approximately $819,000 related to our single chain
antibody collaboration with Micromet AG, (iii) increased spending on our two
late stage development programs, Pegamotecan and ATG Fresenius S, of
approximately $1.4 million, and (iv) increased payroll related expenses of
approximately $1.8 million.
Selling, General and Administrative. Selling, general and administrative
expenses for the three months ended March 31, 2004 increased by 32% to $12.5
million, as compared to $9.5 million in the same period last year. The increase
was primarily due to (i) increased sales and marketing expense of approximately
$970,000 related to the ABELCET Product Line including the lunch of the Clear II
registry, (ii) increased sales and marketing expense of approximately $272,000
related to our oncology sales force for ONCASPAR and DEPOCYT, and (iii)
increased general and administrative personnel and other costs of approximately
$1.8 million.
Merger Expenses. Merger expenses represent costs incurred related to our
mutual termination of the merger agreement with NPS Pharmaceuticals. During the
three months ended March 31, 2003, we incurred $1.4 million of merger related
expenses. There were no such costs in the current period.
Amortization. Amortization expense for the three months ended March 31,
2004 was $3.4 million as compared to $4.0 million in the comparable period last
year. Amortization relates principally to the intangible assets acquired in
November 2002 as part of the ABELCET Product Line. Amortization of intangible
assets is provided over their estimated lives ranging from 1-15 years on a
straight-line basis.
Acquired In Process Research and Development. Acquired in process research
and development for the three months ended March 31, 2004 of $12.0 million was
due to the up-front payment for the execution of a strategic partnership
agreements entered into with INEX related to Onco TCS.
Other Income/Expense. Investment income for the three months ended March
31, 2004 increased to $11.6 million, as compared to $632,000 for the prior year.
The increase was primarily due to the sale of Nektar Therapeutics stock and the
sale of the shares of common stock issued upon such conversion. Interest expense
remained unchanged from the comparable period last year. Interest expense is
related to the $400.0 million in 4.5% convertible subordinated notes, which were
outstanding for both periods. Other expense of $337,000 for the three months
ended March 31, 2004 was principally due to a loss recognized with respect to
the collar associated with the 1.5 million shares of NPS common stock we hold.
17
Income Taxes. During the three months ended March 31, 2004 the Company
recorded a net tax benefit of approximately $5.5 million related primarily to
the reversal of a deferred tax asset valuation allowance of approximately $3.8
million for the write-down in a prior year of our investment in NEKTAR
Convertible Preferred Stock which was converted and the underlying common stock
was sold during the quarter resulting in a financial reporting gain of
approximately $11.0 million. The benefit was also due the reduction of our
estimated taxable income and effective tax rate to 29% as compared to 35% used
in the previous two quarters, due to a payment during the three months ended
March 31, 2004 of $12.0 million to INEX Pharmaceuticals related to acquired
in-process research and development for Onco TCS. The tax provision for the
three months ended March 31, 2003 represented our anticipated Alternative
Minimum Tax liability based on the anticipated taxable income for the full
fiscal year.
Acquisition of ABELCET(R) Business
On November 22, 2002, we acquired the North American rights and
operational assets associated with the development, manufacture, sales and
marketing of ABELCET(R) (Amphotericin B Lipid Complex Injection) ("the ABELCET
Product Line") from Elan Corporation, plc ("Elan") for $360.0 million, plus
approximately $9.3 million of acquisition costs. This transaction was accounted
for as a business combination.
Unless otherwise indicated, the discussions in Management's Discussion and
Analysis of Financial Condition and Results of Operations for the three months
ended March 31, 2004 and 2003 and the nine months ended March 31, 2004 and
financial condition at March 31, 2004 include the results of operations of the
ABELCET Product Line. Comparisons are made to the results of operations and the
financial condition for the nine months ended March 31, 2003, which include
approximately only four months of operations, of the ABELCET Product Line
commencing from our acquisition of the Product Line on November 22, 2002.
Nine months ended March 31, 2004 and March 31, 2003
Revenues. Total revenues for the nine months ended March 31, 2004
increased by 27% to $126.7 million, as compared to $99.7 million for the nine
months ended March 31, 2003. The components of revenues are product sales and
certain contract manufacturing revenues, royalties we earn on the sale of
products by others and contract revenues.
Net product sales and manufacturing revenue increased by 114% to $89.5
million for the nine months ended March 31, 2004, as compared to $41.7 million
for the nine months ended March 31, 2003. The increase in net sales was due to
increased sales of ABELCET and DEPOCYT during the entire nine months ended March
31, 2004, and increased sales of ADAGEN and ONCASPAR. During November 2002, we
acquired the ABELCET Product Line from Elan. During the nine months ended March
31, 2004, we recorded $59.4 million of sales related to the ABELCET Product Line
as compared to $19.6 million for the prior year. Of the total ABELCET Product
Line sales, sales in North America accounted for $50.6 million for the nine
months ended March 31, 2004 as compared to $14.1 for the nine months ended March
31, 2003. Contract manufacturing revenue related to the manufacture and sale of
ABELCET to Elan for the international market and other contract manufacturing
revenue was $8.8 million for the nine month period ended March 31, 2004 as
compared to $5.5 for the comparable period of the prior year. Approximately $1.7
million of the $8.8 million of revenues recorded during the nine months related
to the settlement of amounts previously disputed by Elan. In January 2003, we
obtained an exclusive license to sell, market and distribute SkyePharma's
DEPOCYT. During the nine months ended March 31, 2004, we recorded DEPOCYT sales
of $4.0 million as compared to $1.2 million for the same period last year. Sales
of ONCASPAR increased by 53% to $13.3 million for the nine months ended March
31, 2004 from $8.7 million in the corresponding period in the prior year. This
was a result of our resumption of our marketing efforts subsequent to our
reacquiring from Aventis in June 2002 the right to market and distribute
ONCASPAR for certain territories which we had previously licensed to Aventis.
Sales of ADAGEN increased by 4% for the nine months ended March 31, 2004 to
$12.8 million as compared to $12.2 million for the nine months ended March 31,
2003 due to the timing of shipments.
18
Royalties for the nine months ended March 31, 2004, decreased to $36.5
million as compared to $57.6 million in the same period in the prior year. The
decrease was primarily due to decreased sales of PEG-INTRON by Schering-Plough,
our marketing partner, due to the introduction of a competitive product,
PEGASYS.
Contract revenues for the nine months ended March 31, 2004 increased to
$769,000 as compared to $417,000 in the corresponding period in the previous
year. The increase was related to revenue received from the licensing of our PEG
technology to SkyePharma. In connection with such licensing, we received a
payment of $3.5 million in January 2003 which is being recognized as revenue
over the term of the related agreement.
During the nine months ended March 31, 2004, we had export sales and
royalties on export sales of $27.0 million, of which $22.5 million were sales in
Europe or royalties on sales in Europe. Export sales and royalties recognized on
export sales for the corresponding period in the prior year were $24.2 million,
of which $21.5 million were in Europe.
Cost of Sales and Manufacturing Revenue. Cost of sales and manufacturing
revenue, as a percentage of net sales and manufacturing revenue decreased to 39%
for the nine months ended March 31, 2004 as compared to 43% for the comparable
period last year. The decrease was due to certain purchase accounting
adjustments to the inventory acquired with the ABELCET Product Line, which was
sold during nine months ended March 31, 2003.
Research and Development. Research and development expenses increased by
66% to $24.7 million for the nine months ended March 31, 2004 from $14.9 million
for the comparable period last year. The increase was primarily due to (i)
increased spending of approximately $2.4 million related to our single chain
antibody collaboration with Micromet AG, (ii) increased spending on our two late
stage development programs, Pegamotecan and ATG Fresenius S, of approximately
$2.8 million, (iii) increased spending of approximately $1.6 million related to
our strategic partnership with INEX on INEX's proprietary oncology product Onco
TCS, and (iv) increased payroll related expenses of approximately $3.0 million.
Selling, General and Administrative. Selling, general and administrative
expenses for the nine months ended March 31, 2004 increased by 69% to $35.2
million, as compared to $20.8 million in the comparable period last year. The
increase was primarily due to (i) increased sales and marketing expense of
approximately $10.5 million related to the sales force acquired from Elan as
part of our acquisition of the ABELCET Product Line, (ii) increased sales and
marketing expense of approximately $2.1 million related to the establishment of
an oncology sales force for ONCASPAR and DEPOCYT and (iii) increased general and
administrative personnel and other costs of approximately $1.8 million.
Merger Expenses. Merger expenses represent costs incurred related to our
mutual termination of the merger agreement with NPS Pharmaceuticals. During the
nine months ended March 31, 2003, we incurred $1.4 million of merger related
expenses. There were no such expenses in the current period.
Amortization. Amortization expense increased to $10.1 million for the nine
months ended March 31, 2004 as compared to $5.3 million in the same period last
year as a result of the amortization of the intangible assets acquired in
November 2002 as part of the ABELCET Product Line. Amortization of intangible
assets is provided over their estimated lives ranging from 1-15 years on a
straight-line basis.
Acquired In Process Research and Development. Acquired in process research
and development for the nine months ended March 31, 2004 of $12.0 million was
due to an up-front payment for the execution of a strategic partnership
agreements entered into with INEX related to Onco TCS.
Other Income/Expense. Investment income for the nine months ended March
31, 2004 increased to $12.7 million, as compared to $8.4 million for the prior
year. The increase was primarily due to the sale of Nektar Therapeutics stock
and the sale of the shares of common stock issued upon such conversions.
Interest expense
19
remained unchanged from the comparable period last year. Interest expense is
related to the $400.0 million in 4.5% convertible subordinated notes, which were
outstanding for both periods. Other income of $71,000 for the nine months ended
March 31, 2004, represents the gain recognized on the Collar arrangement related
to the 1.5 million shares of NPS common stock we hold.
Income Taxes. During the nine months ended March 31, 2004 the Company
recorded a net tax benefit of approximately $2.7 million related primarily to
the reversal of a deferred tax asset valuation allowance of approximately $3.8
million for the write-down in a prior year of our investment in NEKTAR
Therapeutics Convertible Preferred Stock which was converted and the underlying
common stock was sold during the nine months resulting in a financial reporting
gain of approximately $11.0 million. The benefit was also due to the reduction
of our estimated taxable income and effective tax rate to 29% as compared to 35%
used in the previous two quarters, due to a payment during the nine months ended
March 31, 2004 of $12.0 million to INEX Pharmaceuticals related to acquired
in-process research and development for Onco TCS (See Note 14). The tax
provision recognized for the nine months ended March 31, 2004 is based on the
estimated annual effective tax rate of 29%.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants discuss their
most "critical accounting policies" in Management's Discussion and Analysis of
Financial Condition and Results of Operations. The SEC indicated that a
"critical accounting policy" is one which is both important to the portrayal of
the company's financial condition and results of operations and requires
management's most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain.
Our consolidated financial statements are presented in accordance with
accounting principles that are generally accepted in the United States. All
professional accounting standards effective as of December 31, 2003 have been
taken into consideration in preparing the consolidated financial statements. The
preparation of the consolidated financial statements requires estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues,
expenses and related disclosures. Some of those estimates are subjective and
complex, and, consequently, actual results could differ from those estimates.
The following accounting policies have been highlighted as significant because
changes to certain judgments and assumptions inherent in these policies could
affect our consolidated financial statements.
Revenues from product sales and manufacturing revenue are recognized based
on shipping terms and a provision is made at that time for estimated future
credits, chargebacks, sales discounts, rebates and returns. These sales
provision accruals are presented as a reduction of the accounts receivable
balances. We continually monitor the adequacy of the accruals by comparing the
actual payments to the estimates used in establishing the accruals. We utilize
the following criteria to determine appropriate revenue recognition: pervasive
evidence of an arrangement exists, delivery has occurred, selling price is fixed
and determinable and collection is reasonably assured.
Royalties under our license agreements with third parties are recognized
when earned through the sale of the product by the licensor net of any estimated
future credits, chargebacks, sales discount rebates and refunds. Since we do not
sell or market the products, we rely on disclosures from our marketing partners
to estimate such sales allowances.
Contract revenues are recorded as the earnings process is completed.
Non-refundable milestone payments that represent the completion of a separate
earnings process are recognized as revenue when earned, upon the occurrence of
contract-specified events and when the milestone has substance. Non-refundable
payments received upon entering into license and other collaborative agreements
where we have continuing involvement are recorded as deferred revenue and
recognized ratably over the estimated service period.
20
Under the asset and liability method of Statement of Financial Accounting
Standards ("SFAS") No. 109, deferred tax assets and liabilities are recognized
for the estimated future tax consequences attributable to differences between
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. A
valuation allowance on net deferred tax assets is provided for when it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. We have significant net deferred tax assets, primarily related to net
operating loss carryforwards, and continue to analyze the level of the valuation
allowance needed taking into consideration the expected future performance of
the Company.
We assess the carrying value of our investments in accordance with SFAS
No. 115 and SEC Staff Accounting Bulletin No. 59. An impairment write-down is
recorded when a decline in the value of an investment is determined to be
other-than-temporary. These determinations involve a significant degree of
judgment and are subject to change as facts and circumstances change.
In accordance with the provisions of SFAS No. 142, goodwill and intangible
assets determined to have an indefinite useful life acquired in a purchase
business combination are not subject to amortization, are tested at least
annually for impairment, and are tested for impairment more frequently if events
and circumstances indicate that the asset might be impaired. Goodwill is
reviewed for impairment by comparing the carrying value to its fair value.
Recoverability of amortizable intangible assets is determined by comparing the
carrying amount of the asset to the future undiscounted net cash flow to be
generated by the asset. The evaluations involve amounts that are based on
management's best estimate and judgment. Actual results may differ from these
estimates. If recorded values are less than the fair values, no impairment is
indicated. SFAS No. 142 also requires that intangible assets with estimated
useful lives be amortized over their respective estimated useful lives.
21
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The following discussion about our exposure to market risk of financial
instruments contains forward-looking statements. Actual results may differ
materially from those described.
Our holdings of financial instruments are comprised of debt securities and
time deposits. All such instruments are classified as securities
available-for-sale. We do not invest in portfolio equity securities or
commodities or use financial derivatives for trading purposes. Our debt security
portfolio represents funds held temporarily pending use in our business and
operations. We manage these funds accordingly. We seek reasonable assuredness of
the safety of principal and market liquidity by investing in rated investment
grade fixed income securities while at the same time seeking to achieve a
favorable rate of return. Our market risk exposure consists principally of
exposure to changes in interest rates. Our holdings are also exposed to the
risks of changes in the credit quality of issuers. We typically invest the
majority of our investments in the shorter-end of the maturity spectrum, and at
March 31, 2004 all of our holdings were in instruments maturing in three years
or less.
The table below presents the principal amounts and related weighted
average interest rates by year of maturity for our investment portfolio as of
March 31, 2004 (in thousands):
2004 2005 2006 2007 2008 Total Fair Value
---- ---- ---- ---- ---- ----- ----------
Fixed Rate 4,569 $27,602 $38,458 $12,274 $ 8,015 $90,918 $91,099
Average Interest Rate 2.52% 2.22% 2.18% 2.29% 3.38% 2.33% --
Variable Rate -- -- -- -- -- --
Average Interest Rate -- -- -- -- -- --
-------------------------------------------------------------------------
$ 4,569 $27,602 $38,458 $12,274 $ 8,015 $90,918 $91,099
=========================================================================
Our 4.5% convertible subordinated notes in the principal amount of $400.0
million due July 1, 2008 have a fixed interest rate. The fair value of the notes
was approximately $383.9 million at March 31, 2004. The fair value of fixed
interest rate convertible notes is affected by changes in interest rates and by
changes in the price of our common stock.
As discussed in Liquidity and Capital Resources, in August 2003, we
entered into a Zero Cost Protective Collar arrangement with a financial
institution to reduce the exposure associated with the 1.5 million shares of
common stock of NPS we received as part of the merger termination agreement with
NPS.
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December
31, 2003, the end of the period covered by this report (the "Evaluation Date").
Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that, as of the Evaluation Date, our disclosure controls and
procedures were effective in timely alerting them to the material information
relating to us required to be included in our periodic SEC filings.
(b) Changes in internal controls over financial reporting.
There were no changes in our internal controls over financial reporting during
the period covered by this report that have materially affected, or are
reasonably likely to materially affect our internal control over financial
reporting.
22
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K).
Page Number
or
Exhibit Incorporation
Number Description By Reference
------ ----------- ------------
3.1 Certificate of Incorporation, as amended ^^^
3.2 Amendment to Certificate of Incorporation \\
3.3 By laws, as amended ^^
4.1 Indenture dated as of June 26, 2001, between the Company and
Wilmington Trust Company, as trustee, including the form of 41/2%
Convertible Subordinated Notes due 2008 attached as Exhibit A thereto ++++
4.2 Rights Agreement dated May 17, 2002 between the Company and
Continental Stock Transfer Trust Company, as rights agent ^
4.3 First Amendment to Rights Agreement, dated as of February 19, 2003 *
10.27 Separation Agreement with Arthur Higgins
dated as of March 16, 2004 @
10.28 Development Agreement between Inex Pharmaceuticals, Inc. and the
Company dated January 19, 2004** @
10.29 Product Supply Agreement between Inex Pharmaceuticals, Inc. and
The Company dated January 19, 2004** @
10.30 Co-Promotion Agreement between Inex Pharmaceuticals, Inc. and the
Company dated January 19, 2004** @
31.1 Rule 13a-14(a) Certifications @
31.2 Rule 13a-14(a) Certifications @
32.1 Section 1350 Certifications @
32.2 Section 1350 Certifications @
@ Filed herewith.
^^^ Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended June 30, 2002 and incorporated herein by reference
thereto.
\\ Previously filed as an exhibit to the Company's Current Report on Form 8-K
filed on December 10, 2002 and incorporated herein by reference thereto.
^^ Previously filed as an exhibit to the Company's Current Report on Form 8-K
filed with the Commission on May 22, 2002 and incorporated herein by
reference thereto.
++++ Previously filed as an exhibit to the Company's Registration Statement on
Form S-3 (File No. 333-67509) filed with the Commission and incorporated
herein by reference thereto.
^ Previously filed as an exhibit to the Company's Form 8-A (File No.
000-12957) filed with the Commission on May 22, 2002 and incorporated
herein by reference thereto.
* Previously filed as an exhibit to the Company's Form 8-A12 G/A (File No.
000-12957) filed with the Commission on February 20, 2003 and incorporated
herein by reference thereto.(b) Reports on Form 8-K
** Certain portions of this document have been omitted and filed separately
with the Commission pursuant to a confidential treatment request.
23
(b) Reports on Form 8-K
On January 8, 2004, we filed with the Commission a Current Report on Form
8-K dated January 2, 2004 reporting David S. Barlow's resignation from our Board
of Directors.
On January 21, 2004, we filed with the Commission a Current Report on Form
8-K dated January 19, 2004 reporting our agreement with Inex Pharmaceuticals
Corporation ("INEX") to develop and commercialize INEX's proprietary oncology
product Onco TCS.
On February 4, 2004, we filed with the Commission a Current Report on Form
8-K/A dated January 19, 2004 amending our report on Form 8-K, filed with the
Securities and Exchange Commission on January 21, 2004, to correct a
typographical error.
On February 4, 2004, we filed with the Commission a Current Report on Form
8-K dated February 4, 2004 reporting our financial results for the quarter ended
December 31, 2003.
On March 18, 2004, we filed with the Commission a Current Report on Form
8-K dated March 16, 2004 reporting that effective May 10, 2004 Arthur J. Higgins
will resign from his position as chief executive officer of Enzon and become
chairman and chief executive officer of Bayer Healthcare.
On March 18, 2004, we filed with the Commission a Current Report on Form
8-K dated March 15, 2004 reporting that Enzon and Inex submitted the final
section of a "rolling submission" of a New Drug Application (NDA) to the United
States Food and Drug Administration (FDA).
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ENZON PHARMACEUTICALS, INC.
(Registrant)
Date: May 10, 2004 By: /s/Arthur J. Higgins
---------------------------
Arthur J. Higgins
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
Date: May 10, 2004 By: /s/Kenneth J. Zuerblis
---------------------------
Kenneth J. Zuerblis
Vice President, Finance,
Chief Financial Officer
(Principal Financial
and Accounting Officer) and
Corporate Secretary
25
Exhibit 10.27
SEPARATION AGREEMENT
This Separation Agreement (the "Separation Agreement") is made and entered
into as of March 16, 2004 between Enzon Pharmaceuticals, Inc., a Delaware
corporation with its executive offices located in Bridgewater, New Jersey (the
"Company") and Arthur Higgins, residing in Libertyville, Illinois ("Executive").
WITNESSETH:
WHEREAS, Executive has been employed as the Company's President and Chief
Executive Officer since May, 2001, has been a member of the Company's Board of
Directors since May, 2001 and has been Chairman of the Company's Board of
Directors since December, 2001;
WHEREAS, Executive and the Company have been party to an employment
agreement dated as of May 9, 2001 and as amended as of May 23, 2001 and as of
December 3, 2003 (the "Employment Agreement");
WHEREAS, Executive and the Company have been party to a Restricted Stock
Award Agreement entered into June 2001 (the "2001 Stock Agreement") and a
Restricted Stock Award Agreement dated as of December 3, 2002 (the "2002 Stock
Agreement" and together with the 2001 Stock Agreement, the "Stock Agreements")
pursuant to which the Company made restricted stock awards of shares of the
Company's common stock (the "Restricted Stock") to Executive;
WHEREAS, on February 6, 2004, the Compensation Committee of the Company's
Board of Directors voted to grant Mr. Higgins 50,000 restricted stock units on
June 30, 2004 (the "2004 Restricted Stock Units");
WHEREAS, the Company granted Executive options to purchase shares of the
Company's common stock pursuant to the Employment Agreement, pursuant to the
resolutions of the Compensation Committee adopted in April 2002 and pursuant to
a Non-Incentive Stock Option Agreement dated as of December 3, 2002 (the
"December 2002 Option Agreement");
WHEREAS, Executive has informed the Company's Board of Directors (the
"Board") that he intends to voluntarily terminate his employment with the
Company and resign as President and Chief Executive Officer of the Company;
WHEREAS, Executive has informed the Board that he wishes to remain a
member of the Board and as Chairman of the Board, and the Board has advised
Executive of its desire to have Executive remain a member of the Board and
Chairman of the Board;
WHEREAS, the Company and Executive wish to set forth (i) the terms and
conditions of Executive's continued employment as the Company's President and
Chief Executive Officer through the date Executive's employment with the Company
terminates, (ii) Executive's role as Chairman of the Executive Committee of the
Board until the Company employs a successor Chief Executive Officer (the
"Successor CEO"), and (iii) the compensation payable to Executive upon the
termination of his employment as the Company's President and Chief Executive
Officer.
NOW THEREFORE, in consideration of the premises, the mutual agreements set
forth below and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties agree as follows:
1. Executive's full-time employment as the Company's President and Chief
Executive Officer shall continue from the date of this Separation Agreement
through the close of business on May 10, 2004 (the "Remaining Term"). During the
Remaining Term, Executive shall continue to serve as the Company's President and
Chief Executive Officer in accordance the provisions of Section 3 of the
Employment Agreement.
2. Executive agrees to serve as Chairman of the Board until such time as
the Board determines it is appropriate to appoint a new Chairman.
3. Executive will assist the Company in searching for a Successor CEO.
4. Executive will serve as a member, and Chairman, of the Executive
Committee of the Board until such time as the Company employs a Successor CEO or
such earlier time as may be determined by the Board. In the event the Company
has not employed a Successor CEO prior to the expiration of the Remaining Term,
the Executive Committee of the Board shall be responsible for the supervision
and direction of the Company's business until such time as the Company employs a
Successor CEO, provided that notwithstanding the foregoing, the Board shall have
the power in its sole discretion to determine the members, powers and role of
the Executive Committee.
5. It is understood and agreed that the termination of Executive's
employment with the Company is the result of a voluntary resignation by the
Executive and not the result of Good Reason (as defined in the Employment
Agreement) or any breach of the Employment Agreement by the Company.
6. Executive will continue to receive his current base salary and his
current medical, dental and life insurance benefits during the Remaining Term.
Executive will be entitled to any deferred compensation and other unpaid amounts
and benefits earned and vested prior to the end of the Remaining Term. In
recognition of the accomplishments of Executive and the Company to date during
the Company's current fiscal year ending June 30, 2004, within fifteen (15) days
after the end of the Remaining Term the Company shall pay to Executive a cash
bonus of $216,000. The Company shall be entitled to make all required tax and
other customary withholdings from such cash payment.
7. Executive shall retain the 10,000 shares of Restricted Stock granted
pursuant to the 2001 Stock Agreement that will have vested under the terms of
the 2001 Stock Agreement as of the end of the Remaining Term. To the extent not
previously done, the Company shall deliver certificates for such 10,000 shares
to Executive and such certificates shall not contain any restrictive legend. The
remaining 15,000 shares of Restricted Stock granted pursuant to the 2001 Stock
Agreement and the entire 200,000 shares of Restricted Stock granted pursuant to
the 2002 Stock Agreement will not have vested as of the end of the Remaining
Term and will be forfeited by Executive back to the Company. The certificates
for such 215,000 unvested shares shall be delivered to the Company together with
any stock powers relating to such certificates executed by Executive. To the
extent necessary Executive will execute and deliver to the Company or its
transfer agent any additional stock powers or other documents required to effect
the forfeiture of such shares to the Company and allow the Company to cancel
such shares. The 2004 Restricted
2
Stock Units shall not be granted to Executive and Executive shall forfeit all
rights he may have in and to the 2004 Restricted Stock Units.
8. Any options granted to Executive which have not vested in accordance
with their terms as of the last day of the Remaining Term shall terminate and be
of no further force and effect as of the last day of the Remaining Term. Any
options granted to Executive which have vested as of the last day of the
Remaining Term shall remain exercisable in accordance with their terms through
the close of business on November 10, 2004, at which time any of such options
which remain unexercised shall terminate and be of no further force and effect.
Attached hereto as Exhibit A is the vesting schedule of all options held by
Executive. It is agreed that the transfer restrictions set forth in Section 3(f)
of the December 2002 Option Agreement are hereby waived and of no further force
and effect.
9. In order to acknowledge Executive's forfeiture of certain restricted
stock of Executive's prior employer when he joined the Company and in
recognition of Executive's many valuable contributions to the Company, within
fifteen (15) days after the end of the Remaining Term, the Company shall make a
cash payment of $1,250,000 to Executive. The Company shall be entitled to make
all required tax and other customary withholdings from such lump sum cash
payment.
10. In consideration of the compensation and benefits provided to
Executive under the Employment Agreement and the additional compensation payable
to Executive under this Separation Agreement, it is agreed that the
non-competition provisions set forth in Section 5(a) of the Employment
Agreement, the confidentiality provisions set forth in Section 5(b) of the
Employment Agreement and the non-solicitation of employees provisions set forth
in Section 5(c) of the Employment Agreement shall remain in full force and
effect in accordance with their terms, provided that the "Non-Compete Period" as
defined in Section 5 (a) of the Employment Agreement and as applicable in
Section 5(c) of the Employment Agreement shall extend through May 10, 2007.
11. Each party agrees not to directly or indirectly make any disparaging,
untrue or defamatory statements or communications (regardless of medium) about
the other.
12. Except as provided in the next sentence, the Employment Agreement is
terminated and of no further force and effect as of the date of this Separation
Agreement. Notwithstanding the preceding sentence, the following sections of the
Employment Agreement shall survive in accordance with their terms, as such
sections may be amended by the terms of this Separation Agreement: Sections 3,
5, 7, 8 and 11.
13. The terms and conditions of this Separation Agreement may not be
altered, amended or modified except by a writing duly executed by both the
Company and Executive.
14. If any provision of this Separation Agreement or the application
thereof is held invalid by a court of law, the invalid provision shall not
affect any other provision or the application thereof which can be given effect
without the invalid provision or application, and to this end the provisions of
this Separation Agreement are declared to be severable.
15. Courts situated within the State of New Jersey shall have sole
jurisdiction over any disputes arising out of or concerning this Separation
Agreement. The rights and obligations of the parties under this Separation
Agreement shall be construed and enforced in accordance
3
with, and governed by, the laws of the State of New Jersey without regard to
principles of conflict of laws.
16. No waiver of any breach of any term or provision of this Separation
Agreement shall be construed to be, nor shall it be, a waiver of any other
breach of this Separation Agreement.
17. This Separation Agreement contains the entire understanding between
the parties hereto with respect to the subject matter hereof and supersedes any
prior understandings, agreements or representations, written or oral, relating
to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Release Agreement
as of the date written above.
COMPANY:
Enzon Pharmaceuticals, Inc.
By: /s/ Kenneth J. Zuerblis
----------------------------
Kenneth J. Zuerblis,
Vice President Finance and
Chief Executive Officer
EXECUTIVE:
By: /s/ Arthur J. Higgins
-----------------------------
Arthur J. Higgins
4
i
DEVELOPMENT AGREEMENT
BETWEEN
INEX PHARMACEUTICALS, INC.
AND
ENZON PHARMACEUTICALS, INC.
January 19, 2004
Development Agreement
Table of Contents
Article 1 Interpretation ................................................. 3
1.1 Definitions ..................................................... 3
1.2 Entire Agreement; Conflicts ..................................... 12
1.3 Governing Law ................................................... 12
1.4 Headings ........................................................ 12
1.5 Severability .................................................... 13
Article 2 Grant and Reservation of Rights ................................ 13
2.1 Grant of Licenses 10
2.2 Reservation of Rights ........................................... 13
2.3 *** .................................... Error! Bookmark not defined.
2.4 Sublicenses ..................................................... 14
Article 3 Milestone Payments for Development ............................. 15
3.1 Signing and Regulatory Milestone Payments ....................... 15
3.2 Withholding Taxes ............................................... 16
3.3 Late Payments ................................................... 17
Article 4 Development .................................................... 17
4.1 Development Activities in accordance with the Development Plan .. 17
4.2 Overview of Development ......................................... 18
4.3 Development Diligence ........................................... 18
4.4 Development Plans ............................................... 18
4.5 Reports on Development .......................................... 19
4.6 Attendance at Regulatory Meetings ............................... 19
4.7 Subcontractors .................................................. 19
Article 5 Development Responsibility and Funding ......................... 19
5.1 Shared Funding of Certain Development Costs ..................... 19
5.2 Development Clinical Activities ................................. 19
5.3 Post-Approval Clinical Activities ............................... 20
5.4 Regulatory Activities ........................................... 20
5.5 Filing of Regulatory Submissions ................................ 21
5.6 Technical and Manufacturing Support Activities .................. 21
5.7 Funding of Development Costs .................................... 21
5.8 Transition ...................................................... 22
5.9 Records ......................................................... 22
5.10 Audits .......................................................... 22
Article 6 Joint Steering Committee ....................................... 23
6.1 Joint Steering Committee ........................................ 23
6.2 Meetings of the Joint Steering Committee ........................ 24
6.3 Working Committees .............................................. 24
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
iii
Article 7 Pharmacovigilance, DDMAC and Recalls ........................... 24
7.1 Regulatory Responsibilities ..................................... 24
7.2 Pharmacovigilance Agent ......................................... 25
7.3 Agency for DDMAC Activities ..................................... 26
7.4 Agent for Regulatory Authorities Generally ...................... 26
7.5 Recalls and Withdrawals of Product .............................. 26
Article 8 Additional Opportunities ....................................... 27
8.1 Pipeline Drug ................................................... 27
8.2 Legal Effect .................................................... 27
Article 9 Representations and Warranties ................................. 27
9.1 By Enzon ........................................................ 27
9.2 By Inex ......................................................... 28
9.3 Survival of Representations and Warranties ...................... 30
9.4 DISCLAIMER ...................................................... 30
Article 10 Intellectual Property Rights .................................. 30
10.1 Injunctive Relief ............................................... 30
10.2 Ownership of Pre-Existing Intellectual Property Rights .......... 31
10.3 Ownership of Intellectual Property Rights in the Product ........ 31
10.4 Ownership of Regulatory Approvals and Regulatory Submissions .... 31
10.5 Ownership of Intellectual Property Rights Outside the Development 31
Article 11 Termination ................................................... 32
11.1 Term ............................................................ 32
11.2 Renewal ......................................................... 32
11.3 Voluntary Termination ........................................... 32
11.4 Termination for Breach .......................................... 33
11.5 Termination upon Bankruptcy ..................................... 33
11.6 Survival of Obligations; Return of Confidential Information ..... 34
11.7 Additional Consequences of Termination .......................... 34
11.8 Termination on a Country by Country Basis ....................... 35
11.9 Termination of Related Agreements ............................... 35
Article 12 Miscellaneous ................................................. 36
12.1 Assignment ...................................................... 36
12.2 Counterparts .................................................... 36
12.3 Force Majeure ................................................... 36
12.4 Further Assurances .............................................. 37
12.5 International Sale of Goods Act ................................. 37
12.6 Modification .................................................... 37
12.7 No Agency ....................................................... 37
12.8 No Solicitation or Hiring of Employees .......................... 37
12.9 Non-Use of Names ................................................ 37
12.10 Notices ......................................................... 37
12.11 Publicity ....................................................... 39
12.12 No Third Party Beneficiaries .................................... 39
12.13 Waiver .......................................................... 40
12.14 Cross Default ................................................... 40
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
3
Development Agreement
This DEVELOPMENT AGREEMENT dated as of the 19th day of January, 2004 between
Inex Pharmaceuticals, Inc., a corporation duly incorporated pursuant to the laws
of Delaware, USA, having a registered office at Corporation Trust Center, 1209
Orange Street, Wilmington, DE 19801 (hereinafter referred to as "Inex"), and
Enzon Pharmaceuticals, Inc., a corporation duly incorporated pursuant to the
laws of Delaware, having a principal place of business at 685 Route 202/206,
Bridgewater, New Jersey 08807, USA (hereinafter referred to as "Enzon").
INTRODUCTION
A. Enzon is a pharmaceutical company with operations in research and
development, import, export, manufacture and sale of pharmaceutical products;
B. Inex is in the business of developing, manufacturing and selling certain
pharmaceutical products, including Vincristine Sulfate Liposomes Injection (as
further defined in this Agreement);
C. Of even date hereof, the Parties have entered into a Product Supply Agreement
for the supply from Inex to Enzon of Vincristine Sulfate Liposomes Injection,
and incidental thereto, the Parties must complete the development of Vincristine
Sulfate Liposomes Injection;
D. Inex and Enzon desire to set out in this Agreement the terms which will
govern the development of Vincristine Sulfate Liposomes Injection and to provide
for licenses for the right to develop, market and distribute Vincristine Sulfate
Liposomes Injection, which licenses are granted solely for the Parties' legal
protection and for the purpose of enabling Enzon to acquire rights to develop,
market, distribute and sell Inex's Vincristine Sulfate Liposomes Injection
product in the Territory for the Term;
E. The execution of this Agreement is ancillary to and a necessary pre-condition
for the establishment of both a market and a product for Inex's business with
respect to manufacturing and selling Vincristine Sulfate Liposomes Injection.
In consideration of the mutual covenants and promises contained in this
Agreement and other good and valuable consideration, and intending to be legally
bound, Inex and Enzon agree as follows:
Article 1 Interpretation
1.1 Definitions
Unless otherwise defined in this Agreement, capitalized terms used in this
Agreement shall have the meaning set out therefor in the Product Supply
Agreement. As used in this Agreement, the following terms, whether used in the
singular or plural, shall have the following meanings:
1.1.1 "Adverse Drug Event" will have the meaning set forth in Exhibit
1.1.1.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
4
1.1.2 "Affiliate" means any corporation, company, partnership, joint
venture or other person or entity which controls, is controlled by
or is under common control with a Party. For purposes of this
Section 1.1.1, "control" shall mean (a) in the case of corporate
entities, direct or indirect ownership of at least 50% of the
stock or shares (or such lesser percentage which is the maximum
allowed to be owned by a foreign corporation in a particular
jurisdiction) entitled to vote for the election of directors or
otherwise having the power to vote on or direct the affairs of
such Party; and (b) in the case of non-corporate entities, direct
or indirect ownership of at least 50% of the equity interest or
the power to direct the management and policies of such
non-corporate entities.
1.1.3 "Agreement" means this Development Agreement including all
exhibits attached to this Agreement.
1.1.4 "Applicable Laws" means all applicable federal, provincial, state
and local laws, ordinances, rules and regulations of any kind
whatsoever in the Territory, including, without limitation,
pharmaceutical and environmental rules and regulations, including
cGMP Requirements, GCP Requirements, GLP Requirements and the
General Biological Products Standards of the FDA, and the Federal
Food, Drug and Cosmetic Act, as amended, or any successor act
thereto ("FDCA").
1.1.5 "Business Day" means any day other than a day which is a Saturday,
a Sunday or a statutory holiday in New York City, New York, USA.
1.1.6 "cGMP Requirements" shall mean the current Good Manufacturing
Practices standards required by the FDA, the TPD and the
equivalent Regulatory Authority elsewhere in the Territory, and
the applicable regulations, policies or guidelines of each of them
in effect for the manufacture and testing of pharmaceutical
materials, active ingredients, or excipients, as applicable.
1.1.7 "Clinical Activity" and "Clinical Activities" mean any one or more
of the activities associated with drug testing in humans,
including trial design and execution, payment of investigators',
institutional, and contractors' fees, drug distribution and
accountability, analytical testing, data management, statistical
analysis, adverse event reporting, and scientific publication,
performed or to be performed by the Parties or their
Representatives in pursuit of the Development of the Product or
post-Regulatory Approval commercialization of the Product.
1.1.8 "Code" or "Codes" means the Code on Interactions with Healthcare
Professionals promulgated by the Pharmaceutical Research and
Manufacturers of America (PhRMA) and the American Medical
Association (AMA) Guidelines on Gifts to Physicians from Industry,
as either of the foregoing may be amended from time to time.
1.1.9 "Commercially Reasonable Efforts" means efforts which are not less
than those efforts a Party makes with respect to other
pharmaceutical products in its portfolio (but, in any event, not
less than the efforts that would be exerted by a reasonably
prudent and diligent pharmaceutical company similarly situated and
seeking to accomplish similar objectives),
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
5
taking into account the product's market potential, level of
competition, number of prescribers and other relevant factors.
1.1.10 "Compendium Listing" means the listing in any two or more
publications or directories including Drugdex Information Service,
AHFS Drug Information, or US Pharmacopoeia Drug Information,
recognized by the US government for coverage under Medicaid,
Medicare or other like health insurance programs, for use of VSLI
in the treatment of Firstline NHL.
1.1.11 "Confidential Information" means:
(a) all proprietary information and materials, patentable or
otherwise, of a Party which is disclosed in writing by
or on behalf of such Party to the other Party and marked
as confidential or proprietary, including DNA sequences,
vectors, cells, substances, formulations, techniques,
methodology, equipment, data, reports, know-how,
preclinical and clinical trials and the results thereof,
sources of supply, patent positioning, marketing plans
and business plans, including any negative developments;
(b) any other information, oral or written, designated in
writing by the disclosing Party to the other Party as
confidential or proprietary within ten (10) days after
such disclosure, whether or not related to the making,
use, importing or selling of the Product; and
(c) the Data, the Inex Technology, the Regulatory Approvals
and Regulatory Submissions, and the Licensed Patents
(all of which are deemed to be Confidential Information
of Inex);
provided that Confidential Information shall not include such
information which:
(d) was known or used by the receiving Party or its
Affiliates prior to its date of disclosure to the
receiving Party, as evidenced by the prior written
records of the receiving Party or its Affiliates; or
(e) either before or after the date of the disclosure to the
receiving Party is lawfully disclosed to the receiving
Party or its Affiliates by an independent, unaffiliated
Third Party rightfully in possession of the Confidential
Information; or
(f) either before or after the date of the disclosure to the
receiving Party becomes published or generally known to
the public through no fault or omission on the part of
the receiving Party or its Affiliates; or
(g) the receiving Party can verify, by written
documentation, results from research and development by
the receiving Party or any of its Affiliates independent
of disclosure by the other Party thereof.
1.1.12 "Co-Promotion Agreement" means the Co-Promotion Agreement between
Inex and Enzon of even date herewith.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
6
1.1.13 "Data" has the meaning set out in Section 10.3.2.
1.1.14 "DDMAC Activities" mean all jointly agreed-to activities performed
or to be performed by one or both Parties in accordance with the
requirements of the Division of Drug Marketing, Advertising and
Communications, Center for Drug Evaluation and Research of the
FDA, and the Office of the Inspector General of the Department of
Health and Human Services of the United States.
1.1.15 "Development" means:
(a) all activities set forth in the Development Plan; and
(b) all activities necessary to obtain and maintain
Regulatory Approvals in each country in the Territory;
including Development Clinical Activities, Regulatory Activities
and Technical and Manufacturing Support Activities.
1.1.16 "Development Clinical Activities" has the meaning set out in
Section 5.2.
1.1.17 "Development Costs" means, with respect to Development of the
Product in respect of the Territory:
(a) the Development FTE Costs and Out-of-Pocket Costs
utilized or incurred by a Party in fulfilling its
obligations under the then-current Development Plan;
(b) all Development FTE Costs and Out of Pocket costs
incurred in excess of the budget in the then-current
Development Plan, provided that any such excess costs
have been approved in advance by the Joint Steering
Committee; and
(c) the Manufacturing Cost of Product produced for the
Development.
For greater certainty, Development Costs do not include
Commercialization Costs as defined in the Product Supply
Agreement.
1.1.18 "Development FTE" means a scientific or technical person employed
by a Party or a Party's Affiliates and assigned to work on
Development with such time and effort to constitute one person
working on Development on a full time basis consistent with normal
business and scientific practice (e.g., having appropriate
education, training and experience and working *** hours per year
of dedicated effort).
1.1.19 "Development FTE Costs" means the price of Development FTEs to be
used for the purposes of determining the costs incurred with
respect to personnel performing work on the Development in
accordance with the then-approved Development Plan. The price per
Development FTE shall initially be *** per Development FTE year or
pro-rata portion thereof incurred on the Development. The
Development FTE rate includes all the fully burdened cost of
salary, employee benefits, incidental materials, travel, lodging
and other expenses including support staff and direct and indirect
overhead for or associated with a Development FTE. On each
anniversary of the Effective Date, the FTE rate shall be
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
7
raised by a percentage equal to the percentage increase in the
Index (defined below) for the twelve (12) month period ending with
December of the calendar year immediately preceding such
anniversary date (such increase, the "CPI Increase"). For purposes
of this Agreement, the term "Index" shall mean the Consumer Price
Index for all Urban Consumers (CPI-U) - - U.S. City Average. All
Items (1982-1984 = 100), as published by the United States Bureau
of Labor Statistics, or if such index is no longer published, then
the index most comparable thereto.
1.1.20 "Development Plan" means the Development Plan for obtaining and
maintaining Regulatory Approvals for the Product in the Territory,
together with a corresponding budget accounting for the
anticipated Development Costs to be expended or incurred by each
Party in conducting the Development. The definitive Development
Plan adopted in accordance with Section 4.4 will form a part of
this Agreement.
1.1.21 "Dollar" and "$" means United States Dollars.
1.1.22 "Effective Date" means the date shown on page one of this
Agreement.
1.1.23 "Elan" means Elan Pharmaceuticals, Inc.
1.1.24 "Elan Consent" means the consent by Elan to the execution and
delivery of the Related Agreements and the subsequent grant of
manufacturing rights contemplated herein.
1.1.25 "Elan Improvements" has the meaning set out therefor in the Elan
License.
1.1.26 "Elan License" means the Amended and Restated License Agreement
made as of April 3, 2003 between Elan, IE Oncology Company Limited
and Inex Pharmaceuticals Corporation.
1.1.27 "Elan Patents" means the Patents set out in Exhibit 1.1.27.
1.1.28 "FDA" means the United States Food and Drug Administration or any
successor thereto.
1.1.29 "Field" means VSLI for all indications in humans.
1.1.30 "First Commercial Sale" means (a) with respect to a country in the
Territory, the first sale by Enzon, its sublicensees or Affiliates
for use, consumption or resale of the Product in such country
(excluding any sales for clinical trials, compassionate uses or
other non-commercial purposes) and (b) with respect to the
Territory, the First Commercial Sale in any country within the
Territory. A sale to a sublicensee or an Affiliate shall not
constitute a First Commercial Sale unless the sublicensee or
Affiliate is the end user of the Product.
1.1.31 "Firstline NHL" means the treatment of aggressive non-Hodgkin's
lymphoma in patients not previously treated for aggressive
non-Hodgkin's lymphoma.
1.1.32 "GCP Requirements" or "Good Clinical Practices" means the then
current standards for clinical trials for pharmaceuticals as
required by the FDA, the TPD and the equivalent Regulatory
Authority elsewhere in the Territory, and as applicable, the
policies and
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
8
guidelines of the International Conference on Harmonization in
effect for the clinical testing of pharmaceutical materials.
1.1.33 "GLP Requirements" or "Good Laboratory Practices" means the
current Good Laboratory Practices standards required by the FDA,
the TPD and the equivalent Regulatory Authority elsewhere in the
Territory in effect for the testing of pharmaceutical materials as
applied to raw materials and finished products.
1.1.34 "include" and "including" (and the like) means "including, without
limitation".
1.1.35 "IND" means an Investigational New Drug application in accordance
with the rules and regulations of the FDA.
1.1.36 "Inex Patents" means the Patents set out in Exhibit 1.1.36.
1.1.37 "Inex Technology" means all technical information and know-how
owned or controlled by Inex which relates to the Product and is
necessary or useful for the development and commercialization of
the Product, and shall include:
(a) as of the Effective Date, all biological, chemical,
pharmacological, toxicological, clinical, assay, control
and manufacturing data and any other information owned
or controlled by Inex and necessary or useful for the
development and commercialization of the Product;
(b) any Data referred to in Section 10.3; and
(c) any Data referred to in Section 12.3 of the Product
Supply Agreement.
1.1.38 "Intellectual Property Rights" means any rights to any Patents and
copyrights and registrations and applications for registration of
the foregoing rights, and trade secrets and moral rights.
"Intellectual Property Rights" do not include trademark, domain
name or trade name rights.
1.1.39 "Joint Steering Committee" means the committee formed pursuant to
Article 6. The Joint Steering Committee formed under this
Agreement shall be the same as the Joint Steering Committee formed
under the Product Supply Agreement.
1.1.40 "Licensed Patents" means the Patents owned or controlled by Inex
relating to VSLI, and necessary or useful for the development and
commercialization of the Product, and shall include:
(a) as of the Effective Date, the Inex Patents and the Elan
Patents;
(b) to the extent of Inex's legal right to grant rights to
same, as of the Effective Date, the Regents' Patents;
(c) any Patents on inventions referred to in Section 10.3;
and
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
9
(d) any Patents on inventions referred to in Section 12.3 of
the Product Supply Agreement.
1.1.41 "NDA" means a New Drug Application in accordance with the rules
and regulations of the FDA.
1.1.42 "NHL" means non-Hodgkin's Lymphoma.
1.1.43 "not to be unreasonably withheld" and the like means not to be
unreasonably withheld or delayed.
1.1.44 "Out-of-Pocket Cost" means an out-of-pocket payment made by a
Party or its Representatives to a Third Party but only to the
extent such payment relates to costs which are incurred by a Party
or its Representatives with respect to fulfilling its obligations
under the Development Plan.
1.1.45 "Party" means Inex or Enzon and "Parties" means Inex and Enzon.
1.1.46 "Patent" means (a) all patent applications filed or having legal
force in any country; (b) all patents that have issued or in the
future issue therefrom, including without limitation utility,
model and design patents and certificates of invention; and (c)
all divisionals, continuations, continuations-in-part, reissues,
renewals, extensions (including supplemental protection
certificates), additions, registrations or confirmations to or of
any such patent applications and patents.
1.1.47 "Person" means and includes any individual, corporation,
partnership, firm, joint venture, syndicate, association, trust,
government body, and any other form of entity or organization.
1.1.48 "Permitted Exception" means any or all of the following:
(a) any termination of the license between ***and the *** by
either *** or the *** before or after the Effective
Date; or
(b) any inability of IE Oncology Company Limited or Inex to
grant sublicenses under the *** License, or the absence
of a consent to such sublicense from *** or the ***; or
(c) any inability of *** to grant Intellectual Property
Rights under the ***to IE Oncology Company Limited
("IE"), or of IE to grant such rights to Inex, or of
Inex to grant such rights to Enzon, which rights in each
case are at least co-extensive (within the Field and
within the Territory as defined in the Related
Agreements) with the scope of Intellectual Property
Rights under the *** purported to be granted by *** to
IE pursuant to the *** License;
or the like respecting the ***.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
10
1.1.49 "Pharmacovigilance" means all the activities associated with
maintaining an effective drug safety monitoring system and adverse
events reporting system in compliance with the requirements of
Regulatory Authorities.
1.1.50 "Post-Approval Clinical Activities" has the meaning set out in
Section 5.3.
1.1.51 "Prime Rate" means the prime or equivalent rate quoted by
Citibank, N.A. from time to time.
1.1.52 "Product" means VSLI.
1.1.53 "Product Supply Agreement" means the agreement for the supply of
the Product from Inex to Enzon entered into as of the Effective
Date.
1.1.54 "QA" means Quality Assurance, being that part of each management
system, within Inex and Enzon separately, having responsibility
for assuring the quality of the Product in respect of compliance
with Regulatory Requirements.
1.1.55 "Quality/Technical Agreement" has the meaning set out in the
Product Supply Agreement.
1.1.56 ***
1.1.57 "Regulatory Activity" and "Regulatory Activities" mean any one or
more of the regulatory activities to be performed by the Parties,
or their Representatives in pursuit of the Development of the
Product, including writing, translation, compilation,
notification, submission, filing, defense, maintenance and renewal
of Regulatory Approvals and payment of fees associated therewith,
and meeting with Regulatory Authorities.
1.1.58 "Regulatory Approvals" means all necessary and appropriate
regulatory approvals which must be obtained before placing the
Product on the market in the Field in any country in the Territory
in which such approval is required, including without limitation,
INDs, NDAs, and any other comparable terms as applicable with
regard to any such approvals in any other country in the
Territory.
1.1.59 "Regulatory Authority" or "Regulatory Authorities" means:
(a) the FDA, the TPD and any other like governmental
authorities, whether federal, provincial, state or
municipal, regulating the importation, distribution,
marketing and/or sale of therapeutic substances in the
Territory; and
(b) the corresponding governmental authorities, whether
federal, provincial, state or municipal, of each other
applicable jurisdiction outside the Territory in which
the Product will be developed, used or sold.
1.1.60 "Regulatory Requirements" means:
(a) Applicable Laws, rules, regulations, guidances, and the
Codes and Standards in respect of all activities of the
Parties and their permitted Representatives under
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
11
the Related Agreements, including guidances in respect
of quality control and QA procedures and processes,
manufacturing and production batch records (including
the Master Production Record), packaging, handling,
storage, delivery and retention of raw material and
Product samples and associated support data, and all
licenses, certificates, authorizations or requirements
from Regulatory Authorities; and
(b) the corresponding laws, rules, regulations and guidances
of each other applicable jurisdiction outside the
Territory in which such activities take place.
1.1.61 "Regulatory Submissions" means all submissions and filings made in
furtherance of obtaining and maintaining any Regulatory Approvals.
1.1.62 "Related Agreements" means, collectively, this Agreement, the
Product Supply Agreement, the Quality/Technical Agreement and the
Co-Promotion Agreement.
1.1.63 "Representatives" means, in respect of a Party, that Party's
Affiliates and their respective directors, officers, employees,
consultants, subcontractors, sublicensees, agents, representatives
and other persons acting under their authority.
1.1.64 "Standards" means the Accreditation Council for Continuing Medical
Education (ACCME) Standards for Commercial Support of Continuing
Medical Education, as they may be amended from time to time.
1.1.65 "Sublicensee" means a Third Party which is not an Affiliate of
Enzon and to whom Enzon has granted a sublicense for the purpose
of developing, using, selling, having sold, distributing,
importing or exporting the Product in one or more countries of the
Territory.
1.1.66 "Technical and Manufacturing Support Activity" or "Technical and
Manufacturing Support Activities" mean any one or more of the
activities to be performed by the Parties or their Representatives
in the area of analytical development, process development,
manufacturing, and quality control, in pursuit of manufacturing
scale-up and the Regulatory Approvals of the Product, including
the design, testing, analysis, qualification, and validation of
methods, equipment and/or processes.
1.1.67 "Term" has the meaning set out in Section 11.1.
1.1.68 "Territory" means Canada, Mexico and the USA.
1.1.69 "Third Party(ies)" means any Person other than Inex or Enzon or an
Affiliate of either of them.
1.1.70 "TPD" means the Therapeutic Products Directorate Organization of
Health Canada.
1.1.71 "Trademarks" means trademarks, trade names, and domain names
identified in Exhibit 1.1.71 and all applications and
registrations thereof in the Territory.
1.1.72 "USA" means the United States of America, including its
territories, possessions and the Commonwealth of Puerto Rico.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
12
1.1.73 "Valid Claim" means either:
(a) a claim of an issued and unexpired patent which has not
been held unenforceable, unpatentable or invalid by a
court or other governmental agency of competent
jurisdiction, and which has not been admitted to be
invalid or unenforceable through reissue, disclaimer or
otherwise; or
(b) a claim in a patent application, provided that if such
pending claim has not issued as a claim of an issued
patent within seven years after the national filing date
of such patent application in a country, such pending
claim shall not be a Valid Claim for purposes of this
Agreement.
In the event that a claim of an issued patent is held by a court
or other governmental agency of competent jurisdiction to be
unenforceable, unpatentable or invalid, and such holding is
reversed on appeal by a higher court or agency of competition
jurisdiction, such claim shall be reinstated as a Valid Claim
hereunder.
1.1.74 "Vincristine" means the chemical compound known as vincristine
sulfate.
1.1.75 "Vincristine Sulfate Liposomes Injection" or "VSLI" means
Vincristine encapsulated in sphingomyelin/cholesterol liposomes or
a kit for production of same.
1.2 Entire Agreement; Conflicts
The Parties hereby agree that, except as expressly modified hereby, the
following Articles of the Product Supply Agreement shall be part of this
Agreement as if set out herein: Sections 12.6 through 12.10 inclusive, Articles
13, 14, 15 and 16. This Agreement, together with the other Related Agreements,
constitutes the entire agreement between the Parties concerning the subject
matter hereof. In the event of a conflict between the terms and conditions set
out in any of the Related Agreements, the following agreements shall govern in
the following priority:
1.2.1 the Product Supply Agreement;
1.2.2 the Quality/Technical Agreement;
1.2.3 this Development Agreement; and
1.2.4 the Co-Promotion Agreement
1.3 Governing Law
This Agreement shall be governed by and construed in accordance with the laws of
Delaware in force therein without regard to its conflict of law rules.
1.4 Headings
The headings contained in this Agreement are for convenience of reference only
and shall not be considered in construing this Agreement. References to Articles
are references to Articles of this
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
13
Agreement and the Sections contained therein, and references to Sections are
references to Sections of this Agreement.
1.5 Severability
If a court or other tribunal of competent jurisdiction should hold any term or
provision of this agreement to be excessive, invalid, void or unenforceable, the
offending term or provision shall be deemed inoperative to the extent it
conflicts with such holding and shall be deemed to be modified to the extent
necessary to conform with such statute or rule of law, while still preserving,
to the extent practicable, the legitimate aims of the Parties, provided that the
remaining portions hereof shall remain in full force and effect. In the event
that the terms and conditions of this Agreement are materially altered as a
result of the above, the Parties will renegotiate the terms and conditions of
this Agreement to resolve any inequities.
Article 2 Grant and Reservation of Rights
2.1 Grant of Licenses
In furtherance of the Product Supply Agreement, and subject to the reservation
set forth in Section 2.2 of this Agreement, Inex hereby grants to Enzon:
2.1.1 an exclusive license for the Field in the Territory under the Inex
Patents;
2.1.2 subject to the terms, conditions and limitations set out in the
***, an exclusive sublicense for the Field in the Territory under
the ***;
2.1.3 subject to Section Error! Reference source not found., to the
extent of Inex's legal right to grant same, a non-exclusive
sublicense for the Field in the Territory under the ***;
2.1.4 an exclusive license for the Field in the Territory under the Inex
Technology; and
for the sole purpose of developing (solely in accordance with the Development
Plan), using, selling, having sold, offering for sale, distributing, importing
and exporting the Product for the Field in the Territory, including the right to
grant sublicenses under these rights in accordance with Section 2.4. Enzon shall
not use or exploit for any purpose of any Licensed Patents or Inex Technology
except as permitted in this Agreement.
2.2 Reservation of Rights
2.2.1 Except as otherwise expressly licensed to Enzon hereunder, Inex
may exploit the Licensed Patents and Inex Technology for any
purpose, including using, making, having made, selling, having
sold, distributing and importing the Product:
(a) outside the Territory;
(b) inside the Territory but outside the Field;
(c) inside the Territory and inside the Field, for the
purpose of sales to Enzon; and
(d) in accordance with Section 11.3.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
14
2.2.2 Inex retains the non-exclusive (non-sublicensable, except as
contemplated herein) right under the Licensed Patents and the Inex
Technology:
(a) to practice the Licensed Patents and the Inex Technology
for internal research purposes for the Field;
(b) to Co-Promote the Product in the Territory in accordance
with the Co-Promotion Agreement; and
(c) to undertake Development as contemplated herein.
2.2.3 For avoidance of doubt, Inex may exploit the Licensed Patents and
Inex Technology in any territory for any liposomal product which
does not contain Vincristine.
2.3 ***
2.4 Sublicenses
2.4.1 Enzon shall have the right to sublicense all the rights granted in
Section 2.1 to its Affiliates. Enzon hereby unconditionally
guarantees the performance of any such Affiliates hereunder as if
they were signatories to this Agreement to the extent the
performance or lack of performance is a breach of this Agreement.
A breach by any such Affiliate of any such obligation shall
constitute a breach by Enzon of this Agreement and shall entitle
Inex to exercise its rights hereunder, in addition to any other
rights and remedies to which Inex may be entitled.
2.4.2 Enzon shall also have the right to sublicense all the rights
granted in Section 2.1 to Third Parties, subject to the following:
(a) Prior to the execution of any sublicense, Enzon shall
provide Inex with at least the following information
with respect to each potential Sublicensee: (i) the
identity of the Sublicensee; (ii) the territory in which
the Product will be sold; and (iii) a copy of the draft
sublicense.
(b) Each sublicense shall contain covenants by the
Sublicensee for the benefit of Inex to observe and
perform similar terms and conditions to those in this
Agreement. All sublicenses granted by Enzon shall be
personal to the Sublicensee and shall not be further
sublicensable or assignable without the prior written
consent of Inex. Such sublicenses shall terminate upon
the termination of Enzon's rights granted herein unless
events of default are cured by Enzon or Sublicensee
within sixty (60) days after notification by Inex of
default and/or as provided by the terms of this
Agreement.
(c) Enzon may grant such sublicenses only with the prior
written consent of Inex, which shall not be unreasonably
withheld.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
15
(d) Unless otherwise agreed in the Elan Consent, Enzon may
grant such sublicenses only with the prior written
consent of Elan, which consent may be withheld in Elan's
absolute discretion.
(e) Any Sublicensee which wishes to grant a further
sublicense shall comply with the terms of this Section
as if the further sublicense were a sublicense
hereunder, including providing to Enzon and Inex the
information described in this Section with respect to
each potential sub-sublicensee, and obtaining the
consent referred to in this Section, prior to the
execution of any such sub-sublicense.
(f) In the event that Enzon becomes aware of a material
breach of any such sublicense by the Sublicensee, Enzon
shall promptly notify Inex of the particulars of same
and take all reasonable steps to enforce the terms of
such sublicense. Enzon shall remain responsible to Inex
for the compliance of each such Sublicensee with the
financial and other obligations due under this
Agreement. Upon the request of Inex, Enzon shall act
reasonably in considering any request of Inex for Enzon
to terminate such sublicense.
Article 3 Milestone Payments for Development
3.1 Signing and Regulatory Milestone Payments
As payments to facilitate the development of the Product and the establishment
of Inex's manufacturing and commercialization business, and as consideration for
the rights granted by Inex to Enzon under this Agreement, Enzon shall make the
following signing and regulatory milestone payments to Inex:
================================================================================
Milestone: Payment:
- --------------------------------------------------------------------------------
3.1.1 Execution of the Product Supply Agreement, $12.0 million
this Agreement and the Co-Promotion Agreement
3.1.2 NDA Accelerated Approval ("AA") in the USA within $20.0 million
eighteen (18) months of completed NDA submission
date
3.1.3 *** $***
3.1.4 *** $***
3.1.5 *** $***
3.1.6 *** $***
3.1.7 *** $***
3.1.8 *** $***
3.1.9 *** $***
================================================================================
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
16
Provided that:
3.1.10 Enzon shall make the milestone payment referred to in Section
3.1.1 to Inex on execution and delivery of this Agreement by the
Parties, in payment for Inex's prior development work and other
rights granted herein;
3.1.11 Enzon shall make the milestone payments other than the ones
referred to in Sections 3.1.1 and Error! Reference source not
found. to Inex within thirty (30) days after achievement of each
milestone by a Party, or by an Affiliate or a Sublicensee;
3.1.12 Enzon shall make the milestone payments referred to in Section
Error! Reference source not found. to Inex on the dates set out
for occurrence of such milestone in Section Error! Reference
source not found.;
3.1.13 except for the payments set out in Section Error! Reference source
not found., each milestone payment hereunder shall be made only
one time, based upon the Product achieving a particular milestone
regardless of how many times such milestone is achieved;
3.1.14 only one of the three alternative milestone payments referred to
in Sections 3.1.2, Error! Reference source not found. and Error!
Reference source not found. will be paid;
3.1.15 payment shall not be owed for a milestone which is not reached;
3.1.16 except as expressly set out in this Agreement, each payment shall
be made without setoff, deduction or similar right;
3.1.17 with the exception of payment referred to in Section 3.1.9, which
is creditable in accordance with its terms, any milestone payment
described herein shall be non-refundable and non-creditable
against any other payment due from Enzon to Inex under this
Agreement;
3.1.18 ***
3.1.19 ***
3.1.20 ***
3.1.21 ***
3.1.22 ***
3.2 Withholding Taxes
The Parties contemplate that there will be no payment or withholding by Enzon of
taxes on any payments made by Enzon to Inex pursuant to this Agreement. In the
event that either Party takes any action, or if the circumstances applicable to
either Party change with the result that taxes must be paid or withheld on the
payments due pursuant to this Agreement, then such taxes shall be borne by such
Party. Without limiting the generality of the foregoing:
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
17
3.2.1 if Enzon assigns or sublicenses its rights hereunder, undergoes a
reorganization or otherwise changes its structure, or changes its
domicile, and thereafter taxes must be paid or withheld on the
payments hereunder, such payments shall be grossed up so that Inex
receives the actual amounts set out in this Agreement; and
3.2.2 if Inex assigns or sublicenses its rights hereunder, undergoes a
reorganization or otherwise changes its structure, or changes its
domicile, and thereafter taxes must be paid or withheld on the
payments hereunder, then such tax or withholding payments shall be
deducted from the amounts set forth herein, and Enzon shall assist
Inex as may be reasonably required, including providing proof of
such payment of such tax payment, in order to allow Inex to claim
the benefit of, exemption from or repayment such tax payment, as
may be applicable; and
3.2.3 in the event that payment or withholding by Enzon of taxes becomes
necessary on any payments made by Enzon to Inex pursuant to this
Agreement when neither Section 3.2.1 nor Section 3.2.2 applies,
then such tax or withholding payments shall be deducted from the
amounts set forth herein, and Enzon shall assist Inex as may be
reasonably required, including providing proof of such payment of
such tax payment, in order to allow Inex to claim the benefit of,
exemption from or repayment such tax payment, as may be
applicable.
Notwithstanding the foregoing, if Inex is able to credit the grossed up portion
of any payment made by Enzon pursuant to Section 3.2.1 against taxes payable by
Inex, or gain exemption from or repayment of such tax payment, Inex will
promptly pay the equivalent of the benefit received by Inex to Enzon.
3.3 Late Payments
Any payment by Enzon or Inex that is not paid on or before the date such payment
is due under this Agreement shall bear interest at a rate equal to the lesser
of:
3.3.1 Prime Rate plus *** per year, or
3.3.2 the maximum rate permitted by law;
calculated based on the number of days that payment is delinquent.
Article 4 Development
4.1 Development Activities in accordance with the Development Plan
Inex and Enzon will undertake Development as set out in the Development Plan and
as amended from time to time by the Parties in accordance with this Article 4.
Subject to Sections 5.2 and 5.8, from the Effective Date until the Parties'
agreement to the terms of the definitive Development Plan, Inex and Enzon will
undertake the Development acting reasonably. If either Party fails to perform
its responsibilities under the Development Plan (the "Non-performing Party")
after reasonable notice of such failure from the other Party (the "Performing
Party"), the Performing Party's sole remedy shall be that the Performing Party
may assume conduct of such responsibilities and the Development Plan shall be
amended to reflect such change. The cost of any such responsibilities so assumed
shall be borne by the Parties as set out in this Agreement.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
18
4.2 Overview of Development
The Parties intend to work cooperatively to pursue the Development in accordance
with the terms of this Agreement. Unless otherwise set out in this Agreement,
the Parties will conduct the Development as directed by the Joint Steering
Committee and in conformance with the Development Plan. The Parties shall
collaborate closely, through the Joint Steering Committee, to assign
responsibility for conducting the various aspects of such Development. Unless
otherwise agreed by the Parties, the Parties will conduct the activities
assigned to them in the Development Plan.
4.3 Development Diligence
4.3.1 Inex shall make its third submission to the FDA for an NDA for the
Product as soon as reasonably possible.
4.3.2 Each of the Parties, directly and through its permitted
Representatives, shall use Commercially Reasonable Efforts to
Develop the Product for the USA and Canada, including carrying out
its respective responsibilities under the Development Plan,
including to:
(a) conduct or cause to be conducted the necessary and
appropriate clinical trials as necessary to obtain and
maintain Regulatory Approvals for the Product; and
(b) prepare, file and prosecute or cause to be prepared,
filed and prosecuted the Regulatory Submissions for the
Product in the USA and Canada.
4.3.3 Each of the Parties, directly and through its permitted
Representatives, shall perform the Development in compliance with
Regulatory Requirements.
4.3.4 Each Party shall ensure none of its Representatives who
participate in any activities under the Related Agreements:
(a) is or has been suspended, debarred or disqualified by
the FDA;
(b) has been convicted of any offence that would form the
basis for any debarment; or
(c) is or has been subject to any proceedings for the
suspension, disqualification or debarment of such Party
or any Representative of such Party.
4.4 Development Plans
4.4.1 Within ninety (90) days after the Effective Date, the Joint
Steering Committee shall prepare, review and submit to the Parties
for approval a detailed Development Plan for the Development of
the Product.
4.4.2 Development of the Product shall be conducted by the Parties in
conformance with the Development Plan.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
19
4.4.3 The Development Plan may be updated by the Joint Steering
Committee and the Parties as provided herein.
4.4.4 At a minimum, the Development Plan as amended from time to time
shall describe the specific activities to be performed in the
Territory for a twelve (12) month period, with a summary of
development activities to be performed thereafter. The Development
Plan will be reviewed on at least a semi-annual basis by the Joint
Steering Committee to update the specific activities to be
performed for the rolling twelve (12) month period, as well as to
reflect the revised Development as the Joint Steering Committee
reasonably determines to be necessary or useful. Notwithstanding
the above, no amendment to any Development Plan shall be construed
to be final unless it has been made in accordance with the
provisions of Article 6.
4.5 Reports on Development
Each Party will keep the other Party fully informed on the progress of the
Development in respect of the Territory, using reasonable reporting requirements
mutually established by the Parties. As a minimum requirement, the Joint
Steering Committee shall receive and review and approve quarterly progress
reports.
4.6 Attendance at Regulatory Meetings
Each Party will inform the other Party of planned meetings between its
representatives and governmental or Regulatory Authorities regarding Regulatory
Approvals and Regulatory Submissions for the Product in the Territory and, where
appropriate to do so, make reasonable efforts to include the other Party in such
meetings.
4.7 Subcontractors
Either Party may subcontract to any of its Representatives any of its
obligations in respect of the Development with the consent of the other Party,
such consent not to be unreasonably withheld; provided however, that the
subcontracting Party shall be responsible for the performance of its
Representatives and shall remain fully responsible and obligated to the other
Party for all activities undertaken by its Representatives.
Article 5 Development Responsibility and Funding
5.1 Shared Funding of Certain Development Costs
Each Party shall bear the initial responsibility for funding all Development
Costs required to support the conduct of all such Party's responsibilities in
pursuit of Regulatory Approvals for the Product in the Territory in accordance
with the Development Plan, subject to allocation and reimbursement for such
expenses in accordance with this Article 5.
5.2 Development Clinical Activities
5.2.1 Subject to Section 5.2.2, Enzon will fund 50%, and Inex 50% of
Development Costs for all the following Clinical Activities (the
"Development Clinical Activities"):
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
20
(a) obtaining and maintaining Regulatory Approval for the
first label claim for the Product in each country in the
Territory, including any FDA mandated Phase III
confirmatory trials for the first label claim if VSLI
receives NDA Accelerated Approval in the USA;
(b) any jointly agreed-to trials designed to obtain
additional Regulatory Approvals for the Product in the
Territory;
(c) all Phase II clinical trials for the Product ongoing as
of the Effective Date, a listing of which is set out in
Exhibit 5.2.1(c); and
(d) all jointly agreed-to trials sponsored by either of the
Parties to explore new indications or dosing regimens
for the Product.
5.2.2 Notwithstanding anything herein to the contrary, Enzon's
contribution to Development Costs for Development Clinical
Activities under this Section 5.2 from the Effective Date through
June 30, 2004 shall be limited to *** of the first *** of
Development Costs incurred. Inex shall pay *** of the Development
Costs incurred during this period in excess of ***, if any.
5.3 Post-Approval Clinical Activities
Enzon will be responsible for and fund *** of the costs for all the following
Clinical Activities (the "Post-Approval Clinical Activities"):
5.3.1 Clinical Activities typically associated with post-Regulatory
Approval commercialization, including Phase IV clinical trials and
post-Regulatory Approval Compendium Listings;
5.3.2 physician-sponsored studies; and
5.3.3 any Clinical Activities undertaken by the Parties not required by
a Regulatory Authority in order to obtain any Regulatory Approval
or as a condition of obtaining or maintaining a Regulatory
Approval.
5.4 Regulatory Activities
5.4.1 The Parties will coordinate their activities with each other with
respect to the overall regulatory strategy for the Product in the
Territory, and with respect to Inex's overall regulatory strategy
for the Product outside the Territory.
5.4.2 Inex will have primary responsibility for Regulatory Activities in
the Territory, with Enzon's input and advice.
5.4.3 Enzon will fund ***, and Inex *** of all Development Costs for
Regulatory Activities associated with obtaining and maintaining
Regulatory Approval for the Product in the Territory.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
21
5.5 Filing of Regulatory Submissions
5.5.1 Inex or an Affiliate of Inex designated by Inex shall be named as
the applicant for all Regulatory Submissions and holder of all
Regulatory Approvals in all countries, including the countries in
the Territory, and all such Regulatory Approvals and Regulatory
Submissions shall be owned as set out in Section 10.4.
5.6 Technical and Manufacturing Support Activities
5.6.1 Each Party will have responsibility for Technical and
Manufacturing Support Activities in the Territory as set out in
the Development Plan, with input and advice from the other Party.
5.6.2 Enzon will fund ***, and Inex *** of all Development Costs
including Costs for Technical and Manufacturing Support Activities
and the following additional activities, if mutually agreed upon,
shall be Technical and Manufacturing Support Activities:
(a) manufacturing scale up activities;
(b) the contracting of secondary suppliers and testing
laboratories;
(c) the establishment of secondary manufacturing sites; and
(d) the establishment of secondary suppliers and/or
alternate sources of raw materials.
5.7 Funding of Development Costs
5.7.1 From and after the Effective Date, in respect of each calendar
quarter in which Development Costs are incurred, the Parties shall
bear their proportionate share of Development Costs as set out in
this Article.
5.7.2 Within twelve Business (12) Days after of the end of each calendar
quarter, each Party shall provide the other Party with a
reasonably detailed invoice setting forth such Party's Development
Costs.
5.7.3 Such invoices shall be accompanied by appropriate documentation
("Supporting Documentation"), including a listing of expenditures
in reasonably specific detail to support the Party's determination
of the actual Development Costs incurred in conducting Development
work during such calendar quarter.
5.7.4 If the invoices and Supporting Documentation (as verified by the
Joint Steering Committee) demonstrate that one Party, in
completing tasks assigned for such quarter under the Development
Plan (but excluding tasks each Party is to perform at its own
expense hereunder) has borne more of the Development Costs than
the share set out for such Party in this Article 5, then within 30
days after the exchange of invoices and Supporting Documentation,
there shall be an accounting and payment between the Parties to
bring the Development Costs incurred by them respectively during
such quarter into conformity with this Article 5.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
22
5.7.5 Each Party shall use Commercially Reasonable Efforts to comply
with the applicable budget for each activity set out in the
Development Plan for such Party during the each calendar year. In
the event that a Party incurs any Development FTE Costs for a
particular activity that exceed the amount budgeted therefor, such
event shall not be considered a breach of this Agreement by such
Party, but the other Party shall not be responsible for funding
any such excess amount, unless otherwise agreed to in writing by
the Parties. If a Party believes that completion of the assigned
Development tasks will exceed the portion of such budget that is
allocated for such Party's efforts, such Party will contact the
Joint Steering Committee promptly after such determination in
order to initiate discussion by the Joint Steering Committee of
such matter and appropriate means of resolving same.
5.8 Transition
From the Effective Date until the Parties' agreement to the terms of the
definitive Development Plan, Inex and Enzon will fund their respective shares of
Development Costs incurred as contemplated by this Agreement. If the Parties
fail to agree on the terms of the definitive Development Plan within 90 days of
the Effective Date, until the terms of the definitive Development Plan are
determined, the Parties shall fund their respective shares of Development Costs
incurred by the Parties, acting reasonably. Notwithstanding the foregoing, after
the Effective Date, in the absence of a definitive Development Plan agreed upon
by the Parties, no more than an aggregate of US$*** in Development Costs will be
incurred without the review of the Joint Steering Committee and the agreement of
the Parties.
5.9 Records
Both Parties shall keep full, true and accurate books of accounts and other
records containing all information and data which may be necessary to ascertain
and verify:
5.9.1 the Development Costs incurred by each of them and their
respective Representatives for a period of three (3) years after
the completion of the Development; and
5.9.2 any other amount payable hereunder for a period of three (3) years
after the completion of the Term.
5.10 Audits
5.10.1 During the Development and for a period of one (1) year following
the completion of the Development, Enzon shall have the right from
time to time (not to exceed once during each calendar year) to
have either its internal financial audit personnel or an
independent firm of accountants (i.e., a certified public
accountant or like person reasonably acceptable to Inex) inspect
the books, records and supporting data of Inex referred to in
Section 5.9. Such independent firm of accountants shall perform
these audits at Enzon's expense upon reasonable prior notice and
during Inex's regular business hours, and shall agree as a
condition to such audit to maintain the confidentiality of all
information disclosed or observed in connection with such audit
and to disclose to Enzon only whether Inex has complied with its
obligations under this Agreement with respect to Development
Costs. If the result of such audit demonstrates an overpayment or
underpayment, there shall be a prompt (but in no event more than
60 days after
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
23
completion of the audit) accounting between the parties to
reconcile such overpayment or underpayment. If the result of such
audit demonstrates an overpayment by Enzon of *** or more, Inex
shall pay Enzon the reasonable costs of such audit.
5.10.2 During the Term and for a period of one (1) year thereafter, Inex
shall have the right from time to time (not to exceed once during
each calendar year) to have either its internal financial audit
personnel or an independent firm of accountants (i.e., a certified
public accountant or like person reasonably acceptable to Enzon)
inspect the books, records and supporting data of Enzon referred
to in Section 5.9. Such independent firm of accountants shall
perform these audits at Inex's expense upon reasonable prior
notice and during Enzon's regular business hours, and shall agree
as a condition to such audit to maintain the confidentiality of
all information disclosed or observed in connection with such
audit and to disclose to Inex only whether Enzon has complied with
its obligations under this Agreement with respect to the payment
of money owing pursuant to this Agreement. If the result of such
audit demonstrates an overpayment or underpayment, there shall be
a prompt (but in no event more than 60 days after completion of
the audit) accounting between the parties to reconcile such
overpayment or underpayment. If the result of such audit
demonstrates an underpayment of *** or more, Enzon shall pay Inex
the reasonable costs of such audit.
5.10.3 The provisions of Sections 5.10.1 and 5.10.2 are based on the
assumption that the net flow of payments under Section 5.7 will be
from Enzon to Inex. If this assumption proves incorrect, the
provisions of Sections 5.10.1 and 5.10.2 will be deemed modified
to permit an appropriate accounting between Inex and Enzon to
correct for any underpayment or overpayment by Inex.
Article 6 Joint Steering Committee
6.1 Joint Steering Committee
6.1.1 As of the Effective Date of this Agreement, the Joint Steering
Committee shall be formed and shall be constituted of four
representatives from each Party. The members of the Joint Steering
Committee as of the Effective Date are as set forth on Exhibit
6.1. The Chairperson of the Joint Steering Committee at the first
meeting of the Joint Steering Committee shall be an Enzon member
of the Joint Steering Committee, and thereafter, the Chairperson
will alternate at each meeting between a representative of Inex
and a representative of Enzon. The Chairperson shall be
responsible for issuing an agenda for the meeting, conducting and
chairing the meeting and preparing the minutes for the meeting,
and such other tasks as assigned by the committee. The Joint
Steering Committee shall meet regularly at least quarterly during
the period when Development in respect of the Territory is
occurring, or more frequently if necessary.
6.1.2 Each Party shall bear its own expenses associated with its
participation in the Joint Steering Committee and its
administration and oversight of the activities contemplated by the
Agreement. Such expenses shall not be included in Development
Costs.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
24
6.2 Meetings of the Joint Steering Committee
6.2.1 The Joint Steering Committee should meet at least once per year at
the location of Inex or an Affiliate of Inex, and once per year at
a location of Enzon or an Affiliate of Enzon. All other meetings
of the Joint Steering Committee may occur by telephone, video
conference or other acceptable means or location if requested by a
Party. The Joint Steering Committee shall oversee all Development
activities of the Parties under this Agreement, including
coordinating the overall strategy for Development. The Joint
Steering Committee shall have the responsibilities as set forth
generally in Exhibit 6.1. Each Party may appoint its
representatives to the Joint Steering Committee and other members
of its project team at its discretion. It is the intent of the
Parties to assign responsibilities for the various operational
aspects of the Development Plan to those portions of their
respective organizations which have the appropriate resources,
expertise and responsibility for such functions. The Joint
Steering Committee shall act only as a body making recommendations
to the Parties, and neither Party is bound by any recommendation
of the Joint Steering Committee. The members of the Joint Steering
Committee shall attempt, in good faith, to reach consensus on all
matters before the committee and make a consensus recommendation
to the Parties. In the event that the Joint Steering Committee
cannot make a consensus recommendation to the Parties which is
acceptable to the Parties, either Party may refer the matter for
resolution in accordance with the terms of Article 16 of the
Product Supply Agreement.
6.2.2 The Joint Steering Committee shall cause there to be recorded
reasonably detailed minutes of its meetings. The Party providing
the chairperson of each meeting shall be responsible for preparing
draft minutes of such meeting and distributing same to the other
members of the committee within five Business Days after such
meeting. If the other Party desires to revise the draft minutes it
will provide comments on such minutes within ten Business Days
after receiving the minutes. If such comments are provided,
members of the Joint Steering Committee designated by each Party
shall confer promptly and in good faith to resolve such comments
and finalize the minutes. If the members of the Joint Steering
Committee are unable to finalize the minutes within 30 days after
the date of the meeting, either Party may refer the matter for
resolution in accordance with the terms of Article 16 of the
Product Supply Agreement.
6.3 Working Committees
The Joint Steering Committee may establish working committees to manage actively
the Development. Such working committees will conduct at a minimum quarterly
planning and review meetings as well as ad hoc meetings as necessary. The
primary method of meeting will be teleconference. Responsibilities of the
working committees may include overseeing the planning and monitoring of the
clinical development process and the regulatory and commercialization processes.
Article 7 Pharmacovigilance, DDMAC and Recalls
7.1 Regulatory Responsibilities
Inex will be responsible for maintaining and fulfilling all Regulatory
Requirements with respect to the Product that are imposed upon Inex as the
manufacturer and holder of the Regulatory Approvals. Subject
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
25
to the other express terms of the Related Agreements, Enzon and its designees
will have sole responsibility for the advertising and other promotion of the
Product and for maintaining and fulfilling all Regulatory Requirements with
respect to the Product that are imposed upon Enzon as the advertiser, marketer
and distributor thereof.
7.2 Pharmacovigilance Agent
7.2.1 Unless the Parties agree to establish the agency referred to in
Section 7.2.2 on an accelerated basis, Inex shall be responsible
for performing Pharmacovigilance in respect of all pre-Regulatory
Approval Clinical Activities (in addition to all other Regulatory
Activities for which Inex is responsible). Until this agency is
established, if Enzon receives any information of any type
whatsoever that may constitute a complaint regarding the Product
or indicates that the Product in any way relates to an Adverse
Drug Event, then it will record the information set forth on
Exhibit 1.1.1 and transmit the completed form to Inex as soon as
possible, and in any event at least in time to allow Inex to meet
its reporting obligations under Regulatory Requirements. Inex will
then report the Adverse Drug Event in accordance with Regulatory
Requirements, and provide Enzon with a copy(ies) of all
documentation provided to Regulatory Authorities in respect of
such complaint or Adverse Drug Event. Further, until this agency
is established, if Inex receives any information of any type
whatsoever that may constitute a complaint regarding the Product
or indicates that the Product in any way relates to an Adverse
Drug Event, then it will record the information set forth on
Exhibit 1.1.1, provide a copy of the completed form to Enzon (if
possible, prior to submitting it to Regulatory Authorities) and
report the Adverse Drug Event in accordance with Regulatory
Requirements.
7.2.2 After Regulatory Approval of the Products by a Regulatory
Authority (or sooner if and to the extent agreed to by the
Parties), Enzon shall be appointed by Inex as Inex's agent with
respect to the regulatory dossier for the Product in the Field in
the Territory for the sole purpose of conducting
Pharmacovigilance. After this agency has been established, Enzon
shall manage and carry out on behalf of Inex all relevant
communications and relations with Regulatory Authorities to the
extent related to Pharmacovigilance with respect to the Product.
Inex shall be entitled to participate in all negotiations and
discussions between Enzon and Regulatory Authorities relating to
Pharmacovigilance with respect to the Product. Without limiting
the generality of the foregoing, after this agency has been
established, if Inex receives any information of any type
whatsoever that may constitute a complaint regarding the Product
or indicates that the Product in any way relates to an Adverse
Drug Event, then it will record the information set forth on
Exhibit 1.1.1 and transmit the completed form to Enzon as soon as
possible, and in any event at least in time to allow Enzon to meet
its reporting obligations under Regulatory Requirements. Enzon
will then report the Adverse Drug Event in accordance with
Regulatory Requirements, and provide Inex with a copy(ies) of all
documentation provided to Regulatory Authorities in respect of
such complaint or Adverse Drug Event. Further, after this agency
has been established, if Enzon receives any information of any
type whatsoever that may constitute a complaint regarding the
Product or indicates that the Product in any way relates to an
Adverse Drug Event, then it will record the information set forth
on Exhibit 1.1.1, provide a copy of the completed form to Inex (if
possible, prior to submitting it to Regulatory Authorities) and
report the Adverse Drug Event in accordance with Regulatory
Requirements.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
26
7.3 Agency for DDMAC Activities
7.3.1 Inex hereby appoints Enzon as its agent for the Product in the
Field in the Territory for the sole purpose of conducting all
DDMAC Activities in the USA and the foreign equivalents in the
remainder of the Territory.
7.3.2 Enzon shall perform the DDMAC Activities in the USA and the
foreign equivalents in the remainder of the Territory in
compliance with Regulatory Requirements.
7.3.3 Enzon will perform all DDMAC Activities in the USA and the foreign
equivalents in the remainder of the Territory and subject to
Section 7.1, be responsible for all post-approval
Pharmacovigilance activities, and assume all the costs associated
therewith.
7.3.4 In each country for which Inex is the holder of the Regulatory
Approval, Enzon shall regularly inform Inex of Enzon's DDMAC
Activities and foreign equivalents and obtain Inex's prior consent
to Enzon's DDMAC Activities and foreign equivalents and plans
respecting any of them. In the event Enzon informs Inex of its
DDMAC Activities, foreign equivalents and plans, and does not
receive a written objection from Inex within 10 Business Days,
Inex shall be deemed to have consented to such activities and
plans.
7.4 Agent for Regulatory Authorities Generally
7.4.1 Nothing in Section 7.1 or this Section 7.4 precludes Inex from
appointing an agent for Regulatory Authorities for products other
than the Product, or for territories outside the Territory.
7.4.2 All activities, communications and relations as well as Enzon's
role as agent for Regulatory Authorities shall be performed by
Enzon in close coordination with Inex, as holder of the Regulatory
Approvals.
7.4.3 In respect of all of the foregoing under Section 7.1 or this
Section 7.4, except as required by Regulatory Requirements and
except for those reporting requirements which have timeliness
requirements that make it impossible to seek and obtain Inex's
consent prior to making such report, any communications with
Regulatory Authorities by Enzon under Section 7.1 or this Section
7.4 are subject to the consent of the Inex, such consent not to be
unreasonably withheld.
7.5 Recalls and Withdrawals of Product
7.5.1 If Inex or Enzon will be required or requested by any Regulatory
Authority to recall any Product for any reason, or should Enzon
decide voluntarily to withdraw any Product:
(a) Enzon will be responsible for co-coordinating such
recall or withdrawal;
(b) Enzon shall pay the costs and expenses of such recall or
withdrawal, subject to recovery of some or all of same
in accordance with the terms of Section 7.5.2;
(c) unless Inex is liable for such costs and expenses in
accordance with the terms of Section 7.5.2, Enzon will
remain responsible to Inex for the Purchase Price for
27
such Product and will reimburse Inex for all of the
reasonable costs and expenses actually incurred by Inex
in connection with such recall or withdrawal including,
but not limited to, administration of the recall or
withdrawal and such other reasonable costs as may be
reasonably related to the recall or withdrawal; and
(d) both Parties will cooperate fully with one another in
connection with any such recall or withdrawal.
7.5.2 if a recall or withdrawal is due to Inex's negligence, willful
misconduct or breach of this Agreement or Inex's failure to
Manufacture the Product in conformity with the Specifications or
the provisions of the Product Supply Agreement or the
Quality/Technical Agreement, Inex will reimburse Enzon for all of
Enzon's reasonable costs and expenses actually incurred by Enzon
in connection with the recall or withdrawal, including the
Purchase Price for the recalled or withdrawn Product, costs of
retrieving Product already delivered to customers, costs and
expenses Enzon is required to pay for notification, shipping and
handling charges, destruction or return of the defective Product
or Product and such other reasonable costs as may be reasonably
related to the recall or withdrawal.
7.5.3 If the Parties are unable to agree on whether or not a recall or
withdrawal is due to Inex's negligence, willful misconduct or
breach of this Agreement, either Party may refer the matter for
resolution pursuant to Article 16 of the Product Supply Agreement.
Article 8 Additional Opportunities
8.1 Pipeline Drug
For a reasonable period after the Effective Date, the Parties will make good
faith efforts to work together to identify and secure rights to one other
oncology or hematology product from within or to be added to Enzon's current
pipeline. The Parties' intention is that the development and commercialization
of such new product in the Territory would be on the basis of a 50:50 funding
and profit sharing split.
8.2 Legal Effect
The matters set forth in this Article 8 constitute merely an expression of the
desire of the Parties to negotiate with each other regarding the terms of an
agreement regarding the subject matter of this Article 8, and nothing in this
Article 8 will have any legal or binding effect unless set out in writing in a
separate agreement and signed by the duly authorized representatives of the
Parties.
Article 9 Representations and Warranties
9.1 By Enzon
Enzon hereby represents and warrants to Inex that, as of the Effective Date:
9.1.1 Enzon has full legal right, power and authority to execute,
deliver and perform its obligations under the Related Agreements;
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
28
9.1.2 the execution, delivery and performance by Enzon of the Related
Agreements does not contravene or constitute a default under any
provision of Applicable Law or its articles or by-laws (or
equivalent documents) or of any judgment, injunction, order,
decree or other instrument binding upon Enzon;
9.1.3 all licenses, consents, authorizations and approvals, if any,
required for the execution, delivery and performance by Enzon of
the Related Agreements have been obtained and to the best
knowledge of Enzon are in full force and effect and all conditions
thereof have been complied with, and, except for appropriate
disclosure regarding the Related Agreements under the Securities
Exchange Act of 1934, as amended, no other action by or with
respect to, or filing with, any governmental authority or any
other person or entity is required in connection with the
execution, delivery and performance by Enzon of the Related
Agreements;
9.1.4 except for the Permitted Exception, to the best knowledge of
Enzon, the exploitation by Enzon of the rights granted to Enzon
hereunder in pursuit of the Development, Manufacture and
Commercialization of the Product do not infringe the Intellectual
Property Rights of any Third Party;
9.1.5 assuming each is a valid, binding and enforceable agreement of
Inex, each of the Related Agreements constitutes a valid and
binding agreement of Enzon, enforceable against Enzon in
accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, moratorium or creditors' rights
generally;
9.1.6 the execution, delivery and performance by Enzon of each Related
Agreement does not and will not conflict with or result in a
material breach of any of the terms and provisions of any Third
Party agreement of Enzon entered into as of the Effective Date;
9.1.7 except for the Permitted Exception, Enzon is not aware of any
impediment, including without limitation any Third Party agreement
of Enzon, which would prevent Enzon from performing its
obligations under the Related Agreements;
9.1.8 Enzon will not enter into any Third Party agreement after the
Effective Date which, in any way, will limit its ability to
perform all of the obligations undertaken by Enzon under the
Related Agreements; and
9.1.9 except for Intellectual Property Rights owned by Elan and licensed
to Enzon, Enzon does not own or control any Intellectual Property
Rights which could be asserted against Inex for Inex's performance
under the Related Agreements, or which could be infringed by the
developing, using, selling, having sold, distributing and
importing of the Product in the Territory.
9.2 By Inex
Inex hereby represents and warrants to Enzon that, as of the Effective Date:
9.2.1 Inex has full legal right, power and authority to execute, deliver
and perform its obligations under the Related Agreements;
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
29
9.2.2 the execution, delivery and performance by Inex of the Related
Agreements does not contravene or constitute a default under any
provision of Applicable Law or its articles or by-laws (or
equivalent documents) or of any judgment, injunction, order,
decree or other instrument binding upon Inex;
9.2.3 all licenses, consents, authorizations and approvals, if any,
required for the execution, delivery and performance by Inex of
the Related Agreements, including the Elan Consent, have been
obtained and, except for the Permitted Exception, to the best
knowledge of Inex, are in full force and effect and all conditions
thereof have been complied with, and, except for appropriate
disclosure regarding the Related Agreements required by any stock
exchange having authority, except for the Permitted Exception, to
the best knowledge of Inex no other action by or with respect to,
or filing with, any governmental authority or any other person or
entity is required in connection with the execution, delivery and
performance by Inex of the Related Agreements;
9.2.4 except for the Permitted Exception, and the rights granted by Inex
outside the Field or outside the Territory, Inex is the exclusive
owner or licensee of all legal and beneficial right, title and
interest in and to the Licensed Patents;
9.2.5 except for the Permitted Exception, Inex has the rights to the
Elan Patents necessary to grant the sublicenses granted in the
Related Agreements and the Elan License has not been breached by
Inex or its Affiliates or, to the best knowledge of Inex, by Elan
and its Affiliates;
9.2.6 except for rights granted by Inex outside the Field or outside the
Territory, Inex is the sole and exclusive owner or licensee of the
Inex Technology, free and clear of any lien, claim or encumbrance
or rights of any other person or entity;
9.2.7 except for the Permitted Exception, to the best knowledge of Inex,
the exploitation by Enzon of the rights granted to Enzon under the
Related Agreements in pursuit of the Development, Manufacture and
Commercialization of the Product do not infringe the Intellectual
Property Rights of any Third Party;
9.2.8 assuming each is a valid, binding and enforceable agreement of
Enzon, each of the Related Agreements constitutes a valid and
binding agreement of Inex, enforceable against Inex in accordance
with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium or creditors' rights generally;
9.2.9 the execution, delivery and performance by Inex of the Related
Agreements does not and will not conflict with or result in a
material breach of any of the terms and provisions of any Third
Party agreement of Inex entered into as of the Effective Date;
9.2.10 except for the Permitted Exception, Inex is not aware of any
impediment, including without limitation any Third Party agreement
of Inex, which would prevent Inex from performing its obligations
under the Related Agreement;
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
30
9.2.11 Inex will not enter into any Third Party agreement after the
Effective Date which, in any way, will limit its ability to
perform all of the obligations undertaken by Inex under the
Related Agreements;
9.2.12 except for the Licensed Patents and Inex Technology, Inex does not
own or control any Intellectual Property Rights which could be
asserted against Enzon for Enzon's performance under the Related
Agreements, or which could be infringed by the developing, using,
selling, having sold, distributing and importing of the Product in
the Territory; and
9.2.13 at the time delivered to Enzon, all Product:
(a) will fully conform to the Regulatory Requirements, the
Specifications and the Master Production Record; and
(b) will not, as the result of Inex's undertakings or
failure to perform its undertakings as set out in this
Agreement, be adulterated or misbranded within the
meaning of Section 501[351] and 502[352] of the Federal
Food, Drug and Cosmetic Act, as amended, and the
regulations issued thereunder or within the meaning of
any applicable state or local law, the adulteration and
misbranding provisions of which are similar to the
Federal Food, Drug and Cosmetic Act.
9.3 Survival of Representations and Warranties
The representations and warranties contained herein shall survive the execution,
delivery and performance of this Agreement by the Parties, notwithstanding any
investigation at any time made by or on behalf of any Party or Parties.
9.4 DISCLAIMER
EXCEPT FOR THE EXPRESS WARRANTIES AND REPRESENTATIONS CONTAINED IN THIS
AGREEMENT, NEITHER Inex NOR ENZON MAKES, AND EACH HEREBY EXPRESSLY DISCLAIMS,
ANY WARRANTIES OR REPRESENTATIONS, EITHER EXPRESS OR IMPLIED, WHETHER IN FACT OR
IN LAW, INCLUDING WITHOUT LIMITATION IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, OR VALIDITY OR SCOPE OR NON-INFRINGEMENT OF
ANY INTELLECTUAL PROPERTY RIGHTS.
Article 10 Intellectual Property Rights
10.1 Injunctive Relief
Each party acknowledges the competitive and technical value of the Licensed
Patents and Inex Technology, and the sensitive and confidential nature of the
Confidential Information and agrees that monetary damages alone will be
inadequate to protect the other party's interests against any actual or
threatened material breach of this Agreement. Accordingly, each party consents
to the granting of specific performance and injunctive or other equitable relief
to the other party in respect of any actual or threatened breach of this
Agreement, without proof of actual damages.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
31
10.2 Ownership of Pre-Existing Intellectual Property Rights
Any Intellectual Property Rights or trademark rights owned by either Party prior
to the Effective Date shall remain solely owned by such Party.
10.3 Ownership of Intellectual Property Rights in the Product
All Intellectual Property Rights arising from and during the course of the
Development, including all Intellectual Property Rights:
10.3.1 to all inventions arising from and during the course of the
Development;
10.3.2 to all data, information, know-how and results and the like
created as part of the Development (the "Data"); and
10.3.3 relating to the Product or improvements thereto or the process for
manufacturing the Product;
shall be solely owned by Inex or its designee, regardless of:
10.3.4 which Party(ies) created or invented the same; and
10.3.5 whether or not such Intellectual Property Rights are required to
obtain and maintain Regulatory Approvals;
and shall be licensed to Enzon hereunder as Licensed Patents and Inex Technology
without additional consideration or formality during the Term. Without limiting
the generality of the foregoing, any Elan Improvements made by Enzon, or its
Representatives, regardless of whether or not arising from and during the course
of the Development, shall be solely owned by Elan and sublicensed (within the
Field and within the Territory) without additional consideration to Enzon
through Inex on the terms set out in this Section. Enzon shall cooperate, and
shall cause its Representatives to cooperate, with Inex and Elan, at Elan's
expense, in perfecting Elan's ownership and other proprietary rights in respect
of any Elan Improvements and Enzon hereby assigns same to Elan and shall execute
and deliver, and cause its Representatives to execute and deliver, to Elan any
documents that Elan may reasonably require with respect thereto. If at any time
Elan does not exercise its rights under this Section, such rights may be
exercised by Inex as if Inex were Elan under this Section.
10.4 Ownership of Regulatory Approvals and Regulatory Submissions
Notwithstanding the terms of Section 10.3:
10.4.1 Inex or its Representatives will own all Regulatory Approvals and
Regulatory Submissions made as part of the Development in respect
of the Product in the Territory and all Intellectual Property
Rights in same; and
10.4.2 Inex or its Representatives may use all Data and Regulatory
Approvals and Regulatory Submissions, in Inex or its
Representative's efforts to register and commercialize the Product
outside the Territory and inside the Territory but outside the
Field.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
32
10.5 Ownership of Intellectual Property Rights Outside the Development
Except as otherwise provided in Sections 10.3 and 10.4, each Party shall have
and retain sole and exclusive title to all inventions, discoveries and know-how
which are made, conceived, reduced to practice or generated by its
Representatives. For greater certainty, Intellectual Property Rights or
inventions or creations generated outside the Development and without access to
the other Party's Confidential Information shall not be licensed hereunder or
included in the Licensed Patents or Inex Technology.
Article 11 Termination
11.1 Term
This Agreement shall become effective on the Effective Date and, unless earlier
terminated as provided for herein, shall expire, on a country-by-country basis,
upon the later of:
11.1.1 expiration of the last to expire of the Licensed Patents
containing Valid Claims covering the Product in such country in
the Territory; and
11.1.2 fifteen years from the date of the First Commercial Sale in that
country;
and such period shall be the "Term" under this Agreement.
11.2 Renewal
On or before six months before the expiration of this Agreement in accordance
with its terms, Enzon may notify Inex in writing that Enzon wishes to renew this
Agreement. In the event that Enzon so notifies Inex, the Parties will negotiate
in good faith for the extension of the Term. If the Parties have not reached
agreement in writing to extend the Term on or before the expiry of the Term,
this Section 11.2 shall be of no further force or effect.
11.3 Voluntary Termination
11.3.1 In the event that Enzon does not have a significant interest in
obtaining or maintaining Regulatory Approval of and marketing
Product in any country of the Territory, Enzon shall promptly
notify Inex in writing. If Inex requests in writing that Enzon
indicate whether or not Enzon has an interest in obtaining or
maintaining Regulatory Approval of and marketing Product in a
country(ies) of the Territory, within thirty (30) days thereafter
Enzon shall notify Inex in writing as to whether or not Enzon has
such an interest. In the event that:
(a) Enzon notifies Inex that it does not have a significant
interest in obtaining or maintaining Regulatory Approval
of and marketing Product in any country(ies) of the
Territory; or
(b) Enzon does not respond in writing within thirty (30)
days of Enzon's receipt of Inex's query;
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
33
(c) Inex may terminate all licenses granted to Enzon
pursuant to this Agreement in respect of such
country(ies) of the Territory, and such country(ies)
shall no longer form part of the Territory.
11.3.2 Enzon may terminate this Agreement in its entirety at any time by:
(a) providing Inex ninety (90) days prior written notice of
Enzon's intention to terminate;
(b) paying all outstanding obligations due to Inex,
including Enzon's portion of all non-cancelable
Development Costs incurred by Inex and its Affiliates
pursuant to the Related Agreements as of the date of
termination; and
(c) paying a termination fee of two million dollars
($2,000,000), unless such termination is effected after
12 months from the Effective Date but prior to Inex
completing its NDA submission to the FDA for the
Product.
(d) All amounts due hereunder shall be paid by Enzon to Inex
within ten (10) days of termination, without reduction,
except as agreed in writing between the parties.
11.4 Termination for Breach
Each Party shall be entitled to terminate this Agreement and the licenses
granted hereunder to the other Party by written notice to the other Party in the
event that the other Party shall be in material default of any of its
obligations hereunder, and shall fail to remedy any such default within ninety
(90) days after notice thereof by the non-breaching Party. Any such notice shall
specifically state that the non-breaching Party intends to terminate this
Agreement in the event that the breaching Party shall fail to remedy the
default. Any such notice shall set out expressly the actions required of the
breaching Party to remedy the default. If such default is not corrected, the
non-breaching Party shall have the right to terminate this Agreement by giving
written notice to the Party in default provided the notice of termination is
given within six (6) months of the default and prior to correction of the
default.
11.5 Termination upon Bankruptcy
11.5.1 This Agreement may be terminated by a Party by providing written
notice to the other Party upon:
(a) the bankruptcy, liquidation or dissolution of the other
Party;
(b) the filing of any voluntary petition for bankruptcy,
dissolution, liquidation or winding-up of the affairs of
the other Party; or
(c) the filing of any involuntary petition for bankruptcy,
dissolution, liquidation or winding-up of the affairs of
the other Party which is not dismissed within one
hundred twenty (120) days after the date on which it is
filed or commenced.
11.5.2 Notwithstanding the foregoing, either Party may seek the waiver of
the operation of Section 11.5.1 in advance of any event giving
rise to a right of termination under Section 11.5.1(b), and,
provided that:
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
34
(a) the requesting Party is in good standing and not in
breach of any of the terms of the Related Agreements;
(b) the requesting Party is in reasonable financial
condition; and
(c) the Party whose consent is sought will not be prejudiced
by granting such waiver,
the Party whose consent is sought will not unreasonably withhold
its consent to such waiver. Such waiver may be revocable in the
event of a material adverse change in circumstances related to the
requesting Party not contemplated at the time of granting the
waiver.
11.6 Survival of Obligations; Return of Confidential Information
11.6.1 Upon any termination of this Agreement pursuant to this Article
11, neither Party shall be relieved of any obligations incurred
prior to such termination.
11.6.2 Upon any termination of this Agreement pursuant to this Article
11, the licenses granted in Section 2.1 will forthwith terminate.
11.6.3 Notwithstanding any termination of this Agreement, the obligations
of the Parties under Article 1, Sections 5.9 and 5.10, Article 9,
Article 10, Article 11 and Article 12, as well as under any other
provisions which by their nature are intended to survive any such
termination, shall survive and continue to be enforceable. 11.6.4
Upon any termination of this Agreement pursuant to this Article
11, except as contemplated hereby, each Party shall promptly
return to the other Party all written Confidential Information,
and all copies thereof (except for one archival copy to be
retained by a person designated by such Party (who shall not make
such Confidential Information generally available to employees or
other representatives of such Party) for the purpose of confirming
which information to hold in confidence hereunder), of the other
Party which is not covered by a license surviving such
termination.
11.7 Additional Consequences of Termination
11.7.1 On or before the effective date of termination of this Agreement,
except as otherwise set forth herein:
(a) Enzon shall promptly deliver to Inex a copy of all Data
and such other information, materials (including
biological materials) and documents in Enzon's
possession or control arising from the development of
the Product under this Agreement, including, without
limitation, the Development, provided that Inex shall be
responsible for any reasonable associated Out-of-Pocket
Costs associated with transferring same;
(b) Enzon shall pay its share of the Development Costs as
determined in accordance with Article 5, including all
non-cancelable Development Costs reasonably committed to
by Inex and its Affiliates prior to the termination of
the Agreement;
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
35
(c) in the event that such termination occurs before the
payment of all of the milestone payments referred to in
Section Error! Reference source not found., then,
concurrently with such termination, Enzon shall pay to
Inex the next such payment, pro-rated so that such
payment is reduced by the proportion of the year
remaining prior to the date for such payment as of the
effective date of such termination;
(d) Enzon's right to use the Data pursuant to Section 10.4.2
will forthwith terminate;
(e) all licenses and sublicenses granted pursuant to this
Agreement shall forthwith terminate;
(f) Enzon shall:
(i) use all reasonable endeavors to take all steps and
execute all documents reasonably necessary to
assign and/or transfer or permit reference to (to
the extent legally permissible in the relevant
country) all Regulatory Approvals and Regulatory
Submissions arising from the development of the
Product under this Agreement, including, without
limitation, the Development, in Enzon's name or in
the name of Enzon's Affiliates or Sublicensees, to
Inex or its designee;
(ii) provide to Inex or its designee copies of or
access to all correspondence, meeting minutes and
any other written information exchanged between
Enzon and any Regulatory Authority(ies) regarding
such Regulatory Approvals and Regulatory
Submissions;
(iii) in the event that no such assignment and/or
transfer and/or reference pursuant to Section
11.7.1(f)(i) may legally be made, then Enzon shall
forthwith surrender such Regulatory Approvals and
Regulatory Submissions for cancellation; and
(iv) upon Inex's request, Enzon shall within the same
period deliver to Inex or its designee any and all
documents relating to Regulatory Approvals and
Regulatory Submissions in its possession or
control arising from the Development that are
reasonably required in order to file, obtain or
maintain Regulatory Approvals for the Product.
11.8 Termination on a Country by Country Basis
In the event of termination of this Agreement in respect of one or more
country(ies) in the Territory pursuant to Section 11.3.1, then Sections 11.6 and
11.7 shall apply in respect of the country(ies) to which such termination
applies.
11.9 Termination of Related Agreements
In the event of termination of this Agreement, the Related Agreements shall
terminate with immediate effect, subject to any continuing or surviving
obligations as set forth in each such Related Agreement.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
36
Article 12 Miscellaneous
12.1 Assignment
12.1.1 The rights and obligations set out in this Agreement are personal
to each Party and for this reason, except as expressly set out in
this Agreement, this Agreement will not be assignable by either
Party in whole or in part, nor will either Party subcontract any
of its obligations hereunder without the prior written consent of
the other Party, which consent shall not be withheld or delayed
unreasonably; provided, however, that the restriction contained
herein will in no way limit the rights of either Party to:
(a) assign or subcontract any right or obligation hereunder
to any of its Affiliates; or
(b) appoint as its agent for any purpose of this Agreement
any such Affiliate; or
(c) assign any right or obligation hereunder to any person
or entity that:
(i) purchases all or substantially all of its assets
to which this Agreement relates or
(ii) purchases all or substantially all of the stock of
either Party; or
(iii) acquires or is combined with either Party in a
merger or some other form of business combination.
12.1.2 This Agreement will be binding upon and will enure to the benefit
of the parties hereto and to any permitted assignee or successor
of either party.
12.1.3 Subject to other provisions of this Section 12.1, if one Party
validly assigns or subcontracts any or all of its obligations
hereunder, such assigning or subcontracting Party agrees to remain
bound by all of its responsibilities and obligations hereunder.
12.1.4 Any and all assignments of this Agreement or any interest herein
not made in accordance with this Section 12.1 will be void ab
initio.
12.2 Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.
12.3 Force Majeure
In the event that either Party is prevented from performing or is unable to
perform any of its obligations under this Agreement due to any act of God; fire;
casualty; flood; war; strike; lockout; failure of public utilities; injunction
or any act, exercise, assertion or requirement of governmental authority;
epidemic; destruction of production facilities; riots; insurrection; failure of
transportation; inability to procure or use materials; or any other cause beyond
the reasonable control of the Party invoking this Section 12.3 if such Party
shall have used its reasonable efforts to avoid such occurrence, such Party
shall give notice to the other Party in writing promptly, and thereupon the
affected Party's performance shall be excused and the
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
37
time for performance shall be extended for the period of delay or inability to
perform due to such occurrence.
12.4 Further Assurances
Each Party hereto agrees to execute, acknowledge and deliver such further
instruments and do all such further acts as may be necessary or appropriate to
carry out the purposes and intent of this Agreement.
12.5 International Sale of Goods Act
The Parties acknowledge and agree that the International Sale of Goods Act and
the United Nations Convention on Contracts for the International Sale of Goods
have no application to this Agreement.
12.6 Modification
No waiver, alteration or modification of any of the provisions hereof shall be
binding unless made in writing and signed by the Parties by their respective
officers thereunto duly authorized.
12.7 No Agency
Nothing herein shall be deemed to constitute either Party as the agent or
Representative of the other Party, or both Parties as joint venturers or
partners for any purpose. Inex shall be an independent contractor, not an
employee or partner of Enzon, and the manner in which Inex renders its services
under this Agreement shall be within Inex's sole discretion. Neither Party shall
be responsible for the acts or omissions of the other Party, and neither Party
will have authority to speak for, represent or obligate the other Party in any
way without prior written authority from the other Party.
12.8 No Solicitation or Hiring of Employees
During the Development and for one year thereafter, neither Inex nor Enzon
shall, without the prior consent of the other Party, solicit the employment of
or hire any person who during the course of employment with the other Party was
involved with activities under the Development Plan and who when solicited or to
be hired is a current employee of the other Party.
12.9 Non-Use of Names
Except as otherwise expressly set out in this Agreement, neither Party shall use
the name of the other Party, nor any adaptation thereof, in any advertising,
promotional or sales literature without prior written consent obtained from such
other Party in each case (which consent shall not be unreasonably withheld or
delayed).
12.10 Notices
Any notice or other communication in connection with this Agreement must be in
writing and if by mail, by registered mail, return receipt requested, and shall
be effective when delivered to the addressee at the address listed below or such
other address as the addressee shall have specified in a notice actually
received by the addressor.
If to Inex:
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
38
Inex Pharmaceuticals, Inc.
c/o Corporation Trust Center
1209 Orange Street
Wilmington, DE 19801
Attention: President and CEO
With copies to:
Inex Pharmaceuticals Corporation
100-8900 Glenlyon Parkway
Burnaby, British Columbia
Canada V5J 5J8
Fax: 604-419-3202
Attention: Sr. V.P. Commercial Operations, and
With a copy to:
Inex Pharmaceuticals Corporation
100-8900 Glenlyon Parkway
Burnaby, British Columbia
Canada V5J 5J8
Fax: 604-419-3202
Attention: Business Development
and: Lang Michener
1500-1055 West Georgia Street
Vancouver, British Columbia
Canada V5J 5J8
Fax: 604-685-7084
Canada V6E 4N7
Attention: Leo Raffin
and:
Farris, Vaughan, Wills & Murphy
2600 - 700 West Georgia Street
Vancouver, British Columbia
Canada V7Y 1B3
Fax: 604-661-9349
Attention: James Hatton
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
39
If to Enzon:
Enzon Pharmaceuticals, Inc.
685 Route 202/206
Bridgewater, New Jersey, USA 08807
Fax: 908.541.8680
Attention: V.P. Business Development
with a copy to:
Enzon Pharmaceuticals, Inc.
685 Route 202/206
Bridgewater, NJ 08807
Attention: General Counsel
Fax: 908.541.8838
12.11 Publicity
Except as required by law, stock exchange or Regulatory Authority:
12.11.1 neither Party, nor any of its Affiliates, shall originate any
publicity, news release or other public announcement, written or
oral, relating to this Agreement or the existence of an
arrangement between the Parties, without the prior written
approval of the other Party and agreement upon the nature and text
of such announcement or disclosure, which approval shall not be
unreasonably withheld;
12.11.2 the Party desiring to make any such public announcement or other
disclosure shall inform the other Party of the proposed
announcement or disclosure in reasonably sufficient time prior to
public release, and shall provide the other Party with a written
copy thereof, in order to allow such other Party to comment upon
such announcement or disclosure; and
12.11.3 notwithstanding the foregoing, the Parties agree that the press
release set out as an Exhibit to the Product Supply Agreement
shall be released by the Parties upon execution and delivery of
this Agreement by both Parties.
12.12 No Third Party Beneficiaries
Except as expressly set out in this Agreement, nothing in this Agreement is
intended to or shall confer upon any Third Part any legal or equitable right,
benefit or remedy of any nature whatsoever.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
40
12.13 Waiver
The waiver by either Party of a breach or a default of any provision of this
Agreement by the other Party shall not be construed as a waiver of any
succeeding breach of the same or any other provision, nor shall any delay or
omission on the part of either Party to exercise or avail itself of any right,
power or privilege that it has or may have hereunder operate as a waiver of any
right, power or privilege by such Party.
12.14 Cross Default
A breach of or default under any of the Related Agreements other than the
Co-Promotion Agreement shall constitute a breach of and default under all the
Related Agreements.
IN WITNESS WHEREOF, the Parties hereto have caused this Development Agreement to
be executed as a sealed instrument in their names by their properly and duly
authorized officers or representatives.
Inex Pharmaceuticals, Inc.
By: /s/ David J. Main
---------------------------
Name: David J. Main
Title: President & CEO
Enzon Pharmaceuticals, Inc.
By: /s/ Arthur J. Higgins
---------------------------
Name: Arthur J. Higgins
Title: Chairman & CEO
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
41
Exhibit 1.1.1: Adverse Drug Event
ADVERSE DRUG EVENT FORM
An Adverse Drug Event shall mean any noxious, unintended, or untoward
medical occurrence in a patient or clinical investigation subject
associated with the use of a medicinal or investigational product, whether
or not related to the medicinal or investigational product.
This Form must be completed and faxed to the Regulatory Authorities (with
a copy provided to the other Party)::
a) Immediately, or not later than 24 hours following receipt of any
information relating to an Adverse Drug Event; and
b) No later than two (2) business days following receipt of any information
relating to a product complaint.
Complaint Date:__________________________
Complaint received by:___________________ Title:________________________
Manner complaint received in: Oral |_| Written |_| Faxed |_|
Other:_________________
Complainant's name:__________________ Phone:___________ Fax: _____________
Clinic's name:_________________ Phone:_____________ Fax:__________________
Clinic's Address:_________________________________________________________
Product Name: ___________ Lot number: ___________ Expiry Date: ___________
Description of Product Complaint or Adverse Drug Event:___________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
42
Exhibit 1.1.27: ***
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
43
Exhibit 1.1.36: ***
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
44
Exhibit 5.2.1(c): Ongoing Phase II Clinical Trials
***
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
45
Exhibit 6.1: Joint Steering Committee Responsibilities
The members of the Joint Steering Committee as of the Effective Date are:
For Enzon:
Eddy Anglade, VP - Clinical
Clarke Atwell, VP - Sales & Marketing
Katherine Bishburg, VP - Regulatory
Eric Liebler, VP - Business Development
For Inex:
Tom MacRury, Senior VP, Commercial Opoerations
Alexandra Mancini, Senior VP, Clinical and Regulatory Affairs
Jeff Charpentier, VP Finance and CFO
Linda Diano, Director, Project Management
The Joint Steering Committee shall have responsibilities including:
1. review amendments to the Development Plan and submit same to the Parties
for review and approval;
2. establish working committees to conduct work under the Development Plan;
3. assign responsibility for conducting all needed Development work
appropriately between the Parties, including providing for subcontractors
to perform certain tasks if desirable;
4. oversee all Development activities, including the review and approval as
appropriate, of all reports on the progress of Development;
5. coordinate the overall strategy for Development and commercialization;
6. meet quarterly, circulate agendas at least one (1) week in advance of each
quarterly meeting, and circulate minutes of meetings within two (2) weeks
following each meeting;
7. verify the reports of Development Costs;
8. such other duties and responsibilities as may be agreed upon by the
Parties; and
9. be the primary contact point between the Parties regarding the transfer of
information and the discussion of each Party's efforts to conduct
Development.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
PRODUCT SUPPLY AGREEMENT
BETWEEN
INEX PHARMACEUTICALS, INC.
AND
ENZON PHARMACEUTICALS, INC.
January 19, 2004
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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TABLE OF CONTENTS
Article 1 Interpretation......................................................6
1.1 Definitions.......................................................6
1.2 Entire Agreement; Conflicts......................................15
1.3 Governing Law....................................................15
1.4 Headings.........................................................15
1.5 Severability.....................................................15
Article 2 Purchasing and Price...............................................15
2.1 Purchase Price of Product........................................15
2.2 Terms of Payment for Manufacturing Cost Plus.....................16
2.3 Terms of Payment for Deferred Sales Payments.....................17
2.4 Remuneration respecting Sublicensees.............................17
2.5 Third Party Payments.............................................17
2.6 Commercial Sales of Development Stock............................17
2.7 Reports and Payment..............................................18
2.8 Withholding Taxes................................................18
2.9 Foreign Payments.................................................19
2.10 Method of Payment................................................19
2.11 Late Payments....................................................19
2.12 Records..........................................................19
2.13 Audits...........................................................19
Article 3 Forecasting and Purchase Orders....................................20
3.1 Sales and Operations Plan........................................20
3.2 Purchase Orders Issued Before First FDA Approval.................21
3.3 Purchase Orders Issued After First FDA Approval..................22
Article 4 Manufacturing......................................................22
4.1 Technical Activities to Support Manufacturing....................22
4.2 Manufacturing in Compliance......................................22
4.3 Subcontractors...................................................22
4.4 Technical Transfer to and Manufacture by Enzon...................22
4.5 Material Change to Financial Terms...............................23
4.6 Quality/Technical Agreement......................................23
Article 5 Supply and Shipment................................................24
5.1 Shipping Notification............................................24
5.2 Shipment of Product..............................................24
5.3 Shipment of Released Product.....................................24
5.4 Risk of Loss and Shipping Expenses...............................24
5.5 Rejection of Delivered Product...................................24
5.6 Obsolescence and Returns.........................................25
5.7 Disposal and Destruction.........................................25
Article 6 Product Receipt and Distribution...................................25
6.1 Receipt..........................................................25
6.2 Storage and Handling.............................................25
6.3 Distribution.....................................................25
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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6.4 Records for Traceability.........................................25
Article 7 Shipments for Launch...............................................25
7.1 Consequence of Launch Supply Failure.............................25
7.2 Enzon's First Option to Terminate................................26
7.3 Enzon's Second Option to Terminate...............................26
7.4 Cure by Inex.....................................................26
Article 8 Changes............................................................27
8.1 Enzon's Right to Notice of and Consent to Changes................27
8.2 New Regulatory Requirements......................................27
8.3 Reservation......................................................27
Article 9 Commercialization..................................................27
9.1 Regulatory Compliance............................................27
9.2 Assignment of Trademarks.........................................28
9.3 Use of Inex Trademarks in Labelling..............................28
9.4 Patent Marking...................................................28
9.5 Commercialization Efforts........................................28
9.6 Commercial Diligence in accordance with Commercialization Plan...28
9.7 Overview of Commercialization....................................29
9.8 Subcontractors...................................................29
9.9 Commercialization Plans..........................................29
9.10 Funding of Commercialization Costs...............................30
9.11 Consequence of No Sales..........................................30
9.12 Reports..........................................................30
9.13 Launch of Competitive Product by Enzon...........................31
Article 10 Joint Steering Committee..........................................31
10.1 Joint Steering Committee.........................................31
10.2 Meetings of the Joint Steering Committee.........................32
10.3 Working Committees...............................................32
Article 11 Pharmacovigilance, DDMAC and Recalls..............................32
11.1 Regulatory Responsibilities......................................32
11.2 Pharmacovigilance Agent..........................................33
11.3 Agency for DDMAC Activities and the Like.........................33
11.4 Agent for Regulatory Authorities Generally.......................34
11.5 Recalls and Withdrawals of Product...............................34
11.6 Replacement Shipments............................................35
Article 12 Restrictive Covenants; Title......................................35
12.1 Injunctive Relief................................................35
12.2 Ownership of Pre-Existing Intellectual Property Rights...........35
12.3 Ownership of Intellectual Property Rights in the Product.........35
12.4 Ownership of Regulatory Approvals and Regulatory Submissions.....36
12.5 Ownership of Intellectual Property Rights Outside the
Commercialization and Co-Promotion...............................36
12.6 Co-operation.....................................................36
12.7 Prosecution and Maintenance of Licensed Patents..................36
12.8 Notice of Inventions.............................................37
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- iv -
12.9 Restriction on Attacks on Intellectual Property..................37
12.10 Elan a Third Party Beneficiary...................................37
Article 13 Allocation of Risk................................................37
13.1 Limits...........................................................37
13.2 Conduct of Infringement Proceedings..............................38
13.3 Defense of Infringement Proceedings..............................38
13.4 Co-operation with Other Licensees................................38
Article 14 Indemnification and Liability Limitations.........................38
14.1 Indemnification by Enzon.........................................38
14.2 Indemnification by Inex..........................................39
14.3 Notice of Claims.................................................40
14.4 Consequential Losses.............................................40
14.5 Actions Between the Parties......................................41
14.6 Insurance........................................................41
Article 15 Confidential Information and Publication..........................41
15.1 Treatment of Confidential Information............................41
15.2 Permitted Disclosures............................................41
15.3 Publications Generally...........................................42
15.4 No Limitation on Regulatory Compliance...........................42
Article 16 Dispute Resolution................................................42
16.1 Negotiation......................................................42
16.2 Arbitration......................................................43
16.3 Consent to Jurisdiction..........................................43
Article 17 Termination.......................................................43
17.1 Term of Agreement................................................43
17.2 Renewal..........................................................44
17.3 Termination for Breach...........................................44
17.4 Termination upon Bankruptcy......................................44
17.5 Termination of Related Agreements................................44
17.6 Effect of Termination............................................45
17.7 Consequences of Termination in Certain Circumstances.............45
17.8 Additional Consequences of Termination...........................46
17.9 Survival of Obligations; Return of Confidential Information......46
Article 18 Miscellaneous.....................................................47
18.1 Assignment.......................................................47
18.2 Counterparts.....................................................47
18.3 Exhibits and Appendices..........................................47
18.4 Force Majeure....................................................47
18.5 Further Assurances...............................................48
18.6 International Sale of Goods Act..................................48
18.7 Modification.....................................................48
18.8 No Agency........................................................48
18.9 No Solicitation or Hiring of Employees...........................48
18.10 Non-Use of Names.................................................48
18.11 Notices..........................................................48
18.12 Parallel Imports.................................................50
18.13 Publicity........................................................50
18.14 No Third Party Beneficiaries.....................................51
18.15 Waiver...........................................................51
18.16 Cross Default....................................................51
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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PRODUCT SUPPLY AGREEMENT
This PRODUCT SUPPLY AGREEMENT dated as of the 19th day of January, 2004 between
Inex Pharmaceuticals, Inc., a corporation duly incorporated pursuant to the laws
of Delaware, USA, having a registered office at Corporation Trust Center, 1209
Orange Street, Wilmington, DE 19801 (hereinafter referred to as "Inex"), and
Enzon Pharmaceuticals, Inc., a corporation duly incorporated pursuant to the
laws of Delaware, having a principal place of business at 685 Route 202/206,
Bridgewater, New Jersey 08807 (hereinafter referred to as "Enzon").
INTRODUCTION
A. Enzon is a pharmaceutical company with operations in research and
development, import, export, manufacture and sale of pharmaceutical products;
B. Inex is in the business of developing, manufacturing and selling certain
pharmaceutical products, including Vincristine Sulfate Liposomes Injection (as
further defined in this Agreement);
C. Of even date hereof, the Parties have entered into a Development Agreement
for the development of Vincristine Sulfate Liposomes Injection and for the
purpose of enabling Enzon to acquire rights to develop, market, distribute and
sell Inex's Vincristine Sulfate Liposomes Injection product;
D. Subject to the terms and conditions set forth in this Agreement, Enzon wishes
to have Inex supply to Enzon Vincristine Sulfate Liposomes Injection; and
E. Inex wishes to supply same to Enzon;
NOW, THEREFORE, the Parties, intending to be legally bound, hereby agree as
follows:
Article 1 Interpretation
1.1 Definitions
Unless otherwise defined in this Agreement, capitalized terms used in this
Agreement shall have the meaning set out therefor in the Development Agreement
and the Co-Promotion Agreement. In the event of a conflict between the
definitions set out for capitalized terms in this Agreement and the capitalized
terms set out in any other Related Agreement, the priority set out in Section
1.2 shall govern. For purposes of this Agreement, the following terms will have
the meanings set forth below:
1.1.1 "Adverse Drug Event" will have the meaning set forth in Exhibit
1.1.1.
1.1.2 "Affiliate" means any corporation, company, partnership, joint
venture or other person or entity which controls, is controlled by
or is under common control with a Party. For purposes of this
Section 1.1.2, "control" shall mean (a) in the case of corporate
entities,
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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direct or indirect ownership of at least 50% of the stock or
shares (or such lesser percentage which is the maximum allowed to
be owned by a foreign corporation in a particular jurisdiction)
entitled to vote for the election of directors or otherwise having
the power to vote on or direct the affairs of such Party; and (b)
in the case of non-corporate entities, direct or indirect
ownership of at least 50% of the equity interest or the power to
direct the management and policies of such non-corporate entities.
1.1.3 "Agreement" means this Product Supply Agreement including all
exhibits attached to this Agreement.
1.1.4 "Applicable Laws" means all applicable federal, provincial, state
and local laws, ordinances, rules and regulations of any kind
whatsoever in the Territory, including, without limitation,
pharmaceutical and environmental rules and regulations, including
cGMP Requirements, GCP Requirements, GLP Requirements and the
General Biological Products Standards of the FDA, and the Federal
Food, Drug and Cosmetic Act, as amended, or any successor act
thereto ("FDCA").
1.1.5 "Approved S&OP" has the meaning set out in Section 3.1.4.
1.1.6 "Business Day" means any day other than a day which is a Saturday,
a Sunday or a statutory holiday in New York City, New York, USA.
1.1.7 "Calendar Quarter" means the three-month period ending on March
31, June 30, September 30 or December 31.
1.1.8 "cGMP Requirements" shall mean the current Good Manufacturing
Practices standards required by the FDA, the Therapeutic Products
Directorate Organization of Health Canada ("TPD") and the
equivalent Regulatory Authority(ies) elsewhere in the Territory,
and the applicable regulations, policies or guidelines of each of
them in effect for the manufacture and testing of pharmaceutical
materials, active ingredients, or excipients, as applicable.
1.1.9 "Code" or "Codes" means the Code on Interactions with Healthcare
Professionals promulgated by the Pharmaceutical Research and
Manufacturers of America (PhRMA) and the American Medical
Association (AMA) Guidelines on Gifts to Physicians from Industry,
as either of the foregoing may be amended from time to time.
1.1.10 "Commercial Quarter" means a Calendar Quarter during which Net
Sales are recorded.
1.1.11 "Commercial Year" means a period of four consecutive Calendar
Quarters commencing with the Initial Commercial Quarter.
1.1.12 "Commercialization" means the activities customarily associated
with sales of pharmaceutical products including without
limitation, DDMAC Activities, price and reimbursement
negotiations, pre-launch and launch activities, marketing, sales,
distribution, Post-Approval Clinical Activities, the development,
prosecution, registration and maintenance of trademarks, trade
names and domain names, and Pharmacovigilance in each country in
the Territory.
1.1.13 "Commercialization Costs" means the cost of Commercialization of
the Product, including the Commercialization FTE Costs and
Out-of-Pocket Costs utilized or incurred by a Party in fulfilling
its obligations under the then-current Commercialization Plan and
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 8 -
all Commercialization FTE Costs and Out of Pocket Costs incurred
in excess of the Budget in the then-current Commercialization
Plan, provided that any such excess costs have been approved in
advance by the Joint Steering Committee. For greater certainty,
"Commercialization Costs" do not include Development Costs as
defined in the Development Agreement.
1.1.14 "Commercialization FTE" means a scientific or technical person
employed by a Party or a Party's Affiliates and assigned to work
on Commercialization with such time and effort to constitute one
person working on Commercialization on a full time basis
consistent with normal business and scientific practice (e.g.,
having appropriate education, training and experience and working
*** hours per year of dedicated effort).
1.1.15 "Commercialization FTE Costs" means the price of Commercialization
FTEs to be used for the purposes of determining the costs incurred
with respect to personnel performing work on the Commercialization
in accordance with the then-approved Commercialization Plan. The
price per Commercialization FTE shall initially be *** per
Commercialization FTE year or pro-rata portion thereof incurred on
the Commercialization. The Commercialization FTE rate includes all
the fully burdened cost of salary, employee benefits, incidental
materials, travel, lodging and other expenses including support
staff and direct and indirect overhead for or associated with a
Commercialization FTE. On each anniversary of the Effective Date,
the FTE rate shall be raised by a percentage equal to the
percentage increase in the Index (defined below) for the twelve
(12) month period ending with December of the calendar year
immediately preceding such anniversary date (such increase, the
"CPI Increase"). For purposes of this Agreement, the term "Index"
shall mean the Consumer Price Index for all Urban Consumers
(CPI-U) - - U.S. City Average. All Items (1982-1984 = 100), as
published by the United States Bureau of Labor Statistics, or if
such index is no longer published, then the index most comparable
thereto.
1.1.16 "Commercialization Plan" means the Commercialization Plan for
Commercializing the Product, together with a corresponding budget
accounting for the anticipated Commercialization Costs to be
expended or incurred by each Party in conducting the
Commercialization. The Parties will adopt a definitive
Commercialization Plan in accordance with Section 9.9, which
Commercialization Plan will form a part of this Agreement.
1.1.17 "Commercially Reasonable Efforts" means efforts which are not less
than those efforts a Party makes with respect to other
pharmaceutical products in its portfolio (but, in any event, not
less than the efforts that would be exerted by a reasonably
prudent and diligent pharmaceutical company similarly situated and
seeking to accomplish similar objectives), taking into account the
product's market potential, level of competition, number of
prescribers and other relevant factors.
1.1.18 "Competitive Product" means any liposomal medicinal products where
such liposomal medicinal products incorporate Vincristine.
1.1.19 "Confidential Information" means:
(a) all proprietary information and materials, patentable or
otherwise, of a Party which is disclosed in writing by
or on behalf of such Party to the other Party and marked
as confidential or proprietary, including DNA sequences,
vectors, cells, substances, formulations, techniques,
methodology, equipment, data, reports,
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 9 -
Inex Technology, preclinical and clinical trials and the
results thereof, sources of supply, patent positioning,
marketing plans and business plans, including any
negative developments;
(b) any other information, oral or written, designated in
writing by the disclosing Party to the other Party as
confidential or proprietary within ten (10) days after
such disclosure, whether or not related to the making,
use, importing or selling of the Product; and
(c) the Data, the Inex Technology, the Regulatory Approvals
and Regulatory Submissions, and the Licensed Patents
(all of which are deemed to be Confidential Information
of Inex);
provided that Confidential Information shall not include such
information which:
(d) was known or used by the receiving Party or its
Affiliates prior to its date of disclosure to the
receiving Party, as evidenced by the prior written
records of the receiving Party or its Affiliates; or
(e) either before or after the date of the disclosure to the
receiving Party is lawfully disclosed to the receiving
Party or its Affiliates by an independent, unaffiliated
Third Party rightfully in possession of the Confidential
Information; or
(f) either before or after the date of the disclosure to the
receiving Party becomes published or generally known to
the public through no fault or omission on the part of
the receiving Party or its Affiliates; or
(g) the receiving Party can verify, by written
documentation, results from research and development by
the receiving Party or any of its Affiliates independent
of disclosure by the other Party thereof.
1.1.20 "Co-Promotion" has the meaning set out in the Co-Promotion
Agreement.
1.1.21 "Co-Promotion Agreement" means the Co-Promotion Agreement between
Inex and Enzon of even date herewith.
1.1.22 "DDMAC Activities" mean all jointly agreed-to activities performed
or to be performed by one or both Parties in accordance with the
requirements of the Division of Drug Marketing, Advertising and
Communications, Center for Drug Evaluation and Research of the
FDA, and the Office of the Inspector General of the Department of
Health and Human Services of the United States.
1.1.23 "Deferred Sales Price" and "Deferred Sales Payment" shall have the
meaning set forth in Exhibit 2.1.1(b).
1.1.24 "Development Agreement" shall mean the Development Agreement
between Inex and Enzon entered into as of the Effective Date.
1.1.25 "DMF" means each drug master file, as defined by the FDA, held by
Inex or Inex's contract manufacturers.
1.1.26 "Dollar" and "$" means United States Dollars.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 10 -
1.1.27 "Effective Date" means the date shown on page one of this
Agreement.
1.1.28 "FDA" means the United States Food and Drug Administration or any
successor agency thereto.
1.1.29 "First Commercial Sale" means (a) with respect to a country in the
Territory, the first sale by Enzon, its sublicensees or its
Affiliates for use, consumption or resale of the Product in such
country (excluding any sales for clinical trials, compassionate
uses or other non-commercial purposes) and (b) with respect to the
Territory, the First Commercial Sale in any country within the
Territory. A sale to a sublicensee or an Affiliate shall not
constitute a First Commercial Sale unless the sublicensee or
Affiliate is the end user of the Product.
1.1.30 "Forecast" shall have the meaning set out in Section 3.1.2.
1.1.31 "GCP Requirements" or "Good Clinical Practices" means the then
current standards for clinical trials for pharmaceuticals as
required by the FDA, the TPD and the equivalent Regulatory
Authority(ies) elsewhere in the Territory, and as applicable, the
policies and guidelines of the International Conference on
Harmonization in effect for the clinical testing of pharmaceutical
materials.
1.1.32 "GLP Requirements" or "Good Laboratory Practices" means the
current Good Laboratory Practices standards required by the FDA
and the TPD and the equivalent Regulatory Authority(ies) elsewhere
in the Territory in effect for the testing of pharmaceutical
materials as applied to raw materials and finished products.
1.1.33 "include" and "including" (and the like) means "including, without
limitation".
1.1.34 "Indemnitee" shall have the meaning set out in Section 14.3.
1.1.35 "Indemnitor" shall have the meaning set out in Section 14.3.
1.1.36 "Inex Technology" means all technical information and know-how
owned or controlled by Inex which relates to the Product and is
necessary or useful for the development and commercialization of
the Product and shall include:
(a) as of the Effective Date, all biological, chemical,
pharmacological, toxicological, clinical, assay, control
and manufacturing data and any other information owned
or controlled by Inex and necessary or useful for the
development and commercialization of the Product;
(b) any Data referred to in Section 10.3 of the Development
Agreement; and
(c) any Data referred to in Section 12.3.
1.1.37 "Intellectual Property Rights" means any rights to any Patents and
copyright rights and registrations and applications for
registration of the foregoing rights, and trade secrets and moral
rights. "Intellectual Property Rights" do not include trademark,
domain name or trade name rights.
1.1.38 "Initial Commercial Quarter" means the Calendar Quarter during
which the First Commercial Sale is recorded.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 11 -
1.1.39 "Joint Steering Committee" or "JSC" means the committee formed
pursuant to Section 10.1 and having the duties and
responsibilities set forth in Exhibit 10.1. The Joint Steering
Committee formed under this Agreement shall be the same as the
Joint Steering Committee formed under the Development Agreement.
1.1.40 "Licensed Patents" means the Patents owned or controlled by Inex
relating to VSLI and necessary or useful for the development and
commercialization of the Product, and shall include:
(a) as of the Effective Date, the Inex Patents, the ***;
(b) any Patents on inventions referred to in Section 10.3 of
the Development Agreement;
(c) any Patents on inventions referred to in Section 12.3;
(d) any Patents to which Inex acquires a right to grant a
sublicense to Enzon pursuant to Section 2.5.2 or 14.2.
1.1.41 "Losses" has the meaning set out in Section 14.1.1.
1.1.42 "Manufacture" shall mean the performance of all activities or a
portion thereof for the manufacture of Product and Product
Components, including the shipping, receipt, handling, testing,
and storage of starting materials, the bulk manufacture, filling,
packaging, labelling, testing, storage, shipping or receiving of
the Product and Product Components, and all associated activities,
including quality control and quality assurance. "Manufacturing",
and "Manufactured" shall have comparable meanings.
1.1.43 "Manufacturing Cost" shall mean, with respect to Manufacture of
the Product the costs described in Exhibit 2.1.1(a).
1.1.44 "Manufacturing FTE" means a person employed by Inex or its
Affiliates and assigned to work, at least as a portion of his or
her responsibilities, on Manufacturing with such time and effort
to constitute one person working on Manufacturing on a full time
basis consistent with normal business and pharmaceutical practice
(e.g., having appropriate education, training and experience and
working 1800 hours per year of dedicated effort).
1.1.45 "Manufacturing FTE Cost" means the price of Manufacturing FTEs to
be used for the purposes of determining the costs incurred with
respect to personnel performing work on the Manufacturing. The
price per Manufacturing FTE shall be *** per Manufacturing FTE
year or pro-rata portion thereof incurred on the Manufacturing.
The Manufacturing FTE rate includes all the fully burdened cost of
salary, employee benefits, incidental materials, travel, lodging
and other expenses including support staff and direct and indirect
overhead for or associated with a Manufacturing FTE. On each
anniversary of the Effective Date, the Manufacturing FTE rate
shall be raised by a percentage equal to the percentage increase
in the Index (defined below) for the twelve (12) month period
ending with December of the calendar year immediately preceding
such anniversary date (such increase, the "CPI Increase"). For
purposes of this Agreement, the term "Index" shall mean the
Consumer Price Index for all Urban Consumers (CPI-U) - - U.S. City
Average. All Items (1982-1984 = 100), as published by the United
States Bureau of Labor Statistics, or if such index is no longer
published, then the index most comparable thereto.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 12 -
1.1.46 "Master Production Record" shall mean Inex's complete detailed
manufacturing and control instructions and specifications for the
manufacture of the Product, as defined by Regulatory Requirements,
as amended from time to time by mutual agreement of the Parties.
The current Master Production Record is identified as set out in
Exhibit 1.1.44.
1.1.47 "NDA" means a New Drug Application in accordance with the rules
and regulations of the FDA.
1.1.48 "Net Sales" means the aggregate United States dollar equivalent of
gross revenues invoiced by Enzon and its Affiliates and its
Sublicensees from or on account of the sale of the Product to
Third Parties, less deductions allowed to customers by Enzon, its
Affiliates or Sublicensees as the case may be, to sell the Product
using generally accepted accounting principles and reasonable
practices with respect to sales of all Enzon's products,
consistently applied, for the following:
***
(collectively, the "Permitted Deductions"). No deduction shall be
made for any item of cost incurred by Enzon, its Affiliates or
Sublicensees in preparing, shipping or selling the Product except
as permitted pursuant to Sections 1.1.48Error! Reference source
not found. through 1.1.48(g) inclusive. Net Sales shall not
include any transfer between any of Enzon and any of its
Affiliates or Sublicensees for resale, but Net Sales shall include
the subsequent final sales to Third Parties by such Affiliates or
Sublicensees. Fair market value shall be assigned to any and all
non-cash consideration such as but not limited to any credit,
barter, benefit, advantage or concession received by Enzon or its
Affiliates or Sublicensees in payment for sale of the Product. As
used in this definition, a "sale" shall have occurred on the
earlier of when the Products are invoiced or shipped.
Notwithstanding anything herein to the contrary, the following
shall not be considered a sale of a Product under this Agreement:
(i) the transfer of a Product to a Third Party without
consideration to Enzon in connection with the development or
testing of a Product; or (ii) the transfer of a Product to a Third
Party without consideration in connection with the marketing or
promotion of the Product (e.g., pharmaceutical samples).
Notwithstanding the foregoing, in calculating Net Sales, no
deductions from gross revenues that are not permitted by U.S. GAAP
from being deducted for the purposes of such calculation shall be
deducted.
1.1.49 "not to be unreasonably withheld" and the like means not to be
unreasonably withheld or delayed.
1.1.50 "Notice of Rejection" shall have the meaning set out in Section
5.5.1.
1.1.51 "Out-of-Pocket Cost" means an out-of-pocket payment made by a
Party to a Third Party but only to the extent such payment relates
to costs which are incurred by such Party with respect to
fulfilling its obligations with respect to Commercialization,
Manufacturing, or Co-Promotion.
1.1.52 "Party" means Inex or Enzon and "Parties" means Inex and Enzon.
1.1.53 "Person" means and includes any individual, corporation,
partnership, firm, joint venture, syndicate, association, trust,
government body, and any other form of entity or organization.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 13 -
1.1.54 "Pharmacovigilance" means all the activities associated with
maintaining an effective drug safety monitoring system and adverse
events reporting system in compliance with the requirements of
Regulatory Authorities.
1.1.55 "Prime Rate" means the prime or equivalent rate quoted by
Citibank, N.A. from time to time.
1.1.56 "Product" means VSLI.
1.1.57 "Product Components" means all components of Products, including
Sodium Phosphate Injection, Sphingomyelin Cholesterol Liposome
Injection, and Vincristine Sulfate Injection.
1.1.58 "Purchase Order" means a purchase order from Enzon to Inex for the
Product issued in accordance with the provisions herein.
1.1.59 "Purchase Price" shall have the meaning set forth in Section 2.1.
1.1.60 "QA" means Quality Assurance, being that part of each management
system, within Inex and Enzon separately, having responsibility
for assuring the quality of the Product in respect of compliance
with Regulatory Requirements.
1.1.61 "Quality/Technical Agreement" shall have the meaning set forth in
Section 4.6.
1.1.62 "Reference Price" has the meaning given it in Section 2.2.1.
1.1.63 "Regulatory Approvals" means all necessary and appropriate
regulatory approvals which must be obtained before placing the
Product on the market in the Field in any country in the Territory
in which such approval is required, including without limitation,
INDs, NDAs, and any other comparable terms as applicable with
regard to any such approvals in any other country in the
Territory.
1.1.64 "Regulatory Authority" or "Regulatory Authorities" means:
(a) the FDA, the TPD and the equivalent Regulatory
Authority(ies) elsewhere in the Territory, whether
federal, provincial, state or municipal, regulating the
importation, distribution, marketing and/or sale of
therapeutic substances in the Territory; and
(b) the corresponding governmental authorities, whether
federal, provincial, state or municipal, of each other
applicable jurisdiction outside the Territory in which
the Product will be developed, used or sold.
1.1.65 "Regulatory Requirements" means:
(a) Applicable Laws, rules, regulations, guidances, and the
Codes and Standards in respect of all activities of the
Parties and their permitted Representatives under the
Related Agreements, including guidances in respect of
quality control and QA procedures and processes,
manufacturing and production batch records (including
the Master Production Record), packaging, handling,
storage, delivery and retention of raw material and
Product samples and associated support data, and all
licenses, certificates, authorizations or requirements
from Regulatory Authorities; and
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 14 -
(b) the corresponding laws, rules, regulations and guidances
of each other applicable jurisdiction outside the
Territory in which such activities take place.
1.1.66 "Regulatory Submissions" means all submissions and filings made in
furtherance of obtaining and maintaining any Regulatory Approvals.
1.1.67 "Related Agreements" means, collectively, this Agreement, the
Quality/Technical Agreement, the Development Agreement and the
Co-Promotion Agreement.
1.1.68 "Representatives" means, in respect of a Party, that Party's
Affiliates and their respective directors, officers, employees,
consultants, subcontractors, sublicensees, agents, representatives
and other persons acting under their authority.
1.1.69 "S&OP" has the meaning set out in Section 3.1.1.
1.1.70 "SOP" means the duly authorized and documented standard operating
procedure practised by each of Enzon and Inex in the performance
of a specified process.
1.1.71 "Specifications" means the specifications for Manufacturing the
Product and the related methods and stability protocols and
procedures as set forth in the approved NDA and any supplements
and amendments thereto, together with the specifications for raw
materials, packaging, sampling, shipping and storage of Product.
The Specifications are set forth at Exhibit 1.1.71 attached
hereto.
1.1.72 "Standards" means the Accreditation Council for Continuing Medical
Education (ACCME) Standards for Commercial Support of Continuing
Medical Education, as they may be amended from time to time.
1.1.73 "Sublicensee" means a Third Party which is not an Affiliate of
Enzon and to whom Enzon has granted a sublicense for the purpose
of developing, using, selling, having sold, distributing or
importing the Product in one or more countries of the Territory.
1.1.74 "Term" shall have the meaning set out in Section 17.1.
1.1.75 "Territory" means Mexico, Canada and the USA.
1.1.76 "Third Party" means any Person other than a Party or an Affiliate
of a Party.
1.1.77 "Trademarks" means trademarks, trade names, and domain names
identified in Exhibit 1.1.77 and all alternate trademarks adopted
and used by Enzon for the Product and all applications and
registrations therefor in the Territory.
1.1.78 "USA" means the United States of America, including its
territories, possessions and the Commonwealth of Puerto Rico.
1.1.79 "Vincristine" means the chemical compound known as vincristine
sulfate.
1.1.80 "Vincristine Sulfate Liposomes Injection" or "VSLI" means
Vincristine encapsulated in sphingomyelin/cholesterol liposomes or
a kit for production of same.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 15 -
1.2 Entire Agreement; Conflicts
This Agreement, together with the other Related Agreements, constitutes the
entire agreement between the Parties concerning the subject matter hereof. In
the event of a conflict between the terms and conditions set out in any of the
Related Agreements, the following agreement shall govern in the following
priority:
1.2.1 this Agreement; then
1.2.2 the Quality/Technical Agreement; then
1.2.3 the Development Agreement; and then
1.2.4 the Co-Promotion Agreement.
1.3 Governing Law
This Agreement shall be governed by and construed in accordance with the laws of
Delaware in force therein without regard to its conflict of law rules.
1.4 Headings
The headings contained in this Agreement are for convenience of reference only
and shall not be considered in construing this Agreement. References to Articles
are references to Articles of this Agreement and the Sections contained therein,
and references to Sections are references to Sections of this Agreement.
1.5 Severability
If a court or other tribunal of competent jurisdiction should hold any term or
provision of this agreement to be excessive, invalid, void or unenforceable, the
offending term or provision shall be deemed inoperative to the extent it
conflicts with such holding and shall be deemed to be modified to the extent
necessary to conform with such statute or rule of law, while still preserving,
to the extent practicable, the legitimate aims of the Parties, provided that the
remaining portions hereof shall remain in full force and effect. In the event
that the terms and conditions of this Agreement are materially altered as a
result of the above, the Parties will renegotiate the terms and conditions of
this Agreement to resolve any inequities.
Article 2 Purchasing and Price
2.1 Purchase Price of Product
2.1.1 Subject to the terms of this Agreement, Enzon will purchase
Product from Inex for commercial resale at the Purchase Price
comprised of the sums set forth in this Section 2.1.1 ("Purchase
Price") below:
(a) Manufacturing Cost for the units delivered as set forth
in Exhibit 2.1.1(a) plus five percent (5%)
(b) Deferred Sales Payments as set forth in Exhibit
2.1.1(b); and
(c) Sales Threshold Bonuses ("Sales Threshold Bonuses") as
follows:
(i) Ten Million Dollars ($10,000,000) payable when
cumulative Net Sales first exceeds One Hundred
Twenty-five Million Dollars ($125,000,000) in any
rolling four (4) Commercial Quarter period; and
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 16 -
(ii) Fifteen Million Dollars ($15,000,000) payable when
cumulative Net Sales first exceeds Two Hundred
Fifty Million Dollars ($250,000,000) in any
rolling four (4) Commercial Quarter period.
2.1.2 Subject to the terms of this Agreement, Enzon will purchase
Product from Inex for use in Post-Approval Clinical Activities at
a purchase price equal to the Manufacturing Cost.
2.1.3 The Parties shall cooperate in good faith to establish a mechanism
to share on a 50/50 basis the per unit financial benefit
associated with any reduction in the Manufacturing Cost derived
from the Technical and Manufacturing Support Activities described
in Section 5.6.2 of the Development Agreement and/or the transfer
of Manufacturing to Enzon (if any) pursuant to Section 4.4. If the
Parties cannot agree, either Party may refer the matter to
resolution pursuant to Article 16.
2.2 Terms of Payment for Manufacturing Cost Plus
With respect to payments pursuant to Section 2.1:
2.2.1 On or before Enzon issues its first pre-launch Purchase Order
pursuant to Section 3.2.1, but in any event on or before the
earlier of: 45 days of the Effective Date; and the date of the
first Purchase Order, the Parties will agree on their best
estimate of the Manufacturing Cost for a unit of Product for 2004
plus five percent (the "Reference Price"). If the Parties are
unable to agree on such price, either Party may refer the matter
for resolution pursuant to Article 16.
2.2.2 Upon shipment of Product and complete QA documentation related
thereto, including Certificate(s) of Analysis, to Enzon, Inex
shall deliver an invoice to Enzon for the Product included in such
shipment, which invoice shall be based on the Reference Price for
the units of Product shipped. Provided the Product has not been
rejected pursuant to Section 5.5.1, Enzon agrees to pay each such
invoice within thirty (30) days after its receipt of the shipment,
complete QA documentation for such shipment and the applicable
invoice.
2.2.3 Within twelve (12) Business Days after the end of each Calendar
Quarter, Inex shall calculate the actual Manufacturing Cost for
the units of Product shipped to Enzon during such Calendar Quarter
and deliver a report setting forth such actual Manufacturing Cost
(with amounts broken out for the line items reflected in Exhibit
2.1.1(a)). Any Manufacturing Cost for the units of Product shipped
to Enzon during any Calendar Quarter and not captured in the
calculation delivered in the report referred to in this Section
shall be captured in subsequent reports.
2.2.4 If the aggregate actual Manufacturing Cost for all the units of
Product shipped to Enzon (and for which Enzon owed or owes payment
to Inex pursuant to Section 2.2.2) during such Calendar Quarter
exceeds the aggregate Reference Price paid or payable by Enzon
pursuant to Section 2.2.2 for the units of Product so shipped,
then Inex will deliver an invoice to Enzon (contemporaneous with
the report described in Section 2.2.3) for the amount of such
excess. Enzon shall pay such invoice within thirty (30) days from
the receipt of such invoice.
2.2.5 If the aggregate actual Manufacturing Cost for all the units of
Product shipped to Enzon (and for which Enzon owed or owes payment
to Inex pursuant to Section 2.2.2) during such Calendar Quarter is
less than the aggregate Reference Price paid or payable by
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 17 -
Enzon pursuant to Section 2.2.2 for the units of Product so
shipped, then Inex will deliver a credit statement to Enzon
(contemporaneous with the report described in Section 2.2.3) for
the amount of such deficiency. The amount of the deficiency shall
be credited against future amounts owed by Enzon to Inex under
Section 2.2.2.
2.2.6 At least once annually, or as more frequently as the Parties may
agree, the Parties will agree on their best estimate of a revised
Reference Price, and thereafter use the revised Reference Price
for the purposes of invoices issued pursuant to Section 2.2.2. If
the Parties are unable to agree on such price, either Party may
refer the matter for resolution pursuant to Article 16.
2.3 Terms of Payment for Deferred Sales Payments
With respect to the Deferred Sales Payment as set forth in Section 2.1.1(b), on
a quarterly basis, Enzon shall make a Deferred Sales Payment in accordance with
Exhibit 2.1.1(b) on each unit of Product in every country in the Territory until
the expiry of the Term in such country.
2.4 Remuneration respecting Sublicensees
In the event Enzon grants sublicenses to others to sell the Product, such
sublicenses shall include an obligation for the Sublicensee to account for and
report its sales of the Product on the same basis as if such sales were sales of
Enzon, and Inex shall receive compensation in the same amounts as if the sales
of the Sublicensee were sales of Enzon.
2.5 Third Party Payments
2.5.1 Inex shall pay all royalties or other remuneration owing to Third
Parties pursuant to agreements between Inex and such Third Parties
in effect as of the Effective Date which result from the exercise
by Enzon of the rights granted in Section 2.1 of the Development
Agreement.
2.5.2 If, during the term of this Agreement, Enzon and Inex mutually
agree that it is necessary to seek a license from any Third Party
in the Territory in order to avoid infringement during the
exercise of the rights herein granted or if a court of competent
jurisdiction determines that such a license is required, or if an
independent, mutually acceptable Third Party patent attorney
determines that such a license is required (in accordance with the
procedure outlined in this Section 2.5.2), ***. In the event that
the Parties are unable to agree on whether any such license is
needed or on the terms of such license, the Parties shall submit
such dispute to an independent, mutually acceptable Third Party
patent attorney for a final and binding determination of such
dispute, and the Parties shall equally share the cost of engaging
such patent attorney.
2.5.3 Notwithstanding the provisions of Section 2.5.2, if the license
from the Third Party or the royalty or other fee payable to such
Third Party gives rise to an indemnification obligation under the
Related Agreements in favour of Enzon on the part of Inex, then
such royalty or other fee shall be paid by Inex as Losses in
accordance therewith.
2.6 Commercial Sales of Development Stock
Any Product produced for Development which, by agreement of the Parties, is
converted to commercial stock for resale, will be sold by Inex to Enzon for
commercial sale pursuant to this Agreement, and any
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 18 -
contribution of Development Costs already paid by Enzon in respect of such stock
will be credited against Enzon's purchase of such stock.
2.7 Reports and Payment
Enzon shall deliver to Inex within thirty (30) days after the end of each
Commercial Quarter a written report showing its computation of Deferred Sales
Payments and Sales Threshold Bonuses, if any, due under this Agreement in
respect of such Commercial Quarter, and setting out:
2.7.1 Net Sales segmented in each such report according to sales by
Enzon, each Affiliate and each Sublicensee, as well as on a
country-by-country and month-by-month basis.
2.7.2 Deductions from gross revenues by the categories for same set out
in the definition of Net Sales.
2.7.3 The rates of exchange used to convert such Deferred Sales Payments
to United States dollars from the currency in which such sales
were made. For purposes hereof, such conversion calculations are
to be made on a monthly basis and the rate of exchange to be used
for converting Deferred Sales Price payments hereunder from a
foreign currency to United States dollars in any month shall be
equal to the average of: (i) the daily foreign mid-range rate as
published in the Wall Street Journal (or any rate replaced
thereby) in respect of the first Business Day of the relevant
month; and (ii) the same rate in respect of the last Business Day
of the relevant month.
Enzon, simultaneously with the delivery of each such report, shall tender
payment in United States dollars all Deferred Sales Payments and Sales Threshold
Bonuses, if any, shown to be due thereon.
2.8 Withholding Taxes
The Parties contemplate that there will be no payment or withholding by Enzon of
taxes on any payments made by Enzon to Inex pursuant to this Agreement. In the
event that either Party takes any action, or if the circumstances applicable to
either Party change with the result that taxes must be paid or withheld on the
payments due pursuant to this Agreement, then such taxes shall be borne by such
Party. Without limiting the generality of the foregoing:
2.8.1 if Enzon assigns or sublicenses its rights hereunder, undergoes a
reorganization or otherwise changes its structure, or changes its
domicile, and thereafter taxes must be paid or withheld on the
payments hereunder, such payments shall be grossed up so that Inex
receives the actual amounts set out in this Agreement; and
2.8.2 if Inex assigns or sublicenses its rights hereunder, undergoes a
reorganization or otherwise changes its structure, or changes its
domicile, and thereafter taxes must be paid or withheld on the
payments hereunder, then such tax or withholding payments shall be
deducted from the amounts set forth herein, and Enzon shall assist
Inex as may be reasonably required, including providing proof of
such payment of such tax payment, in order to allow Inex to claim
the benefit of, exemption from or repayment such tax payment, as
may be applicable; and
2.8.3 in the event that payment or withholding by Enzon of taxes becomes
necessary on any payments made by Enzon to Inex pursuant to this
Agreement when neither Section 2.8.1 nor Section 2.8.2 applies,
then such tax or withholding payments shall be deducted from the
amounts set forth herein, and Enzon shall assist Inex as may be
reasonably required,
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 19 -
including providing proof of such payment of such tax payment, in
order to allow Inex to claim the benefit of, exemption from or
repayment such tax payment, as may be applicable.
Notwithstanding the foregoing, if Inex is able to credit the grossed up portion
of any payment made by Enzon pursuant to Section 2.8.1 against taxes payable by
Inex, or gain exemption from or repayment of such tax payment, Inex will
promptly pay the equivalent of the benefit received by Inex to Enzon.
2.9 Foreign Payments
Where payments are due Inex hereunder for sales of the Product in a country in
the Territory where, by reason of currency regulations or taxes of any kind, it
is impossible or illegal for Enzon, any Affiliate or Sublicensee to transfer
such payments to Inex, such payments shall be deposited in whatever currency is
allowable by the Person not able to make the transfer for the benefit or credit
of Inex in an accredited bank in that country in the Territory that is
reasonably acceptable to Inex.
2.10 Method of Payment
Enzon shall make all payments due under this Agreement in U.S. Dollars by wire
transfer of funds via the Federal Reserve Wire Transfer System to Inex's account
as designated in writing by Inex to Enzon.
2.11 Late Payments
Any payment by Enzon or Inex that is not paid on or before the date such payment
is due under this Agreement shall bear interest at a rate equal to the lesser
of:
2.11.1 Prime Rate plus *** per year, or
2.11.2 the maximum rate permitted by law;
calculated based on the number of days that payment is delinquent.
2.12 Records
Both Parties shall keep full, true and accurate books of accounts and other
records containing all information and data which may be necessary to ascertain
and verify:
2.12.1 the Commercialization Costs incurred by each Party and their
respective Representatives hereunder for a period of three (3)
years after the completion of the Commercialization; and
2.12.2 any other amount payable hereunder for a period of three (3) years
after the completion of the Term.
2.13 Audits
During the Term and for a period of three years thereafter, each Party shall
have the right from time to time (not to exceed once during each calendar year)
to have either its internal financial audit personnel or an independent firm of
accountants (i.e., a certified public accountant or like person reasonably
acceptable to the Party being audited) inspect the books, records and supporting
data of the other Party referred to in Section 2.12. Such independent firm of
accountants shall perform these audits at the requesting Party's expense upon
reasonable prior notice and during the other Party's regular business hours, and
shall agree as a condition to such audit to maintain the confidentiality of all
information disclosed or observed in connection
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 20 -
with such audit and to disclose to the requesting Party only whether the other
Party has complied with its obligations under this Agreement with respect to the
calculation and payment of Commercialization Costs and any other money owing
pursuant to this Agreement. If the result of such audit demonstrates an
overpayment or underpayment, there shall be a prompt (but in no event more than
60 days after completion of the audit) accounting between the parties to
reconcile such overpayment or underpayment. If the results of such audit
demonstrates a discrepancy and the discrepancy represents *** or more of the
actual value, then the party that has to pay to settle the discrepancy shall pay
the reasonable costs of the audit.
Article 3 Forecasting and Purchase Orders
3.1 Sales and Operations Plan
3.1.1 The Parties will confer monthly as contemplated by this Section to
review and update a rolling eighteen (18) month Sales and
Operation Plan (the "S&OP") to govern activities related to
forecasting, production capacity, inventory management, risk
management and other activities related to the timely and
efficient management of the supply and distribution of the
Product.
3.1.2 Initially, within 30 days after the Effective Date, and on or
before the last Business Day of each month thereafter, Enzon will
provide Inex by electronic mail a rolling, eighteen (18) month
forecast ("Forecast") estimating Enzon's requirements for Product
for the following eighteen (18) months. The Forecast will be made
in good faith to assist Inex in developing the S&OP and, except as
otherwise set forth in this Agreement, shall be non-binding. Each
Forecast will contain:
(a) in respect of Forecasts provided by Enzon subsequent to
Inex's first shipment to Enzon, an inventory status of
Products on hand; and
(b) in respect of the first nine (9) months of each
Forecast, the quantities of Product to be purchased
broken down both by:
(i) the use for the Product, designated as either for
clinical use or commercial use; and
(ii) the jurisdiction in which the Product will be
used.
3.1.3 Promptly (but in any event within two (2) Business Days after
becoming aware of same) Inex will notify Enzon of any difficulties
that are likely to cause a delay in meeting or a failure to meet
Enzon's requirements during the Forecast period. Inex shall
present detailed descriptions of such difficulties for discussion
during the monthly S&OP planning meeting or teleconference.
3.1.4 Within one week of Inex's receipt of Enzon's Forecast for each
Forecast period, Inex will provide Enzon a draft S&OP setting out
the quantity of Product scheduled to be Manufactured during the
Forecast period, and the Parties will jointly review and make
reasonable efforts to agree upon such changes as may be required
to develop an S&OP approved by both Parties (the "Approved S&OP").
In the absence of express agreement of the Parties to the
contrary, if the Parties fail to agree on any Approved S&OP, Inex
will continue to operate using the most recently Approved S&OP. In
the absence of express agreement of the Parties to the contrary,
in no event will the total and monthly quantities of Product set
out in the Approved S&OP exceed the capacity of Inex's
Representatives.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 21 -
3.1.5 Inex's commitment to Manufacture, and Enzon's commitment to
Purchase such quantities of Product as set forth in the first nine
(9) months of each Approved S&OP shall be binding upon the
parties.
3.1.6 The parties acknowledge and confirm that Inex shall rely upon the
Forecasts provided by Enzon in determining its Manufacturing
schedules and acquiring the necessary raw materials in advance
thereof, and notwithstanding the non-binding nature of the
remaining nine (9) months of the Approved S&OP, Enzon shall use
Commercially Reasonable Efforts to project accurately its
requirements.
3.2 Purchase Orders Issued Before First FDA Approval
3.2.1 Prior to the FDA's grant of Regulatory Approval for the Product,
and pursuant to each Approved S&OP, Enzon will provide Inex
binding Purchase Orders by facsimile or electronic mail at least
nine (9) months prior to each proposed delivery date, specifying
(a) delivery date specified as "the week of;"
(b) delivery location; and
(c) mode of delivery (default transportation will be by
surface in the USA);
and shall pay to Inex within five Business Days of issuing each
such Purchase Order, a pre-payment of *** of the Reference Price
of the quantity of Product specified in each Purchase Order,
creditable against Enzon's future payment of the Purchase Price of
the Product.
3.2.2 Inex or its designee will respond by facsimile or electronic mail
within three (3) Business Days of receipt of Enzon's Purchase
Orders with a confirmed delivery date that is within two (2) weeks
of that specified in the Purchase Order.
3.2.3 Notwithstanding anything else herein to the contrary, except for
the payment of *** of the Reference Price under Section 3.2.1,
Enzon shall not be obligated to purchase any shipment of Product
for commercial use prior to Regulatory Approval of the Product by
the FDA.
3.2.4 Provided the batch or batches of Product Manufactured pursuant to
Enzon's Purchase Orders under Section 3.2.1 meets the minimum
shelf life set forth in Section 5.2.2 or such other shelf life as
agreed between the Parties acting reasonably and provided Enzon
shall not have rejected the Product pursuant to Section 5.5.1,
Enzon shall purchase such batch or batches of Product at the
Purchase Price less the pre-payment already made in respect of
such batch or batches of Product as set out in Section 3.2.1.
Inex's right to receive payment hereunder is in addition to and
not in lieu of Inex's right to quarterly reconciliations of
payment pursuant to Article 2.
3.2.5 If any batch of Product Manufactured pursuant to Enzon's Purchase
Orders under Section 3.2.1 does not meet the minimum shelf life
set forth in Section 5.2.2 or such other shelf life as agreed
between the Parties acting reasonably, Enzon shall not be required
to purchase such batch of Product, but shall not be entitled to a
refund of any prepayment made in respect of such batch of Product
pursuant to Section 3.2.1.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 22 -
3.3 Purchase Orders Issued After First FDA Approval
3.3.1 In accordance with the most recently Approved S&OP, Enzon will
provide Inex a binding Purchase Order at least nine (9) months
prior to each proposed delivery date, specifying:
(a) quantity of Product to be purchased as provided in the
Approved S&OP, broken down both by:
(i) the use for the Product, designated as either for
clinical use or commercial use; and
(ii) the jurisdiction in which the Product will be
used;
(b) delivery date specified as "the week of" as provided in
the Approved S&OP;
(c) delivery location; and
(d) mode of delivery (default transportation will be by
surface in the USA).
3.3.2 Enzon will send all Purchase Orders to Inex by facsimile or
electronic mail.
3.3.3 Inex or its designee will respond by facsimile or electronic mail
within three (3) Business Days of receipt of Enzon's Purchase
Order with a confirmed delivery date that is within two (2) weeks
of that specified in the Purchase Order.
Article 4 Manufacturing
4.1 Technical Activities to Support Manufacturing
Subject to Section 4.4 and unless otherwise agreed between the Parties, Inex
will oversee all Manufacturing activities required to:
4.1.1 obtain and maintain Regulatory Approvals; and
4.1.2 provide Product for Clinical Activities and commercial sale.
4.2 Manufacturing in Compliance
Inex shall Manufacture the Product in compliance with the Regulatory
Requirements, the Specifications and the Master Production Record.
4.3 Subcontractors
Except for contracts executed prior to the Effective Date, Inex may not
subcontract to any Third Party the Manufacture of the Product without the
consent of Enzon, which consent shall not be withheld unreasonably. Inex shall
be responsible to Enzon for the performance of and all activities undertaken by
Inex's subcontractors.
4.4 Technical Transfer to and Manufacture by Enzon
If the Parties' mutually agree that Inex will subcontract some or all of the
Manufacture of Product to Enzon, upon completion by Inex of manufacturing due
diligence with Enzon to Inex's satisfaction:
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 23 -
4.4.1 the Parties will amend the Commercialization Plan to establish the
respective responsibilities of the Parties in respect of such
subcontracting;
4.4.2 Enzon will effect such transfer and ensure validation of Enzon's
processes and facility by no later than a date to be mutually
agreed upon by the Parties;
4.4.3 Enzon will fund *** and Inex will fund *** of all costs of such
transfer, including FTE Costs and Out of Pocket Costs;
4.4.4 the Manufacture of Product by Enzon will cover clinical and
commercial requirements both inside and outside the Territory;
4.4.5 for Product supplied by Enzon to Inex for commercial purposes
outside the Territory, Product will be supplied at the cost of
goods per unit of Product ***;
4.4.6 for Product supplied by Enzon to Inex for clinical development,
Product will be supplied at Manufacturing Cost; and
4.4.7 the Parties will amend this Agreement or enter into a new Product
Supply Agreement to provide for such transfer.
The matters set forth in this Section 4.4 constitute merely an expression of the
desire of the Parties to negotiate with each other regarding the terms of an
agreement regarding the subject matter of this Section 4.4, and nothing in this
Section 4.4 will have any legal or binding effect unless set out in writing in a
separate agreement and signed by the duly authorized representatives of the
Parties.
4.5 Material Change to Financial Terms
Unless otherwise agreed in writing by the Parties, in the event of:
4.5.1 any material amendment to any of the Related Agreements;
4.5.2 any termination of any of the Related Agreements that does not
result in termination of all of the Related Agreements;
the Parties will review and renegotiate financial terms under the amended or
remaining Related Agreements so that the financial compensation received by Inex
as a result of the amended or remaining Related Agreements is no less favourable
to Inex than the financial terms of the Related Agreements would have been
without such amendment or termination. If the Parties are unable to agree to
such terms, either Party may refer the matter for resolution pursuant to Article
16.
4.6 Quality/Technical Agreement
Upon execution of this Agreement, the Parties will commence good faith
negotiations of a Quality/Technical Agreement setting forth in greater detail
the regulatory and quality assurance responsibilities of the Parties with regard
to the Manufacture of Product and further providing for compliance with
Regulatory Requirements. Each of the Parties will exercise Commercially
Reasonable Efforts to finalize and execute such agreement within 90 days after
the Effective Date.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 24 -
Article 5 Supply and Shipment
5.1 Shipping Notification
5.1.1 No later than five (5) Business Days prior to Product shipment,
Inex will provide Enzon with shipping details that include lot
number, quantity, shipping date, transport mode, and destination.
5.1.2 Inex will send all shipping notices to Enzon by facsimile or
electronic mail.
5.2 Shipment of Product
5.2.1 In respect of each shipment of Product, Inex shall:
(a) ensure the Product is properly stored in validated
transport containers;
(b) prepare and ship Product in accordance with approved
shipping SOPs;
(c) provide tracking information to Enzon upon shipment from
Inex's or Inex's subcontractors' facilities at the time
of shipment.
5.2.2 All Product shipped by Inex or its designees shall have a expiry
date no less than eight (8) months from the date of shipment,
provided that Enzon purchases the entire batch or batches of
Product Manufactured for shipment, except as mutually agreed upon
between the Parties, acting reasonably. The Parties will use
Commercially Reasonable Efforts to increase the Product shelf life
to at least twelve (12) months.
5.2.3 Unless otherwise agreed between the Parties, Inex shall not ship
any Product to Enzon except pursuant to a Purchase Order.
5.3 Shipment of Released Product
Inex will ship Product to Enzon or Enzon's designees only after Product has been
released by Inex's QA representatives. Enzon shall not be responsible for QA
release of the Product.
5.4 Risk of Loss and Shipping Expenses
The Product will be shipped F.A.S. Enzon's designated location.
5.5 Rejection of Delivered Product
5.5.1 After receipt by Enzon of the Product or of the sample of the
Product and complete QA documentation corresponding thereto,
including Certificate(s) of Analysis, if Enzon rejects the Product
delivered to it by reason of any shortage in quantity of the
shipment, damage to the Product or packaging, including the
shipping container, or any obvious defect detectable by the naked
eye, Enzon will notify Inex within 10 Business Days.
5.5.2 Product not rejected in accordance with these terms within such
period will be deemed accepted.
5.5.3 Inex will use Commercially Reasonable Efforts to make up any
shortage of Product.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 25 -
5.6 Obsolescence and Returns
If Enzon has not rejected the Product in accordance with Section 5.5, Inex will
not accept return of any Product from Enzon or its Representatives regardless of
the reason(s) therefor.
5.7 Disposal and Destruction
Unless otherwise agreed in writing between the Parties, unsold Product in
Enzon's possession or control will be destroyed or disposed by Enzon in
accordance with Regulatory Requirements at Enzon's sole expense.
Article 6 Product Receipt and Distribution
6.1 Receipt
Unless otherwise agreed upon in advance between the Parties, Enzon shall
practice receipt procedures in accordance with agreed SOPs or written
instructions agreed between the Parties.
6.2 Storage and Handling
If Enzon or its Representatives' receipt, storage or handling of Product is not
done in accordance with the Specifications or Regulatory Requirements and the
whole or part of a shipment of Product is rendered unsuitable for its purpose,
Enzon shall remain liable for the Purchase Price of any compromised Product and
for any shipping costs associated with such purchase.
6.3 Distribution
In respect of each shipment of Product from Enzon to its Representatives or any
Third Parties, Enzon shall, and shall cause its Representatives to:
6.3.1 ensure the Product is properly stored in validated transport
containers; and
6.3.2 prepare and ship Product in accordance with approved shipping
SOPs.
6.4 Records for Traceability
Enzon shall maintain and shall require its Representatives who receive, handle,
store, ship, or distribute Product to maintain a record retention policy
consistent with cGMP and Regulatory Requirements, and to maintain records with
sufficient detail to facilitate traceability in the event of recalls or
voluntary withdrawals of Product.
Article 7 Shipments for Launch
7.1 Consequence of Launch Supply Failure
7.1.1 If Inex fails to deliver to Enzon at least *** of the quantity of
Product (that satisfies all material, applicable requirements of
this Agreement) ordered by Enzon in its initial pre-Regulatory
Approval Purchase Order (as contemplated in Section 3.2) (such ***
the "Minimum Launch Quantity") within six months after the: the
delivery date specified in such Purchase Order; and the date of
Regulatory Approval; whichever is later, and such failure has not
been caused by any act or omission of Enzon (such failure to
deliver within six months shall be a "Launch Supply Failure"),
Inex shall, within 10 Business Days after the Launch Supply
Failure, make a cash payment to Enzon in the amount set out in
Section 7.1.2 to compensate Enzon for the loss in value associated
with a delayed
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 26 -
launch. For greater clarity, in the event of a Launch Supply
Failure, the date of the Launch Supply Failure will be the date
six months from the later of: the delivery date specified in such
Purchase Order; and the date of Regulatory Approval.
7.1.2 The amount to compensate for the loss in value shall be:
(a) if the Launch Supply Failure is before April 15, 2006,
then the amount shall be ***; and
(b) if the Launch Supply Failure is on or after April 15,
2006 and before April 15, 2007, then the amount shall be
***; and
(c) if the Launch Supply Failure is on or after April 15,
2007, then the amount shall be ***.
7.2 Enzon's First Option to Terminate
7.2.1 Upon the occurrence of a Launch Supply Failure, Enzon shall have
the right, which right must be exercised within ten Business Days
after the date of occurrence of the Launch Supply Failure, to
terminate this Agreement immediately upon notice to Inex.
Termination by Enzon under this Section 7.2 shall not relieve Inex
of its liability under Section 7.1.
7.2.2 If Enzon fails to exercise its termination right pursuant to
Section 7.2.1, then it may not terminate this Agreement for a
period of six months after the date of occurrence of the Launch
Supply Failure, provided Inex does not commit any non-supply
related material breach of this Agreement that would otherwise
provide a basis for termination by Enzon.
7.3 Enzon's Second Option to Terminate
If Enzon elects not to exercise its termination right pursuant to Section 7.2.1,
but Inex fails to deliver the Minimum Launch Quantity within six months after
the Launch Supply Failure, Enzon shall be entitled to terminate this Agreement
immediately upon notice to Inex, which right must be exercised within ten
Business Days after the expiry of six months after the Launch Supply Failure.
Any such termination by Enzon shall be deemed to be pursuant to Section 17.3.
7.4 Cure by Inex
If a Launch Supply Failure occurs and Enzon has not exercised its termination
right pursuant to Section 7.2.1 or 7.3, and Inex delivers the Minimum Launch
Quantity, then Enzon shall, within 10 Business Days after such delivery
(provided such shipment is not rejected under Section 5.5.1) make a cash payment
to Inex in an amount determined by the following formula:
***
where X is equal to the amount of the payment to be made by Enzon, A is equal to
the amount paid by Inex to Enzon pursuant to Section 7.1.2, Y is equal to the
number of full months elapsed between the date of occurrence of the Launch
Supply Failure and the date of the delivery of the Minimum Launch Quantity and Z
is equal to a fraction that expresses the pro rata portion of the last month
elapsed prior to the delivery.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 27 -
Article 8 Changes
8.1 Enzon's Right to Notice of and Consent to Changes
8.1.1 In respect of changes to the Specifications, Master Production
Records, procedures, processes, materials, facilities, equipment
or any matter contained or referenced in the NDA or DMFs
pertaining to the Product, Inex shall notify Enzon and/or seek
Enzon's prior approval in accordance with the Quality/Technical
Agreement.
8.1.2 The Quality/Technical Agreement will provide that Inex will:
(a) inform Enzon of all notices received by Inex in respect
of changes described in Section 8.1.1 provided to Inex
by its Representatives; and
(b) cooperate with Enzon to resolve all requests for changes
described in Section 8.1.1;
so that all notice and consent obligations between Inex and Enzon
take into consideration those now in effect between Inex and its
Representatives.
8.2 New Regulatory Requirements
Inex and Enzon will use Commercially Reasonable Efforts to make such changes as
reasonably necessary to the Master Production Record, the Specifications or
procedures, processes, materials, facilities, equipment or any matter utilized
by Inex under this Agreement or contained or referenced in Inex's NDA or DMF
controlled by Inex to meet new Regulatory Requirements and guidelines in the
Territory. Upon agreement by the Parties to proceed with such changes, Enzon
shall be responsible for ***, and Inex ***, of all costs incurred by the
Parties, including Development FTE costs, in respect of any changes made by
either Party pursuant to this Section 8.2.
8.3 Reservation
Except as set out in this Article 8, as between Inex and Enzon, Inex retains the
sole right and authority to make all decisions with respect to the Manufacture
of the Product and Inex's performance under this Agreement.
Article 9 Commercialization
9.1 Regulatory Compliance
9.1.1 Each of the Parties, directly and through its permitted
Representatives, shall perform the Commercialization activities in
compliance with Regulatory Requirements.
9.1.2 Each Party shall ensure none of its Representatives who
participate in any Commercialization and/or Co-Promotion:
(a) is or has been suspended, debarred or disqualified by
the FDA;
(b) has been convicted of any offence that would form the
basis for any debarment; or
(c) is or has been subject to any proceedings for the
suspension, disqualification or debarment of such Party
or any Representative of such Party.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 28 -
9.2 Assignment of Trademarks
Inex shall assign to Enzon the Trademarks identified in Exhibit 1.1.77 in the
Territory as soon as reasonably possible after such Trademark(s) may be legally
transferred. Inex shall own and have the right to use all Trademarks outside the
Territory.
9.3 Use of Inex Trademarks in Labelling
9.3.1 The parties agree that Enzon shall affix to the outer packaging of
and shall include on the package insert for the Product, and in
addition to its own trademarks and names, one or more labels
displaying with equal prominence to the Enzon trademarks or names,
the Inex name and corporate logo, or such other trademark or
statement as Inex shall reasonably request. Inex shall also have
the right to review and approve all claims relating to the
intended use of Product contained in package inserts and other
promotional materials, which approval shall not be unreasonably
delayed or withheld.
9.3.2 Inex hereby grants to Enzon a non-exclusive license, sublicensable
in accordance with the terms of this Agreement, to use such
name(s) or trademark(s) accordingly and in substantially the same
manner as used by its owner; provided, however, that each such use
of such trademark(s) be accompanied by a printed notice
identifying Inex as the owner thereof. In the event that any
Products do not meet the specifications or quality standards
required under this Agreement, Inex may cause Enzon to remove all
trademarks of Inex from such Product and shall have the right to
cancel the foregoing grant of license to use such trademarks,
unless Enzon promptly meets such specifications or quality
standards. Inex shall have the right to receive and approve the
use of its marks in any proposed product literature, advertising
material or material for publication.
9.4 Patent Marking
Enzon shall mark all Product made, used or sold under the terms of the Related
Agreements, or their containers in compliance with the applicable patent marking
laws. Inex shall have the right to review and approve all patent marking, such
approval not to be unreasonably withheld.
9.5 Commercialization Efforts
Subject to the terms of the Co-Promotion Agreement, in each country in the
Territory in which the Product has received Regulatory Approval, Enzon, directly
and through its permitted Representatives, shall use Commercially Reasonable
Efforts to Commercialize the Product. Enzon's Commercially Reasonable Efforts to
Commercialize the Product shall include the obligation to Manufacture the
Product only if the Manufacture of same is transferred to Enzon pursuant to
Section 4.4.
9.6 Commercial Diligence in accordance with Commercialization Plan
Subject to the terms of the Co-Promotion Agreement, without limiting Enzon's
obligations set out in Section 9.5:
9.6.1 Enzon will undertake the Commercialization as set out in the
Commercialization Plan and as amended from time to time by the
Parties in accordance with this Article 9.
9.6.2 Enzon shall:
(a) conduct pre-launch marketing activities in respect of
the Product;
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 29 -
(b) market and launch the Product and sell the Product in
each country in the Territory where Regulatory Approval
have been granted;
(c) pay *** of the costs of Commercializing the Product,
including the costs referred to in this Section;
(d) Enzon will maintain a minimum effort of an aggregate of
*** Sales Representatives and Medical Science Liaisons
to Promote the Product in the Territory; and
(e) diligently prosecute and maintain the Trademarks and use
the Trademarks for the Product.
9.7 Overview of Commercialization
The Parties intend to work cooperatively to pursue the Commercialization in
accordance with the terms of this Agreement and the Co-Promotion Agreement.
Unless otherwise agreed by the Joint Steering Committee or otherwise set out in
this Agreement, Enzon will conduct the Commercialization monitored by the Joint
Steering Committee and under the oversight of the Parties in conformance with
the Commercialization Plan.
9.8 Subcontractors
Either Party may subcontract to any of its Representatives any of its
obligations in respect of the Commercialization with the consent of the other
Party, such consent not to be unreasonably withheld or delayed; provided
however, that the subcontracting Party shall be responsible for the performance
of its Representatives and shall remain fully responsible and obligated to the
other Party for all activities undertaken by its Representatives.
9.9 Commercialization Plans
9.9.1 Within ninety (90) days after the Effective Date, Enzon shall
prepare, review and submit to the Parties for approval a detailed
Commercialization Plan for the Commercialization of the Product
and the Parties shall reasonably promptly thereafter agree on a
reasonable, detailed Commercialization Plan. The Commercialization
Plan shall reflect Enzon's covenant set forth in Section 9.5.
9.9.2 Commercialization of the Product shall be conducted by Enzon in
conformance with the Commercialization Plan.
9.9.3 The Commercialization Plan may be updated by Enzon for review and
approval by the Parties as provided herein.
9.9.4 At a minimum, the Commercialization Plan as amended from time to
time shall describe the specific activities to be performed for a
twelve (12) month period, with a summary of Commercialization
Activities to be performed thereafter. The Commercialization Plan
will be reviewed on at least a semi-annual basis by the Joint
Steering Committee to update the specific activities to be
performed for the rolling twelve (12) month period, as well as to
reflect the revised Commercialization Plan as the Joint Steering
Committee reasonably determines to be necessary or useful.
Notwithstanding the above, no amendment to any Commercialization
Plan shall be construed to be final unless it has been made in
accordance with the provisions of this Article 9.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 30 -
9.9.5 The JSC shall review progress against the Commercialization Plan
on a quarterly basis.
9.10 Funding of Commercialization Costs
From and after the Effective Date until the definitive Commercialization Plan is
approved by the Parties, Enzon shall fund 100% of the cost of Commercialization
activities and shall pay Inex for any Commercialization Costs incurred by Inex
in accordance with the interim budget set out as Exhibit 9.10 (the "Interim
Budget"). After the Effective Date, in the absence of a definitive
Commercialization Plan agreed upon by the Parties, no commitment not in effect
as of the Effective date with a price exceeding $5,000 in Commercialization
Costs will be incurred without the agreement of the Parties. If the Parties fail
to agree on the terms of the definitive Commercialization Plan within 90 days of
the Effective Date, until the terms of the definitive Commercialization Plan are
determined, Enzon shall fund 100% of Commercialization Costs incurred by the
Parties acting reasonably, in pursuit of Commercialization of the Product during
this transition period. After the definitive Commercialization Plan is approved
by the Parties, Enzon shall fund 100% of the cost of Commercialization
activities and shall pay Inex for any Commercialization Costs incurred by Inex
in its performance of activities in accordance with the Commercialization Plan
as amended from time to time, without deduction or set off, except as otherwise
expressly set forth in this Agreement. On a quarterly basis, Inex shall send
Enzon invoices accompanied by the appropriate documentation, including a listing
of expenditures in reasonably specific detail within twelve (12) Business Days
after the end of each Calendar Quarter. Enzon shall pay such invoices within
thirty (30) days after receipt of same. Any Commercialization Costs arising in
any Calendar Quarter and not captured in the calculation delivered in the report
referred to in this Section shall be captured in subsequent reports. The costs
incurred by Inex in pursuing Co-Promotion activities under the Co-Promotion
Agreement shall not be included in the Commercialization Costs referenced above
in this Section 9.10 or reimbursed by Enzon. The Co-Promotion Agreement
describes the manner in which Enzon will make payments to Inex in respect of
such Co-Promotion activities.
9.11 Consequence of No Sales
In addition to the terms of Section 9.6, Enzon shall be deemed to have breached
its obligation to use Commercially Reasonable Efforts in conducting marketing of
a Product in any country in the Territory if, for a continuous period of *** at
any time following launch of commercial sales of the Product in any such
country, no sales of the Product are made in the ordinary course of business in
such country by Enzon, an Affiliate or a Sublicensee, unless Enzon is prevented,
restricted, interfered with or delayed in making such sales by reason of a cause
beyond Enzon's reasonable control and can demonstrate same to Inex, in which
event such period shall be extended by the period of Enzon's inability, provided
that Enzon uses Commercially Reasonable Efforts to avoid or remove the cause of
such inability.
9.12 Reports
Enzon shall report to Inex on the status and progress of Enzon's efforts under
this Article 9 as follows:
9.12.1 Enzon shall deliver to Inex within thirty (30) days after the end
of each Calendar Quarter reports setting forth in general terms,
reasonably sufficient for evaluation of the diligence obligations
contained herein, the efforts Enzon made to commercialize the
Product during the such year, including the achievement of any
Sales Threshold Bonuses, any significant adverse developments, and
any plans for or occurrences of any commercial sales of the
Product in any jurisdiction and a summary of the efforts it
intends to make in the upcoming year(s) on these matters. Enzon
agrees to appropriately consider any Inex input and comments
related to Enzon's plan for the upcoming year(s), provided that it
is understood that Enzon shall have final decision making
responsibility for such plans.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 31 -
9.12.2 To the extent that such could not be appropriately communicated to
Inex in accordance with Section 9.12.1, Enzon shall keep Inex
informed in a timely manner of significant developments in Enzon's
(and its Affiliates and Sublicensees where relevant) progress of
its efforts to Commercialize the Product, including without
limitation, the achievement of any Sales Threshold Bonuses, any
significant adverse developments, and any plans for or occurrences
of any commercial sales of the Product in any jurisdiction.
9.13 Launch of Competitive Product by Enzon
Enzon hereby agrees that in the event Enzon or its Affiliates, either alone or
in partnership, in collaboration or in conjunction with any Person other than
Inex or Inex's Affiliate(s), whether as principal, agent, employee, director,
officer, shareholder, licensor or in any capacity or manner whatsoever, whether
directly or indirectly, develops, manufactures or commercializes any Competitive
Product during the Term in the Territory, this Agreement shall terminate and
Enzon's rights hereunder shall revert to Inex. No termination pursuant to this
Section shall terminate this Agreement with respect to any other country in the
Territory. Notwithstanding the foregoing, if Enzon or an Affiliate acquires an
entity or all or substantially all of the assets of an entity during such period
of time and such entity distributes or such assets include a Competitive
Product, Enzon, or its Affiliate(s), shall have two hundred seventy (270) days
in which to either (a) divest itself of such Competitive Product or to otherwise
cease distribution of such Competitive Product, and Enzon shall not be in
violation of this Section 9.13 if it so divests or ceases distribution within
such two hundred seventy (270) day period, or (b) terminate this Agreement and
Related Agreements. The Parties mutually agree that Enzon's (or Affiliates')
commercialization, as described above, of any Competitive Product shall not be
deemed a breach of this Agreement, and Inex's sole recourse for such an event
shall be that as described in this Section 9.13 only.
Article 10 Joint Steering Committee
10.1 Joint Steering Committee
10.1.1 As of the Effective Date of this Agreement, the Joint Steering
Committee shall be formed and shall be constituted of four
representatives from each Party. The members of the Joint Steering
Committee as of the Effective Date are as set forth on Exhibit
10.1. The Chairperson of the Joint Steering Committee at the first
meeting of the Joint Steering Committee shall be an Enzon member
of the Joint Steering Committee, and thereafter, the Chairperson
will alternate at each meeting between a representative of Inex
and a representative of Enzon. The Chairperson shall be
responsible for issuing an agenda for the meeting, conducting and
chairing the meeting and preparing the minutes for the meeting,
and such other tasks as assigned by the committee. The Joint
Steering Committee shall meet regularly:
(a) at least quarterly during the period when
Commercialization is occurring, or more frequently if
necessary; and
(b) at such periods to be determined by the Joint Steering
Committee.
10.1.2 Each Party shall bear its own expenses associated with its
participation in the Joint Steering Committee and its
administration and oversight of the activities contemplated by
this Agreement. Such expenses shall not be included in
Commercialization Costs.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 32 -
10.2 Meetings of the Joint Steering Committee
10.2.1 The Joint Steering Committee should meet at least once per year at
the location of Inex or an Affiliate of Inex, and once per year at
a location of Enzon or an Affiliate of Enzon. All other meetings
of the Joint Steering Committee may occur by telephone, video
conference or other acceptable means if requested by a Party. The
Joint Steering Committee shall oversee all Commercialization
activities of the Parties under this Agreement, including
coordinating the overall strategy for Commercialization. The Joint
Steering Committee shall have the responsibilities as set forth
generally in Exhibit 10.1. Each Party may appoint its
representatives to the Joint Steering Committee and other members
of its project team at its discretion. The Joint Steering
Committee shall act only as a body making recommendations to the
Parties, and neither Party is bound by any recommendation of the
Joint Steering Committee. The members of the Joint Steering
Committee shall attempt, in good faith, to reach consensus on all
matters before the committee and make a consensus recommendation
to the Parties. In the event that the Joint Steering Committee
cannot make a consensus recommendation to the Parties which is
acceptable to the Parties, either Party may refer the matter for
resolution in accordance with the terms of Article 16.
10.2.2 The Joint Steering Committee shall cause there to be recorded
reasonably detailed minutes of its meetings. The Party providing
the chairperson of each meeting shall be responsible for preparing
draft minutes of such meeting and distributing same to the other
members of the committee within five Business Days after such
meeting. If the other Party desires to revise the draft minutes it
will provide comments on such minutes within ten Business Days
after receiving the minutes. If such comments are provided,
members of the Joint Steering Committee designated by each Party
shall confer promptly and in good faith to resolve such comments
and finalize the minutes. If the members of the Joint Steering
Committee are unable to finalize the minutes within 30 days after
the date of the meeting, either Party may refer the matter for
resolution in accordance with the terms of Article 16.
10.3 Working Committees
The Joint Steering Committee may establish working committees to oversee the
Commercialization. Such working committees will conduct at a minimum quarterly
planning and review meetings as well as ad hoc meetings as necessary. The
primary method of meeting will be teleconference. Responsibilities of the
working committees may include overseeing the planning and monitoring of the
manufacturing and supply issues arising under this Agreement.
Article 11 Pharmacovigilance, DDMAC and Recalls
11.1 Regulatory Responsibilities
Inex will be responsible for maintaining and fulfilling all Regulatory
Requirements with respect to the Product that are imposed upon Inex as the
manufacturer and holder of the Regulatory Approvals. Subject to the other
express terms of the Related Agreements, Enzon and its designees will have sole
responsibility for the advertising and other promotion of the Product and for
maintaining and fulfilling all Regulatory Requirements with respect to the
Product that are imposed upon Enzon as the advertiser, marketer and distributor
thereof.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 33 -
11.2 Pharmacovigilance Agent
11.2.1 Unless the Parties agree to establish the agency referred to in
Section 11.2.2 on an accelerated basis, Inex shall be responsible
for performing Pharmacovigilance in respect of all pre-Regulatory
Approval Clinical Activities (in addition to all other Regulatory
Activities for which Inex is responsible). Until this agency is
established, if Enzon receives any information of any type
whatsoever that may constitute a complaint regarding the Product
or indicates that the Product in any way relates to an Adverse
Drug Event, then it will record the information set forth on
Exhibit 1.1.1 and transmit the completed form to Inex as soon as
possible, and in any event at least in time to allow Inex to meet
its reporting obligations under Regulatory Requirements. Inex will
then report the Adverse Drug Event in accordance with Regulatory
Requirements, and provide Enzon with a copy(ies) of all
documentation provided to Regulatory Authorities in respect of
such complaint or Adverse Drug Event. Further, until this agency
is established, if Inex receives any information of any type
whatsoever that may constitute a complaint regarding the Product
or indicates that the Product in any way relates to an Adverse
Drug Event, then it will record the information set forth on
Exhibit 1.1.1, provide a copy of the completed form to Enzon (if
possible, prior to submitting it to Regulatory Authorities) and
report the Adverse Drug Event in accordance with Regulatory
Requirements.
11.2.2 After Regulatory Approval of the Products by a Regulatory
Authority (or sooner if and to the extent agreed to by the
Parties), Enzon shall be appointed by Inex as Inex's agent with
respect to the regulatory dossier for the Product in the Field in
the Territory for the sole purpose of conducting
Pharmacovigilance. After this agency has been established, Enzon
shall manage and carry out on behalf of Inex all relevant
communications and relations with Regulatory Authorities to the
extent related to Pharmacovigilance with respect to the Product.
Inex shall be entitled to participate in all negotiations and
discussions between Enzon and Regulatory Authorities relating to
Pharmacovigilance with respect to the Product. Without limiting
the generality of the foregoing, after this agency has been
established, if Inex receives any information of any type
whatsoever that may constitute a complaint regarding the Product
or indicates that the Product in any way relates to an Adverse
Drug Event, then it will record the information set forth on
Exhibit 1.1.1 and transmit the completed form to Enzon as soon as
possible, and in any event at least in time to allow Enzon to meet
its reporting obligations under Regulatory Requirements. Enzon
will then report the Adverse Drug Event in accordance with
Regulatory Requirements, and provide Inex with a copy(ies) of all
documentation provided to Regulatory Authorities in respect of
such complaint or Adverse Drug Event. Further, after this agency
has been established, if Enzon receives any information of any
type whatsoever that may constitute a complaint regarding the
Product or indicates that the Product in any way relates to an
Adverse Drug Event, then it will record the information set forth
on Exhibit 1.1.1, provide a copy of the completed form to Inex (if
possible, prior to submitting it to Regulatory Authorities) and
report the Adverse Drug Event in accordance with Regulatory
Requirements.
11.3 Agency for DDMAC Activities and the Like
11.3.1 Inex hereby appoints Enzon as its agent for the Product in the
Field in the Territory for the sole purpose of conducting all
DDMAC Activities in the USA and the foreign equivalents in the
remainder of the Territory.
11.3.2 Enzon shall perform the DDMAC Activities in the USA and the
foreign equivalents in the remainder of the Territory in
compliance with Regulatory Requirements.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 34 -
11.3.3 Enzon will perform all DDMAC Activities in the USA and the foreign
equivalents in the remainder of the Territory and subject to
Section 11.2, be responsible for all post-approval
Pharmacovigilance activities, and assume all the costs associated
therewith.
11.3.4 In each country for which Inex is the holder of the Regulatory
Approval, Enzon shall regularly inform Inex of Enzon's DDMAC
Activities and foreign equivalents and obtain Inex's prior consent
to Enzon's DDMAC Activities and foreign equivalents and plans
respecting any of them. In the event Enzon informs Inex of its
DDMAC Activities, foreign equivalents and plans, and does not
receive a written objection from Inex within 10 Business Days,
Inex shall be deemed to have consented to such activities and
plans.
11.4 Agent for Regulatory Authorities Generally
11.4.1 Nothing in Sections 11.2, 11.3 or this Section 11.4 precludes Inex
from appointing an agent for Regulatory Authorities for products
other than the Product, or for territories outside the Territory.
11.4.2 All activities, communications and relations as well as Enzon's
role as agent for Regulatory Authorities shall be performed by
Enzon in close coordination with Inex, as holder of the Regulatory
Approvals.
11.4.3 In respect of all of the foregoing under Sections 11.2, 11.3 or
this Section 11.4, except as required by Regulatory Requirements
and except for those reporting requirements which have timeliness
requirements that make it impossible to seek and obtain Inex's
consent prior to making such report, any communications with
Regulatory Authorities by Enzon under Sections 11.2, 11.3 or this
Section 11.4 are subject to the consent of the Inex, such consent
not to be unreasonably withheld.
11.5 Recalls and Withdrawals of Product
11.5.1 If Inex or Enzon will be required or requested by any Regulatory
Authority to recall any Product for any reason, or should Enzon
decide voluntarily to withdraw any Product:
(a) Enzon will be responsible for co-ordinating such recall
or withdrawal;
(b) Enzon shall pay the costs and expenses of such recall or
withdrawal, subject to recovery of some or all of same
in accordance with the terms of Section 11.5.2;
(c) unless Inex is liable for such costs and expenses in
accordance with the terms of Section 11.5.2, Enzon will
remain responsible to Inex for the Purchase Price for
such Product and will reimburse Inex for all of the
reasonable costs and expenses actually incurred by Inex
in connection with such recall or withdrawal including,
but not limited to, administration of the recall or
withdrawal and such other reasonable costs as may be
reasonably related to the recall or withdrawal; and
(d) both Parties will cooperate fully with one another in
connection with any such recall or withdrawal.
11.5.2 If a recall or withdrawal is due to Inex's negligence, wilful
misconduct or breach of this Agreement or Inex's failure to
Manufacture the Product in conformity with the Specifications or
the provisions of this Agreement or the Quality/Technical
Agreement referred to in Section 4.6, Inex will reimburse Enzon
for all of Enzon's reasonable costs
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 35 -
and expenses actually incurred by Enzon in connection with the
recall or withdrawal, including the Purchase Price for the
recalled or withdrawn Product, costs of retrieving Product already
delivered to customers, costs and expenses Enzon is required to
pay for notification, shipping and handling charges, destruction
or return of the defective Product or Product and such other
reasonable costs as may be reasonably related to the recall or
withdrawal.
11.5.3 If the Parties are unable to agree on whether or not a recall or
withdrawal is due to Inex's negligence, wilful misconduct or
breach of this Agreement, either Party may refer the matter for
resolution pursuant to Article 16.
11.6 Replacement Shipments
In the event of a recall or withdrawal of Product, and upon Enzon's request,
Inex shall use Commercially Reasonable Efforts to deliver replacement Product as
soon as reasonably possible.
Article 12 Restrictive Covenants; Title
12.1 Injunctive Relief
Each Party acknowledges the competitive and technical value and the sensitive
and confidential nature of the Confidential Information and agrees that monetary
damages alone will be inadequate to protect the other Party's interests against
any actual or threatened material breach of this Agreement. Accordingly, each
Party consents to the granting of specific performance and injunctive or other
equitable relief to the other Party in respect of any actual or threatened
breach of this Agreement, without proof of actual damages.
12.2 Ownership of Pre-Existing Intellectual Property Rights
Any Intellectual Property Rights or trademark rights owned by either Party prior
to the Effective Date shall remain solely owned by such Party.
12.3 Ownership of Intellectual Property Rights in the Product
All Intellectual Property Rights arising from and during the course of the
Commercialization or Co-Promotion, including all Intellectual Property Rights:
12.3.1 to all inventions arising from and during the course of the
Commercialization or Co-Promotion;
12.3.2 to all data, information, know-how and results and the like
created as part of the Commercialization or Co-Promotion (the
"Data"); and
12.3.3 relating to the Product or improvements thereto or the process for
manufacturing the Product;
shall be solely owned by Inex or its designee, regardless of:
12.3.4 which Party(ies) created or invented the same; and
12.3.5 whether or not such Intellectual Property Rights are required to
obtain and maintain Regulatory Approvals;
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 36 -
and shall be licensed to Enzon hereunder as Licensed Patents and Inex Technology
without additional consideration or formality during the Term. Without limiting
the generality of the foregoing, any Elan Improvements made by Enzon, or its
Representatives, regardless of whether or not arising from and during the course
of the Commercialization or Co-Promotion, shall be solely owned by Elan and
sublicensed (within the Field and within the Territory) without additional
consideration to Enzon through Inex on the terms set out in this Section. Enzon
shall cooperate, and shall cause its Representatives to cooperate, with Inex and
Elan, at Inex's expense, in perfecting Elan's ownership and other proprietary
rights in respect of any Elan Improvements and shall execute and deliver, and
cause its Representatives to execute and deliver, to Elan any documents that
Elan may reasonably require with respect thereto. If at any time Elan does not
exercise its rights under this Section, such rights may be exercised by Inex as
if Inex were Elan under this Section.
12.4 Ownership of Regulatory Approvals and Regulatory Submissions
Notwithstanding the terms of Section 12.3:
12.4.1 Inex or an Affiliate of Inex will own all Regulatory Approvals and
Regulatory Submissions made as part of the Commercialization or
Co-Promotion in respect of the Product in the Territory and all
Intellectual Property Rights in same; and
12.4.2 Inex may use all Data and Regulatory Approvals and Regulatory
Submissions without further consideration, in Inex's efforts to
register and commercialize the Product outside the Territory and
inside the Territory but outside the Field.
12.5 Ownership of Intellectual Property Rights Outside the Commercialization
and Co-Promotion
Except as otherwise provided in Sections 12.3 and 12.4, and subject to
provisions of the Development Agreement, each Party shall have and retain sole
and exclusive title to all inventions, discoveries and know-how which are made,
conceived, reduced to practice or generated by its Representatives. For greater
certainty, Intellectual Property Rights or inventions or creations generated
outside the Commercialization and Co-Promotion and without access to the other
Party's Confidential Information shall not be licensed hereunder as or included
in the Licensed Patents or Inex Technology.
12.6 Co-operation
Enzon shall make available to Inex or Inex's authorized attorneys any Enzon
Representatives whom Inex in its reasonable judgment deems necessary in order to
assist it in obtaining patent protection of the Licensed Patents and any
applications therefor. Enzon shall execute all legal documents reasonably
necessary to support the filing, prosecution and maintenance of said Patents.
Enzon shall, at the request of Inex, enter into such further agreements and
execute any and all documents as may reasonably be required to ensure that
ownership of the Licensed Patents remains with Inex.
12.7 Prosecution and Maintenance of Licensed Patents
12.7.1 Inex shall be responsible for and pay all future costs of
prosecuting and maintaining the Licensed Patents.
12.7.2 Subject to Inex's obligations to its licensors, if Inex decides to
abandon prosecution or maintenance of a particular Licensed Patent
whose claims relate directly to the Field, Inex will notify Enzon
of such decision as soon as reasonably possible, and in any event
no less than 30 days prior to the effective abandonment date. As
for patent applications, upon receiving such notice, Enzon may
request that Enzon have the right to continue such prosecution of
such patent application, which request Inex will reasonably
consider,
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 37 -
but Inex need not grant such request in any event if Inex has a
strategic reason, with respect to its prosecution strategy for its
Patents, for abandoning such patent applications. As for issued
patents, upon receiving such notice, Enzon will have the right at
its sole discretion, to direct Inex to continue payment of
maintenance fees of any such issued patents, at Enzon's expense.
12.8 Notice of Inventions
Each Party will report promptly any inventions or anything giving rise to
Intellectual Property Rights arising in the course of and in connection with the
Development, Commercialization or Co-Promotion to the other Party. Without
limiting the generality of the foregoing, Enzon shall promptly notify Inex of
any Elan Improvements, and Inex will notify Elan of such Elan Improvements.
12.9 ***
12.10 Elan a Third Party Beneficiary
The Parties agree that Elan is a third party beneficiary under this Agreement
and shall have the right (at its option) to directly enforce any obligations for
the benefit of Elan contained in this Agreement.
Article 13 Allocation of Risk
13.1 Limits
Except as expressly set out in the Related Agreements, nothing in the Related
Agreements shall be construed as:
13.1.1 a warranty or representation by Inex as to title to the Licensed
Patents and Inex Technology or that anything made, used, sold or
otherwise disposed of under the license granted in the Related
Agreements is or will be free from infringement of patents,
copyrights, trade-marks, industrial design or other intellectual
property rights;
13.1.2 a warranty or representation by Inex that any patents covered by
the Related Agreements are valid or enforceable;
13.1.3 an obligation by Inex to bring or prosecute or defend actions or
suits against Third Parties for infringement of patents,
copyrights, trade-marks, industrial designs or other intellectual
property or contractual rights;
13.1.4 the conferring by Inex of the right to use in advertising or
publicity the name of Inex or its trade marks;
13.1.5 a warranty or representation by Enzon that anything made, used,
sold or otherwise disposed of under the license granted in the
Related Agreements is or will be free from infringement of
patents, copyrights, trade-marks, industrial design or other
intellectual property rights; or
13.1.6 the conferring by Enzon of the right to use in advertising or
publicity the name of Enzon or its trade marks.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 38 -
13.2 ***
13.3 ***
13.4 Co-operation with Other Licensees
Enzon acknowledges that Inex or its Affiliates have granted rights:
13.4.1 in the Territory in respect of fields outside the Field, and
13.4.2 outside the Territory,
and may grant to other sublicensees rights:
13.4.3 in the Territory in respect of fields outside of the Field, or
13.4.4 outside the Territory,
similar to those granted to Enzon under Sections 13.2, 13.3 and this Section
13.4. In the event of any litigation of the kind described in Sections 13.2 and
13.3:
13.4.5 inside the Territory in fields outside of the Field, or outside
the Territory, that may reasonably affect Enzon's use in the
Territory of the Licensed Patents or Inex Technology in the Field
or the use or sale of the Product; or
13.4.6 in respect of the Field that may reasonably affect Inex or one or
more of Inex's or its Affiliates' sublicensee's use of the
Licensed Patents or Inex Technology outside the Field or outside
the Territory or the manufacture, use or sale of products outside
the Field or outside the Territory by Inex, its Affiliates, or one
or more other such sublicensee(s);
then Inex, Enzon and such other sublicensees will use good faith efforts to
consult with each other and consider the interests of the other parties in
determining the course of action, if any, necessary or appropriate to prosecute
or defend the litigation. Inex will use Commercially Reasonable Efforts to
include in its sublicense agreements, provisions that allow the participation of
Enzon as contemplated herein.
Article 14 Indemnification and Liability Limitations
14.1 Indemnification by Enzon
14.1.1 Enzon hereby agrees that it shall be responsible for, indemnify,
hold harmless and defend Inex and its Affiliates, and their
respective shareholders, partners, Representatives, and their
respective heirs, successors and assigns (collectively, the "Inex
Indemnitees") from and against any and all claims, demands,
losses, liabilities, damages, Development Costs and expenses
(including reasonable legal fees) (collectively, "Losses")
suffered or incurred by any Inex Indemnitee arising out of,
relating to, resulting from or in connection with:
(a) any claim by Enzon's employees arising out of the
employment by Enzon of such employees and related to the
employment relationship or termination thereof; or
(b) any Third Party claims arising out of or relating to:
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 39 -
(i) the breach of any representation or warranty made
by Enzon in any of the Related Agreements;
(ii) the default by Enzon in the performance or
observance of any of its obligations to be
performed or observed under any of the Related
Agreements;
(iii) the breach by Enzon, its Affiliates or
Sublicensees of any Regulatory Requirements in
connection with the Product or in the performance
or observance of any of its obligations to be
performed or observed under any Related Agreement;
or
(iv) the negligence or wilful misconduct of Enzon or
its Representatives.
14.1.2 The foregoing shall not apply to the extent that such Losses are
due to:
(a) the breach of any representation or warranty made by
Inex in the Related Agreements;
(b) the default by Inex in the performance or observance of
any of its obligations to be performed or observed under
the Related Agreements;
(c) the breach by Inex of any Regulatory Requirements in
connection with the Product or in the performance or
observance of any of its obligations to be performed or
observed under the Related Agreements; or
(d) the negligence or wilful misconduct of Inex or its
Representatives.
14.2 Indemnification by Inex
14.2.1 Inex hereby agrees that it shall be responsible for, indemnify,
hold harmless and defend Enzon and Enzon's Affiliates and
Sublicensees, and their respective shareholders, partners,
Representatives, and their respective heirs, successors and
assigns (collectively, the "Enzon Indemnitees"), from and against
any and all Losses suffered or incurred by any Enzon Indemnitee
arising out of, relating to, resulting from or in connection with:
(a) any claim by Inex's employees arising out of the
employment by Inex of such employees and related to the
employment relationship or termination thereof; or
(b) any Third Party claims arising out of or relating to:
(i) the breach of any representation or warranty made
by Inex in any Related Agreement;
(ii) Inex's failure to convey to Enzon Intellectual
Property Rights under the Regents' Patents at
least co-extensive (within the Field and within
the Territory as defined in the Related
Agreements) with the scope of the Intellectual
Property Rights under the Regents' Patents
purported to be granted by Elan to IE pursuant to
the Elan License;
(iii) the default by Inex in the performance or
observance of any of its obligations to be
performed or observed under any Related Agreement;
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 40 -
(iv) the breach by Inex of any Regulatory Requirements
in connection with the Product or in the
performance or observance of any of its
obligations to be performed or observed under any
Related Agreement; or
(v) the negligence or wilful misconduct of Inex or its
Representatives.
14.2.2 The foregoing shall not apply to the extent that such Losses are
due to:
(a) the breach of any representation or warranty made by
Enzon in the Related Agreements;
(b) the default by Enzon in the performance or observance of
any of its obligations to be performed or observed under
the Related Agreements;
(c) the breach by Enzon, its Affiliates or Sublicensees of
any Regulatory Requirements in connection with the
Product or in the performance or observance of any of
its obligations to be performed or observed under the
Related Agreements; or
(d) the negligence or wilful misconduct of Enzon or its
Representatives.
14.3 Notice of Claims
In the event that a claim is made pursuant to Section 14.1 or 14.2 above against
any person or entity which seeks indemnification hereunder (the "Indemnitee"),
the Indemnitee shall give the indemnifying Party (the "Indemnitor") prompt
notice of any claim or lawsuit or other action for which it seeks to be
indemnified under this Agreement and agrees that the Indemnitor shall not have
any obligation under the relevant Section unless:
14.3.1 the Indemnitor is granted, subject to the provisions of this
Section 14.3 and the relevant provisions of Article 13, full
authority and control over the defense, including settlement,
against such claim or law suit or other action, and
14.3.2 the Indemnitee cooperates fully with the Indemnitor and its agents
in defense of the claims or law suit or other action.
The Indemnitee shall have the right to participate in the defense of any such
claim, complaint, suit, proceeding or cause of action referred to in this
Section utilizing attorneys of its choice, at its own expense, provided however,
that the Indemnitor shall, subject to the provisions of this Section 14.3 and
the relevant provisions of Article 13, have full authority and control to handle
any such claim, complaint, suit proceeding, or cause of action, including any
settlement or other disposition thereof, for which the Indemnitee seeks
indemnification under this Section, provided however, subject to the following
sentence, that no settlement or consent judgment or other voluntary final
disposition may be entered into without the consent of the Indemnitee if such
settlement would require the Indemnitee to be subject to an injunction or to
make a monetary payment or would restrict the claims in or admit any invalidity
of any Licensed Patent(s) or significantly adversely affect the rights of the
Indemnitee.
14.4 Consequential Losses
NO PARTY WILL BE LIABLE FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES OF ANY NATURE
ARISING FROM SUCH PARTY'S ACTIVITIES UNDER THE RELATED AGREEMENTS; PROVIDED,
HOWEVER, THAT THIS LIMITATION SHALL NOT LIMIT THE INDEMNIFICATION
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 41 -
OBLIGATION OF SUCH PARTY UNDER SECTIONS 14.1 OR 14.2 FOR CONSEQUENTIAL OR
INCIDENTAL DAMAGES RECOVERED BY A THIRD PARTY.
14.5 Actions Between the Parties
For the avoidance of doubt, in connection with actions brought by one Party
hereto against the other (whether for breach of any provisions hereof, any
representation or warranty made herein or otherwise), each Party expressly
reserves all of its rights and remedies under Applicable Law, including, without
limitation, the right to sue for breach of contract.
14.6 Insurance
Except as provided for below, for the term of this Agreement and for a period of
five years after the expiration of this Agreement or the earlier termination
thereof, each of the Parties shall obtain and maintain, and shall cause their
respective Affiliates and any Sublicensees to obtain and maintain, at their
respective sole cost and expense, comprehensive general liability insurance,
including product liability insurance on the Products, in amounts, which are
reasonable and customary in the USA pharmaceutical industry for companies of
comparable size and activities, but in no event less than ***. To the extent
reasonably practicable, this insurance shall include the other Party and their
respective Representatives as additional insureds. Each Party shall provide
written proof of the existence of such insurance to the other Party upon
request. If a Party maintains clinical trial insurance separate from its product
liability insurance, which clinical trial insurance is in an amount that is
reasonable and customary in the US pharmaceutical industry for companies of
comparable size and activities, then the product liability insurance need not
commence until FDA approval.
Article 15 Confidential Information and Publication
15.1 Treatment of Confidential Information
Each Party hereto shall maintain the Confidential Information of the other Party
in confidence, and shall not disclose, divulge or otherwise communicate such
Confidential Information to others, or use it for any purpose, except pursuant
to, and in order to carry out, the terms and objectives of the Related
Agreements, and hereby agrees to exercise every reasonable precaution to prevent
and restrain the unauthorized disclosure of such Confidential Information by any
of its Representatives.
15.2 Permitted Disclosures
15.2.1 Either Party may disclose the Confidential Information of the
other Party to its permitted Representatives to facilitate or
carry out the activities under the Related Agreements, provided
that such Third Parties enter into an agreement with such Party
which contains confidentiality provisions substantially the same
as those set forth herein, and such Party remains liable to the
other Party for the breach of such terms by such Party's
Representatives.
15.2.2 Either Party may disclose the Confidential Information of the
other Party to its attorneys, accountants or other advisors, or
actual or potential lenders, investors or purchasers, each of whom
is subject to confidentiality restrictions similar to those set
forth herein and such Party remains liable to the other Party for
the breach of such terms by such persons.
15.2.3 Either Party may disclose the Confidential Information of the
other Party to the extent such disclosure is required to be
disclosed by the receiving Party to comply with Applicable Laws,
to defend or prosecute litigation or to comply with governmental
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 42 -
regulations, provided that the receiving Party provides prior
written notice of such disclosure to the other Party and takes
reasonable and lawful actions to avoid and/or minimize the degree
of such disclosure, and provided further that disclosure of such
Confidential Information pursuant to this Section shall not
relieve the receiving Party of continued adherence to Section 15.1
with respect to such Confidential Information.
15.3 Publications Generally
The following restrictions shall apply with respect to the disclosure in
scientific journals or publications or speeches by any Party or any employee or
consultant of any Party relating to the inventions contained in the Licensed
Patents and the Inex Technology or to the activities or results of the
Development, Manufacture or Commercialization:
15.3.1 a Party (the "Publishing Party") shall provide the other Party
with an advance copy of any proposed publication and such other
Party shall have a reasonable opportunity to recommend any changes
it reasonably believes are necessary to preserve Intellectual
Property Rights or Confidential Information belonging in whole or
in part to Inex or Enzon, and the incorporation of such
recommended changes shall not be unreasonably refused; and
15.3.2 if such other Party informs the Publishing Party, within fifteen
(15) Business Days after receipt of an advance copy of a proposed
publication, that such publication in its reasonable judgment
could be expected to have a material adverse effect on any
Intellectual Property Rights or Confidential Information belonging
in whole or in part to Inex or Enzon, the Publishing Party shall
delay or prevent such publication as proposed. In the case of
inventions, the delay shall be sufficiently long to permit the
timely preparation and filing of a patent application(s) or
application(s) for a certificate of invention on the information
involved but not less than ninety (90) days or more than 120 days.
Nothing in this Section 15.3 shall apply to Promotional Materials approved for
use in accordance with the Co-Promotion Agreement.
15.4 No Limitation on Regulatory Compliance
Nothing in the Related Agreements shall be construed as preventing or in any way
inhibiting either Party from complying with Regulatory Requirements governing
the development, manufacture, use and sale or other distribution of Product in
the Territory in any manner which it reasonably deems appropriate, including,
for example, by disclosing to Regulatory Authorities confidential or other
information received from the other Party.
Article 16 Dispute Resolution
16.1 Negotiation
Subject to Section 12.1 of this Agreement:
16.1.1 If a dispute or controversy regarding any right or obligation
under the Related Agreements arises between the Parties and cannot
be resolved within fifteen (15) days of the dispute or
controversy, or within such other period as may be agreed by the
Parties, the Parties will seek to resolve such dispute or
controversy or failure to agree by good
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confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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faith negotiation between senior management representatives of the
Parties, to be commenced promptly after such dispute or
controversy or failure to agree arises.
16.1.2 If such dispute or controversy or failure to agree is not resolved
by such negotiation within thirty (30) days after written notice
by one Party to the other, and at least one Party requires such
resolution, then the Parties shall proceed as follows: any
unresolved dispute, controversy, action, claim or proceeding
initiated by either Party (other than a Third Party action, claim
or other proceeding in a bona fide action, claim or other
proceeding initiated by a Third Party against a Party) relating
to, arising out of or resulting from any Related Agreement, or the
performance by either Party of its obligations under any Related
Agreement, or any alleged breach, termination or invalidity of any
Related Agreement, whether before or after termination or
expiration of any Related Agreement, shall be finally resolved by
binding arbitration pursuant to Section 16.2.
16.2 Arbitration
Subject to Section 12.1 of this Agreement, in the event of any unresolvable
dispute, difference, or question arising between the Parties in connection with
the Related Agreements or any clause or the construction thereof, or the rights,
duties or liabilities of either Party, or the scope or validity of any patent
licensed hereunder, the matter shall be submitted for arbitration in accordance
with the rules of the American Arbitration Association. Such arbitration shall
take place in Chicago, Illinois or as otherwise agreed by the Parties. A single
arbitrator shall be appointed by agreement of the Parties to resolve all such
disputes, differences or questions. The arbitrator shall be guided by the
contents of the Related Agreements in arriving at a decision to resolve the
dispute, but may rely on extrinsic evidence where appropriate and/or necessary.
The arbitrator's resolution must be pursuant to and consistent with the laws of
Delaware. The Parties shall share the cost of the arbitration unless, in the
arbitrator's opinion, the position advanced by one of the Parties, or the nature
or manner of presenting it, is such that it would be unfair to so apportion such
expenses, in which case the arbitrator may apportion such expenses differently.
16.3 Consent to Jurisdiction
Subject to Section 12.1 of this Agreement, the parties hereto irrevocably
consent to the non-exclusive personal jurisdiction of any state or federal court
in the Northern District of Illinois for the enforcement of any arbitration
award arising under the Related Agreements.
Article 17 Termination
17.1 Term of Agreement
This Agreement shall become effective on the Effective Date and, unless earlier
terminated as provided for herein, shall expire, on a country-by-country basis,
upon the later of:
17.1.1 expiration of the last to expire of the Licensed Patents
containing Valid Claims covering the Product in such country in
the Territory; and
17.1.2 fifteen years from the date of the First Commercial Sale in that
country;
and such period shall be the "Term" under this Agreement.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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17.2 Renewal
On or before six months before the expiration of this Agreement in accordance
with its terms in any country in the Territory, Enzon may notify Inex in writing
that Enzon wishes to renew this Agreement. In the event that Enzon so notifies
Inex, the Parties will negotiate in good faith for the extension of the Term. If
the Parties have not reached agreement in writing to extend the Term on or
before the expiry of the Term in such country, this Section 17.2 shall be of no
further force or effect.
17.3 Termination for Breach
Each Party shall be entitled to terminate this Agreement by written notice to
the other Party in the event that the other Party shall be in material default
of any of its obligations hereunder, and shall fail to remedy any such default
within ninety (90) days after notice thereof by the non-breaching Party. Any
such notice shall specifically state that the non-breaching Party intends to
terminate this Agreement in the event that the breaching Party shall fail to
remedy the default. Any such notice shall set out expressly the actions required
of the breaching Party to remedy the default. If such default is not corrected,
the non-breaching Party shall have the right to terminate this Agreement by
giving written notice to the Party in default provided the notice of termination
is given within six (6) months of the default and prior to correction of the
default.
17.4 Termination upon Bankruptcy
17.4.1 This Agreement may be terminated by a Party by providing written
notice to the other Party upon:
(a) the bankruptcy, liquidation or dissolution of the other
Party;
(b) the filing of any voluntary petition for bankruptcy,
dissolution, liquidation or winding-up of the affairs of
the other Party; or
(c) the filing of any involuntary petition for bankruptcy,
dissolution, liquidation or winding-up of the affairs of
the other Party which is not dismissed within one
hundred twenty (120) days after the date on which it is
filed or commenced.
17.4.2 Notwithstanding the foregoing, either Party may seek the waiver of
the operation of Section 17.4.1 in advance of any event giving
rise to a right of termination under Section 17.4.1(b), and,
provided that:
(a) the requesting Party is in good standing and not in
breach of any of the terms of the Related Agreements;
(b) the requesting Party is in reasonable financial
condition; and
(c) the Party whose consent is sought will not be prejudiced
by granting such waiver,
the Party whose consent is sought will not unreasonably withhold
its consent to such waiver. Such waiver may be revocable in the
event of a material adverse change in circumstances related to the
requesting Party not contemplated at the time of granting the
waiver.
17.5 Termination of Related Agreements
In the event of termination of this Agreement, the Related Agreements shall
terminate with immediate effect, subject to any continuing or surviving
obligations as set forth in each such Related Agreement.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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17.6 Effect of Termination
The termination of this Agreement for any reason will be without prejudice to:
17.6.1 at Enzon's option and request, and subject to the terms of this
Agreement, Inex shall continue to perform its obligations
hereunder in respect of any Purchase Orders delivered to Inex
prior to the effective date of such termination, and Enzon will
pay Inex for any such Product received in accordance with such
Purchase Order(s);
17.6.2 Inex's right to receive all payments accrued from Enzon as of the
effective date of such termination including, but not limited to,
payment for all Product for which a Purchase Order has been
received as of the effective date of such termination and for
which Enzon has elected to have Inex perform its obligations
hereunder pursuant to Section 17.6.1;
17.6.3 Inex's right to receive reimbursement for all costs and
liabilities incurred by Inex as of the date of Inex's receipt of
Enzon's notice of termination, which cost and liabilities Inex has
properly and reasonably incurred in exercising good supply chain
management practices in response to Enzon's Forecast. For greater
certainty, such costs and liabilities shall include all reasonable
and necessary non-cancellable obligations entered into prior to
Inex's receipt of Enzon's notice of termination, but arising after
Inex's receipt of Enzon's notice of termination; and
17.6.4 any other legal, equitable or administrative remedies as to which
either Party may then or thereafter become entitled.
17.7 Consequences of Termination in Certain Circumstances
17.7.1 In the event of:
(a) the termination of this Agreement by Enzon pursuant to
Sections 17.3 or 17.4:
(i) Inex hereby provides Enzon permission to provide
the FDA and any foreign equivalent of the FDA in
the Territory with reference access to Inex's NDA
filed or to be filed in the United States, Canada
and elsewhere and such other Regulatory
Submissions as Enzon may request. In countries in
the Territory where required by Regulatory
Requirements, Enzon may incorporate Inex's NDA and
Regulatory Submissions into Enzon's own
submissions;
(ii) Inex will use Commercially Reasonable Efforts, at
Enzon's expense, to transfer the Inex Technology
then in the possession of Inex to the extent
necessary to permit Enzon or its designee to
Manufacture the Product. Where the Manufacturing
is performed by Third Parties, Inex shall use
Commercially Reasonable Efforts to assist Enzon,
at Enzon's expense, in dealing with such Third
Parties; and
(iii) Enzon will buy Inex's raw materials, work in
progress and inventory of Product at Inex's cost
of same; and
(iv) For up to three years after the effective date of
such termination, Inex shall use Commercially
Reasonable Efforts to ensure that Enzon has a
continuous and uninterrupted supply of Product, on
commercially
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confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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reasonable terms to the extent under Inex's
reasonable control, until Enzon has a reasonably
secure alternative source of supply for the
Product, provided that Enzon is using Commercially
Reasonable Efforts to obtain such an alternative
source of supply.
(b) termination of this Agreement by Inex pursuant to
Sections 17.3 or 17.4, Inex may, on notice in writing to
Enzon, do any or all of the following:
(i) cause Enzon to buy Inex's raw materials, work in
progress and inventory of Product at Inex's cost
of same;
(ii) cause Enzon to assign to Inex any Trademarks and
all registrations and applications therefor
without additional consideration; and
(iii) terminate the license to certain Inex Trademarks
set out in Section 9.3.
17.7.2 Enzon shall within thirty (30) days after the effective date of a
termination pursuant to this Article 17, notify Inex in writing of
the amount of the Product which Enzon, its Affiliates and
Sublicensees then have on hand, the sale of which would, but for
the termination, be subject to payments to Inex in accordance with
this Agreement, and Enzon, its Affiliates and Sublicensees shall
thereupon be permitted during the six (6) month period following
such termination to sell that amount of the Product, provided that
Enzon shall pay the aggregate sums owed to Inex pursuant to this
Agreement thereon at the conclusion of the earlier of the last
such sale or such period.
17.8 Additional Consequences of Termination
17.8.1 On or before the effective date of termination of this Agreement,
Enzon shall promptly deliver to Inex a copy of all Data and such
other information, materials (including biological materials) and
documents in Enzon's possession or control arising from the
development of the Product under this Agreement, including,
without limitation, the Development, provided that Inex shall be
responsible for any reasonable associated Out-of-Pocket Costs
associated with transferring same;
17.8.2 In the event that termination occurs before the payment of all
Manufacturing Costs referred to in Article 2, then, concurrently
with such termination, Enzon shall pay to Inex such payment on the
effective date of such termination.
17.9 Survival of Obligations; Return of Confidential Information
17.9.1 Upon any termination of this Agreement pursuant to this Article
17, neither Party shall be relieved of any obligations incurred
prior to such termination.
17.9.2 Notwithstanding any termination of this Agreement, the obligations
of the Parties under Article 1, Sections 2.8, 2.9, 2.11, 2.12,
2.13, 5.6, 5.7, 6.2, 6.3, 6.4, 9.12 and 11.5, Article 12, Article
13, Article 14, Article 15, Article 16, Article 17 and Article 18,
as well as under any other provisions which by their nature are
intended to survive any such termination, shall survive and
continue to be enforceable.
17.9.3 Upon any termination of this Agreement pursuant to Article 17,
except as contemplated hereby, each Party shall promptly return to
the other Party all Manufactured materials, written Confidential
Information, and all copies thereof (except for one archival copy
to
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confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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be retained by a person designated by such Party (who shall not
make such Confidential Information generally available to
employees or other representatives of such Party) for the purpose
of confirming which information to hold in confidence hereunder),
of the other Party which is not covered by a license surviving
such termination.
Article 18 Miscellaneous
18.1 Assignment
18.1.1 The rights and obligations set out in this Agreement are personal
to each Party and for this reason, except as expressly set out in
this Agreement, this Agreement will not be assignable by either
Party in whole or in part, nor will either Party subcontract any
of its obligations hereunder without the prior written consent of
the other Party, which consent shall not be withheld or delayed
unreasonably; provided, however, that the restriction contained
herein will in no way limit the rights of either Party to:
(a) assign or subcontract any right or obligation hereunder
to any of its Affiliates; or
(b) appoint as its agent for any purpose of this Agreement
any such Affiliate; or
(c) assign any right or obligation hereunder to any person
or entity that:
(i) purchases all or substantially all of its assets
to which this Agreement relates or
(ii) purchases all or substantially all of the stock of
either Party; or
(iii) acquires or is combined with either Party in a
merger or some other form of business combination.
18.1.2 This Agreement will be binding upon and will enure to the benefit
of the parties hereto and to any permitted assignee or successor
of either party.
18.1.3 Subject to other provisions of this Section 18.1, if one Party
validly assigns or subcontracts any or all of its obligations
hereunder, such assigning or subcontracting Party agrees to remain
bound by all of its responsibilities and obligations hereunder.
18.1.4 Any and all assignments of this Agreement or any interest herein
not made in accordance with this Section 18.1 will be void ab
initio.
18.2 Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.
18.3 Exhibits and Appendices
Each exhibit hereto is incorporated by reference and made a part of this
Agreement.
18.4 Force Majeure
In the event that either Party is prevented from performing or is unable to
perform any of its obligations under this Agreement due to any act of God; fire;
casualty; flood; war; strike; lockout; failure of public
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confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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utilities; injunction or any act, exercise, assertion or requirement of
governmental authority; epidemic; destruction of production facilities; riots;
insurrection; failure of transportation; inability to procure or use materials,
or any other cause beyond the reasonable control of the Party invoking this
Section 18.4 if such Party shall have used its reasonable efforts to avoid such
occurrence, such Party shall give notice to the other Party in writing promptly,
and thereupon the affected Party's performance shall be excused and the time for
performance shall be extended for the period of delay or inability to perform
due to such occurrence.
18.5 Further Assurances
Each Party hereto agrees to execute, acknowledge and deliver such further
instruments and do all such further acts as may be necessary or appropriate to
carry out the purposes and intent of this Agreement.
18.6 International Sale of Goods Act
The Parties acknowledge and agree that the International Sale of Goods Act and
the United Nations Convention on Contracts for the International Sale of Goods
have no application to this Agreement.
18.7 Modification
No waiver, alteration or modification of any of the provisions hereof shall be
binding unless made in writing and signed by the Parties by their respective
officers thereunto duly authorized.
18.8 No Agency
Except as explicitly set forth herein, nothing herein shall be deemed to
constitute either Party as the agent or representative of the other Party, or
both Parties as joint venturers or partners for any purpose. Inex shall be an
independent contractor, not an employee of Enzon, and the manner in which Inex
renders its services under this Agreement shall be within Inex's sole
discretion. Neither Party shall be responsible for the acts or omissions of the
other Party, and neither Party will have authority to speak for, represent or
obligate the other Party in any way without prior written authority from the
other Party.
18.9 No Solicitation or Hiring of Employees
During the Term and for one year thereafter, neither Inex nor Enzon shall,
without the prior consent of the other Party, solicit the employment of or hire
any person who during the course of employment with the other Party was involved
with activities under the Commercialization Plan and who when solicited or to be
hired is a current employee of the other Party.
18.10 Non-Use of Names
Except as otherwise expressly set out in this Agreement, neither Party shall use
the name of the other Party, nor any adaptation thereof, in any advertising,
promotional or sales literature without prior written consent obtained from such
other Party in each case (which consent shall not be unreasonably withheld or
delayed).
18.11 Notices
Any notice or other communication in connection with this Agreement must be in
writing and if by mail, by registered mail, return receipt requested, and shall
be effective when delivered to the addressee at the address listed below or such
other address as the addressee shall have specified in a notice actually
received by the addressor.
If to Inex:
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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Inex Pharmaceuticals, Inc.
c/o Corporation Trust Center
1209 Orange Street
Wilmington, DE 19801
Attention: President and CEO
With copies to:
Inex Pharmaceuticals Corporation
100-8900 Glenlyon Parkway
Burnaby, British Columbia
Canada V5J 5J8
Fax: 604-419-3202
Attention: Sr. V.P. Commercial Operations;
With a copy to:
Inex Pharmaceuticals Corporation
100-8900 Glenlyon Parkway
Burnaby, British Columbia
Canada V5J 5J8
Fax: 604-419-3202
Attention: Business Development
and:
Lang Michener
1500-1055 West Georgia Street
Vancouver, British Columbia
Canada V6E 4N7
Fax: 604-685-7084
Attention: Leo Raffin
and:
Farris, Vaughan, Wills & Murphy
2600 - 700 West Georgia Street
Vancouver, British Columbia
Canada V7Y 1B3
Fax: 604-661-9349
Attention: James Hatton
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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If to Enzon:
ENZON PHARMACEUTICALS, INC.
685 Route 202/206
Bridgewater, New Jersey
08807
Fax: 908.541.8680
Attention: Vice President, Business Development
with a copy to:
Enzon Pharmaceuticals, Inc.
685 Route 202/206
Bridgewater, NJ 08807
Fax: 908.541.8838
Attention: General Counsel
18.12 Parallel Imports
Enzon and Inex shall each use its Commercially Reasonable Efforts to provide
that each Party's sublicensees, distributors or dealers to whom each Party or
its Affiliates or sublicensees sells the Products for resale shall not sell any
Product to any customer located outside any country or region of the Territory
where each Party may exercise its rights.
18.13 Publicity
Except as required by law, stock exchange or Regulatory Authority:
18.13.1 neither Party, nor any of its Affiliates, shall originate any
publicity, news release or other public announcement, written or
oral, relating to this Agreement or the existence of an
arrangement between the Parties, without the prior written
approval of the other Party and agreement upon the nature and text
of such announcement or disclosure, which approval shall not be
unreasonably withheld;
18.13.2 the Party desiring to make any such public announcement or other
disclosure shall inform the other Party of the proposed
announcement or disclosure in reasonably sufficient time prior to
public release, and shall provide the other Party with a written
copy thereof, in order to allow such other Party to comment upon
such announcement or disclosure; and
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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18.13.3 notwithstanding the foregoing, the Parties agree that the press
release set out in Exhibit 18.13.3 shall be released by the
Parties upon execution and delivery of this Agreement by both
Parties.
18.14 No Third Party Beneficiaries
Except as expressly set out in this Agreement, nothing in this Agreement is
intended to or shall confer upon any Third Part any legal or equitable right,
benefit or remedy of any nature whatsoever.
18.15 Waiver
The waiver by either Party of a breach or a default of any provision of this
Agreement by the other Party shall not be construed as a waiver of any
succeeding breach of the same or any other provision, nor shall any delay or
omission on the part of either Party to exercise or avail itself of any right,
power or privilege that it has or may have hereunder operate as a waiver of any
right, power or privilege by such Party.
18.16 Cross Default
A breach of or default under any of the Related Agreements other than the
Co-Promotion Agreement shall constitute a breach of and default under all the
Related Agreements.
IN WITNESS WHEREOF, the Parties have executed this Product Supply Agreement as
of the date first above written.
Inex Pharmaceuticals, Inc.
By: /s/ David J. Main
---------------------------
Name: David J. Main
Title: President & CEO
Enzon Pharmaceuticals, Inc.
By: /s/ Arthur J. Higgins
---------------------------
Name: Arthur J. Higgins
Title: Chairman & CEO
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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Exhibit 1.1.1: Adverse Drug Event
ADVERSE DRUG EVENT FORM
An Adverse Drug Event shall mean any noxious, unintended, or untoward
medical occurrence in a patient or clinical investigation subject
associated with the use of a medicinal or investigational product, whether
or not related to the medicinal or investigational product.
This Form must be completed and faxed to the Regulatory Authorities (with
a copy provided to the other Party):
a) Immediately, or not later than 24 hours following receipt of any
information relating to an Adverse Drug Event; and
b) No later than two (2) business days following receipt of any information
relating to a product complaint.
Complaint Date:__________________________
Complaint received by:___________________ Title:_____________________
Manner complaint received in: Oral |_| Written |_| Faxed |_|
Other:___________________________________
Complainant's name:_________________ Phone:_______________ Fax: ________
Clinic's name:_________________ Phone:___________________ Fax:___________
Clinic's Address:_________________________________________________________
Product Name: ____________ Lot number: __________ Expiry Date:____________
Description of Product Complaint or Adverse Drug Event:___________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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Exhibit 1.1.44: Master Production Record
Inex SOP 1202.28-RO Manufacturing of Vincristine Sulfate Liposomes Injection
(14.2 mg/mL) (incorporated by reference)
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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Exhibit 1.1.71: Specifications
Specifications as set forth in the approved NDA will be inserted upon FDA
approval
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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Exhibit 1.1.77: Trademarks in the Territory
The trademark which the FDA approves for use in association with the Product in
the USA and its Canadian counterpart.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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Exhibit 2.1.1(a): Manufacturing Cost
***
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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Exhibit 2.1.1(b): Deferred Sales Price and Deferred Sales Payments
In partial consideration for the purchase of Product, Enzon shall pay Inex
Deferred Sales Payments based on all Net Sales in the Territory of the Product
by Enzon, its Affiliates and Sublicensees at the following rates, calculated in
the manner set out below and in Article 2:
- --------------------------------------------------------------------------------
Deferred
Annual Net Sales of Product in Territory ($) Sales Price
================================================================================
***
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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Exhibit 9.10: Interim Budget
***
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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Exhibit10.1: Joint Steering Committee Responsibilities and Initial Constituency
The members of the Joint Steering Committee as of the Effective Date are:
For Enzon:
Eddy Anglade, VP - Clinical
Clarke Atwell, VP - Sales & Marketing
Katherine Bishburg, VP - Regulatory
Eric Liebler, VP - Business Development
For Inex:
Tom MacRury, Senior VP, Commercial Operations
Alexandra Mancini, Senior VP, Clinical and Regulatory Affairs
Jeff Charpentier, VP Finance and CFO
Linda Diano, Director, Project Management
The Joint Steering Committee shall have the following responsibilities:
1. review amendments to the Commercialization Plan and submit same to the
Parties for review and approval;
2. establish working committees to conduct work under the Commercialization
Plan;
3. assign responsibility for conducting all needed Commercialization work
appropriately between the Parties, including providing for subcontractors
to perform certain tasks if desirable;
4. oversee all Commercialization activities;
5. coordinate between the Parties with respect to the overall strategy for
Commercialization;
6. review the reports of Commercialization Costs;
7. review the reports of Net Sales against sales targets;
8. be the primary contact point between the Parties regarding the transfer of
information and the discussion of each Party's efforts to conduct
Commercialization;
9. such other duties and responsibilities as may be agreed upon by the
Parties; and
10. be the primary contact point between the Parties regarding the transfer of
information and the discussion of each Party's efforts to conduct
Commercialization.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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Exhibit 18.13.3: Press Release
ENZON AND INEX SIGN COMMERCIALIZATION PARTNERSHIP FOR ONCOLOGY DRUG ONCO TCS
Bridgewater, NJ, and Vancouver, Canada - January XX, 2004 - Enzon
Pharmaceuticals, Inc. ("Enzon"; NASDAQ: ENZN) and Inex Pharmaceuticals
Corporation ("INEX"; TSX: IEX) today announced a strategic partnership to
develop and commercialize INEX's proprietary oncology product Onco TCS.
Under the terms of the agreement, Enzon receives the exclusive North American
commercialization rights for Onco TCS for all indications. The lead indication
is relapsed aggressive non-Hodgkin's lymphoma (NHL) for which INEX is in the
process of submitting a "rolling" New Drug Application (NDA) to the United
States Food and Drug Administration (FDA), which is expected to be completed
during the first quarter of calendar year 2004. The product is also in numerous
phase II clinical trials for several other cancer indications, including
first-line NHL.
INEX receives a US$12 million up-front payment and will receive up to a US$20
million payment upon Onco TCS receiving approval from the FDA. Additional
development milestones and sales based bonus payments could total US$43.75
million, of which US$10 million is payable upon annual sales first reaching
US$125 million and US$15 million is payable upon annual sales first reaching
US$250 million. INEX will also receive a percentage of commercial sales of Onco
TCS and this percentage will increase as sales reach certain predetermined
thresholds.
INEX has the option of complementing Enzon's sales efforts by co-promoting Onco
TCS through the formation of a dedicated North American sales and medical
science liaison force. The costs of building INEX's co-promotion force would be
shared equally by both companies and Enzon will record all sales in the licensed
territories.
Arthur Higgins, Enzon's chairman and chief executive officer, said, "This
transaction is highly complementary to our R&D and manufacturing infrastructure,
is an excellent fit with the therapeutic focus of our field force and most
importantly, offers the potential to significantly increase Enzon's product
revenues beginning as soon as fiscal 2005."
David Main, INEX's president and chief executive officer, said the agreement
meets INEX's objectives for a commercialization partnership. "It rewards our
company for successfully taking Onco TCS through clinical trials and through to
an NDA, it gives us a strong partner dedicated to oncology with which to share
costs of commercializing Onco TCS and expanding its potential uses. It also lets
us benefit from future sales with a formula for capturing an increasing share of
commercial sales."
"Enzon has expertise in the development, manufacturing and marketing of
liposomal drugs and has the motivation to make Onco TCS sales an important part
of its future," Main said. "This deal also provides a cost-effective means for
us to build our own commercial infrastructure to work alongside Enzon's, which
is important for our future growth strategy and pipeline activities."
Enzon and INEX will share equally the future development costs designed to
obtain and maintain marketing approvals in North America for Onco TCS, while
Enzon will pay all sales and marketing costs and certain other post-approval
clinical development costs typically associated with commercialization
activities. Enzon plans to market Onco TCS through its entire North American
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 61 -
sales force of approximately 60 people, which currently markets ABELCET(R),
ONCASPAR(R), and DEPOCYT(R) to the oncology market.
INEX retains manufacturing rights and will initially manufacture and supply the
drug and be reimbursed by Enzon. INEX and Enzon are discussing the potential of
transferring manufacturing to Enzon's sterile injectable manufacturing facility
in Indianapolis, Indiana where Enzon manufacturers its commercial drug
ABELCET(R) (Amphotericin B Lipid Complex Injection) and where MYOCETTM (liposome
encapsulated doxorubicin citrate complex) is manufactured for Elan Corporation,
plc.
The companies will also explore the acquisition and joint development of other
cancer drugs.
About Onco TCS
Onco TCS is a proprietary drug comprised of the widely used off-patent cancer
drug vincristine encapsulated in INEX's TCS (liposomal) drug delivery
technology. The TCS technology provides prolonged blood circulation, tumor
accumulation and extended drug release at the cancer site. These characteristics
are designed to increase the effectiveness and reduce the side effects of the
encapsulated drug.
INEX has completed a pivotal phase II/III clinical trial treating relapsed
aggressive NHL with Onco TCS. Currently, there is no effective treatment for
patients with aggressive NHL that have relapsed following first-line and
second-line treatment.
INEX's multi-center pivotal phase II/III trial treated 119 NHL patients who had
not responded to their previous therapy or had responded and subsequently
relapsed. After treatment with Onco TCS, an overall response rate of 25% was
attained. The results of this pivotal trial were released in June 2003 and
presented in December 2003 at the American Society of Hematology annual
conference along with interim results from two ongoing phase II trials in
relapsed Hodgkin's disease and relapsed B-cell lymphoma.
INEX has submitted two major sections of its "rolling" NDA to the FDA seeking
marketing approval for Onco TCS as a treatment for relapsed aggressive NHL. The
first section was submitted September 30, 2003 and included nonclinical, safety
and pharmacology data. The second section was submitted December 3, 2003 and
included data on manufacturing process, stability of the drug, composition of
the drug and other chemistry and related information. INEX expects the third and
final section, containing data from clinical trials, to be submitted during the
first quarter of calendar year 2004.
A "rolling" NDA is a process used by the FDA to expedite the review of a drug
intended for the treatment of a serious or life threatening condition and that
demonstrates the potential to address an unmet medical need. This allows the FDA
to begin to review sections of the NDA as they are submitted, as opposed to the
normal approval process, which requires the entire NDA to be submitted at one
time. In order to be eligible to submit a rolling NDA, a company will usually
have been granted Fast Track designation by the FDA, which INEX received in
August 2000.
Subject to acceptance of the full NDA for review, INEX expects to have a
response from the FDA within six months. If approved, it is anticipated that
Onco TCS could be introduced to the marketplace before the end of calendar year
2004 or early in 2005.
Although INEX has chosen to file an NDA for relapsed aggressive NHL as the first
route to approval for Onco TCS, Enzon and INEX intend to develop Onco TCS for
use as a stand-alone
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 62 -
drug and/or in combination therapy for several cancers in which vincristine is
now used. Onco TCS is being evaluated in several phase II clinical trials as a
treatment for first-line NHL, relapsed small cell lung cancer, relapsed
Hodgkin's disease, relapsed acute lymphoblastic leukemia, relapsed pediatric
malignancies, relapsed NHL in combination with the approved cancer drug
Rituxan(R) (rituximab), and relapsed NHL in combination with the approved cancer
drug etoposide.
About Non-Hodgkin's Lymphoma (NHL)
NHL is the fifth-leading cause of cancer deaths in the United States (23,400
estimated in 2003) and the sixth-leading cause of cancer deaths in Canada (2,800
estimated in 2003), according to estimates of the American Cancer Society and
the Canadian Cancer Society. Approximately 53,400 and 6,400 new cases were
diagnosed in the U.S. and Canada respectively in 2003.
Enzon Conference Call
Company management of Enzon will be hosting a conference call on Wednesday,
January 14, 2004 at 7:30 AM EST regarding the agreement. All interested parties
can access the call using the following information:
Domestic dial-in number 888-423-3274
International dial-in number 612-332-0345
Access Code 717232
Enzon's conference call will also be webcast in a "listen only" mode via the
internet at http://www.vcall.com. Additionally, for those parties unable to
listen at the time of Enzon's conference call, a rebroadcast will be available
following the call from Wednesday, January 14, 2004 at approximately 11:00 AM.
This rebroadcast will end on Wednesday, January 21, 2004 at 11:59PM. The
rebroadcast may be accessed using the following information:
Domestic Dial-In Number: 800-475-6701
International Dial-In Number: 320-365-3844
Access Code: 717232
INEX Conference Call
Company management of INEX will be hosting a conference call on Wednesday,
January 14, 2004 at 8:30 AM EST regarding the formation of the partnership. All
interested parties can access the call using the following information:
Dial-In Number: 416-405-9328
North American toll free access: 800-387-6216
INEX's conference call will also be webcast via the internet at
www.inexpharm.com.
Additionally, for those parties unable to listen at the time of INEX's
conference call, a replay will be available shortly following the completion of
the call. This rebroadcast will end on January 20, 2004 at 11:59 PM. The
rebroadcast may be accessed using the following information:
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 63 -
Dial-In Number: 416-695-5800
North American toll free access: 800-408-3053
Access Code: 1520395
About INEX
INEX is a Canadian biopharmaceutical company developing and commercializing
proprietary drugs and drug delivery systems to improve the treatment of cancer.
INEX entered into the partnership with Enzon through agreements entered into by
its wholly owned U.S. subsidiary, Inex Pharmaceuticals, Inc.
About Enzon
Enzon Pharmaceuticals is a biopharmaceutical company dedicated to the discovery,
development and commercialization of therapeutics to treat life-threatening
diseases. The company has developed or acquired a number of marketed products,
including PEG-INTRON(R), marketed by Schering-Plough, and ABELCET(R),
ONCASPAR(R), ADAGEN(R), and DEPOCYT(R), which are all marketed in North America
by Enzon's hospital and oncology sales forces. Enzon's science-focused strategy
includes an extensive drug development program that leverages the Company's
macromolecular engineering technology platforms, including PEG modification and
single-chain antibody (SCA(R)) technologies Internal research and development
efforts are complemented by strategic transactions that provide access to
additional products, projects, and technologies. Enzon has several drug
candidates in various stages of development, independently and with partners.
There are forward-looking statements contained herein that are not based
on historical fact, including without limitation statements containing the
words "believes," "may," "plans," "will," "estimate," "continue,"
"anticipates," "intends," "expects," and similar expressions. Such
forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, events or
developments to be materially different from actual future results, events
or developments. Such factors include the risk that Onco-TCS may not
receive regulatory approval from the FDA, as well as those described in
Enzon's Form 10-K and Forms 10-Q on file with the SEC and INEX's publicly
filed periodic reports and others, such as, (i) as to Enzon, Enzon's
ability to successfully launch and market Onco-TCS, Enzon's ability to
sustain profitability, and positive cash flow; risks in obtaining and
maintaining regulatory approval for indications and expanded indications
for Enzon's products; market acceptance of and continuing demand for
Enzon's products; timing and results of clinical trials and the impact of
competitive products and pricing and (ii) as to INEX, INEX's stage of
development, lack of product revenues, additional capital requirements,
risks associated with the completion of clinical trials and obtaining
regulatory approval to market INEX's products, risks associated with the
failure to secure all necessary intellectual property from third parties,
the ability to protect its intellectual property and dependence on
collaborative partners. These factors should be considered carefully and
readers are cautioned not to place undue reliance on such forward-looking
statements. All information in this press release is as of January __,
2004, and Enzon and INEX undertake no duty to update this information.
This release is also available at http://www.enzon.com and
http://www.inexpharm.com
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 2 -
Contacts for Enzon Pharmaceuticals, Inc. Contacts for Inex Pharmaceuticals
Corporation
Investors Investors
- --------- ---------
Susan M. Mesco Ian Mortimer
Director, Investor Relations Senior Director, Investor Relations
Phone: 908-541-8678 Phone: 604-419-3200
Media Media
- ----- -----
Euro RSCG Life NRP James Hoggan & Associates Inc.
Mark Vincent Karen Cook Boas
Phone : 212-845-4239 Phone: 604-739-7500
Enzon's common shares are traded on NASDAQ under the trading symbol "ENZN".
INEX's common shares are traded on the Toronto Stock Exchange under the trading
symbol "IEX".
- i -
CO-PROMOTION AGREEMENT
BETWEEN
INEX PHARMACEUTICALS, INC.
AND
ENZON PHARMACEUTICALS, INC.
January 19, 2004
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- ii -
TABLE OF CONTENTS
Article 1 Interpretation.......................................................1
1.1 Definitions..........................................................1
Article 2 Co-Promotion.........................................................3
2.1 Co-Promotion Rights..................................................3
2.2 Use by Inex of Representatives.......................................4
2.3 Enzon's Back Office Responsibilities.................................4
Article 3 Coordination.........................................................4
3.1 Coordination of Activities...........................................4
3.2 Reporting Relationships..............................................4
3.3 Supervision and Management of Personnel..............................4
3.4 Training.............................................................5
3.5 Communication........................................................5
3.6 Marketing Subcommittee..............................................5
Article 4 Promotional Material.................................................5
4.1 Approved Promotional Materials.......................................5
4.2 Provision of Enzon's Promotional Materials...........................5
4.3 Approval of Inex's Promotional Material..............................5
4.4 Use of Promotional Materials.........................................6
4.5 Corporate Logos......................................................6
4.6 Website..............................................................6
Article 5 Compliance...........................................................7
5.1 Consistent Statements................................................7
5.2 Medical Science Liaisons.............................................7
5.3 Communications to Sales Representatives and
Medical Science Liaisons.............................................7
5.4 Standards............................................................7
Article 6 Payments by Enzon....................................................8
6.1 Reporting and Payment of Co-Promotion Commercialization Costs........8
6.2 Additional Sales Representatives and Medical Science Liaisons........8
6.3 Payment of Co-Promotion Costs........................................8
6.4 Notice of Other Promotional Activities...............................9
6.5 Taxes; Indemnification...............................................9
Article 7 Termination..........................................................9
7.1 Term of Agreement....................................................9
7.2 Termination for Breach...............................................9
7.3 Termination upon Bankruptcy.........................................10
7.4 Effect of Termination...............................................10
7.5 Survival of Obligations; Return of Confidential Information.........11
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- iii -
Article 8 Miscellaneous.......................................................11
8.1 Assignment..........................................................11
8.2 Counterparts........................................................12
8.3 Exhibits and Appendices.............................................12
8.4 Force Majeure.......................................................12
8.5 Further Assurances..................................................12
8.6 Modification........................................................12
8.7 No Agency...........................................................12
8.8 No Solicitation or Hiring of Employees..............................13
8.9 Non-Use of Names....................................................13
8.10 Notices.............................................................13
8.11 Publicity...........................................................14
8.12 No Third Party Beneficiaries........................................15
8.13 Waiver..............................................................15
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 1 -
CO-PROMOTION AGREEMENT
This CO-PROMOTION AGREEMENT dated as of the 19th day of January, 2004 between
Inex Pharmaceuticals, Inc., a corporation duly incorporated pursuant to the laws
of Delaware, USA, having a registered office at Corporation Trust Center, 1209
Orange Street, Wilmington, DE 19801 (hereinafter referred to as "Inex"), and
Enzon Pharmaceuticals, Inc., a corporation duly incorporated pursuant to the
laws of Delaware, having a principal place of business at 685 Route 202/206,
Bridgewater, New Jersey 08807 (hereinafter referred to as "Enzon").
INTRODUCTION
A. Enzon is a pharmaceutical company with operations in research and
development, import, manufacture and sale of pharmaceutical products;
B. Inex is in the business of developing, manufacturing and selling certain
pharmaceutical products, including Vincristine Sulfate Liposomes Injection (as
further defined in this Agreement);
C. Of even date hereof, the Parties have entered into a Product Supply Agreement
pursuant to which Inex will supply to Enzon Vincristine Sulfate Liposomes
Injection (the "Product Supply Agreement");
D. Of even date hereof, the Parties also have entered into a Development
Agreement for the development of Vincristine Sulfate Liposomes Injection and for
the purpose of providing for the Regulatory Approval of, and conveying certain
rights to Enzon with respect to, Inex's Vincristine Sulfate Liposomes Injection
product in the Territory (the "Development Agreement"); and
E. Subject to the terms and conditions set forth in this Agreement, the Parties
wish to set out certain co-promotion rights for Inex and Enzon in the Territory.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
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NOW, THEREFORE, the Parties, intending to be legally bound, hereby agree as
follows:
Article 1 Interpretation
1.1 Definitions
Unless otherwise defined in this Agreement, capitalized terms used in this
Agreement shall have the meaning set out therefor in the Product Supply
Agreement or the Development Agreement (in the event of a conflict, the Product
Supply Agreement shall prevail). For purposes of this Agreement, the following
terms will have the meanings set forth below:
1.1.1 "Code" or "Codes" means the Code on Interactions with Healthcare
Professionals promulgated by the Pharmaceutical Research and
Manufacturers of America (PhRMA) and the American Medical
Association (AMA) Guidelines on Gifts to Physicians from Industry,
as either of the foregoing may be amended from time to time.
1.1.2 "Commercialization" means the activities customarily associated
with sales of pharmaceutical products including without
limitation, Manufacturing, DDMAC Activities, price and
reimbursement negotiations, pre-launch and launch activities,
marketing, sales, distribution, Co-Promotion, Post-Approval
Clinical Activities, the development, prosecution, registration
and maintenance of trademarks, trade names and domain names, and
pharmaco-vigilance in each country in the Territory.
1.1.3 "Co-Promotion" or "Promotion" means:
(a) Detailing and/or other related activities, including the
provision of medical information services or medical
liaison support, and
(b) market research, journal advertising, direct mail
programs, participation in trade shows, symposia,
congresses and other medical meetings; and
(c) MSL Activities;
undertaken by Enzon, or by Inex in concert with Enzon's marketing
personnel and sales force to augment Enzon's marketing and sale of
VSLI. When used as a verb, "Co-Promote" or "Promote" means to
engage in such activities.
1.1.4 "Co-Promotion Costs" means, with respect to Co-Promotion of the
Product by Inex or its Representatives, Inex's personnel cost of
Sales Representatives and Medical Science Liaisons including ***.
For greater certainty, "Co-Promotion Costs" are not included in
Commercialization Costs as defined in the Product Supply
Agreement.
1.1.5 "Detail" means a face-to-face meeting (including live video
presentation) with a physician; other medical professional with
prescribing authority; or office nurse or medical paraprofessional
with influence over pharmaceutical
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 3 -
prescribing or treatment regimes for patients in the Territory
during which scientific and/or medical information about the
Product is discussed. When used as a verb, the term "Detailing"
means to engage in the activity of a Detail.
1.1.6 "Medical Science Liaison" means an individual employed by either
Party to perform MSL Activities.
1.1.7 "MSL Activities" means through the use of Medical Science Liaisons
the maintenance of effective relationships with clinical
investigators with respect to the Product in the Territory. MSL
Activities would also include responding to physicians' requests
for medical information with respect to the Field.
1.1.8 "Pharmacovigilance" means all the activities associated with
maintaining an effective drug safety monitoring system and adverse
events reporting system in compliance with the requirements of
Regulatory Authorities.
1.1.9 "Product Labeling" means:
(a) the full prescribing information for the Product,
including any required patient information, as approved
by Regulatory Authorities; and
(b) all labels and other written, printed, or graphic matter
upon any container, wrapper, or any package insert,
utilized with or for the Product.
1.1.10 "Promotional Materials" means all written, printed, graphic,
electronic, audio or video matter, including journal
advertisements, sales visual aids, direct mail, direct-to-consumer
advertising, web pages, web links, Internet postings, broadcast
advertisements, sales reminder aids (e.g., scratch pads, pens and
other such items) and reprints intended for use or used by the
Parties in connection with any Promotion, except the Product
Labeling.
1.1.11 "Sales Representative" means an individual employed by either
Party or whose services are contracted for by either Party and who
engages in Co-Promotion.
1.1.12 "Standards" means the Accreditation Council for Continuing Medical
Education (ACCME) Standards for Commercial Support of Continuing
Medical Education, as they may be amended from time to time.
1.1.13 "Term" shall have the meaning set out in Section 7.1.
Article 2 Co-Promotion
2.1 Co-Promotion Rights
Inex shall have the right to engage in Co-Promotion activities with respect to
VSLI in the Territory pursuant to and in accordance with the provisions of this
Agreement.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 4 -
2.2 Use by Inex of Representatives
To the extent Inex does engage in Co-Promotion activities, it will do so through
its own employees or, subject to the approval of Enzon, not to be unreasonably
withheld, through its Representatives, such Representatives to include a
contract sales force.
2.3 Enzon's Back Office Responsibilities
Notwithstanding any Co-Promotion activities engaged in by the Parties, Enzon
shall remain responsible to book all sales of VSLI, conduct reimbursement
negotiations, conduct Pharmacovigilance, handle returns/recalls and order
processing, invoicing and collection, distribution, warehousing, inventory and
receivables, collection of sales data from hospitals and other end users and all
other customer service related functions and the like.
Article 3 Coordination
3.1 Coordination of Activities
Enzon and Inex shall cooperate on the determination of activities to be
undertaken by Inex employees and its Representatives engaged in Co-Promotion on
both a geographic and physician base basis. Due consideration will be given to
ensure that Inex employees and its Representatives have no lesser economic
opportunity than Enzon employees for their respective geographic and physician
assignments.
3.2 Reporting Relationships
To the extent they are engaged in Co-Promotion, Inex employees and its
Representatives shall be subject to the control and direction of Enzon. For the
purposes of conducting Co-Promotion, such Inex employees and Representatives
shall have reporting responsibilities and be subordinate to the Enzon managers
to whom their peer level Enzon employees report and are subordinate. Enzon
managers will work cooperatively with their peer level Inex employees and Inex's
Vice President, Sales & Marketing or such other executive officer as Inex
designates in the management of such Inex employees and Representatives. To the
extent the same Inex employees and its Representatives are engaged in
promotional activities related to products other than VSLI, they shall not be
subject to the control and direction of Enzon.
3.3 Supervision and Management of Personnel
Inex shall cooperate with Enzon promptly and reasonably with respect to the
supervision and management of its employees and its Representatives engaged in
Co-Promotion. Subject to Section 3.1, Inex shall consider in good faith and give
due weight to and, to the extent practicable, accommodate the recommendations of
Enzon with respect to the management of Inex's employees and its Representatives
engaged in Co-Promotion, including such matters as territorial assignments,
performance improvement and disciplinary actions, promotions, demotions,
terminations, etc. In addition, to the extent practical, the Parties will employ
similar compensation systems to foster strategic alignment and to foster
positive relations between each Party's personnel engaged in Co-Promotion.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 5 -
3.4 Training
Inex shall have the opportunity to review all training materials prior to their
use. Inex employees and its Representatives engaged in Co-Promotion shall be
subject to the same training, knowledge and performance requirements to which
their peer level Enzon employees are subject. They shall attend the same
training sessions and the same sales and other meetings that Enzon employees are
required to attend. Enzon shall bear all costs of organizing and conducting any
training sessions, except for travel and out-of-pocket costs incurred by Inex
personnel which shall be shared by Inex and Enzon pursuant to Section 6.1.
3.5 Communication
Each Party shall have the right to arrange for its employees and Representatives
directly involved in Co-Promotion of the Product to visit the other Party at the
other Party's offices, and to discuss related activities with the technical and
business personnel and consultants of such Party, provided that such visits
shall be upon reasonable prior notice and during normal business hours and shall
not unreasonably interrupt the operations of such Party.
3.6 Marketing Subcommittee
The Joint Steering Committee shall create a subcommittee, to be called the
Marketing Subcommittee, which will be constituted of such persons and engage in
such activities regarding Co-Promotion as shall be determined by the Joint
Steering Committee.
Article 4 Promotional Material
4.1 Approved Promotional Materials
In its Co-Promotion, Inex shall use only the Promotional Materials approved by
Enzon in writing and the trademarks, tradenames and domain names maintained by
Enzon and Inex for VSLI. Enzon shall bear all costs related to the preparation
and production of promotional materials for use by Inex employees and its
Representatives.
4.2 Provision of Enzon's Promotional Materials
Enzon shall provide Inex with sufficient final copies of all Promotional
Materials concurrently with Enzon's finalization of the form of same, and in any
event, prior to any public dissemination of same.
4.3 Approval of Inex's Promotional Material
Enzon shall have absolute discretion to approve all Promotional Materials
prepared by Inex prior to their use by Inex in Co-Promoting the Product. Enzon
shall designate an employee contact to whom Inex shall send for approval all
Promotional Materials.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 6 -
4.4 Use of Promotional Materials
4.4.1 Each Party shall own all Intellectual Property Rights in any
Promotional Materials created or developed by such Party.
4.4.2 Inex will provide to Enzon prior to their use Promotional
Materials that Inex creates for use outside the Territory. Inex
will consider in good faith any comments or suggestions made by
Enzon concerning such Promotional Materials.
4.4.3 Inex reserves the right to use outside the Territory all
Promotional Material created by Inex and approved by Enzon for use
inside the Territory.
4.4.4 Inex shall have the opportunity to review Promotional Materials
created by Enzon.
4.4.5 Enzon and Inex will cooperate in good faith with Inex's
Representatives, and Inex will use Commercially Reasonable Efforts
to cause its Representatives to cooperate in good faith with Enzon
and Inex, with respect to the preparation of Promotional Materials
for, and the use of such materials in, different geographic
markets on a global basis.
4.5 Corporate Logos
All training materials and Promotional Materials shall bear both Parties'
corporate logos in equal prominence. During the Term, each Party grants to the
other, the non-exclusive right to use its corporate logo in the Territory solely
for the purpose of the Promotion of the Product in accordance with the terms of
this Agreement. Each Party will use commercially reasonable efforts to protect
the other Party's corporate name, logo and symbol. Each Party acknowledges that
the other Party owns all right, title and interest in such other Party's
corporate name, logo and symbols and all good will associated therewith and that
any and all use of corporate name, logo or symbols under the Related Agreements,
and any good will associated with such use, shall inure exclusively to the
benefit of the owner of such name, logo or symbol.
4.6 Website
On any website relating solely to the Product that is owned or controlled by, or
operated on behalf of, Enzon to promote the Product (the "Websites"), Enzon
shall place (or cause to have placed) the Inex logo and accompanying text
provided by Inex, or such other Inex logo and accompanying text as Inex may
designate from time to time in writing to Enzon, subject to review and approval
of any such text by Enzon. Any such logo and accompanying text shall be given
appropriate placement on such websites and shall link to a uniform resource
locator ("URL") address designated by Inex, which URL address may be changed by
Inex from time to time upon reasonable notice to Enzon; provided, however, that
before providing any such link to a URL address, Enzon shall have the right to
review and approve the contents thereof. Inex grants Enzon the right to
establish a link to the Websites or other websites designated by Enzon and
approved by Inex from specific websites relating solely to the Product owed or
controlled by, or operated on behalf of, Inex. Enzon also grants Inex the right
to place (or cause to have
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 7 -
placed) the Enzon logo and accompanying text provided by Enzon, or such other
Enzon logo and accompanying text as Enzon may designate from time to time in
writing to Inex, on such Inex websites, subject to review and approval of any
such text by Inex. The content of the websites owned or controlled by Inex
relating solely to the Product and accessible in the Territory, and the portions
of other websites owned or controlled by Inex that relate to the Product and are
directed at Commercializing the Product shall be subject to the review and
approval of Enzon, which approval shall not be unreasonably withheld.
Article 5 Compliance
5.1 Consistent Statements
In connection with each Party's Promotion and Detailing of the Product, neither
Party shall make, nor permit its Sales Representatives to make, any statement,
representation or warranty, oral or written, to any person that is inconsistent
with the Product Labeling or the Promotional Materials. Each Party shall
promptly notify the other Party of and provide the other Party with a copy of
any correspondence or other reports or complaints received by a Party from any
Regulatory Authority, or any third party claiming that any Promotional Materials
are inconsistent with the Product Labeling or are otherwise in violation of
Regulatory Requirements.
5.2 Medical Science Liaisons
Each Party shall conduct MSL Activities using only Medical Science Liaisons who
have sufficient technical training and experience to perform such activities in
a manner consistent with the practice by leading pharmaceutical and
biotechnology companies of such activities within the Field. Each Party shall
require each Medical Science Liaison to attend training before such Medical
Science Liaison is permitted to conduct MSL Activities.
5.3 Communications to Sales Representatives and Medical Science Liaisons
Enzon shall provide Inex with copies of general communications (including
communications sent electronically or by voice mail) disseminated by Enzon to
the Sales Representatives and Medical Science Liaisons and relating to
strategies for the Promotion or Detailing of the Product or the conduct of MSL
Activities, as applicable.
5.4 Standards
In addition to its obligations to comply with Regulatory Requirements, each
Party shall:
5.4.1 Promote the Product in conformity with the practices and
procedures relating to the education of the medical community set
forth in the Standards; and
5.4.2 promptly notify the other Party of and provide the other Party
with a copy of any correspondence or other reports with respect to
the Promotion of the Product or the conduct of the MSL Activities
that a Party receives from:
(a) the Accreditation Council for Continuing Medical
Education (ACCME) relating to either Party's compliance
with the Standards;
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 8 -
(b) the PhRMA and the AMA relating to either Party's
compliance with the Codes; and
(c) the Division of Drug Marketing, Advertising and
Communications (DDMAC), of the FDA in relation to either
Party's compliance with Applicable Laws.
Article 6 Payments by Enzon
6.1 Reporting and Payment of Co-Promotion Costs
Enzon shall reimburse Inex for 50% of the Co-Promotion Costs of Inex's
Co-Promotion to augment Enzon's efforts up to a maximum of 30 sales persons and
medical science liaisons in accordance with the following:
6.1.1 after launch of the Product and until Enzon has achieved Net Sales
of the Product of at least $*** in any rolling four Commercial
Quarter period, the number of Sales Representatives and Medical
Science Liaisons shall not exceed ***;
6.1.2 after Enzon has achieved Net Sales of the Product of at least $***
in any rolling four Commercial Quarter period, but before it has
achieved annual Net Sales of the Product of at least $*** in any
rolling four Commercial Quarter period, the number of Sales
Representatives and Medical Science Liaisons shall not exceed ***;
and
6.1.3 after Enzon has achieved Net Sales of the Product of at least $***
in any rolling four Commercial Quarter period:, the number of
Sales Representatives and Medical Science Liaisons may increase to
*** or such number of Sales Representatives and Medical Science
Liaisons above *** as mutually agreed to by the Parties in writing
(and in accordance with such agreement).
6.2 Additional Sales Representatives and Medical Science Liaisons
Notwithstanding the foregoing, Inex may at any time utilize Sales
Representatives and Medical Science Liaisons in excess of the numbers set out in
Sections 6.1.1, 6.1.2 and 6.1.3 at Inex's expense, provided that such Sales
Representatives and Medical Science Liaisons comply with the terms of this
Agreement and Inex bears any incremental costs of Enzon associated with such
Sales Representatives and Medical Science Liaisons.
6.3 Payment of Co-Promotion Costs
On a quarterly basis, within 12 Business Days after the end of each Calendar
Quarter, Inex shall send Enzon invoices for 50% of its Co-Promotion Costs
accompanied by the appropriate documentation, including a listing of
expenditures in reasonably specific detail. Enzon shall pay such invoices within
thirty (30) days after receipt of same. Any Co-Promotion Costs incurred by Inex
or its Representatives in a particular quarter and not reflected in the invoice
delivered pursuant to the foregoing sentence shall be captured in subsequent
invoice(s).
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 9 -
6.4 Notice of Other Promotional Activities
If any Inex employee or Representative engaged in Co-Promotion is to commence
promotional activities with respect to any other product, Inex will provide
written notice thereof to Enzon at least 60 days prior to the commencement of
such other promotional activities. Enzon shall not be obligated to reimburse
Inex with respect to any promotional activities related to other products. For
purposes of determining Enzon's reimbursement obligations, the Commercialization
Costs for any employee engaged in such other promotional efforts shall be
allocated between VSLI and the other products on an equitable basis.
6.5 Taxes; Indemnification
The Inex employees and Representatives engaged in the Co-Promotion shall not be
deemed to be employees of Enzon. Inex shall be responsible for all income tax
withholding and similar obligations to all relevant taxing and other authorities
associated with all personnel engaged in Co-Promotion. Enzon's sole financial
obligations shall be to make the reimbursement payments directly to Inex as set
forth in this Agreement. Inex hereby does indemnify and shall defend Enzon
against and hold it harmless from any and all claims and/or liabilities that may
arise out of any characterization of, or attempt to characterize, any person
engaged in the Co-Promotion as an employee of Enzon.
Article 7 Termination
7.1 Term of Agreement
This Agreement shall become effective on the Effective Date and, unless earlier
terminated as provided for herein, shall expire, on a country-by-country basis,
upon the expiration of any of the Related Agreements and such period shall be
the "Term" under this Agreement.
7.2 Termination for Breach
Each Party shall be entitled to terminate this Agreement by written notice to
the other Party in the event that the other Party shall be in material default
of any of its obligations hereunder, and shall fail to remedy any such default
within sixty (60) days after notice thereof by the non-breaching Party. Any such
notice shall specifically state that the non-breaching Party intends to
terminate this Agreement in the event that the breaching Party shall fail to
remedy the default. Any such notice shall set out expressly the actions required
of the breaching Party to remedy the default. If such default is not corrected,
the non-breaching Party shall have the right to terminate this Agreement by
giving written notice to the Party in default provided the notice of termination
is given within six (6) months of the default and prior to correction of the
default.
7.3 Termination upon Bankruptcy
7.3.1 This Agreement may be terminated by a Party by providing written
notice to the other Party upon:
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 10 -
(a) the bankruptcy, liquidation or dissolution of the other
Party;
(b) the filing of any voluntary petition for bankruptcy,
dissolution, liquidation or winding-up of the affairs of
the other Party; or
(c) the filing of any involuntary petition for bankruptcy,
dissolution, liquidation or winding-up of the affairs of
the other Party which is not dismissed within one
hundred twenty (120) days after the date on which it is
filed or commenced.
7.3.2 Notwithstanding the foregoing, either Party may seek the waiver of
the operation of Section 7.3.1 in advance of any event giving rise
to a right of termination under Section 7.3.1(b), and, provided
that:
(a) the requesting Party is in good standing and not in
breach of any of the terms of the Related Agreements;
(b) the requesting Party is in reasonable financial
condition; and
(c) the Party whose consent is sought will not be prejudiced
by granting such waiver,
the Party whose consent is sought will not unreasonably withhold
its consent to such waiver. Such waiver may be revocable in the
event of a material adverse change in circumstances related to the
requesting Party not contemplated at the time of granting the
waiver.
7.4 Effect of Termination
The termination of this Agreement for any reason will be without prejudice to:
7.4.1 Inex's right to receive all payments accrued from Enzon as of the
effective date of such termination;
7.4.2 Inex's right to receive reimbursement for all costs and
liabilities incurred by Inex as of the date of Inex's receipt of
Enzon's notice of termination, which cost and liabilities Inex has
properly and reasonably incurred in its obligations hereunder. For
greater certainty, such costs and liabilities shall include all
reasonable and necessary non-cancellable obligations entered into
prior to Inex's receipt of Enzon's notice of termination, but
arising after Inex's receipt of Enzon's notice of termination; and
7.4.3 any other legal, equitable or administrative remedies as to which
either Party may then or thereafter become entitled.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 11 -
7.5 Survival of Obligations; Return of Confidential Information
7.5.1 The provisions of Article 1, Sections 4.4.1, 4.4.3, 4.4.5, Article
5, Section 6.5, Article 7 and Article 8 will survive any
expiration or termination of this Agreement in accordance with
their terms.
7.5.2 Upon any termination of this Agreement pursuant to Article 7,
except as contemplated hereby, each Party shall promptly return to
the other Party all written Confidential Information, and all
copies thereof (except for one archival copy to be retained by a
person designated by such Party (who shall not make such
Confidential Information generally available to employees or other
representatives of such Party) for the purpose of confirming which
information to hold in confidence hereunder), of the other Party
which is not covered by a license surviving such termination.
Article 8 Miscellaneous
8.1 Assignment
8.1.1 The rights and obligations set out in this Agreement are personal
to each Party and for this reason, except as expressly set out in
this Agreement, this Agreement will not be assignable by either
Party in whole or in part, nor will either Party subcontract any
of its obligations hereunder without the prior written consent of
the other Party, which consent shall not be withheld or delayed
unreasonably; provided, however, that the restriction contained
herein will in no way limit the rights of either Party to:
(a) assign or subcontract any right or obligation hereunder
to any of its Affiliates; or
(b) appoint as its agent for any purpose of this Agreement
any such Affiliate; or
(c) assign any right or obligation hereunder to any person
or entity that:
(i) purchases all or substantially all of its assets
to which this Agreement relates or
(ii) purchases all or substantially all of the stock of
either Party; or
(iii) acquires or is combined with either Party in a
merger or some other form of business combination.
8.1.2 This Agreement will be binding upon and will enure to the benefit
of the parties hereto and to any permitted assignee or successor
of either party.
8.1.3 Subject to other provisions of this Section 8.1, if one Party
validly assigns or subcontracts any or all of its obligations
hereunder, such assigning or
- 12 -
subcontracting Party agrees to remain bound by all of its
responsibilities and obligations hereunder.
8.1.4 Any and all assignments of this Agreement or any interest herein
not made in accordance with this Section 8.1 will be void ab
initio.
8.2 Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.
8.3 Exhibits and Appendices
Each exhibit hereto is incorporated by reference and made a part of this
Agreement.
8.4 Force Majeure
In the event that either Party is prevented from performing or is unable to
perform any of its obligations under this Agreement due to any act of God; fire;
casualty; flood; war; strike; lockout; failure of public utilities; injunction
or any act, exercise, assertion or requirement of governmental authority;
epidemic; destruction of production facilities; riots; insurrection; failure of
transportation; inability to procure or use materials, or any other cause beyond
the reasonable control of the Party invoking this Section 8.4 if such Party
shall have used its reasonable efforts to avoid such occurrence, such Party
shall give notice to the other Party in writing promptly, and thereupon the
affected Party's performance shall be excused and the time for performance shall
be extended for the period of delay or inability to perform due to such
occurrence.
8.5 Further Assurances
Each Party hereto agrees to execute, acknowledge and deliver such further
instruments and do all such further acts as may be necessary or appropriate to
carry out the purposes and intent of this Agreement.
8.6 Modification
No waiver, alteration or modification of any of the provisions hereof shall be
binding unless made in writing and signed by the Parties by their respective
officers thereunto duly authorized.
8.7 No Agency
Except as explicitly set forth herein, nothing herein shall be deemed to
constitute either Party as the agent or representative of the other Party, or
both Parties as joint venturers or partners for any purpose. Inex shall be an
independent contractor, not an employee of Enzon, and the manner in which Inex
renders its services under this Agreement shall be within Inex's sole
discretion. Neither Party shall be responsible for the acts or omissions of the
other Party, and neither Party will have authority to speak for, represent or
obligate the other Party in any way without prior written authority from the
other Party.
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 13 -
8.8 No Solicitation or Hiring of Employees
During the Term and for one year thereafter, neither Inex nor Enzon shall,
without the prior consent of the other Party, solicit the employment of or hire
any person who during the course of employment with the other Party was involved
with activities under the Commercialization Plan and who when solicited or to be
hired is a current employee of the other Party.
8.9 Non-Use of Names
Except as otherwise expressly set out in this Agreement, neither Party shall use
the name of the other Party, nor any adaptation thereof, in any advertising,
promotional or sales literature without prior written consent obtained from such
other Party in each case (which consent shall not be unreasonably withheld or
delayed).
8.10 Notices
Any notice or other communication in connection with this Agreement must be in
writing and if by mail, by registered mail, return receipt requested, and shall
be effective when delivered to the addressee at the address listed below or such
other address as the addressee shall have specified in a notice actually
received by the addressor.
If to Inex:
Inex Pharmaceuticals, Inc.
c/o Corporation Trust Center
1209 Orange Street
Wilmington, DE 19801
Attention: President and CEO
With copies to:
Inex Pharmaceuticals Corporation
100-8900 Glenlyon Parkway
Burnaby, British Columbia
Canada V5J 5J8
Fax: 604-419-3202
Attention: Sr. V.P. Commercial Operations;
With a copy to:
Inex Pharmaceuticals Corporation
100-8900 Glenlyon Parkway
Burnaby, British Columbia
Canada V5J 5J8
Fax: 604-419-3202
Attention: Business Development
and:
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 14 -
Lang Michener
1500-1055 West Georgia Street
Vancouver, British Columbia
Canada V6E 4N7
Fax: 604-685-7084
Attention: Leo Raffin
and:
Farris, Vaughan, Wills & Murphy
2600 - 700 West Georgia Street
Vancouver, British Columbia
Canada V7Y 1B3
Fax: 604-661-9349
Attention: James Hatton
If to Enzon:
ENZON PHARMACEUTICALS, INC.
685 Route 202/206
Bridgewater, New Jersey
08807
Fax: 908.541.8680
Attention: Vice President, Business Development
with a copy to:
Enzon Pharmaceuticals, Inc.
685 Route 202/206
Bridgewater, NJ 08807
Fax: 908.541.8838
Attention: General Counsel
8.11 Publicity
Except as required by law, stock exchange or Regulatory Authority:
8.11.1 neither Party, nor any of its Affiliates, shall originate any
publicity, news release or other public announcement, written or
oral, relating to this Agreement or the existence of an
arrangement between the Parties, without the prior written
approval of the other Party and agreement upon the nature and text
of such announcement or disclosure, which approval shall not be
unreasonably withheld;
8.11.2 the Party desiring to make any such public announcement or other
disclosure shall inform the other Party of the proposed
announcement or disclosure in reasonably sufficient time prior to
public release, and shall provide the other Party with a written
copy thereof, in order to allow such other Party to comment upon
such announcement or disclosure; and
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
- 15 -
8.11.3 notwithstanding the foregoing, the Parties agree that the press
release set out as an Exhibit to the Product Supply Agreement
shall be released by the Parties upon execution and delivery of
this Agreement by both Parties.
8.12 No Third Party Beneficiaries
Except as expressly set out in this Agreement, nothing in this Agreement is
intended to or shall confer upon any Third Part any legal or equitable right,
benefit or remedy of any nature whatsoever.
8.13 Waiver
The waiver by either Party of a breach or a default of any provision of this
Agreement by the other Party shall not be construed as a waiver of any
succeeding breach of the same or any other provision, nor shall any delay or
omission on the part of either Party to exercise or avail itself of any right,
power or privilege that it has or may have hereunder operate as a waiver of any
right, power or privilege by such Party.
IN WITNESS WHEREOF, the Parties have executed this Co-Promotion Agreement as of
the date first above written.
Inex Pharmaceuticals, Inc.
By: /s/ David J. Main
---------------------------
Name: David J. Main
Title: President & CEO
Enzon Pharmaceuticals, Inc.
By: /s/ Arthur J. Higgins
---------------------------
Name: Arthur J. Higgins
Title: Chairman & CEO
*** Indicates the omission of confidential material pursuant to a request for
confidential treatment made in accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, as amended. The Confidential material is being filed
separately with the Secretary to the Securities and Exchange Commission.
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 of
THE SARBANES-OXLEY ACT OF 2002
I, Arthur J. Higgins, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Enzon
Pharmaceuticals, Inc. ("Enzon");
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and we have:
a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material
information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in
which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this
quarterly report our conclusions about the effectiveness
of the disclosure and procedures, as of the end of the
period covered by this report based on such evaluation;
c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the
registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and to the audit
committee of registrant's board of directors (or persons performing
the equivalent functions):
a) All significant deficiencies and material weaknesses in
the design or operation of internal control over
financial reporting which are reasonable likely to
adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal control over financial
reporting.
May 10, 2004 By: /s/ Arthur J. Higgins
---------------------------------------
Arthur J. Higgins
Chief Executive Officer
(Principal Executive Officer)
26
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 of
THE SARBANES-OXLEY ACT OF 2002
I, Kenneth J. Zuerblis, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Enzon
Pharmaceuticals, Inc. ("Enzon");
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and we have:
a. Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material
information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in
which this quarterly report is being prepared;
b. Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this
quarterly report our conclusions about the effectiveness
of the disclosure and procedures, as of the end of the
period covered by this report based on such evaluation;
c. Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the
registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and to the audit
committee of registrant's board of directors (or persons performing
the equivalent functions):
a. All significant deficiencies and material weaknesses in
the design or operation of internal control over
financial reporting which are reasonable likely to
adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal control over financial
reporting.
May 10, 2004 By: /s/ Kenneth J. Zuerblis
---------------------------
Kenneth J. Zuerblis
Vice President Finance,
Chief Financial Officer
Corporate Secretary
(Principal Financial and
Accounting Officer) and
Corporate Secretary
27
Exhibit 32.1
CERTIFICATION PURSUANT TO
SECTION 906,
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Enzon Pharmaceuticals, Inc. and
Subsidiaries (the "Company") on Form 10-Q for the period ended March 31, 2004 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Arthur Higgins, Chairman, President and Chief Executive Officer of
the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss.
906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13 (a) or
15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations
of the Company.
By: /s/ Arthur J. Higgins
--------------------------------
Arthur J. Higgins
Chief Executive Officer
(Principal Executive Officer)
May 10, 2004
A signed original of this written statement required by section 906 has been
provided to Enzon Pharmaceuticals, Inc. and furnished to the Securities and
Exchange Commission or its staff upon request.
28
Exhibit 32.2
CERTIFICATION PURSUANT TO
SECTION 906,
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Enzon Pharmaceuticals, Inc. and
Subsidiaries (the "Company") on Form 10-Q for the period ended March 31, 2004 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Kenneth J. Zuerblis, Vice President Finance, Chief Financial
Officer and Corporate Secretary of the Company, certify, pursuant to 18 U.S.C.
ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that
to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13 (a) or
15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations
of the Company.
By: /s/ Kenneth J. Zuerblis
-------------------------
Kenneth J. Zuerblis
Vice President Finance,
Chief Financial Officer
(Principal Financial and
Accounting Officer) and
Corporate Secretary
May 10, 2004
A signed original of this written statement required by section 906 has been
provided to Enzon Pharmaceuticals, Inc. and furnished to the Securities and
Exchange Commission or its staff upon request.
29