UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 10-K/A

(Amendment No. 1)

 

(Mark One)

 

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2017

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________________ to ________________

 

Commission file number 001-37797

 

INNOVATE BIOPHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   27-3948465
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

8480 Honeycutt Road, Suite 120
Raleigh, North Carolina 27615
(Address of principal executive offices, including zip code)

 

(919) 275-1933
(Registrant’s telephone number, including area code)

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

 

Title of each class Name of each exchange on which registered
Common Stock $0.0001 Par Value The Nasdaq Stock Market LLC

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.  Yes   ¨     No   þ

 

Indicate by check mark if the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  Yes   ¨     No   þ  

 

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   þ     No   ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   þ      No   ¨

 

Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or an amendment to this 10-K. ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ¨   Accelerated filer ¨
Non-accelerated filer   ¨   Smaller reporting company þ
(Do not check if smaller reporting company)     Emerging growth company þ

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   þ

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   ¨      No  þ  

 

The aggregate value of common stock held by non-affiliates of the registrant as of June 30, 2017, the last business day of the registrant’s most recently completed second fiscal quarter, was $3,878,345 (based on the last reported closing sale price on the Nasdaq Capital Market on that date of $4.90 per share).

 

As of March 12, 2018, the registrant had 25,691,680 shares of common stock, par value $0.0001 per share, issued and outstanding.

 

 

 

 

 

  

TABLE OF CONTENTS

Form 10-K/A

(Amendment No. 1)

 

EXPLANATORY NOTE
 
PART I
 
ITEM 1. BUSINESS 3
     
PART IV
 
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 36
     
  SIGNATURES 41

 

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EXPLANATORY NOTE

 

Innovate Biopharmaceuticals, Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-K/A (this “Amendment”) to amend the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as filed with the Securities and Exchange Commission (the “SEC”) on March 14, 2018 (the “Form 10-K”). This Amendment is being filed solely to (i) update “Item 1. Business” to reflect comments received from the SEC Staff on the Company’s Form 8-K filed with the SEC on February 2, 2018, as amended and previously reflected therein, (ii) re-file Exhibits 10.1 and 10.2 to the Form 10-K (the “Exhibits”) and (iii) amend Part IV, “Item 15. Exhibits, Financial Statement Schedules” of the Form 10-K, including revising the Exhibit Index. The Exhibits, as re-filed on this Amendment, restore certain provisions that had previously been redacted in accordance with the Company’s application for confidential treatment in response to comments received from the SEC Staff. In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new certifications by the Company’s principal executive officer and principal financial officer are filed as exhibits to this Amendment.

 

No attempt has been made in this Amendment to modify or update the other disclosures presented in the Form 10-K. This Amendment does not reflect events occurring after the filing of the Form 10-K (i.e., those events occurring after March 14, 2018) or modify or update disclosures that may be affected by subsequent events. Such subsequent matters are addressed in subsequent reports filed with the SEC. Accordingly, this Amendment should be read in conjunction with the Form 10-K and the Company’s other filings with the SEC.

 

PART I

 

Item 1. Business.

 

Merger of Monster Digital, Inc. and Innovate Biopharmaceuticals Inc.

 

On January 29, 2018, Monster Digital, Inc. (“Monster”) and privately held Innovate Biopharmaceuticals Inc. (“Private Innovate”) completed a reverse recapitalization in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated July 3, 2017, as amended (the “Merger Agreement”), by and among Monster, Monster Merger Sub, Inc. (“Merger Sub”) and Private Innovate, which changed its name in connection with the transaction to IB Pharmaceuticals Inc. (“IB Pharmaceuticals”). Pursuant to the Merger Agreement, Merger Sub merged with and into IB Pharmaceuticals with IB Pharmaceuticals surviving as the wholly owned subsidiary of Monster (the “Merger”).  Immediately following the Merger, Monster changed its name to Innovate Biopharmaceuticals, Inc. (“Innovate”). In connection with the closing of the Merger, Innovate’s common stock began trading on the Nasdaq Capital Market under the ticker symbol “INNT” on February 1, 2018. Prior to the Merger, Monster was incorporated in Delaware in November 2010 under the name “Monster Digital, Inc.”

 

Except as otherwise noted or where the context otherwise requires, as used in this report, the words “we,” “us,” “our,” the “Company” and “Innovate” refer to Innovate Biopharmaceuticals, Inc. as of and following the closing of the Merger on January 29, 2018 and, where applicable, the business of Private Innovate prior to the Merger. All references to “Monster” refer to Monster Digital, Inc. prior to the closing of the Merger.

 

Overview

 

Prior to the Merger, Monster’s primary business focus was the design, development and marketing of premium products under the “Monster Digital” brand for use in high-performance consumer electronics, mobile products and computing applications.

 

After the Merger, we are a clinical-stage biopharmaceutical company developing novel medicines for autoimmune and inflammatory diseases with unmet needs. Our pipeline includes drug candidates for celiac disease, nonalcoholic steatohepatitis (NASH), Crohn’s disease (CD) and ulcerative colitis (UC). Our lead program, INN-202 (larazotide acetate or larazotide) is entering Phase 3 registration trials, targeted for the second half of 2018, and has the potential to be the first-to-market therapeutic for celiac disease, an unmet medical need, which affects an estimated 1% of the North American population or approximately 3 million individuals. Celiac patients have no treatment alternative other than a strict lifelong adherence to a gluten-free diet, which is difficult to maintain and can be deficient in key nutrients. Additionally, current FDA labeling standards allow up to 20 parts per million (ppm) of gluten in “gluten-free” labelled foods, which are sufficient to cause celiac symptoms in many patients, including abdominal pain, abdominal cramping, bloating, gas, headaches, ataxia, ’‘brain fog’’ and fatigue. Long-term ramifications of celiac disease include enteropathy associated T-cell lymphoma (EATL), osteoporosis and anemia.

 

 3 

 

  

 

 

Figure 1: Larazotide’s mechanism of action is applicable to multiple diseases.

 

Larazotide is an 8-amino acid peptide orally administered in a capsule which has been tested in more than 500 celiac patients with statistically significant improvement in celiac symptoms. The FDA has granted larazotide Fast Track Designation for celiac disease. Larazotide’s safety profile was similar to placebo primarily because larazotide is not systemically absorbed into the blood circulation. Additionally, larazotide’s mechanism of action (MoA) as a tight junction regulator is a new approach to treating autoimmune diseases, such as celiac disease. Pre-clinical studies have shown larazotide causes a reduction in permeability across the intestinal epithelial barrier, making it the only drug candidate known to us which is in clinical trials with this MoA. Increased intestinal permeability underlies several diseases in addition to celiac disease, including NASH, Crohn’s disease, ulcerative colitis and irritable bowel syndrome (IBS), among others (Figure 1). We are engaging in multiple research collaborations to expand larazotide’s clinical indications with a shorter time to proof-of-concept.

  

With the release of the Phase 2b trial data in 342 celiac patients at the 2014 Digestive Disease Week (DDW) conference, larazotide became the first and the only drug for the treatment of celiac disease (published data), which met its primary efficacy endpoint with statistical significance. The Phase 2b data showed statistically significant (p=0.022) reduction in abdominal and non-GI (headache) symptoms as measured by the CeD PRO. After a successful End-of-Phase 2 meeting with the FDA, which confirmed the regulatory path forward, we expect to launch the Phase 3 registration program later this year with topline data expected by 2019.

 

Larazotide is being investigated as an adjunct to a gluten-free diet for celiac patients who continue to experience symptoms despite adhering to a gluten-free diet. Due to the difficulty of maintaining a gluten-free diet due to lack of easy access to and the higher cost of gluten-free foods, contamination from gluten as well as social pressures, it is estimated that more than half the celiac population experiences multiple, potentially debilitating, symptoms per month. A study from the UK indicates that more than 70% of patients diagnosed with celiac disease consume gluten either intentionally or inadvertently (Hall et al. 2013).

 

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Another indication for which larazotide is currently being developed is NASH. NASH is an unmet need disease affecting approximately 5%-6% of the US adult population. There are currently several drugs in development; however, to our knowledge, none have larazotide’s MoA. We are developing a proprietary formulation of larazotide, INN-217, for efficient delivery to the intestine. INN-217 has the potential to reduce the transport of lipopolysaccharide (LPS), which is produced by gram negative bacteria in the gut, from the intestinal lumen to the liver via the portal circulation. Several studies have shown the link between NASH and increased levels of LPS, which translocates across an inflamed, “leaky” epithelial barrier to the liver thus directly damaging liver cells via an inflammatory cascade. INN-217 can potentially decrease the flux of LPS across the leaky epithelial barrier, which is known to play an important role in the pathogenesis of NASH. Since none of the NASH drugs in development currently target intestinal permeability, INN-217 has the potential to affect NASH alone and work synergistically with late stage NASH drugs in development, which are primarily focused on metabolic targets such as farnesoid X receptor (FXR) and acetyl-CoA carboxylase (ACC).

 

 

Figure 2: LPS (Lipopolysaccharide) is a toxin produced by intestinal bacteria and can translocate via the leaky epithelial barrier to the liver and damage liver cells. Thus LPS has been implicated in the pathogenesis of NASH.

 

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INN-108, is in development for the treatment of mild-to-moderate UC. INN-108 is expected to be delivered orally using an azo-bonded pro-drug approach linking mesalamine or 5-ASA (5-amino salicylic acid) to 4-APAA (approved as Actarit in Japan in 1994 for the treatment of rheumatoid arthritis). After having completed a successful Phase 1 trial at currently approved doses of mesalamine, INN-108 is expected to enter a proof-of-concept Phase 2 trial. The azo-bond protects INN-108 (Figure 2) from the low pH in the stomach, allowing it to transit to the colon where the UC lesions are primarily located. In the colon, the azo bond is broken enzymatically by azoreductases, leading to the separation of mesalamine and 4-APAA which has a synergistic anti-inflammatory effect. Although the majority of patients present with mild-to-moderate UC, the focus of drug development has been in moderate-to-severe UC with little innovation or drug development for mild-to-moderate UC. The mainstay of treatment for mild-to-moderate UC continues to be various oral reformulations of mesalamine such as Shire’s Lialda (approved 2007) and Pentasa (approved 1993), Allergan’s Asacol HD (approved 2008) and Valeant/Salix’s Apriso (approved 2008).

 

We also own the global rights to INN-329, a proprietary formulation of secretin, a peptide hormone which is used to improve visualization in magnetic resonance cholangiopancreatography (MRCP) procedures. Secretin is a 27-amino acid long hormone which rapidly stimulates release of pancreatic secretions, thus improving visualization of the pancreatic ducts during imaging procedures.

 

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Our Strategy

 

Our goal is to become a leading biopharmaceutical company by developing novel therapeutics that have the potential to transform current treatment paradigms for patients and to address unmet medical needs. We are currently pursuing the development of drugs for autoimmune and inflammatory diseases that target established biological pathways. The critical components of our strategy are as follows:

 

  Advance INN-202 (larazotide) for celiac disease into Phase 3 clinical trials.   Our highest clinical priority is to initiate the Phase 3 trials for larazotide for the treatment of celiac disease. We had a successful End-of-Phase 2 meeting with the FDA in 2017. With the guidance and agreement reached with the FDA, we plan to initiate our Phase 3 trials during the second half of 2018.

 

  Accelerate development of INN-217 (larazotide) for NASH. Increased intestinal permeability leads to LPS translocation to the liver and is one of the key recognized pathogenic factors in NASH.  Larazotide’s mechanism of action to decrease intestinal permeability could thus have a therapeutic effect in NASH. We plan to develop larazotide alone and in combination with select NASH therapies in clinical trials with the potential for synergistic therapeutic benefit.

 

  Further the study INN-108 for Ulcerative colitis . We are currently developing plans to initiate the proof of concept Phase 2 trials for INN-108 for the treatment of UC. We plan to initially develop INN-108 for mild-to-moderate UC in adults.

  

  Further the study of INN-289 (larazotide) for Crohn’s disease. The mechanism of action of larazotide to decrease intestinal permeability can have a therapeutic effect in inflammatory bowel disease (IBD). In an IL-10 knockout animal model, larazotide showed promising data which can position it for a proof-of-concept study using a proprietary formulation of larazotide, INN-289, alone and in combinations with select approved immunological therapies.

 

  Seek partnerships to commercialize late stage pipeline drugs. With large addressable markets, such as celiac disease, we plan to seek out partners with established presences and histories of successful commercialization.

 

  Leverage and protect our existing intellectual property portfolio and secure patents for additional indications. We intend to continue to expand our intellectual property protection strategy, grounded in securing composition of matter patents and method of use patents for newer indications. We plan to develop newer formulations for the product candidates for other indications and improved performance of existing indications.

 

  In-license additional intellectual property and pipeline drugs to expand our presence in the treatment of autoimmune and inflammatory diseases . In addition to broadening our current pipeline through indication expansion, we plan to explore expansion of our product pipeline through in-licensing, strategic partnerships and product acquisitions, as we did in 2016 by in-licensing of larazotide from Alba Therapeutics Corporation. We expect that future pipeline expansion decisions will be based on the unmet medical needs in autoimmune and inflammatory disease areas including, but not limited to, celiac disease and ulcerative colitis, the commercial opportunity, and the ability to rapidly develop and commercialize a product candidate.

 

  Leverage the expertise of our management team and network of scientific advisors and key opinion leaders . We are led by a strong management team with deep experience in drug development, collaborations, operations, and corporate finance. Our team has been involved in a broad spectrum of R&D activities leading to successful outcomes, including FDA approvals and drug launches. We will continue to leverage the collective experience and talent of our management team, network of leading scientific experts, and key opinion leaders to strategize and implement our development and eventually our commercialization strategy.

  

  Out-license our non-core assets/indications and establish research collaborations . From time to time, we review our internal research priorities and therapeutic focus areas and may decide to out-license non-core assets/indications that arise from current and future available data. We may seek research collaborations that leverage the capabilities of our core assets to monetize and expand upon the breadth of opportunities that may be accessible through our drug candidates.

 

  Outsource capital intensive operations . We plan to continue to outsource capital intensive operations, including most clinical development and all manufacturing operations of our product candidates, to facilitate the rapid development of our pipeline by using high quality specialist vendors and consultants in a capital efficient manner.

 

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Our Drug Product Pipeline

 

Our current pipeline is focused on clinical stage assets with large markets and unmet medical needs. We continue to leverage additional proof-of-concept work for larazotide to expand into additional indications, including NASH, Crohn’s disease and ulcerative colitis. The following table summarizes key information about our pipeline of drug product candidates to date (Table 1):

 

 

 

Table 1: Our key pipeline products are clinical stage and address large markets with chronically dosed therapies.

   

INN-202 (Larazotide) for Celiac Disease  

 

Larazotide is being developed for the treatment of celiac disease and has successfully completed a Phase 2b trial showing statistically significant reduction in abdominal and non-GI (headache) symptoms. We are planning to launch the Phase 3 trials in the second half of 2018.

  

Larazotide is an orally administered, locally acting, non-systemic, synthetic 8-amino acid (Figure 3), tight junction regulator being investigated as an adjunct to a gluten-free diet in celiac disease patients who still experience persistent GI symptoms despite being on a gluten-free diet. Because of larazotide’s lack of absorption into the blood circulation, we believe that fewer complications, if any, are likely to develop for individuals taking chronically dosed lifetime medication.

 

The larazotide drug product is an enteric coated drug product formulated as enteric coated multiparticulate beads filled into hard gelatin capsules for oral delivery. The enteric coating is designed to allow the bead particles to bypass the stomach and release larazotide upon entry into the small intestine (duodenum). A mixed bead formulation is used to allow partial release of larazotide upon entry into the duodenum and to release the remaining larazotide approximately 30 minutes later. In clinical trials, larazotide has been dosed 15 minutes before meals allowing time for its effect in the small bowel before exposure to gluten.

 

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Figure 3: Larazotide acetate is an 8-amino acid peptide in an oral capsule using a proprietary formulation

 

Larazotide’s Mechanism of Action

 

In research studies supportive of the mechanism of action, larazotide has been shown to stimulate recovery of mucosal barrier function via the regulation of tight junctions both in vitro and in vivo , including in a celiac disease mouse model (Gopalakrishnan, 2012). In doing so, it is proposed that larazotide reduces the symptoms associated with celiac disease.

 

In several autoimmune diseases, this increased intestinal permeability or paracellular leakage allows increased exposure to a triggering antigen and a consequent inflammatory response, the characteristics of which are determined by the particular disease and the genetic makeup of the individual. A new paradigm for autoimmune diseases is that there are three contributing factors to the development of disease:

 

  1. A genetically susceptible immune system that allows the host to react abnormally to an environmental antigen;

 

  2. An environmental antigen that triggers the disease process; and

 

  3. The ability of the environmental antigen to interact with the immune system.

  

Larazotide regulates tight junction opening triggered by both gluten and inflammatory cytokines, thus reducing uptake of gluten. Larazotide also disrupts the intestinal permeability-inflammation loop, and has been shown to reduce symptoms associated with celiac disease.

 

Larazotide’s Dose Response

 

Previously published in vitro work using Caco-2 cells has shown a linear dose response for larazotide in reducing permeability of the epithelial barrier by tightening the tight junctions (Gopalakrishnan, 2012). In several clinical trials, larazotide has exhibited clinical benefit by reducing celiac symptoms at lower doses while inhibition of this activity occurs at the higher doses. To better understand this observation, Dr. Anthony Blikslager from North Carolina State University evaluated the pharmacology of larazotide at the luminal surface of the small intestine in an ex vivo porcine model. A section of the porcine intestine was ligated, placed in an Ussing chamber and changes in permeability were measured by electrical resistance. Multiple experiments demonstrated that following an ischemic insult causing increased intestinal permeability, full length larazotide is capable of restoring intestinal wall integrity to that of the non-ischemic control. Subsequently, it was discovered that a specific aminopeptidase located within the brush borders of the intestinal epithelium cleaves larazotide into two fragments which lack either one or both N-terminus glycine (G) residues ( GG VLVQPG). Both cleaved fragments, GVLVQPG and VLVQPG, do not decrease intestinal permeability. Moreover, when these two fragments are administered in combination with the active full-length larazotide, they inhibit larazotide’s activity to restore intestinal wall integrity or reduce permeability. These data demonstrate that higher doses of larazotide lead to local buildup of breakdown fragments, which then compete with and block activity of larazotide after threshold concentration is reached. The in vitro experiments using Caco-2 monolayers did not show the same pharmacology and dose response because they lack the brush border and therefore lack the aminopeptidase which cleaves larazotide. These data also provide an explanation for the clinical observations of an optimal lower dose of larazotide, which avoids the reservoir of competing inactive fragments generated at high doses of larazotide.

 

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Figure 4: An aminopeptidase in the brush border cleaves larazotide into two fragments, #1 and #2, which then act as inhibitors of larazotide

 

 

 

Figure 5: Illustrative effect of gluten ingestion, breakdown to gliadin which can cross a “leaky” epithelial barrier in the small bowel thus activating the intestinal-inflammatory loop and leading to symptoms and villous atrophy.

 

The Intestinal Barrier, Tight Junctions, and Intestinal Permeability

 

The intestine is one of the largest interfaces between a person and his or her environment, and an intact intestinal barrier is essential in maintaining overall health. An important function of the intestinal barrier is to regulate the trafficking of macromolecules between the environment and the host. Together with gut-associated lymphoid tissue and the neuroendocrine network, the intestinal epithelial barrier controls the equilibrium between tolerance and immunity to non self-antigens. When the finely tuned trafficking of macromolecules is dysregulated, both intestinal and extra-intestinal autoimmune disorders can occur in genetically susceptible individuals (Figure 5).

 

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Transcellular fluxes (through the cell membrane) allow nutrients and small molecules to enter the cell from the luminal side of the intestine and exit on the serosal side (internal milieu). Paracellular fluxes (between cells) in contrast are limited by size and charge constraints imposed by the tight junctions between epithelial cells. The paracellular pathway is the key regulator of intestinal permeability to larger more complex macromolecules that may be immunogenically significant.

 

Intestinal epithelial cells adhere to each other through junction complexes. The tight junction, also referred to as zonula occludens, represents the major barrier to diffusion within the paracellular space between intestinal cells. Multiple proteins that make up the tight junction have been identified including occludin, claudin family members, and junctional adhesion protein (JAM). These interact with cytosolic proteins (ZO-1, ZO-2, and ZO-3) that function as adaptors between the tight junction proteins and actin and myosin contractile elements within the cell. Acting together, they open and close the paracellular junctions between cells. It is now apparent that tight junctions are dynamic structures that are involved in developmental, physiological, and pathological processes.

 

The role of tight junction dysfunction in the pathogenesis of autoimmune diseases is under active investigation. Many autoimmune populations have increased intestinal permeability, and it is believed that this may play a fundamental role in the development of autoimmunity. In susceptible populations, the opening of tight junctions between intestinal epithelial cells may lead to exposure to oral antigens via paracellular transport and a consequent autoimmune response. A wide range of gastrointestinal and systemic inflammatory diseases are associated with abnormal intestinal permeability including celiac disease, type 1 diabetes, inflammatory bowel diseases (Crohn’s disease and UC), and ankylosing spondylitis.

 

Summary of Key Clinical Trials using Larazotide in Celiac Disease

  

Larazotide has been administered to humans in seven clinical trials. These include three Phase 1 trials: (two trials in healthy subjects and a Phase 1b proof of concept (POC) trial in subjects with celiac disease), two Phase 2 gluten challenge studies in subjects with controlled celiac disease, and additionally two Phase 2 trials in subjects with active celiac disease (Table 2). After the Phase 1 studies, larazotide was tested to explore which endpoint would be suitable for celiac disease. After looking at permeability changes in the gut, which turned out to be highly variable in a large trial setting, and then mucosal healing, which likely requires a longer-term study, symptom reduction showed the most consistent and reliable reduction both in a gluten challenge and a ’‘real-life’’ trial. Importantly, after exposure in more than 800 subjects, the safety profile of larazotide remained similar to placebo due to its lack of absorption into the bloodstream, which we believe is an important advantage for a chronically dosed drug.

 

The initial Investigational New Drug Application (IND) for the treatment of celiac disease was filed with the FDA by Alba Therapeutics Corporation (Alba) on 12 August 2005 for the use of larazotide acetate (INN-202). The IND was transferred from Alba to Innovate effective March 8, 2016. Over the course of the seven clinical studies, 5 patients experienced a serious adverse event, of which 2 received placebo and 3 received larazotide. These events included inflammation of the gallbladder, gall stones, depression, allergic reaction to penicillin, and appendicitis. We do not believe that any of these events were considered related to treatment with study medication.

 

Trial   Study Date   Clinical Trial   No. of Subjects
-001    2005   Phase 1: Single Escalating Doses in Healthy Volunteers   24
-002    2005-06   Phase 1b: Multiple Dose POC in Celiac Patients – Gluten Challenge   21
-003    2006   Phase 1: Multiple Escalating Dose in Volunteers   24
-004    2006-07   Phase 2a: Multiple Dose POC in Celiac Patients Gluten Challenge 2 weeks   86
-006    2008   Phase 2b: Dose Ranging, in Celiac Patients Gluten Challenge, 6 weeks   184
-011    2008-09   Phase 2b: POC and Dose Ranging in Active Celiac Patients   105
-06B    2008   Phase 2b: Similar to -006, in Celiac Patients   42
-012    2011-13   Phase 2b: Multiple dose in Celiac patients with Symptoms on a Gluten-Free Diet   342

 

Table 2: Significant drug exposure in more than 800 subjects in multiple clinical trials consistently showed a safety profile similar to placebo, which we believe is an important advantage for chronic lifetime administration.

 

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Clinical Trial (’006) Results Revealed Key Insight into Symptom Reduction as a Primary Endpoint

 

A Phase 2b study with a gluten challenge (CLIN1001-006) was conducted in 184 subjects with well-controlled celiac disease on a gluten-free diet. Subjects were randomized to one of four treatment groups, (placebo, 1 mg, 4 mg, or 8 mg larazotide) and asked to take treatment 15 minutes prior to each meal (TID). Nine hundred (900) mg of gluten was taken with each meal. Subjects remained on their gluten-free diet throughout the duration of the trial. The trial results revealed key insights into how to move the program forward by focusing on reduction of symptoms. The 1-mg dose prevented the development of gluten-induced symptoms as measured by GSRS (a patient-reported outcome (PRO) devised and validated by AstraZeneca), and all drug treatment groups had lower anti-transglutaminase antibody levels than the placebo group. Results of pre-specified secondary endpoints suggest that larazotide reduced antigen exposure as manifested by reduced production of anti-tissue transglutaminase (tTG) levels and immune reactivity towards gluten and gluten-related gastrointestinal symptoms in subjects with celiac disease undergoing a gluten challenge.

  

  

Figure 6: The overall trial designs for Phase 2b and Phase 3 are similar with a screening period followed by 12 weeks of randomization to larazotide vs. placebo.

 

  

 

Figure 7: Responder Rate Analysis: Larazotide is the only drug in development for celiac disease to meet its primary endpoint with statistical significance as measured by the copyrighted CeD PRO (celiac disease patient reported outcome), an FDA-agreed upon primary endpoint for Phase 3 (shown above). Source: Gastroenterology 2015; 148:1311–1319; p. 1315

 

Clinical Trial (’012) Met the Primary Endpoint with Statistical Significance (CeD-GSRS/CeD PRO)

 

The purpose of the ’012 study was to assess the efficacy (reduction and relief of signs and symptoms of celiac disease) of 3 different doses of larazotide (0.5 mg, 1 mg, and 2 mg TID) versus placebo for the treatment of celiac disease in adults as an adjunct to a gluten-free diet. Larazotide or placebo which was administered TID, 15 minutes prior to each meal. After a screening period, subjects were asked to continue following their current gluten-free diet into a placebo-run in phase for 4 weeks after which they were randomized to drug versus placebo. Subjects maintained an electronic diary capturing: daily symptoms celiac disease patient reported outcome (CeD-PRO), weekly symptoms (CeD-GSRS), bowel movements (BSFS), and a self-reported daily general well-being assessment (Figure 6).

 

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The primary endpoint of average on-treatment CeD GSRS score throughout the treatment period was met at the 0.5 mg TID dose. In addition, a number of pre-specified secondary and exploratory endpoints, such as symptomatic days and symptom-free days, collectively demonstrated that a dose of 0.5 mg TID was superior to placebo and higher doses of larazotide. No difference was observed between the two higher dose levels (1 and 2 mg TID) or placebo, suggesting a narrow dose range around the 0.5mg dose which seems to correlate with pre-clinical data.

 

   

Figure 8: Treatment effect of larazotide from the Phase 2b trial (’012) compared to approved IBS/CIC drugs with varying treatment effects mostly in the mid to high single digit range. Source: Gastroenterology 2015; 148:1311–1319; p. 1315 and FDA Drug Labels

 

The CeD PRO, a copyrighted PRO created specifically for celiac disease and wholly owned by us, showed a statically significant (p=0.022) treatment effect of 14.3% (drug responder rate minus placebo responder rate). Although to our knowledge there are no celiac drugs approved as a comparator, the treatment effect was greater than several other GI dugs approved for IBS and chronic idiopathic constipation (CIC) which use a similar clinical trial design (Figure 8).

 

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Path Forward to Phase 3 Trials

 

After a successful End-of-Phase 2 meeting with the FDA, agreements were reached on the key aspects of the Phase 3 trials. The FDA agreed on using the previously validated CeD PRO as the primary endpoint with two doses of larazotide which bracket the range of efficacy in previous trials. Two Phase 3 trials with a size of about 500 patients each would allow for more than a 90% power to replicate the Phase 2b trial results. Most other criteria, such as inclusion, exclusion and site selection/coordination, are expected to remain similar to the ’012 Phase 2b trial.

 

About Celiac Disease

 

Celiac disease is a genetic autoimmune disease triggered by the ingestion of gluten-containing foods such as wheat, barley, and rye. Individuals with celiac disease have increased intestinal permeability, commonly referred to as a ’‘leaky’’ gut. This allows macromolecules that normally remain on the luminal side of the intestine to pass through to the serosal side through tight junctions via paracellular diffusion (Figure 9). In the case of celiac disease, this permeability may allow gluten break-down products, the triggering antigens of celiac disease, to reach gut-associated lymphoid tissue(GALT), initiating an inflammatory response. Celiac disease is characterized by chronic inflammation of the small intestinal mucosa that may result in diverse symptoms, malabsorption, atrophy of intestinal villi, and a variety of clinical manifestations.

   

 

Figure 9: The epithelial barrier separates the intestinal content from the immune system (lamina propria) and the vasculature.

 

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Figure 10: Intestinal villi atrophy in celiac patients, a characteristic finding upon biopsy of the small intestine.

 

Large Population — Unmet Need (no drug approved); Serious Long-Term Consequences

 

Celiac disease affects an estimated 1% of the Western population (Dubé, 2005). Currently, there are no therapeutics available to treat celiac disease, and the current management of celiac disease is a life-long adherence to a gluten-free diet. Changes in dietary habits are difficult to maintain, and foods labeled as gluten-free may still contain small amounts of gluten (up to 20 ppm per FDA labeling standards). Dietary compliance is imperfect in a large fraction of patients (Rostom, 2006) and difficult to adhere to on an ongoing basis (Green, 2007). In a survey conducted in the United Kingdom non-adherence to the gluten-free diet was found to be as high as 70% (Hall, 2013).

 

There are serious long-term consequences to exposure to gluten in patients with celiac disease, including the risk of developing osteoporosis, stomach, esophageal, or colon cancers, and T-cell lymphoma (Green 2003, Green 2007). The continuous GI symptoms often result in significant morbidity with a substantial reduction in quality of life. In addition, not all patients respond to a gluten-free diet. Patients with known celiac disease may continue to have or re-develop symptoms despite being on a gluten-free diet (Rostom 2006). This suggests a need for a therapeutic agent for the treatment of celiac disease (Green, 2007; Hall, 2013).

 

Celiac disease represents a model of an autoimmune disorder in which the following elements are known:

 

  1. The triggering environmental factor is glutenin or gliadin, the proline, glutamine and glycine rich glycoprotein fractions of gluten;

 

  2. There is a close genetic association with HLA haplotypes DQ2 and/or DQ8; and

 

  3. A highly specific humoral autoimmune response occurs.

 

Genetics of Celiac Disease

 

The high incidence of celiac disease in first degree relatives of celiac patients (10 − 15%) and high concordance rate in monozygotic twins (80%) suggest a strong genetic component. Gliadin deamidation by tissue transglutaminase (tTG) enhances the recognition of gliadin peptides by human leukocyte antigen (HLA) DQ2 and DQ8 T cells in genetically predisposed subjects, which in turn may initiate the cascade of autoimmune reactions responsible for mucosal destruction. This interaction implies that gliadin and/or its breakdown peptides in some way cross the intestinal epithelial barrier and reach the lamina propria of the intestinal mucosa where they are recognized by antigen-presenting cells. The enhanced paracellular permeability of individuals with celiac disease would allow passage of macromolecules through the paracellular spaces with resulting autoimmune inflammation. There is a strong genetic predisposition to celiac disease, with major risk associated with HLA DQ2 (approximately 95% of celiac disease patients) and HLA-DQ8 (approximately 5% of celiac disease patients). The prevalence of celiac disease in the U.S. is estimated to be approximately 1%; however approximately 30% of the general U.S. population is HLA DQ2 positive (Figure 11), indicating that additional factors are involved in the development of celiac disease.

  

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Figure 11: Distribution of HLA-DQ2/DQ8 in the general US population and in celiac disease. Source: J. Clin. Invest. 2007 Jan 2;117(1):41.

 

In celiac disease, an inflammatory reaction occurs in the intestine that is characterized by infiltration of immune cells in the lamina propria and epithelial compartments with chronic inflammatory cells and progressive architectural changes to the mucosa. Both adaptive and innate branches of the immune system are involved. The adaptive response is mediated by gluten-reactive CD4+ T cells in the lamina propria that recognize gluten-derived peptides when presented by the HLA class II molecules DQ2 or DQ8. The CD4+ T cells then produce pro-inflammatory cytokines such as interferon gamma. This results in an inflammatory cascade with the release of cytokines, anti-tTG antibodies, T cells, and other tissue-damaging mediators leading to villous injury and crypt hyperplasia in the intestine. Anti-human tissue transglutaminase (anti-tTG) antibodies are also produced, which form the basis of serological diagnosis of celiac disease.

 

Anti-tTG Antibodies: Highly Sensitive and Specific Blood-based ELISA Diagnostic Test

 

The current approach for diagnosis of celiac disease is to use anti-tissue transglutaminase-2 (tTG-2) antibody tests as an initial screen with definitive diagnosis from biopsy of the small intestine mucosa. The diagnosis of celiac disease is confirmed by demonstration of characteristic histologic changes in the small intestinal mucosa, which are scored based on criteria initially put forth by Marsh and later modified. In 2012, the European Society of Pediatric Gastroenterology, Hepatology, and Nutrition (ESPGHAN) Guidelines allowed symptomatic children with serum anti-tTG antibody levels ≥10 times upper limit of normal to avoid duodenal biopsies after positive human leukocyte (HLA) test and serum anti-endomysial antibodies.

 

The need for multiple clinical and laboratory findings to diagnose celiac disease makes monitoring disease progression difficult. International guidelines give standardized definitions and criteria for the diagnosis of celiac disease, however there are not clear standards for follow-up and monitoring of treatment. This is particularly true for celiac patients diagnosed as adults, who respond differently and less completely to a gluten-free diet than do celiac patients diagnosed as children. It is not clear who should perform follow-up of patients with celiac disease and at what frequency but the American College of Gastroenterology suggests that an annual follow-up seems reasonable. Recommendations for monitoring disease progression include assessing symptoms and dietary compliance, and repeating serology tests. Markers of celiac disease progression and improvement that are both validated and provide a timely assessment of disease activity are lacking.

 

Role of Tissue Transglutaminase in Celiac Disease

 

Anti-tTG-2 antibodies are produced in the small-intestinal mucosa (Picarelli et al. 1996), where they can bind tTG-2 present in the basement membrane and around blood vessels and form deposits characteristic of the disease. tTG-2 has been implicated in a variety of human disorders including several neurodegenerative conditions and cancer. Transglutaminases (TGs) were first discovered in the 1950s and are a family of enzymes which catalyze Ca2+-dependent post-translational modification of proteins. Of the seven isoforms discovered so far all share the same basic four-domain tertiary structure, with minor variations, although their catalytic mechanism is conserved, resembling that of the cysteine proteases. tTGs cause transamidation, esterification, and hydrolysis, all of which lead to post-translational modifications in the target proteins. Characteristically, tTG’s mediate selective protein cross-linking by forming covalent isopeptide linkages between two target proteins. The resulting cross-linked products in many cases have high molecular masses and are unusually resistant to proteolytic degradation and mechanical strain. As in the case of the gliadin fragments in celiac disease, they are able to pass thru the leaky paracellular pathway from the lumen to the lamina propria , where the immune cells reside and are then activated.

  

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Gliadin fragments, in addition to being rich in proline, also have high glutamine content, which makes them suitable substrates for tTG-2, which targets glutamine residues. For augmented DQ2/8 binding, the conversion of glutamine residues to glutamic acid is catalyzed by tTG-2 as a deamidation reaction. After deamidation, the gliadin peptides become highly negatively charged in key anchor positions, thereby increasing their affinity to the HLA molecules. CD4+ T cells recognize the deamidated gliadin peptides bound to the HLA DQ2 or DQ8 molecules by their T cell receptors, thus activating intestinal inflammation leading to villous atrophy.

 

Gluten and Food Labeling

 

Gluten is a complex molecule contained in several grains such as wheat, rye and barley. Gluten can be subdivided into two major protein subgroups according to its solubility in alcohol and aqueous solutions. These subclasses consist of gliadins, soluble in 40 − 70% ethanol and glutenins which are large, polymeric molecules insoluble in both alcohol and aqueous solutions. The gliadins and glutenins can be further subdivided into groups according to their molecular weight. Glutenins can be subdivided into low and high molecular weight proteins, while the gliadin protein family contains α-, β-, γ- and ω- types. Both glutenins and gliadins are characterized by a high amount of prolines (20%) and glutamines (40%) that protect them from complete degradation in the gastrointestinal tract and make them difficult to digest. Currently 31 nine-amino acid peptide sequences in the prolamins of wheat and related species have been defined as being celiac toxic or celiac ’‘epitopes.’’ These epitopes are located in the repetitive domains of the prolamins, which are proline and glutamine-rich, and the high levels of proline make the peptide resistant to proteolysis. In addition, the prolamin-reactive T cells also recognize these epitopes to a greater extent when specific glutamine residues in their sequences have been deamidated to glutamic acid by tTG-2. The immunodominant sequence after wheat challenge corresponds to a well-characterized 33 residue peptide from α-gliadin, ’’33-mer,’’ that is resistant to gastrointestinal digestion (with pepsin and trypsin) and was initially identified as the major celiac toxic peptide in the gliadins.

 

The FDA finalized a standard definition of ’‘gluten-free’’ in August 2013. As of August 5, 2014, all manufacturers of FDA-regulated packaged food making a gluten-free claim must comply with the guidelines outlined by the FDA ( www.fda.gov/gluten-freelabeling ). A ’‘gluten free’’ claim still allows up to 20 ppm of gluten which leads to more than 100mg/day up to 500 mg/day of gluten exposure. Due to presence of gluten in foods, beer/liquor, cosmetics and household products, exposure is virtually impossible to completely avoid, and with cross-contamination, celiac patients cannot avoid exposure to gluten therefore, making symptoms more frequent than expected.

 

CNS   Endocrine   Oncology/Heme   Skin   Other
Headaches   Type 1 Diabetes  

Enteropathy

associated T-cell

lymphoma (EATL)

  Dermatitis herpetiformis   Rheumatoid arthritis (RA)
Gluten ataxia  

Autoimmune

Thyroid

  anemia   Alopecia areata  

Reduced bone

Density

Peripheral neuropathies   Addison’s disease       Vitiligo   Sjogren’s syndrome

 

Table 3: Diseases associated with celiac disease

  

Non-GI Manifestations of Celiac Disease and Co-Morbidities

 

Headache, Gluten Ataxia: Nervous System Manifestation of Celiac Disease. The association between celiac disease and neurologic disorders has been supported by numerous studies over the past 40 years. While peripheral neuropathy and ataxia have been the most frequently reported neurologic extra-intestinal manifestations of celiac disease a growing body of literature has established headache as a common presentation of celiac disease as well. The exact prevalence of headache among patients ranges from about 30% to 6% (Lebwohl, 2016).

 

Dermatitis herpetiformis: Skin Manifestation of Celiac Disease. Dermatitis herpetiformis (DH) is an inflammatory cutaneous disease characterized by intensely pruritic polymorphic lesions with a chronic-relapsing course, first described by Duhring in 1884. DH’s only treatment is a strict lifelong gluten-free diet, for achieving and maintaining a permanent control. It appears in around 25% patients with celiac disease, at any age of life, mainly in adults and is a very characteristic clinical presenting symptom.

 

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INN-217: Non-alcoholic steatohepatitis (NASH) and The Microbiome

 

NASH is a growing epidemic affecting approximately 5 – 6% of the general population. An additional 10% to 20% of the general population who ingest little (< 70 g/week for females and <140 g/week for males) to no alcohol are characterized with fat accumulation in the liver, without inflammation or damage, a condition called nonalcoholic fatty liver disease (NAFLD). The progression of fatty liver to NAFLD to NASH to cirrhosis is a serious condition which has no approved FDA treatment. Evidence supporting a role for the gut-liver axis in the pathogenesis of NAFLD/NASH has been accumulating over the past 20 years. LPS or endotoxin translocation is thought to be a primary cause of downstream signaling in the liver causing inflammation and damage. NASH is associated with increased gut permeability caused by disruption of intercellular tight junctions in the intestine allowing LPS from bacteria to pass into the portal circulation to the liver directly damaging hepatocytes. LPS constitutes the outer leaflet of the outer membrane of most gram-negative bacteria. LPS is comprised of a hydrophilic polysaccharide and a hydrophobic component known as lipid A which is responsible for the major bioactivity of endotoxin. When released and translocated into the bloodstream from the gut, LPS can cause a variety of cytokine activity and inflammation in the host.

 

The disrupted barrier along with an altered microbiome in the gut contribute to NASH as recently demonstrated by a group from Emory University, Rahman et. al. , in Gastroenterology (2016). Knockout mice missing the junctional adhesion molecule A (JAM-A) ( F11r-/- ), which have a defect in the intestinal epithelial barrier thus making it “leaky,” develop more severe steatohepatitis. JAM-A is a component of the tight junction complex that regulates intestinal epithelial paracellular permeability. F11r-/- mice therefore have leaky tight junctions that allow for translocation of gut bacteria to peripheral organs. By restoring the leaky tight junctions, larazotide could potentially have a beneficial therapeutic effect by blocking translocation of bacterial toxins via the paracellular pathway and may also help normalize the dysbiotic microbiome found in NASH.

  

According to a marketing and research firm, GlobalData, the market for NASH therapeutics is expected to grow significantly. GlobalData estimates that the market in the United States, France, Germany, Italy, Spain, the United Kingdom, and Japan for such therapeutics will be approximately $25.3 billion by 2026. We expect that this market could be addressed by larazotide, although we are unable to estimate what portion until the effect in this population has been studied in clinical trials to understand the specific patient-type in NASH that may derive benefit.

 

 

 

Figure 12: Growing NASH population up to 5%-6% of adults in the US alone.

  

INN-289: Crohn’s Disease: Chronic Disease with need to oral therapeutics

  

Innovate is working on a proprietary formulation of larazotide for Crohn’s disease, INN-289. Animal data has shown the effect of larazotide on disease attenuation in an IL-10 knockout mouse model (Arrieta, 2009), which has been well established and used for several drug development programs. Larazotide was placed in the drinking water of the mice at a low dose (0.1 mg/ml) or high dose (1.0 mg/ml) during the period from 4 to 17 weeks of age. Results were compared to wild type mice, IL-10 knockout mice with no treatment, and IL-10 knockout mice treated with probiotics. Intestinal and colonic permeability was significantly reduced in the high dose larazotide treatment group, but not in the untreated IL-10 knockout group. Larazotide treatment caused a reduction in all tissue markers of colonic inflammation (IFNγ and TNFα) and in histological inflammation.

 

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Other Indications using Larazotide’s Mechanism of Action

 

Larazotide for Environmental Enteric Dysfunction (EED): Positive in vitro Data;

 

Environmental enteric dysfunction (EED) is a rare pediatric tropical disease in the U.S. and Europe, however, more than 165 million children in developing countries in Africa and Asia suffer from it. As per section 524 of the Federal Food, Drug, and Cosmetic Act (FD&C) Act, EED would likely fall under ’‘Current List of Tropical Disease’’ number ’S,’ thus making a drug approved for EED in the U.S. potentially eligible for a Priority Review Voucher.

 

The histological presentation of EED is very similar to celiac disease with villous atrophy and chronic inflammation of the small bowel and the pathogenesis of EED is linked to increased intestinal permeability. We have tested larazotide against some of the pathogens commonly found in EED (unpublished) and found positive in vitro results which will need to be confirmed in animal models before starting a clinical trial in EED.

 

INN-108: Mild-to-Moderate Ulcerative Colitis

  

INN-108 is in development for mild-to-moderate UC and is expected to enter a proof-of-concept Phase 2 trial in the second half of 2018 after a successful Phase 1 trial at currently approved doses of mesalamine. UC is an IBD that affects more than 1.25 million people in the major markets of the United States, France, Germany, Italy, Spain, the United Kingdom, and Japan and is characterized by inflammation and ulcers in the colon and rectum. UC is a chronic disease that can be debilitating and sometimes lead to life-threatening complications. While poorly understood, a multitude of environmental factors and genetic vulnerabilities are thought to lead to the dysregulation of the immune response via a defective epithelial barrier. Although the majority of patients present with mild-to-moderate UC which can progress to severe UC, the focus of drug development has been in moderate-to-severe UC with little innovation or drug development for mild-to-moderate UC. The mainstay of treatment for mild-to-moderate UC remain various oral reformulations of mesalamine or 5-ASA (5-amino salicylic acid) such as Shire’s Lialda (approved 2007) and Pentasa (approved 1993), Allergan’s Asacol HD (approved 2008) and Valeant/Salix’s Apriso (approved 2008).

 

The initial IND was filed with the FDA by Nobex Corporation on May 15, 2003 for the use of APAZA (INN-108) for the treatment of ulcerative colitis. The IND was then transferred from Seachaid Corporation to Innovate effective March 19, 2014. Two Phase 1 studies in healthy subjects and patients with ulcerative colitis were conducted by Nobex with INN-108. No serious adverse events were reported during either study.

 

INN-108 uses an azo-bonded pro-drug approach linking mesalamine to 4-APAA. Mitsubishi Pharma developed 4-APAA as Actarit in Japan which was approved in 1994 for rheumatoid arthritis. IBD drugs were all originally approved for RA, from the oldest 5-ASA, sulfasalazine, to the latest biologics, Humira and Enbrel. 4-APAA has more than two decades of safety data as a standalone drug and has an MoA which is differentiated from mesalamine though the ultimate effect for both is anti-inflammatory (Figure 13). Taken orally as a tablet, the azo-bond protects INN-108 from the low pH in the stomach, thus allowing it to transit to the colon where the UC lesions are located. In the colon, the azo bond is broken enzymatically leading to the release of mesalamine and 4-APAA which have a synergistic anti-inflammatory effect. With the addition of 4-APAA, which is not approved in the U.S. or EU, to the already approved mesalamine, the synergistic effect could lead to superior clinical efficacy over the currently approved oral mesalamines.

 

    

 

Figure 13: 4-APAA is covalently bonded to 5-ASA via a high energy azo-bond which is only enzymatically cleaved in the colon. The anti-inflammatory effect of each of 5-ASA and 4-APAA via different pathways which could lead to a potential synergistic anti-inflammatory effect as seen in animal studies.

  

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INN-108: UC Animal Model Data Shows Synergy between 4-APAA and Mesalamine

 

The effects of chronic treatment with INN-108 on Clostridium diffıcile toxin A — induced colitis of the colon is shown in Figure 14. Orally administered INN-108 was significantly more potent than sulfasalazine or 4-APAA alone (McVey, 2005).

 

 

Figure 14: A rat UC model using toxin A induced-colitis as the insult leads to sloughing of the colonic epithelium with increasing doses. Using sulfasalazine vs. INN-108 to protect against the toxin A injury showed INN-108 was significantly more potent that sulfasalazine. Source: McVey DC et al. Digestive Diseases and Sciences. 2005 Mar 1;50(3):565-73.

 

INN-108 Clinical Development Pathway

  

After completing two Phase 1 studies, the first of which was conducted between June 2003 and July 2003, and the second of which was conducted between and February 2004 and June 2004, a profile was established with dosing of mesalamine and 4-APAA at 2 grams each for a total of 4 grams three times a day.

 

The typical dose of the various approved mesalamine formulations range from 1.5g to 2.4g per day, thus INN-108’s mesalamine content is within the established approved dose range. The addition of 4-APAA is thought to improve the efficacy above mesalamine, which would allow INN-108 to be used either after or instead of current mesalamines. In a Phase 2 trial, we plan to compare INN-108 to mesalamine seeking to demonstrate a greater clinical effect than mesalamine alone.

 

Ulcerative Colitis: Lack of Innovation in New Drug Development for Past Several Decades

 

Conventional therapies broadly inhibit mechanisms involved in the inflammatory process and are commonly used to effectively treat patients experiencing a mild-to-moderate form of the disease. For mild-to-moderate UC, oral mesalamine has an established efficacy and safety profile. However, gastroenterologists cite the need for new therapies for mild-to-moderate UC.

 

Patients who do not respond to mesalamine are typically eventually transitioned to biologics. The primary targets for biologics have been to control the immune response and inflammatory cascade, by inhibiting or downregulating molecules such as TNF-α, NF-κB, IL-1β and IFN1-γ. We believe INN-108 bridges the gap between mesalamine and biologics by its mechanism of action of both inhibiting the inflammatory process and down-regulating the cytokines.

 

About Ulcerative Colitis

 

UC is a chronic intermittent relapsing inflammatory disorder of the large intestine and rectum. While poorly understood, a multitude of environmental factors and genetic vulnerabilities are thought to lead to the dysregulation of the immune response via a defective epithelial barrier. As a result, chronic inflammation and ulceration of the colon occurs. UC is specific to the colon and affects only the mucosal lining of the colon. Common symptoms of UC include diarrhea, bloody stools, and abdominal pain. The majority of patients are intermittent in their disease course, in that they experience a relapse among periods of remission. However, some patients experience only a single episode of the disease prior to maintaining remission whereas other patients are chronically symptomatic and may require a proctocolectomy to treat their condition.

 

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History of Drug Development in Mild-to-Moderate Ulcerative Colitis

 

The original compound used in UC was sulfasalazine (Azulfidine), a conjugate of 5-ASA linked to sulfapyridine by an azo bond, which is split into the two molecules by bacterial azoreductases in the colon. The 5-ASA component or mesalamine is the active therapeutic moiety of sulfasalazine, with sulfapyridine thought to have little if any therapeutic effect. Sulfapyridine, however, is the cause of most of the significant adverse side effects of sulfasalazine.

 

 This led to the development of other 5-ASA preparations utilizing azo chemistry to deliver high concentrations of mesalamine or 5-ASA to the colon by preventing early absorption of the drug in the small intestine. Such preparations include olsalazine (Dipentum), consisting of two molecules of 5-ASA bonded together by an azo bond, and balsalazide (Colazal), consisting of 5-ASA azo bonded to an inert carrier (4-aminobenzoyl-β-alanine). The efficacy of these newer oral forms of 5-ASA is comparable to that of sulfasalazine, but they are better tolerated. However, some side effects persist which prevent wider use. In each of these preparations, the only active moiety is mesalamine or 5-ASA, an anti-inflammatory agent.

 

INN-329

 

INN-329 is a proprietary formulation of secretin, a peptide hormone which is used to improve visualization in a magnetic resonance cholangiopancreatography (MRCP) procedures. Secretin is a 27-amino acid long hormone which rapidly stimulates release of pancreatic secretions, thus improving visualization of the pancreatic ducts during imaging procedures. Secretin has also been tested in a variety of central nervous system conditions such as autism, though currently approved only for pancreatic function testing and imaging with endoscopic retrograde cholangiopancreatography (ERCP).. We acquired the assets of secretin from Repligen Corporation in December 2014.

 

The initial IND and was filed with the FDA by Repligen on July 29, 2005 for MRCP. The IND was transferred from Repligen to Innovate in January 2015. The New Drug Application (NDA) for MRCP was filed with the FDA on December 21, 2011 and was transferred to Innovate in January 2015.

 

MRCP has been used for more than 20 years as a non-invasive tool for imaging pancreatic ducts. With the addition of secretin pancreatic secretions are increased leading to significantly improved visualization of the pancreatic ducts for detection of abnormalities, including pancreatic cancer. The gold standard for pancreatic duct imaging had been ERCP, an expensive and invasive procedure with complications such as pancreatitis (3 − 5%), bleeding (1 − 2%), perforation (1%), infection (1 − 2%) and death (1/250). More than a half-million ERCP procedures are performed annually in the U.S. and as the role of ERCP diminishes for screening, it will further the need for approval of secretin for S-MRCP. We expect to repeat a Phase 3 trial with a partner, if and when secured, as per previous discussion with the FDA to look at improvement in visualization of the pancreatic duct via MRCP with and without secretin.

 

Our Intellectual Property

 

We strive to protect the proprietary technology that we believe is important to our business, including our product candidates and our processes. We seek patent protection in the United States and internationally for our product candidates, their methods of use, and processes of manufacture and any other technology to which we have rights, as appropriate. Additionally, we have licensed the rights to intellectual property related to certain of our product candidates, including patents and patent applications that cover the products or their methods of use or processes of manufacture. The terms of the licenses are described below under the heading “Licensing Agreements.” The patent families related to the intellectual property covered by the licenses include 29 U.S. patents and 107 foreign patents with expiration dates ranging from 2018 to 2035. We also rely on trade secrets that may be important to the development of our business.

 

Our success will in part depend on the ability to obtain and maintain patent and other proprietary rights in commercially important technology, inventions and know-how related to our business, the validity and enforceability of our patents, the continued confidentiality of our trade secrets, and our ability to operate without infringing the valid and enforceable patents and proprietary rights of third parties. We also rely on continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary position.

 

We cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications we may own or license in the future, nor can we be sure that any of our existing patents or any patents we may own or license in the future will be useful in protecting our technology and products. For this and more comprehensive risks related to our intellectual property, please see “Risk Factors—Risks Related to Our Intellectual Property.”

  

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CeD PRO: Copyrighted Primary Endpoint for Celiac Disease Tested in a Successful Clinical Trial

 

The patient reported outcome (PRO) primary end point for celiac disease (CeD PRO) was developed based on FDA guidance and is copyrighted in the United States effective October 13, 2011.  The copyright registration is in effect for 95 years from the year of first publication or 120 years from the year of creation, whichever expires first. If the drug is approved by the FDA and is the first drug to be approved for celiac disease, Innovate believes that the PRO will become the standard for assessing efficacy in celiac disease.  Competitor companies seeking to use a PRO to establish efficacy in this indication would either need to develop their own PRO or would be required to license the CeD PRO from Innovate, thus providing an additional barrier to competitor entry into the marketplace. 

 

  Strategic Collaborations and License Agreements

 

We have entered into collaboration agreements with several academic institutions and other contract research organizations to investigate pre-clinical studies for the use of our product candidates in potential other indications or to further broaden our understanding of the current indications.

 

Licensing Agreements

 

License with Alba Therapeutics Corporation

 

In February 2016, we entered into a license agreement (the “Alba License”) with Alba Therapeutics Corporation (“Alba”) to obtain an exclusive worldwide license to certain intellectual property relating to larazotide and related compounds.

  

Our initial area of focus for this asset relates to the treatment of celiac disease. We now refer to this program as INN-202. The license agreement gives us the rights to (i) patent families owned by University of Maryland, Baltimore (UMB) and licensed to Alba, (ii) certain patent families owned by Alba, and (iii) one patent family that is jointly owned. In connection with the Alba License, we also entered into a sublicense agreement with Alba under which Alba sublicensed the UMB patents to us (the “Alba Sublicense”).

 

As consideration for the Alba License, we agreed to pay (i) a one-time, non-refundable fee of $0.4 million at the time of execution and (ii) set payments totaling up to $151.5 million upon the achievement of certain milestones in connection with the development of the product, which milestones include the dosing of the first patient in the Phase 3 clinical trial, acceptance and approval of the New Drug Application, the first commercial sale, and the achievement of certain net sales targets. The last milestone payment is due upon the achievement of annual net sales of INN-202 in excess of $1.5 billion. Upon the first commercial sale of INN-202, the license becomes perpetual and irrevocable. The term of the Alba Sublicense, for which we paid a one-time, non-refundable fee of $0.1 million, extends until the earlier of (i) the termination of the Alba License, (ii) the termination of the underlying license agreement, or (iii) an assignment of the underlying license agreement to us. After we make the first milestone payment after the dosing of the first patient in the Phase 3 clinical trial and are able to demonstrate sufficient financial resources to complete the trial, we have the exclusive option to purchase the assets covered by the license.

 

The patents covering the composition-of-matter for the larazotide peptide expire in 2018 (2019 outside the United States). The Alba Therapeutics patent estate nevertheless provides product exclusivity for INN-202 in the U.S. until June 4, 2031, not including patent term extensions that may apply upon product approval.

 

Significant patents in the INN-202 patent estate include issued patents in the U.S. for methods of treating celiac disease with larazotide (US Patents 8,034,776 and 9,279,807), of which the last to expire has a term to July 16, 2030.

 

Other significant patents include the larazotide formulation patent family, which has three issued U.S. patents as well as 39 filings outside the U.S. (31 issued). The significant patents in the INN-202 patent estate formulation patent family includes patents covering the composition-of-matter (US Patent 9,265,811) and corresponding methods of treatment (US Patents 8,168,594 and 9,241,969) for the larazotide formulation, with the last to expire patent having an expiration in the U.S. of June 4, 2031.

 

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License with Seachaid Pharmaceuticals, Inc.

 

In April 2013, we entered into a license agreement (the “Seachaid License”) with Seachaid Pharmaceuticals, Inc. (“Seachaid”) to further develop and commercialize the licensed product, the compound known as APAZA. This program is now referred to as INN-108 by us.

 

The license agreement gives us the exclusive rights to (i) commercialize products covered by the patents owned or controlled by Seachaid related to the composition, formulation or use of any APAZA compound in the territory that includes the U.S., Canada, Japan, and most countries in Europe, and (ii) use, research, develop, export and make products worldwide for the purposes of such commercialization.

 

As consideration for the Seachaid License, we agreed to pay a one-time, non-refundable fee of $0.2 million at the earlier of the time we meet certain financing levels or 18 months following the execution of the agreement and set payments totaling up to $6.0 million upon the achievement of certain milestones in connection with the development of the product, filing of the New Drug Application, the first commercial sale, and payments ranging from $1.0 million to $2.5 million based on the achievement of certain net sales targets. There are future royalty payments in the single digits based on achieving sales targets, and we are required to pay Seachaid a portion of any sublicense revenue. The royalty payments continue for each licensed product and in each applicable country until the earlier of (i) the date of expiration of the last valid claim for such products to expire or (ii) the date that one or more generic equivalents if such product makes up 50 percent or more of sales in the applicable country. The term of the Seachaid License extends on a product-by-product and country-by-country basis until the expiration of the royalty period for the applicable product in the applicable country.

  

The INN-108 patent estate includes issued patents for:

 

(i.) immunoregulatory compounds and derivatives and methods of treating diseases therewith, of which the last to expire has a term to December 17, 2021 (in the U.S.) and August 28, 2021 (in Europe);

(ii.) methods and compositions employing 4-aminophenylacetic acid, of which the last to expire has a term to to August 29, 2021 (in the U.S.);

(iii.) 5-ASA derivatives having anti-inflammatory and antibiotic activity, of which the last to expire has a term to August 29, 2021 (in the U.S.) and August 28, 2021 (in Europe); and

(iv.) synthesis of azo bonded immunoregulatory compounds, of which the last to expire has a term to May 31, 2028 (in the U.S.) and July 7, 2025 (in Europe).

 

The corresponding European patent application for (ii.) methods and compositions employing 4-aminophenylacetic acid is still pending, but if issued would provide a term to March 22, 2025 in the countries where the application is validated.

 

The INN-108 patent estate includes also provisional patent applications for pharmaceutical compositions, delivery compositions, methods of prophylaxis and methods of treatment. These patent applications have not yet been issued, and so it is impossible to know the expiration date of any intellectual property that might result from these applications.

 

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Asset Purchase Agreement

 

In December 2014, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Repligen Corporation (“Repligen”) to acquire Repligen’s RG-1068 program for the development of secretin for the pancreatic imaging market and MRCP procedures. We now refer to this program as INN-329. As consideration for the Asset Purchase Agreement, we agreed to make a non-refundable cash payment on the date of the agreement and future royalty payments consisting of a percentage between five and fifteen of annual net sales, with such royalty payment percentage increasing as annual net sales increase. The royalty payments are made on a product-by-product and country-by-country basis and the obligation to make the payments expires with respect to each country upon the later of (i) the expiration of regulatory exclusivity for the product in that country or (ii) ten years after the first commercial sale in that country. The royalty amount is subject to reduction in certain situations, such as the entry of generic competition in the market.

 

Manufacturing and Supply

 

We contract with third parties for the manufacturing of all of our product candidates, including INN-108, INN-202 and INN-329, for pre-clinical and clinical studies and intend to continue to do so in the future. We do not own or operate any manufacturing facilities, and we have no plans to build any owned clinical or commercial scale manufacturing capabilities. We believe that the use of contract manufacturing organizations (CMOs) eliminates the need to directly invest in manufacturing facilities, equipment and additional staff. Although we rely on contract manufacturers, our personnel or consultants have extensive manufacturing experience overseeing CMOs.

 

As we further develop our molecules, we expect to consider secondary or back-up manufacturers for both active pharmaceutical ingredient and drug product manufacturing. To date, our third-party manufacturers have met the manufacturing requirements for our product candidates in a timely manner. We expect third-party manufacturers to be capable of providing sufficient quantities of our product candidates to meet anticipated full-scale commercial demands but we have not assessed these capabilities beyond the supply of clinical materials to date. We currently engage CMOs on a ’‘fee for services’’ basis based on our current development plans. We plan to identify CMOs and enter into longer term contracts or commitments as we move our product candidates into Phase 3 clinical trials.

 

We believe alternate sources of manufacturing will be available to satisfy our clinical and future commercial requirements; however we cannot guarantee that identifying and establishing alternative relationships with such sources will be successful, cost effective, or completed on a timely basis without significant delay in the development or commercialization of our product candidates. All of the vendors we use are required to conduct their operations under current Good Manufacturing Practices, or cGMP, a regulatory standard for the manufacture of pharmaceuticals.

 

Commercialization

 

We own or control exclusive rights to all three of our product candidates in the markets of the United States, France, Germany, Italy, Spain, the United Kingdom, and Japan. We plan to pursue regulatory approvals for our products in the United States and the European Union, and may independently commercialize these products in the United States. In doing so, we may engage strategic partners to assist with the sales and promotion of our products.

 

Our anticipated commercialization strategy in the United States would target key prescribing physicians, including specialists such as gastroenterologists, as well as provide patients with support programs to ensure product access. Outside of the United States, we plan to seek partners to commercialize our products via out-licensing agreements or other similar commercial arrangements.

 

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Competition

 

The pharmaceutical industry is highly competitive and characterized by intense and rapidly changing competition to develop new technologies and proprietary products. Our potential competitors include both major and specialty pharmaceutical companies worldwide. Our success will be based in part on our ability to identify, develop and manage a portfolio of product candidates that are safer and more effective than competing products.

 

The competitive landscape in celiac disease is currently limited, which we believe is due to lack of significant past R&D investments and lack of recognition and education around the disease. To our knowledge, there are no late stage competitors entering Phase 3 clinical trials or any who have successfully completed Phase 2 studies to date. However, in recent years large pharmaceutical companies have begun to expand their focus areas to autoimmune diseases such as celiac disease, and given the unmet medical needs in these areas, we anticipate increasing competition. A few early stage programs are active, with time to enter Phase 1 clinical trials still several years away, including Roche/Genetech’s RG7625 (cathepsin S inhibitor), Takeda/PvP’s KumaMax (gluten degrading enzyme), Celimmune/Amgen’s AMG-714 (an IL-15 MAb) and Dr. Falk Pharma/Zeria’s ZED-1227 (a tTG-2 inhibitor). ImmunogenX’s IMGX003 (two gluten degrading enzymes) failed to meet its primary endpoint in a Phase 2b trial in 2015.

 

Product   Status   Mechanism   Company   Route   Product Type
AMG 714   Phase 2  

Anti-IL-15

MAb

 

Celimmune/

Amgen

 

Subcutaneous;

2x/month

 

MAb

(humanized)

                     
ZED-1227   Phase 1b   TGase-2 inhibitor  

Zedira GmbH/

Dr Falk

Pharma

  Oral  

Small molecule

(peptidomimetic)

                     
Nexvax2   Phase 1   Tolerizing vaccine   ImmusanT   Intradermal   3 gliadin epitopes (peptides)
KumaMax   Pre-clinical   Enzymatic degradation of gluten  

Takeda/PvP

Biologics

  Oral   Recombinant enzyme

 

Table 4: Current celiac drugs in development are still in pre-clinical to early Phase 2 proof-of-concept stage. No drugs have completed a successful Phase 2b efficacy trial other than larazotide.

  

Ulcerative colitis drug development has historically been primarily focused on the moderate-to-severe UC population with little investment and research and development in mild-to-moderate UC, which is the majority of the patient populations. Current treatments for mild-to-moderate UC include the mesalamine reformulations that are pictured in Figure 15 below and described above under the heading “History of Drug Development in Mild to Moderate Ulcerative Colitis,” as well as Lialda, Pentasa, Asacol HD and Apriso, Valeant/Salix’s Uceris (oral MMX-formulated budesonide; a corticosteroid) and 5-mercaptopurine (severe side effects). Eventually, half of the mild-to-moderate UC patients progress from mesalamine to the more expensive biologics, which creates a significant potential market opportunity for any drug that is more effective than mesalamine and less expensive than the biologics.

 

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Figure 15: Other than various reformulations of mesalamine which have been used for the past several decades, no new drugs have been approved for mild-to-moderate UC

 

Government Regulations

 

The FDA and other regulatory authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record keeping, approval, advertising, promotion, marketing, post-approval monitoring, and post-approval reporting of drugs, such as those we are developing. Along with third-party contractors, we will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory agencies of the countries in which we wish to conduct studies or seek approval or licensure of our product candidates. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources.

 

Government Regulation of Drugs

 

The process required by the FDA before drug product candidates may be marketed in the United States generally involves the following:

 

  completion of preclinical laboratory tests and animal studies performed in accordance with the FDA’s current Good Laboratory Practices, or GLP, regulation;

 

  submission to the FDA of an Investigational New Drug application, or IND, which must become effective before clinical trials may begin and must be updated annually or when significant changes are made;

 

  approval by an independent Institutional Review Board, or IRB, or ethics committee for each clinical site before a clinical trial can begin;

 

  performance of adequate and well-controlled human clinical trials to establish the safety, purity and potency of the proposed product candidate for its intended purpose;

 

  preparation of and submission to the FDA of a New Drug Application, or NDA, after completion of all required clinical trials;

 

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  a determination by the FDA within 60 days of its receipt of a NDA to file the application for review;

 

  satisfactory completion of an FDA Advisory Committee review, if applicable;

 

  satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is produced to assess compliance with current Good Manufacturing Practices, or cGMP, and to assure that the facilities, methods and controls are adequate to preserve the product’s continued safety, purity and potency, and of selected clinical investigational sites to assess compliance with current Good Clinical Practices, or cGCPs; and

 

  FDA review and approval of the NDA to permit commercial marketing of the product for particular indications for use in the United States, which must be updated annually and when significant changes are made.

 

The testing and approval processes require substantial time, effort and financial resources, and we cannot be certain that any approvals for our product candidates will be granted on a timely basis, if at all. Prior to beginning the first clinical trial with a product candidate, we must submit an IND to the FDA. An IND is a request for authorization from the FDA to administer an investigational new drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for clinical studies. The IND also includes results of animal and in vitro studies assessing the toxicology, pharmacokinetics, pharmacology, and pharmacodynamic characteristics of the product; chemistry, manufacturing, and controls information; and any available human data or literature to support the use of the investigational product. An IND must become effective before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial.

 

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with cGCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical study. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent protocol amendments. Furthermore, an independent Institutional Review Board, or IRB, for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site, and must monitor the study until completed. Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objectives. Some studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. There are also requirements governing the reporting of ongoing clinical studies and clinical study results to public registries.

 

For purposes of NDA approval, human clinical trials are typically conducted in three sequential phases that may overlap.

 

  Phase 1.  The drug product is initially introduced into healthy human subjects and tested for safety. In the case of some products for severe or life-threatening diseases, the initial human testing is often conducted in patients.

 

  Phase 2.  The drug product is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosing schedule.

  

  Phase 3.  Clinical trials are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an expanded patient population at geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk to benefit ratio of the product and provide an adequate basis for product labeling.

 

  Phase 4.  In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product. These so-called Phase 4 studies may be required as a condition to approval of the NDA.

 

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Phase 1, Phase 2 and Phase 3 testing may not be completed successfully within a specified period, if at all, and there can be no assurance that the data collected will support FDA approval or licensure of the product. Concurrent with clinical trials, companies may complete additional animal studies and develop additional information about the drug characteristics of the product candidate, and must finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

 

NDA Submission and Review by the FDA

 

Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development, nonclinical studies and clinical trials are submitted to the FDA as part of a NDA requesting approval to market the product for one or more indications. The NDA must include all relevant data available from pertinent preclinical and clinical studies, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls, and proposed labeling, among other things. Data can come from company-sponsored clinical studies intended to test the safety and effectiveness of a use of the product, or from a number of alternative sources, including studies initiated by investigators. The submission of a NDA requires payment of a substantial User Fee to FDA, and the sponsor of an approved NDA is also subject to annual product and establishment user fees. These fees are typically increased annually. A waiver of user fees may be obtained under certain limited circumstances.

 

Within 60 days following submission of the application, the FDA reviews an NDA to determine if it is substantially complete before the agency accepts it for filing. The FDA may refuse to file any NDA that it deems incomplete or not properly reviewable at the time of submission and may request additional information. In this event, the NDA must be resubmitted with the additional information. Once a NDA has been filed, the FDA’s goal is to review the application within ten months after it accepts the application for filing, or, if the application relates to an unmet medical need in a serious or life-threatening indication, six months after the FDA accepts the application for filing. The review process may be significantly extended by FDA requests for additional information or clarification. The FDA reviews a NDA to determine, among other things, whether a product is safe and effective for the indication being pursued, and the facility in which it is manufactured, processed, packed, or held meets standards designed to assure the product’s continued safety and effectiveness. The FDA may convene an advisory committee to provide clinical insight on application review questions. Before approving a NDA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving a NDA, the FDA will typically inspect one or more clinical sites to assure compliance with cGCP. If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

 

The testing and approval process requires substantial time, effort and financial resources, and each may take several years to complete. The FDA may not grant approval on a timely basis, or at all, and we may encounter difficulties or unanticipated costs in our efforts to secure necessary governmental approvals, which could delay or preclude us from marketing our products. After the FDA evaluates a NDA and conducts inspections of manufacturing facilities where the investigational product and/or its drug substance will be produced, the FDA may issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application is not ready for approval. A Complete Response Letter may request additional information or clarification. The FDA may delay or refuse approval of a NDA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product.

 

If regulatory approval of a product is granted, such approval may entail limitations on the indicated uses for which such product may be marketed. For example, the FDA may approve the NDA with a Risk Evaluation and Mitigation Strategy, or REMS, plan to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing regulatory standards is not maintained or if problems occur after the product reaches the marketplace. The FDA may require one or more Phase 4 post-market studies and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization, and may limit further marketing of the product based on the results of these post-marketing studies. In addition, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of our products under development.

 

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A sponsor may seek approval of its product candidate under programs designed to accelerate FDA’s review and approval of new drugs that meet certain criteria. Specifically, new drug products are eligible for fast track designation if they are intended to treat a serious or life-threatening condition and demonstrate the potential to address unmet medical needs for the condition. For a fast track product, the FDA may consider sections of the NDA for review on a rolling basis before the complete application is submitted if relevant criteria are met. A fast track designated product candidate may also qualify for priority review, under which the FDA sets the target date for FDA action on the NDA at six months after the FDA accepts the application for filing. Priority review is granted when there is evidence that the proposed product would be a significant improvement in the safety or effectiveness of the treatment, diagnosis, or prevention of a serious condition. If criteria are not met for priority review, the application is subject to the standard FDA review period of 10 months after FDA accepts the application for filing. Priority review designation does not change the scientific/medical standard for approval or the quality of evidence necessary to support approval.

 

Under the accelerated approval program, the FDA may approve an NDA on the basis of either a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Products subject to accelerated approval must have associated marketing materials submitted for pre-approval by the FDA’s Office of Prescription Drug Promotion during the pre-approval review period. Post-marketing studies or completion of ongoing studies after marketing approval are generally required to verify the product’s clinical benefit in relationship to the surrogate endpoint or ultimate outcome in relationship to the clinical benefit. In addition, the Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted and signed into law in 2012, established breakthrough therapy designation. A sponsor may seek FDA designation of its product candidate as a breakthrough therapy if the product candidate is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the therapy may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Sponsors may request the FDA to designate a breakthrough therapy at the time of or any time after the submission of an IND, but ideally before an end-of-Phase 2 meeting with FDA. If the FDA designates a breakthrough therapy, it may take actions appropriate to expedite the development and review of the application, which may include holding meetings with the sponsor and the review team throughout the development of the therapy; providing timely advice to, and interactive communication with, the sponsor regarding the development of the drug to ensure that the development program to gather the nonclinical and clinical data necessary for approval is as efficient as practicable; involving senior managers and experienced review staff, as appropriate, in a collaborative, cross-disciplinary review; assigning a cross-disciplinary project lead for the FDA review team to facilitate an efficient review of the development program and to serve as a scientific liaison between the review team and the sponsor; and considering alternative clinical trial designs when scientifically appropriate, which may result in smaller or more efficient clinical trials that require less time to complete and may minimize the number of patients exposed to a potentially less efficacious treatment. Breakthrough designation also allows the sponsor to file sections of the NDA for review on a rolling basis. We may seek designation as a breakthrough therapy for some or all of our product candidates.

 

Fast Track designation, priority review and breakthrough therapy designation do not change the standards for approval but may expedite the development or approval process.

 

Orphan Drug Status

 

Under the Orphan Drug Act, the FDA may grant orphan drug designation to drug candidates intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that costs of research and development of the drug for the indication can be recovered by sales of the drug in the United States. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Although there may be some increased communication opportunities, orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.

 

If a drug candidate that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications, including a full NDA, to market the same drug for the same indication for seven years, except in very limited circumstances, such as if the second applicant demonstrates the clinical superiority of its product or if FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA application user fee.

 

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Orphan drug exclusivity could block the approval of our drug candidates for seven years if a competitor obtains approval of the same product as defined by the FDA or if our drug candidate is determined to be contained within the competitor’s product for the same indication or disease.

 

As in the United States, designation as an orphan drug for the treatment of a specific indication in the European Union, must be made before the application for marketing authorization is made. Orphan drugs in Europe enjoy economic and marketing benefits, including up to 10 years of market exclusivity for the approved indication unless another applicant can show that its product is safer, more effective or otherwise clinically superior to the orphan designated product.

 

The FDA and foreign regulators expect holders of exclusivity for orphan drugs to assure the availability of sufficient quantities of their orphan drugs to meet the needs of patients. Failure to do so could result in the withdrawal of marketing exclusivity for the orphan drug.

 

Post-Approval Requirements

 

Any products manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, distribution, and advertising and promotion of the product. After approval, most changes to the approved product labeling, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications with clinical data. Drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with GMP, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance. We cannot be certain that we or our present or future suppliers will be able to comply with the cGMP regulations and other FDA regulatory requirements. If our present or future suppliers are not able to comply with these requirements, the FDA may, among other things, halt their clinical trials, require them to recall a product from distribution, or withdraw approval of the NDA.

 

  Future FDA and state inspections may identify compliance issues at our facilities or at the facilities of our contract manufacturers that may disrupt production or distribution, or require substantial resources to correct. In addition, discovery of previously unknown problems with a product or the failure to comply with applicable requirements may result in restrictions on a product, manufacturer or holder of an approved NDA, including withdrawal or recall of the product from the market or other voluntary, FDA-initiated or judicial action that could delay or prohibit further marketing.

 

The FDA may withdraw approval of an NDA if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:

 

  restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market, or product recalls;

 

  fines, warning letters, or holds on post-approval clinical studies;

 

  refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product license approvals;

 

  product seizure or detention, or refusal to permit the import or export of products; or

 

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  injunctions or the imposition of civil or criminal penalties.

 

The FDA closely regulates the marketing, labeling, advertising and promotion of drugs and biologics. A company can make only those claims relating to safety and efficacy that are consistent with the FDA approved label and with FDA regulations governing marketing of prescription products. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products.

 

Other Healthcare Laws and Compliance Requirements

 

Our sales, promotion, medical education, clinical research and other activities following product approval will be subject to regulation by numerous regulatory and law enforcement authorities in the United States in addition to FDA, including potentially the Federal Trade Commission, the Department of Justice, the Centers for Medicare and Medicaid Services, or CMS, other divisions of the U.S. Department of Health and Human Services and state and local governments. Our promotional and scientific/educational programs and interactions with healthcare professionals must comply with the federal Anti-Kickback Statute, the civil False Claims Act, physician payment transparency laws, privacy laws, security laws, anti-bribery and corruption laws, and additional federal and state laws similar to the foregoing.

 

The federal Anti-Kickback Statute prohibits, among other things, the knowing and willing, direct or indirect offer, receipt, solicitation or payment of remuneration in exchange for or to induce the referral of patients, including the purchase, order or lease of any good, facility, item or service that would be paid for in whole or part by Medicare, Medicaid or other federal health care programs. Remuneration has been broadly defined to include anything of value, including cash, improper discounts, and free or reduced price items and services. The federal Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, formulary managers, and beneficiaries on the other. Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations may be subject to increased scrutiny and review if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the federal Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all its facts and circumstances. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the federal Anti-Kickback Statute has been violated. The government has enforced the federal Anti-Kickback Statute to reach large settlements with healthcare companies based on sham research or consulting and other financial arrangements with physicians. Further, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act. Many states have similar laws that apply to their state health care programs as well as private payers.

 

Federal false claims and false statement laws, including the federal civil False Claims Act, or FCA, impose liability on persons and/or entities that, among other things, knowingly present or cause to be presented claims that are false or fraudulent or not provided as claimed for payment or approval by a federal health care program. The FCA has been used to prosecute persons or entities that “cause” the submission of claims for payment that are inaccurate or fraudulent, by, for example, providing inaccurate billing or coding information to customers, promoting a product off-label, submitting claims for services not provided as claimed, or submitting claims for services that were provided but not medically necessary. Actions under the FCA may be brought by the Attorney General or as a qui tam action by a private individual, or whistleblower, in the name of the government. Violations of the FCA can result in significant monetary penalties and treble damages. The federal government is using the FCA, and the accompanying threat of significant liability, in its investigation and prosecution of pharmaceutical and biotechnology companies throughout the country, for example, in connection with the promotion of products for unapproved uses and other illegal sales and marketing practices. The government has obtained multi-million and multi-billion dollar settlements under the FCA in addition to individual criminal convictions under applicable criminal statutes. In addition, certain companies that were found to be in violation of the FCA have been forced to implement extensive corrective action plans, and have often become subject to consent decrees or corporate integrity agreements, restricting the manner in which they conduct their business.

 

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The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payers; knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services; and willfully obstructing a criminal investigation of a healthcare offense. Like the federal Anti-Kickback Statute, the Affordable Care Act amended the intent standard for certain healthcare fraud statutes under HIPAA such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

 

Given the significant size of actual and potential settlements, it is expected that the federal government will continue to devote substantial resources to investigating healthcare providers’ and manufacturers’ compliance with applicable fraud and abuse laws. Many states have similar fraud and abuse statutes or regulations that may be broader in scope and may apply regardless of payer, in addition to items and services reimbursed under Medicaid and other state programs. To the extent that our products, once commercialized, are sold in a foreign country, we may be subject to similar foreign laws.

 

There has been a recent trend of increased federal and state regulation of payments made to physicians and other healthcare providers. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the Affordable Care Act, among other things, imposed new reporting requirements on certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, for payments or other transfers of value made by them to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Covered manufacturers are required to collect and report detailed payment data and submit legal attestation to the accuracy of such data to the government each year. Failure to submit required information may result in civil monetary penalties of up to an aggregate of $150,000 per year (or up to an aggregate of $1 million per year for “knowing failures”), for all payments, transfers of value or ownership or investment interests that are not timely, accurately and completely reported in an annual submission. Additionally, entities that do not comply with mandatory reporting requirements may be subject to a corporate integrity agreement. Certain states also mandate implementation of commercial compliance programs, impose restrictions on covered manufacturers’ marketing practices and/or require the tracking and reporting of gifts, compensation and other remuneration to physicians and other healthcare professionals.

 

We may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology and Clinical Health Act, or HITECH, and their respective implementing regulations impose specified requirements on certain health care providers, plans and clearinghouses (collectively, “covered entities”) and their “business associates,” relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s security standards directly applicable to “business associates,” defined as independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, certain states have their own laws that govern the privacy and security of health information in certain circumstances, many of which differ from each other and/or HIPAA in significant ways and may not have the same effect, thus complicating compliance efforts.

 

If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to them, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs, imprisonment, contractual damages, reputational harm, and diminished profits and future earnings, any of which could adversely affect our ability to operate our business and our financial results.

 

In addition to the foregoing health care laws, we are also subject to the U.S. Foreign Corrupt Practices Act, or FCPA, and similar worldwide anti-bribery laws, which generally prohibit companies and their intermediaries from making improper payments to government officials or private-sector recipients for the purpose of obtaining or retaining business. We have plans to adopt an anti-corruption policy, which will become effective upon the completion of this transaction, and expect to prepare and implement procedures to ensure compliance with such policy. The anti-corruption policy mandates compliance with the FCPA and similar anti-bribery laws applicable to our business throughout the world. However, we cannot assure you that such a policy or procedures implemented to enforce such a policy will protect us from intentional, reckless or negligent acts committed by our employees, distributors, partners, collaborators or agents. Violations of these laws, or allegations of such violations, could result in fines, penalties or prosecution and have a negative impact on our business, results of operations and reputation.

 

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Coverage and Reimbursement

 

Sales of pharmaceutical products depend significantly on the extent to which coverage and adequate reimbursement are provided by third-party payers. Third-party payers include state and federal government health care programs, managed care providers, private health insurers and other organizations. Although we currently believe that third-party payers will provide coverage and reimbursement for our product candidates, if approved, we cannot be certain of this. Third-party payers are increasingly challenging the price, examining the cost-effectiveness, and reducing reimbursement for medical products and services. In addition, significant uncertainty exists as to the reimbursement status of newly approved healthcare products. The U.S. government, state legislatures and foreign governments have continued implementing cost containment programs, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products. Adoption of price controls and cost containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. We may need to conduct expensive clinical studies to demonstrate the comparative cost-effectiveness of our products. The product candidates that we develop may not be considered cost-effective and thus may not be covered or sufficiently reimbursed. It is time consuming and expensive for us to seek coverage and reimbursement from third-party payers, as each payer will make its own determination as to whether to cover a product and at what level of reimbursement. Thus, one payer’s decision to provide coverage and adequate reimbursement for a product does not assure that another payer will provide coverage or that the reimbursement levels will be adequate. Moreover, a payer’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Reimbursement may not be available or sufficient to allow them to sell our products on a competitive and profitable basis.

 

Healthcare Reform

 

The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to change the healthcare system in ways that could materially affect our ability to sell our products profitably. Among policy makers and payers in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

 

By way of example, in 2010 the Affordable Care Act was signed into law, intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. Among the provisions of the Affordable Care Act of importance to our potential drug candidates are:

 

  an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs;

 

  an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the average manufacturer price for branded and generic drugs, respectively;

 

  a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;

 

  a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for a manufacturer’s outpatient drugs to be covered under Medicare Part D;

 

  extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

 

  expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;

 

  expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; and

 

  a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

 

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In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. These changes include, among others, the Budget Control Act of 2011, which mandates aggregate reductions to Medicare payments to providers of up to 2% per fiscal year effective in 2013, and, due to subsequent legislative amendments, will remain in effect through 2024, unless additional Congressional action is taken. The American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on customers for our product candidates, if approved, and, accordingly, our financial operations.

 

We expect that healthcare reform measures that may be adopted in the future, including the possible repeal and replacement of the Affordable Care Act which the Trump administration has stated is a priority, are unpredictable, and the potential impact on our operations and financial position are uncertain, but may result in more rigorous coverage criteria and lower reimbursement, and place additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government-funded programs may result in a similar reduction in payments from private payers. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our drugs.

 

Foreign Regulation

 

In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products to the extent we choose to develop or sell any products outside of the United States. The approval process varies from country to country and the time may be longer or shorter than that required to obtain FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement, and privacy, can vary greatly from country to country.

 

Research and Development Expenses

 

Private Innovate had research and development expenses of $4.0 million and $1.9 million for the years ended December 31, 2017 and December 31, 2016, respectively.

 

Employees

 

 

Following completion of the Merger, we now have five full-time employees. We also engage consultants to provide services to us, including clinical development, manufacturing support, regulatory support, business development, and general business operational support.

 

Corporate Information

 

Private Innovate was incorporated under the laws of North Carolina under the name “GI Therapeutics, Inc.” in 2012 and changed its name to “Innovate Biopharmaceuticals Inc.” when it converted to a Delaware corporation in 2014. In January 2018, Merger Sub merged with and into Private Innovate with Private Innovate surviving as a wholly owned subsidiary of the Company, and the Company changed its name to Innovate Biopharmaceuticals, Inc. Our principal executive offices are located at 8480 Honeycutt Road, Suite 120, Raleigh, NC 27615 and our telephone number is (919) 275-1933. Our corporate website address is  http://www.innovatebiopharma.com . Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act, will be made available free of charge on our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission, or the SEC. The contents of our website are not incorporated into this Annual Report on Form 10-K and our reference to the URL for our website is intended to be an inactive textual reference only.

 

This Annual Report on Form 10-K contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Annual Report on Form 10-K, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other company.

 

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We are an “emerging growth company” as defined in the JOBS Act, and therefore we may take advantage of certain exemptions from various public company reporting requirements. As an “emerging growth company:”

 

  we will present no more than two years of audited financial statements and no more than two years of related management’s discussion and analysis of financial condition and results of operations;
  we will avail ourselves of the exemption from the requirement to obtain an attestation and report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act;
  we will provide less extensive disclosure about our executive compensation arrangements; and
  we will not require stockholder non-binding advisory votes on executive compensation or golden parachute arrangements.

 

However, we have chosen to irrevocably opt out of the extended transition periods available under the JOBS Act for complying with new or revised accounting standards. We will remain an “emerging growth company” for up to five years, although we will cease to be an “emerging growth company” upon the earliest of (1) December 31, 2021, (2) the last day of the first fiscal year in which our annual gross revenues are $1.07 billion or more, (3) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities, and (4) the date on which we are deemed to be a “large accelerated filer” as defined in the Exchange Act.

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PART IV

 

Item 15. Exhibits, Financial Statement Schedules.

 

  (a)(1) Financial Statements

 

The financial statements required by this item were previously submitted in a separate section beginning on page F-1 of the Form 10-K filed on March 14, 2018.

 

  (a)(2) Financial Statement Schedules

 

Financial statement schedules have been omitted because they are either not required, not applicable, or the information is otherwise included.

 

  (a)(3) Exhibits

 

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EXHIBIT INDEX

 

        FILED   INCORPORATED BY REFERENCE
EXHIBIT NO.   DESCRIPTION   HEREWITH   FORM   FILE NO.   EXHIBIT   FILING DATE
                         
2.1 + Agreement and Plan of Merger and Reorganization by and among Monster Digital, Inc., Merger Sub and Innovate Biopharmaceuticals Inc., dated July 3, 2017       8-K   001-37797   2.1   July 6, 2017
                         
2.2   Amendment, dated January 3, 2018, to Agreement and Plan of Merger and Reorganization by and among Monster Digital, Inc., Merger Sub and Innovate Biopharmaceuticals Inc., dated July 3, 2017       8-K   001-37797   2.1   January 5, 2018
                         
2.3   Form of Support Agreement, by and between Monster Digital, Inc. and certain directors, officers and stockholders of Innovate Biopharmaceuticals Inc. (now IB Pharmaceuticals Inc.)       8-K   001-37797   2.2   July 6, 2017
                         
2.4   Form of Support Agreement, by and between Innovate Biopharmaceuticals Inc. and the directors and executive officers and certain stockholders of Monster Digital, Inc. (now IB Pharmaceuticals)       8-K   001-37797   2.3   July 6, 2017
                         
3.1   Certificate of Incorporation of the Company, as amended   *                
                         
3.2   Amended and Restated Bylaws of the Company       8-K   001-37797   3.2   February 2, 2018
                         
4.1   Form of Share Certificate   *                
                         
4.2   Form of Warrant       8-K   001-37797   4.1   February 2, 2018
                         
4.3   Senior Note dated January 29, 2018       8-K   001-37797   4.2   February 2, 2018
                         
4.4   Subscription Agreement dated January 29, 2018       8-K   001-37797   10.1   February 2, 2018
                         
4.5   Form of Warrant Certificate       S-1   333-207938   4.2   June 24, 2016
                         
4.6   Form of Warrant Agreement by and between Monster Digital, Inc. and Corporate Stock Transfer, Inc.       S-1   333-207938   4.3   June 24, 2016
                         
4.7   Warrant dated August 18, 2015 held by Noel Lee       S-1   333-207938   10.10   November 10, 2015
                         
4.8   Registration Rights Agreement dated November 10, 2016 by and between Monster Digital, Inc. and Gibralt Capital Corporation       10-K   001-37797   10.23   March 31, 2017
                         
10.1 Sublicense Agreement, dated February 19, 2016, between Innovate Biopharmaceuticals Inc. (now IB Pharmaceuticals Inc.) and Alba Therapeutics Corporation   X                
                         
10.2 License Agreement, dated February 26, 2016, between Innovate Biopharmaceuticals Inc. (now IB Pharmaceuticals Inc.) and Alba Therapeutics Corporation   X                
                         
10.3 Asset Purchase Agreement, dated December 23, 2014, between Innovate Biopharmaceuticals Inc. (now IB Pharmaceuticals Inc.) and Repligen Corporation   *                
                         
10.4 Apaza License Agreement, dated April 19, 2013, between Innovate Biopharmaceuticals Inc. (now IB Pharmaceuticals Inc.) and Seachaid Pharmaceuticals, Inc., as amended   *                

 

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        FILED   INCORPORATED BY REFERENCE
EXHIBIT NO.   DESCRIPTION   HEREWITH   FORM   FILE NO.   EXHIBIT   FILING DATE
                         
10.5   Note Purchase Agreement dated January 29, 2018       8-K   001-37797   10.2   February 2, 2018
                         
10.6 # Form of Director Indemnification Agreement       8-K   001-37797   10.3   February 2, 2018
                         
10.7 # Monster Digital, Inc. 2012 Omnibus Incentive Plan       S-1   333-207938   10.1   November 10, 2015
                         
10.8 # Form of Option Agreement and Option Grant Notice under the 2012 Omnibus Incentive Plan       S-1   333-207938   10.2   November 10, 2015
                         
10.9 # Form of Restricted Stock Award Agreement and Notice of Grant of Restricted Stock Award under the 2012 Omnibus Incentive Plan       S-1   333-207938   10.3   November 10, 2015
                         
10.10 # Form of Restricted Stock Unit Award Agreement and Notice of Grant of Restricted Stock Unit Award under 2012 Omnibus Incentive Plan       S-1   333-207938   10.4   November 10, 2015
                         
10.11 # Innovate Biopharmaceuticals Inc. 2015 Stock Incentive Plan, as amended   *                
                         
10.12 # Form of Incentive Stock Option Agreement under the 2015 Stock Incentive Plan   *                
                         
10.13 # Form of Nonstatutory Stock Option Agreement under the 2015 Stock Incentive Plan   *                
                         
10.14 # Form of Restricted Stock Purchase Agreement under the 2015 Stock Incentive Plan   *                
                         
10.15 # Consulting Agreement, dated May 7, 2015, by and between the Company and David Clarke       S-1   333-207938   10.11   November 10, 2015
                         
10.16 # Executive Employment Agreement, dated June 6, 2016, by and between the Company and David Olert       S-1   333-207938   10.21   November 10, 2015
                         
10.17 # Separation Agreement and Release of Claims, dated January 26, 2018, by and between the Company and David Olert   *                
                         
10.18   Consulting Agreement, dated February 17, 2018, by and between the Company and David Olert   *                

 

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        FILED   INCORPORATED BY REFERENCE
EXHIBIT NO.   DESCRIPTION   HEREWITH   FORM   FILE NO.   EXHIBIT   FILING DATE
                         
10.19 # Consulting Agreement, dated May 26, 2016, by and between the Company and Jonathan Orban       S-1   333-207938   10.22   November 10, 2015
                         
10.20 # Executive Employment Agreement, dated November 2, 2015, by and between Innovate Biopharmaceuticals Inc. (now IB Pharmaceuticals Inc.) and Christopher Prior, as amended   *                
                         
10.21 # Executive Employment Agreement, dated October 28, 2015, by and between Innovate Biopharmaceuticals Inc. (now IB Pharmaceuticals Inc.) and Sandeep Laumas, as amended   *                
                         
10.22 # Executive Employment Agreement, dated October 28, 2015, by and between Innovate Biopharmaceuticals Inc. (now IB Pharmaceuticals Inc.) and Jay Madan, as amended   *                
                         
10.23 # Executive Employment Agreement, dated March 9, 2018, by and between the Company and June Almenoff   *                
                         
10.24 # Non-Employee Director Compensation Policy   *                
                         
10.25 # Amended and Restated Executive Employment Agreement, dated March 11, 2018, by and between the Company and Sandeep Laumas   *                
                         
10.26 # Amended and Restated Executive Employment Agreement, dated March 11, 2018, by and between the Company and Christopher Prior   *                
                         
10.27 # Amended and Restated Executive Employment Agreement, dated March 11, 2018, by and between the Company and Jay Madan   *                
                         
21.1   List of Subsidiaries   *                
                         
23.1   Consent of CohnReznick LLP   *                
                         
31.1   Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002   *                
                         
31.2   Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002   *                

 

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        FILED   INCORPORATED BY REFERENCE
EXHIBIT NO.   DESCRIPTION   HEREWITH   FORM   FILE NO.   EXHIBIT   FILING DATE
                         
31.3   Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002   X                
                         
31.4 Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X                
                         
32.1   Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002   *                
                         
32.2   Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002   *                
                         
101.INS   XBRL Instance Document   *                
                         
101.SCH   XBRL Taxonomy Extension Schema Document   *                
                         
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document   *                
                         
101.DEF   XBRL Taxonomy Extension Definition Document   *                
                         
101.LAB   XBRL Taxonomy Extension Label Linkbase Document   *                
                         
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document   *                

   

+ Pursuant to Regulation S-K Item 601(b)(2), certain schedules (or similar attachments) to this exhibit have not been filed herewith. A list of omitted schedules (or similar attachments) is included in the agreement. The Company agrees to furnish supplementally a copy of any such schedule (or similar attachment) to the Securities and Exchange Commission upon request; provided, however, that the Company may request confidential treatment of omitted items.
Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.
# Indicates management contract or compensatory plan or arrangement.

 

* Indicates that the exhibit was previously filed or furnished on or with the Company’s Annual Report on Form 10-K on March 14, 2018, as applicable.

 

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SIGNATURES

 

Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 to its Annual Report on Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: June 29, 2018 Innovate Biopharmaceuticals, Inc.
     
  By /s/ Christopher Prior, Ph.D.
    Name: Christopher Prior, Ph.D.
    Title: Chief Executive Officer

 

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Exhibit 10.1

 

SUBLICENSE AGREEMENT

 

This Sublicense Agreement (“Agreement”) effective as of February 19, 2016 (“Effective Date”) is made by and between Alba Therapeutics Corporation, a Delaware corporation (“Alba”), having an address at 100 International Drive, 23rd Floor, Baltimore, MD 21202, and Innovate Biopharmaceuticals, Inc., a Delaware corporation, having an address at 8601 Six Forks Road, Suite 400, Raleigh, NC 27615 (“Innovate”).

 

WHEREAS, Alba and Innovate are parties to an Option Agreement, dated October 7, 2015, as amended, in which Alba granted an exclusive option to Innovate for the purchase of Alba’s assets relating to Larazotide acetate and related compounds, which option was exercised by Innovate on January 15, 2016.

 

WHEREAS, in lieu of entering into an asset purchase agreement, Alba and Innovate elected to enter into a license arrangement with respect to substantially all of Alba’s assets (the “Assets”) and an accompanying sublicense arrangement with respect to that certain Restated Master License Agreement, dated as of July 1, 2005, by and between Alba and the University of Maryland, Baltimore, a copy of which is attached hereto as Exhibit A (the “UM License Agreement”).

 

WHEREAS, as of equal date hereof, Alba and Innovate shall enter into that certain License Agreement (the “Primary License Agreement”), pursuant to which, among other things, Alba shall grant to Innovate, and Innovate shall accept, an exclusive license to the Assets.

 

WHEREAS, subject to certain conditions set forth in the Primary License Agreement, upon completion by Innovate of certain clinical milestones, Alba desires to sell, and Innovate desires to purchase, the Assets and the UM License pursuant to an asset purchase agreement incorporating terms mutually agreed upon therein.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Alba and Innovate hereby agree as follows:

 

I.       DEFINITIONS

 

A.       “Licensed Field” shall mean all fields.

 

B.       “Licensed Product(s)” shall mean any pharmaceutical composition containing, consisting of, or comprising: (i) [***] ; (ii) larazotide, including any salt or ester thereof including larazotide acetate; and (iii) to the extent not contemplated by the preceding clauses (i)-(ii), a compound for treating or preventing a condition, including but not limited to Celiac Disease, or its use in treatment or prevention of a condition, including but not limited to Celiac Disease, where the compound or method of use is covered by an issued patent.

 

C.       “Patent Rights” shall mean Alba’s interest in the patents and patent applications related to the Licensed Product, as further itemized in Exhibit B, including (i) patents and patents that may issue from the applications, (ii) all continuations, continuations-in-part, divisions, reissues, re-examinations or extensions of the foregoing, and (iii) and foreign counterparts of any of the foregoing.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 

 

  

II.       Grant; SUBLICENSES

 

A.       Alba hereby grants to Innovate, and Innovate accepts, an exclusive worldwide sublicense under the UM License Agreement with respect to the Patent Rights, to conduct research and development and to make, have made, use, lease, offer to sell, sell and import the Licensed Products within the Licensed Field, anywhere in the world, for the term of this Agreement.

 

B.       Innovate hereby agrees to be bound by, and comply with all obligations under, the terms of the UM License Agreement as it pertains to Licensed Products, which terms are incorporated by reference herein and made a part of this Agreement, and to satisfy Alba’s obligations and those of its sublicensees per the terms of the UM License Agreement, as if Innovate were the original licensee (i.e. “Company”) thereunder.

 

C.       In addition to and not in lieu of the provisions of Section II.B above, the provisions and terms of Article 16 (Claims, Indemnification and Insurance) of the UM License Agreement shall be read mutatis mutandis as if Alba were the licensor thereunder (i.e. “UM”, “UM Party” and “UM Parties”) and Innovate were the licensee thereunder (i.e. “Company”) so as to offer Alba indemnification by Innovate and the benefits of insurance coverage; provided that the foregoing reference to Article 16 of the UM License Agreement shall not include Sections 16.01, 16.04(b) or 16.04(c) thereof.

 

D.       In no event shall Innovate grant a sublicense under this Agreement without first obtaining Alba’s written consent; provided that, in any sublicense for which Alba grants consent, Innovate shall remain responsible for the obligations of its sublicensees.

 

III.       CONSIDERATION

 

A.       At execution of this Agreement, Innovate will pay to Alba a one-time, non-refundable sublicense fee of One Hundred Thousand Dollars ($100,000.00).

 

IV.       Representations and Warranties

 

A.       Alba hereby represents and warrants to Innovate that: (i) Alba has full legal right, power and authority to execute, deliver and perform its obligations under this Agreement; (ii) the execution, delivery and performance by Alba of this Agreement do not contravene or constitute a default under any provision of applicable law or of any agreement, judgment, injunction, order, decree, or other instrument binding upon Alba; and (iii) the officer of the Alba executing this Agreement has been authorized by the Alba’s board of directors or governing body to execute this Agreement as the act of the Alba.

 

B.       Innovate hereby represents and warrants to Alba that: (i) Innovate has full legal right, power and authority to execute, deliver and perform its obligations under this Agreement; (ii) the execution, delivery and performance by Innovate of this Agreement do not contravene or constitute a default under any provision of applicable law or of any agreement, judgment, injunction, order, decree, or other instrument binding upon Innovate; and (iii) the officer of Innovate executing this Agreement has been authorized by Innovate’s board of directors or governing body to execute this Agreement as the act of Innovate.

 

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V.       TERM AND TERMINATION

 

A.       This Agreement shall terminate upon the earlier of (i) the termination of the Primary License Agreement pursuant to the terms thereof, (ii) termination of the UM License Agreement pursuant to the terms thereof or (iii) an assignment of the UM License Agreement by Alba to Innovate upon an asset transfer agreement pursuant to Section 3.06 of the Primary License Agreement

 

VI.       MISCELLANEOUS

 

A.       This Agreement shall be governed, construed, and interpreted in all respects in accordance with laws of the State of Maryland without regard to the conflict of laws provisions of such.

 

B.       This Amendment may be executed in counterparts with the same effect as if both parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument.

 

C.       If any provision of this Agreement is held to be invalid, the other provisions will not be affected to the greatest extent possible consistent with the parties’ intent.

 

[signature page to follow]

 

 3 

 

 

The parties have caused this Agreement to be executed by their duly authorized representatives on the dates indicated below.

 

  Innovate:
   
  Innovate Biopharmaceuticals Inc.
     
  By: /s/ Jay P Madan
  Name: Jay P Madan
  Title:   President
   
  Alba:
   
  Alba Therapeutics Corporation
     
  By: /s/ Wendy Perrow
  Name: Wendy Perrow
  Title:   CEO

 

[Signature Page to Sublicense Agreement]

 

 

 

 

EXHIBIT A

 

UM LICENSE AGREEMENT

 

[See attached]

 

 

 

 

RESTATED

 

MASTER LICENSE AGREEMENT

effective July 1, 2005

between

UNIVERSITY OF MARYLAND, BALTIMORE

and

ALBA THERAPEUTICS CORPORATION

 

TABLE OF CONTENTS

  

Article 1. BACKGROUND   1
     
Article 2. DEFINITIONS   1
     
Article 3. GRANT OF LICENSE; OPTION   5
     
Article 4. COMPANY RESPONSIBILITIES   9
     
Article 5. CONSIDERATION: PAYMENTS   10
     
Article 6. DATA   16
     
Article 7. PATENT PROSECUTION AND PUBLICATIONS   17
     
Article 8. CONFIDENTIALITY   20
     
Article 9. REPORTS AND ACCOUNTING   22
     
Article 10. INFRINGEMENT   23
     
Article 11. TERM AND TERMINATION   25
     
Article 12. ASSIGNABILITY   27
     
Article 13. APPLICABLE LAW; WAIVER   27
     
Article 14. INTEGRATION AND INTERPRETATION   27
     
Article 15. REPRESENTATIONS AND WARRANTIES   28
     
Article 16. CLAIMS, INDEMNIFICATION AND INSURANCE   28
     
Article 17. ADVERTISING AND PUBLICITY   30
     
Article 18. DISPUTE RESOLUTION   30
     
Article 19. MISCELLANEOUS   30
     
EXHIBIT A-1   35
     
EXHIBIT A-2   36
     
EXHIBIT B   37
     
EXHIBIT C   38
     
EXHIBIT D   46
     
EXHIBIT E   47

 

 

 

 

RESTATED

MASTER LICENSE AGREEMENT

for “Zonula Occludens Toxin and Zonulin and other Patents”

 

This Restated Master License Agreement (“Agreement”) effective July 1, 2005 (“Effective Date”) is made by and between the University of Maryland, Baltimore (“UM”), a constituent institution of the University System of Maryland, a public corporation and an instrumentality of the State of Maryland, having an address at 520 West Lombard Street, East Hall, Room 200, Baltimore, Maryland 21201, and Alba Therapeutics Corporation, a corporation of Delaware, with its principal place of business at 2400 Boston St., Suite 310, Baltimore, MD 21224 (“Company”).

 

Article 1. BACKGROUND

 

1.01       As a public research and education institution, UM is interested in licensing Patent Rights (as defined below) to Company in order to benefit the public through the development and marketing by Company of new and useful tools, methods and commercial products.

 

1.02       Valuable inventions (“Inventions”) comprised of the Patent Rights identified in Exhibit A-1, and generally known as “Zonula Occludens Toxin and Zonulin,” have been made by Inventors (as defined below).

 

1.03       Subject to certain rights retained by the federal government in inventions resulting from federally supported work, under UM policy or by assignment of rights from prior owners UM owns all right, title, and interest in and to the Inventions, which has been confirmed by the execution of assignments to UM from the Inventors or by assignment from a prior owner; provided, however, that UM is the joint owner with ISS (defined below) of one Invention, as indicated in Exhibit A-1.

 

1.04       Company desires to obtain a license to the Patent Rights as set forth in this Agreement.

 

Article 2. DEFINITIONS

 

In this Agreement, the following terms have the meanings set forth in this Article.

 

2.01       “Affiliate”: Any entity that directly or indirectly controls, is controlled by, or is under common control with Company. “Control” means the right to exercise more than 50% of the voting rights of a controlled corporation, limited liability company, or partnership, or the power to direct or cause the direction of the management or policies of any other controlled entity.

 

2.02       “Company Data”: Information arising out of or resulting from use of the Patent Rights made by one or more employees, agents or consultants of, or owned by, Company or Company’s Affiliates or Sublicensees, including, without limitation, documents, drawings, sketches, models, designs, data, memoranda, tapes, records, formulae and algorithms, in hard copy form or in electronic form.

 

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2.03       “Company Facilities”: All funds, offices, laboratories, computers, equipment, computer networks, animal care facilities, and libraries, owned or controlled by Company or an Affiliate of Company, or utilized for Company pursuant to a contract between Company and a Third Party. Company Facilities includes, without limitation, space in Building One of the UMB BioPark which is leased by Company.

 

2.04       “Company Improvement”: Any Improvement (a) having as inventors, under U.S. patent law, only one or more Company Personnel, none of whom used UM Facilities in the work that resulted in the Improvement; or (b) otherwise owned by Company or a Company Affiliate pursuant to agreement with a Third Party.

 

2.05       “Company Personnel”: Employees, agents or consultants of Company or Company’s Affiliates; also, members of Company’s scientific advisory board. Company Personnel includes UM Personnel while acting as Company Personnel, and not as UM Personnel, pursuant to a written agreement between Company and the individual(s) approved in writing by UM before services were performed for Company.

 

2.06       “Confidential Information”: Information relating to the subject matter of the Patent Rights which has not been made public and includes, without limitation, any documents, drawings, sketches, models, designs, data, memoranda, tapes, records, formulae and algorithms, given orally, in hard copy form, or in electronic form, which Company receives from UM or UM Personnel, or UM or UM Personnel receives from Company.

 

2.07       “First Commercial Sale”: The initial transfer of a Licensed Product for compensation by Company, an Affiliate or a Sublicensee to a Third Party. Transfer of a Licensed Product for clinical testing occurring prior to the issuance of any required regulatory approval for sale does not constitute First Commercial Sale. Transfer of a Licensed Product for use as Research Tools does not constitute First Commercial Sale.

 

2.08       “Improvement”: An invention or discovery directly related to the Patent Rights in the Licensed Field which is or may be patentable or otherwise protected under law, and is reasonably necessary for the practice of the Patent Rights by Company or an Affiliate under this Agreement.

 

2.09       “ISS” means Instituto Superiore di Sanita, a joint owner of one of the inventions listed in Exhibit A-1, as indicated on that Exhibit.

 

2.10       “Joint Data”: Information arising out of or resulting from use of the Patent Rights made (a) by one or more employees, agents or consultants of, or owned by, Company or Company’s Affiliates, and (b) by one or more UM Personnel or agents or consultants of UM, or owned by UM, including, without limitation, documents, drawings, sketches, models, designs, data, memoranda, tapes, records, formulae and algorithms, in hard copy or electronic form.

 

2.11       “Joint Improvement”: Any Improvement having as inventors under U.S. patent law: (a) one or more Company Personnel and one or more UM Personnel; (b) one or more Company Personnel who used UM Facilities in the work that resulted in the Improvement; or (c) one or more UM Personnel who used Company Facilities in the work that resulted in the Improvement.

 

2.12       “Licensed Field”: The exclusive use of Patent Rights for all indications, applications, and uses including, without limitation, therapeutics, drug delivery products, research tools, research diagnostics, and clinical diagnostics.

 

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2.13       “Licensed Product”: Any product that but for this license infringes any claims in the Patent Rights.

 

2.14       “Licensor Inventor(s)”: [***] .

 

2.15       “Net Sales”: The gross sales revenues and fees invoiced by Company, an Affiliate or a Sublicensee to independent Third Party purchasers who are not Affiliates, for the sale of Licensed Products, less the sum of the following: (a) credits, allowances, discounts and rebates to, and charge backs from the account of, such Third Party purchasers for spoiled, damaged, out-dated, rejected or returned Licensed Products; (b) actual freight and insurance costs incurred in transporting such Liccnsed Products to such Third Party purchasers; (c) cash, quantity and trade discounts and other price reductions; (d) sales, use, value-added and other direct taxes incurred; (e) customs duties, surcharges and other governmental charges incurred in connection with the exportation or importation of such Licensed Products; and (f) the cost to Third Party purchasers of the devices for dispensing or administering such Licensed Products, as well as diluents or similar materials which accompany such Licensed Products as they are sold.

 

Net Sales do not include any resales of Licensed Product after its sale by Company, an Affiliate or a Sublicensee to a Third Party purchaser. In computing Net Sales, (1) no deductions from gross revenues and fees will be made for commissions paid to individuals, whether they be with independent sales agencies or regularly employed on the payroll by Company, its Affiliate(s) or Sublicensee(s), or for cost of collections, and (2) Licensed Products will be considered sold when invoiced.

 

2.16       “Patent Expenses”: All fees and charges of outside patent counsel related to Patent Rights that have not been reimbursed to UM, as well as all costs incurred by UM, or, where appropriate, Company, in connection with the preparation, filing, prosecution, issuance, reissuance, reexamination, interference, and maintenance of applications for patent or equivalent protection for the Patent Rights and UM Improvements.

 

2.17       “Patent Rights”: UM’s interest, as owner and as licensee (as indicated in Exhibit A-1) in:

 

(a)       U.S. and foreign patent applications and patents listed in Exhibit A-1 as of the Effective Date;

 

(b)       U.S. and foreign patent applications filed after the Effective Date that contain the same subject matter as the invention reports listed in Exhibit B, provided that the inventions claimed in such applications do not constitute Company Improvements;

 

(c)       any divisions or continuations, or the foreign equivalent of these, of the U.S. and foreign patent applications described in (a) and (b);

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

  

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(d)       foreign patent applications which are filed as the foreign counterparts of the U.S. patent applications described in (a) and (b), and the foreign equivalent of divisions or continuations of such foreign patent applications;

 

 

(e)       U.S. and foreign patents issuing from the applications described in (a), (b), (c) and (d); and

 

(f)       any reissues, reexaminations or patent-term extensions, or the foreign equivalent of these, of U.S. and foreign patents described in (a) or (d).

 

2.18       “Sublicense Income”: Consideration in any form received by Company or a Company Affiliate in consideration for the grant to any Sublicensee of a sublicense of the Patent Rights or Improvements (if licensed to Company). Sublicense Income will include without limitation any royalties on the Net Sales of Licensed Products, license signing fee, license maintenance fee, success fee, equity, and any similar consideration paid to Company or a Company Affiliate by or on behalf of the Sublicensee. Sublicense Income will exclude payment received in consideration for anything other than such sublicense, such as consideration for any equity or other investment in or extension of credit to Company, consideration for research or other services rendered by Company or Company Affiliates, or consideration for licenses(s) granted under technology other than the Patent Rights or Improvements.

 

2.19       “Sublicensee”: A person or entity, including an Affiliate, to which Company sublicenses or transfers all or some of the Patent Rights.

 

2.20       “Third Party”: Any entity or person other than UM, Company, an Affiliate or a Sublicensee.

 

2.21       “UM Affiliates”: University of Maryland Medical System Corporation, faculty practice organizations of UM, the Baltimore Veterans Administration Medical Center, any constituent institutions of the University System of Maryland, and ISS.

 

2.22       “UM Data”: Information in UM’s possession received from Inventor(s) prior to the Effective Date which is directly related to Patent Rights in the Licensed Field and reasonably necessary for the practice of the Patent Rights by Company or an Affiliate or Sublicensee under this Agreement. UM Data includes, without limitation, documents, drawings, sketches, models, designs, data, memoranda, tapes, records, formulae and algorithms, in hard copy form or in electronic form.

 

2.23       “UM Facilities”: All funds, personnel, offices, laboratories, computers, equipment, computer networks, animal care facilities, and libraries owned or controlled by UM or an Affiliate of UM, or utilized for UM work pursuant to a contract between UM and a Third Party.

 

2.24       “UM Improvement”: An Improvement that, under U.S. patent law, (a) (i) has as inventors only one or more UM Personnel, none of whom used Company Facilities in the work that resulted in the Improvement, or (ii) otherwise is owned by UM pursuant to an agreement with a Third Party; and (b) is not restricted, as to licensing, by an option or license granted by UM under a sponsored research agreement with a Third Party.

 

 4 

 

  

2.25       “UM Personnel”: Those Licensor Inventors employed by UM and its Affiliates, and students, trainees, and other persons working with Licensor Inventors, using UM resources, and subject to the USM Policy. UM Personnel includes Company Personnel who are acting as UM Personnel, and not as Company Personnel, pursuant to a written agreement between UM and the individual(s) approved in writing by Company before services were performed for Company.

 

2.26       “UM Rights in Improvements”: UM Improvements and UM’s joint interest in Joint Improvements.

 

2.27       “USM Policy” means the University System of Maryland Policy on Intellectual Property, effective July 1, 2002, as amended, or, as applicable, the predecessor Policy on Patents, effective May 31, 1990, as amended.

 

Article 3. GRANT OF LICENSE; OPTION

 

3.01       Subject to rights of the United States under grants to UM and pursuant to 35 U.S.C. Section 201 et seq. and all implementing regulations, and subject to Section 3.02, UM grants to Company, and Company accepts, an exclusive worldwide license under Patent Rights to conduct research and development and to make, have made, use, lease, offer to sell, sell and import the Licensed Products within the Licensed Field as defined in Section 2.13 above, for the term of this Agreement. This license includes the right to grant sublicenses consistent with this Agreement.

 

3.02       (a)       UM specifically reserves the rights:

 

1.       I. to practice, and permit UM Personnel and ISS to practice, under the Patent Rights, and to make and use the Licensed Products, and permit 1SS to make and use the Licensed Products, on a royalty-free basis solely for noncommercial research and education, and to license universities, colleges, and other noncommercial research or educational institutions to practice under the Patent Rights, and make and use the Licensed Products on a royalty-free basis solely for noncommercial research and education;

2.       to provide information and material covered by the Patent Rights to universities, colleges and other noncommercial research or educational institutions, but only for research and educational purposes and uses, and not for any commercial purposes or uses; and

3.       to permit UM Personnel to disseminate and publish scientific findings from research related to Patent Rights, subject to Section 7.05.

 

(b)       UM agrees to offer Company the opportunity to negotiate for licenses of the Patent Rights outside the Licensed Field prior to entering into negotiation with other parties.

 

(c)       UM agrees:

 

1.       to provide Company with a complete list of any outstanding material transfer agreements (“MTA”) relating to material (as defined in Section 1.4 of the form of MTA attached as Exhibit C) as of the Effective Date, and

2.       subsequent to the Effective Date, to give Company 14 days notice prior to granting a research license or MTA involving the material or the Patent Rights. UM further agrees to use reasonable efforts to enforce all such research licenses or MTAs to their fullest extent. UM will use the form of MTA attached as Exhibit C to transfer materials after the Effective Date.

 

 5 

 

  

3.03       Company may transfer its rights to an Affiliate consistent with this Agreement, provided Company is responsible for the obligations of its Affiliate relevant to this Agreement, including the payment of royalties, whether or not paid to Company by its Affiliate.

 

3.04       Company may grant sublicenses consistent with this Agreement, provided Company is responsible for the obligations of its Sublicensees relevant to this Agreement, including the payment of royalties, whether or not paid to Company by its Sublicensees.

 

3.05       Company will identify its Affiliates and its Sublicensees under this Agreement to UM by name, address and field of sublicense (both as to geography and subject matter), and any other reasonable information necessary for UM to conduct a meaningful audit under Section 9.01, except that Company reserves the right to redact any and all confidential, technical and financial information that is nonessential to any such UM audit.

 

3.06       This Agreement confers no license or rights by implication, estoppel, or otherwise under any patent applications of UM other than Patent Rights within the Licensed Field, regardless of whether such patent applications or patents are dominant or subordinate to Patent Rights within the Licensed Field. Joint Improvements and UM Improvements are not considered part of Patent Rights unless added to Exhibit A-1 by proper amendment of this Agreement. Notwithstanding the foregoing, UM hereby represents that, without making an affirmative inquiry, soliciting a formal legal analysis or obtaining any other type of legal opinion, as of the Effective Date, it does not have any knowledge of patent claims, assertions or issued patents which are or purport to be dominant or subordinate to or otherwise may block Patent Rights identified in Exhibit A-1 within the Licensed Field. UM will notify Company promptly in writing of any patent claims, assertions or issued patents which are or purport to be dominant or subordinate to or otherwise may block Patent Rights within the Licensed Field of which UM becomes aware after the Effective Date of this Agreement, however, such obligation implies no burden on UM to perform a search and/or analysis in seeking these patent claims, assertions or issued patents. [***] .

 

3.07       If Company intends to accept from Affiliates or Sublicensees anything of value in lieu of cash in consideration for any sublicense or other transfer of Patent Rights or Licensed Products, Company must notify UM in writing, within 30 days after the effective date of the Sublicensee or Affiliate agreement.

 

3.08       UM Improvements are owned by UM. Joint Improvements arc owned jointly by Company and UM. Company Improvements are owned by Company. UM has a nonexclusive option to negotiate with Company to enter into a nonexclusive, nontransferable license to UM to practice Company Improvements in any field of use for research and education but not for commercial purposes, and otherwise under those terms and conditions as may be agreed upon by UM and Company in a separate license agreement.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

  

 6 

 

  

3.09       (a)          Subject to rights of other parties sponsoring research at UM, Company has an exclusive option to enter into an exclusive license agreement with UM for UM Rights in Improvements, within the Licensed Field, so long as (i) this Agreement is in effect, (ii) Company pays Patent Expenses for UM Rights in Improvements, and (iii) Company has not notified UM that Company declines to exercise its option. During the term of this option, UM Rights in Improvements will be subject to the same patent prosecution terms and conditions applicable to Patent Rights under Article 7 of this Agreement.

 

(b)          1.      Company shall have an exclusive right of first negotiation with respect to UM Rights in Improvements (and UM agrees to negotiate with Company in good faith for at least 120 days with respect thereto) by giving written notice to UM within 60 days after Company receives written notice from UM of a UM Improvement or Joint Improvement in accordance with Section 3.11(a) below, or within 60 days after Company gives written notice to UM of a Joint Improvement in accordance with Section 3.11(b) below.

 

2.     Company’s exercise of the right of first negotiation initiates a negotiation period of 120 days. UM and Company will negotiate commercially reasonable terms including but not limited to royalties on Net Sales. The royalty rate will not exceed [***] %, provided that the UM Improvement or Joint Improvement did not result from research carried out in UM Facilities financed with qualified bonds within the meaning of Section 141 of the Internal Revenue Code unless in designated space available for private activity. If the research was carried out in space in UM Facilities financed with qualified bonds within the meaning of Section 141 of the Internal Revenue Code and not designated as space available for private activity, then the provisions of 3.09(b)(3) shall apply.

 

3.       In order to comply with federal requirements associated with tax exempt financing of UM Facilities, if a UM Improvement or Joint Improvement results from research at UM Facilities sponsored by Company or an Affiliate, the royalty rate will not necessarily be set by terms of this license and will be determined following invention of a UM Improvement or Joint Improvement using a methodology to arrive at a fair market value determined without regard to research support provided by Company. The fair market value may be more than [***]%, less than [***]%, or [***]%. If UM and Company do not agree upon a fair market value within 30 days after Company exercises its right of first negotiation, then a mutually agreeable neutral party will determine the fair market value of the UM Improvement or Joint Improvement.

 

4.       If any Licensed Product is claimed both by (a) Patent Rights and (b) UM Improvements and/or Joint Improvements, then Company will only be responsible for paying [***].

 

(c)         If the parties do not reach agreement under the right of first negotiation for any UM Improvement or Joint Improvement, and if UM thereafter determines to offer licenses to the UM Improvements or UM’s joint interest in Joint Improvements to Third Parties on materially different economic terms than offered to or negotiated with Company, then UM, prior to offering such terms to a Third Party, shall offer such new terms to Company and negotiate in good faith with Company for at least 30 days to conclude an agreement on such terms.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

  

 7 

 

  

(d)       Notwithstanding the foregoing, if Company determines in its sole discretion that the applicable UM Improvements or Joint Improvements are not of strategic interest to Company, Company may waive the foregoing 120-day negotiation period and /or Company’s right of first negotiation, in whole or in part, in writing.

 

3.10       The terms of any license to Company for UM Rights in Improvements will include a reservation of a nonexclusive, non-transferable, irrevocable and royalty-free license to UM to practice UM Rights in Improvements in any field of use for research and education but not for commercial purposes.

 

3.11        (a)      UM will report promptly to Company in writing each UM Improvement and each Joint Improvement disclosed to UM. This reporting requirement will be triggered by UM’s determination that any invention disclosure concerns a UM Improvement or Joint Improvement. A copy of a provisional patent application filed by UM for the UM Improvement or Joint Improvement will satisfy this reporting requirement.

 

(b)       Company will report promptly to UM in writing each Joint Improvement and each Company Improvement disclosed to Company. A copy of a provisional patent application filed by Company for a Joint Improvement or Company Improvement will satisfy this reporting requirement.

 

(c)       If UM or Company determines that it has received a disclosure from an inventor which does not relate to a Joint Improvement, and relates only to an Improvement owned solely by the other party, then the party that received the disclosure will not file a provisional application, will forward the disclosure immediately to the other party as confidential information, and will counsel the disclosing inventor to contact the other party.

 

(d)       Either party, or both, may file a provisional application on an Improvement that may be a Joint Improvement prior to the parties having discussed inventorship and ownership issues. If UM or Company determines that it has received a disclosure involving one or more inventors who is employed by or affiliated with the other party, or who is employed by both parties, then the party which received the disclosure will notify the other party immediately that a disclosure has been made so that the other party may request a disclosure from its personnel. As soon as a provisional application is filed by UM or Company, and disclosed to the other party, the parties will confer to determine inventorship and whether the disclosed improvement is owned by one party or is a Joint Improvement. The parties will determine (i) which of them will file a provisional application if no application has been filed; (ii) if two applications have been filed, which will be withdrawn; or (iii) if one of them has filed an application which should have been filed by the other, in which case the filing party will assign the application to the other party.

 

(e)       If there is a dispute between the parties as to ownership of an improvement, or as to identification of inventors, and/or whether the inventors were acting as Company Personnel or UM Personnel, the parties will refer the matter to a mutually agreeable, neutral third party for binding resolution. Normally the third party will be a partner in a national or regional intellectual property law firm that does not represent either party as to any other matter.

 

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(f)       The parties recognize a common legal interest in the prosecution of patent rights subject to this Agreement, and the prosecution or defense of interferences and infringement claims. The Parties have determined that a mutual defense agreement is not necessary to establish attorney-client privilege with respect to communications among the Parties and patent counsel engaged by one or both of them with respect to patent issues in which the Parties have mutual interest. Notwithstanding the foregoing, the Parties reserve the right to enter into joint defense agreements, commonality of interest agreements or any other agreements that are deemed appropriate, and the entry of the Parties into such agreements shall not be considered an admission that such agreements are necessary to preserve the confidentiality and privileged nature of attorney-client communications. Each Party shall assert, and instruct its counsel to assert, the confidentiality and privileged nature of communications among the Parties and their counsel as contemplated by this Agreement as well as prior communications among the Parties and their counsel with regard to matters that are the subjects of this Agreement, so long as there is mutuality of interest. Neither Party is obligated by this Agreement to share privileged material with the other Party. UM and Company do not intend to waive any legal privilege or other privilege created by law as a result of sharing with each other the communications between each of them and its patent counsel, whether or not UM and Company are using the same patent counsel or separate counsel.

 

(g)       For business reasons, UM and Company may be represented by the same patent counsel, which counsel will be instructed that it represents both parties so that the attorney client relationship privilege attaches to counsel’s communications with both parties. In this event, the counsel chosen may not represent either party as to business negotiations between them, or as to any dispute between them. If there is a dispute between the parties as to prosecution of any patent application, either party may require that each party secure separate legal counsel for any application in dispute, with neither party being represented as to that application by the counsel originally retained to prosecute it on behalf of both parties.

 

Article 4. COMPANY RESPONSIBILITIES

 

4.01       Company will use its commercially reasonable efforts to bring one or more Licensed Products to market in each country in which Patent Rights are licensed through a diligent program for exploitation of the Patent Rights within the Licensed Field. Company’s efforts must satisfy the following milestones:

 

(a)       [***] .

 

(b)       [***].

 

(c)       [***].

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

  

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(d)        Company will use commercially reasonable efforts to meet the following specific diligence milestones:

 

1.       [***];

2.       [***];

3.       [***];

4.       [***]; and

5.       [***] .

6.       [***].

7.       [***].

 

4.02       Company agrees that any Licensed Products for use or sale in the United States will be manufactured substantially in the United States in accordance with the requirements of 35 U.S.C. Section 204 and 37 CFR 401.14(a)(i). in the event Company determines that compliance with this obligation is commercially impracticable, UM agrees that it will apply for a waiver of such obligation from the United States Government. In agreements with Affiliates and Sublicensees, Company will pass through this obligation. Company will use its best efforts to enforce this obligation and will promptly advise UM of any known violations, or charges of violations, of this obligation.

 

4.03       The use and disclosure of technical information acquired pursuant to this Agreement and the exercise of Patent Rights granted by this Agreement are subject to the export, assets, and financial control regulations of the United States of America, including, without limitation, restrictions under regulations of the United States that may be applicable to direct or indirect re-exportation of such technical information or of equipment, products, or services directly produced by use of such technical information. Company is responsible for taking any steps necessary to comply with such regulations.

 

4.04       Company will ensure that “Patent Pending” or the Patent Rights patent number or both appears on all Licensed Products, their labels or their packaging.

 

4.05       Company represents that, as of the Effective Date, it and its Affiliates qualify as a small business concern that meets the size standards set forth in 13 CFR Part 121 to be eligible for reduced patent fees under 37 C.F.R. 1.27. Company must provide written notification to UM immediately upon Company’s learning that Company and its Affiliates no longer qualify as a small business concern or immediately after Company sublicenses any part of the Patent Rights to an entity that does not qualify as a small business concern.

 

Article 5. CONSIDERATION: PAYMENTS

 

In consideration of the license granted to Company of the Patent Rights listed in Exhibit A-1 as of the Effective Date:

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

  

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5.01       (a) Company will pay to UM the following [***] milestone payments for Licensed Products brought to market by Company, its Affiliates or its Sublicensees:

 

1.      Upon [***] for the first Licensed Product in each of the following [***] areas: 

A. [***] $[***]
B. [***] $[***]
C. [***] $[***]
D. [***] $[***]

 

2.      Upon [***] for the first Licensed Product in each of the following [***] areas:

A. [***] $[***]
B. [***] $[***]
C. [***] $[***]
D. [***] $[***]

 

3.      Upon the first Licensed Product in any area listed in (1) and (2) above in this subsection first achieving the following levels of Net Sales in a calendar year, the following payments [***]:

A.Net Sales of $[***]: $[***],

creditable against royalties due for that year

 

B.Net Sales of $[***]: $[***],

creditable against royalties due for that year

 

C.Net Sales of $[***]: $[***],

creditable against royalties due for that year

 

D.Net Sales of $[***]: $[***],

creditable against royalties due for that year.

 

(b)       Upon [***] for a Licensed Product that is [***], Company will pay UM $[***]. Upon [***] for a Licensed Product that is [***], Company will pay UM $[***].

 

(c)       If Company received milestone payments from a Sublicensee for any of the milestones listed in Sections 5.01(a) or 5.01(b), the percent share of any milestone payments paid to UM under Section 5.05(d) and (e) shall be credited toward the milestone payments required by Section 5.01(a) or (b), as appropriate.

 

5.02       Except to the extent otherwise provided by Sections 5.05, 5.06, and 5.07, Company and its Affiliates will pay to UM a running royalty on Net Sales of Licensed Products covered by Patent Rights as described in Exhibit A-2. If no running royalty is due for any calendar year, Company will so report as required by Section 9.02.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

  

 11 

 

  

5.03        (a) Company will pay UM minimum annual royalties on a calendar year basis as set forth below, beginning with a minimum annual royalty due for the calendar year in which the First Commercial Sale occurs, if the aggregate of all running royalties due under Section 5.02 and all other creditable fees or payments due under this Article 5 is less than the minimum annual royalty amount for that year. The following are the minimum annual royalties for:

 

·Calendar year in which [***]: $[***]
·Calendar year following [***]: $[***]
·Calendar year following [***]: $[***]
·Calendar year following [***]: $[***]
·Calendar year following [***]: $[***]

 

(b)       Company will pay UM the difference between the minimum annual royalty and the total of running royalties and all other creditable fees or payments due for a calendar year. For this purpose, “other creditable fees or payments” are the fees and payments listed in 5.01(a)(1) and (2), 5.01(b), and 5.05.

 

5.04       (a) Company and its Affiliates will pay running royalties on a country by country basis as provided in Section 5.02 for Net Sales in each country of Licensed Products covered under Patent Rights in that country, until disallowance, expiration or invalidation of all claims in the Patent Rights of that country that cover the Licensed Products.

 

(b)       Except as provided in Section 11.01, on a country by country basis, if a claim of any patent comprising the Patent Rights is invalidated by a court of competent jurisdiction from which no appeal is taken, or from which no further appeal can be taken, UM agrees that it will not terminate this Agreement but will terminate only the future obligations of Company pursuant to Article 5 with respect to Licensed Products made under the invalidated claim(s) and not covered by other claim(s) of the Patent Rights.

 

5.05       For Licensed Products sold in a calendar year by a Sublicensee that is not an Affiliate, Company will pay to UM:

 

(a)       If a sublicense permits practice of Patent Rights in the field of [***], (i) [***]% of all royalties received by Company and its Affiliates from the Sublicensee’s Net Sales of [***], (ii) [***]% of all licensing, upfront, milestone or other payments (excluding royalties on Net Sales and payments for research and development) received by Company and its Affiliates from the Sublicensee in consideration of its rights as a Sublicensee, and (iii) [***]% of the fair market value of non-cash consideration received by Company and its Affiliates under the Sublicensee’s license agreement in consideration of its rights as a Sublicensee;

 

(b)       If a sublicense permits practice of Patent Rights for [***], (i) [***]% of all royalties received by Company and its Affiliates from the Sublicensee’s Net Sales of [***], and (ii) [***]% of all licensing, up-front, milestone or other payments (excluding royalties on Net Sales and payments for research and development) received by Company or its Affiliates from the Sublicensee in consideration of its rights as a Sublicensee, and (iii) [***]% of the fair market value of non-cash consideration received by Company or its Affiliates under the Sublicensee’s license agreement in consideration of its rights as a Sublicensee;

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

  

 12 

 

  

(c)       If a sublicense permits practice of Patent Rights for [***]: (i) [***]% of all royalties received by Company and its Affiliates from the Sublicensee’s Net Sales of [***], (ii) [***]% of all licensing, up-front, milestone or other payments (excluding royalties on Net Sales and payments for research and development) received by Company and its Affiliates from the Sublicensee in consideration of its rights as a Sublicensee, and (iii) [***]% of the fair market value of non-cash consideration received by Company and its Affiliates under the Sublicensee’s license agreement in consideration of its rights as a Sublicensee;

 

(d)       In all other cases involving a Sublicensee’s use of Patent Rights, (i) [***]% of all royalties received by Company and its Affiliates from the Sublicensee’s Net Sales of Licensed Products, (ii) [***]% of all licensing, upfront, milestone or other payments (excluding royalties on Net Sales and payments for research and development) received by Company and its Affiliates from the Sublicensee in consideration of its rights as a Sublicensee (unless this [***]% is payable pursuant to an earlier subsection of this section), and (iii) [***]% of the fair market value of non-cash consideration received by Company and its Affiliates under the Sublicensee’s license agreement in consideration of its rights as a Sublicensee (unless this [***]% is payable pursuant to an earlier subsection of this section).

 

(e)       If Company enters into a sublicense permitting practice of Patent Rights both in the field of [***] and in the field of [***], the sublicense will state separate consideration for each field so that it can be determined whether 5.05(a) applies or 5.05(b) or 5.05(c) applies, to specific consideration.

 

(f)       Non-cash consideration from a Sublicensee may be accepted by Company or an Affiliate provided that Company notifies UM within 30 days after such consideration is rendered. If a Sublicensee’s license agreement provides fair market value in cash or non-cash consideration for the Sublicensee’s use of Patent Rights and, in addition, provides that Company or an Affiliate will receive other funds for separate consideration (e.g., payment for Company research, or for the purchase of Company stock at market price), no royalty is due with respect to the Sublicensee’s payment of such other funds. The fair market value of non-cash consideration is the greater of the fair market value determined as of the effective date of the sublicense agreement or the date of transfer of the non-cash consideration to the Company or Affiliate. Notice required by this paragraph is in addition to the notice required under Section 3.07.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

  

 13 

 

  

(g)       For any non-cash Sublicense Income paid in securities or other assets, Company will pay UM the royalty in kind by transferring and delivering to UM the required percentage of such securities or other assets within sixty (60) days of Company or Company Affiliate receiving such securities or other assets; provided, however, that if Company or Company Affiliate cannot transfer and deliver such securities or other assets within such period without violating an applicable law, regulation or other legal requirement, or the terms of any agreement or other arrangement with a Third Party (including the Sublicensee), then Company or Company Affiliate will transfer and deliver such securities or other assets to UM on its first opportunity to do so. Any income received by Company or a Company Affiliate during the period of delay which is allocable to the securities or other assets due to UM also will be transferred to UM at the time the securities or other assets are so transferred.

 

(h)       For non-cash Sublicense Income that cannot be quantified and shared as contemplated by Section 5.05(g), the parties will negotiate in good faith to arrive at a mutually agreeable solution under which UM will receive the required percentage of the value received by Company and/or Company Affiliates as Sublicense Income. Disputes over the required percentage to be shared with UM that cannot be resolved through the dispute resolution process under Article 18 will be referred to a mutually agreed national accounting firm or other independent expert for resolution.

 

5.06       (a)      In the event that Company or an Affiliate is required to license one or more technologies of a Third Party in order to conduct research and development and to make, have made, use, lease, offer to sell, sell or import Licensed Products or to practice or otherwise make use of the Patent Rights, and is required to pay a royalty to one or more Third Parties, Company or its Affiliate may deduct from royalties due to UM [***]% of the royalty paid to the Third Party(ies), but in no event may the royalties due to UM be reduced by more than [***]% as a result of licenses from Third Parties.

 

(b)       In sublicense agreements, Company will not permit Sublicensees that are not Affiliates to deduct more than [***]% of royalties due to Company as a result of licenses from Third Parties.

 

5.07        (a)       No multiple fees or royalties are payable because any Licensed Product, its manufacture, use, sale, or lease is or will be covered by more than one patent application or patent licensed under this Agreement as part of Patent Rights.

 

(b)       The aggregate reduction of royalties on Net Sales as a result of applicability of Sections 5.05, 5.06, and 5.07 will not exceed [***] % of royalties as calculated with no reduction of royalties on Net Sales as permitted by these Sections.

 

5.08       (a)       Royalties are payable from the country in which they are earned and are subject to foreign exchange regulations then prevailing in the country. Royalty payments must be paid to UM in United States Dollars by check(s) drawn to the order of UM or by electronic funds transfers to an account designated by UM. To the extent sales may have been made by Company, its Affiliates or Sublicensees in a foreign country, those royalties will be determined first in the currency of the country in which the royalties are earned, and then converted to their equivalent in United States Dollars. The buying rates of exchange for converting the currencies involved into the currency of the United States quoted by the Morgan Guaranty Trust Company of New York, New York, [***], will be used to determine any such conversion. Company will bear any loss of exchange or value or pay any expenses incurred in the transfer or conversion to U.S. dollars.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

  

 14 

 

  

(b)       To the extent that statutes, laws, codes, or government regulations (including currency exchange regulations) prevent or limit royalty payments to UM by Company, its Affiliates or its Sublicensees with respect to Net Sales received in any country, Company will render to UM annual reports of sales of Licensed Products in such country. All monies due and owing UM as provided in the annual reports at UM’s option (1) will be deposited promptly by Company, its Affiliates or its Sublicensees, as the case may be, in a local bank in such country in an account to be designated by UM in writing, or (2) will be paid promptly to UM or deposited in its account, as directed in writing by UM in any other country where the payment or deposit is lawful under the currency restrictions.

 

5.09       If Company sells Licensed Products to its Affiliates or Sublicensees for subsequent resale, no royalty will be due on the sales to Affiliates or Sublicensees, but royalty will be calculated and paid on the resale of the Licensed Product to a Third Party. If Company sells Licensed Products to a Third Party in a non-ann’s length transaction, and the Licensed Products are not subsequently resold, the selling price of the Licensed Products to the Third Party is deemed to be the selling price that would have been received in an arm’s length transaction, based on sales of products of similar quantity and quality on or about the time of such transaction, or, in the absence of such sales, based upon reasonable pricing practices in Company’s industry.

 

5.10       All payments required by this Article 5 with respect to Net Sales, milestones, or other consideration received during a calendar year are due on the date the annual report for that year, as required by Section 9.02, is due to UM, i.e., the 90th day after the end of the calendar year for which payment is due. Interest is due on any payments to UM required by any Section of this Agreement that are more than 30 days late. Also, interest is due on the amount of any underpayment of royalties or other amounts payable to UM under this Agreement. The interest rate is the prime rate plus [***] percent simple interest per annum accruing from the due date.

 

5.11       If Joint Improvements and/or UM Improvements are added to Patent Rights by amendment of Exhibit A-1, the amendment will specify whether and how the terms of Sections 5.01 to 5.08 are applied to the Patent Rights. Except as provided in 3.09(b), there is no presumption that Joint Improvements or UM Improvements will be licensed upon the terms and conditions originally provided in those Sections.

 

5.12      (a)       UM has received [***] shares of common stock in Company ([***]% of total founders shares) having a fair market value per share as determined by the Company’s Board of Directors in its sole and absolute discretion, for and in consideration of this Agreement and without payment of any further consideration by UM.

  

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

  

 15 

 

  

(b)       No later than October 15, 2005: (i) for and in consideration of the grant of license to Patent Rights related to U.S. Provisional patent application [***] and without payment of any further consideration by UM, Company will issue or transfer to UM an additional [***] shares of common stock in Company and will pay UM $[***]; and (ii) for and in consideration of [***], and without payment of any further consideration by UM, Company will issue or transfer to UM an additional [***] share of common stock in Company and will pay UM $[***].

 

(c)       Founders shares and common stock issued to UM pursuant to (a) and (b) will have the same rights as those issued in connection with fully paid common stock to other founders. UM agrees that founders’ equity excludes equity allocated to Company’s incentive stock pool, and equity sold/granted to raise pre-seed financing.

 

(d)       Company acknowledges that UM:

 

1.       will transfer a portion of its Company shares to those inventors who are subject to the USM Policy, in accordance with the USM Policy, and

2.       in addition, subject to the Stock Transfer Agreement (Exhibit E), may transfer any or all of its remaining Company shares to custody of its investment manager.

 

(e)       Company agrees to fully cooperate with UM and to take all actions necessary to complete the prompt transfer of Company shares by UM in accordance with UM’s instructions and subject to any restrictions on voting, sale, transfer, or other matters required by UM. Any document(s) and issued or reissued stock certificates necessary to accomplish a transfer of Company shares by UM will be executed by Company and delivered to UM within 30 days after Company’s receipt of UM’s request.

 

(f)       UM’s ownership of Company shares is subject to UM’s execution of a Stock Transfer Agreement as attached as Exhibit E. Transfers of Company shares by UM in accordance with the USM Policy will be subject to the prior requirement that transferee inventors execute a Stock Transfer Agreement on corresponding terms.

 

Article 6. DATA

 

6.01       Company Data is owned by Company. Joint Data is owned jointly by Company and UM. UM Data is owned by UM.

 

6.02       Nothing herein shall be construed to require Company to disclose or deliver to UM or any Third Party Company Data related only to a Company Improvement unless one of the inventors of that Company Improvement is both Company Personnel and UM Personnel. In such cases, Company will disclose the Company Improvement to UM as provided below, and will disclose the Company Data as needed for UM and Company to determine inventorship and ownership of the improvement.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 16 

 

  

6.03       Nothing herein shall be construed to require either party to disclose or deliver to the other party any information or communication that is considered by the disclosing party to be protected by the attorney-client privilege, or is considered by the disclosing party to be attorney work product, without the express written consent of the disclosing party, or the execution of an agreement consistent with Exhibit F.

 

6.04       To the extent permitted by law, UM will keep any and all Company Data and Company Improvements, howsoever disclosed to or acquired by UM, confidential in accordance with Article 8, and Company will keep UM Data and Joint Data confidential in accordance with Article 8 if so requested by UM. Any information that would identify human research subjects or patients will be maintained confidentially by UM and Company to the extent permitted by law. Joint Data which may result from research carried out by UM personnel will be subject to Section 7.05. Any part of Joint Data which is Company Confidential Information will be subject to Article 8.

 

6.05       While this Agreement is in effect and Company is pursuing commercialization efforts, Company will have the right to use UM Data and Joint Data in and for regulatory filings on behalf of Company or its Affiliates and UM will have the right to use Joint Data for noncommercial research purposes. If this Agreement is terminated, UM will have (a) the exclusive right to use and publish UM Data and (b) the non-exclusive right to use and publish Joint Data, for noncommercial research purposes, and for regulatory filings related to Patent Rights, both rights being subject to Section 7.05 and, with respect to protection of Company Confidential Information, Article 8.

 

Article 7. PATENT PROSECUTION AND PUBLICATIONS

 

7.01       (a)        UM is responsible for filing any patent applications for the Patent Rights, and UM Improvements. Company is responsible for filing any patent application for Joint Improvements unless Company and UM agree in writing that UM will assume such responsibility for any or all of Joint Improvements. Company is responsible for the filing, prosecution, and maintenance of patent applications for Company Improvements.

 

(b)       The scope of patent coverage within Patent Rights, UM Improvements, or Joint Improvements will not be significantly modified by the party responsible for filing patent applications without prior review of the other party. UM will not significantly limit the scope of patent coverage within Patent Rights or UM Improvements without the prior written consent of Company. Company will not significantly modify or limit the scope of patent coverage within Joint Improvements without the prior written consent of UM. If approval is requested by notice in writing, and is neither given nor denied in writing within 10 business days after the date notice is received, approval will be deemed given.

 

(c)       With respect to Patent Rights and UM Improvements, UM will invoice Company for Patent Expenses incurred by UM after the Effective Date with respect to U.S. patents and patent applications. Company will pay the invoice in full to UM within 30 days after the date of UM’s invoice. Company’s failure to pay an invoice on time will result in interest charges in accordance with Section 5.10 as well as loss of input into patenting decisions until such time as Company pays all outstanding invoices for Patent Expenses and accrued interest. Additionally, Company’s failure to pay an invoice and accrued interest within 90 days after date of invoice will result in termination of Company’s option rights under Section 3.09.

 

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(d)       Further, with respect to Patent Rights and UM Improvements, and with respect to the filing and prosecution of foreign patent applications specified by Company in accordance with Section 7.04, Company will pre-pay or directly pay charges and fees, including attorneys’ fees, or will reimburse UM for those charges and fees, at UM’s option.

 

(e)       With respect to Joint Improvements, Company may choose outside patent counsel subject to UM’s approval, which approval must not be withheld or delayed unreasonably. If UM has not approved or diasapproved patent counsel within 10 business days of notice of a request for approval, UM’s approval shall be deemed given. Fees incurred by Company for patent action on Joint Improvements are Company’s sole responsibility.

 

(f)       If Company chooses not to file a patent application for a Joint Improvement, or chooses to abandon an application for a Joint Improvement, it will give UM 30 days prior notice, and UM may continue prosecution of a patent application at its own expense if it chooses. If UM chooses not to file, or to abandon, a patent application as described in this section, then Company’s license of UM’s interest in the Joint Improvement will terminate as of the date UM gives notice of its decision.

 

(g)       If UM and Company do not agree on actions relating to scope of patent coverage for any of Patent Rights, UM Improvements or Joint Improvements, UM may terminate immediately Company’s right to prosecute the patent application(s) involved, and in such case UM may continue prosecution, using its own, independent counsel, and at Company’s expense, unless Company notifies UM that Company chooses to terminate its license of the Patent Rights, UM Improvements or Joint Improvements involved.

 

(h)       Determination that UM Personnel or Company Personnel are inventors of an improvement. For purposes of this Agreement, all UM Personnel or Company Personnel who are considered inventors of an Improvement under United States patent law will be listed as inventors of that Improvement. Only inventorship under U.S. law will be considered in determining whether an Improvement is a Company Improvement, Joint Improvement or UM Improvement. The Parties recognize that the patent laws of countries where patent applications are filed may follow rules of inventorship that differ from U.S. patent law.

 

7.02        (a)       UM will invoice Company for Patent Expenses incurred by UM prior to the Effective Date that have not been reimbursed by Third Parties and arc identified in Exhibit D, and Company will pay the invoice in full to UM not later than September 1, 2005.

 

(b)       If Company does not license UM Improvements, Company will have no obligation under Section 3.09(a) to pay Patent Expenses related to the UM Improvements or Joint Improvements incurred by UM for patent filing and prosecution activities occurring more than 60 days after Company’s option is terminated or expires as provided in Section 3.09. UM will act in good faith to minimize the Patent Expenses incurred between receipt of notice and the end of the 60 day period.

 

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(c)       If this Agreement is terminated for any reason other than expiration in accordance with Section 11.01, Company will have no obligation to pay Patent Expenses related to Patent Rights or UM Improvements incurred by UM for patent filing and prosecution activities occurring more than 60 days after termination. UM will act in good faith to minimize the Patent Expenses incurred between receipt of notice of termination and the end of the 60 day period.

 

7.03       Company and UM will cooperate to limit the Patent Expenses while making reasonable efforts to have the Patent Rights cover all items of commercial interest and importance. Company and UM will cooperate to define the scope and content of U.S. and foreign patent applications to be filed under Patent Rights. UM is solely responsible for making decisions regarding scope and content of U.S. and foreign applications to be filed under Patent Rights and UM Improvements and prosecution of the applications. Company is solely responsible for making decisions regarding scope and content of U.S. and foreign applications to be filed under Joint Improvements and prosecution of the applications. The responsible party will give the other party a reasonable opportunity to advise the responsible party with respect to their respective patent applications. The parties will cooperate with each other in the prosecution, filing, and maintenance of their respective patent applications. The parties will advise one another promptly as to all material developments with respect to the applications. Copies of all papers received and filed in connection with prosecution of applications will be provided promptly to the other party to enable it to advise the responsible party thereon.

 

7.04      (a)       UM has disclosed to Company or Company has disclosed to UM the patent applications and patents in effect for the Patent Rights listed in Exhibit A-1. With respect to patent application Serial Numbers [***] , or further patent applications related to invention reports listed in Exhibit B, or UM Improvements, UM will file patent applications in [***], and additional countries specified by Company in accordance with this section. Company will specify in writing to UM the additional foreign countries in which patent applications are to be filed and prosecuted. Company will specify such additional countries no later than 60 days before the national phase filing deadline for the pertinent patent application. UM or Company will cause foreign filings to be made by patent counsel. If Company gives at least 60 days prior written notice to UM, Company may elect to discontinue support for Patent Expenses in any country other than [***]. Company will be responsible for reasonable Patent Expenses incurred in that 60 day period with respect to the country or countries where Company is ceasing support. From and after UM’s receipt of Company’s notice, Company’s exclusive rights in Patent Rights and UM Rights in Improvements will become non-exclusive with respect to the country or countries where Company is ceasing support, and Company will execute such documents as reasonably may be requested by UM to confirm conversion of Company’s rights.

 

(b)       UM may elect to file and prosecute patent applications, solely at its own expense, in foreign countries not listed in Section 7.04(a) or not specified by Company. If UM so elects, Company will have no right to approve UM’s patent counsel, and no license rights with respect to Patent Rights and UM Improvements in those countries, and no option rights with respect thereto in those countries, unless otherwise agreed to by the parties in writing.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

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7.05       In order to safeguard Patent Rights, UM Improvements and Joint Improvements, UM will request that UM Personnel not disseminate or publish any results or otherwise publicly disclose the results of research performed by UM Personnel relating to the Patent Rights within the Licensed Field and subject to the license(s) granted to Company under this Agreement unless any materials containing those results are first submitted to UM and, by UM, to Company, for review, comment, and consideration of appropriate patent action. UM will inform UM Personnel working with Patent Rights that they are required to submit materials relating to a planned written publication or other public disclosure to UM for review at least 90 days prior to the date of the planned submission for written publication or other disclosure. UM will promptly advise Company of any proposed publications or public disclosures reported to UM and will furnish Company a copy of the proposed publication or public disclosure as soon as submitted to UM. Company will advise UM within 30 days after Company’s receipt of the materials whether patent applications will be filed in connection with obtaining or maintaining Patent Rights related to the materials submitted by UM. UM will advise UM Personnel that they must delay written publication or public disclosure up to a maximum of 60 days after the date Company receives the materials to enable UM or Company to file, at Company’s expense, any patent applications recommended by Company.

 

Article 8. CONFIDENTIALITY

 

8.01       Knowingly or inadvertently, either party may disclose to the other certain Confidential Information. Disclosures by UM are deemed to refer to disclosures by any UM Personnel. Disclosures by Company are deemed to refer to disclosures by Company officers, directors, employees, consultants or agents. Confidential Information may be disclosed only in accordance with the provisions of this Article.

 

8.02       Except as hereafter specifically authorized in writing by the disclosing party, the receiving party will not disclose or use the Confidential Information for a period of [***] years after the date of receipt of Confidential Information.

 

8.03       These obligations of non-disclosure and nonuse do not apply to any Confidential Information which the receiving party can demonstrate by reliable written evidence:

 

(a)       was generally available to the public at the time of disclosure to the receiving party; or

 

(b)       was already in the possession of the receiving party at the time of the disclosure, other than pursuant to a confidential disclosure agreement between the parties and not due to any unauthorized act by the receiving party; or

 

(c)       was developed by the receiving party prior to the disclosure; or

 

(d)       the receiving party is required by law to disclose.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

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8.04       These obligations of non-disclosure and nonuse will not continue to apply to any Confidential Information which the receiving party can demonstrate by reliable written evidence:

 

(a)       has become generally available to the public other than through a breach of this Agreement by the receiving party after disclosure;

 

(b)       has been acquired by the receiving party on a nonconfidential basis from any third party having a lawful right to disclose it to the receiving party; or

 

(c)       corresponds to information developed by the receiving party independent of and with no reliance upon the disclosing party’s Confidential Information.

 

8.05       Each party will use that level of care to prevent the use or disclosure of the other party’s Confidential Information as it exercises in protecting its own Confidential Information.

 

8.06       All Confidential Information will be clearly marked as confidential by the disclosing party and, if not in written or tangible form when disclosed, will be indicated as confidential upon disclosure and then summarized in writing and so marked as confidential within 30 days after disclosure to the receiving party.

 

8.07       Notwithstanding the foregoing, Company, its Affiliates and its Sublicensees are permitted to disclose and use the Confidential Information to the extent reasonably necessary to exercise Company’s license or sublicenses hereunder, or to comply with Federal reporting requirements, provided that any disclosure is made subject to written confidentiality restrictions consistent with those accepted by Company in this Agreement.

 

8.08       UM is an educational institution with standards and practices for protection of Confidential Information that differ from Company’s standards and practices. By this Agreement UM undertakes reasonable efforts to enforce and protect to its fullest extent the confidentiality of Company’s Confidential Information.

 

8.09       The records of UM are subject to the Maryland Access to Public Records Law (Title 10, Subtitle 6, Part III, State Government Article, Annotated Code of Maryland). This Agreement and its Exhibits (whether or not made part of this Agreement) are public records of UM under the Act. Reports to UM, as provided in Article 9, are public records of UM. Confidential Information of Company contained in this Agreement (and its Exhibits) and any other Confidential Information of Company received by UM is not subject to disclosure in response to a request under the Act if the Confidential Information is determined to be confidential financial information, confidential commercial information, or trade secret information as provided in Section 10-617(d) of the Act. Company asserts that any Confidential Information of Company provided to UM under this Agreement is confidential financial or commercial information, or trade secret information, not subject to disclosure under the Act. Unless UM determines on the advice of counsel that such position is not reasonable, UM agrees to assert this position in response to any request for public records applicable to Company’s Confidential Information, and to promptly notify Company upon receipt of such a request.

 

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8.10       Upon termination of this Agreement for any reason other than those set forth in Section 11.01 or a material breach by UM, Company will return to UM all material which is Confidential Information of UM, together with all copies and other forms of reproduction, except that a single archive copy may be kept in Company’s legal files. Each party agrees that termination of this Agreement does not alter the [***] year obligation of confidentiality set forth in Section 8.02.

 

8.11       Upon termination of this Agreement for any reason other than those set forth in Section 11.01 or a material breach by Company, UM will return to Company all material which is Confidential Information of Company, together with all copies and other forms of reproduction, except that a single archive copy may be kept in UM’s legal files. Each party agrees that termination of this Agreement does not alter the [***] year obligation of confidentiality set forth in Section 8.02.

 

Article 9. REPORTS AND ACCOUNTING

 

9.01       During the term of this Agreement and for 5 years after its termination, Company will undergo annual audit by an independent public auditor. Company will keep, and will request each Affiliate and Sublicensee to keep, for at least four years after the close of each fiscal year of the organization in question, business records containing all the particulars that may be necessary to enable royalties payable to UM to be determined. Furthermore, the Company will permit Company records to be inspected at any time during regular business hours, upon reasonable notice, by an independent auditor appointed by UM for this purpose and acceptable to Company who will report to UM and Alba the amount of royalty or other compensation payable under this Agreement and the information used to calculate such royalty or compensation. This audit will be at UM’s expense unless the audit shows an underpayment in amounts due to UM in relation to amounts paid to UM by [***]% or more for any annual period (as defined in Section 9.02) subject to audit, in which case the audit expense will be borne by Company.

 

9.02       Within 90 days after each December 31, Company will deliver to UM a true and accurate report, giving particulars of the business conducted by Company, its Affiliates and its Sublicensees, if any, in the preceding year that are pertinent to any accounting for royalties, fees, or other payments under this Agreement. These reports will be certified as correct by an authorized officer of Company and will include at least the following information for the reporting period:

 

(a)       number of Licensed Products manufactured and sold by Company and by each Affiliate and each Sublicensee;

 

(b)       total billings for Licensed Products sold by Company and by each Affiliate and by each Sublicensee;

 

(c)       accounting for all Licensed Products used or sold;

 

(d)       deductions as provided in Section 2.16;

 

(e)       names and addresses of all Affiliates and Sublicensees of Company;

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 22 

 

  

(f)       facts indicating Company’s diligence in accordance with Article 4.

 

9.03       With each report submitted in accordance with Section 9.02, Company must pay to UM the royalties, fees, or other payments due and payable under this Agreement for the annual period covered by the report. If no royalties, fees or other payments are due with the report, Company will so report.

 

9.04       UM is a unit of the government of the State of Maryland. Where Company, an Affiliate or a Sublicensee is required to report and withhold for taxation revenues paid to UM as licensor, Company, the Affiliate or the Sublicensee will assert that UM is exempt from the tax by virtue of its governmental status. If the Company, Affiliate, or Sublicensee nevertheless is required to withhold tax, any tax required to be withheld will be paid promptly by Company or its Affiliates and its Sublicensees for and on behalf of UM to the appropriate governmental authority, and Company will furnish UM with proof of payment of the tax together with official or other appropriate evidence issued by the competent governmental authority sufficient to enable UM to support a claim for tax credit or refund with respect to any sum so withheld. Any tax required to be withheld on payments by Company to UM will be an expense of and be borne solely by UM, and Company’s royalty payment(s) to UM following the withholding of the tax will be decreased by the amount of such tax withholding. Company will cooperate with UM in the event UM elects to seek, at its own expense, administrative or judicial determination of tax exemption.

 

9.05       During the implementation of the Business Plan described in Section 4.01, and if requested by UM, and subject to Company’s right to fully preserve confidentiality of attorney work product and all material which is subject to attorney client privilege, Company will allow UM to inspect, at any time during regular business hours and upon reasonable notice, all Company correspondence to and from any pertinent U.S. regulatory agency and any foreign equivalent.

 

9.06       Company will report to UM the following dates within 60 days after occurrence: [***].

 

Article 10. INFRINGEMENT

 

10.01      UM and Company agree to notify each other promptly of each infringement or possible infringement of the Patent Rights of which either party becomes aware.

 

10.02      Company may (a) bring suit in its own name, at its own expense, and on its own behalf for infringement of presumably valid claims in the Patent Rights licensed to Company; (b) in any such suit, enjoin infringement and collect for its use damages, profits, and awards of whatever nature recoverable for such infringement; and (c) settle any claim or suit for infringement of the Patent Rights. Company may not compel UM or ISS to initiate or join in any such suit for patent infringement. Company may request UM or ISS to initiate or join in any such suit if necessary to avoid dismissal of the suit. If UM or ISS is made a party to any such suit, Company will reimburse and indemnify UM and ISS for any costs, expenses, or fees which UM or ISS incurs as a result of its joinder. In all cases, Company agrees to keep UM reasonably apprised of the status and progress of any litigation.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

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10.03       If an infringement action or a declaratory judgment action alleging invalidity or non-infringement of any of the Patent Rights is brought against Company or raised by way of counterclaim or affirmative defense in an infringement suit brought by Company under Section 10.02, Company may (a) defend the suit in its own name, at its own expense, and on its own behalf for presumably valid claims in the Patent Rights; (b) in any such suit, ultimately enjoin infringement and collect for its use, damages, profits, and awards of whatever nature recoverable for such infringement; and (c) settle any claim or suit for damages or a declaratory judgment involving the Patent Rights, including the granting of further licenses on sublicenses, provided that Company does not admit UM’s or ISS’s infringement or concede invalidation of any Patent Rights, without UM’s or ISS’s prior written consent, respectively. UM consent will not be unreasonably withheld. Company may not compel UM or ISS to initiate or join in any such suit. Company may request UM and ISS to initiate or join in any such suit if necessary to avoid dismissal of the suit. If UM or ISS is made a party to any such suit, Company will reimburse and indemnify UM or ISS for any costs, expenses, or fees which it incurs as a result of its joinder. In all cases, Company agrees to keep UM reasonably apprised of the status and progress of any litigation.

 

10.04      (a)       Company will not settle any action described in Section 10.02 or 10.03 without first notifying UM. In any action under Sections 10.02 or 10.03, the expenses of Company and UM, including costs, fees, attorney fees, and disbursements, will be paid by Company.

 

(b)       Up to [***] % of such expenses may be credited against the running royalties payable to UM under Article 5 under the Patent Rights in the country in which such suit is filed. If [***]% of such expenses exceed the amount of running royalties payable by Company in any royalty year, the expenses in excess may be carried over as a credit on the same basis in succeeding royalty years. Any recovery of compensatory damages made by Company, through court judgment or settlement, will be treated as [***]. Any other recovery made by Company, through court judgment or settlement, [***]. Any remaining recoveries will [***].

 

10.05      UM will cooperate reasonably with Company in connection with any action under Sections 10.02 or 10.03. UM agrees to provide prompt access to all necessary documents and to render reasonable assistance in response to requests by Company.

 

10.06      UM has a continuing right to intervene in a suit initiated by Company under Section 10.02 or in a declaratory judgment action involving the Patent Rights brought against Company under Section 10.03. In either case, if UM chooses to intervene, UM will be responsible for its litigation expenses and will be entitled to all recoveries which it obtains for itself as a result of its intervention.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 24 

 

  

10.07       If Company desires to initiate a suit for patent infringement under Section 10.02, Company will notify UM in writing within 90 days after giving or receiving notice of infringement under Section 10.01. If Company fails to notify UM of its intent to initiate suit within the 90 day period or if Company notifies UM that it does not intend to initiate suit, UM may initiate suit at its own expense. In such case, UM is entitled to all recoveries from such action.

 

10.08       If an infringement action or a declaratory judgment action alleging invalidity or non-infringement of any of the Patent Rights is brought against Company or raised by way of counterclaim or affirmative defense in an infringement suit brought by Company as described in Section 10.02, Company will notify UM whether Company intends to respond in opposition to such legal action within 15 days after Company’s receipt of notice of the filing of such action. If Company fails to notify UM of its intent to respond in opposition to such legal action within the 15 day period, or if Company notifies UM that it does not intend to oppose the action, UM may respond to the legal action at UM’s expense. In such case, UM is entitled to all recoveries from such action.

 

10.09       Company will cooperate reasonably with UM in connection with any action described in Sections 10.07 or 10.08. Company agrees to provide prompt access to all necessary documents and to render reasonable assistance in response to requests by UM.

 

Article 11. TERM AND TERMINATION

 

11.01       Unless sooner terminated in accordance with any of the succeeding provisions of this Article 11, this Agreement will continue in full force and effect until abandonment, disallowance, expiration, or invalidation of the last Patent Right anywhere which is licensed under this Agreement.

 

11.02       Should Company fail to pay UM any sum due and payable under this Agreement, UM may terminate this Agreement on 90 days written notice, unless Company pays UM within the 90 day period all delinquent sums together with interest due and unpaid. Upon expiration of the 90 day period, if Company has not paid all sums and interest due and payable, the rights, privileges, and licenses granted under this Agreement terminate.

 

11.03       Prior to the First Commercial Sale of a Licensed Product to a Third Party, Company is considered diligent with regard to development of a Licensed Product as long as Company updates and reports progress against the Business Plan and achieves the milestones described in Section 4.01 and as long as Company continues to provide the necessary financial and other resources which are required to maintain progress in accomplishing the Business Plan, as it relates to Licensed Products, and, conducts or enables others to conduct the activities required to maintain scheduled progress in accomplishing the Business Plan, as it relates to Licensed Products.

 

11.04       If UM declares Company not diligent in development or sales of Licensed Product based upon the criteria set forth in Section 11.03, then UM may terminate the portion of license or option grants under this Agreement upon 90 days written notice as may be appropriate with regard to the specific Licensed Field or subfield milestones set forth in Section 4.01(d). The withholding by a regulatory agency of marketing approval in spite of Company’s diligent effort to obtain such approval may not be the basis for UM to declare Company not diligent.

 

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11.05       In the event that Company, an Affiliate or a Sublicensee breaches Sections 3.03, 3.04, 3.05, 9.01, 9.02, 9.03, 10.04(a), 12.01, 15.02, 16.02, 16.03 or 19.02, or fails to make any payment to UM when due as provided by the terms above in this Agreement (except for Section 7.01(c), UM may terminate this Agreement upon 90 days written notice to Company. However, if the breach is corrected within the 90-day period and UM is reimbursed for all damages directly resulting from the breach, this Agreement will continue in full force and effect and UM will so notify Company in writing. Failure of Company to pay an invoice as required in Section 7.01(c) is grounds for immediate termination of this Agreement by UM if payment is overdue by [***] days or more.

 

11.06       Company may terminate this Agreement at any time by giving UM 90 days written notice of termination, and upon payment to UM of all payments maturing through the effective date of the termination.

 

11.07       Expiration or termination of this Agreement does not relieve either party of any obligation for payment and reporting which arises before expiration or termination including obligations under Articles 5, 7 (but only for expenses incurred before termination) and 9. Articles 2, 10, 13, 14, 15, 16, 17, and 18 and Sections 5.12, 6.03, 11.08, 11.09 and 19.11 will survive expiration or termination. Article 8 and Sections 9.01 and 19.02 will survive expiration or termination and will expire in accordance with their terms. Other sections of this Agreement will be effective after expiration or termination where that intent is clear from the content of those sections.

 

11.08       Upon termination of this entire Agreement pursuant to Section 11.05, any Sublicensee not in default may seek a license directly from UM to practice Patent Rights within the licensed field set out in its sublicense and upon the consideration stated in its sublicense to the extent such consideration has not previously been paid to Company. UM will permit a Sublicensee not in default to continue use of Patent Rights for a period of up to 60 days (“the Continuation Term”) after termination of this Agreement while UM and the Sublicensee negotiate, such license to be consistent with the terms of this Agreement subject to appropriate amendments of Article 5 and relevant definitions to substitute the consideration and field of use provisions from the sublicense. Should UM and the Sublicensee fail to agree upon an amendment within the Continuation Term, they will submit the definition and consideration provisions in dispute between them to commercial arbitration for resolution, and include the resulting provisions in a license. Prior to the Continuation Term, and in consideration of the opportunity to enter into a license agreement with UM, a Sublicensee seeking a license from UM must tender to UM a written agreement to pay [***].

 

11.09       Upon the expiration or termination of all or part of the license rights of Company under this Agreement, and at UM’s request, Company will execute a document acknowledging the license rights that have expired or terminated.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 26 

 

  

Article 12. ASSIGNABILITY

 

12.01       Company may assign this Agreement to an Affiliate or to a successor to all or substantially all of Company’s assets or business to which this Agreement relates. Company may not otherwise assign or transfer this Agreement without the prior written consent of UM, which will not be unreasonably withheld.

 

12.02       UM may assign this Agreement to a successor-in-interest but UM may not otherwise assign or transfer this Agreement without the prior written consent of Company, which will not be unreasonably withheld.

 

Article 13. APPLICABLE LAW; WAIVER

 

13.01       This Agreement is made and construed in accordance with the laws of the State of Maryland without regard to choice of law issues, except that all questions concerning the construction or effect of patents will be decided in accordance with the laws of the country in which the particular patent concerned has been granted.

 

13.02       Company submits itself to the jurisdiction of the State courts of the State of Maryland and the Federal court in the Northern District of the State of Maryland for purposes of any suit relating to this Agreement, and further agrees that any action against UM relating to this Agreement will be initiated by Company only in a court of competent jurisdiction in Baltimore City, or Baltimore County, Maryland.

 

13.03       UM and Company waive their rights to trial by jury as to any litigation between them relating to this Agreement.

 

Article 14. INTEGRATION AND INTERPRETATION

 

14.01       This Agreement, together with any Exhibits specifically referenced and attached, embodies the entire understanding between Company and UM. There are no contracts, understandings, conditions, warranties or representations, oral or written, express or implied, with reference to the subject matter of this Agreement that arc not merged in this Agreement.

 

14.02       This Agreement is negotiated as an arm’s-length business transaction. Draftsmanship will not be taken into account in construing the Agreement.

 

14.03       If any condition or provision in any Article of this Agreement is held to be invalid or illegal or contrary to public policy by a court of competent jurisdiction from which there is no appeal, this Agreement will be construed as though the provision or condition did not appear. The remaining provisions of this Agreement will continue in full force and effect.

 

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Article 15. REPRESENTATIONS AND WARRANTIES

 

15.01       UM hereby represents that to the knowledge of the executing UM officer, as of the date of execution by the officer, (a) as confirmed by assignments from UM Personnel who are known to be among the Licensor Inventors, or by assignment from prior owners of certain Patent Rights, (a) UM has full right, title, and interest in and to the Patent Rights identified in Exhibit A-1 (subject to any rights of the United States under grants to UM and pursuant to 35 U.S.C. Section 201 et seq. and all implementing regulations), saving only the invention listed in Patent Rights which is jointly owned by UM and ISS; (b) the Patent Rights identified in Exhibit A-1 are not the subject matter of any currently pending claims, actions or litigation involving UM, and UM has not been informed of any related matters or litigation contemplated either by UM or any Third Party; and (c) UM is unaware that any person disputes inventorship or ownership of Patent Rights as described in this Agreement. [***]. UM warrants that the officer of UM executing this Agreement is authorized to do so on behalf of UM. UM EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, AND PATENT VALIDITY, WITH RESPECT TO PATENT RIGHTS.

 

15.02       Company hereby represents and warrants to UM that: (a) Company has full legal right, power and authority to execute, deliver and perform its obligations under this Agreement; (b) the execution, delivery and performance by Company of this Agreement do not contravene or constitute a default under any provision of applicable law or of any agreement, judgment, injunction, order, decree, or other instrument binding upon Company; and (c) the officer of the Company executing this Agreement has been authorized by the Company’s board of directors or governing body to execute this Agreement as the act of the Company.

 

Article 16. CLAIMS, INDEMNIFICATION AND INSURANCE

 

16.01       UM and its officers and employees acting within the scope of their employment by UM are subject to the Maryland Tort Claims Act (“the Act”), Title 12, Subtitle 1, State Government Article, Annotated Code of Maryland, which permits claims in tort against the State of Maryland under certain circumstances and subject to limits provided by law. In order to file a claim under the Act, a claimant must submit a written claim to the Treasurer of the State of Maryland or a designee of that office within one year after the injury to the person or property that is the basis of the claim.

 

16.02       Company warrants and represents that it maintains comprehensive liability insurance coverage for itself, its officers, employees and agents, in the minimum amounts of $[***] per claim and $[***] aggregate, applicable to bodily injury and property damage. Prior to the initiation of any human trials in any geographical location with any products, processes, or protocols developed either by Company, its Affiliates, or Sublicensees or their officers, servants, or agents, or by Third Parties acting on behalf of or under authorization from Company, its Affiliates or Sublicensees, using licensed Patent Rights, the Company will establish and maintain Product & Clinical Trials Liability insurance coverage in the amount of $[***] per claim and $[***] aggregate. Company warrants that its liability insurance will cover contractually assumed obligation for product liability claims referred to in Section 16.03, when/if human clinical trials are commenced. UM acknowledges that Company’s liability insurance will not cover indemnity claims related to patent infringement referred to in Section 16.03. A certificate evidencing the required insurance coverage will be delivered to UM: (i) at or before execution of this Agreement; (ii) each time there is a change in Company’s insurance coverage; and (iii) each time Company’s insurance coverage is renewed. Company agrees to require its insurance carrier(s) to notify UM within 15 days prior to cancellation of Company’s insurance coverage, except in the case of cancellation for nonpayment of premium, where 10 days advance notice will be provided. If Company does not secure liability insurance written on an occurrence basis, but instead secures liability insurance written on a claims-made basis, Company warrants that it will purchase extending reported coverage or otherwise provide insurance satisfying its obligations hereunder for a period of not less than [***] years following termination of this Agreement.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 28 

 

  

16.03       (a)      Company will defend, indemnify, and hold harmless UM, UM Personnel, UM Affiliates, the University System of Maryland, the State of Maryland, and their regents, officers, employees, students, and agents (each individually a “UM Party” and all, collectively “UM Parties”), and ISS, against any and all claims, costs or liabilities, including attorney’s fees and court costs at trial and appellate levels, for any loss, damage, personal injury, or loss of life:

 

1.       caused by the actions of Company, its Affiliates, or Sublicensees, or their officers, servants, or agents, or Third Parties acting on behalf of or under authorization from Company, its Affiliates or Sublicensees, in the performance of this Agreement;

2.       arising out of use of licensed Patent Rights by Company, its Affiliates, or Sublicensees or their officers, servants, or agents, or by any Third Party acting on behalf of or under authorization from Company, its Affiliates, or Sublicensees; or

3.       arising out of use by a Party of products, processes, or protocols developed either by Company, its Affiliates, or Sublicensees or their officers, servants, or agents, or by Third Parties acting on behalf of or under authorization from Company, its Affiliates or Sublicensees, using licensed Patent Rights, provided such use was consistent with any instructions, protocols or supervision provided by Company.

 

(b)       Company’s agreement to defend, indemnify and hold harmless a UM Party or ISS is conditioned upon:

 

1.       UM or ISS, as the case may be, promptly notifying Company in writing after it receives notice of a claim, and

2.       the UM Party seeking indemnification, or ISS, fully cooperating with Company in the defense of the claim.

 

(c)       Company’s agreement to defend, indemnify and hold harmless a UM Party or ISS will not apply to any claim, cost, or liability attributable to the negligent act or willful misconduct of the UM Party, ISS, or a Third Party acting outside the direction or control of Company.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 29 

 

  

16.04       UM and Company further agree that nothing in this Agreement will be interpreted as:

 

 (a)       a denial to either party of any remedy or defense available to it under the laws of the State of Maryland;

 

 (b)       the consent of the State of Maryland or its agents and agencies to be sued; or

 

 (c)       a waiver of sovereign immunity or any other governmental immunity of the State of Maryland and UM beyond the extent of any waiver provided by law.

 

Article 17. ADVERTISING AND PUBLICITY

 

17.01       Neither party will use the name of the other or any of its employees or personnel, or any adaptation thereof, in any advertising, promotional, or sales literature without prior written consent obtained from the other party. Company may not use the name of ISS in conjunction with the invention owned by ISS and licensed hereunder without first securing the consent of ISS. Either party may publicize the fact that the parties have made this Agreement.

 

Article 18. DISPUTE RESOLUTION

 

If a dispute between the parties related to this Agreement arises, either party, by notice to the other party, may have the dispute referred to the parties’ respective officers designated below, or their successors, for attempted resolution by good faith negotiations within 30 days after the notice is received. The designated officers are as follows:

 

For Company: Chief Executive Officer
For UM: Vice President, Research and Development

 

In the event the designated officers are not able to resolve the dispute within this 30 day period, or any agreed extension, they will confer in good faith with respect to the possibility of resolving the matter through mediation with a mutually acceptable Third Party or a national mediation organization. The parties agree that they will participate in any mediation sessions in good faith in an effort to resolve the dispute in an infoitnal and inexpensive manner. All expenses of the mediator will be shared equally by the parties. Any applicable statute of limitations will be tolled during the pendency of a mediation initiated under this Agreement. Evidence of anything said or any admission made in the course of any mediation will not be admissible in evidence in any civil action between the parties. In addition, no document prepared for the purpose of, or in the course of, or pursuant to, the mediation, or copy thereof, will be admissible in evidence in any civil action between the parties. However, the admissibility of evidence will not be limited if all parties who participated in the mediation consent to disclosure of the evidence.

 

Article 19. MISCELLANEOUS

 

19.01       No license or right is granted by implication or otherwise with respect to any patent application or patent owned by either party, unless specifically set forth in this Agreement.

 

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19.02      (a)      Company will not knowingly employ or compensate, directly or indirectly, any person working in the Licensed Field, or involved in negotiating this Agreement on behalf of UM, while the person is employed by UM or for [***] thereafter, unless UM provides Company with prior written consent of the UM President to the employment or compensation by Company, which shall not be unreasonably withheld. “Compensation” includes but is not limited to: stock option or stock purchase agreements, consulting agreements, any other form of agreement executed between a UM employee and Company, and cash payments. “Employment” includes both uncompensated and compensated service to Company. The Maryland Public Ethics Law, Title 15, State Government Article, Annotated Code of Maryland, may apply to a decision by the UM President in regard to such matter.

 

(b)       [***].

 

(c)       Company and one of the Licensor Inventors, [***], are considering business relationships between them which may involve [***] being an officer, employee, or consultant of Company. As a consequence of the business relationship created by this Agreement between Company and [***]’s employer, UM, and as a consequence of the fact that [***] is an employee of the State of Maryland by virtue of his UM employment, [***]’s relationships with Company during the term of this Agreement would cause him to be in violation of the State Public Ethics Law (Title 15, Subtitle 5, State Government Article, Annotated Code of Maryland), unless an exemption is granted to him by UM. The same situation would pertain to any other UM Personnel who have responsibilities relating to Patent Rights or this Agreement who may consider business relationships with Company. Company agrees that it will not enter into any paid or unpaid employment or other business relationship with [***] or other UM Personnel without verifying with the UM Conflict of Interest Officer that to do so will not cause the UM Personnel in question to be in violation of the State Public Ethics Law.

 

19.03       If Company conducts clinical trials of a Licensed Product, it will give full consideration to using UM or the University of Maryland Medical System Corporation as a site for clinical trials, subject to agreement on terms and conditions, including compensation, negotiated in good faith.

 

19.04       Neither party is liable for failure or delay in performing any of its obligations under this Agreement if the failure or delay is required in order to comply with any governmental regulation, request or order, or necessitated by other circumstances beyond the reasonable control of the party so failing or delaying, including but not limited to Acts of God, war (declared or undeclared), insurrection, fire, flood, accident, labor strikes, work stoppage or slowdown (whether or not such labor event is within the reasonable control of the parties), or inability to obtain raw materials, supplies, power or equipment necessary to enable a party to perform its obligations. Each party will: (a) promptly notify the other party in writing of an event of force majeure, the expected duration of the event and its anticipated effect on the ability of the party to perform its obligations; and (b) make reasonable efforts to remedy the event of force majeure.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

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19.05       All notices, consents and other communications required or allowed under this Agreement must be in writing and are effective upon receipt: (a) when delivered by hand; or (b) when received by the addressee after being mailed by registered or certified mail (air mail if mailed overseas), return receipt requested; or (c) when received by the addressee, by delivery service (return receipt requested), in each case addressed to the party at its address set forth below (or to another address that a party may later designate by notice to the other party):

 

If to UM:Director, Technology Commercialization

Office of Research and Development

University of Maryland, Baltimore

515 West Lombard Street, Fourth Floor

Baltimore, Maryland 21201-1602

 

Copy to:University Counsel

University of Maryland, Baltimore

520 West Lombard Street

East Hall, Second Floor

Baltimore, Maryland 21201-1627

 

If to Company:Chief Executive Officer

Alba Therapeutics Corporation

2400 Boston St., Suite 310

Baltimore, MD 21224

 

Copy to :General Counsel

Alba Therapeutics Corporation

2400 Boston Street

Suite 302

Baltimore, MD 21224

 

19.06       This Agreement, including Exhibits, may not be amended, nor may any right or remedy of either party be waived, unless the amendment or waiver is in writing and signed by a duly authorized representative of each party.

 

19.07       A failure or delay by a party in exercising any of its rights or remedies under this Agreement does not constitute a waiver of the rights or remedies, nor does any single or partial exercise of any right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy. The rights and remedies of the parties provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.

 

19.08       UM and Company are not (and nothing in this Agreement may be construed to constitute them as) partners, joint venturers, agents, representatives or employees of the other, nor is there any status or relationship between them other than that of independent contractors. Neither party has any responsibility nor liability for the actions of the other party except as specifically provided in this Agreement. Neither party has any right or authority to bind or obligate the other party in any manner or make any representation or warranty on behalf of the other party.

 

 32 

 

  

19.09       Unless otherwise provided, all costs and expenses incurred in connection with this Agreement will be paid by the party which incurs the cost or expense, and the other party has no liability for such cost or expense.

 

19.10       This Agreement is not intended to create, and does not create, enforceable legal rights as a third party beneficiary or through any other legal theory on the part of any University Personnel or any other person except as otherwise provided by Section 16.03.

 

19.11       This Agreement is signed in duplicate originals. The headings used in this Agreement are for convenience of reference only and do not affect the meaning or construction of this Agreement.

 

[remainder of page intentionally blank]

[signatures on following page]

 

 33 

 

 

The parties have caused this Agreement to be executed by their duly authorized representatives on the dates indicated below.

 

  UNIVERSITY OF MARYLAND, BALTIMORE
         
    BY: /s/ David J. Ramsay
    WITNESS: /s/ Dorothy C. Trueheart
      David J. Ramsay, D.M., D.Phil.
      President
         
    Date: 10/5/2005
      Date: 10/5/2005
         
    ALBA THERAPEUTICS CORPORATION
     
    BY: /s/ Blake M. Paterson
    WITNESS: /s/ [illegible]
      Blake M. Paterson, MD
      Corporate Secretary
      President
         
    Date: 14 Oct 2005
      Date: 10/14/05

 

 34 

 

 

9/12/2005

 

EXHIBIT A-1: PATENT RIGHTS

 

[***]

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 35 

 

 

EXHIBIT A-2: ROYALTY RATES

 

[***]

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 36 

 

 

EXHIBIT B: INVENTION REPORTS

 

[***]

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 37 

 

 

EXHIBIT C: SAMPLE MATERIAL TRANSFER AGREEMENT

 

See attached file MTA070704

 

 38 

 

 

EXHIBIT C

 

MATERIAL TRANSFER AGREEMENT FOR ZOT AND ZONULIN,

SUBJECT TO LICENSE AGREEMENT WITH

ALBA THERAPEUTICS CORPORATION

 

This MATERIAL TRANSFER AGREEMENT (this “Agreement”) dated as of ___________, _____ (the “Effective Date”), is entered into by and between the University of Maryland, Baltimore, a constituent institution of the University System of Maryland, which is a public corporation and an instrumentality of the State of Maryland, located at 520 West Lombard Street, Baltimore Maryland 21201 (“PROVIDER”), and ________________________________, a ________ institution located at ______________, (“RECIPIENT”), on behalf of (“RECIPIENT SCIENTIST”).

 

The parties agree as follows:

 

1.The terms “PROVIDER”, “RECIPIENT”, and “RECIPIENT SCIENTIST” have the meanings indicated above. Other terms used in this Agreement are defined as follows:

 

1.1.AGONISTS/ANTAGONISTS: Agonists or antagonists to a receptor protein created through the use of the MATERIAL by RECIPIENT that are not PROGENY, MODIFICATIONS or UNMODIFIED DERIVATIVES.

 

1.2.COMMERCIAL PURPOSES: The sale, lease, license, or other transfer of the MATERIAL, MODIFICATIONS, or AGONISTS/ANTAGONISTS to a for-profit organization. COMMERCIAL PURPOSES includes uses of the MATERIAL, MODIFICATIONS or AGONISTS/ANTAGONISTS by any organization, including RECIPIENT, to perform contract research, to screen compound libraries, to produce or manufacture products for general sale, or to conduct research activities that result in any sale, lease, license, or transfer of the MATERIAL, MODIFICATIONS or AGONISTS/ANTAGONISTS to a for-profit organization. However, industrially sponsored academic research will not be considered a use of the MATERIAL, MODIFICATIONS or AGONISTS/ANTAGONISTS for COMMERCIAL PURPOSES per se, unless any of the above conditions of this definition are met.

 

1.3.LICENSEE: Alba Therapeutics Corporation, which has licensed from PROVIDER certain specific and exclusive rights to use the MATERIAL for COMMERCIAL PURPOSES.

 

1.4.MATERIAL: PROVIDER’s ORIGINAL MATERIAL, PROGENY, and UNMODIFIED DERIVATIVES and its associated confidential and proprietary data and information.

 

1.5.MODIFICATIONS: Substances created by RECIPIENT which contain or incorporate the MATERIAL.

 

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1.6.NONPROFIT ORGANIZATION(S): A university or other institution of higher education or an organization of the type described in section 501(c)(3) of the Internal Revenue Code of 1954 (26 U.S.C. 501(c)) and exempt from taxation under section 501(a) of the Internal Revenue Code (26 U.S.C. 501(a)) or any nonprofit scientific or educational organization qualified under a state nonprofit organization statute. As used herein, the term also includes government agencies.

 

1.7.ORIGINAL MATERIAL: Zot, Zonulin: “Zonula Occludens Toxin” otherwise known as Zot, Zonulin, covered under various US & foreign patents.

 

1.8.PROGENY: Unmodified descendant from the MATERIAL, such as virus from virus, cell from cell, or organism from organism.

 

1.9.PROVIDER SCIENTIST: [***] , an employee of PROVIDER, or scientists working under his direct supervision.

 

1.10.UNMODIFIED DERIVATIVES: Substances created by RECIPIENT which constitute an unmodified or modified functional sub-unit or product expressed by the ORIGINAL MATERIAL. Some examples include: subclones of unmodified or modified cell lines, purified or fractionated sub-sets of the ORIGINAL MATERIAL, proteins expressed by DNA/RNA supplied by PROVIDER, or “-monoclonal antibodies secreted by a hybridomas cell line.

 

2.PROVIDER shall provide RECIPIENT with the MATERIAL on the terms and conditions of this Agreement.

 

3.PROVIDER retains all right and title in the MATERIAL and MODIFICATIONS. RECIPIENT shall use the MATERIAL and MODIFICATIONS solely for the following, non-commercial, research purposes: ______________________________________________________________________________________________. RECIPIENT UNDERSTANDS THAT THE MATERIAL IS PROVIDED SOLELY FOR NON-HUMAN RESEARCH PURPOSES, HAS NOT BEEN APPROVED FOR USE WITH HUMAN SUBJECTS INCLUDING FOR DIAGNOSTIC PURPOSES, AND CANNOT AND WILL NOT BE ADMINISTERED TO HUMAN SUBJECTS.

 

4.MATERIAL is to be used only at the RECIPIENT organization and only in the RECIPIENT SCIENTIST’s laboratory under the direction of the RECIPIENT SCIENTIST or others working under his/her direct supervision. MATERIAL will not be transferred to anyone else within the RECIPIENT organization without the prior written consent of the PROVIDER. RECIPIENT shall limit transfer and disclosure of the MATERIAL only as reasonably necessary for completion of the research described above, which may include, without limitation of the forgoing, transfer and disclosure to RECIPIENT’s directors, officers, employees, consultants and legal advisors.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 40 

 

 

5.RECIPIENT and RECIPIENT SCIENTIST agree to refer to PROVIDER any request for MATERIAL from any person or entity other than those persons who are working under the RECIPIENT SCIENTIST’s direct supervision and persons described in the last sentence of paragraph 4 above.

 

6.RECIPIENT agrees that MATERIAL, MODIFICATIONS, and AGONISTS/ANTAGONISTS will be transferred to anyone else other than RECIPIENT’S SCIENTIST and permitted persons within RECIPIENT organization only under a material transfer agreement between PROVIDER and RECIPIENT organization with terms at least as restrictive as the terms of this Agreement.

 

7.RECIPIENT agrees that MATERIAL, MODIFICATIONS, and AGONISTS/ANTAGONISTS are subject to certain rights of LICENSEE.

 

8.To the extent supplies of MATERIAL are available, PROVIDER or PROVIDER SCIENTIST will make MATERIAL available, under a separate implementing letter to this Agreement or other agreement having terms consistent with the terms of this Agreement, only to other scientists at NONPROFIT ORGANIZATION(S) who wish to replicate RECIPIENT SCIENTIST’s research; provided that such other scientists reimburse PROVIDER for any costs relating to the preparation and distribution of MATERIAL.

 

9.(a) RECIPIENT will have the right, without restriction, to distribute substances created by RECIPIENT through the use of MATERIAL only if such substances are not PROGENY, UNMODIFIED DERIVATIVES, MODIFICATIONS, or AGONISTS/ANTAGONISTS.

 

(b) Upon notice to PROVIDER and under the Uniform Biological Material Transfer Agreement published in the Federal Register on March 8, 1995 (or an agreement at least as protective of PROVIDER’s and LICENSEE’s rights), RECIPIENT may distribute MODIFICATIONS and AGONISTS/ANTAGONISTS to non-profit or governmental organizations for non-commercial research purposes only.

 

10.RECIPIENT acknowledges that MATERIAL is the subject of patents and patent applications, and significant rights granted to LICENSEE. Except as expressly provided in this Agreement, no express or implied licenses or other rights are provided to RECIPIENT under any patents, patent applications, trade secrets or other intellectual property rights of PROVIDER, including with respect to PROGENY, MODIFICATIONS, UNMODIFIED DERIVATIVES or AGONISTS/ANTAGONISTS, or other modified forms of the MATERIAL. In particular, but without limiting the foregoing, no express or implied licenses or other rights are provided to use MATERIAL, MODIFICATIONS, AGONISTS/ANTAGONISTS or any related patents of PROVIDER, including patents covering the composition of matter, methods of manufacture or use of any of the foregoing, for any COMMERCIAL PURPOSES. This agreement shall not be construed to grant any license or other grants to RECIPIENT in the MATERIAL or MODIFICATIONS or AGONISTS/ANTAGONISTS, or under any patent rights or other intellectual property rights of PROVIDER or LICENSEE.

 

 41 

 

 

11.RECIPIENT is free to file patent application(s) claiming inventions made by RECIPIENT through the use of provided MATERIAL but agrees to notify PROVIDER thirty (30) days prior to filing a patent application claiming MODIFICATIONS, or AGONISTS/ANTAGONISTS or method(s) of manufacture or use(s) of provided MATERIAL.

 

12.This Agreement will terminate upon the earliest of the following: (1) one (1) year from the Effective Date; (2) one (1) year from the actual receipt of the MATERIAL; (3) when MATERIAL becomes generally available from third parties, such as through reagent banks or from public repositories; (4) upon completion of RECIPIENT’s current research with MATERIAL; or (5) upon thirty (30) days written notice of termination by either party. Upon the request of PROVIDER, RECIPIENT shall either promptly destroy or return to PROVIDER all remaining MATERIAL.

 

13.Termination of this Agreement under Section 12 above will have the following consequences:

(a)       if termination should occur under Section 12(3) above, RECIPIENT will be bound to PROVIDER by the least restrictive terms applicable to MATERIAL obtained from the-then-available sources; and

(b)       if termination should occur under Section 12(4) above, RECIPIENT will discontinue its use of MATERIAL and will, upon direction of PROVIDER, return or destroy any remaining MATERIAL. RECIPIENT, at is discretion, will also either destroy MODIFICATIONS or remain bound by the terms of this Agreement as they apply to MODIFICATIONS; and

(c)       if PROVIDER terminates this Agreement under Section 12(5) above, other than for breach of this Agreement or with cause such as an imminent health risk or patent infringement by RECIPIENT and/or RECIPIENT SCIENTIST, PROVIDER may defer the effective date of termination for a period of up to one (1) year, upon’ request from RECIPIENT, (“Deferred Date of Termination”) to provide RECIPIENT an opportunity to complete research in progress, e.g., on-going experiments. Upon the effective date of termination, or if granted by PROVIDER, the Deferred Date of Termination, RECIPIENT will discontinue its use of MATERIAL and will, upon direction of PROVIDER, return or destroy any remaining MATERIAL. RECIPIENT, at its discretion, also will destroy MODIFICATIONS and AGONISTS/ANTAGONISTS or remain bound by the terms of this Agreement as they apply to MODIFICATIONS and AGONISTS/ANTAGONISTS.

 

14.RECIPIENT hereby acknowledges that the MATERIAL is experimental in nature, may have hazardous properties, and is provided “AS IS.” PROVIDER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE MATERIAL OR THE USE THEREOF. PROVIDER DISCLAIMS ALL LMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGEMENT.

 

15.RECIPIENT shall comply in all material respects with all laws and governmental rules, regulations and guidelines which are applicable to the MATERIAL or the use thereof, including biosafety procedures, and with any safety precautions accompanying the MATERIALS.

 

 42 

 

 

16.RECIPIENT assumes all liability for damages that may arise from its use, storage or disposal of the MATERIAL. PROVIDER will not be liable to RECIPIENT for any loss, claim or demand made by RECIPIENT, or made against RECIPIENT by any other party, due to or arising from the use of the MATERIAL by RECIPIENT, except to the extent provided by Maryland law with respect to a tort claim asserted by RECIPIENT against PROVIDER.

 

17.This Agreement represents the entire agreement between the parties regarding the subject matter hereof and shall supersede all previous communications, representations, understandings and agreements, whether oral or written, by or between the parties with respect to the subject matter hereof.

 

18.No change, modification, extension, termination or waiver of this Agreement, or any of the provisions herein contained, shall be valid unless made in writing and signed by duly authorized representatives of the parties.

 

19.All necessary and relevant Paragraphs will survive termination of this Agreement for any reason whatsoever where it is clear from the content of those Sections that they are intended to survive, including without limitation, Sections, 1, 6, 13, 14, 15 and 21.

 

20.MATERIAL will be provided following payment to PROVIDER of a processing fee of ________________________.

 

21.This Agreement may not be interpreted to prevent or to delay publication of research findings resulting from the use. of MATERIAL, MODIFICATIONS or AGONISTS/ANTAGONISTS. RECIPIENT SCIENTIST agrees to provide appropriate acknowledgment of the source of MATERIAL in all publications.

 

22.RECIPIENT will provide to PROVIDER written progress reports of all data generated from the research in which MATERIAL is used, and a final written report regarding the research results within sixty days (60) of completion of RECIPIENT’s research with the MATERIAL.

 

 43 

 

 

IN WITNESS WHEREOF, the parties have entered into this Agreement as of the Effective Date.

 

  UNIVERSITY OF MARYLAND, BALTIMORE
     
  By:           
     
  Title:  
     
  [RECIPIENT]
     
  By:  
     
  Title:  

 

 44 

 

 

EXHIBIT A

 

MATERIALS

 

[TO BE COMPLETED]

 

 45 

 

 

EXHIBIT D: PATENT EXPENSES INCURRED PRIOR TO THE EFFECTIVE DATE

 

[***]

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 46 

 

 

EXHIBIT E

 

STOCK TRANSFER AGREEMENT

 

UM Acknowledged    /s/ DJR   Date 11/10/05
     
Company Acknowledged    /s/ BMP   Date 10/14/05

  

 47 

 

 

EXHIBIT E: STOCK TRANSFER AGREEMENT

 

This Stock Transfer Agreement (the “Agreement”) is made as of the ____ day of August, 2004 (the “Effective Date”) by and between Blake M. Paterson, MD, Chief Executive Officer of Alba Therapeutics Corporation (“Paterson”), Alba Therapeutics Corporation, a Delaware corporation (the “Company”), and University of Maryland, Baltimore (“UMB”).

 

In consideration for the mutual promises and covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree follows:

 

1.           Number of Shares Transferred from Paterson to UMB. Paterson agrees to transfer to UMB [***] shares of the Company’s Common Stock. The consideration for the stock will be the execution on or before the Effective Date of a Master License Agreement between UMB and Company. The closing of such transfer shall occur immediately upon execution of this Agreement.

 

2.           Right of First Refusal.

 

(a)       Notice of Transfer. (i) In accordance with the University System of Maryland Policy on Intellectual Property (IV-3.20) and Policy on Patents (IV-3.00), UMB remits to inventors the inventor’s share of revenue from inventions licensed by UMB. Revenue sharing includes equity received by UMB. The inventors as transferees of shares of Stock shall be required as a condition of such transfer to agree in writing (in a form satisfactory to the Company) that they will receive and have such shares of Stock or interest subject to the provisions of this Agreement, including the Right of First Refusal. (ii) With the exception of the transfer from UMB to inventors, UMB agrees that in the event that UMB proposes to sell, assign, pledge, encumber, transfer or otherwise dispose of (“Transfer”) any of UMB’s Stock, UMB shall give the Company written notice of UMB’s intention (“Transfer Notice”), describing the number of shares of Stock offered (“Offered Shares”), the identity of the prospective transferee and the consideration and the material terms and conditions upon which the proposed Transfer is to be made. The Transfer Notice shall certify that the UMB has received a firm offer from the prospective transferee and in good faith believes a binding agreement for Transfer is obtainable on the terms set forth, and shall also include a copy of any written proposal or letter of intent or other agreement relating to the proposed Transfer.

 

(b)       Right of First Refusal. With the exception of transfers noted in 2(a)(i) above, with respect to any proposed Transfer, the Company shall have an option to purchase all or none of the Offered Shares (the “Right of First Refusal”). To exercise such option, the Company must notify UMB in writing before the expiration of the thirty (30) day period following the delivery of the Transfer Notice to the Company. If the Company elects to purchase the Offered Shares, it shall pay consideration for the Offered Shares no less favorable in price and material terms and conditions than are described in the Transfer Notice.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 48 

 

 

(c)       Closing Procedures; Subsequent Transfers. If the Company exercises the Right of First Refusal, the Company and UMB shall consummate the sale of the Offered Shares on the terms set forth in the Transfer Notice by the date sixty (60) days after the delivery of the Transfer Notice to the Company; provided, however, that, in the event the Transfer Notice provides for the payment for the shares of Stock other than in cash, the Company shall have the option to pay for the shares of Stock by the discounted cash equivalent of the consideration described in the Transfer Notice as reasonably determined by UMB and the Company. If the Company fails to exercise in full the Right of First Refusal on a timely basis, then UMB may, not later than one hundred twenty (120) days following delivery to the Company of the Transfer Notice, conclude the Transfer subject to the Transfer Notice on the terms and conditions described in such notice. Any proposed transfer on terms and conditions different from those described in the Transfer Notice, as well as any proposed transfer by UMB more than one hundred twenty (120) days following delivery of the Transfer Notice, shall again be subject to the Right of First Refusal and shall require UMB to deliver a new Transfer Notice to the Company and to comply with the procedures described in this Section 2 with respect to such different or new Transfer.

 

(d)       Condition to Transfer. All transferees of shares of Stock or any interest therein other than the Company shall be subject to the prior requirement that transferee execute a stock transfer agreement in a form acceptable to the Company.

 

(e)       Termination of Right. The Right of First Refusal shall terminate at such time as a public market exists for the Company’s Common Stock (or any other stock issued by the Company, or any successor, in exchange for the Stock). For the purpose of this Agreement, “public market” shall be deemed to exist if (i) such stock is listed on a national securities exchange or the Nasdaq National Market or (ii) such stock is traded on the over-the-counter market and prices therefor are published daily on business days in a recognized financial journal.

 

(f)       Limitation on Right. Notwithstanding the provisions of this Section 2, the Right of First Refusal set forth in this Section 2 shall not apply to:

 

(i)       any transfer to UMB’s investment manager, or to UMB’s affiliates provided that in any case any such transferee shall be subject to the prior requirement that transferee execute 21 stock transfer agreement in a form acceptable to the Company.

 

(ii)       any sale or transfer of the Stock in a public offering of securities of the Company registered under the Securities Act of 1933, as amended (the “Securities Act”).

 

3.           Assignment of Purchase Rights. The Company shall have the right to assign the Right of First Refusal to such person or persons as it may select in its reasonable discretion.

 

4.           Stock Dividends, Etc. If, from time to time, there is any stock dividend, stock split or other change in the character or amount of any of the outstanding stock of the Company, then in such event any and all new substituted or additional securities to which UMB is entitled by reason of UMB’s ownership of the Stock acquired pursuant to this Agreement shall be considered Stock and shall be immediately subject to the Right of First Refusal and all other terms of this Agreement to the same extent as the Stock owned by UMB immediately before such event.

 

 49 

 

  

5.            Legends. All certificates representing any shares of Stock subject to the provisions of this Agreement shall have endorsed thereon the following legends:

 

(a)       “THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED PURSUANT TO AN AGREEMENT BETWEEN THE COMPANY AND THE HOLDER OF THESE SHARES, OR HIS, HER OR ITS PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS COMPANY.”

 

(b)       “THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.”

 

(c)       Any legend required to be placed thereon under applicable state securities laws.

 

6.            Representations and Warranties. In connection with the Transfer of the Stock, UMB hereby agrees, represents and warrants as follows:

 

(a)       With the exception of the transfer to inventors described in 2(a)(i) above or to a UMB investment manager or affiliate as described in 2(f)(i), UMB is receiving the Stock solely for UMB’s own account for investment and not with a view to, or for resale in connection with, any distribution thereof within the meaning of the Securities Act.

 

(b)       UMB realizes that UMB’s acquisition of the Stock will be a highly speculative investment, and UMB is able, without impairing UMB’s financial condition, to hold the Stock for an indefinite period of time and to suffer a complete loss of UMB’s investment.

 

(c)       The Company and Paterson have disclosed to UMB that:

 

(i)       The sale of the Stock has not been registered under the Securities Act, and the Stock must be held indefinitely unless a transfer of it is subsequently registered under the Securities Act or an exemption from such registration is available, and that the Company is under no obligation to register the Stock;

 

(ii)       The Company will make a notation in its records of the aforementioned restrictions on transfer and legends.

 

 50 

 

 

(d)       UMB is aware of the provisions of Rule 144, promulgated under the Securities Act, which, in substance, permits limited public resale of “restricted securities” public offering subject to the satisfaction of certain conditions, including among other things: the resale occurring not less than one year from the date UMB acquired the Stock; the availability of certain public information concerning the Company; the sale being through a broker in an unsolicited “broker’s transaction” or in a transaction directly with a market maker; and limitations on the amount of Stock that may be sold during any three-month period. UMB further represents that UMB understands that at the time UMB wishes to sell the Stock there may be no public market upon which to make such a sale, and that, even if such a public market then exists, the Company may not be satisfying the current public information requirements of Rule 144, and that, in such event, UMB would be precluded from selling the Stock under Rule 144 even if the one-year minimum holding period had been satisfied.

 

(e)       Without in any way limiting UMB’s representations and warranties set forth above, subject to 2(a)(i) above, UMB further agrees that the UMB shall in no event make any disposition of all or any portion of the Stock which the UMB is acquiring unless and until:

 

(i)       There is then in effect a Registration Statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with said Registration Statement; or

 

(ii)       UMB shall have (1) notified the Company of the proposed disposition and furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (2) if reasonably requested by the Company, furnished the Company with an opinion of UMB’s own counsel to the effect that such disposition will not require registration of such shares under the Securities Act, and such opinion of UMB’s counsel shall have been concurred in by counsel for the Company, and the Company shall have advised the UMB of such concurrence.

 

7.           “Market Stand-Off” Agreement. UMB hereby agrees that in connection with any underwritten public offering by the Company, during the period of duration (not to exceed 180 days) specified by the Company and ah underwriter of common stock of the Company following the effective date of the Registration Statement of the Company filed under the Securities Act with respect to such offering, he or she will not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase, pledge or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any securities of the Company held by him or her at any time during such period except common stock included in such registration. If requested by such underwriter, UMB agrees to execute a lock-up agreement in such form as the underwriter may reasonably propose.

 

8.           Transfers in Violation of Agreement. The Company shall not be required (i) to transfer on its books any shares of Stock of the Company which shall have been sold or transferred in violation of any of the provisions set forth in this Agreement or (ii) to treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so transferred.

 

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9.           Miscellaneous.

 

(a)       Further Instruments. The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.

 

(b)       Notice. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given (i) upon personal delivery, or (ii) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the party to be notified at the address as set forth on the signature pages hereof or at such other address as such party may designate by ten (10) days advance written notice to the other parties hereto.

 

(c)       Successors and Assigns. This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer herein set forth, be binding upon UMB, UMB’s successors and assigns.

 

(d)       Applicable Law; Entire Agreement; Amendments. This Agreement, together with the exhibits hereto, shall be governed by and construed in accordance with the laws of the State of Delaware as it applies to agreements between Delaware residents, entered into and to be performed entirely within Delaware with the exception of matters relating sovereign immunity or any other governmental immunity of the State of Maryland or UMB which shall be governed by Maryland law, and constitutes the entire agreement of the parties with respect to the subject matter hereof superseding all prior written or oral agreements, and no amendment or addition hereto shall be deemed effective unless agreed to in writing by the parties hereto.

 

(e)       Right to Specific Performance. UMB agrees that the Company and Paterson shall be entitled to a decree of specific performance of the terms hereof or an injunction restraining violation of this Agreement, said right to be in addition to any other remedies available to the Company.

 

(f)       Severability. If any provision of this Agreement is held by a court to be invalid, void or unenforceable, the remaining provisions shall nevertheless continue in full force and effect without being impaired or invalidated in any way and shall be construed in accordance with the purposes and tenor and effect of this Agreement.

 

(g)       Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, but all of which together shall constitute one instrument.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

University of Maryland, Baltimore   Alba Therapeutics Corporation
     
/s/ David J. Ramsay   /s/ Blake M. Paterson
David J. Ramsay, D.M., D.Phil.   Blake M. Paterson, MD
President   Chief Executive Officer
     
Address:   Address:
     
c/o Director, Technology Commercialization   Alba Therapeutics Corporation
Office of Research and Development   2400 Boston Street
University of Maryland, Baltimore   Suite 410
515 West Lombard Street, Fourth Floor   Baltimore, MD 21224
Baltimore, Maryland 21201-1602    

 

BLAKE M. PATERSON, M.D.
 
/s/ Blake M. Paterson
Signature
 
Address:
 
c/o Alba Therapeutics
2400 Boston Street
Suite 410
Baltimore, MD 21224

 

 53 

 

 

FIRST AMENDMENT

 

to

 

RESTATED

 

MASTER LICENSE AGREEMENT

 

effective July 1, 2005

between

UNIVERSITY OF MARYLAND, BALTIMORE

and

ALBA THERAPEUTICS CORPORATION

 

This First Amendment (“Amendment”) to Restated Master License Agreement (“Agreement”) effective July 1, 2005, is made by and between the University of Maryland, Baltimore (“UM”), a constituent institution of the University System of Maryland, a public corporation and an instrumentality of the State of Maryland, having an address at 520 West Lombard Street, East Hall, Room 200, Baltimore, Maryland 21201, and Alba Therapeutics Corporation, a corporation of Delaware, with its principal place of business at 2400 Boston St., Suite 310, Baltimore, MD 21224 (“Company”).

 

For [***] and other valuable consideration, receipt of which is acknowledged, the parties agree as follows:

 

1.       This Amendment is effective December 1, 2005.

 

2.       Section 3.01 of the Agreement is deleted in its entirety and replaced with the following provision:

 

“3.01 Subject to rights of the United States under grants to UM and pursuant to 35 U.S.C. Section 201 et seq. and all implementing regulations, and subject to Section 3.02, UM grants to Company, and Company accepts, an exclusive worldwide license under Patent Rights to conduct research and development and to make, have made, use, lease, offer to sell, sell and import the Licensed Products within the Licensed Field as defined in Section 2.12 above, for the term of this Agreement. This license includes the right to grant sublicenses consistent with this Agreement.”

 

3.       Section 3.09(a) of the Agreement is deleted in its entirety and replaced with the following provision:

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 54 

 

 

“3.09 (a) Subject to rights of other parties sponsoring research at UM, Company has an exclusive option to enter into an exclusive license agreement with UM for UM Rights in Improvements, within the Licensed Field, so long as (i) this Agreement is in effect, (ii) Company files, prosecutes, and maintains patent applications and issued patents for Patent Rights and UM Rights in Improvements and pays Patent Expenses for Patent Rights and UM Rights in Improvements to the extent required by this Agreement, and (iii) Company has not notified UM that Company declines to exercise its option. During the term of this option, UM Rights in Improvements will be subject to the same patent prosecution and maintenance terms and conditions applicable to Patent Rights under Article 7 of this Agreement.”

 

4.       Section 3.11(a) of the Agreement is deleted in its entirety and replaced with the following provision:

 

“3.11 (a) UM will report promptly to Company in writing each UM Improvement and each Joint Improvement disclosed to UM. Company will report promptly to UM in writing each UM Improvement and each Joint Improvement disclosed to Company. This reporting requirement is triggered by determination by the receiving party that a disclosed invention concerns a UM Improvement or Joint Improvement. A copy of a provisional patent application filed by UM for the UM Improvement or Joint Improvement will satisfy this reporting requirement. IF UM does not file a patent application, Company will do so upon UM’s request. Promptly after filing of any patent application related to Patent Rights, UM Improvements or Joint Improvements, UM and Company will confer in good faith to determine inventorship of the intellectual property described in the patent application.”

 

5.       Article 4 of the Agreement is amended by the addition of the following Section 4.06:

 

4.06Company will file, prosecute and maintain any patent applications and issued patents related to Patent Rights, UM Improvements and Joint Improvements pursuant to the terms and conditions of Section 7 of this Agreement.

 

6.       Article 7 of the Agreement is deleted in its entirety and replaced with the following Article 7:

 

“ARTICLE 7. PATENT PROSECUTION AND PUBLICATIONS

 

7.01     (a)       UM is responsible for filing and prosecuting patent applications for the Patent Rights and UM Improvements through November 30, 2005; Company is responsible for filing any patent applications for the Patent Rights and UM Improvements on and after December 1, 2005, subject to UM’s continuing ability to file provisional applications on UM Improvements and to withdraw from Company the responsibility to file and prosecute applications relating to UM Improvements (see 7.01(g)). Company is responsible for filing and prosecuting any patent applications for Joint Improvements unless Company and UM agree in writing that UM will assume such responsibility for any or all of Joint Improvements. Company is responsible for the filing, prosecution, and maintenance of patent applications for Company Improvements.

 

 55 

 

 

(b)       The scope of patent coverage within Patent Rights, UM Improvements, or Joint Improvements will not be significantly modified or limited, and the identification of inventors will not be modified, by the party responsible for filing patent applications without prior approval of the other party. If approval is requested by notice in writing, and is neither given nor denied in writing within 10 business days after the date notice is received, approval will be deemed given.

 

(c)       UM will invoice Company for Patent Expenses incurred by UM. Company will pay the invoice in full to UM within 30 days after the date of UM’s invoice. Company’s failure to pay an invoice on time will result in interest charges in accordance with Section 5.10 as well as loss of input into patenting decisions until such time as Company pays all outstanding invoices for Patent Expenses and accrued interest. Additionally, Company’s failure to pay an invoice and accrued interest within 90 days after date of invoice will result in termination of Company’s option rights under Section 3.09. Fees incurred by Company for patent action are Company’s responsibility.

 

(d)       Further, with respect to Patent Rights and UM Improvements, and with respect to the filing and prosecution of foreign patent applications specified by Company or filed by Company in accordance with Section 7.04, Company will pre-pay or directly pay charges and fees, including attorneys’ fees, or will reimburse UM for those charges and fees, at UM’s option, if such charges and fees were incurred prior to December 1, 2005, result from instructions given by UM prior to December 1, 2005, or otherwise were incurred by UM as a result of agreement with Company or pursuant to the terms of this Agreement.

 

(e)       Company will choose outside patent counsel subject to UM’s approval, which approval must not be withheld or delayed unreasonably. If UM has not approved or disapproved patent counsel within 10 business days of notice of a request for approval, UM’s approval shall be deemed given. Fees incurred by Company for patent action are Company’s sole responsibility.

 

(f)       If Company chooses not to file a patent application for a Patent Rights, a UM Improvement or a Joint Improvement, or chooses to abandon a patent application or an issued patent for any or all of Patent Rights, a UM Improvement or a Joint Improvement, it will give UM 30 days prior notice, and UM may file, prosecute or maintain the patent application or issued patent at its own expense if it chooses. Company will act in good faith to maintain and meet all deadlines occurring during the 30 day period. Company’s license of the Patent Rights or UM’s interest in the UM Improvement or Joint Improvement will terminate as of the date Company gives notice of its decision.

 

 56 

 

 

(g)       If UM and Company do not agree on actions relating to scope of patent coverage for any of Patent Rights, UM Improvements or Joint Improvements, then UM may terminate immediately Company’s right to prosecute the patent application(s) involved, and in such case UM may continue prosecution, using its own, independent counsel. Patent Expenses incurred under this paragraph for the patent application or issued patent involved shall be paid by Company unless Company notifies UM that Company chooses to terminate its license of the Patent Rights, UM Improvements or Joint Improvements involved.

 

(h)       For purposes of this Agreement, all UM Personnel or Company Personnel who are considered inventors of an Improvement under United States patent law will be listed as inventors of that Improvement. Only inventorship under U.S. law will be considered in determining whether an Improvement is a Company Improvement, Joint Improvement or UM Improvement. The Parties recognize that the patent laws of countries where patent applications are filed may follow rules of inventorship that differ from U.S. patent law. If the parties do not agree as to inventorship, the matter will be submitted to patent counsel acceptable to both parties for binding resolution. The party prosecuting the application in question will designate counsel to advise the parties. The other party may reject this designation by notice given within 10 days after receipt of the proposal. This notice will include two proposed alternative counsel. The first party will choose one of the two, and the parties will use that counsel. Costs associated with evaluation of inventorship will be divided equally between the parties.

 

7.02   (a)      If Company does not license UM Improvements or UM’s Interest in Joint Improvements, then Company will have no obligation under Section 7.01 to file or prosecute a patent application for the UM Improvements or Joint Improvements, or under Section 3.09(a) to pay Patent Expenses related to the UM Improvements or Joint Improvements incurred by UM for patent filing and prosecution activities occurring more than 60 days after Company’s option is terminated or expires as provided in Section 3.09. UM will act in good faith to minimize the Patent Expenses incurred between receipt of notice and the end of the 60 day period. If Company is responsible for prosecution or maintenance of the patent applications for UM Improvements or Joint Improvements involved, then Company will act in good faith to maintain the patent applications and meet all deadlines occurring during the 60-day period.

 

(b)      If this Agreement is terminated for any reason other than expiration in accordance with Section 11.01, Company will have no obligation to pay Patent Expenses related to Patent Rights or UM Improvements incurred by UM for patent filing and prosecution activities occurring more than 60 days after termination, and no obligation to pursue patent applications related to Patent Rights or UM Improvements and pay related Patent Expenses for more than 60 days after termination. UM will act in good faith to minimize the Patent Expenses it incurs between receipt of notice of termination and the end of the 60 day period.

 

7.03      Company and UM will cooperate to limit the Patent Expenses while making reasonable efforts to have the Patent Rights cover all items of commercial interest and importance. Company and UM will cooperate to define the scope and content of U.S. and foreign patent applications to be filed under Patent Rights, UM Improvements and Joint Improvements. Company will give UM reasonable opportunity to advise Company and patent counsel with respect to patent applications prosecuted by Company pursuant to this Agreement. The parties will cooperate with each other in the prosecution, filing, and maintenance of their respective patent applications covering Patent Rights. Company will advise UM promptly as to all material developments with respect to the applications. Copies of all papers received and filed by Company in connection with prosecution of applications will be provided promptly to UM to enable it to advise Company thereon.

 

 57 

 

 

7.04       (a)      UM has disclosed to Company or Company has disclosed to UM the patent applications and patents in effect for the Patent Rights listed in Exhibit A-1. With respect to patent application Serial Numbers [***] , or further patent applications related to invention reports listed in Exhibit B, or UM Improvements, Company will file patent applications in [***], and additional countries chosen by Company. If Company gives at least 60 days prior written notice to UM, Company may elect to discontinue patent prosecution and support for Patent Expenses in any country other than [***]. Company will be responsible for Patent Expenses incurred in that 60 day period with respect to the country or countries where Company is ceasing support. From and after UM’s receipt of Company’s notice, Company’s exclusive rights in Patent Rights and UM Rights in Improvements will become non-exclusive with respect to the country or countries where Company is ceasing support, and Company will execute such documents as reasonably may be requested by UM to confirm conversion of Company’s rights.

 

(b)    UM may elect to file and prosecute patent applications, solely at its own expense, in foreign countries not listed in Section 7.04(a) or not chosen by Company. If UM so elects, Company will have no right to approve UM’s patent counsel, no license rights with respect to Patent Rights and UM Improvements in those countries, and no option rights with respect thereto in those countries, unless otherwise agreed to by the parties in writing.

 

7.05       In order to preserve the ability to secure patents or equivalent foreign protection for Patent Rights, UM Improvements and Joint Improvements, UM will request that UM Personnel not disseminate or publish any results or otherwise publicly disclose the results of research performed by UM Personnel relating to the Patent Rights within the Licensed Field and subject to the license(s) granted to Company under this Agreement unless any materials containing those results are first submitted to UM and, by UM, to Company, for review, comment, and consideration of appropriate patent action. UM will inform UM Personnel working with Patent Rights that they are required to submit materials relating to a planned written publication or other public disclosure to UM for review at least 90 days prior to the date of the planned submission for written publication or other disclosure. UM will promptly advise Company of any proposed publications or public disclosures reported to UM and will furnish Company a copy of the proposed publication or public disclosure as soon as submitted to UM. Company will advise UM within 30 days after Company’s receipt of the materials whether patent applications will be filed by Company in connection with obtaining or maintaining Patent Rights related to the materials submitted by UM. UM will advise UM Personnel that they must delay written publication or public disclosure up to a maximum of 60 days after the date Company receives the materials to enable Company to file, at Company’s expense, any patent applications Company chooses to file.”

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 58 

 

 

7.       The parties have caused this Amendment to be executed by their duly authorized officers on the dates indicated below.

  

UNIVERSITY OF MARYLAND,      
BALTIMORE      
         
BY: /s/ David J. Ramsay   WITNESS   /s/ Dorothy C. Trueheart
  David J. Ramsay, D.M., D.Phil.       
  President      
         
Date: 12/9/05   Date:   12/9/05
         
ALBA THERAPEUTICS CORPORATION      
         
BY: /s/ Blake M. Paterson   WITNESS   /s/ [illegible]
  Blake M. Paterson, MD     Corporate Secretary
  President and CEO      
         
Date: 12/1/2005   Date:   12/1/05

 

 59 

 

 

SECOND AMENDMENT

to

RESTATED

MASTER LICENSE AGREEMENT

 

effective July 1, 2005

between

UNIVERSITY OF MARYLAND, BALTIMORE

and

ALBA THERAPEUTICS CORPORATION

 

This Second Amendment (“Second Amendment”) to the Restated Master License Agreement effective July 1, 2005, is made by and between the University of Maryland, Baltimore, a constituent institution of the University System of Maryland, a public corporation and an instrumentality of the State of Maryland, having an address at 520 West Lombard Street, East Hall, Room 200, Baltimore, Maryland 21201 (“UM”), and Alba Therapeutics Corporation, a Delaware corporation, with its principal place of business at 800 West Baltimore St., Suite 400, Baltimore, MD 21201 (“Company”).

 

RECITALS

 

A.UM and Company are parties to the Agreement, as amended by the First Amendment to Restated Master License Agreement effective December 1, 2005. The Agreement, as amended by the First Amendment, is referred to as “the Agreement” in these Recitals.

 

B.UM has disclosed to Company [***] inventions that are “UM Improvements” under the Agreement, and Company has exercised its option, under the Agreement, to license the inventions. The [***] UM Improvements are: [***].

 

C.The Parties have agreed to amend the Agreement to include the UM Improvements identified in the preceding paragraph as licensed Patent Rights, and to state the consideration due UM for this change in the Agreement.

 

D.The Parties have recognized that it is necessary and appropriate to confirm license to Company, under the Agreement, of UM’s joint undivided interest in U.S. Patent Appln. [***].

 

E.UM has disclosed to Company certain Invention Reports that are not reflected in Exhibit B to the Agreement, and the parties have agreed to add those Invention Reports to Exhibit B, acknowledging that the patent applications and patents based on those Invention Reports will be Patent Rights as defined in the Agreement.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 60 

 

 

NOW, THEREFORE, in consideration of the mutual promises set forth in the Agreement, and in this Second Amendment, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

Amendments

 

1.       This Second Amendment is effective February 15, 2007. On and after that date, the term “Agreement” as used in the Restated Master License Agreement or either amendment of it shall mean the Restated Master Licensed Agreement as amended by both the First Amendment and this Second Amendment.

 

2.       Exhibit A-1 is amended by addition of the following descriptions of Patent Rights:

 

[***]

 

3.       Exhibit B of the Agreement is deleted in its entirety and replaced with the attached list of invention reports captioned “Exhibit B — Amended 2/15/2007”.

 

4.       Section 4.01(d)5. is deleted in its entirety and replaced with the following Section 4.01(d)5.:

 

[***]

 

5.       Section 5.01(a) is amended by the addition of the following language as a new paragraph 4:

 

[***]

 

6.       Section 5.12 is amended by the addition of the following language as a new subsection 5.12(g):

 

“(g) For and in consideration of (i) the grant of license to the UM Improvements identified in paragraph 2 of the Second Amendment of this Agreement, and added to Exhibit A-1, and (ii) the commitment of UMB to license under the Agreement, for no additional consideration, Patent Rights based upon UM Improvements identified in paragraph 3 of the Second Amendment, Company will pay to UM [***]. This payment is due no later that [***].”

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 61 

 

 

7.     In Section 19.05, the notice addresses are deleted in their entirety and replaced with the following addresses:

 

If to UM:Address for postal mail ONLY:

Director, Technology Commercialization

Office of Research and Development

University of Maryland, Baltimore

660 West Redwood Street, Room 021

Baltimore, Maryland 21201-1541

 

Address for other forms of communication permitted by this Agreement:

Director, Technology Commercialization

Office of Research and Development

University of Maryland, Baltimore

110 South Paca Street

Fourth Floor

Baltimore, Mary land 21201

 

Copy to:University Counsel

University of Maryland Baltimore

520 West Lombard Street

East Hall, Suite 200

Baltimore, Maryland 21201-1627

 

If to Company:Chief Executive Officer

Alba Therapeutics Corporation

800 West Baltimore Street

Suite 400

Baltimore, MD 21201

 

Copy to:General Counsel

Alba Therapeutics Corporation

800 West Baltimore Street

Suite 400

Baltimore, MD 21201

 

IN WITNESS WHEREOF, the Parties hereto have caused this Second Amendment to be executed by their duly authorized officers.

 

UNIVERSITY OF MARYLAND,      
BALTIMORE      
         
BY:   /s/ David J. Ramsay   WITNESS   /s/ Dorothy C. Trueheart
  David J. Ramsay, D.M., D.Phil.      
  President      
         
Date:   3/14/07   Date:   3/14/07
         
ALBA THERAPEUTICS CORPORATION      
         
BY: /s/ Blake M. Paterson   WITNESS /s/ Teresa Wenhauer
  Blake M. Paterson, MD      
  President and CEO      
         
Date:   13 March 2007   Date:    3/13/07

 

 62 

 

 

EXHIBIT B AMENDED 2-15-2007

 

INVENTION REPORTS

 

[***]

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 63 

 

 

THIRD AMENDMENT

to

RESTATED

MASTER LICENSE AGREEMENT

 

effective July 1, 2005

between

UNIVERSITY OF MARYLAND, BALTIMORE

and

ALBA THERAPEUTICS CORPORATION

 

This Third Amendment (“Third Amendment”) to the Restated Master License Agreement effective July 1, 2005, as amended, is made by and between the UNIVERSITY OF MARYLAND, BALTIMORE, a constituent institution of the University System of Maryland, a public corporation and an instrumentality of the State of Maryland (“UM”), and ALBA THERAPEUTICS CORPORATION, a Delaware corporation (“Company”).

 

RECITALS

 

A.       UM and Company are parties to the Restated Master License Agreement effective July 1, 2005, as amended by the First Amendment effective December 1, 2005, and by the Second Amendment effective February 15, 2007. The Restated Master License Agreement, as amended, is referred herein to as the “Agreement.” Company and UM have agreed to amend the Agreement as set forth herein.

 

B.       An invention has been made jointly by Company and UMB known as [***] . The parties agree that the invention constitutes a “Joint Improvement” under the Agreement. Company has exercised its option under the Agreement to license UM’s interest in the invention, on the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the mutual promises set forth in the Agreement, and in this Third Amendment, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

Amendments

 

1.       The effective date of this Third Amendment shall be the date of the last signature on the signature page. On and after that date, the term “Agreement” as used in the Restated Master License Agreement or either amendment of it shall mean the Restated Master Licensed Agreement as amended by the First Amendment, the Second Amendment, and this Third Amendment.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 64 

 

 

2.       Exhibit A-1 is amended by addition of the following description of Patent Rights:

 

[***]

 

3.       Section 4.01(d)(3) is deleted in its entirety and replaced with the following:

 

3.       Left-intentionally blank.

 

4.       Section 4.01(d)(6) is deleted in its entirety and replaced with the following:

 

[***]

 

5.       Section 5.12 is amended by addition of the following language as a new subsection 5.12(h):

“(h) For and in consideration of the grant of an exclusive license to UM’s rights in the Joint Improvement identified in paragraph 2 of this Third Amendment, and added to Exhibit A-1, Company will pay to UM [***]. This payment is due [***].”

 

6.       Article 5 of the Agreement is further amended by the addition of the following Section 5.13:

 

5.13 In consideration of UM’s agreement to amend the Agreement as set forth in this Third Amendment, Company agrees to pay the following:

 

(a) [***]

 

(b) [***]

 

7.       Section 11.02 is deleted in its entirety and replaced with the following:

 

11.02    (a)        Should Company fail to pay UM any sum due and payable under this Agreement, UM may terminate this Agreement on 90 days written notice, unless Company pays UM within the 90 day period all delinquent sums together with interest due and unpaid. Upon expiration of the 90 day period, if Company has not paid all sums and interest due and payable, the rights, privileges, and licenses granted under this Agreement terminate.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 65 

 

 

(b)       Notwithstanding the foregoing, if the delinquent sum and/or interest is only with respect to the [***] fee payable under Section 5.13(b), then UM may only terminate the rights, privileges, and licenses granted under this Agreement with respect to [***], and the other rights, privileges, and licenses granted under this Agreement of the Agreement shall remain in full force and effect.

 

8.       In Section 19.05, the notice addresses are deleted in their entirety and replaced with the following addresses:

 

If to UM:Assistant Vice President, CVIP

Office of Research and Development

University of Maryland, Baltimore

620 West Lexington Street, 4th Floor

Baltimore, Maryland 21201

 

Copy to:University Counsel

University of Maryland Baltimore

520 West Lombard Street

East Hall, Suite 200

Baltimore, Maryland 21201-1627

 

If to Company:Chief Executive Officer

 

Alba Therapeutics Corporation

800 West Baltimore Street, Suite 400

Baltimore, Maryland 21201

 

Copy to:General Counsel

Alba Therapeutics Corporation

800 West Baltimore Street, Suite 400

Baltimore, Maryland 21201

 

9.       Except as specifically modified in this Third Amendment, all terms and conditions of the Agreement shall remain in full force and effect.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 66 

 

 

IN WITNESS WHEREOF, the Parties hereto have caused this Third Amendment to be executed by their duly authorized officers.

 

WITNESS:   UNIVERSITY OF MARYLAND, BALTIMORE  
          
/s/ [illegible]   By: /s/ David J. Ramsay (SEAL)
      David J. Ramsay, D.M., D.Phil.  
      President  
         
    Date: December 2, 2008  
         
ATTEST:   ALBA THERAPEUTICS CORPORATION  
         
    By: /s/ Bruce A. Peacock (SEAL)
      Bruce A. Peacock  
      President and CEO  
         
    Date: December 1, 2008  

 

 67 

 

 

EXHIBIT B

 

PATENT RIGHTS

 

[***]

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission.

Omitted portions have been filed separately with the Commission.

 

 68 

 

 

Exhibit 10.2

 

LICENSE AGREEMENT


effective February 26, 2016


between


ALBA THERAPEUTICS CORPORATION


and


INNOVATE BIOPHARMACEUTICALS, INC.

 

TABLE OF CONTENTS

 

ARTICLE 1. BACKGROUND   1
ARTICLE 2. DEFINITIONS   1
ARTICLE 3. GRANT OF LICENSE; Assignment of Contracts; OPTION   3
ARTICLE 4. COMPANY RESPONSIBILITIES   5
ARTICLE 5. CONSIDERATION: PAYMENTS   6
ARTICLE 6. DATA   8
ARTICLE 7. PATENT PROSECUTION   8
ARTICLE 8. CONFIDENTIALITY   8
ARTICLE 9. [INTENTIONALLY OMITTED]   10
ARTICLE 10. INFRINGEMENT   10
ARTICLE 11. TERM AND TERMINATION   11
ARTICLE 12. ASSIGNABILITY   12
ARTICLE 13. APPLICABLE LAW; WAIVER   12
ARTICLE 14. INTEGRATION AND INTERPRETATION   13
ARTICLE 15. REPRESENTATIONS AND WARRANTIES   13
ARTICLE 16. CLAIMS, INDEMNIFICATION AND INSURANCE   14
ARTICLE 17. ADVERTISING AND PUBLICITY   15
ARTICLE 18. DISPUTE RESOLUTION   16
ARTICLE 19. MISCELLANEOUS   16

 

EXHIBIT A COPYRIGHTS
EXHIBIT A-1 INVENTORY
EXHIBIT B LICENSED PATENTS
EXHIBIT C UMD SUBLICENSE
EXHIBIT D   TRANSFERRED CONTRACTS
EXHIBIT E   DEVELOPMENT PLAN

 

-i

 

  

LICENSE AGREEMENT

 

This License Agreement (“Agreement”) effective as of February 26, 2016 (“Effective Date”) is made by and between Alba Therapeutics Corporation, a Delaware corporation (“Alba”), having an address at 100 International Drive, 23rd Floor, Baltimore, MD 21202, and Innovate Biopharmaceuticals, Inc., a Delaware corporation, having an address at 8601 Six Forks Road, Suite 400, Raleigh, NC 27615 (“Company”).

 

ARTICLE 1. BACKGROUND

 

1.01       Alba and Company are parties to an Option Agreement, dated October 7, 2015, as amended, in which Alba granted an exclusive option to Company for the purchase of Alba’s assets relating to Larazotide acetate and related compounds, which option was exercised by Company on January 15, 2016.

 

1.02       In lieu of entering into an asset purchase agreement, Alba and Company elected to enter into a license arrangement with respect to Alba’s Assets (as defined below) and an accompanying sublicense arrangement (in the form of Exhibit C) with respect to that certain Restated Master License Agreement, dated as of July 1, 2005, by and between Alba and the University of Maryland, Baltimore.

 

1.03       In furtherance of such license arrangement and a potential eventual asset transfer, Alba desires to grant, and the Company desires to accept, an exclusive license to the Assets, upon the terms and subject to the conditions set forth in this Agreement.

 

1.04       Subject to certain conditions set forth herein, upon completion by the Company of certain clinical milestones Alba desires to sell, and the Company desires to purchase, the Assets pursuant to an asset purchase agreement incorporating terms mutually agreed upon herein.

 

ARTICLE 2. DEFINITIONS

 

In this Agreement, the following terms have the meanings set forth in this Article.

 

2.01       “Affiliate”: Any entity that directly or indirectly controls, is controlled by, or is under common control with Company. “Control” means the right to exercise more than 50% of the voting rights of a controlled corporation, limited liability company, or partnership, or the power to direct or cause the direction of the management or policies of any other controlled entity.

 

2.02       “Assets”: Intellectual Property and all other assets owned or controlled by Alba primarily related to the Licensed Product, including, without limitation, all inventory (including inventory identified on Exhibit A-1), contracts, books, records, files, regulatory filings and data related to the Licensed Product.

 

2.03       “CeD PRO Instrument”: The Celiac Disease Patient Reported Outcome Instrument developed by Alba, including User Manual and Evidence Dossier, and any translations of the foregoing.

 

2.04       “Commercially Reasonably Efforts”: With respect to the performance of development, manufacturing or commercialization activities with respect to the Licensed Products by Company or its Affiliates, the expenditure of efforts and resources consistent with the usual and commercially reasonable practice of Company in the exercise of its reasonable business discretion (but no less efforts and resources than a similarly-situated company would reasonably be expected to expend), with respect to development, manufacturing or commercialization of other products that are of similar market potential at a similar stage in their development or product life.

 

 1 

 

  

2.05       “Confidential Information”: Information relating to the subject matter of the Licensed Product or Patent Rights which has not been made public and includes, without limitation, any documents, drawings, sketches, models, designs, data, memoranda, tapes, records, formulae and algorithms, given orally, in hard copy form, or in electronic form, which Company receives from Alba, or Alba receives from Company.

 

2.06       “Copyrights & Trademarks”: The copyrights and trademarks listed on Exhibit A hereto.

 

2.07        “First Commercial Sale”: The initial transfer of a Licensed Product for compensation by Company, an Affiliate or a Sublicensee to a Third Party. First Commercial Sale shall not include any transfer or disposition of a sample or for charitable purposes (including, without limitation, pursuant to an early access, compassionate use, named patient, indigent access or patient assistance program), or for preclinical, clinical or regulatory purposes.

 

2.08       “Improvement”: An invention or discovery by Company directly related to the Patent Rights in the Licensed Field which is or may be patentable or otherwise protected under law, and is reasonably necessary for the practice of the Patent Rights by Alba or a third party.

 

2.09       “Intellectual Property”: Patent Rights, Copyrights & Trademarks and Know-How.

 

2.10       “Know-How”: All data, results, improvements, processes, methods, protocols, formulas, inventions, trade-secrets and other information, patentable or otherwise, which may include (but is not limited to) scientific, research and development, manufacturing know-how, pre-clinical, clinical, regulatory, manufacturing, safety, marketing, financial and commercial information or data which is owned or controlled by Alba and are necessary or useful to the research, development and/or commercialization of the Licensed Product.

 

2.11       “Licensed Field”: All fields.

 

2.12       “Licensed Product(s)”: Any pharmaceutical composition containing, consisting of, or comprising: (i) [***]; (ii) larazotide, including any salt or ester thereof including larazotide acetate; and (iii) to the extent not contemplated by the preceding clauses (i)-(ii), a compound for treating or preventing a condition, including but not limited to Celiac Disease, or its use in treatment or prevention of a condition, including but not limited to Celiac Disease, where the compound or method of use is covered by an issued Licensed Patent

 

2.13       “MAA”: A marketing authorization application filed with the European Medicines Agency or any successor agency thereto (“EMA) to obtain regulatory approval for a new drug under the centralized EMA filing procedure or, if the centralized EMA filing procedure is not used, filed to obtain regulatory approval for a new drug using applicable procedures in accordance with applicable law in any European Union country.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

 2 

 

  

2.14       “NDA”: A New Drug Application for purposes of the United States Federal Food, Drug, and Cosmetic Act, as amended from time to time, and the rules, regulations, guidelines, guidances and requirements promulgated thereunder, as may be in effect.

 

2.15       “Net Sales”: The gross sales revenues and fees invoiced by Company, an Affiliate or a Sublicensee to independent Third Party purchasers who are not Affiliates, for the sale of Licensed Products, less the sum of the following: (a) credits, allowances, discounts and rebates to, and charge backs from the account of, such Third Party purchasers for spoiled, damaged, out-dated, rejected or returned Licensed Products; (b) actual freight and insurance costs incurred in transporting such Licensed Products to such Third Party purchasers; (c) cash, quantity and trade discounts and other price reductions; (d) sales, use, value-added and other direct taxes incurred (which term shall include any annual fees due under Section 9008 of the United States Patient Protection and Affordable Care Act of 2010 allocable to such Licensed Product); (e) customs duties, surcharges and other governmental charges incurred in connection with the exportation or importation of such Licensed Products; and (f) the cost to Third Party purchasers of the devices for dispensing or administering such Licensed Products, as well as diluents or similar materials which accompany such Licensed Products as they are sold.

 

Net Sales do not include any resales of Licensed Product after its sale by Company, an Affiliate or a Sublicensee to a Third Party purchaser. In computing Net Sales, (1) no deductions from gross revenues and fees will be made for commissions paid to individuals, whether they be with independent sales agencies or regularly employed on the payroll by Company, its Affiliate(s) or Sublicensee(s), or for cost of collections, and (2) Licensed Products will be considered sold when invoiced.

 

2.16       “Patent Rights”: Alba’s interest in the patents and patent applications related to the Licensed Product, as further itemized in Exhibit B, including (i) patents and patents that may issue from the applications, (ii) all continuations, continuations-in-part, divisions, reissues, re-examinations or extensions of the foregoing, and (iii) and foreign counterparts of any of the foregoing.

 

2.17       “Phase 3 Trial”: A controlled clinical study of a Licensed Product that is prospectively designed to demonstrate with statistical significance the efficacy and safety of the Licensed Product for use in a particular indication and that is sufficient to obtain regulatory approval by the FDA to market the Licensed Product in such indication.

 

2.18        “Sublicensee”: A person or entity, including an Affiliate, to which Company sublicenses all or some of the Patent Rights or Assets.

 

2.19       “Third Party”: Any entity or person other than Alba, Company, an Affiliate or a Sublicensee.

 

2.20       “Transferred IND” shall mean the Investigational New Drug Application (IND# 70,568) for larazotide acetate submitted on September 11, 2005 (Serial Number 0000).

 

ARTICLE 3. GRANT OF LICENSE; Assignment of Contracts; OPTION

 

3.01       Alba hereby grants to Company, and Company accepts, an exclusive worldwide license under the Assets, including the Patent Rights, to conduct research and development and to make, have made, use, lease, offer to sell, sell and import the Licensed Products within the Licensed Field, anywhere in the world, for the term of this Agreement; provided, however, that with respect to the CeD PRO Instrument, such license shall be exclusive, subject only to licenses granted prior to the Effective Date which licenses are included in the Transferred Contracts.

 

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3.02       During the term of this Agreement, Company may transfer its rights to an Affiliate consistent with this Agreement, provided Company is responsible for the obligations of its Affiliate relevant to this Agreement, including the payment of milestones, whether or not paid to Company by its Affiliate.

 

3.03       During the term of this Agreement, Company may grant sublicenses consistent with this Agreement, provided Company is responsible for the obligations of its Sublicensees relevant to this Agreement, including the payment of milestones, whether or not paid to Company by its Sublicensees, and provided further that in no event shall Company grant such a sublicense without first obtaining Alba’s written consent, which consent shall not be unreasonably withheld. For clarification, no consent requirement shall be applicable after execution of the Asset Purchase Agreement.

 

3.04       Company will identify its Affiliates and its Sublicensees under this Agreement to Alba by name, address and field of sublicense (both as to geography and subject matter), and any other reasonable information necessary for Alba to conduct a meaningful audit under Section 9.01 below, except that Company reserves the right to redact any and all Confidential Information that is nonessential to any such Alba audit.

 

3.05       Alba hereby assigns to Company, and Company hereby assumes, Alba’s rights and all obligations first arising after the Effective Date under (i) the contracts identified on Exhibit D attached hereto (the “Transferred Contracts”) and (ii) the Transferred IND, and Alba shall have no liability thereunder for obligations first arising from and after the Effective Date, and the Company hereby agrees to indemnify Alba against any and all such liabilities thereunder; provided that, in the event this Agreement terminates for any reason, Company shall execute any and all documents necessary to assign back to Alba, and Alba shall assume back from Company, Alba’s rights and obligations under the Transferred Contracts and the Transferred IND. Company shall not transfer, assign, modify, sublicense or terminate the Transferred Contracts or the Transferred IND without first obtaining Alba’s written consent, which consent shall not be unreasonably withheld; provided, however, that Company may assign the Transferred Contracts and the Transferred IND in connection with an assignment of this Agreement pursuant to Article 12; and provided further that such assignments be subject to Alba’s reversion rights as set forth in the immediately preceding sentence.

 

3.06        (a)      Upon payment by Company of the first Milestone Payment (as defined in Section 5.01(b) below), and provided that Company has delivered to Alba reasonable evidence of sufficient financial resources necessary to complete Company’s Phase 3 Trial in accordance with the Development Plan (as defined below), Company shall have an exclusive option to purchase (the “Company Option to Purchase”) the Assets from Alba pursuant to the terms of a customary asset purchase agreement (an “Asset Purchase Agreement”), exercisable by Company’s delivery to Alba, on or before the first (1st) anniversary of such first Milestone Payment, of a written notice informing Alba that Company is exercising its Company Option to Purchase (such notice, the “Company Exercise Notice”).

 

(b)       During the term of this Agreement, Alba shall have the right to sell (the “Alba Option to Sell”) the Assets to Company pursuant to the terms of an Asset Purchase Agreement, exercisable by Alba’s delivery to Company of a written notice informing the Company that Alba is exercising its Alba Option to Sell (such notice, the “Alba Exercise Notice”).

 

(c)       Upon either delivery by Company of the Company Exercise Notice or by Alba of the Alba Exercise Notice, Company and Alba agree to negotiate in good faith and execute an Asset Purchase Agreement within ninety (90) days following such delivery (the “Negotiation Period”). Should the Parties fail to enter into an Asset Purchase Agreement before the end of the Negotiation Period following Company’s delivery of the Company Exercise Notice, this License Agreement will remain in effect.

 

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(d)          Notwithstanding the forgoing, such Asset Purchase Agreement shall include at least the following provisions:

 

1.       a purchase price payable by Company to Alba for the purchase of the Assets that consists [***].

 

2.       indemnification provisions substantially similar to the indemnification provisions set forth in this Agreement, subject to appropriate escrows, baskets and caps consistent with an asset purchase transaction;

 

3.       the same diligence requirements set forth in this Agreement;

 

4.       reporting provisions whereby Company shall provide reasonable updates regarding product development, clinical and regulatory matters sufficient to enable Alba to satisfy its obligations to its stockholders; and

 

5.       for [***] ([***]) years following the effective date of the Asset Purchase Agreement, a covenant whereby Alba agrees it shall not directly or indirectly develop or commercialize any product that competes against the Licensed Product.

 

ARTICLE 4. COMPANY RESPONSIBILITIES

 

4.01       Company will use its Commercially Reasonable Efforts to bring one or more Licensed Products to market in accordance with the Development Plan (as defined below), subject in all cases to the following:

 

(a)       Company has delivered to Alba prior to execution of this Agreement a confidential development plan (the “Development Plan”) with respect to the development, manufacture and commercialization of the Licensed Product, a copy of which is attached hereto as Exhibit E. The Development Plan, and any reports or other information related thereto delivered by Company to Alba pursuant to Section 5.02(b) below, will be treated as Confidential Information by Alba.

 

(b)       To the extent that the Company’s responsibility for any aspect of the Development Plan is made the responsibility of an Affiliate or Sublicensee, Company retains its obligations to Alba as to this Article as if Company is solely responsible for that aspect.

 

4.02       Company agrees that any Licensed Products for use or sale in the United States will be manufactured substantially in the United States in accordance with the requirements of 35 U.S.C. Section 204 and 37 CFR 401.14(a)(i). In the event Company determines that compliance with this obligation is commercially impracticable, Company agrees that it will apply for a waiver of such obligation from the United States Government. In agreements with Affiliates and Sublicensees, Company will pass through this obligation. Company will use its best efforts to enforce this obligation and will promptly advise Alba of any known violations, or charges of violations, of this obligation.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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4.03       The use and disclosure of technical information acquired pursuant to this Agreement and the exercise of Patent Rights granted by this Agreement are subject to the export, assets, and financial control regulations of the United States of America, including, without limitation, restrictions under regulations of the United States that may be applicable to direct or indirect re-exportation of such technical information or of equipment, products, or services directly produced by use of such technical information. Company is responsible for taking any steps necessary to comply with such regulations.

 

ARTICLE 5. CONSIDERATION: PAYMENTS

 

In consideration of the license granted to Company:

 

5.01        (a)      At execution of this Agreement, Company will pay to Alba a one-time, non-refundable license fee of Four Hundred Thousand Dollars ($400,000.00).

 

(b)       In addition, Company shall make each of the following payments to Alba (each, a “Milestone Payment”) upon the occurrence of each of the following corresponding events (each, a “Milestone Trigger”):

 

  Milestone Payment Milestone Trigger
1. $[***] Dosing of first patient in first Phase 3 Trial
2. $[***] First Acceptance of an NDA or MAA for a Licensed  Product
3. $[***] First Approval of an NDA or MMA for a Licensed Product
4. $2,500,000.00 First Commercial Sale for a Licensed Product
5. $[***] First instance of annual Net Sales of Licensed Products in any calendar year exceeding $100,000,000.00
6. $[***] First instance of annual Net Sales of Licensed Products in any calendar year exceeding $500,000,000.00
7. $[***] First instance of annual Net Sales of Licensed Products in any calendar year exceeding $1,000,000,000.00
8. $[***] First instance of annual Net Sales of Licensed Products in any calendar year exceeding $1,500,000,000.00

 

(c)       For the avoidance of doubt, if Company achieves more than one of the Milestone Triggers in the same calendar year, then Company shall, at the time prescribed in this Article 5, pay to Alba the applicable Milestone Payments for all of such Milestone Triggers achieved in such calendar year. For example, if Net Sales for a calendar year are $500,000,000.00 and Company has not previously paid to Alba the Milestone Payment applicable to Milestone Trigger 5 (but has previously paid to Alba the Milestone Payments applicable to Milestone Triggers 1, 2, 3 and 4), then Company shall pay $[***] to Alba (the sum of the Milestone Payments applicable to Milestone Triggers 5 and 6).

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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5.02       From and after the Effective Date:

 

(a)       Company shall use its Commercially Reasonable Efforts to cause each Milestone Trigger to occur as promptly as practicable and shall not take any action or omit to take any action with the intent of circumventing or delaying any Milestone Trigger or Company’s obligations set forth in this Article V.

 

(b)       No later than forty five (45) days after the end of each calendar quarter (until Milestone Payment #3 has been made), Company shall provide Alba with a written report for such calendar quarter (each, a “Milestone Report”), in each case, setting forth in reasonable detail all material development, manufacturing and commercialization activities undertaken by or on behalf of Company, during such quarter with respect to the Licensed Product, as well as summary results of all pre-clinical or clinical studies related to Licensed Product completed during such quarter, including a review of activities as measured against the Development Plan, and shall otherwise keep Alba reasonably informed as to its activities and the status of its efforts with respect to the achievement of the Milestone Triggers, including, until the occurrence of the first Milestone Trigger, updates on Company’s efforts to raise the capital necessary to accomplish the Development Plan. Company shall actively engage with Alba (including by making available Company’s most senior research and development employee) to answer any questions regarding any Milestone Report and to provide such additional information and documents as Alba may reasonably request with respect thereto.

 

(c)       If a Milestone Trigger has been achieved during a calendar quarter, the Milestone Report for such calendar quarter shall indicate such achievement.

 

(d)       Without limiting clause (b) above, Company shall (until all of the Milestone Payments have been made), upon at least ten (10) business days’ prior notice, permit an independent third party accounting firm reasonably acceptable to both parties reasonable access during normal business hours to examine such records at the facilities where such records are customarily kept, as may be necessary for the sole purpose of verifying the calculation and reporting of Net Sales. Such examination shall occur no more frequently than once each calendar year and shall be paid for by Alba, unless the auditor determines that Company undercalculated Net Sales by more than $[***], in which case such examination shall be paid for by Company. The independent accounting firm may only disclose to Alba (i) whether a Milestone Trigger has been achieved or (ii) that Company undercalculated Net Sales.

 

5.03        Company shall pay each Milestone Payment with respect to a Development Milestone Trigger to Alba within thirty (30) days after providing to Alba notice of the achievement of the applicable Milestone Trigger (whether in a Milestone Report or otherwise). Interest is due on any Milestone Payment payable to Alba under this Agreement. The interest rate is the prime rate plus [***] percent simple interest per annum accruing from the due date.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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ARTICLE 6. DATA

 

6.01       Nothing herein shall be construed to require either party to disclose or deliver to the other party any information or communication that is considered by the disclosing party to be protected by the attorney-client privilege, or is considered by the disclosing party to be attorney work product, without the express written consent of the disclosing party. In no event shall this clause be deemed to permit (i) Alba to withhold any pre-clinical or clinical data or (ii) Company to withhold any data or information required to be included in any Milestone Report prepared for, and delivered to, Alba pursuant to Section 5.02(b) above.

 

ARTICLE 7. PATENT PROSECUTION

 

7.01       Company, at company’s expense shall file, prosecute and maintain all patents and patent applications specified in Exhibit B. Company shall have control over all patent matters, provided however, that Company shall allow Alba an opportunity to comment and advise Company on decisions that diminish or limit the scope of any patent or application. If Company elects to abandon any patent application (except for purposes of filing a continuation application) or patent in any country, Company shall notify Alba in writing at least thirty (30) days prior to any filing or payment due date or any other deadline that requires action to avoid loss of rights and thereafter, Alba shall have the right to control the filing, prosecution, and/or maintenance of such patent application or patent in such country at its own expense. By written notification to Alba at least thirty (30) days in advance of any filing or response deadline, or fee due date, company may elect not to have a particular patent application maintained in any particular country or not to pay expenses associated with filing, prosecuting or maintaining a particular patent application or patent, provided that company pays for all costs incurred up to Alba’s receipt of such notification. Upon such notification, Alba may file, prosecute and/or maintain such patent applications or patent in such country at its own expense and for its own benefit, and any rights or license granted hereunder held by company, an affiliate or sublicensee relating to such patent application or patent in such country shall terminate.

 

ARTICLE 8. CONFIDENTIALITY

 

8.01       Knowingly or inadvertently, either party may disclose to the other certain Confidential Information. Disclosures by Alba are deemed to refer to disclosures by any Alba officers, directors, employees, consultants or agents. Disclosures by Company are deemed to refer to disclosures by Company officers, directors, employees, consultants or agents. Confidential Information may be disclosed only in accordance with the provisions of this Article.

 

8.02       Except as hereafter specifically authorized in writing by the disclosing party, the receiving party will not disclose or use the Confidential Information for a period of [***] years after the date of receipt of Confidential Information.

 

8.03       These obligations of non-disclosure and nonuse do not apply to any Confidential Information which the receiving party can demonstrate by reliable written evidence:

 

(a)       was generally available to the public at the time of disclosure to the receiving party; or

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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(b)       was already in the possession of the receiving party at the time of the disclosure, other than pursuant to a confidential disclosure agreement between the parties and not due to any unauthorized act by the receiving party; or

 

(c)       was developed by the receiving party prior to the disclosure; or

 

(d)       the receiving party is required by law to disclose.

 

8.04       These obligations of non-disclosure and nonuse will not continue to apply to any Confidential Information which the receiving party can demonstrate by reliable written evidence:

 

(a)       has become generally available to the public other than through a breach of this Agreement by the receiving party after disclosure;

 

(b)       has been acquired by the receiving party on a nonconfidential basis from any third party having a lawful right to disclose it to the receiving party; or

 

(c)       corresponds to information developed by the receiving party independent of and with no reliance upon the disclosing party’s Confidential Information.

 

8.05       Each party will use that level of care to prevent the use or disclosure of the other party’s Confidential Information as it exercises in protecting its own Confidential Information, which in no event will be less than a reasonable standard of care.

 

8.06       All Confidential Information will be clearly marked as confidential by the disclosing party and, if not in written or tangible form when disclosed, will be indicated as confidential upon disclosure and then summarized in writing and so marked as confidential within 30 days after disclosure to the receiving party.

 

8.07       Notwithstanding the foregoing, Company, its Affiliates and its Sublicensees are permitted to disclose and use the Confidential Information to the extent reasonably necessary to exercise Company’s license or sublicenses hereunder, or to comply with Federal reporting requirements, provided that any disclosure is made subject to written confidentiality restrictions consistent with those accepted by Company in this Agreement. During the Term and after execution of the Asset Purchase Agreement, any Confidential Information related to Licensed Product shall be deemed to constitute Confidential Information of Company.

 

8.08       Upon termination of this Agreement (unless terminated by virtue of execution of the Asset Purchase Agreement), (i) Company will return to Alba all material which is Confidential Information of Alba, together with all copies and other forms of reproduction, except that a single archive copy may be kept in Company’s legal files, and (ii) Alba will return to Company all material which is Confidential Information of Company, together with all copies and other forms of reproduction, except that a single archive copy may be kept in Alba’s legal files. Each party agrees that termination of this Agreement does not alter the [***] year obligation of confidentiality set forth in Section 8.02.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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ARTICLE 9. [INTENTIONALLY OMITTED]

 

ARTICLE 10. INFRINGEMENT

 

10.01       Alba and Company agree to notify each other promptly of each infringement or possible infringement of the Patent Rights of which either party becomes aware.

 

10.02       Company may (a) bring suit in its own name, at its own expense, and on its own behalf for infringement of presumably valid claims in the Patent Rights licensed to Company; (b) in any such suit, enjoin infringement and collect for its use damages, profits, and awards of whatever nature recoverable for such infringement; and (c) settle any claim or suit for infringement of the Patent Rights. Company may not compel Alba to initiate or join in any such suit for patent infringement. Company may request Alba to initiate or join in any such suit if necessary to avoid dismissal of the suit. If Alba is made a party to any such suit, Company will reimburse and indemnify Alba for any costs, expenses, or fees which Alba incurs as a result of its joinder. In all cases, Company agrees to keep Alba reasonably apprised of the status and progress of any litigation.

 

10.03       If an infringement action or a declaratory judgment action alleging invalidity or non-infringement of any of the Patent Rights is brought against Company or raised by way of counterclaim or affirmative defense in an infringement suit brought by Company under Section 10.02, Company may (a) defend the suit in its own name, at its own expense, and on its own behalf for presumably valid claims in the Patent Rights; (b) in any such suit, ultimately enjoin infringement and collect for its use, damages, profits, and awards of whatever nature recoverable for such infringement; and (c) settle any claim or suit for damages or a declaratory judgment involving the Patent Rights, including the granting of further licenses on sublicenses, provided that Company does not admit Alba’s infringement or concede invalidation of any Patent Rights, without Alba’s prior written consent, respectively. Alba consent will not be unreasonably withheld. Company may not compel Alba to initiate or join in any such suit. Company may request Alba to initiate or join in any such suit if necessary to avoid dismissal of the suit. If Alba is made a party to any such suit, Company will reimburse and indemnify Alba for any costs, expenses, or fees which it incurs as a result of its joinder. In all cases, Company agrees to keep Alba reasonably apprised of the status and progress of any litigation.

 

10.04       Company will not settle any action described in Section 10.02 or 10.03 without first notifying Alba. In any action under Sections 10.02 or 10.03, the expenses of Company and Alba, including costs, fees, attorney fees, and disbursements, will be paid by Company.

 

10.05       Alba will cooperate reasonably with Company in connection with any action under Sections 10.02 or 10.03. Alba agrees to provide prompt access to all necessary documents and to render reasonable assistance in response to requests by Company.

 

10.06       Alba has a continuing right to intervene in a suit initiated by Company under Section 10.02 or in a declaratory judgment action involving the Patent Rights brought against Company under Section 10.03. In either case, if Alba chooses to intervene, Alba will be responsible for its litigation expenses and will be entitled to all recoveries which it obtains for itself as a result of its intervention.

 

10.07       If Company desires to initiate a suit for patent infringement under Section 10.02, Company will notify Alba in writing within 90 days after giving or receiving notice of infringement under Section 10.01. If Company fails to notify Alba of its intent to initiate suit within the 90 day period or if Company notifies Alba that it does not intend to initiate suit, Alba may initiate suit at its own expense. In such case, Alba is entitled to all recoveries from such action.

 

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10.08       If an infringement action or a declaratory judgment action alleging invalidity or non-infringement of any of the Patent Rights is brought against Company or raised by way of counterclaim or affirmative defense in an infringement suit brought by Company as described in Section 10.02, Company will notify Alba whether Company intends to respond in opposition to such legal action within 15 days after Company’s receipt of notice of the filing of such action. If Company fails to notify Alba of its intent to respond in opposition to such legal action within the 15 day period, or if Company notifies Alba that it does not intend to oppose the action, Alba may respond to the legal action at Alba’s expense. In such case, Alba is entitled to all recoveries from such action.

 

10.09       Company will cooperate reasonably with Alba in connection with any action described in Sections 10.07 or 10.08. Company agrees to provide prompt access to all necessary documents and to render reasonable assistance in response to requests by Alba.

 

ARTICLE 11. TERM AND TERMINATION

 

11.01       Unless sooner terminated in accordance with any of the succeeding provisions of this Article 11, this Agreement will continue in full force and effect. Upon payment of Milestone Payment 4, the licenses granted herein shall thereafter be perpetual and irrevocable. Upon payment of Milestone Payment 8, the licenses granted herein shall thereafter be perpetual, irrevocable and royalty free.

 

11.02       Should Company fail to pay Alba any sum due and payable under this Agreement prior to and including Milestone Payment 4, Alba may terminate this Agreement on thirty (30) days written notice, unless Company pays Alba within the thirty (30) day period all delinquent sums together with interest due and unpaid. Upon expiration of the thirty (30) day period, if Company has not paid all sums and interest due and payable, the parties will enter into a thirty (30) day Cure Period during which time, both parties will attempt to resolve the non-payment. If no resolution is reached at the end of the Cure Period, then the rights, privileges, and licenses granted under this Agreement will terminate.

 

11.03       Prior to the First Commercial Sale of a Licensed Product to a Third Party, Company is considered diligent with regard to development of a Licensed Product as long as Company updates and reports progress against the Development Plan in its Milestone Reports and as long as Company continues to use Commercially Reasonable Efforts pursuant to Section 4.01 above to accomplish the Development Plan as it relates to Licensed Products.

 

11.04       If Alba reasonably believes that Company is not diligent in development of Licensed Product based upon the criteria set forth in Section 11.03, then Alba may assert a breach and its termination rights under Section 11.05 below and invoke the dispute resolution procedures in Section 18.

 

11.05       In the event that prior to the First Commercial Sale of a Licensed Product to a Third Party Company, an Affiliate or a Sublicensee breaches Sections 3.02, 3.03, 3.04, 4.01, 5.02, 5.03, 10.04(a), 12.01, 15.02, 16.01 or 16.02, Alba may terminate this Agreement upon 90 days written notice to Company. However, if the breach is corrected within the 90-day period and Alba is reimbursed for all damages directly resulting from the breach, this Agreement will continue in full force and effect and Alba will so notify Company in writing.

 

11.06       Expiration or termination of this Agreement does not relieve either party of any obligation for payment and reporting which arises before expiration or termination including obligations under Articles 5 and 7 (but only for expenses incurred before termination). Articles 2, 10, 13, 14, 15, 16, 17, and 18 and Sections 6.03, 11.07, 11.08 and 19.09 will survive expiration or termination. Article 8 and Sections 19.02 will survive expiration or termination and will expire in accordance with their terms. Other sections of this Agreement will be effective after expiration or termination where that intent is clear from the content of those sections

 

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11.07       Upon termination of this entire Agreement pursuant to Section 11.05, any Sublicensee not in default may seek a license directly from Alba to practice Patent Rights within the licensed field set out in its sublicense and upon the consideration stated in its sublicense to the extent such consideration has not previously been paid to Company. Alba will permit a Sublicensee not in default to continue use of Patent Rights for a period of up to 60 days (the “Continuation Term”) after termination of this Agreement while Alba and the Sublicensee negotiate, such license to be consistent with the terms of this Agreement subject to appropriate amendments of Article 5 and relevant definitions to substitute the consideration and field of use provisions from the sublicense. Should Alba and the Sublicensee fail to agree upon an amendment within the Continuation Term, they will submit the definition and consideration provisions in dispute between them to commercial arbitration for resolution, and include the resulting provisions in a license. Prior to the Continuation Term, and in consideration of the opportunity to enter into a license agreement with Alba, a Sublicensee seeking a license from Alba must tender to Alba a written agreement to pay running royalties and milestone payments to Alba with respect to Net Sales during the Continuation Term and any subsequent period of arbitration upon the terms that running royalties and milestones due Alba from the Company would be calculated in this Agreement, or to pay running royalty and milestone payments at the rate provided in the sublicense, whichever is greater.

 

11.08       Upon the termination of this Agreement (unless terminated by virtue of execution of the Asset Purchase Agreement), and notwithstanding anything to the contrary in Section 8.09 above, at Alba’s request, Company will (a) execute a document acknowledging the license rights that have expired or terminated (b) execute any and all documents necessary to assign all Company Improvements to Alba and (c) make a good faith effort to transfer to Alba any other data, information or results, relating to the Licensed Products, obtained by Company during the term of this Agreement, whether or not the same constitutes Company Confidential Information.

 

ARTICLE 12. ASSIGNABILITY

 

12.01       Company may assign this Agreement to an Affiliate or to a successor to all or substantially all of Company’s assets or business related to Licensed Product. Company may not otherwise assign or transfer this Agreement without the prior written consent of Alba, which will not be unreasonably withheld.

 

12.02       Alba may assign this Agreement to a successor-in-interest but Alba may not otherwise assign or transfer this Agreement without the prior written consent of Company, which will not be unreasonably withheld.

 

ARTICLE 13. APPLICABLE LAW; WAIVER

 

13.01       This Agreement is made and construed in accordance with the laws of the State of Delaware without regard to choice of law issues, except that all questions concerning the construction or effect of patents will be decided in accordance with the laws of the country in which the particular patent concerned has been granted.

 

13.02       Each Party submits itself to the jurisdiction and venue of any state of federal court located in the State of Delaware.

 

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13.03       Alba and Company waive their rights to trial by jury as to any litigation between them relating to this Agreement.

 

ARTICLE 14. INTEGRATION AND INTERPRETATION

 

14.01       This Agreement, together with any Exhibits specifically referenced and attached, embodies the entire understanding between Company and Alba with respect to the subject matter hereof. There are no contracts, understandings, conditions, warranties or representations, oral or written, express or implied, with reference to the subject matter of this Agreement that arc not merged in this Agreement.

 

14.02       This Agreement is negotiated as an arm’s-length business transaction. Draftsmanship will not be taken into account in construing the Agreement.

 

14.03       If any condition or provision in any Article of this Agreement is held to be invalid or illegal or contrary to public policy by a court of competent jurisdiction from which there is no appeal, this Agreement will be construed as though the provision or condition did not appear. The remaining provisions of this Agreement will continue in full force and effect.

 

ARTICLE 15. REPRESENTATIONS AND WARRANTIES

 

15.01       Alba hereby represents that, as of the date of execution by the officer (a) Alba has full right, title, and interest in and to the Patent Rights identified in Exhibit B (unless otherwise noted as co-owned on Exhibit B); (b) to the knowledge of the executing Alba officer, the Patent Rights identified in Exhibit B are not the subject matter of any currently pending claims, actions or litigation involving Alba, and Alba has not been informed of any related matters or litigation contemplated either by Alba or any Third Party; (c) Alba is unaware that any person disputes inventorship or ownership of Patent Rights as described in this Agreement; (d) to the knowledge of the executing Alba officer, the Transferred Contracts are in full force and effect, binding and enforceable upon Alba and the other parties thereto; (e) Alba and each other party to Transferred Contracts are in material compliance therewith; (f) to the knowledge of the executing Alba officer, Alba all pre-clinical studies conducted by or on behalf of Alba with respect to Licensed Product were conducted in compliance with all applicable laws and standards applicable to pharmaceutical development; (g) to the knowledge of the executing Alba officer, Alba has disclosed to Company prior to the Effective Date all preclinical and clinical data related to Licensed Product known to Alba; and (h) to the knowledge of the executing Alba officer, neither Alba nor any of its Affiliates nor any Third Party owns or controls any intellectual property related to Licensed Products which is not licensed to Company hereunder or under the accompanying Sublicense with the University of Maryland. Alba warrants that the officer of Alba executing this Agreement is authorized to do so on behalf of Alba. Alba EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, AND PATENT VALIDITY, WITH RESPECT TO PATENT RIGHTS. ALBA EXPRESSLY DISCLAIMS ANY RELIANCE ON ANY AND ALL OF ALBA’S CLINICAL OR TOXOCOLOGY TRIAL DATA AND RESULTS, AND COMPANY HEREBY ACKNOWLEDGES THAT ALBA SHALL HAVE NO LIABILITY FOR COMPANY’S DECISION TO ADVANCE THE LICENSED PRODUCT IN RELIANCE ON SUCH DATA AND RESULTS.

 

15.02       Company hereby represents and warrants to Alba that: (a) Company has full legal right, power and authority to execute, deliver and perform its obligations under this Agreement; (b) the execution, delivery and performance by Company of this Agreement do not contravene or constitute a default under any provision of applicable law or of any agreement, judgment, injunction, order, decree, or other instrument binding upon Company; and (c) the officer of the Company executing this Agreement has been authorized by the Company’s board of directors or governing body to execute this Agreement as the act of the Company.

 

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ARTICLE 16. CLAIMS, INDEMNIFICATION AND INSURANCE

 

16.01       Company warrants and represents that it maintains comprehensive liability insurance coverage for itself, its officers, employees and agents, in the minimum amounts of $[***] per claim and $[***] aggregate (inclusive of umbrella coverage), applicable to bodily injury and property damage. Prior to the initiation of any human trials in any geographical location with any products, processes, or protocols developed either by Company, its Affiliates, or Sublicensees or their officers, servants, or agents, or by Third Parties acting on behalf of or under authorization from Company, its Affiliates or Sublicensees, using licensed Patent Rights, the Company will establish and maintain Product & Clinical Trials Liability insurance coverage in the amount of $[***] per claim and $[***] aggregate. Company warrants that its liability insurance will cover contractually assumed obligation for product liability claims referred to in Section 16.03, when/if human clinical trials are commenced. Alba acknowledges that Company’s liability insurance will not cover indemnity claims related to patent infringement referred to in Section 16.03. A certificate evidencing the required insurance coverage will be delivered to Alba: (i) at or before execution of this Agreement; (ii) each time there is a change in Company’s insurance coverage; and (iii) each time Company’s insurance coverage is renewed. Company agrees to require its insurance carrier(s) to notify Alba within 15 days prior to cancellation of Company’s insurance coverage, except in the case of cancellation for nonpayment of premium, where 10 days advance notice will be provided. If Company does not secure liability insurance written on an occurrence basis, but instead secures liability insurance written on a claims-made basis, Company warrants that it will purchase extending reported coverage or otherwise provide insurance satisfying its obligations hereunder for a period of not less than [***] years following termination of this Agreement.

 

16.02      (a)        Company will defend, indemnify, and hold harmless Alba, Alba Personnel and Alba Affiliates, and their, officers, employees, and agents (each individually an “Alba Party” and all, collectively “Alba Parties”), against any and all claims, costs or liabilities, including attorney’s fees and court costs at trial and appellate levels, for any loss, damage, personal injury, or loss of life:

 

1.       caused by the actions of Company, its Affiliates, or Sublicensees, or their officers, servants, or agents, or Third Parties acting on behalf of or under authorization from Company, its Affiliates or Sublicensees, in the performance of this Agreement;

 

2.       arising out of use of licensed Patent Rights by Company, its Affiliates, or Sublicensees or their officers, servants, or agents, or by any Third Party acting on behalf of or under authorization from Company, its Affiliates, or Sublicensees; or

 

3.       arising out of use by a Third Party of products, processes, or protocols developed either by Company, its Affiliates, or Sublicensees or their officers, servants, or agents, or by Third Parties acting on behalf of or under authorization from Company, its Affiliates or Sublicensees, using licensed Patent Rights, provided such use was consistent with any instructions, protocols or supervision provided by Company.

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

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(b)         Alba will defend, indemnify, and hold harmless Company, Company Personnel and Company Affiliates, and their officers, employees, and agents (each individually a “Company Party” and all, collectively “Company Parties”), against any and all claims, costs or liabilities, including attorney’s fees and court costs at trial and appellate levels, for any loss, damage, personal injury, or loss of life:

 

1.       caused by the actions of Alba or its Affiliates or their officers, servants, or agents, or Third Parties acting on behalf of or under authorization from Alba or its Affiliates or Sublicensees;

 

2.       arising out of use of licensed Patent Rights by Alba, its Affiliates or their officers, servants, or agents, or by any Third Party acting on behalf of or under authorization from Alba or its Affiliates;

 

3.       arising out of use, prior to the Effective Date, by a Third Party of products, processes, or protocols developed either by Alba or its Affiliates or their officers, servants, or agents, or by Third Parties acting on behalf of or under authorization from Alba or its Affiliates, using licensed Patent Rights, provided such use was prior to the Effective Date and consistent with any instructions, protocols or supervision provided by Alba.

 

(c)         Company’s agreement to defend, indemnify and hold harmless a Alba Party is conditioned upon and Alba’s agreement to defend, indemnify and hold harmless a Company Party is conditioned upon:

 

1.       Alba or Company promptly notifying the other in writing after it receives notice of a claim, and

 

2.       the Alba Party or Company Party seeking indemnification fully cooperating with Alba and the Company in the defense of the claim.

 

(d)         Company’s agreement to defend, indemnify and hold harmless a Alba Party will not apply to any claim, cost, or liability attributable to the negligent act or willful misconduct of the Alba Party or a Third Party acting outside the direction or control of Company. Alba’s agreement to defend, indemnify and hold harmless a Company Party will not apply to any claim, cost, or liability attributable to the negligent act or willful misconduct of the Company Party or a Third Party acting outside the direction or control of Alba.

 

16.03       Alba and Company further agree that nothing in this Agreement will be interpreted as a denial to either party of any remedy or defense available to it under the laws of the State of Delaware.

 

ARTICLE 17. ADVERTISING AND PUBLICITY

 

17.01       Neither party will use the name of the other or any of its employees or personnel, or any adaptation thereof, in any advertising, promotional, or sales literature without prior written consent obtained from the other party. Either party may publicize the fact that the parties have made this Agreement.

 

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ARTICLE 18. DISPUTE RESOLUTION

 

If a dispute between the parties related to this Agreement arises, either party, by notice to the other party, may have the dispute referred to the parties’ respective officers designated below, or their successors, for attempted resolution by good faith negotiations within 30 days after the notice is received. The designated officers are as follows:

 

For Company: Chief Executive Officer

For Alba: Chief Executive Officer

 

In the event the designated officers are not able to resolve the dispute within this 30 day period, or any agreed extension, they will confer in good faith with respect to the possibility of resolving the matter through mediation with a mutually acceptable Third Party or a national mediation organization. The parties agree that they will participate in any mediation sessions in good faith in an effort to resolve the dispute in an informal and inexpensive manner. All expenses of the mediator will be shared equally by the parties. Any applicable statute of limitations will be tolled during the pendency of a mediation initiated under this Agreement. Evidence of anything said or any admission made in the course of any mediation will not be admissible in evidence in any civil action between the parties. In addition, no document prepared for the purpose of, or in the course of, or pursuant to, the mediation, or copy thereof, will be admissible in evidence in any civil action between the parties. However, the admissibility of evidence will not be limited if all parties who participated in the mediation consent to disclosure of the evidence.

 

ARTICLE 19. MISCELLANEOUS

 

19.01       No license or right is granted by implication or otherwise with respect to any patent application or patent owned by either party, unless specifically set forth in this Agreement.

 

19.02       Neither party is liable for failure or delay in performing any of its obligations under this Agreement if the failure or delay is required in order to comply with any governmental regulation, request or order, or necessitated by other circumstances beyond the reasonable control of the party so failing or delaying, including but not limited to Acts of God, war (declared or undeclared), insurrection, fire, flood, accident, labor strikes, work stoppage or slowdown (whether or not such labor event is within the reasonable control of the parties), or inability to obtain raw materials, supplies, power or equipment necessary to enable a party to perform its obligations. Each party will: (a) promptly notify the other party in writing of an event of force majeure, the expected duration of the event and its anticipated effect on the ability of the party to perform its obligations; and (b) make reasonable efforts to remedy the event of force majeure.

 

19.03       All notices, consents and other communications required or allowed under this Agreement must be in writing and are effective upon receipt: (a) when delivered by hand; or (b) when received by the addressee after being mailed by registered or certified mail (air mail if mailed overseas), return receipt requested; or (c) when received by the addressee, by delivery service (return receipt requested), in each case addressed to the party at its address set forth below (or to another address that a party may later designate by notice to the other party):

 

If to Alba:

Alba Therapeutics Corporation

100 International Drive, 23rd Floor

Baltimore, MD 21202

   
Copy to:

Morgan, Lewis & Bockius LLP

One Federal Street

Boston, MA 02110

Attn: and Mark Hayman, Esq.

   
If to Company:

Innovate Biopharmaceuticals, Inc.

8601 Six Forks Road

Suite 400

Raleigh, NC 27615

   
Copy to:

Hutchison PLLC

3110 Edwards Mill Road, Suite 300

Raleigh, NC 27612

Attn: Bill Wofford, Esq.

 

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19.04       This Agreement, including Exhibits, may not be amended, nor may any right or remedy of either party be waived, unless the amendment or waiver is in writing and signed by a duly authorized representative of each party.

 

19.05       A failure or delay by a party in exercising any of its rights or remedies under this Agreement does not constitute a waiver of the rights or remedies, nor does any single or partial exercise of any right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy. The rights and remedies of the parties provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.

 

19.06       Alba and Company are not (and nothing in this Agreement may be construed to constitute them as) partners, joint venturers, agents, representatives or employees of the other, nor is there any status or relationship between them other than that of independent contractors. Neither party has any responsibility nor liability for the actions of the other party except as specifically provided in this Agreement. Neither party has any right or authority to bind or obligate the other party in any manner or make any representation or warranty on behalf of the other party.

 

19.07       Unless otherwise provided, all costs and expenses incurred in connection with this Agreement will be paid by the party which incurs the cost or expense, and the other party has no liability for such cost or expense.

 

19.08       This Agreement is not intended to create, and does not create, enforceable legal rights as a third party beneficiary or through any other legal theory on the part of any Section 16.02.

 

19.09       This Agreement is signed in duplicate originals. The headings used in this Agreement are for convenience of reference only and do not affect the meaning or construction of this Agreement.

 

19.10       Further Assurance. Each Party shall duly execute and deliver, or cause to be duly executed and delivered, such further instruments and do and cause to be done such further acts and things, including the filing of such assignments, agreements, documents, and instruments, as may be necessary or as the other Party may reasonably request in connection with this Agreement or to carry out more effectively the provisions and purposes hereof, or to better assure and confirm unto such other Party its rights and remedies under this Agreement. Without limiting the generality of the foregoing, in the

 

[signature page to follow]

 

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The parties have caused this Agreement to be executed by their duly authorized representatives on the dates indicated below.

 

  Company:
     
  Innovate Biopharmaceuticals, Inc.
     
  By: /s/ Jay P Madan
  Name: Jay P Madan
  Title: President
     
  Alba:  
     
  Alba Therapeutics Corporation
     
  By: /s/ Wendy Perrow
  Name: Wendy Perrow
  Title:   CEO

 

[Signature Page to License Agreement]

 

 

 

  

EXHIBIT A

 

COPYRIGHTS & TRADEMARKS

 

A.Celiac Disease Patient Reported Outcome (CeD PRO) Instrument

1.Certificate of Registration of the Celiac Disease PRO Questionnaire, Registration Number TXu-780-192, effected date of registration October 13, 2011

2.Copyright Certificate of Registration No. TXu-780-192, letter regarding the Registration of Celiac Disease PRO Questionnaire, dated February 21 2012

 

B.Trademark Status Chart

[***]

 

C.Wheat Character

[***]

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

 

 

  

EXHIBIT A-1

 

INVENTORY

 

[***]

  

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

 

 

  

EXHIBIT B

 

PATENT RIGHTS

 

(*co-owned with University of Maryland, Baltimore)

 

Morgan
Lewis
Docket
Reference
Title Application No. Application
Date
Registration
No.
Case
Status
Country

[***]

 

 

[***]

METHOD FOR TREATING CELIAC DISEASE 12/616,638 Feb-09-2007 8,168,594

 

 

Registered

 

United States of America
[***] METHOD FOR TREATING CELIAC DISEASE 13/449,819 Feb-09-2007 9,241,969 Registered United States of America

 

[***]

 

 

[***]

MATERIALS AND METHODS FOR THE TREATMENT OF CELIAC DISEASE 11/925,522 Oct-26-2007 8,034,776

 

 

Registered

 

United States of America

 

[***]

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

 

 

  

EXHIBIT C

 

FORM OF UMD SUBLICENSE

 

[Filed as Exhibit 10.1 to the Form 10-K/A for the year ended December 31, 2017]

 

 

 

  

EXHIBIT D

 

TRANSFERRED CONTRACTS

 

[***]

 

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

 

 

  

EXHIBIT E

 

DEVELOPMENT PLAN

 

[***]

  

 

 

[***] Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission.

 

 

 

Exhibit 31.3

 

CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

 

I, Christopher Prior, certify that:

 

  1. I have reviewed this Amendment No. 1 to the annual report on Form 10-K/A of Innovate Biopharmaceuticals, Inc. (the “registrant”);

 

  2. Based on my knowledge, this 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 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and 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 report is being prepared;

 

  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d) 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 the audit committee of the 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 reasonably 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.

 

  By: /s/ Christopher Prior
June 29, 2018   Christopher Prior
    Chief Executive Officer
    (Principal Executive Officer)

 

 

 

 

Exhibit 31.4

 

CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

 

I, Jay Madan, certify that:

 

  1. I have reviewed this Amendment No. 1 to the annual report on Form 10-K/A of Innovate Biopharmaceuticals, Inc. (the “registrant”);

 

  2. Based on my knowledge, this 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 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and 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 report is being prepared;

 

  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d) 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 the audit committee of the 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 reasonably 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.

 

  By: /s/ Jay Madan
June 29, 2018   Jay Madan
    President, Chief Business Officer and Interim
Principal Financial Officer
    (Principal Financial Officer)